Huge increase in insurance premiums adds to growing pressure on businesses
Analysis (1) of industry data by Mactavish, the specialist outsourced insurance buyer and claims resolution expert, reveals that 93,570 firms in London closed in 2020. This was 18.4% higher than in 2019, 27% higher than in 2018 and 17.5% more than in 2017.
There were however 107,310 new businesses launched in London last year which was 2.1% up on the 105,070 start-ups in 2019.
Mactavish says one of the factors putting pressure on businesses is a dramatic increase in the cost of insurance premiums. A growing number are finding it difficult to pay these, and may either have to curtail their operations or close as a result. It says there has also been considerable erosion in the quality and extent of the cover offered by insurers, meaning that buyers are often left paying more for less.
Bruce Hepburn, CEO, Mactavish said: “The COVID-19 crisis has had a devastating impact on the UK economy. As the risks facing the country increase and insurers are raising prices to improve their margins, many firms are finding it difficult to pay their premiums. They are having to cut back on the quality of their cover or on their operations, and for some it is the final nail in the coffin. However, there are ways you can reduce your insurance costs and also improve the quality of cover, such as having two brokers pitch for your business along with their preferred insurance partners, as opposed to just using one broker, which is what most companies do today.”
According to recent reports, UK commercial insurance pricing has surged by over 40% across the board. Despite this, Mactavish says that on some of the tenders it has run on behalf of clients, premiums have fallen by over 30% against the estimates given by incumbent brokers.
What should insurance buyers do?
Firstly, Mactavish advises firms to start from the ground-up. They should reflect on their insurance programmes and develop a robust understanding of the key scenarios they want to be covered.
Secondly, the other crucial area of focus in a hard market – of the type not seen for over 15 years – is how firms market their risk effectively. This involves improving insurers’ understanding of their exposures and differentiating it from those of their peers. Developing a bespoke risk prospectus is an effective way of ensuring that insurers will not view their risk as a commodity – or sell them an unsuitable generic policy – and puts firms in the best position to achieve improved, reliable coverage at a more competitive rate.
Hepburn added: “In a hard market, you shouldn’t see buying insurance as a procurement decision, Instead, you need to understand that you are seeking capital from insurers and approach your renewal on that basis. You must ask yourself: how can I help my firm stand out? How can I communicate how we manage and mitigate risk so that we get the best possible terms from underwriters?”
Mactavish specialises in helping companies enhance their chances of securing reliable insurance policies or challenging claims that have been disputed.