Most business insurance policies are issued with one-year policy terms, creating a natural opportunity for businesses, their counsel and risk managers to re-evaluate coverage each year at renewal time. Many companies fail to take advantage of this opportunity and simply renew their policies each year without considering whether their insurance needs – or the coverages available – may have changed. Here are four questions to ask when your policies come for renewal:
- Has my company’s risk exposure changed? Changes in risk exposure result from a variety of factors, such as business growth, development of new products or services, litigation trends, and geographic expansion. Changes in risk exposure may inform both the types of coverage your company needs as well as the appropriate limits and sublimits for those coverages.
- Have the policy terms changed? Even if your insurance carrier is willing to renew your company’s policy, this does not necessarily mean that the carrier has not made changes to the coverage being offered. You should carefully consider any changes in policy terms, such as new exclusions or conditions, sublimits, or retentions and evaluate their potential impact.
- Have the insurance markets changed? Markets for many insurance products – such as cyber insurance – continue to evolve, and the insurance products available in the market one year may or may not be the same as those available the next. Even markets for more “traditional” insurance products, such as commercial general liability insurance, change periodically in response to litigation trends, the development of new insurance industry policy forms, or consolidation within the insurance industry. When renewing a policy, consider whether any such market changes may impact available coverages.
- Has my company reported all claims and potential claims? All business insurance policies contain specific reporting requirements, and many policies require claims to be reported to the insurer during the policy term – i.e., before renewal. Further, carriers may deny claims based on facts not disclosed in the policy application. Finally, many policies contain provisions allowing insureds to provide notice of circumstances that may give rise to a claim, allowing future claims to be covered under the policy in effect at the time of the report and preserving the limits of later policies for other claims. All of these common policy terms create strong incentives for insureds to consider whether all claims and potential claims have been reported prior to policy renewal.
Approaching the renewal of your insurance policy intentionally and with these questions in mind will help reduce the risk of surprises in the future.