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What Information Is Needed During the Commercial Insurance Renewal?

The devil is in the details and when it comes to renewing your commercial insurance a lack of detail is very likely to result in a higher premium.

When renewing any commercial property insurance, an underwriter requires information on location, occupation (i.e. how the building is being used), values (i.e. building and stock values), limits and deductibles. Risk mitigation information is also required. For example, to protect against property damage and business interruption (PD/BI), underwriters will be looking to see whether any of their recommendations have been completed and which recommendations are outstanding. Finally, a complete claims record is needed to show the frequency and severity of any claims for the previous five years and beyond before a premium can be provided.

Providing this data to renew commercial insurance policies for one, two or even up to five properties is not that demanding and shouldn’t have a large impact on time and resource. However, consider for a moment those organizations that have hundreds, even thousands of commercial properties in multiple locations across the world. When dealing with commercial insurance renewal on this scale the level of detailed data required can mount up fast. This is when managing large sets of data in a spreadsheet based system becomes a Risk Manager’s nightmare as the potential for inaccurate data is greatly increased.

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Providing underwriters with detailed information is crucial in order for them to make an accurate assessment. This can result not only in a reduction in premiums, but also added protection against any potential void claims in the future.

In one example the owner of a US property located in South Carolina, which was a high risk for windstorms, provided the basic level of detail outlined above in the initial stage of its commercial insurance renewal process - this resulted in a premium of $450,000. At the renewal stage, the company provided far more detailed data to the underwriter including details on the construction of the building, its frame, the cladding construction, the year the building was built, the number of stories, details of the roof covering, the age of the roof, the equipment used for the roof and anchoring, the roof's geometry, the door and window design, and details of the contingency plan should a severe windstorm take place. This extra level of detail made a significant difference to the premium, reducing it from $450,000 to $255,000 – a savings of $195,000.

This is a good example of where the Latin phrase “Uberrima fides” - meaning “utmost good faith” - really paid off. Uberrima fides is the name of the policy that governs insurance contracts and means that all parties involved in an insurance contract must deal in good faith, making a full declaration of all material facts in the insurance proposal.[1] Armed with the extra detail regarding the commercial property, the underwriter in this example was able to provide a contract that fit the needs of the company more accurately and at a lower premium.

It must be made clear at this point that more information does not automatically mean a reduction in premiums for all organizations. Providing more detail to an insurer may actually lead to an increase in premiums, but by providing high-quality data, Risk Managers are meeting their duty of disclosure. Meaning that when a claim is made, policies will not be at risk of being voided and claims only being partially paid.

If Risk Managers fail to meet this duty by not providing this level of detailed data, any insurance claims could have to be paid by the organization, rather than the insurer, therefore impacting the company’s profit and loss margin. It will also result in a very uncomfortable time for the Risk Manager tasked with explaining why the organization was not covered for such claims.

Commercial insurance renewals for large, multi-national organizations can be a time consuming task involving large amounts of different data sets. Having an RMIS system to help manage this process in a structured manner with pre-defined, standard renewal questionnaire templates that can be easily adapted to meet specific business needs will reduce the burden on Risk Managers, ensure that the correct data is collected and is accurate and will provide underwriters with the level of detail they require to provide the correct insurance policies at the right premium. 

To learn more about commercial insurance renewal and insurance renewal software download The Definitive Guide to Commercial Insurance Renewal or contact us today!

Joe Fitzpatrick is Director of Commercialization with the Ventiv Technology Global Product Management team. Joe works in the Atlanta Ventiv office and can be reached at joe.fitzpatrick@ventivtech.com or by phone at 770-308-5446.

 

Download the Definitive Guide to Commercial Insurance Renewal

[1] http://en.wikipedia.org/wiki/Uberrima_fides

Mar 4, 2015

 | Originally posted on 

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