The Straight Talk on Insurance Benchmarking for Businesses
Ever feel like your company insurance costs are a bit…hazy? Curious what factors go into producing a quote? How do insurers determine the right rate for your industry? Are you getting a fair rate compared to your peers? What about compared to your competitors?
You’re not alone.
Insurance benchmarking is like comparing apples to apples, but with a bigger price tag and fewer apples to choose from.
What is insurance benchmarking?
Think of it as the “keeping up with the Joneses” for your business insurance. But in simpler terms, it’s comparing your insurance coverage, costs and risk management processes to similar companies in your industry.
The insights in benchmarking reports are a powerful tool that helps you understand if you’re paying too much or too little (potentially meaning you don’t have the right amount of coverage) for your insurance.
How does benchmarking work?
Benchmarking involves gathering, comparing and analyzing data to inform you of the appropriate actions to take to optimize your insurance.
But you shouldn’t handle it alone. Big companies have risk managers who crunch data all day, but most businesses don’t. Keep reading to understand the why. First, let’s walk through the process.
Here’s a step-by-step breakdown of how it works:
1. Data Collection
Gather details about your current insurance policies, including:
- Types of insurance coverage (general liability, property, workers’ compensation, cyber liability)
- Coverage limits and deductibles
- Premium costs
- Policy exclusions
- Claims history (frequency, severity and types of claims)
- Risk management practices and safety measures
2. Industry Research
Obtain benchmarking data from various sources, such as:
- Industry associations and trade groups that publish insurance benchmarks
- Insurance brokers and consultants who have access to industry data
- Benchmarking studies and reports from market research firms
- Peers and competitors willing to share insurance information (anonymously, if needed)
3. Data Comparison
- Analyzing coverage: Compare the types and limits of the business’s coverage against industry standards
- Cost analysis: Compare premiums to those of similar companies
- Claims analysis: Assess the business’s claims history relative to industry averages
- Risk management practices: Compare the risk management and loss control practices with industry best practices
Understanding this information empowers businesses to confidently assess whether their insurance coverage is both cost-effective and comprehensive while remaining aligned with industry standards and best practices.
Why can’t I benchmark myself?
There’s a mountain of data involved, and it’s no small task to collect it yourself. Most businesses lack the specialized data needed to make benchmarking reports. Accessing the required information is expensive and time-consuming. Outsourcing this task to experts with the right resources and expertise is, ultimately, the cost-effective option.
Brokers can access industry-wide data and specialized resources, like company performance, risk management and market share across different industries—all things that are crucial for accurate analysis and comparisons.
They also know how to navigate the insurance sector, the right questions to ask and how to interpret the data like a seasoned translator.
What are the benefits of benchmarking?
If you need more convincing, consider a few reasons on how benchmarking can help support continuous improvement:
- Cost savings: Identify opportunities to reduce insurance costs without compromising coverage; this could involve negotiating better rates, increasing deductibles or bundling policies
- Improved coverage: Ensure that the business has adequate protection against risks
- Enhanced risk management: Identify ways to reduce the frequency and severity of claims through improved risk management practices
- Competitive advantage: Maintain insurance practices that are in line with or superior to competitors; for construction companies, benchmarking can even assist with bidding
Interested in benchmarking for your business?
Benchmarking helps you compare your insurance coverage, costs and benefits with industry standards. This can help you find areas where you might overspend or lack coverage. You can make better decisions that match your business goals and risk management strategies using these insights. Insurance brokers are key in this process because they have the expertise and industry knowledge to help you navigate the complex world of insurance policies and market trends. They can provide a personalized analysis to show how your current insurance setup compares and suggest improvements to optimize your coverage and costs.If you’re thinking about insurance benchmarking for your business, it’s smart to start by engaging with a trusted insurance broker. Brokers who specialize in conducting thorough benchmarking analyses can give you a comprehensive overview of your insurance landscape. If you have questions about how benchmarking works or want to begin a detailed analysis, Crane Agency is ready to help.
