Amid a hardening insurance market, property insurers are requiring more evidence that businesses are taking appropriate risk mitigation steps as part of the underwriting process—leaving risk managers and chief financial officers facing additional pressures to work with a reduced budget.
Businesses are finding a property insurance market with increasing premiums of 10% to 60% on average, restricted capacity, tightening terms and conditions, and increasing retention. Buyers must demonstrate effective risk control programs to achieve positive outcomes, but those efforts can come with price tags that, on the surface, run counter to cost reduction mandates. That’s because some of those improvements may require capital investments in facilities or additional risk assessment and control resources.
However, risk managers have an opportunity to successfully juggle those opposing demands. By partnering with their broker, risk managers can achieve the risk resilience they desire through these four cost-effective approaches:
Take Ownership of Your Data
Property insurers want to see more detailed construction, occupancy, protection and exposure (COPE) information from insureds to help support their underwriting. As a result, risk buyers should work closely with their brokers to help them make sense of what critical data they should present, and how they can conduct self-assessments to generate some of that data on their own.
The more complete COPE data, natural catastrophe modeling and risk control improvement plan details you can provide, the better you’re likely to fare with underwriters. In today’s property insurance marketplace, in which insurers are underwriting to a technical rate, your broker can be your interpreter and translate your data in an effort to move underwriters’ pens.
In an environment in which companies without a property loss history are seeing double-digit premium increases, and some insurers are declining businesses coverage altogether, many risk managers are being forced to take larger retentions. To combat this environment, risk buyers should show insurers they’re taking a more holistic approach to controlling risk, from inception to regular evaluations and updates. Risk managers should partner with their broker to use insights from data to understand where there’s room to innovate for loss mitigation, including by developing creative strategies for reducing risk without necessarily having to invest significant capital. For example, if coverage for a property that has four buildings has gone up significantly, but those buildings are very old, changing coverage forms to actual cash value or agreed value versus replacement cost value could be an option to explore.
Highlight Your Workforce Initiatives
One way businesses can address lower-cost risk improvements is by demonstrating their commitment to controlling risk. Workforce programs such as hot-work protocols, impairment programs, effective management of combustible storage, or fire protection system inspections and maintenance are examples of showing insurers that you’re constantly looking to mitigate risk. Businesses with special hazards may also choose to highlight well protected high-piled storage, dust hazard analysis and chemical process safety management protocols that are in place.
A proactive approach can also be taken when moving to a new facility or reconfiguring a manufacturing line. Working with your broker to manage changes well in advance of closing or start-up dates can prevent unexpected and costly risk-control adjustments after the new location is up and running.
Elevate Your Narrative With the C-Suite
How risk managers tell their story inside the organization is just as important as how they tell it to underwriters—and it’s imperative to win C-suite buy-in for capital expenditures needed for risk control improvements. There may also be opportunities to align the property risk control agenda with environmental, social and governance (ESG) efforts because mitigating property risks can provide benefits across these areas.
Though it might be difficult to calculate direct cost-benefit outcomes for risk control expenditures, a broker can help risk managers convey a complete narrative. Risk control improvements should become part of the organization’s culture, and that can happen only with a top-down commitment.
Ultimately, business leaders want to see their organizations meet objectives and obtain customer fulfillment. By focusing on results-driven outcomes, the organization can successfully juggle the opposing demands of reducing costs and improving risk quality.
 “Navigating a Hardening Property Market,” Adjusters International