Forget bundling for a discount. Here’s how to truly save money on insurance.
The Bundle and the Blind Spot
For years, I bundled my home and auto insurance with one company. I thought the “multi-policy discount” was the best way to save money. It’s not. The real way to save money is to improve your risk profile. I took a defensive driving course, which lowered my auto premium far more than the bundle discount. I also raised my homeowner’s deductible and installed a water leak detection system. By actively reducing my risk, I was able to get much lower rates from multiple companies, saving far more than the illusion of a bundle discount ever did.
Stop chasing a lower premium. Chase a lower total cost of risk (TCOR) instead.
The Premium and the Hidden Price Tag
My company was obsessed with getting the lowest possible insurance premium. We thought we were saving money. We weren’t. We were chasing the wrong metric. Our “Total Cost of Risk” (TCOR) also included the cost of our deductibles, our uninsured losses, and the administrative time spent on claims. We had a low premium, but because of our poor safety record, our TCOR was sky-high. We shifted our focus. By investing in safety to reduce our claims, our TCOR plummeted, even though our premium didn’t change much. That was the real savings.
The hidden truth about premium financing that brokers won’t admit.
The Loan and the Extra Line of Credit
My broker offered to set me up with a “premium financing” company to pay for my large commercial insurance premium. It seemed like a simple payment plan. The hidden truth is that this isn’t just a convenience; it’s a loan. I was signing a formal loan agreement with a third-party finance company. This had two implications my broker didn’t emphasize: First, I was paying interest, increasing my total cost. Second, it was a new line of credit that could impact my ability to get other business loans from my bank.
What nobody tells you about deductible buy-down policies.
The Buy-Down and the Better Bet
My property insurance policy had a massive, $100,000 deductible for hurricane damage. It was a risk I couldn’t afford. What nobody tells you is that you can often buy a separate, smaller insurance policy to cover that big deductible. It’s called a “deductible buy-down.” For a small premium, I bought a policy from a different insurer that would pay for the first $75,000 of my deductible. It was a much cheaper way to reduce my out-of-pocket risk than trying to get my primary insurer to lower their huge, mandatory deductible.
I spent 10 years optimizing insurance portfolios. Here’s what I learned.
The Price and the Unseen Value
After a decade of optimizing insurance for large companies, I learned one crucial lesson. The best portfolio is rarely the one with the lowest price. It’s the one that provides the most value. A cheap policy with dangerous exclusions can cost you millions in an uncovered claim. A slightly more expensive policy with broader language and a responsive claims team is a much better value. Stop looking at your insurance as a commodity. The real art of optimization is finding the perfect balance between cost, coverage, and the quality of the insurer’s promise.
Unpopular opinion: A high deductible can be your best friend.
The Deductible and the Discipline It Demands
Most people are terrified of a high deductible. Unpopular opinion: it can be your best friend. First, a high deductible will dramatically lower your annual premium, freeing up cash flow. Second, and more importantly, it forces you to have skin in the game. When you know you are responsible for the first $5,000 of any loss, you become much more disciplined about risk management. You fix the leaky faucet. You drive more carefully. A high deductible can be a powerful financial incentive to create a safer environment and to prevent the small, stupid losses.
90% of CFOs don’t understand this about captive insurance tax advantages.
The Captive and the Tax Code
Most CFOs think a captive insurance company is just a way to self-insure. They don’t understand the powerful tax advantages. Under a specific section of the tax code (831b), a small captive can receive up to $2.3 million in premiums tax-free. And if the captive has a profitable year with few claims, those underwriting profits can be distributed to the owners as long-term capital gains, which are taxed at a much lower rate than ordinary income. It’s a highly regulated but incredibly powerful tool for tax-efficient wealth accumulation.
This simple annual marketing of our insurance program transformed our costs.
The Renewal and the Race We Created
For years, we just renewed our insurance with our incumbent broker and carrier. We were loyal, and our costs kept creeping up. We implemented a simple, transformative change. Every single year, 120 days before renewal, we force our broker to “market” our insurance program. This means they have to get competitive quotes from at least three other qualified insurance carriers. This simple act of creating a competitive environment has saved us over 20% on our premiums. The carriers know they have to fight for our business, and that race gives us the best possible terms.
You’re not overpaying for insurance because of your risks. It’s because of your broker’s laziness.
The Risk and the Lazy Broker
You think your insurance premium is high because your business is “high-risk.” You’re probably wrong. You are overpaying because your insurance broker is lazy. A lazy broker will just send a one-page application to their one favorite underwriter and accept the first quote they get back. A great broker will do the hard work. They will create a detailed underwriting submission that tells your story. They will aggressively market your account to a dozen different carriers. They will negotiate. Your high premium is not a reflection of your risk; it’s a reflection of your broker’s lack of effort.
Stop accepting the renewal as-is. Market your policies every 1-2 years instead.
The Automatic and the Overpayment
Your insurance renewal arrives. It has a modest 5% increase. You accept it as-is and send a check. Stop doing this. You are leaving a fortune on the table. The insurance marketplace is dynamic. New carriers enter, and appetites change. You should have a policy of aggressively marketing your insurance program—getting competitive quotes from other carriers—at least every two years. The simple act of creating competition will almost always result in better terms and a lower premium than just passively accepting the automatic renewal your insurer sends you.
The uncomfortable truth about “loyalty” discounts.
The “Discount” and the Data
Insurance companies love to advertise their “loyalty discounts” for long-time customers. The uncomfortable truth is that they are often a complete illusion. While you might be getting a 10% “loyalty” discount off your renewal premium, that renewal premium has already been inflated by 15%. The data shows that loyal customers who don’t shop around often end up paying significantly more over time than customers who regularly switch carriers. The “discount” is a marketing tool designed to make you feel rewarded while they are quietly overcharging you.
Why everything you know about saving money on insurance is backwards.
The Premium and the Prevention
Everything you think you know about saving money on insurance is backwards. You think the way to save is to haggle with your agent for a lower premium. That’s a tiny part of the equation. The real way to save money is to become a better risk. You save money by investing in a safety program that reduces your claims. You save money by strengthening your contracts to transfer risk to others. You save money by having a business continuity plan that minimizes the impact of a disaster. Stop focusing on the premium; focus on the prevention.
I tried to use a direct-to-consumer insurer to save money. The claim denial cost me 100x more.
