The hard property market for the past few years has had a huge impact on the terms and conditions of property policies. Higher premiums generally get most of the headlines, along with larger deductibles, but behind that, insurers are examining their book of business and exposures, and hence have cut back on their capacity offerings, reducing limits, sub-limits or even excluding coverage.
As such, it is tempting for Risk Managers to reduce their limits purchasing to mitigate rising premiums increases.
As you face your upcoming property renewal, examine and measure your policy limits and sub-limits to determine if you are adequately covered or not. So, how do you measure the adequacy of your limits? with accurate property values.
With accurate values, you and your broker can pinpoint risk exposures and be prepared to work with your underwriter to assure adequacy of your limits and sub-limits. You will avoid purchasing limits that are too high or low and you may even be able to barter between sub-limits to better cover your company’s risk exposure.
Without accurate property values, your choices are limited, risky and expensive. You may offset the risk of underinsuring your policy limit by adding an excess buffer layer of limits, but this method adds premium expense, does not address sub-limits in your policy, and may be totally unnecessary. I suggest that a major focus should be on sub-limits. By their very nature, sub-limits exist because the risk exposure is too high for insurers’ appetite. With so many sub-limits on a typical policy, I suggest you and your broker review the adequacy of your sub-limits and assure your company is properly covered. Don’t rely on property values you are not sure are accurate, when making these critical decisions. Safe to say, if unsure, get accurate property values delivered by an insurable value specialist.