Non-conventional insurance programmes
Vincent McIvor outlines an alternative insurance option for public & private sector organisations.
RSA Insurance, with its local offices in Law Society House in Belfast, has been a market leader in the local government and public sector insurance market for many years. Its strong proposition has been driven by local technical underwriting expertise, dedicated operational service and is supported by local claims specialists based in Northern Ireland.
Our flexible approach and in-depth knowledge of the sector has helped drive the concept of non-conventional insurance programmes. In simple terms, this is where the customer selects an excess or retention level, up to which they bear the cost of each and every claim. This can be subject to an agreed aggregate amount, providing certainty so that the customer knows exactly what their potential maximum outlay will be.
Far from being complex, this approach is primarily about ‘partnership’, as it brings the insurer, broker and customer into a working relationship. All parties will work to develop a robust risk management programme focusing on reducing the number and severity of incidents, thus delivering benefits for all parties involved. Non-conventional programmes are now common place in larger organisations as they make practical and commercial sense.
Why take this approach?
First of all, let’s remind ourselves of the core purpose of insurance. Essentially it exists to:
• protect assets;
• compensate in the event of a loss;
• control costs of legal liabilities; and
• transfer risk.
The fundamentals are that customers pay a premium to transfer risk to their insurers who undertake to pay claims. With a non-conventional insurance approach however, the risk is ultimately shared, allowing participation by all parties in the creation of joint risk management strategies, bespoke for the organisation in question. There are huge benefits to be derived from this type of insurance solution:
Firstly, it helps to reduce cost as customers only pay a premium for the risk beyond the agreed excess/retention limit.
Secondly, the customer maintains control of the claims situation alongside the insurer, ensuring they play an integral part in the claims negotiation process.
Thirdly, the approach facilitates the creation of a fund to introduce effective risk management. New money is not required to do this; rather cash comes from savings on IPT, interest on claims cash reserves and surplus claims reserves.
Fourthly, the customer benefits immediately from risk improvement measures through early investment of those funds saved (as opposed to the conventional insurance basis on which insurers may eventually reduce terms after the risk improves).
In summary, a non-conventional insurance programme is appropriate for organisations which experience frequent claims of a modest value, are forward thinking and interested in accepting risk, but which also wish to derive benefit from an improved claims experience with cost benefits.
We at RSA take great pride in the wealth of experience of our local underwriters working in this sector and we continuously focus on keeping our market knowledge at the cutting edge. Collaboration with our brokers and customers, however, is the key to addressing the challenges of an ever more onerous and fast changing market. Non-conventional insurance programmes offer an alternative means of working with customers to identify the ‘right’ solution for their bespoke needs.
Vincent McIvor is Head of Commercial Lines Sales and Development at RSA Insurance NI. He can be contacted by telephone on 028 9032 0190 or by email at Vincent.McIvor@ni.rsagroup.com