The Direct and the Denial
I thought I was being smart. I bought my business insurance from a direct-to-consumer insurer online, cutting out the “middleman” broker to save a few hundred dollars on the premium. Then I had a major claim. The direct insurer, who had no relationship with me, denied it based on a technicality. I had no expert advocate in my corner to fight for me. The cost of that one uncovered claim was a hundred times more than the money I had “saved” on the premium. The cheap path was the most expensive one I could have taken.
Hot take: Your low premium is a sign of poor coverage.
The Price and the Pathetic Policy
You just got an insurance quote that is dramatically cheaper than all the others. You’re ecstatic. Hot take: your low premium is not a sign of a great deal; it’s a sign of a terrible policy. Insurance is a data-driven business. If one company is significantly cheaper, it’s because their product is inferior. Their policy is likely full of dangerous exclusions, low sub-limits, and unfair claims provisions. A cheap policy is not a bargain; it’s a warning sign that you are buying a product that will not be there when you need it.
Most business owners waste hours haggling over 5%. A better risk profile saves 30%.
The Haggle and the Huge Savings
I’ve seen business owners spend hours haggling with their broker to try and get a 5% discount on their renewal premium. It’s a massive waste of time. They are focused on the wrong thing. Instead of haggling, they should be investing that time in improving their company’s risk profile. A documented safety program, a formal fleet management plan, and strong contractual risk transfer can make your business a “best-in-class” risk in the eyes of an underwriter. That will earn you a 30% discount without a single minute of haggling.
The 10-minute habit that replaced my fear of renewal increases.
The Story and the Strategic Update
I used to live in fear of getting my insurance renewal notice. It always felt like a surprise increase. I replaced that fear with a 10-minute habit. Once a month, I send my insurance broker a short, bullet-point email with a strategic update on our business. I tell him about our new safety initiatives, our positive sales trends, and our operational improvements. This habit ensures that when it’s time for renewal, he has a year’s worth of positive stories to tell the underwriter. It turns the renewal from a scary surprise into a planned, positive conversation.
Your high premium isn’t caused by the market. It’s your poor loss history.
The Market and the Mirror
Your broker tells you your premium is going up because it’s a “hard market.” That might be part of the story, but it’s often an excuse. The real reason your premium is high is your own company’s poor loss history. The “loss run” report, which details all of your past claims, is the single most important document in underwriting. A company with frequent or severe losses is a bad risk, regardless of what the broader market is doing. Before you blame the market, you need to look in the mirror.
If you’re not analyzing your TCOR, you’re already losing money.
The TCOR and the True Cost
If you are only looking at your insurance premium, you are losing money. You must be analyzing your “Total Cost of Risk” (TCOR). This is a more holistic metric. It includes your insurance premiums, but it also adds the cost of your retained losses (like deductibles), the administrative costs of your risk management department, and the fees you pay to outside vendors. TCOR gives you the true, complete picture of what risk is costing your organization. It is the only metric that allows you to make truly smart, strategic decisions about where to invest your resources.
Stop glorifying a cheap price. Start glorifying value.
The Price and the Promise
Our culture is obsessed with getting a “cheap price” on everything, including insurance. This is a dangerous mindset. In insurance, a cheap price is often a direct reflection of a cheap promise. A policy with a low premium is likely to have poor coverage and a difficult claims process. We need to stop glorifying the price and start glorifying the value. A policy from a high-quality insurer with broad, well-written coverage that will actually pay a claim without a fight is a much better “value,” even if it costs a little more.
The real cost of under-insuring your property that nobody calculates.
The Coinsurance and the Catastrophic Penalty
To save money, a business owner might insure their $1 million building for only $700,000. They think they are just taking a small risk on a total loss. They don’t understand the “coinsurance” penalty. Most policies require you to insure your property for at least 80% of its value. If you don’t, you are penalized on all claims, not just a total loss. In this case, because they only insured for 70%, the insurer would only pay 7/8ths of even a small, $100,000 claim. That “savings” on the premium can lead to a catastrophic, unexpected penalty.
What sophisticated CFOs do with their insurance budget that others don’t.
The Budget and the Balance Sheet
An average CFO treats the insurance premium as a simple operating expense to be minimized. A sophisticated CFO does something different. They see their insurance program as a tool for managing the company’s balance sheet. They will use a high deductible or a captive insurer to strategically retain predictable risks on their own balance sheet, while using the commercial insurance market to protect the company from the catastrophic, “black swan” events that could truly impair their financial strength. It’s a strategic use of capital, not just an expense line.
The myth of the “soft market” is costing you a fortune.
The Market and the Missed Opportunity
When the insurance market is “soft,” it means there is a lot of competition and prices are low. Many business owners will just sit back and enjoy the lower premiums. This is a myth, and it’s costing you. A soft market is not a time to be passive; it’s a time to be aggressive. This is the moment to go to your broker and demand broader coverage, better terms, and lower deductibles. The carriers are hungry for business and are willing to make concessions they would never make in a hard market. A soft market is a massive, but often missed, opportunity.
I quit my high-commission broker and my net insurance cost dropped 15%.
The Commission and the Real Cost
I was with a broker who charged a high commission rate. He told me it was because he provided great service. I decided to test that theory. I switched to a broker who charged a much lower commission. My net insurance cost—the premium plus the commission—dropped by 15% overnight. And the service was just as good, if not better. I learned that a high commission is often just a sign of an inefficient brokerage, not a sign of superior service. Don’t be afraid to ask about your broker’s compensation.
Controversial: Paying a fee to a broker or consultant is cheaper than “free” commissions.
The Fee and the Freedom from Bias
The standard way to pay a broker is a “free” commission. Here’s the controversy: it’s often cheaper to pay a broker a flat fee for their services instead. Why? Because a fee-based arrangement removes the conflict of interest. The broker is now working only for you, not for a hidden commission from the insurance company. They are free to recommend the absolute best solution for you, even if it’s a solution that pays them no commission at all. The transparency and unbiased advice you get is often worth far more than the commission you thought you were saving.
95% of online “how to save” articles are useless. Here’s a real strategy.
The Clickbait and the Real Cost-Cutter
Online articles on “how to save on insurance” are full of useless, generic tips like “raise your deductible” or “bundle your policies.” Here’s a real strategy. The single biggest driver of your insurance cost is your claims history. The most powerful way to save money is to invest in a robust risk management program that prevents claims from happening in the first place. A documented safety program, a formal fleet management plan, and strong contract review procedures will lower your claims, which will, in turn, lower your premium far more than any bundle discount ever could.
