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Independent Insurance Reviews for Financial Institutions

04.01.2019

Financial institutions manage their own financial risk, but what about insurance risk? Even if you take the time to secure competitive bids for your insurance coverage, there are often hidden costs that you may not recognize.

Few banking executives are experts on their business insurance policies. Insurance coverage often goes unchallenged and unexamined for years until something prompts a closer look. That could include being asked about the business’ coverage by a board of directors; undergoing a significant business change that requires different coverage; or, unfortunately, disaster striking and learning there isn’t enough coverage or that the coverage in place is simply inadequate.

Any business or lending institution should undergo an insurance review every three to five years to stay up to date with current pricing and coverage options. Larger banks may hire risk managers to work on this full time, but medium-sized or smaller lending institutions do not usually need or cannot afford this full-time function. But that doesn’t mean you should forgo the risk management process.

A properly focused independent analysis will identify areas where the insured can take advantage of immediate cost-saving measures. Independent advice means the consultant does not sell insurance, so a business receives objective advice about necessary coverage and appropriate cost.

Factors banks and financial institutions often overlook

Each business has risks, and sometimes those risks are extremely unique. An impartial review can help determine the appropriate cost and coverage for the business to avoid being underinsured, improperly insured, or overpaying.

Financial institutions face unrelenting pressure on the bottom line. Regulatory changes, data breaches and other cyber risks, and global economic uncertainty present challenges that apply additional pressure. Regardless of the size of your bank or organization, there’s an inherent myriad of risk management challenges lending institutions face in their line of business.

Questions to ask when evaluating insurance coverage

To ensure comprehensive insurance protection, here are just some of the questions financial institutions should consider:

  • Are all entities involved in our lending institution (including, but not limited to, real estate operations, mortgage operations and charitable foundations) listed on the appropriate insurance policies?
  • Do we have liability coverage for our directors and chief executives?
  • Do we have adequate cyber insurance in the event of a breach or loss of critical information?
  • Do we have coverage to protect assets in case of employee fraud or theft?
  • Does our coverage protect us if our facilities are damaged or destroyed by fire or other natural disaster, and we are prevented from doing business?
  • Do we have business interruption coverage that will protect income?
  • Are people enrolled in our health insurance plan who are not eligible?
  • Do we have the right health insurance plan design?
  • Can I reduce the cost of insurance without reducing the coverage?

Most organizations don’t review their insurance policies often or thoroughly enough. Even with a great insurance program and trusting relationship with a broker or provider, surprises can arise, and an independent insurance review can help ensure you find the best solutions for your entity’s needs.

If your institution needs a cost-effective insurance review or you’re interested in learning more about our risk management services, please contact Bill Goddard, Insurance Consulting Principal, at bgoddard@bswllc.com or 314.983.1253.

To learn more about our full suite of services for the financial services industry, contact Lincoln Gray, Financial Services Industry Group Leader, at lgray@bswllc.com or 314.983.1235.

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