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How brokers can talk clients out of declining coverages


July 10, 2019   by Adam Malik


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Companies looking to save a few bucks by declining certain insurance coverage options are putting themselves at risk, and it’s up to brokers to ensure their clients understand the consequences.

What do you tell a commercial client who doesn’t want specific insurance options?

A business might limit its growth, shut the door on acquisitions, and otherwise not improve their bottom line by reducing insurance options, said Craig Pinnock, chief financial officer at Northbridge Financial Corporation. Not having insurance means a business can’t make proper investments to expand, and choosing the status quo is unlikely to be a company’s strategy of choice.

Brokers need to tell clients: “You might not see it as part of your marketing, but it’s pretty important to be able to say that you have insurance coverage,” he explained. “Companies don’t want to do business with companies that could have an issue and then not be there to finish the job.”

Each day that a company can’t do business because of an uninsured loss is a day that they’re not making money, not to mention the reputational damage, Pinnock noted. Getting this across to customers can help send the message that they need to ensure they’re staying protected.

“Insurance is designed to help put you back in your position as quickly as you can, and that’s been demonstrated over and over in a number of the large loss events in Canada and around the world,” Pinnock added.

Dedicate the time to sit down with clients and help them evaluate their risks and understand the areas in which insurance can help, he recommended. “I think the mere fact that [insurance] allows you to take certain risks that you couldn’t, and allows you to write certain clients or conduct certain services you couldn’t, is an important thing for brokers to work with their customers on.”

Pinnock was speaking in the context of how companies might react if the economy takes a downward turn. That’s when companies look to tighten their purse strings. Brokers need to ensure that they’re explaining what each dollar the customer is spending is doing for them in the big picture.

“The cost of insurance is not just the premium that you’re paying,” Pinnock said. “If you think about it singularly as the premium dollar going out the door, I think you can make sub-optimal decisions. Part of the decision process is what that dollar is doing from an enterprise perspective.”

No matter how the economy is going or how business is shaping up for clients, brokers need to analyze what they can sell no matter what the situation. One big-ticket item is cyber insurance.

“Cyber protection is only going to become more and more important over time,” Pinnock said. “I think we – and most of the marketplace – are looking at how you can design a coverage that is all of affordable, efficient and effective for customers. We’ve been marching down that road and would continue irrespective of the economy.”