One small change to our safety program saved us 40% on our Workers’ Comp premium.
The Nurse and the Nudged-Up Savings
Our company was struggling with high Workers’ Compensation costs. We made one small change that had a massive impact. We hired a “triage nurse” service. Now, when an employee has a minor injury, their first call is to a 24/7 nurse hotline. The nurse can often provide simple first aid advice that prevents the employee from going to the emergency room for a minor cut or sprain. This simple intervention dramatically reduced the number of small, unnecessary claims we had, which lowered our experience modifier and saved us 40% on our premium.
The truth about group purchasing programs that the organizers profit from hiding.
The Group and the Grossed-Up Margin
Your trade association offers an “exclusive” group insurance program with the promise of lower rates. The truth the organizers won’t tell you is that they are often making a significant profit from the arrangement. The insurance broker or the carrier is often paying a handsome endorsement fee back to the association. This cost is passed on to you in the premium. While the group’s buying power can sometimes help, you can often get a better deal on your own in the open market, without paying for the hidden administrative margin of the group.
Stop paying your Workers’ Comp premium upfront. Use a pay-as-you-go plan instead.
The Upfront and the Unnecessary Burden
The traditional way to pay for Workers’ Compensation is to pay a large portion of the estimated annual premium upfront. This can be a huge cash flow burden for a small business. Stop doing this. Ask your broker for a “pay-as-you-go” plan. These plans integrate with your payroll system. Your premium is calculated and paid automatically with each payroll cycle, based on your actual payroll numbers, not an estimate. It smooths out your cash flow and eliminates the need for a painful annual audit.
Replace your high-frequency claims with a higher deductible. Thank me later.
The Frequency and the Financial Freedom
My company was being eaten alive by a high frequency of small, predictable claims. Our insurance premiums were soaring. My broker suggested a counterintuitive solution. We dramatically increased our deductible. We chose to handle all those small, frequent claims ourselves, out of our own cash flow. It was scary at first. But our premium plummeted. We now only use our insurance for the truly catastrophic, unpredictable events. It has given us more control, more financial freedom, and has forced us to be better at managing our own small losses. You’re welcome.
The captive insurance secret that could turn your premium into an asset.
The Captive and the Cash-Back
Here’s a secret about “captive” insurance that can transform your business. When you form your own captive insurance company and pay premiums to it, that money doesn’t just disappear. If you have a good year with few claims, the underwriting profit and the investment income belong to you. The captive can build up a massive cash reserve. You can then use that reserve to make loans back to your main operating company at a much lower interest rate than a bank would charge. You have turned your insurance premium from a dead expense into a flexible, strategic financial asset.
Why your traditional cost-cutting approach fails with insurance.
The Cost and the Coverage Collapse
In most parts of a business, you can cut costs by finding a cheaper supplier for a commodity product. This approach fails completely with insurance. Insurance is not a commodity. When you cut the “cost” of your insurance by buying a cheaper policy, you are not getting a bargain. You are getting a policy with weaker coverage, more exclusions, and from a lower-quality insurer. The traditional approach of just finding the lowest price will inevitably lead to a situation where your “cost-cutting” has created a catastrophic, uninsured coverage collapse.
I ignored my consultant’s advice to invest in risk control for years. It cost me a fortune in premiums.
The Control and the Cost
A risk management consultant told me for years that I needed to invest in better loss control programs, like a formal fleet safety plan and an ergonomic assessment of our factory. I always ignored him. I saw it as an unnecessary expense. I was paying a fortune in high insurance premiums, but I thought that was just the cost of doing business. I finally made the investment in loss control. Our claims dropped dramatically. Our premiums went down by 30%. The investment paid for itself in less than two years.
Let’s be honest: Your “renewal” is just your insurer’s first offer.
The Renewal and the Re-Negotiation
Let’s be honest with ourselves. The renewal quote that your insurance company sends you is not a final, take-it-or-leave-it number. It is their first offer. It is the starting point in a negotiation. They are testing you to see if you will just passively accept it. You should never, ever accept the first renewal offer. You should always question the increase, you should always ask for competing quotes, and you should always be prepared to negotiate. Your renewal is not a bill; it is a proposal.
87% of businesses get their property valuation wrong, leading to coinsurance penalties.
The Valuation and the Vicious Penalty
Most business owners have no idea what the true “replacement cost” of their building is. They are just guessing. This is a massive mistake. Almost every property policy has a “coinsurance” clause that requires you to insure the building for at least 80-90% of its value. If you get the valuation wrong and under-insure the property, you will be hit with a vicious coinsurance penalty on any claim, not just a total loss. Getting a professional, third-party insurance appraisal is the only way to avoid this dangerous trap.
This weird habit of asking for premium credits outperforms asking for a discount every time.
The Credit and the Control
Instead of just asking my broker for a “discount,” I have a weird habit that works much better. I ask him, “What specific premium credits are we eligible for?” An underwriter has a list of official, approved “schedule credits” they can apply for things like having a superior safety program, excellent management, or a modern facility. By asking for the specific “credits,” I am speaking their language and forcing them to look for justifiable reasons to lower my premium. It’s a much more professional and effective approach than just begging for a discount.
The real reason your premiums are so high (hint: it’s not the insurance company’s greed).
The Data and the Dollars
You think your insurance premiums are high because the insurance company is greedy. That’s a simple, but mostly wrong, explanation. The real reason your premiums are high is because the underwriting data says you are a bad risk. Your loss history is poor, your industry is hazardous, or your financial statements are weak. The premium is not an emotional number; it is a mathematical calculation based on the data you provide. If you want to lower your premium, you have to change your data by becoming a safer, more professional, and more profitable business.
Ditch your guaranteed cost program. Use a loss-sensitive plan instead.
The Guarantee and the Gamble
A standard, “guaranteed cost” insurance program is simple: you pay your premium and you’re done. It’s also inefficient if you have a good safety record. You should ditch it and move to a “loss-sensitive” plan, like a retrospective rating plan. In these plans, your final premium is adjusted up or down based on your actual claims experience during the year. If you have a great year with few claims, you can get a massive portion of your premium back. It’s a way to bet on your own performance and to be directly rewarded for your commitment to safety.
