Buying insurance can be a difficult. Suchitra Narayanan, head of risk and insurance for Bumi Armada, explains how to make a success of your policies.
In my last StrategicRISK column I went through the eight steps to successfully buying insurance. In this column I will be discussing the major challenges when buying insurance, how to make the policies a success, and the insurance buying pitfalls to avoid.
Major challenges when buying insurance
Country / local requirements
At Bumi Armada, though we are Malaysian based, much of our revenue is generated outside of Malaysia, in fairly diverse and complex countries such as Turkmenistan, Nigeria and Indonesia. Each country can be very different in terms of insurance rules and regulations and staying on top of these laws in order to be compliant is of paramount importance. For us, having a broker with a global reach is crucial so that we can better understand local requirement and proactively manage these.
With a business that has a diverse geographical span, being able to meet deadlines when placing insurance can sometimes be challenging. Even if you start your renewal process early, you might stumble upon roadblocks such as finding capacity to meet your placement requirements. Planning and pre-work is vital - allow yourself more than enough time to ensure that the lead up to the renewal date is as smooth as can be.
Another challenge is meeting the requirements of stakeholders. As an insurance buyer, you are effectively the facilitator of the procurement of the policy, but you need to keep your key stakeholders in mind - what are their requirements and have they all been met? The policies, should seamlessly meet these requirements so that key risks identified have been transferred, where possible.
In today’s oil and gas environment cost is a huge factor. The energy insurance market is experiencing very low rates, which benefits the buyer naturally. However, the question that buyers should be asking is how long will this continue for and how do I manage budgets and set expectations accordingly?
The only way I believe we can successfully manage this is by communication. Establish relationships with underwriters and keep abreast of changes that may occur in the market. Also monitor trends so that you can pre-empt any movements in capacity and rates.
How to make the insurance policies a success
Using the insurance policies as a strategic tool is the key to a successful placement and programme. It needs to accurately reflect the risk appetite of the business. Some organisations might be very risk adverse and wish to insure as much as is possible whilst others may take a different view. Finding the optimal balance that works for your organisation is really important. This should be a C-suite decision, so getting buy-in and being able to present the options available in a clear fashion is critical.
From an external perspective, transparency with underwriters will serve you well in the long run. Be honest about the risks and challenges facing the business (as well as the highlights too!). Trust is a key factor in the underwriter / client relationship. At Bumi Armada, we believe that this transparency has helped us in gaining the long-term support of underwriters.
Lastly, the front-to-back process needs to always be dynamic and proactive. Always look for new types of insurances that may be available that might suit your business. Ensure that your insurance programme evolves with your organisation.