Insurance is a Commodity – Risk Management is an Art

October 12th, 2016

During times of economic downturn, it is not uncommon for companies to cut costs and scrutinize the pricing on everything from office supplies to vendor contracts. While this cost cutting may be necessary for short-term financial stability, executives must also consider the long-term ramifications of their actions.

One such misstep that could prove costly down the road involves the shifting of attitudes towards insurance brokerage services. By focusing only on obtaining the lowest possible premium pricing, companies may be leaving themselves exposed to gaps in coverage for risks that are not addressed. This could have a significant impact in the event of a large claim or loss.

When purchasing insurance, it is important to make sure that the price being considered is for the appropriate coverage. Coverage terms and conditions, proper endorsements and other elements of the insurance contract need to be reviewed by an insurance expert to ensure that the policies provide adequate and appropriate protection for your specific situation. The savings in purchase price are quickly negated if your ability to recover in the event of a loss is hampered or even forfeited by restrictive policy terms or conditions. This is particularly true for many general policy forms on the market today that do not address specific industry risks and hazards.

Simply put, insurance is not a commodity. While price is definitely an important factor, it should not be the driving force behind your ultimate decision. Purchasing a less expensive, inadequate policy could leave you exposed to significant financial losses, business interruptions, litigation, and ironically, higher insurance rates in the future.