Stop pretending all insurers are the same. Get competitive quotes.
The Myth of the Monolith
Many business owners just stick with the same insurance company for years, pretending that all insurers are basically the same. This is a costly mistake. The insurance market is incredibly diverse. Different companies have different appetites for risk, different pricing models, and different policy forms. The insurer that was the best fit for you five years ago may be the worst fit for you today. The only way to know is to get competitive quotes from multiple, qualified carriers every single year. The market is not a monolith.
The 6-word phrase that changed how I think about insurance costs.
You can’t insure a burning house.
My mentor told me a simple, 6-word phrase that has guided my entire risk management philosophy: “You can’t insure a burning house.” It means that if your business is already a disaster—with a terrible safety record, a history of lawsuits, and poor financial controls—no insurance company will want to cover you at any price. You have to put the fire out first. You have to become a well-managed, low-risk operation before you can expect to get good, affordable insurance. Insurance is a reward for being a good risk, not a solution for being a bad one.
What the underwriting industry doesn’t want you to know about schedule credits.
The Credit and the Secret Discount
What the insurance underwriting industry doesn’t want you to know is that they have a secret stash of discounts they can apply to your premium. It’s called a “schedule credit.” An underwriter has the discretionary authority to apply a credit of up to 25% (or more) to your policy based on their subjective assessment of your risk. If you have a great management team, a clean facility, and a professional broker who tells your story well, you can earn a massive schedule credit that is not listed on any official form.
I was today years old when I learned about retrospective rating plans.
The Retro and the Refund
I was today years old when I learned about “retrospective rating plans.” I always thought my workers’ comp premium was a fixed cost. A “retro” plan changed everything. In this plan, I pay an estimated premium upfront. Then, after the year is over, the insurer looks at my actual claims for that year. If my claims were lower than expected, they send me a massive refund check. If my claims were higher, I have to pay more. It turned my insurance from a fixed expense into a variable one that was directly tied to my own safety performance.
Normalize asking for a breakdown of your premium components.
The Breakdown and the Black Box
Your insurance premium can feel like a mysterious “black box.” You just get one big number. You should normalize asking your broker for a detailed breakdown of all the premium components. How much of the cost is for the pure “loss cost”? What are the carrier’s expense and profit loads? What are the state taxes and fees? Getting this detailed breakdown demystifies the process. It allows you to see exactly what you are paying for and it helps you to have a more intelligent and data-driven conversation with your broker about where the real savings opportunities are.
Plot twist: Your biggest opportunity for savings isn’t the premium. It’s your retained losses.
The Retention and the Real Savings
Companies spend all their energy trying to negotiate a 10% reduction in their insurance premium. The plot twist is that their biggest opportunity for savings is somewhere else entirely. It’s in actively managing their “retained losses”—the costs they pay out-of-pocket for their deductibles and self-insured programs. By implementing programs to reduce the frequency and severity of these smaller, retained claims, a company can often save far more money than they ever could by just haggling over the premium for their catastrophic coverage.
The loss-run report everyone ignores that gives me an edge in a claim.
The Run and the Revealing Data
The “loss run” report is a detailed history of all your past insurance claims. Most companies only look at it once a year at renewal. I have my broker send me an updated loss run every single quarter. I review it meticulously. Why? Because it’s full of valuable data. I can spot trends in our claims before they become a major problem. And I can check to make sure the insurance company isn’t “over-reserving” our claims—setting aside too much money—which can negatively impact our premiums. It’s a powerful, but often ignored, data source.
Stop optimizing for the first year’s premium. Optimize for the 5-year total cost.
The Teaser Rate and the Long-Term Trap
A new insurance carrier will often come in with a very low “teaser rate” to win your business in the first year. If you are only optimizing for the first year’s premium, you will fall into this trap. A smarter approach is to optimize for the lowest possible total cost over a five-year period. A stable, high-quality carrier that gives you a fair, sustainable premium year after year is a much better long-term partner than a carrier that lures you in with a lowball price and then hits you with a massive increase in year two.
The brutal truth about why your “good driver” discount is barely making a dent.
The “Discount” and the Data-Driven Reality
You have a perfect driving record, and you are proud of your “good driver” discount. The brutal truth is that this discount is probably barely making a dent in your premium. Why? Because your rate is not just based on your driving record. The insurance company is using dozens of other data points in their algorithm: your zip code, your credit score, the type of car you drive, and even your marital status. The “good driver” discount is a small, feel-good concession in a much larger, and more complex, data-driven pricing model.
Throw away your old renewal application. A fresh submission gets a fresh look.
The Old and the Overlooked
For years, our broker would just update the payroll and sales numbers on our old renewal application and send it back to the same underwriter. We were getting stale, lazy renewals. We threw it all away. We created a brand new, professional underwriting submission from scratch. We told the story of our business and all the improvements we had made. We forced our broker to send it to a dozen new underwriters. A fresh submission got us a fresh look from the market, and the results were dramatically better.
The 5-minute test that reveals if your broker is truly marketing your account.
The Question and the Quick Confirmation
To see if your broker is actually working hard for you, try this 5-minute test. Call your broker and ask this simple question: “Could you please send me a list of all the insurance carriers you have submitted our account to this year, along with the name of the specific underwriter you spoke with at each one?” A broker who is truly marketing your account will be able to provide this information immediately. A lazy broker who has only gone to one or two markets will start to make excuses. Their answer will tell you everything.
Why everyone is wrong about the impact of a single claim on your rates.
The Claim and the Context
Everyone is terrified that a single claim will cause their insurance rates to skyrocket. They are wrong. Underwriters are smarter than that. They look at the context. Was the claim a result of a freak accident, or was it a symptom of a poor safety culture? Was it a one-time event, or is it part of a pattern of frequency? A single, large, but clearly random claim will often have very little impact on your long-term rates. A pattern of small, preventable claims, however, is a massive red flag that will absolutely cause your rates to soar.
Stop asking “can you lower the price?”. Ask “what can we do to improve our risk profile?” instead.
The Price and the Proactive Partnership
I used to go into my renewal meetings and ask my broker, “Can you lower the price?” It was a weak, adversarial question. I changed my approach. Now, I ask a much more powerful question: “What are the top three things we can do as a company this year to improve our risk profile in the eyes of an underwriter?” This question transforms the dynamic. It turns my broker from a salesperson into a strategic advisor. It turns our relationship into a proactive partnership focused on making our business better, not just cheaper.
