Diversification of insurance and risk can bring significant additional benefits
Decentralisation of insurance to several insurance companies
Spreading insurance across several insurance companies is a practice that has been used by insurance brokers for a long time. Decentralisation of business insurance means that a single organisation buys different insurance policies from several insurance companies instead of a single integrated solution. This can bring significant cost savings as it allows us to source the best solutions on the market from different insurers.
In addition, not all the insurance you need may be available from the same insurer, or the policies available may not be comprehensive enough. Different insurers offer different products and services, and decentralisation often allows for better and more flexible cover, as you can pick the cherries off the cake.
Sharing a single risk between several insurers
What does it mean when an insurance company wants to share a risk? This is a newer approach that is not yet very common in the Finnish market. In practice, sharing insurance cover means that the insurer considers that the risk the customer wants to insure is too large to be insured alone, or the insurer wants to limit its potential claims expenditure.
This is often the case when the sector to be insured is particularly risky and cover is difficult to find. Insurance companies hardly ever offer pre-shared risk themselves (except for normal risk reinsurance 😊), but these arrangements are almost always handled by insurance brokers.
Why does an insurance broker want to diversify?
It is naturally in the broker's interest to look for new ways of insuring in order to find the best option for his client in the whole insurance market.
Insurance brokers use their creativity and expertise to find solutions that are not always to the liking of the client or the insurance company. This may mean forging new partnerships, looking for special products from abroad or analysing the market in depth.
The broker's extensive knowledge of the insurance market enables him to connect clients with the right insurance companies. The broker knows which companies are willing to take certain types of risk and which are not. This market knowledge is key to risk allocation.
Brokers also constantly negotiate the details of contracts on behalf of their clients. They ensure that clients get the best possible terms and prices. This negotiating skill is particularly important when it comes to sharing complex and large risks between several insurers.
Many insurance companies = more administrative work
Typically, decentralisation may involve more insurance administration, as you have to deal with more insurance company documents and negotiate with more contacts. This is precisely why a broker is often a valuable asset, especially when managing large or complex insurance packages.
The broker's client has no more work to do than a client of a single insurance company. Insurance brokers now have access to sophisticated electronic systems that allow them to manage policies and documents from multiple insurance companies efficiently.
At Söderberg & Partners, our clients can see all their insurance policies in a single view in S&P Online, which makes it much easier to manage and check everything. And, of course, we also check all insurance policies and invoices.
The broker assists the client with all the administrative tasks related to insurance, ensuring that all the necessary documents and information are up-to-date and easily accessible.
Have you considered decentralising insurance in your organisation?
Decentralising insurance can bring a number of significant benefits. It allows for better risk management by sharing the risk between several insurers. It can also open the door to more specialised or comprehensive insurance products, leading to cost savings in the long run.
Diversified insurance coverage can also provide solutions tailored to the specific needs of an organisation that might not otherwise be possible.
If you are considering decentralising insurance in your organisation or need expert advice on the best solutions, please contact us. We are happy to help ensure that your organisation has comprehensive and cost-effective insurance cover - however it makes sense to spread the risks.
