As I’m sure you know, COVID-19 as well as the subsequent, sudden fall in oil prices have caused a sudden collapse in the revenues and payrolls for many businesses. What you may not know is how this change could affect your insurance premium.
The total premiums charged for many insurance policies are based on a company’s revenues or payrolls. These revenue and payroll levels are estimated when the policy is put into effect, and then adjusted at an audit once the policy expires.
Because of the financial strain on companies brought upon by COVID-19, many companies are asking how they can adjust the premium basis of their policies now—and improve their cash-flow now—rather than wait until after the policy expires.
We have been working with many of our clients to make mid-term adjustments to their insurance premiums. In most cases, we’ve been successful; insurance companies are generally recognizing that it’s important to support their customers, and they’ve been adjusting their policies and premiums early, rather than waiting until the audit after the policies expire. So far, our firm has recovered hundreds of thousands of dollars for our clients.
Some insurance companies have been less flexible adjusting those policies with premiums not specifically based on revenues or payrolls. The biggest issue here has been with Umbrella/Excess Liability policies. A lot of this resistance is because the Umbrella/Excess Liability insurance market remains unstable, and consequently there is a general shortage of available Excess insurance capacity. In some cases, it is difficult for some companies to even obtain Excess coverage, and this shortage of capacity is affecting the ability of insurance companies to negotiate their premiums.
Regardless, we’ve been encouraging our clients to have these conversations with their insurance companies. These negotiations often result in at least some return premium now, and a better sense of what to expect at the upcoming renewal.
This article is part of our COVID-19 coverage.