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Who can you trust ?

Have you ever wondered about the 'Financial Rating' information at the end of insurance company correspondence? How important is it and what does it actually tell you?

The issue of insurer 'financial ratings' has become more relevant than ever since the Christchurch Earthquake. There is no point in paying the cheapest premium if you will not receive what you expect at claim time, or if the insurance company itself is not even around at claim time.

In an earlier article I discussed some of the key lessons learned from the Canterbury earthquake. Two of the main points were:

1. Every insurance company is required to have a solvency rating that reflects its claims paying ability. When choosing your insurer it is very important to know their solvency rating. Claim time is when 'the rubber meets the road' – so make sure you are with an insurer with a good rating.
   
   
2. Check whether your insurer is a member of The Insurance Council. The Insurance Council has developed a set of principles which aims to continually improve the standards of practice and service that member companies provide to their customers. Standards around quality, ethics, service, claims settlement and providing insurance cover that meets the customer needs.

A number of high profile companies conduct independent evaluations of companies operating in the financial services industry – including insurers. This provides a means of benchmarking financial strength and dependability.

A.M. Best is one of the leading providers of insurance ratings worldwide, with over 100 years' experience of the insurance industry. Their Financial Strength Rating (FSR) is an assessment of an insurer's ability to meet its obligations to policyholders. The 'secure' ratings are A++, A+ (superior), A, A- (excellent) and B++, B+ (good). In recent years, these ratings have become an increasingly important factor in consumers' decisions to purchase insurance.

Another well-known ratings provider is Standard & Poor's. This international company has been assessing the financial strength of insurance companies since 1971. Its premier ratings start with AAA (extremely strong), AA (very strong), A (strong) and BBB (good).

So, insuring with a stable, secure insurance company is one way to make sure you get the best outcomes when you need them for your premium dollar.

Another way to effectively manage your insurance spend is to keep your insurance broker up to date with any changes in your circumstances. It is important to not only renew your insurances each year – but to review your insurances to make sure that:

1. You are paying a fair premium.

2. You are neither under, nor over insured. You may be paying into cover you no longer need or lack cover for new risks that you face.

3. Your cover is up to date so that it will work for you when you need it most... at claim time. Policies are getting more complicated and the types of cover are more complex than before.

One way to do this is to make sure that you meet with your insurance broker annually – businesses that use a broker are more likely to be properly covered than those that don't use a broker. There is a key role for a broker to play in educating and advising about the different risks faced and the solutions available.
If you review your insurances each year, not just renew your insurances, there will be a much reduced chance of problems rearing their ugly heads at claim time.

Why should you review annually?

The answer to this question is because circumstances change:

• you may have started a new business
• you may have taken on a business partner
• your business debt may have increased/decreased
• the value of your business may have increased
• you may have got married
• you may have had a baby
• you may have purchased an investment property

The global economic downturn has affected everyone. Whilst Kiwis do their best to "weather the storm" and reduce their living costs, the protection and peace of mind provided by your insurance protection portfolio becomes more valuable than ever.

It is also important to review regularly to manage your premium. Perhaps you are questioning the value of the insurance cover that you have, or you have put off the decision to protect your family, business or lifestyle. However, it is in times like these that your insurances are more important than ever.

If affordability is your main concern, there may be changes that you can make to your existing policy to reduce premiums. Depending on the covers that you have, these changes can include:

Restructuring your benefits.

• Increasing your excess amount.
• Extending a "wait period" or reducing the benefit payment period.
• Reviewing payment frequency.
• Reviewing your current level of cover

In summary, the need to manage your insurance spend effectively is paramount:

1. Make sure you are with a highly 'rated' insurer
   
   
2. Get the right policy coverage – tailored to meet the needs of your business
   
   
3. Conduct regular reviews to make sure that your cover is up to date
   
   
4. Get your sums assured and your indemnity periods right
   
   
5. Get the right advice from the right broker