The Business of Insurance in 2018?
The Business of Insurance – What exactly is the business of insurance?
This is the question many business owners may face.
However, the business of insurance is not just the protection of a business, rather, it
has to do with the process of accepting the risk for the business. For example, think about perspective
insureds living in catastrophic loss areas, like a hurricane zone. States such as Florida, Louisiana, Texas are some
locations that come to mind when it comes to these types of threats. If you have a business in these high-risk locations,
then the commercial property would face extreme loss if not protected with some type of insurance policy.
This is why insurance is a paramount business asset. Because if it were not for some type of coverage
to offset the total risk, the loss could be detrimental to the business or commercial property owner.
The Business of Insurance – Catastrophic Size?
Since we are discussing major loss, catastrophic size, it is best to take some precautions before
you make your insurance purchase. As an example, make sure to research whether an insurance carrier
can manage the risk in the first place. This is an important step since these type of
risks are not just any risk, but one of epic portions.
Business Insurance – Carrier Financial Record
If you find that an insurance carrier can financially withstand an event of this magnitude, go for it!
However, make sure to check the past track record of the insurance carrier. Check to see if claims were
paid out on a timely basis, and if the insurance company ever faced a devastating claim loss.
If so, make sure to find out how it impacted the future earnings and insuring power of the
insurance carrier? These are questions you may need to answer before making your
insurance purchase if your commercial property is located in a catastrophic prone area.
This will provide a good overview of what to expect when shopping or comparing rates.
This is always a good practice to do your homework, research the facts and get the experts opinions
before making any decisions. If you need a day, a week or so to this overview,
then take that time and do it. This is for your business and your protection at the end of the day.
Empirical Proof – Insurance Coverage
We all like historical evidence. It helps provide concrete decision making,
especially when it comes to insurance coverage.
So, let’s go back to the ISO. Let’s look at their study that was conducted back in 1996.
This study was performed by the Managing Catastrophe Risk. This study was to review what
factors affected the risk factor of a major storm. This major storm of the
study was, of course, severe hurricanes and there
threats to certain demographics.
2 Influential Factors – Location and Geographic
Now that the study was introduced back in 1996, 2 factors came to light from it.
The first is location. Location is an important factor when considering hurricanes as you can imagine.
This is because in certain areas for example, the East and Gulf Coasts of the U.S.
are a hotbed for such extreme weather activity, compared to the Midwest. Studying the
location of the site where the hurricanes hit, can provide a better perspective on how often
it strikes in those locations. Preventive measures can be put in place for
better security as well as future research and study.
The second concentration of influence on the loss report would be geographic concentration.
What exactly is geographic concentration and how does it impact the discussion of commercial insurance.
Geographic’s are huge when it comes to such storm severities and devastation.
This is because this concentration or system, can show for how many times a
hurricane for example, has hit a certain spot. Let’s move on to the language and
communication that is conveyed during insurance transactions.
This will prompt us to our next topic of discussion, the commercial truth.
The Commercial Insurance Truth – Spread Too
Everyone has them, opinions that is! Opinions are formulated through
studies and research projects. But the study shows that damage is likely in these conditions,
so opinions on these matters are justified. Now, if an insurance carrier has too many
of these accounts or insureds on books, it gives off the wrong message.
An insurance carrier does not want one location of the business. A diversified book based on the territory is
the main affair to regaining order. This is because of the relationship between loss and
location proximity is a factor in the business of insurance.
Insurance Carriers Perspective
If you were to asses the above information and include a list where policies
are located and how long they have been in the coverage area, a roadmap would
soon appear. This would help to provide an overview of how many times a
certain risk has had a chance of suffering a hurricane loss in any given year.
This research data is collected whenever a hurricane comes ashore.
Why is this important? This is because it will likely hit some of the properties
that the insurance company has on its books as written policies.
Loss and Cost Reduction Overview
On a positive note, the insurance company can reduce loss or keep it relatively low.
This is done through geographically dispersed policies. In closing on this topic,
there are more tools of the trade. These tools have incorporated computer technology and
data analysis. This is all used in the hopes of providing a better way to scientific learning
and the understanding of hurricanes.
The business of Insurance: Advanced Technological Studies
The Geographic Information System helps manage locations and the distribution of
property’s they cover. Many insurance carriers are now using computerized
information systems. This advanced location-specific system will help address
property risks and property address. This will provide a location-specific data
input about the risk. Quantity is not an option either. An insurance company
can also use GIS to analyses many policies. So, you can see how
bulk numbers can be handled in this process. This bulk policy examination can identify
large groups in a specific location, which is a very powerful feature.
Use these advancements and procedures when finding the right insurance policy for your business or operation.