Premium allocations – getting the balance right

Premium allocations – getting the balance right

The renewal process can be challenging for any business. Determining appropriate levels of cover vs price as well as selecting both your Broking and Insurance providers. Unless you’re an insurance expert, it can be pretty daunting. Now throw in multiple members, clients or employees with varying degrees of complexity and it can be pretty tricky to navigate. 

It’s important to get the balance of premium right from the beginning as future costs are often predicated on the past.

So what are premium allocations?

Premium allocations involve taking an annual premium charged to an organisation and breaking it down into departments, clients or members to determine the most fair and equitable contribution amount for each entity to pay. There can be multiple factors involved like claims performance, size of each entity, location of risk or different covers required and each area can be priced differently. When multiple factors apply “splitting the bill” evenly each way just won’t cut it.

Premium allocations take all the variables into consideration and determine the right balance for each entity to pay.

In today’s world of bundled pricing, centres of excellence, and shared services, organisations must actively manage profitability and accountability across products, customers, regions, and channels—driving the need for structured and sometimes complex allocations. For organisations to improve profitability and accountability, it is critical that all products and services receive their appropriate share of revenue and cost allocations and that organisations understand the cost to serve their customers.

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That’s where we can help…

Howden’s Alternative Risk Management Services (or ARMS as we like to call ourselves!) can do all that hack work for you, leaving you to do what you do best.

Whether it’s a business unit, multi-member set-up or completely separate entities, we can put together an allocation matrix formula that automatically generates the right premium level for all. We consider what’s important to you, and build the calculations around that.

How do we work?

Whether the criteria is claims experience, sums insured, risk management practices or even geography, we can factor it all in. We take the time to understand how your organisation works.

• Discover what’s important to you
• Consider the critical aspects needed in our analysis
• Come up with an accurate solution formula that works

The way we work is always fair and equitable, and we free you from complicated analysis. 

Who benefits most from ARMS Premium allocation services?

All sorts of organisations are suited – mostly multi-member, or multiple outlet businesses. Any organisation that is experiencing friction within the group or requires an independent approach to premium allocations. 

Experts say that the ideal premium allocation strategy is about balance. On one hand, it needs to appropriately reflect the risk being insured. On the other, it must satisfy the client’s objectives, as well as those of regulators, local subsidiaries, insurers and brokers., Ensuring that premium allocation is done appropriately and on a timely basis can make a multinational program run much smoother for everyone.

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Where do I start?

Getting the right balance both in business and life can be challenging, but premium allocations are simple when you let us do the work.