Ways to Cut Your Insurance Costs

For many companies, insurance premiums represent one of the largest expenses on their books each year. Insurance costs are always a prime consideration when purchasing policies, renewing coverage, or choosing an insurance agent or broker.

“No two businesses are exactly alike, and no two businesses have identical insurance needs,” says the Associated Press. “Your cost for small business insurance will thus be affected by several factors, including the following:

• Coverage Choices: Your coverage choices are a major determinant of your insurance cost. A business with more extensive coverage needs will likely pay more than one with fewer needs.
• Claim History: A business with a long history of insurance claims will almost definitely pay more for coverage.
• Type of Business and Industry: The type of business affects the cost of insurance.”

The question is, how can you reverse the trend of ever-increasing premiums and start taking control of your insurance spending? How can you develop an insurance program that demands the best rates and coverage the market has to offer?

Let's look at some key strategies you can implement to better control your company's insurance costs.

Implement a Robust Risk Management Program

One of the most effective ways to reduce insurance premiums over the long term is to lower your company's risk profile. This means being proactive about identifying, assessing, and mitigating the various risks your business faces.

“Don't just sit back and let claims happen, plan for them and build processes to mitigate those claims where it makes sense. You probably already have some risk mitigation procedures in place, even if you don't know it,” says Kyle Dean, President & CEO of Dean & Draper. “Depending on what industry your company operates in, there are numerous techniques, processes, procedures and tools you can be utilizing to mitigate your risk and in turn, lower your insurance cost.”

Key components of a strong risk management program include:

• Conducting thorough risk assessments to pinpoint areas of exposure.
• Implementing safety protocols and training employees in safe work practices.
• Maintaining facilities and equipment to high standards.
• Developing and testing business continuity and disaster recovery plans.
• Investigating all accidents and near-misses to determine root causes.

By taking tangible steps to reduce risk, you demonstrate to insurers that your company is a better risk to insure, which can translate into lower premiums over time. A good insurance broker can provide risk management expertise and resources to help you build out your program.

Explore Alternative Risk Financing Options

For some companies, traditional guaranteed cost insurance programs may not be the most cost-effective approach. Alternative risk financing techniques allow you to retain more risk in a controlled way in exchange for potentially lower costs. 

Options to consider include:

• Large deductible plans where you pay more out-of-pocket for each claim.
• Self-insurance for more predictable, high-frequency losses.
• Captive insurance where you create your own licensed insurance company.
• Parametric solutions that pay out automatically based on a triggering event.

The feasibility of alternative risk financing depends on your company's cash flow, risk appetite, and ability to manage claims. An experienced broker can help you model different scenarios and determine if one of these approaches could help you better control costs.

Partner with the Right Broker

Perhaps the single most important factor in managing insurance costs is working with a knowledgeable, proactive and consultative insurance broker such as Dean & Draper.

The right broker will invest time to thoroughly understand your business, risk profile and objectives. They will have deep expertise in your industry, broad market access to secure competitive terms, and will provide strategic risk management guidance.

Look for a broker who operates as an extension of your team, not just a transactional middleman. They should proactively present new ideas to drive down costs, enhance coverage, and make your insurance program a competitive advantage.

“A long-term broker partnership built on transparency, trust, and continuous improvement is key to optimizing costs over time,” advises Dean.

Require Insurers to Compete for Your Business

Insurance is a competitive marketplace, and your broker should make insurers compete aggressively for your business.

This means marketing your program to a wide range of carriers, maintaining centralized data on your risk and loss history, and pushing for the broadest terms at the best rates.

Your broker should provide a coverage and pricing comparison at each renewal so you can easily evaluate quotes and see how they were able to improve your program year-over-year.

If your broker doesn't provide this analysis, ask for it. Foster a dynamic where insurers must sharpen their pencils because they know your business is heavily shopped each year.

Manage Your Claims Proactively

How you manage claims when they occur has a direct impact on your insurance costs.

Delays in reporting claims, lack of communication with adjusters, and failure to document incidents can all lead to higher settlement costs.

This translates into higher premiums at renewal. To keep claim costs in check:

• Report claims to your insurers immediately when they happen.
• Coordinate closely with adjusters and provide all the information they need.
• Document accident scenes with photos, witness statements, etc.
• Implement a return-to-work program to minimize lost time after employee injuries.
• Maintain accurate loss runs and review them with your broker regularly.

“Effective claim management, in partnership with your broker and carriers, will help you minimize claim expenses and negotiate the best renewal terms,” explains Dean.

Take Control of Your Insurance Costs

Insurance may be a necessary cost of doing business, but that doesn't mean it has to be uncontrollable. By implementing smart risk management practices, exploring alternative program structures, partnering with the right broker, making insurers compete, and staying on top of claims, you can take meaningful steps to reduce your company's insurance spending.

The team at Dean & Draper knows the challenges companies face in controlling insurance costs in a difficult market. As a leading insurance broker and risk management consultant, we are here to provide the expertise, analysis, and advocacy you need to get the best results from your insurance program.

Contact us today to discuss how we can help you drive down costs and make your insurance a source of competitive advantage.

The recommendation(s), advice, and contents of this material are provided for informational purposes only and do not purport to address every possible legal obligation, hazard, code violation, loss potential, or exception to good practice. Dean & Draper Insurance Agency specifically disclaims any warranty or representation that acceptance of any recommendations or advice contained herein will make any premises, property, or operation safe or in compliance with any law or regulation. Under no circumstances should this material or your acceptance of any recommendations or advice contained herein be construed as establishing the existence or availability of any insurance coverage with Dean & Draper Insurance Agency. By providing this information to you, Dean & Draper Insurance Agency does not assume (and specifically disclaims) any duty, undertaking, or responsibility to you.  The decision to accept or implement any recommendation(s) or advice contained in this material must be made by you.