The habit of challenging our experience mod worksheet that I wish I’d started years ago.
The Mod and the Mistake
Your “experience modifier” for workers’ comp is calculated using a complex formula based on your past claims. I used to just accept the number as a fact. I wish I had started the habit of challenging the worksheet years ago. I now have my broker get a copy of the worksheet from the rating bureau every year. We check it for errors. We have found clerical mistakes, claims that were not ours, and incorrect job classifications. By finding and correcting these mistakes, we have been able to significantly lower our mod and our premium.
Here’s why “telematics” discounts are terrible for most commercial fleets.
The Telematics and the Trap
“Telematics” programs, which track your commercial vehicle fleet’s every move, are sold as a way to get a discount on your insurance. For most fleets, they are a trap. Yes, they can identify your worst drivers. But they also create a massive, permanent, and discoverable data trail. In the event of an accident, a plaintiff’s attorney will subpoena your telematics data. Any instance of speeding or hard braking, even from weeks before the accident, will be used to paint your entire company as a reckless and negligent operator. The small discount is not worth the massive legal risk.
I’ll say what everyone’s thinking: Your insurer is over-reserving your claims and it’s costing you money.
The Reserve and the Renewal Ramification
Let’s just say what every risk manager is thinking. Your insurance company is probably intentionally “over-reserving” your open claims. This means they are setting aside a higher amount of money for a future payout than the claim is actually worth. Why? Because those high reserves make your loss history look worse than it is. And that inflated loss history is then used as a justification to charge you a higher premium at your next renewal. It’s a quiet, legal, and very effective way for them to increase your costs.
The skill of financial analysis that matters more than your relationship with the underwriter.
The Analysis and the Argument
A good relationship with your underwriter is helpful. The skill of financial analysis is much more powerful. I learned to stop just “talking” to my underwriter and to start “presenting” to them. I now go into my renewal meetings with a professional-grade financial analysis. I show them our strong balance sheet, our improving safety trends, and our proactive risk management investments. A data-driven, financial argument is far more persuasive to an underwriter than a friendly chat. They are in the business of numbers, so you need to speak their language.
This counterintuitive action of spending more on risk management fixed our high premium problem.
The Investment and the Impressive Return
Our insurance premiums were out of control. We took a counterintuitive step. We decided to spend more money. We hired a dedicated safety director and invested in a new training program. Our short-term expenses went up, but our claims went down dramatically. After two years of a cleaner loss history, we went to the insurance market. The underwriters saw us as a best-in-class risk. Our premium dropped by 40%. The investment in risk management paid for itself many times over. We had to spend money to save money.
Why your good intention of “bundling” is actually costing you access to better, cheaper markets.
The Bundle and the Barrier to Specialists
You bundle all your insurance with one big carrier to get a “multi-policy discount.” Your good intention is actually costing you money. The carrier that is great at property insurance is probably mediocre at liability and terrible at cyber. By bundling, you are preventing yourself from going to the specialist insurance markets that only focus on one specific type of coverage. A standalone policy from a specialist carrier is often both broader and cheaper than the compromised version in your bundled package.
Quit using your payroll company for workers’ comp. It’s not worth the lack of expertise.
The Payroll and the Policy Problem
Many payroll companies now offer a “pay-as-you-go” workers’ compensation insurance plan. It seems convenient. It’s a mistake. Your payroll company is a technology company, not an insurance expert. They are just reselling a policy from a single carrier. They cannot provide you with expert advice on claims, safety programs, or managing your experience modifier. When you have a serious claim, you will find you have no expert advocate in your corner. The convenience is not worth the massive sacrifice in expertise and service.
The metric everyone tracks (premium) that means absolutely nothing compared to your TCOR.
The Premium and the Full Picture
Everyone in the C-suite tracks the annual insurance premium. It’s the metric they all know. It’s a vanity metric. It means absolutely nothing compared to your company’s “Total Cost of Risk” (TCOR). TCOR is a much more holistic number. It includes your premium, but also your retained losses, your administrative costs, and your legal fees. Focusing only on the premium is like looking at one single tree and ignoring the entire forest. TCOR is the only metric that gives you the full, true picture of what risk is costing your organization.
Stop calling it a “cost.” Call it an “investment in your balance sheet.”
The Cost and the Capital
I used to think of our insurance premium as a “cost,” a painful expense that hit our P&L statement. I changed my language. Now, I call it an “investment in our balance sheet.” This is a powerful mindset shift. We are investing a certain amount of capital to protect our entire balance sheet from a catastrophic event. It’s not an expense to be minimized; it’s a strategic capital allocation decision, just like an investment in a new factory or a new piece of technology.
The decision I made to join a group captive that everyone said was risky (but saved us 50%).
The Captive and the Control
I made a decision that my peers said was risky. I pulled my company out of the traditional insurance market and joined a “group captive.” This is an insurance company owned by a group of similar, best-in-class businesses. We pool our premiums and share our risks. Because we are all committed to safety, our claims are much lower than the industry average. My company’s total insurance cost has gone down by 50%. We have more control, more stability, and we even get a dividend back in profitable years. It was the best decision I ever made.
What I learned from a premium audit that changed our entire accounting process.
The Audit and the Accounting Adjustment
Our workers’ compensation policy was subject to an annual premium audit. The auditor reclassified several of our office staff into a much higher-rated, more expensive job classification. It cost us a fortune. What I learned from that audit changed our accounting. We now work with our accountant to structure our payroll records in a way that clearly and accurately reflects the specific duties of each employee, using the insurance bureau’s own classification codes. This proactive accounting has saved us from any future audit surprises.
The common mistake of misclassifying payroll that’s costing you a fortune in workers’ comp.
The Payroll and the Premium Penalty
I see this mistake everywhere. A business will lump all their payroll into one or two broad categories for their workers’ compensation policy. This is costing them a fortune. The premium for an office worker is a tiny fraction of the premium for a machine operator. If you don’t segregate your payroll accurately, the insurer is required to assign all the payroll to the highest-rated, most expensive classification. By meticulously breaking out your payroll by the correct, specific job codes, you can dramatically and legally reduce your premium.
PSA: Insurance premium taxes are a scam. Here’s proof.
