Why a claim doesn’t always push up your insurance premium

If and when you’re in the situation of making a claim on a business insurance policy, and even if you’re confident that you’ll be compensated and get a decent pay out to cover any losses, you’ll most likely have the concern: ‘Could this possibly increase my premium at renewal time?’

Such thoughts may have you considering an alternative insurance provider in the future or even create doubts as to whether to submit a claim. But if you have the right insurance team beside you in the first place, alongside clear processes and communication, you can be confident not only in making a claim, but also that you won’t necessarily be faced with that dreaded price hike at a future date.

Why do business insurance premiums increase following a claim?

Before we talk about how to avoid a price hike, here’s a quick rationale of why businesses face paying more after a claim. And it really isn’t personal.

Insurers are all about managing and estimating risk. So, if you’ve had an incident – be it theft, flooding, loss of goods, a liability claim, or even reputational damage – that means the risk is tangible and real with a potential cost, rather than in the abstract. Even when there is clearly no blame on the part of the policy-holder, the insurer (all calculated and assessed by those super smart actuaries) has a case to suggest there is a stronger probability it could happen again. Hence, a potential premium increase.

The three key elements when assessing business insurance premiums are: 

• Risk assessment: Insurers look at your historical claims to predict the chance of a future one. If you’ve made a claim in the past, the greater the assumption that there will be another
• Business type: Your business or trade type affects what you pay, as some trades are riskier than others. Scaffolders will be set at a higher premium than a cake decorating company, due to what the work involves
• Coverage amount: The more extensive your need for coverage, the higher your premiums are likely to be – regardless of previous claims.

How different claims may impact your business insurance

The possible rise in premiums also depends on the type of claim you’re making.

• Property damage is a very typical business insurance claim, varying from the widespread damage caused by fire or flood to hot liquid accidentally seeping into a pricey bit of office kit
• Liability claims are usually around a customer or visitor slipping or tripping in your retail premises, workshop, or office. Alternatively, someone may be suing you for failure to deliver a product or service, or perhaps a client is suing you for not delivering what you promised
• Employee compensation claims arise if an employee is injured at or through work and decides to take legal action. The knock-on effect on premiums is that whatever the outcome, the case itself suggests there is a health and safety situation that needs to be resolved
• Professional indemnity claims arise if you must compensate a client for something such as providing poor advice or misleading information
• Vehicle claims are made if a business vehicle is stolen or involved in an accident. If this becomes a regular pattern, insurers can justify a higher premium by calculating you and/or your drivers are prone to prangs
• Business interruption claims have a basis in a forced closure or halting of production and services. Whether that’s the result of a fire or flood, a problem in the supply chain, or a staffing issue, business interruption can be costly, with substantial consequences to your premium.

Keeping your business premiums at a minimum

Now the important bit – making sure you’re not paying any more than you need to in five simple steps:

1. Report the incident immediately 

Thorough and immediate reporting of an incident to your insurer is the golden rule as this means they can take swift action. The longer you delay, the stickier things get… including the possibility that your claim may be denied. 

2. Gather evidence and submit a detailed report 

If necessary, take photos, get witness statements, and collect as many details as possible that can support a claim. Details and evidence (Including time-stamped video/CCTV footage) equal answers to insurer questions! And that in turn gives them a clearer picture of the incident and impact, which can back up a claim.

3. Fill out a claims form 

If you’re asked to fill out a claims form by your insurer, do it quickly, comprehensively, and accurately, checking for errors or omissions before sending.

4. Don’t forget supporting documents 

While you may not have these immediately, submit police reports, repair estimates, medical records, and emails as and when you have them - all of which may strengthen and support your claim.

5. Review, settle, reinstate

It’s now down to your insurer to review, reinstate and hopefully, based on all of the evidence provided, settle a claim and reinstate the policy. 

The silver bullet: Partnering with an insurance broker

If you aren’t doing so already, what can remove a world of pain throughout a business insurance claim is having the services of a specialist insurance broker team, such as Howden. Going directly to a familiar and expert account handler as soon as you need to make a claim means you have the best guidance and advice from day one. A great broker will be active even prior to a claim arising, often they'll ensure that you’ve mitigated for any risk before the incident. Brokers can also recommend steps ahead of renewal to ensure minimal chance of a repeat performance, therefore mitigating and premium loading. All of which will help reduce the likelihood of a hefty renewal premium increase.

To understand how you can keep your business insurance renewal costs down while staying fully protected, talk to us today via the buttons below.

We look forward to working with you.