Have you ever really thought about how your insurer calculates your premium? It’s almost certain that you’ve wished that your premium were lower. Did you know that there are tools for insurance companies that could reduce what you pay for your insurance? Cheaper insurance doesn’t need to be of a lower quality either. Here’s how it works:
Understanding Your Insurance Broker
Your insurer is most likely to work with a broker. The broker’s job is to represent a range of products to you. They give you options regarding the level of cover, the types of cover, etc. In general brokers do a valuable job by analyzing and understanding the market to get you the best value for money.
However, that doesn’t mean that they couldn’t work more effectively. When it comes to your premium there are 3 headline areas that you’re paying for. The first is the level of risk you represent. This isn’t a personal calculation. Risk is worked out based on averages around the data that the insurer collects from you. Young people have more car accidents, older people are more likely to claim on health insurance policies, some residential and office locations are more likely to be burgled, etc. The risk is a fixed risk and in general most insurance companies are very good at calculating risk. This part of your premium is fixed, unless your circumstances change the risk you represent is usually fairly constant.
The third part (we’ll come back to the second in a minute) is the profit that an insurer and a broker need to make. This is generally fixed too. The whole point of running a business is to make a profit and therefore some of your premium goes to ensure that the broker has an incentive to stay in business.
Where cost savings can be made and passed on to you
The second area is simple; it’s the administration cost of running a business. Your broker or insurer needs to pay their electricity bills, rent, staff costs, IT costs, etc. This area is the one where cost savings can be made and passed on to you.
One of the biggest expenses of running an insurance brokerage is IT (it’s estimated that up to 10% of the annual outlay of a business is in Information Technology). Brokers typically run several computer systems each of which needs updating separately, the hardware needs monitoring and upgrading and so on.
Yet, if your broker were to turn to a product like Schemeserve Insurance Software much of this spending could be reduced or eliminated. This software allows a broker to manage their activity through a single system. The hardware is managed by the software company. The licenses are provided on a low-cost monthly basis. In essence the software company does all the work and can share the efficiency savings (in terms of volumes of scale and specific expertise that is shared with many customers) with the broker.
Therefore a broker that invests in these tools for insurance brokers can save money and those savings can be passed on to you.
In addition, these tools increase the level of service you receive. By bringing all an insurer’s products together into one system your data can be better used to identify the right kinds of insurance product for your needs. Customer service becomes more consistent because your information is held in one place rather than many systems. Sales become simpler because the broker can use an Internet portal to help guide your choices (eliminating expensive salesmen).
In short, the kind of software that your broker uses can reduce your premiums and improve the level of service you receive. Isn’t it time you asked your broker why they haven’t moved across to a platform like this?