The Tax and the Takeaway
Here’s a public service announcement. The “premium taxes” that are added to your insurance policy are a scam, but not in the way you think. They are a real tax that the insurance company has to pay to the state. The scam is that these taxes are often a hidden, and significant, driver of your total cost. A state like Florida has much higher premium taxes than a state like Illinois. For a large company, the choice of where to domicile their business can have a massive impact on the taxes they pay on their insurance premiums.
The skill of negotiation that finance departments should teach but don’t.
The Negotiation and the Net Savings
Finance departments are great at teaching you how to analyze a spreadsheet. The skill they should be teaching, but don’t, is negotiation. Every single aspect of your insurance program is negotiable: the premium, the deductible, the policy language, the service fees. I’ve seen a skilled negotiator save a company more money in a one-hour meeting with an underwriter than an analyst could save in a year of spreadsheet work. The ability to advocate, to persuade, and to negotiate from a position of strength is the most underrated skill in financial management.
This 5-minute action of reviewing your loss runs for errors beats trusting your insurer every time.
The Loss Run and the Lie
Your “loss run” is the official record of your claims history. I have a 5-minute action I take every time I get one: I review it for errors. It’s amazing what you can find. I have found claims listed that belonged to a different company. I have found claims that were closed without payment but were still showing a massive “reserve” amount. These errors make your history look worse than it is and directly increase your premium. Never, ever trust that the insurer’s data is accurate.
Why that “low-cost” insurer is actually doing it wrong for businesses with claims.
The Low Cost and the High Cost of a Claim
A “low-cost” insurance carrier makes its money by doing two things: being very selective in who they insure, and being very aggressive in how they handle claims. They are great for a business that never has a claim. But the moment you do, you will discover their business model. Their claims department is understaffed, their adjusters are inexperienced, and their goal is to pay as little as possible. The initial savings on the premium is a terrible bargain when you consider the massive financial and emotional cost of fighting them on a real claim.
Stop waiting for the renewal quote to arrive 2 days before expiration. Start the process 120 days out.
The Timeline and the Upper Hand
If you wait for your renewal quote to arrive two days before your policy expires, you have already lost the negotiation. You have no time, no options, and no leverage. The professional approach is to start the renewal process 120 days before expiration. This gives your broker plenty of time to thoroughly market your account, it gives you time to analyze the options, and it signals to your incumbent carrier that you are a serious buyer who is in control. The person who controls the timeline controls the negotiation.
The actuarial consultant I use that most CFOs have never heard of.
The Actuary and the Accurate Prediction
As a CFO, I used to just guess at our future losses when setting our insurance budget. Then I hired an actuarial consultant. Most CFOs have never heard of doing this. For a reasonable fee, an independent actuary analyzes our past claims data and creates a statistically sound projection of our future losses. This gives us an incredibly accurate number to use for our budgeting and for our negotiations with the insurance company. It replaces a “gut feeling” with a powerful, data-driven financial tool.
Your cost problem exists because you believe your broker is getting you the best deal.
The Belief and the Unchallenged Broker
You have a cost problem with your insurance because of a simple, and probably wrong, belief. You believe your broker is already getting you the best possible deal. Because of this belief, you don’t challenge them. You don’t make them compete. You don’t ask them to show you their work. The moment you replace that passive belief with a healthy, professional skepticism, your cost problem will start to be solved. A broker who knows they are being managed and held accountable will always deliver a better result than one who is not.
Delete that “compare quotes” app. Your understanding of value will improve instantly.
The App and the Apples-to-Oranges Comparison
Those “compare quotes” apps for business insurance are a trap. They give you the illusion of an apples-to-apples comparison, but they are not. They are comparing a policy from a low-quality carrier with a dozen exclusions to a policy from a high-quality carrier with broad coverage. The prices are different because the products are fundamentally different. You will improve your understanding of value instantly if you delete the app and have a conversation with a professional broker who can explain the real difference between the quotes.
The advice on self-insured retentions I give that makes brokers uncomfortable (but works).
The Retention and the Return on Investment
I advise my clients to think of their “self-insured retention” (SIR) not as a deductible, but as an investment. The premium savings you get from a higher SIR is your “return.” Is that return high enough to justify the risk of paying the SIR? For example, if increasing your SIR by $50,000 saves you $10,000 in premium, that’s a 20% return on your “investment.” This financial language makes brokers uncomfortable, but it’s the right way for a CFO to analyze the decision.
Why the common fear of market volatility is irrational and the real fear of a non-competitive renewal is ignored.
The Volatility and the Complacent Vendor
Business owners are often afraid of the “hard” insurance market, where prices are volatile. This is an irrational fear. You can’t control the market. The real, rational fear you should have is the fear of a non-competitive renewal process. You can control that. A lazy broker who doesn’t aggressively market your account will give you a bad result in any market, hard or soft. Fearing the market you can’t control while ignoring the competitive process you can control is a classic mistake.
I tried to use an online quoting platform for our package policy so you don’t have to. Here’s what happened.
The Platform and the Pathetic Policy
I thought I could save time and money by using a new online platform to quote our company’s entire insurance package. It was a pathetic failure. The platform’s algorithm couldn’t understand our unique risks. It spit out a generic, off-the-shelf policy that was full of gaps and exclusions. The “low price” it quoted was for a product that was completely wrong for our business. I learned that for a complex business, there is no technological substitute for a conversation with an experienced, human insurance professional.
The question about “loss development factors” that instantly reveals if a CFO knows insurance.
The LDF and the Long Tail
When I’m interviewing a new CFO, I ask them this question: “Can you please explain how an insurance company uses ‘loss development factors’ to calculate your ultimate losses?” A CFO who knows insurance will be able to explain that an LDF is a multiplier that actuaries use to project the future cost of current claims, accounting for the “long tail” of liability. A CFO who gives a blank stare is revealing that they only see the premium, not the deep, financial mechanics of risk.
This old-school method of a competitive broker RFP beats every incumbent broker’s “best offer.”
The RFP and the Real Best Offer
The best way to get a great deal on your insurance is an old-school method: a competitive “Request for Proposal” (RFP) for a new broker. We do it every three years. We make our current broker compete against two other, qualified firms. The process forces every single one of them to be at their absolute best. The “best offer” from our incumbent broker is always magically better when they know they are in a fight to keep our business. A competitive process will always beat a cozy, long-term relationship.
Stop romanticizing a 30-year relationship with your insurer. It’s actually costing you innovation and savings.
