The Questions Insurers Are Asking More Often
By Simone Adeney
The questions insurers ask at renewal can provide a useful indication of where they are seeing risk.
Maintenance, continuity planning, contractor arrangements, financial information and cyber controls are all receiving closer attention. Being prepared for these questions can help your broker present the business clearly, address any concerns early and keep the renewal process moving.
Maintenance records
Insurers may ask for evidence that buildings, equipment and safety systems are being properly maintained.
This can include:
Equipment servicing schedules
Electrical testing
Fire system inspections
Roof and gutter maintenance
Records of repairs
The records do not need to be complicated. They simply need to be current, dated and easy to locate.
If a claim occurs, the condition of the property or equipment before the loss may form part of the insurer’s assessment. Clear maintenance records can help demonstrate that known issues were being identified and managed.
Business continuity planning
A common question is what the business would do if it could no longer operate from its usual premises.
Insurers may want to understand:
Whether the business could operate from another location
Which systems, suppliers and staff are critical
How long customers could continue to be serviced
Whether alternative arrangements are already in place
How quickly the business could resume trading
A lengthy document is not always necessary. A short, realistic plan can show that the business understands its key dependencies and has considered how it would respond to a disruption.
Flood and weather exposure
Property insurers may ask detailed questions about flood, storm and water damage exposure.
This can include:
Previous water entry or weather related losses
Flood mapping for the location
Drainage around the site
The height of stock and equipment above floor level
Measures taken to reduce potential damage
For some properties, this information can influence the premium, excess or the cover available.
Providing accurate information early gives your broker more time to explain the exposure, highlight any improvements and explore the available options.
Contractor and labour hire arrangements
Liability insurers are looking closely at how contractors and labour hire workers are engaged and managed.
Common questions include:
Are certificates of currency collected and reviewed?
Are licences and qualifications checked?
Are written contracts in place?
Is there a consistent approval process?
Are contractor records kept up to date?
Is labour supplied between related entities within the business group?
The final question is often overlooked.
A business may have one entity that employs staff while another entity within the same corporate group utilises those employees to perform work. Although both entities are related, this arrangement may still be regarded as an internal labour hire arrangement by insurers.
Where an employee is injured, the workers' compensation insurer may pay the statutory benefits and then seek to recover its costs from another entity it considers was responsible for, or contributed to, the injury. This legal right is known as subrogation. Depending on the circumstances, subrogation can apply to internal labour hire arrangements in a similar way to external labour hire arrangements, particularly where the host entity exercised control over the employee's work or contributed to the incident.
As a result, insurers are increasingly seeking to understand internal labour hire arrangements, including which entity employs the workers, which entity directs and supervises them, and how responsibilities are allocated between related companies. This enables insurers to properly assess liability exposures and ensure the insurance programme is structured to respond as intended.
Financial information and organisational charts
Insurers may also request financial statements and an organisational chart as part of the underwriting process.
Businesses can be reluctant to provide this information, particularly where it is commercially sensitive. However, it can play an important role in obtaining appropriate cover.
An organisational chart helps the insurer and broker understand:
Which entities form part of the group
Which entity employs staff
Which entities own property or assets
Where contracts and revenue sit
How the entities interact with one another
This helps ensure the correct entities are named on the policy and reduces the risk of an important part of the business being unintentionally left out.
Financial statements also assist in demonstrating the financial position and stability of the business. As standard, Management Liability and Directors & Officers (D&O) policies include an insolvency exclusion. Providing current financial statements enables the broker to demonstrate the financial strength of the business and present a case to the insurer for the exclusion to be removed or amended.
While providing financial statements does not guarantee that the insolvency exclusion will be removed or amended, without this information the insurer is unlikely to have sufficient grounds to depart from its standard underwriting position.
Cyber controls
Cyber security questions are no longer limited to standalone cyber insurance.
Insurers may ask about:
Multi factor authentication
Data backups and recovery testing
Staff training
Payment verification procedures
User access controls
Incident response planning
These questions may also appear in management liability, professional indemnity and other insurance proposals.
The absence of basic safeguards can affect the terms offered, particularly where the controls could reasonably be expected for a business of that size and type.
What insurers are looking for
Across each of these areas, insurers are generally looking for clear evidence that the business understands its exposures and has practical controls in place.
Good information is:
Current
Specific to the business
Consistent across the proposal
Supported by records
Reflective of how the business operates today
This does not mean every business needs complex systems or lengthy documents. It means the information provided should be accurate and able to support the risk being presented to the market.
At Sage, we help clients understand what insurers are likely to ask, identify the information that is genuinely required and present it clearly.
Starting early can reduce unnecessary back and forth, provide time to address gaps and help put the business in a stronger position at renewal.
This article contains general information only and does not take into account your objectives, financial situation or needs. Please speak with your broker about your specific circumstances.
