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december 2015 year
december 2015 year
Partner Katerina Shum
exclusively for journal "Business"

When to Say Yes to Higher Insurance Rate for Policy Renewal

Partner Katerina Shum
exclusively for journal "Business"

Insurance policy is usually concluded for the term equal to one year. However there is a possibility that the insurance rate will be increased for the renewed policy while the insured has hoped to receive the lower rate considering the absence of insured losses during the year. Normally you can save 3-5 % each year if no insured event took place.

However there are some cases when the increased rate is reasonable. They are given below.

1)      The rates, stipulated by corresponding legislative documents, have been increased for compulsory insurance products. This is particularly true for motor vehicle third party liability insurance.

What is to be done then? One way is to negotiate the best possible discount with the insurance company or with the help of insurance broker to offset the increased cost of insurance. Another way is to choose another insurer offering more competitive prices. Keep in mind, though, that the cheaper insurance is, the higher chance for you to be denied indemnity for the insured losses. Besides, there is always the lower limit of the insurance rate stipulated by rules and regulations.

2)      You encountered insured loss during the term of agreement.

In this case everything depends on the sum of indemnity paid and overall loss ratio of your policies with a particular insurer. If it significantly exceeds the insurance premium not only for the current policy, but even for the several previous ones, it’s safe to assume that the insurance rate will be increased for the next year to compensate for the financial losses insurance company suffered. The option available for you to still keep the same amount of premium is to increase the deductible amount of the policy. Another way is to eliminate the cause of the insured event that took place to prevent similar emergencies in the future. Besides, always notify the insurer about measures you took to lower the risk of the losses.  

3)      Loss in the industry similar to yours.  

Insurers do take the emergencies in the whole market seriously. Of course, they further adjust their rates accordingly. For example, if the inflammable material were used to make the building cold-proof which later caused the fire in the facility,  the insurance companies will look closely for similar materials in other objects they are about to insure and probably offer the higher insurance rates or refuse the coverage outright.

Another vivid example is the recent fire in the petroleum depo in Vasylkiv district which brought about surge of the insurance rates and the number of denial of coverage for other petroleum facilities.

To prevent this situation you can gather the documents from fire inspection as an evidence of meeting their requirements in terms of fire safety. Or you can invite the insurance surveyor to prove that your facility a low-risk one.

Survey usually results in a list of drawbacks and corresponding recommendations for their elimination from the side of insurance company. Once you’ve undertook the required actions, you can count on being offered the same insurance rate as for the preceding insurance policy.

Owner’s responsibility in managing his property is the key to lower chance of the insured event and, subsequently, to lower insurance rates
To sum it up, it all comes down to the following. Owner’s responsibility in managing his property is the key to lower chance of the insured event and, subsequently, to lower insurance rates. Moreover, the measures taken to improve the operational safety of a facility give you a right to ask for better terms of insurance.