How SMEs can prepare for potential rising premiums
Whilst some policyholders have already noticed a rise in their premiums this year, it’s not time to panic yet. All insurers prepare and make allowances for increased claims during potentially difficult disaster seasons (bushfires, floods and storms), so it’s not certain that premiums will increase this year.
Nevertheless, nothing is guaranteed, so it’s always a good idea to be prepared for premium increases at some time in the future. Let’s take a quick look at why premiums may increase for SMEs this year and then at how you can prepare for these potential increases. We’ll finish up with looking at some of the ways SMEs can mitigate any likely premium increases.
Why might premiums increase this year?
The short answer is that the risks taken by insurance providers have increased due to natural disasters and they may need to mitigate these losses. Premiums reflect the probability that an SME will make a claim against a policy, so the more likely these claims, the higher the premiums. Having already prepared for the disaster season in Australia last year, it’s unlikely that any future increases will be across the board in 2020.
Five ways you can prepare for potential premium increases
1. Build a relationship with your local insurance adviser
Building and maintaining a long-term relationship with your insurance adviser helps them understand your business needs. This means that they can secure the best cover for your business and advise you on potential future changes to these costs.
2. Maintain a safe workplace
Training your employees on new equipment and keeping OHS sessions up to date will help SMEs reduce the likelihood of on-site accidents and lower their overall risks. Less risk means lower premiums, so it’s a win-win situation.
3. Keep comprehensive records
It’s vital that all SMEs maintain records of employee training and equipment maintenance. SMEs that maintain good record keeping and have an up to date risk mitigation program can often benefit from discounted premiums from their insurance providers.
4. Know your business risks
If you have ignored one or more potential risks, your business can potentially suffer devastating consequences from a lack of insurance cover at some time in the future. This is why every business needs to identify their risks, review them regularly and speak to an experienced insurance adviser who can provide suitable on-going coverage.
5. Review your insurance needs
Not purchasing insurance or purchasing inadequate insurance is not the way to reduce your costs. In the end, this strategy can cost SMEs their livelihood, so it’s a good idea to reassess your insurance needs before any potential increases occur. A good insurance provider will know what types of insurance coverage your business needs.
Will SME’s premiums increase in 2020?
Hopefully, SME premiums won’t rise this year, but if they do increase due to the recent catastrophes, your company will need to be in good shape. Knowing your business risks, keeping good records, maintaining a safe work environment, reviewing your insurance needs and building a positive relationship with your insurance provider are all strategies that encourage providers to lower, not raise your premiums.
To speak to an insurance specialist about your business insurance and premiums today, contact Gail Findlay.
Advisr does not provide advice and does not hold a financial service license (AFSL). All information above has been provided by Gail Findlay.