Insurance is an integral part of risk management strategy at any business.
It is meant to mitigate the financial impact associated with risks taken by a company, including legal action, delinquencies and disasters. Insurance provision is intended to minimise the adverse consequences of all routine and unforeseen enterprise risks.
Businesses are prone to unpredictable business challenges that pose a variety of risk trajectories. Any business at a particular point in time can run into unchartered domains, putting its continuity or financials at risk.
Therefore, business depends on insurance providers as the first responder to cover such uncertainties. It is indeed a daunting task as insurance has evolved with more sophistication.
Managements need to do a deep dive to acquire a better understanding of the specific risks that their business faces and to map them appropriately.
A mindset change is needed
However, the notion of insurance narrative needs to change. Most businesses assume that once the insurance is locked, all risks their risks are passed to the provider with no recourse to the company.
Until the insured party does not have a defined obligation, no protection is assured. Locking insurance is no assurance if the requirements of the underlying risk of the policy do not comply. Interestingly, most businesses assign insurance at the top of their agenda. Never do they miss the insurance deadlines.
They go an extra mile to negotiate the best premium, but do they all read between the lines of their insurance policy documents? Perhaps not! Why this apathy?
The general perception of the insurance once covered is taken for granted, but actually, this is not the way it works. Apart from putting a robust structure and competent professionals at the helm, it is advisable to perform a past-claims analysis. Such a review reveals not only sheer numbers of claims and amounts of payout, it also provides an in-depth look at the specifics of the claims.
This review, in turn, can show trends and problem areas to cover for as well as actions that a company should immediately take in the event of a loss.
Insurers’ push back is natural
There is usual grievance about the insurance pushbacks on claims, with providers dragging their feet to push back the claimants. Claims continue to pile up as insurance providers cite noncompliance to the terms.
As per the insurer’s pushback, the claim does not merit its conditions stipulated in the policy nor does the insured provide the documentation in line with policy needs. It is also true that on the prima facie basis insurance treats all claims with suspicion unless corroborated with abundant evidence.
Many times, the insurance carrier expresses bad faith in context to the claim. It doesn’t matter how valid your claim is. If an insurance company is not willing to entertain your application, it certainly won’t unless all merits align to the exact wordings of the policy.
Insurance adjusters often try their level best to make the claimant compromise with a lower value. They try their best to find inconsistencies in your record and representations. In such circumstances, you got to win based on your housekeeping and consistency of your representation in the claim.
It would help if you strengthened your push with readily available facts and figures to receive the compensation you truly deserve.
Businesses need to move away from the culture of just providing for the premium and due date to going into logic of the insurance objective. With the advancement of risk regimes in the corporate world, the need for insurance has increased multi-fold.
From the traditional risks of property and life to the addition of risks such as product liability, professional indemnity, credit risk and business interruption, these require sophisticated risk management insights and safeguarding measures. Companies must not leave this to the financial or legal teams to manage it.
Ideally legal should administer it, finance to review, supply chain to negotiate, and operations to own it. This way insurance shield will help companies to neutralise risks.
Tariq Chauhan is Group CEO at EFS Facilities Services Group.