Mark Clayton

Beware!! – The Insurance Premium Trap

As the pressure on every business is to reduce outgoing cost it is easy to understand why insurer RSA recent survey revealed premium level is ahead of every other factor when considering what insurance to purchase. Cost was named in the top three factors by 61% of the survey’s SME respondents.


Cost is king ... (isn’t it?)

Now this may not come as a surprise to too many of us. To think business owners and controllers are going to ignore cost would be just plain stupid. However, perhaps more worryingly, just 38% 0f the same SMEs ranked scope of cover as a top consideration. To ignore cover and focus purely on cost is an incredibly dangerous path to follow and may not end well for those who tread it.

Mark Clayton – InEvexco Managing Director commented “This is indeed a statistic which should set alarm bells ringing but fortunately I believe the vast majority of our clients are more aware of the significant risks in choosing insurance policies and broker services based on price with little or no regard to other crucial elements”.

Underinsurance isn’t the answer

As an additional worry there is an increasing concern within the insurance industry where price sensitivity is contributing to an underinsurance problem. Underinsurance leads to reduced claim payments. Deliberate, significant underinsurance could even lead to a claim being totally denied by an insurer. So another trap opens when for a relatively small saving in premium a company could be left with a large financial gap in cover. What’s the point in that? Some might say thats ‘chasing fools gold’.

Value for Money is the Aim

Interestingly, the survey highlighted 58% of businesses rated ‘Brokers Understanding’ of their business and ‘Quality of Service’ close to the premium cost importance. This underlines the importance of specialist brokers who have developed an empathic understanding of their clients’ businesses and insurance needs.

“Across the range of specialist insurance products and covers InEvexco offer, these are supported by professional, experienced staff who not only understand their customers’ industry but have tailored certain insurance policies to provide more relevant and comprehensive cover to our clients”. Mark Clayton proudly says.

Please Beware

Mark Clayton offered this as a final consideration for SMEs. “Price is dangerously flexible across the insurance market whereas quality of service, knowledge and experience should be sort at the highest level to ensure a broker can offer a client the right cover for the right price. To buy insurance below the right price will nearly always mean cover and service has been compromised – This is the dangerous Insurance Price Trap”.

To avoid the Insurance Price Trap prudent buyers will ensure they identify a specialist insurance broker who offers an in-depth understanding, excellent reputation and experience serving the particular sector they are in. If the price of this service is affordable, this is the one to go for. It may not be the cheapest but it will prove to be worth the money in the event of that dreaded claim.

Buying cheap insufficient insurance cover from an inexperienced broker would be like engaging the services of the cheapest builder to build your dream home – It could leave you exposed to risks and ultimately surrounded by rubble, broken dreams and financial ruin. So, Beware the Insurance Price Trap!

RSA’s Survey’s complete Top 10 Factors which influence SME owners’ decision when buying insurance:

  • Premium Cost (61%)
  • Customer Service or Understanding of Their Business (58%)
  • Scope of Cover (38%)
  • Product Features (25%)
  • Transparency of Products/Details (23%)
  • Tailored Products (20%)
  • Claims Support (18%)
  • Brand Awareness (12%)
  • Recommendations from family or friends (12%)
  • E-access/On-Line (10%)


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