Nonetheless, your company can do many things to reduce risk and your commercial insurance premiums.
History & Severity of Claims
The first factor many insurers look at is how your claims history compares to similarly-sized businesses in your industry. If your business has many claims or severe claims when compared to others, you’ll pay more. (Also read: CLUE Yourself In: How Your Claims History Informs Your Insurance Future.)
Fortunately, a solid workplace safety program and proactive risk management reduces accidents, injuries, and insurance premiums when you meet or better similar companies.
A safety management review to identify risks and regular safety inspections can pinpoint potential problems so you can act before incidents occur. Worker safety and equipment training are also valuable ways to reduce accidents, injuries and claims.
Property Vulnerabilities & Location
While you’re probably not going to move your business for lower insurance premiums, you will want to discuss a potential new location with your insurer before you commit.
A business located in a remote location, a neighborhood with a high crime rate, or an area without a fire station or hydrant nearby typically pays more. Neighborhoods prone to flooding, high winds, hail, sewer backups, or earthquakes will also pay more and need specialized insurance.
Regardless of your business location, you can focus on improving building security and replace end-of-life property with newer, safer materials to improve safety, qualify for discounts and reduce claims.
Policy Limits & Deductibles
They multiply this “total insurable value” against the insurance rate to determine your premium. However, the asset class of each holding affects your premiums too, because the risk, rate, and depreciation for each class differ.
For instance, your company may have a policy with a $750,000 property insurance limit. Within that total, you own $100,000 inventory, $500,000 in leasehold improvements, $140,000 in equipment, and $10,000 in computer equipment. If you incorrectly report you have more in an asset class, you could pay more than necessary and leave your business exposed in another.
Consequently, it is very important to review the assets in your statement of values at least annually. This ensures your policy limits suit your needs as your business grows and changes.
Increased deductibles lower premiums, but you also assume more risk. Often times, deductibles are charged per incident and not annually either. Work with your agent or broker to determine and understand an appropriate deductible.
Increasing your deductible may not be a viable option for your business if you assume more risk than you can handle.
You need to have proper balance between premiums and deductibles.
Vehicles & Drivers
Your insurer calculates your commercial auto insurance premiums based on many factors. They start by analyzing the type, size, and number of vehicles you own.
Newer vehicles usually cost more to insure since they cost more to repair. Larger vehicles such as heavy trucks typically cost more to insure than passenger cars since they can cause more damage and steeper claims.
If you own many vehicles, you may benefit from lower fleet rates. Your insurer will also examine how you use and store your vehicles.
The rates for companies with sales representatives traveling hundreds of miles each week will differ greatly from contractors hauling tools, equipment, and materials to local work sites. If you store your vehicles in a secure area rather than an open lot, you’ll probably pay a lower rate.
Your business location and driver experience greatly affects your insurance rates too. You will pay more for novice than seasoned drivers, because they’re more likely to cause claims.
Bustling urban companies typically pay more for insurance than rural businesses as the likelihood of accidents, injuries, theft, and vandalism increases in congested areas.
Regulations, Claims Costs, Fraud, & Fees
Some expenses contribute to higher premiums, but they’re beyond your control. Fees levied by government bodies, taxes, court settlements, vehicle and property repair costs, and fraudulent claims are just a few. Insurance companies adjust their rates to reflect these costs, but how much they adjust them can vary greatly between carriers.
An independent broker or agent accesses many products for superior coverage and rates. Don’t automatically renew without a thorough review.
New products and products suited to your business profile could reduce your premiums.
Measures such as strengthened data protection, fraud awareness training, materials handling training and driver training can all lead to discounts. Installing a security or sprinkler system or replacing your existing one with newer technology could also lower costs.
Your agent or broker should actively seek multi-policy, loyalty discounts, and claims-free discounts. If you pay your full premium instead of choosing installments, you’ll also pay less.
Some insurers offer commercial vehicle discounts to established companies, especially if your drivers have commercial licenses.
The formulas used to calculate your insurance rates vary from one insurer to another. Talk to your agent or broker to understand ways you can save, and before you file a claim.
They’re industry experts and can pinpoint potential problems and tailor your coverage to your needs. Their expertise could reduce your commercial insurance premiums and provide superior coverage.