Why do businesses buy insurance?

Businesses buy insurance to protect their assets and income streams; to protect the assets of directors and officers of the company; to pay compensation to third parties in the event of a claim against the company; and, in certain circumstance, because it is a legal obligation.


What is the starting point to buy insurance?

The starting point for buying insurance is to identify what risks your business faces and whether these risks could give rise to a significant loss.  Such an exercise will enable you to identify those risks that are significant to your business.

You should then evaluate the control measures that you currently have in place to minimize the likelihood and/or consequences of a loss. You may be confident that a particular risk will not materialize or, if it does, it will not cause a serious problem.  In that case, you may decide to buy only limited insurance for that risk or even none at all, unless that type of cover is either a legal obligation or a requirement of your customers

Unless you are obliged or required to buy insurance, it is up to you to decide whether to buy insurance and what limit of indemnity is appropriate.  For example, you may decide not to buy Business Interruption insurance because you believe that a fire in your premises would not cause you undue disruption.

Alternatively, you may decide to buy a specific limit of Professional Indemnity cover because it is in line with the other members of your trade association or it is the amount specified by your customers.


Can I get external help in buying Insurance?

You should consider appointing an insurance broker or agent, because they have specialist skills and can save you time and money.

An insurance agent will normally only deal with one insurance company and represents an insurance company.  Use of an agent may therefore restrict your range of insurance options.

The broker on the other hand can provide you with a ‘choice’ of insurers and products and is legally your agent and representative rather than that of an insurance company.


How can a broker help me in buying insurance?

Rather than making critical risk transfer decisions on your own, you may prefer to take advice from an insurance broker. Also, a broker can save you time by identifying the best insurer/re-insurer for your business, advising you on what type of cover is most appropriate and presenting information about your company to potential insurers/re-insurers. This information should include details of your existing risk management practices so that the insurer can decide whether to offer you cover and how much premium to charge. Besides, brokers bring in an element of neutrality and objectivity in the purchase process. In addition to their understanding of Risk Management and Insurance, brokers provide support in claims settlement.

What is the range of services that a broker can provide?

A good insurance broker provides a range of services including the following:

  • Identify your insurable risks and decide how much insurance to purchase,
  • Compile and validate the insurance data that will be presented to insurance companies
  • Complete insurance proposal forms, when necessary
  • Present your insurance information to alternative insurance companies
  • Identify cost-effective risk control improvements
  • Evaluate quotes from insurance companies, and
  • Claims Management


How is a broker remunerated?

Across the world, a broker traditionally earns his remuneration through a commission paid by the insurance company. More recently however, the fee based model has also emerged in several countries where the customer pays a fee to the broker, particularly if a risk consulting service is provided. A combination of the two is often found in vogue depending on the services provided.


How do I select my Insurance broker?

Choosing an insurance broker is one of the most important decisions a risk manager must make. Although there is no magic formula for making the right choice, here are a few tips:

  • Make sure you are assigned a good Account Manager who has the ability to tap the firm’s resources to service your account. All the major brokerage firms (like good Universities) have excellent people. In the end it is all about people and about engaging the right people. Be cautious about the sales tendency to trot out the heavy hitters initially, only to be serviced by the most junior persons after your account is won.
  • The expertise of its specialists is a very important consideration in dealing with a broker. From the perspective of seasoned risk and insurance management professionals, who are by definition generalists, it is refreshing to meet experts who actually know their subject area more thoroughly than the risk manager. Ideally the interaction among the broker, the risk manager and the under-writer should result in a synergy, wherein their combined work product is better than that which any one of them could have achieved individually.
  • The global presence of a broking firm is an important aspect to consider. One must however be conscious of the fact that a broker might have a global presence, but not a global identity, or the ability to consistently deliver products and services in a seamless manner throughout the world.
  • The next crucial quality in a broking firm is their ability to syndicate and bring together the capacity of numerous insurers to achieve desired limits.
  • The broker should be able to communicate his proposals and recommendations clearly and precisely.
  • The broker should display a sense of urgency while responding to issues.
  • Another attribute the broker must possess is negotiation leverage-clout.
  • The broker should be able to negotiate good coverage and also help with settling claims.
  • The broker should possess a reasonable understanding of the customer’s business.
  • One of the most important qualities that a broker should possess is the ability to support in settlement of Claims. They are the very reason insurance exists. Unfortunately, because claims are generally a non-revenue generating activity for both the broker and the insurer, they are often last on the list. However, when the big loss occurs, a knowledgeable broker's help in navigating the claims process will be invaluable.


How do I select my Insurer?

Price should not be the only consideration when choosing your insurance company. The most important service from your insurance company will be the full and prompt payment of the claim when a loss occurs. And you need to therefore look at issues such as financial strength, track record etc.


Why should you choose Howden as your broker?

  • We are focused.
  • When engaged by a customer we are able to produce outstanding results thanks to our large number of specialists in business critical insurance. Our specialists have been exposed to international best practices across industry sectors.
  • We are totally customer focused in providing leading-edge products and services.
  • We are led by an experienced, multidisciplinary team of professionals drawn from the fields of finance, law, insurance, reinsurance, financial services, information technology, engineering, loss prevention and possess the requisite experience, technical skills and professionalism to provide our customers with robust insurance solutions. The management team of the Company brings over 300 years of combined best practice driven specialist insurance experience and expertise to Howden.
  • Being part of the Howden Broking Group (the broking arm of Hyperion Insurance Group Headquartered in UK) we have an international presence. With a physical presence in over 19 countries with 36 branches we are present in all major continents. Our seamless connection with Howden Broking Group worldwide puts us in a tactically strong position in accessing reinsurance markets and capacity.
  • No matter what a client’s business is, or how difficult the situation, we give it everything we have. We are not just interested in winning the client’s business; we want to make sure the client stays with us.
  • We have one of the best Claims team in the broking industry with a proven track record of getting several complex claims settled.