As the economic downturn tests businesses nationwide, brokers can play a key role in helping clients to make good decisions about protecting their business when costs are under pressure.

In this climate, businesses are more likely to implement quick changes

The credit crunch is forcing tough challenges on managers and business owners: from squeezed profit margins and lack of consumer confidence to redundancies. Under pressure, businesses can make the wrong move and put themselves at risk, says Mike Lawton, UK Mid-Market Director, RSA. “In this climate, businesses are more likely to implement quick changes,” he says. “Companies need to be careful that by moving quickly they do not make mistakes. If they’re making people redundant, for example, they need to make sure they keep the right balance of skills and knowledge in the organisation.”

Helping clients save money

In general, insurance costs tend to reflect the level of activity in a business. So a business that is shrinking needs to ensure that their broker understands how the business has changed since the last renewal.

This is where a good broker will prove its worth by advising clients on how they can get the maximum value from their insurance spend

Another challenge can be how to handle limited cash flow, says Mike. “Some managers may create future problems by cutting corners or resources in health and safety, maintenance or outsourcing”. This is where a good broker will prove its worth by advising clients on how they can get the maximum value from their insurance spend.  For example, a contractor may be doing less ‘high hazard’ work but still be paying a premium based on estimates provided several years ago.

Many businesses will be making drastic changes to the way they operate. By demonstrating that they understand these changes and their clients’ plans for the future, brokers can prove their added value. For example, a company that is bringing an outsourced function back in-house, may have different insurance needs: the same goes for those who are outsourcing to cut costs. “Brokers understand how insurers calculate premiums and what they’re looking for in terms of risk management” says Mike. “A broker will quickly establish how the risk profile of the business has changed. Do they need a different insurance programme? How can the client save money without losing vital cover?” says Mike. 

It may be a difficult conversation, but businesses need to make sure they aren’t exposed to more risks and open to more claims.

Effective risk management is also something that brokers will raise with clients, says Mike. “It may be a difficult conversation, but businesses need to make sure they aren’t exposed to more risks and open to more claims.  Companies may make changes that mean the maintenance of essential plant is compromised – the result can be a potential claim that causes massive disruption to the business.” This could mean that the owner of the business is distracted from the vital role of meeting the needs of customers at a time when competition is fierce.

Tracking trends

And, at a time when uncertainty seems to be the only constant, 300 years of experience helps. RSA has a track record of working with customers who are adapting their business to a different economic outlook...

Each sector will experience the recession in its own way. Being the insurer of choice for hundreds of thousands of businesses, RSA has a robust overview of the claims background and trends in each sector. “This helps us to develop practical information and advice about how our customers’ businesses can cope when the going gets tough,” says Mike.

And, at a time when uncertainty seems to be the only constant, 300 years of experience helps. RSA has a track record of working with customers who are adapting their business to a different economic outlook.. “We see each of our specialist segments as a long term play and you can’t pretend to understand a sector if you only play in the boom periods” says Mike, “So brokers and their clients can rely on us to work with them through tough times – that doesn’t mean we will always be the cheapest – it does mean we look at customer profitability over the cycle and that’s why we’ve insured many businesses for over 100 years”.

Article courtesy of RSA