It is not uncommon to wonder what added value an insurance broker can bring if the company will only take out the mandatory insurance policies in any case. Well, to put it modestly, they can completely optimise the entire insurance cover. Usually, the result is not only a more cost-efficient insurance package but also more high-quality insurance cover.
The services of an insurance broker bring added value, particularly to organisations whose operations involve numerous risks. In that case, the insurance needs are also usually quite substantial and complex. In this article, however, we will explore quite a basic insurance cover and means to optimise it.
We will go over the workers’ compensation insurance that is mandatory in Finland for all employers. How can you even optimise such a mandatory insurance cover as this? You’ll soon find out – keep reading!
Two pricing models of workers’ compensation insurance
As most people who have taken out an insurance policy for an organisation know, two pricing models are applied to the workers’ compensation insurance: tariff-based premiums and special-rate premiums.
For small enterprises, where the total amount of remuneration paid is reasonably small, the payment is most often based on the tariff pricing that insurance companies have determined. The tariff-based premium is mostly based on wage costs and the risk classification of the work that is carried out in the company (in other words, a classification of how many accidents are likely to happen in the work in question).
Special-rate premiums apply to larger companies. In determining a special-rate premium, it is important to consider the company’s own accident statistics. When those are taken into account in the premium, the pricing model is particularly beneficial for the companies and organisations where accidents are rare.
The general rule is that, the greater the proportion of risk borne by the policyholder*, the lower the premium (when no exceptional** loss or damage occurs). If the company suffers exceptional accidents, the premium will increase according to the proportion of the risk the company has borne.
Voluntarily choosing special-rate premiums?
Not everyone has realised that you can also switch to a special-rate premium voluntarily. When to make the change? That is something that requires some knowledge and insight. As the situations are always organisation-specific, a broker can help assess where in your company’s stages of development it is wiser to stick to the tariff-based premium and when to opt for a special-rate premium.
In special-rate insurances, remember that the company’s own occupational safety activities are highly emphasised in their “profitability”. Naturally, when occupational safety is well taken care of, there are considerably fewer accidents, which keeps insurance premiums much lower.
Occupational safety is an important part of insurance brokers’ job. Brokers have experience and insight of occupational safety in various industries. Brokers are also able to identify opportunities for closer cooperation with the organisation’s insurers, for example. Many insurance companies are happy to help reduce their clients’ accidents by offering various types of training, information and support measures. A broker can also help you make full use of your partnership with insurers.
The ability and desire to take risks determine the results
In practice, you have to choose between paying larger insurance premiums now and taking fewer risks for the company or saving money in insurance premiums and taking the risk of having to pay a larger sum later.
This is where an insurance broker can offer valuable support. The basic idea of insurances is to buy safety and peace of mind. True peace of mind can only be achieved when you know what you have insured and why and, most of all, which risks are yours to bear.
* Risk bearing refers to the policyholder’s assessment of being able to use their assets in potential accidents and not needing compensation for damages if the risk in question is realised. In other words, the company must have sufficient assets to bear the desired risks. In many cases, bearing minor risks and even their realisation is considerably more affordable in the long run than overly expensive insurance.
** Here, exceptional loss or damage refers to severe loss or damage, such as having to retrain the person or needing employment accident pension due to the accident.