The Relationship and the Lack of a Reason to Innovate
You are proud of your 30-year relationship with the same insurance carrier. You think it’s a sign of stability. It’s not. It’s a sign of stagnation. That insurer has no reason to offer you their newest, most innovative policy forms or their most aggressive pricing. They know you are a loyal, “sticky” customer who isn’t going anywhere. That romantic idea of a long-term relationship is actually preventing you from getting access to the better products and better pricing that they are using to attract new customers.
The principle of “risk appetite” that guides every decision on how much insurance to buy.
The Appetite and the Amount of Risk You Can Stomach
The amount of insurance you should buy is not a technical question; it’s a philosophical one. It is guided by the principle of “risk appetite.” You must ask yourself: how much risk is our organization willing, and able, to take on our own balance sheet? Are we aggressive, or are we conservative? The answer to that question will determine your deductible levels, your policy limits, and your entire insurance strategy. It is the most important, and most personal, decision in all of risk management.
Why your premium is vanity and your risk-adjusted cost of capital is sanity.
The Premium vs. The Performance
As a CEO, I used to focus on our insurance premium as a key metric. It’s a vanity metric. The number that represents sanity is our “risk-adjusted return on capital.” I now view our risk management and insurance program as an investment. We spend a certain amount of capital on premiums, deductibles, and safety programs. In return, we get a more stable, resilient business. The real measure of success is how efficiently we are using that capital to reduce our risk and improve the overall financial performance of the company.
Forget premium reduction. Aim for TCOR optimization instead.
The Reduction and the Real Goal
For years, my goal was “premium reduction.” I would haggle with my broker to get the price down. It was the wrong goal. My goal now is “Total Cost of Risk (TCOR) optimization.” This is a much broader and more strategic objective. It means I am looking at the entire picture—my premiums, my retained losses, my administrative costs—and I am trying to find the most efficient and effective way to manage all of it. A lower TCOR is a much more meaningful achievement than just a small reduction in one single line item.
The realization that made me quit focusing on price and start focusing on value.
The Price and the Poor Performance
I used to be obsessed with the price of my insurance. I would always choose the cheapest option. That realization changed after my first major claim with a low-cost insurer. Their claims service was terrible, their policy was full of holes, and the entire process was a nightmare. I realized I had been focusing on the wrong thing. A cheap price is worthless if the company doesn’t show up when you need them. I now focus on value—the combination of a fair price, broad coverage, and a high-quality, responsive insurance carrier.
What amateurs do (accept the renewal) that pros never do.
The Acceptance and the Annual Competition
An amateur business owner will receive their insurance renewal, maybe with a small increase, and they will just accept it and pay the bill. A professional insurance buyer would never, ever do this. A pro treats every single renewal as a new opportunity to create a competitive marketplace. They will demand that their broker get multiple, competing quotes, even if they are happy with their current insurer. They know that the only way to ensure they are getting the best terms and pricing is to make the carriers fight for their business, every single year.
The investment in a loss control survey that everyone avoids that has the highest ROI.
The Survey and the Substantial Savings
Most business owners avoid paying for an independent “loss control” survey. They see it as an unnecessary expense. It has the highest ROI of almost any consulting engagement. For a few thousand dollars, a professional loss control engineer will come to your facility and identify all of your hidden risks—the safety hazards, the fire risks, the security gaps. The detailed report they provide can be used to fix those problems, which will reduce your claims. It can also be submitted to your underwriter to justify a major premium credit.
Stop saying “my insurance is expensive.” Say “my risk profile is driving a high cost of risk transfer.”
The Expense and the Expert’s Expression
When you say, “My insurance is expensive,” it sounds like you are a victim of a greedy insurance company. It’s weak language. I’ve learned to use the language of a risk management professional. Now, I say, “Our company’s current risk profile is driving a high cost of risk transfer.” This language shows that I understand that the premium is a direct result of my own company’s operations and that I have the power to change it by improving our risk profile. It shifts the mindset from being a victim to being in control.
The truth about underwriting profitability I couldn’t say as an underwriter.
The Underwriter and the Unspoken Rule
I used to be an insurance underwriter. Here’s a truth I couldn’t say out loud. My bonus was not just based on how much premium I wrote. It was heavily based on the “profitability” of my book of business. This meant I had a powerful, personal financial incentive to be very conservative. I would rather decline a borderline account than take a risk that might lead to a claim and hurt my loss ratio. The entire system is designed to reward underwriters for being cautious, not for being creative or helpful to the client.
This tiny detail in your property’s statement of values separates accurate premiums from inflated ones.
The SOV and the Square Footage
When you submit your “Statement of Values” (SOV) for your property insurance, you list the location and the replacement cost of each building. A tiny detail that can save you a fortune is how you list the square footage. Many companies will just list the total square footage. A savvy insured will break it down. They will show how much is office space, how much is warehouse space, and how much is manufacturing space. Each of these has a different rate. Providing this detail allows the underwriter to give you a much more accurate, and often lower, premium.
Why a low premium is a trap for companies experiencing rapid growth.
The Growth and the Gross Underinsurance
A fast-growing company gets a low insurance premium and they think it’s a great deal. It’s a trap. A standard insurance policy is based on your historical revenue and payroll. If you are experiencing rapid growth, your “exposure base” is quickly outgrowing your policy. You are grossly underinsured, and you won’t discover it until you have a claim or a premium audit. A growing company needs a broker who understands how to structure a policy that can flex and grow with the business, not a cheap, static policy that will leave them exposed.
Replace your complicated renewal negotiation with a simple, data-driven submission. You’re welcome.
The Negotiation and the Narrative of Numbers
I used to dread our annual insurance renewal negotiation. It was a long, complicated argument with our broker. I replaced it with a simple, data-driven process. Now, 120 days before renewal, we provide our broker with a professional “underwriting submission.” It’s a presentation that tells our story with data. It shows our improving safety trends, our strong financials, and our risk management investments. We don’t have to negotiate anymore. The data makes the argument for us. You’re welcome.
The skill of financial modeling that’s 10x more valuable than haggling.
The Model and the Masterful Decision
Some business owners think they can save money on insurance by being a tough haggler. The skill that is ten times more valuable is financial modeling. The ability to build a simple financial model that shows the long-term impact of different risk management decisions—like choosing a higher deductible, or investing in a loss control program—is a superpower. It allows you to make strategic, data-driven decisions that will save you far more money over the long run than you could ever save by just haggling over this year’s premium.
