Finding the Right Insurance Coverage
Like many companies, freight brokers purchase insurance coverage each year to protect their operations and meet customer requirements. Getting the best solution for your needs starts in a place you might not expect; rather than focusing your search around price, begin by identifying your chief concerns and objectives and then design an insurance program to address those factors.
Here are four things to keep in mind as you consider coverage for your business.
#1 – GO BEYOND THE BOTTOM LINE
Annual premium is an important part of the decision-making process, but it is not the only item worth looking at. These modifications may affect your premiums and are worth exploring:
- Coverage Options: Request pricing with or without options based on your risk retention appetite and what may be required by your larger clients.
- Risk Retention Limits: Think about increasing your deductible to save on insurance premiums.
- Coverage Limits: Capping certain coverages with an annual aggregate may help keep premiums down.
- Supplemental coverage and enhancements: Review all “add-on” coverages closely to determine if they are necessary. If not, ask your provider if removing certain enhancements could lower your overall premium.
- Lump Sum Payment: Pay premiums annually or see if your provider offers interest-free installments to avoid costly financing charges.
Although some of these options may have a minimal impact on your overall annual premium, it is best to consider all options before discussing available programs in further detail.
#2 – GET THE BEST QUALITY OF COVERAGE
When it comes to insurance coverage, it is important to outline your needs and then formulate a list of questions for your provider to ensure you understand the differences between each program. Skip this important step and you could end up with coverage that doesn’t adequately protect your interests.
Identify your risk with questions like: What are our exposures and how do we insure them? What do our clients expect from our coverage?
Discuss program options with industry experts. Talk to several providers to locate some programs that are designed for freight brokers and carefully compare their benefits. Ask questions like: What coverage is included in my policy? What are my annual policy limits vs. my occurrence policy limits? What triggers coverage and how will my policy respond? Is this a ‘liability only’ policy or do I need to be sued before my policy responds? Will my policy indemnify my clients for their losses? Does my provider assist in mitigating losses with carriers before a claim needs to be submitted to my insurer?
Discuss internally which program is the best fit. Make sure you agree about which coverage to pursue.
#3 – KNOW YOUR CUSTOMERS’ REQUIREMENTS AT RENEWAL TIME
With a growing number of contractual requirements being imposed by shippers, it is important for freight brokers to understand their insurance policies and make sure they meet the most common requirements of their client base. It is also critical to identify problem contracts and ask your insurance representative or legal counsel whether terms can be satisfied. In some cases, you may not be able to move forward without taking on uninsurable risk. Expect a flexible response from your provider and keep an open mind about looking for other options that may help mitigate your risks.
#4 – CHOOSE A FLEXIBLE PROGRAM
Shipping clients often have their own vendor contracts and insurance requirements, which poses a significant challenge to freight brokers in coordinating coverage requirements. A flexible insurance program and the purchase of additional insurance coverage or enhancements may address this concern. Ask your insurance representative to price out any relevant coverage so you can weigh the increased cost against the anticipated revenue from the prospective shipper. There are additional factors to consider, such as:
- The ability of the insurance partner to provide larger policy limits when needed.
- The ability to designate your clients as an additional insured and loss payee with a waiver of subrogation.
It is very common for freight brokers to receive these types of requests and important to understand how they may affect your coverage.
It is also advisable to ask and understand how the insurance provider manages insurance certificates, and know whether they provide an online certificate issuance and management portal to their clients. Your time is valuable and any program benefits that can make you and your staff more efficient are worth considering.
A Final Word
Designing an insurance program is a critical function within any organization and there are several factors to consider. Although program pricing is important, it should not be the only consideration in making your insurance decision. It is important to identify what is important to your organization and create a program that satisfies your needs and expectations.
