When the economy begins to falter, every business, whether a one man band or larger enterprise, starts looking at reducing costs in anticipation of a drop in turnover and therefore profit. Business insurance should be one of those costs under scrutiny. Why wait until your renewal?
Firstly, if you are still in business, be it experiencing a reduction in sales or possibly staff numbers, you shouldn’t be tempted to just cancel your business insurance on the basis you had never needed it before.
When everyone is suffering from the impact of a struggling economy, that’s exactly when contract disputes, accusations of negligence or professional errors start rising. And many do turn into insurance claims. In other words, as tempting as it may be to eliminate insurance costs all together to survive the hard times, it’s possibly the worst timing to do so.
The good news is there are a number of steps you can take to keep your business insurance premium at bay.
Renegotiate your current deal
Every insurance policy states that if your business activities change, you must inform your insurers. This is a caveat insisted upon by insurance companies to ensure that you pay the appropriate amount of premium for the risk. However, whilst the intent of this condition is to protect the insurers from giving you cover for something you haven’t declared to them, you can use it in your favour.
Have your sales dropped? Has the number of your clients diminished? Have you reduced staff? All of these changes decrease the risk for the insurers. As such you should ring up your insurance provider and ask for a new deal to reflect your new circumstances.
Unfortunately many insurance providers, as many businesses discovered during Covid, will not budge and insist that the deal can only be reviewed at a renewal. Strictly speaking that’s not true and if that is the answer you have received, it’s time to look at the next step.
The UK insurance market is one of the most mature in the world and the first page of Google results represents only a fraction of the choices you have and it certainly isn’t always the best choice for small businesses. Keep clicking through to page 2, 3 or more to see other options.
A word of caution when it comes to price comparison websites. At a first glance they can offer great prices but there are invariably extra costs – be it APR, policy fees or charges to make changes. Plus quite a large number of these sites fall under the same umbrella. In reality that means you are only comparing a handful of insurance providers over and over who can afford to pay the price charged by comparison websites .
Consider your insurance limits
Reducing limits isn’t always advisable and it is only possible in certain circumstances. However, this approach can make your premium cheaper. It’s better to be insured partially than not at all. For example if you are holding business liability insurance with a significant policy limit for public liability or professional indemnity, ask yourself whether your business needs it. Perhaps you selected it because it was a good deal at the time or one of your former clients insisted on it.
Reduced or changed business activity can sometimes mean reduced risk and therefore an opportunity to review your business insurance needs.
Ashley, who runs a commercial estate agency, decided to eliminate property valuations for banks which was the riskiest activity of his business. The area was very litigious and costly to insure due to the high policy limits required. As a result he saved a substantial amount on his professional indemnity insurance and the profits of his business improved.
Question the flexibility of your insurance provider
- Do they charge fees for changes or cancellation?
- Can you pay monthly without extra APR on your premium?
- Will they allow you to hit the ‘hibernation’ mode to reduce your premium when work is slow?
When you start adding up all these costs, often you find that they can almost double the original insurance premium quoted. Choose an insurance provider who is upfront about their charges so that you can plan ahead.
Switch if it makes sense
Consumers and small businesses are more accustomed these days to look at switching providers of utilities, internet, telephone, even bank accounts to improve their cash flow. The same should apply to business insurance.
Firstly, there really is little value in waiting for the renewal date to come around if you have spotted a better deal. You may miss out. Plus many insurance providers still like to impose a loyalty tax. In other words you’re likely to pay incrementally more each year if you stay with your current insurance provider.
Secondly, even if there’re some cancellation costs associated with moving your insurance midterm, that shouldn’t stop you from taking action if the new deal you have found will start saving you money within a month or two. Make the call, find out the terms to cancel your current insurance and do the maths. Often you’ll find that your current insurer will offer you a discount to stay. That’s always nice but you should ask why they haven’t done so voluntarily. Insurance providers should always offer the best deal available to all their customers, new or existing.