Risk management is vital, especially over the holidays!
Date posted: 18 Nov 2013
Managing business risk is a year-round necessity. But as we approach the festive season and business start shutting down for the holidays, it's even more important to make sure your clients have risk management systems in place.
“The cost of risk to a business insurance client is made up of three elements,” explains Justin Naylor, head of independent brokers for Etana Insurance Johannesburg. “They are the cost of insurance, (the premium or the risk that is transferred to the insurer), the cost of retention (the claims that a business decides it can retain for itself, also known as excess or self-insurance), and the cost of risk management (the price paid to minimise or avoid perils within the business).”
Etana is currently a sister company to Hollard in South Africa, but will soon be merging into the Hollard fold.
Justin highlights that many people focus purely on the cost that insurance will have on their businesses, and neglect expenditure on excess and risk management. However, in seeking the most beneficial insurance cover, businesses (with help and advice from their brokers) should focus on sourcing the optimum balance between these three entities. Businesses should transfer risks that they are unable to handle to insurers, accept small and predictable risks through selecting reasonable excess and implement cost effective risk management to prevent losses.
“Insurance premiums are determined by a business’s previous claims history. Therefore a business should work towards minimising their experience and avoid large, unpredictable claims. The benefit? Being quoted on competitive and predictable premiums in the long run,” explains Justin.
Many have varied perceptions when it comes to excess. The fact remains that it can be a very valuable tool for a business to use when obtaining a beneficial insurance deal. Excess is intended to do away with very small claims that a business should be able to carry within their day-to-day running expenses.
These claim costs are expensive to administer compared to
the benefit of the client. An
unconsidered element is the fact that excess
says a lot about a risk to the insurer. Clients
have an intimate knowledge of their business and
what potential perils are linked to it. If a business
owner decides to voluntarily take a larger excess
and share of the risk, it indicates to the insurer
that this person is on top of managing potential
hazards. Circumstances such as this, where
a client takes on a high excess, will result in
an instant premium reduction.
An alarm system with an armed response tactical unit is still a very effective and necessary form of securing a property. Image courtesy of Etana Insurance.