How Business Insurance Brokers can protect your small business
There's a reason why:
- Insurance brokers handle around 90% of the commercial insurance transacted in Australia
- Play a major role in risk assessment, risk financing and insurance distribution, handling over $16 billion
- Account for around half of Australia's total general insurance business
According to National Insurance Brokers Association of Australia (NIBA), the traditional role of brokers is to, essentially, act as a representative on behalf of the client. This goes above and beyond the more commonly-held idea of a broker as someone who streamlines the search process. In fact, insurance brokers create relationships of trust with their clients -- relationships that call on a broker to provide expert assistance, 'assisting customers to assess and manage their risks, providing advice on what insurance is appropriate for the customer's personal or business needs'. This necessary core of trust is why insurance brokers are required, in Australia, to have an Australian Financial Services (AFS) licence to operate.
How small businesses can find and select a broker
Finding an insurance broker can help eliminate the overwhelm and helps get you laser-focused on your specific needs in finding the right policy cover for your business. The process all starts with you. Before you can approach a broker, you'll want to understand what your business needs. There are two types of insurance that are absolutely compulsory in Australia: These are workers' compensation and CTP (compulsory third party). Besides these, take a moment to take stock of where you may be vulnerable. This is your due diligence on risk management in relation to your business. When evaluating each insurance broker, keep the NIBA's guidelines for what constitutes the traditional broker role in mind:
- Is the insurance broker able to provide advice on what insurance is appropriate for my business needs?
- Does the insurance broker demonstrate detailed technical expertise including knowledge of prices, terms and conditions, benefits and pitfalls of the wide range of insurance policies on the market? Can they and are they willing to explain this to me in an accessible and understandable way?
- Can the insurance broker provide assistance in interpreting, arranging and completing insurance documentation?
- Do they have demonstrable experience in predicting, managing and reducing risks as well as a history of assisting in the resolution of claims?
How brokers work with small businesses
Many businesses choose an insurance broker because they can usually offer products and policies that match your specific requirements and have understanding across the vast range of insurance products taht are available. Businesses are essentially benefitting from the expertise as well as the relationship the insurance broker has with the insurer. Buying insurance through a broker often allows businesses to tailor their specific needs under one policy, avoiding paying for covers that don't apply to the business.
Calculating Insurance Premiums
It's part of a broker's job and role to calculate premiums, break down coverage and explain the advantages and disadvantages of each policy. Despite the fact that brokers can avail their business clients of competitive premiums, some of the factors that determine cost are beyond them:
- Nature of the business, as well as internal size and structure and what kinds of products or services, will be sold
- Business income
- Claims history
- Nominated sum insured
- Interaction of the business with third parties
- Risk factors involved in running operations
Discounts and savings
Here's where businesses can benefit the most from having an insurance broker on their side. Besides highly-qualified, expert advice on the critical nature of risk within the business, brokers provide significant multi-policy discounts. Insurance Brokers can also communicate with businesses to inform them of what they can do in order to benefit from discounts. For example, a business could benefit from a discount right off the bat if certain safety and security measures are in place.
Advising on risk management
This is where insurance brokers go above and beyond for their clients, bringing a technical level of expertise. It's not only about finding the right policy but about making you, the business owner, aware of the fact that there is always risk present in a business. It's a broker's job to know the nature of the market, as well as to understand the ins and outs of your business, before ever giving advice on which policy will mitigate as much of this risk as possible. In this case, it can be a good idea to find an insurance broker who specialises in your specific kind of business or industry.
Find the 'perfect match'
There are many different kinds of insurance policies. There are also many different levels of insurance coverage provided, most varying from one insurer to the next. It's part of a broker's commitment to a client to provide comprehensive and customised assessments that evaluate policies and to give you suggestions on what is best for your business, based on both your current level and future plans for expansion and growth. This kind of risk management and assessment allows businesses to feel confident that brokers are designing and helping them choose the policies that are right for their situation, preventing risk, minimising loss, and negotiating terms and covers with insurance companies.
How an insurance broker can be vital at claims time
Business doesn't end at the end of a business day. Similarly, a relationship built with an insurance broker doesn't end because you've signed the proverbial dotted line. In fact, a true test of the efficacy of a broker comes at claims time. Insurance brokers in Australia act as the liaison between the business and the insurer. In such a pivotal role, the broker assists the business to fill out paperwork, file claims, follow up with the insurer and handle the provisions of your claim. For example, if part of the business's policy is to be eligible for a rental car coverage in case of an accident, brokers can expedite and handle this, alongside the insurance provider. Think of your broker as someone who speaks multiple languages: They speak your language, understanding the needs of your business. At the same time, they speak the language of insurance as well as that of the insurance companies. During stressful moments of filing claims, it's an insurance broker's intricate knowledge of the fine print on your insurance policy that can make all the difference.
Advisr does not provide advice and does not hold a financial service license (AFSL). All information above has been provided by Andy Jamieson.