Are Your Insurance Policy Limits Right for Your Organisation?

Limit of liability refers to the maximum an insurer will pay for any  claim.  It is important to make sure you have the right insurance limits in place – but this can be a challenging task. Getting it wrong can have a significant impact on your organisation’s balance sheet.  Limit analysis carried out by an analytical professional is one way to bring some science to the guesswork.

“Limit analysis helps to bring some science to the guesswork and equips you with the information you need to make such an important business decision”.

The problem

Many risk professionals struggle to put a value on their liability risk exposures and map out their maximum foreseeable losses which can lead to policy limits based on guesswork, budget constraints or benchmarking. The problem with this approach is that it does not take into account the risks unique to your organisation.

The impact

If your policy limit is too low, your organisation’s balance sheet may be crippled by an uninsured loss. In the event of a catastrophic loss you may also face intensive questioning from your organisation, its board and even shareholders about the policy limit decision.

The solution

Limit analysis is Aon’s risk quantification process that helps you identify and assess the specific liability risks your organisation is facing. Using information from your business and Aon’s risk library, we identify worst case scenarios, potential impacts and then model the risk using Monte Carlo simulation.

The benefits

• Avoiding catastrophic balance sheet costs – Limit Analysis will provide information to help ensure the organisation’s liability insurance is fit for purpose and the business is not exposed to an underinsurance risk.
• Efficient spending – Our method will provide information to help inform you of appropriate limits of liability and avoid unnecessary spending on over-insurance. With the current insurance market challenges, it is timely to revisit an organisation’s underlying risk exposure when assessing the adequacy of limits.
• Tailored approach – You will be equipped with information that is specifically tailored to your organisation’s risks and needs – insurance is not a one size fits all approach.

How we can help

Our expert Risk Analytics team can conduct limit analysis for your organisation to assist you in choosing the right policy limits.