Not many people know but there is a technical terms used within the insurance industry know as “Price Optimisation”. You’d like to know about it because it affects the cost of your Tradies Insurance.
As the name suggests, it is about optimising the price the customer pays for their insurance for the purpose of maximising the insurer profit. Some could argue that every business tries to maximise their own profit but as a consumer, nothing stops you from being a little alert and ensuring that you don’t loose the value out of your insurance. Let us explain.
to be financially savvy and save money!
The techniques insurers apply to maximise their profit
As you can imagine, insurance companies have been very data rich for a long time. They have been capturing data that gives them insights on a range of topics for example, the risk in any business, the customer’s buying intent, the geographical and demographical sources of new business and renewal opportunities.
They employ actuaries and number crunching nerds – experts in the field of mathematics and computer science to crunch this data and draw insights that accurately predict consumer behaviour. Armed with this information, they price every policy to maximise the benefits to their bottom line.
Insurers use actuaries and data scientists to crunch copious amounts of data to predict customer behaviour.
One of the common insights that has been validated numerous times is that customers are reluctant to make a switch to a new service provider (insurer) because of the fear of the unknown but when they do, they tend to stay with their provider for a long period. They become “loyal”.
After a few years with the same insurer, call it loyalty or complacency, the customer’s stickiness allows the insurer the extra leverage to move prices knowing the customer is not going any where soon.
People often see this happening in their own lives but the “stickiness” prevents them from seeing it objectively and making the right decision i.e. get comparative prices from else where.
It is not uncommon to see the insurance renewal prices for the same risk profile to be higher than the new business prices. Its in your best interest to shop around.
You don’t want to be taken for granted.
As business people and customers, we naturally gravitate towards supporting the businesses that support you but you also want to make sure that no one takes undue advantage of your loyalty by pushing the prices up continuously because they can as you’ve been busy working hard in your business.
How to save money on insurance then?
Every renewal notice that you get is an opportunity to do something about the pricing or risk management in your business. Get your insurance broker to do these simple things to make sure you are getting the best deal:
Every renewal notice is an opportunity to review your pricing. Make the most of it!
- Ask your broker to present your renewal at-least 4 weeks before renewal date.
- Get them to provide comparative quotes in writing and keep on file.
- Avoid the temptation to leave everything to your broker hoping they would act in your best interest. They would however like everyone else, they have time pressures and deadlines to meet and can make errors.
- Ask them if they have had a discussion with your current insurer for a no claims discount.
That’s why you pay them a broker fee, make them work for it.