Further phases usually depend on the Client’s appreciation of the conclusions. At this point, PROSPECTOR may either be appointed a specific single task, or some form of co-operation is established on a permanent basis. In any case, the service includes advice concerning any categories of insurance agreed with the Client, arrangement and implementation of insurance programmes, and their supervision.
First things first
I. Basic questions
Before any measures aimed at the conclusion of insurance contracts are taken, company executives responsible for risk management and insurance should establish the following facts:
1. Where can the company be threatened by a peril? Do the perils relate to:
a) company property or property entrusted to it
b) company personnel
c) modus operandi or technological processes
d) commercial turnover
e) business partners
f) products or services rendered
g) data kept in the company
h) persons outside the company.
2. Can the localised risk areas be effectively insured or is it necessary, or just more beneficial, to handle a given risk using non-insurance methods (e.g., quality improvements within the company, transfer of risk onto other subjects)?
3. Which insurance option(s) should be considered crucial in the company’s particular situation, and which ones can the company do without? Where is the line between comfort and necessity – Is the comfort affordable?
4. Whenever insurance is indicated as a method of risk control, should it be a continuous insurance relationship maintained through repeated periods of time (general agreements), or it is more convenient to take out individual policies according to temporary needs (e.g., on purchase of vehicles, transport of goods, etc.) ?
5. Must the company impose spending limits on insurance? If so, what is the maximum spending level or other criteria which should determine insurance expenditures?
II. Determine possibilities
Having established the basic facts, the next move is to find the best offer to satisfy the company’s insurance needs. The task can be named as the selection of trustworthy insurers, who will provide satisfactory insurance terms to cover the indicated risks at justifiable premium rates. At this point, a recommendable course of action might be the following:
1. Compile an inquiry in which to include the basic information regarding:
a) insurance subject and worth to be covered,
b) location and territory of insurance
c) expected scope of insurance cover,
d) desired system of insurance (e.g., fixed sum insurance, intrinsic value insurance, excess insurance, etc.),
e) how the property or activity to be covered is secured against the occurrence of perils,
f) history of claims and indemnities.
2. File the inquiry with pre-selected insurers whose know-how and capacity may grant the necessary cover. Be prepared to answer the insurers’ questions and give more details on the risks to be covered.
3. Analyse and compare the offers submitted by insurers, paying special attention to:
a) adequacy of proposed insurance cover
b) terms and conditions of the insurance, especially the exclusions and limitations of the insurer’s liability
c) quotation of insurance premium
d) claim handling procedures
e) indemnity/compensation payout formula
f) space for alterations.
4. Negotiate with selected insurers to tailor their offer to the needs and capabilities of your company.
III. Make sure you get correct solutions
Before drawing conclusions on the choice of a particular offer, it is recommended to check:
1. Your company’s ability to fulfil all the conditions for the insurance to be effective. This may concern the requirements for technical devices protecting property against damage or loss as well as prophylactics.
2. The financial credibility of the insurance companies involved.
3. The ability of the existing organisational structure of the potential insurer to provide efficient service, especially handling of claims in case of their expected high frequency and territorial dispersion.
Prior to the conclusion of insurance contracts, detailed arrangements should be made with regard to:
1. Compliance of insurance terms and conditions with the company’s profile, ensuring that none of the vital aspects of the company’s operations, such as the specific nature of services, the use of leased property, employment of subcontractors, etc., are left outside the insurance programme due to general exclusions of the insurer’s liability
2. Retention of the acceptable part of the risk within the company (franchise, own share in the loss, deliberate limiting of insurance coverage and limiting the insurer’s responsibility) combined with an adequate reduction of the premium.
3. The system correlating the insurance amount with the claim amount calculation method, that is, the declared value of the insured property with the function to be fulfilled by the potential indemnity (e.g., insurance up to the value diminished by wear or value allowing full replacement of the lost property).
4. Inclusion of additional provisions.
IV. Choose the procedure
An adequate insurance programme is not a luxury, it is a must.
This statement is equally valid in respect of small and medium-sized businesses as well as market tycoons. Whenever adversity hits the business of the latter, sole self-reliance on reserves may seriously affect their financial position and linger on for years. For smaller companies struck by similar misfortune only prudence which had been employed in the right time offers a chance to survive.
Who should assume the task of designing and implementing an adequate insurance programme?
1. A dedicated unit working within the company, if it is justified by the volume of its insurance needs and the company has the required human resources.
2. A professional insurance broker.
The best effects, however, are offered by a mixed approach, i.e. close co-operation between the broker and the company’s respective managerial and operational staff.