What Influences the Cost of Business Insurance in Singapore?
The cost of business insurance is usually a concern for most entrepreneurs. It is the one reason businesses choose one insurance policy or insurer over another. Insurance protects businesses from a “what if” situation. For example, one does not know if his business premises will go up in flames. However, should the warehouse burn, the business will recover the losses from the insurance company.
Insurance companies in Singapore are quite competitive. Some use the price of business insurance policies to attract businesses. If you are seeking business insurance for the first time, you are justified to wonder what insurance companies consider when coming up with the cost of business insurance policies.
The Type of Business
Businesses are exposed to different levels of risks. The higher the risk, the more you are expected to pay. For example, a company selling high-value jewellery is likely to pay more for insurance than one that sells trinkets. Likewise, businesses that sell goods that are easier to steal because they are lightweight may carry a greater risk than a business with bulky stock.
Location of the Business
Some businesses are located in more secure neighbourhoods. Insurers will look at the level of risk based on the location of the business. Most business insurance companies do not have catalogues for the cost of business insurance because various factors influence the level of risk.
Businesses that are run purely online may not be judged by location but by the level of risk. Some businesses are more exposed to high levels of cybercrime.
Are you Renting the Premises or do you Own the Property?
A restaurant run in a rented facility is likely to pay less business insurance than one that is being run on its premises. The is because the insurer will cover the cost of the property in the restaurant and the building as well. So, the property insurance premium will be higher.
The business that owns the premises may be saving on rent, but it has other obligations, such as insuring the building as it is one of the properties owned by the business. A business owner operating in a rented building is only concerned about the property in the space. The building owner is responsible for the cost of insuring the premises.
Past Claims History
Insurance companies are wary about providing business insurance coverage to businesses with a history of negligence. These are high-risk customers because a history of costly mistakes is a sign of a trend that is likely to continue. Some insurance companies may opt not to insure such a business, while others may choose to charge a higher premium.
A business with a history of high claims, such as for machinery breakdown, is likely to get a higher bill than a business with no history of claims.
Insurance companies customize business insurance policies to cater to the level of exposure. Your insurer is a business that expects to make a profit. So, charging a low fee for a business that carries a higher risk makes no sense.
Equally, charging a high premium for a low-risk business will discourage businesses from taking insurance. So, in a bid to find a balance, most insurers consider the above factors when determining business insurance costs.