Introduction
It is quite imperative for you to have a thorough know-how of how an Insurance Due Diligence Checklist is curated in a comprehensive manner indeed.
This is especially true for those of you dealing with insurance-related transactions day in and day out of your professional career here in the insurance sector.
As a business partner, you might deal with acquisitions, and mergers or assess the risk factors that are prevalent inside your business stream. You might want to therefore understand how to curate your very own Insurance Due Diligence Checklist.
Helping you understand the prime factors that teach you the know-how pertaining to the same. Shall we get started?
General Insurance Coverage Review
As a business owner, you must keep track of all types of insurance policies you may have taken up for business purposes or to maintain the well-being of employees who are working in your organization. Here, we are talking about:
- General liability occurrence insurance
- Property insurance
- Workers and employees’ insurance packages for health coverage
- Cyber
- D & O (Directors and Officers)
This way, you make sure, you have covered every aspect of your business contingency and you can chart out the insurance due diligence process memorandum in conjunction with the same.
Looking at coverage limits and policy terms
This is the next predominant step you take with respect to checking into your insurance-related checklist.
You must look at the coverage limits of every policy you take up for your business parlance. You must look into the terms and conditions of every single policy you take up for your business enterprise. You can appoint dedicated teams to look into policy periods, renewal dates, gap coverages, and terms that allow flexibility with respect to the claim proceedings.
This way, you firmly ensure that you have taken the right kind of insurance policies that perfectly align with the business operations you have in mind. While you do the review checks, make sure you also look for specific exclusions that underlie every single policy you take up for your business venture. This way, you make sure you do not expose your company to specific risks due to the potential gaps or exclusions that might be prevalent within each coverage policy.
Above all, you must also review the historical claims your firm might have made with similar policies taken up in the past. This way, you make sure you leave no stone unturned!
Looking at the financial stability of the insurer
You must make a deliberate effort to look into the financial strength of the insurers or service providers with whom you would want to sign up with. Look for AAA ratings for the insurance provider via online and offline mediums.
To further authenticate your validation, you can research the insurer’s history of claims. This way, you would be able to get ample cue cards on the claim handling history of the insurance service provider you would love to partner with.
Alongside, you can also look at the reputation of the insurance service provider in the market. This can be done by evaluating the premium changes of the insurer over the last 3-5 years. By doing so, you can assess the market risk or volatility of the firm you are planning to sign up with.
Looking at the risk assessment of your business enterprise
Before you decide on the insurance service provider, you must determine what type of policies you might want to take for your business enterprise.
Here are pointers that can help you identify what type of risk factors you have within your manufacturing hub or your business domain:
- Hazard Risk Exposure: You can look for physical risks that might be prevalent within your business domain. These include natural calamities, fire, theft, etc. Once you are done identifying what these risks are, you must further ensure that you have policies that cover these scenarios as such.
- Operational Risk Exposure: You can allow your business teams to assess coverage with respect to the operational risks that you might foresee for your business in the future. These include employee misconduct, cyber-attacks, or other forms of product liability.
- Regulatory Compliance Risks: You must ensure that your business firm is adequately covered against regulatory or legal changes that are tendered by local governments or other governing authorities from time to time.
Determining the claim handling process in a comprehensive manner
As a business owner, you must look into each type of risk factor your business might face in the future. Only then would you be able to decipher what type of insurance policies you might need for the safety of your business?
On this parlance, you must allow your business contingency teams to evaluate the efficiency and responsiveness of the insurers who would be handling your claims.
To do so, the teams must assess the size of claims that have been made with insurers vis-a-vis the frequency of claims that have been made by other clients in the past. You must also look into the history of claim denials the insurers had with their clients and understand the potential reasons that underlie them. This way, you would be better equipped to submit claim requests that are more likely to get sanctioned over getting rejected.
Unveiling loss prevention and risk management programs
You can determine if your business enterprise has implemented any kind of risk mitigation strategies or loss prevention programs to name a few.
To validate the same, you can carry out business audits or hold risk-managing surveys that must be filled out by workers or employees who are taking care of manufacturing or administration activities on a day-to-day basis.
You can hold safety training programs for your employees too. This way, you get clear-cut access to risk-managing strategies your business teams are currently up with. And you can ensure you take up insurance policies that are related to the same!
Mergers/ Acquisitions or business changes
You must take steps to understand how mergers and acquisitions impact your business structure. This way, you can further assess if existing insurance policies align with the changes in the structure of your expanded business modules.
You must further verify if existing policies are valid or not. Post a major merger or acquisition deal, you may have to take up new policies to circumvent the changes in your business domain.
Here, you can also look for contingency coverage plans that should stay in place to take in changes in your business environment.
The Bottom Line
Although we have seen business-aided insurance policies that cover part of your Insurance Due Diligence Checklist, you must also allocate dedicated teams to look for viable insurance policies that take care of your working force comprising industry workers and office-based employees on the whole.
The workforce team must ensure that every employee of the organization has insurance policies covering health, dental, vision, life insurance, and other riders that offer disability benefits.
Only if you care about the welfare of your employees can you build a stronger working force that can further grow the brand and credibility of your business domain.
What are your thoughts on this? Do mention it in the comments below!
Frequently Asked Questions or FAQs
As a buyer who wants to purchase a crucial policy, what are the specific needs you would be looking for?
Answer: As a buyer, you must look for the specified niche you are looking at. You might want to unveil the cost of an independent insurance policy or have business-related circumstances that establish the requirement for business-related policies that protect the assets and workforce of your business domain.
How do you choose policies for business needs?
Answer: You must allow an insurance advisor to conduct a profile of your business domain to assess the type of policies your enterprise might need. You would also get valuable insights that look at the value these policies might bring for your business domain vis-a-vis the expenses you incur for availing the same.
