Paying bills is something we all do as a part of life. Whether it’s personal or business, we have expenses that must be paid. I must admit, I’ve overlooked a bill in the past. For most of us, missing a payment can lead to a service being disconnected temporarily which is an inconvenience, but it doesn’t have a major long-term impact. However, missing an insurance payment is very different – it can result in having your policy canceled and leaving your business uninsured. Missing payments can also have major effects on how much you will pay for insurance premiums in the future.
Insurance carriers are in the business of managing risk. If a carrier perceives that your business is high risk, then your premiums are going to increase. Insurance underwriters look at many items when pricing your premiums including credit score, DUNS Report and payment history with your policies. These all paint a picture that illustrates the risk of insuring your business. Non-Payments are a great concern for underwriters, as they see this as part of a larger risk.
An experienced commercial lines underwriter from Cincinnati Insurance Company shared his concern surrounding payment issues:
“Non-pay incidents are a cause of concern. From an underwriting perspective, I often wonder, if they cannot pay their bills on-time, just what kind of client do we insure, and what other items are they neglecting in their operation? Do they skimp on regular auto and property maintenance items? What is daily housekeeping like at the premises? Do they care for their equipment?
We have collected data that shows polices with three or more cancellations have an average loss ratio of 71%. Accounts that pay on time, their loss ratio average drops to 56%.
Moving forward, we have been instructed to thoroughly vet accounts with histories of non-pays. Additionally, we have been asked to make this part of our regular underwriting at renewal and anniversary. Pay problem accounts may not receive favorable pricing due to a consistent history of not paying their insurance bill on-time.”
Missing insurance payments can have immediate and long-lasting effects. When a policy is cancelled the carrier decides whether to allow a reinstatement or not. If the carrier chooses to deny reinstatement your business will be forced to find another carrier/policy. This process takes time and your business is left uninsured during the process leaving you unprotected.
Once your policy is dropped, a notice of cancellation will be sent. When these notices are sent by the carrier, they are not always just being seen by you. Other third parties may receive these cancellation notifications as it may have been a requirement or endorsement on your policy. This can cause additional work for both you and the additional insured on your policy. It may also send a negative image of your company. Finally, every insurance application asks the following question: “Any policy or coverage declined, cancelled or non-renewed during the prior three years for any premises or operations?” Now, the answer for your business will be YES. Which will undoubtedly affect the pricing for your premiums.
As you can see it is imperative to ensure the insurance premiums for your business are paid on time. Do you need advice on insurance for your business? Contact me at 610.966.1315 to have a conversation about your options.
Insurance products offered through Univest Insurance, Inc., a licensed insurance agency affiliate of Univest Corporation, are obligations of and underwritten by unaffiliated insurance companies. They are not insured by the FDIC or any other agency of the United States and are not deposits of or guaranteed by any bank.