We thought we’d put this simple 5-point guide to insurance for business covering the following aspects for your convenience:

1. Why insure

2. What to insure

3. When to insure

4. How to get insurance

5. Types of insurance

So lets make a start then! Please click on one of the above topics.

If you’re a business, getting a quote directly from an insurance company can be difficult. Unless it’s NRMA or a Suncorp brand (i.e. GIO or AAMI), chances are that you won’t get very far without a broker (incidentally, NRMA offer the same product as CGU).

The problem is a historical one with brokers traditionally representing the interests of their clients to numerous insurers in a bid to get the ‘best cover at the best price’. The argument goes that brokers offer the distribution base through which to pursue a larger target market. Of course, this outsourced distribution comes at a cost to the customer through broker commissions (generally around 20% of the premium for business insurance). But as insurance companies and brokers have gotten bigger and bigger this cozy relationship seems to have forgotten one thing – the customer!

In a bid to compete against other brokers or insurers, policy enhancements have resulted in highly homogenous products. Enter a little thing called ‘the internet’. With the benefit of over 10 years of experience in other countries such as the UK and US, industry insiders believe that new, online insurance quote systems could potentially see an end to broking as we know it. There is a firm belief that online comparison tools or ‘aggregators’ as they are called will become the new insurance brokers and ultimately benefit those insurance companies that do deal direct with the public.

These tools not only offer greater transparency over price, but also the immediacy of service that just cannot be rivaled by brokers. Have you ever woken up in the middle of the night and remembered that you need to buy insurance?? Hopefully you haven’t but if you did, wouldn’t it be nice to get an insurance quote online when you want it?

To our mind, it makes sense to give customers another avenue through which to purchase business insurance – hopefully with zero commissions! Technology should make our lives easier and the ability to access readily available information on how best to protect our businesses can only be a good thing – after all, we are really just paying a broker for the market knowledge and insurance contacts that they have. The problem however, is that this has also become commoditised with brokers ultimately only accessing the same policy terms and conditions as their own competitors (but some achieving higher commissions!).

Of course, technology such as the internet offers a much wider audience for insurance companies and no doubt, lower costs – however don’t hold your breath for lower premiums!

If you didn’t already know, in Australia many insurance brokers chose to join buying groups – commonly referred to as ‘cluster groups’, presumably to achieve better cover for you. As a buying group, they can negotiate better terms and conditions with underwriters. The problem however is that soon enough, every other buying group ends up with the same terms and conditions (i.e. policy wordings)!

Buying groups also serve to enable greater competition against the largest competitors out there: Aon Risk Services and Marsh – the world’s two biggest brokers. In case you missed your last Aon phone call at renewal you’ll probably won’t get one as your premium only represents a tiny proportion of the commission they would otherwise receive chasing larger clients.

We’re not sure about you but we’d rather support the ‘little guy’ as presumably they offer better service and will be there when I need them most – come claim time. Unfortunately however sometimes, the little guy gets caught up in ‘big guy’ talk and align themselves with buying groups with interests other than yours – for example getting better commissions from insurance companies. Fair call if you’re a small broker dependent upon these commissions, but the reality is that commissions are merely an expense factored into the insurance companies pricing – meaning that if it goes up, so too will your premiums…

Which is why we are always amazed when buying groups such as Austbrokers or IBNA (now combined as AIMS) hold lavish conferences for their members and suppliers (i.e. insurance companies) in exotic locations. For insurers attendance is effectively compulsory, as they need to demonstrate their support – so they typically send a handful of sales staff along, to enjoy the sights in Cape Town, South Africa for example (AIMS conference in 2010). The conference in Cape Town for example attracted over 320 delegates including presumably, the majority of the 120 odd AIMS-affiliated brokers.

Of course, if you haven’t guessed it already this only adds to the insurance company’s expenses and therefore your premium. If you’re also lucky enough to get charged a ‘risk management’ fee or an ‘advisory’ fee or any other sort of wonderful broking fee this might be another reason why their costs are so high – we wonder if your broker is part of AIMS or some other buying group?

Indeed, in a recent interview with insuranceNEWS.com.au, AIMS General Manager Mr McAvenna concluded, “the best way to engage more effectively with insurers will be by holding our next few conferences in Australia”. Hmmm.