Stop treating your insurance premium like an uncontrollable expense. Treat it like a manageable outcome of your operations.
The Expense and the Outcome
Most businesses treat their insurance premium as an uncontrollable, external expense, like the weather. This is the wrong mindset. Your insurance premium is a manageable outcome that is a direct reflection of your own internal operations. You can control it. By improving your safety record, by strengthening your contracts, and by professionalizing your risk management, you can directly and significantly lower your premium. It is not something that happens to you; it is a number that you can, and should, actively manage.
The experiment I ran with a higher property deductible that proved our risk tolerance was too low.
The Deductible and the Data
Our company had always had a very low, $5,000 deductible on our property insurance. Our leadership team was terrified of taking on more risk. I ran an experiment. I looked at our loss history for the last ten years. We had never had a single property claim. I then got a quote that showed we could save $20,000 a year in premium by moving to a $25,000 deductible. The data proved that our fear was irrational. Our actual risk was very low. The experiment gave me the evidence I needed to prove our risk tolerance was too conservative.
Why your old pricing worked before but doesn’t in a hard insurance market.
The Hard Market and the Harsh Reality
For years, you enjoyed low, stable insurance prices during a “soft market.” You got lazy. You didn’t invest in risk management. Now, the market has turned “hard.” The carriers are losing money, and they are dramatically increasing rates for everyone. Your old pricing is gone forever. In a hard market, the underwriters scrutinize every single account. The only way to get a decent price is to be a “best-in-class” risk. The hard market is a harsh reality check that separates the well-managed companies from the poorly-managed ones.
The choice to use a non-admitted carrier that everyone judges that actually saved us 20%.
The Non-Admitted and the Nimble Advantage
My board of directors was very nervous about using a “non-admitted” insurance carrier. They aren’t licensed in our state and aren’t backed by the state’s guarantee fund. But for our unique, hard-to-place risk, it was the best choice. A non-admitted carrier has “freedom of rate and form.” This means they are not bound by the rigid rules of the standard market. They were able to offer us a highly customized policy, with the exact coverage we needed, for a premium that was 20% lower than the compromised policy offered by the standard carriers.
I stopped accepting premium increases without a detailed justification. The increases stopped.
The Justification and the Jolt to the System
For years, I would get a renewal notice with a 10% premium increase and I would just passively accept it. I decided to stop. Now, for any premium increase, I demand a detailed, written justification from the underwriter. I want to see the specific data they are using to support the increase. This simple act of demanding accountability has had a jolting effect. The underwriters know they are being watched. In many cases, when they are forced to justify the increase, they will often “find” a way to reduce it.
The concept of “actuarial soundness” that nobody understands but changes everything about pricing.
The Actuary and the Art of a Fair Price
“Actuarial soundness” is a concept that nobody outside the insurance industry understands, but it’s the foundation of all pricing. It means that the premium being charged for a pool of risks must be sufficient to cover all the expected claims and expenses for that pool. An insurance company that consistently prices its products below an actuarially sound level will eventually go bankrupt. This is why just “lowering the price” is not a sustainable strategy. A fair price is one that is actuarially sound for both you and the insurer.
This unpopular opinion on premium audits will trigger accountants but it’s true.
The Audit and the Adversarial Stance
Here’s an unpopular opinion that will trigger your accountant. You should treat your annual insurance premium audit as an adversarial meeting. The auditor, who is hired by the insurance company, has a financial incentive to classify your sales and payroll in the most expensive possible categories to increase your final premium. You should never, ever let them conduct the audit alone. You or your broker should be in the room, with your own set of carefully prepared records, ready to argue for the most favorable possible interpretations under the rules.
Stop copying your competitor’s insurance program. Do your own cost-benefit analysis instead.
The Copycat and the In-Customized Coverage
I know a CEO who told his broker to just “get me the same insurance program as my biggest competitor.” This is an incredibly lazy and dangerous approach. Your competitor has a different balance sheet, a different risk tolerance, and a different claims history. The insurance program that is perfect for them might be a terrible fit for you. Stop being a copycat. You need to do your own, unique cost-benefit analysis to design a program that is perfectly tailored to your company’s specific financial and operational reality.
The mistake of ignoring your claims frequency I see everywhere that’s so easy to fix.
The Frequency and the Fix
Companies are often obsessed with the “severity” of their claims—the one big, expensive loss. They often completely ignore their “frequency”—the steady drumbeat of small, predictable claims. This is a huge mistake. An underwriter is often more scared of a high-frequency problem than a high-severity one. A high frequency of small claims is a sign of a poor safety culture and a broken system. The good news is that this is so easy to fix. By focusing on the root causes of those small, frequent events, you can dramatically improve your entire risk profile.
Why this new “dynamic pricing” isn’t innovative. It’s just more frequent rate changes.
The “Dynamic” and the Disguised Volatility
The new buzzword in insurtech is “dynamic pricing,” where your premium can change on a monthly or even daily basis based on real-time data. It’s being sold as an innovation. It’s not. It’s just a way to introduce more volatility and to have more frequent rate increases. The fundamental underwriting principles are not changing. The company is just changing the timing of how they apply their pricing model to you. It’s not a revolution in pricing theory; it’s just a new payment plan.
The rule I break consistently (I always get a competing quote, even if I’m happy) and why you should too.
The Quote and the Constant Competition
I have a rule I break consistently with my broker, even when I am perfectly happy with my renewal offer. I always make him get at least one competing quote from another carrier. Why? Because it keeps everyone honest. It validates that the offer from my incumbent carrier is, in fact, a fair one. And it constantly provides me with valuable market intelligence on what other carriers are offering. The simple act of creating competition, even if you don’t intend to switch, is a powerful discipline that ensures you are always getting the best possible deal.
Stop believing you’re getting the best price. Believe in the power of a competitive marketplace instead.
The Belief and the Bidding War
For years, I believed my long-time broker when he told me he was getting me the “best price.” It was a belief based on loyalty, not on evidence. I stopped believing and started testing. I now believe in the power of a competitive marketplace. By making multiple, qualified brokers and carriers compete for my business every single year, I am not just getting a price; I am getting a market-driven result. I don’t have to believe in my broker’s promises; I can believe in the data that a real bidding war provides.