How do insurers deem a trade to be riskier than others?

Insurers consider several factors when determining risk levels, including the likelihood of a claim arising from the trade, the potential costs of a claim, the type of work carried out, historical claim information, and the severity of those claims. Here, we’ll take a deep dive into each.

What is the likelihood of that trade making a claim?

The likelier a trade is to make a claim, the riskier it is deemed to be. More risk means higher premiums.

Various factors are considered, including the hazards involved and whether they work at height, use heat, or work with water systems. Each of these carries more risk, or, if you were to look at it a different way, more accidents come from each of these factors.

Think of it this way: insurance works by pooling risk. You pay the insurer a fixed figure each month, and in return, the insurer takes on the risk of covering you if something goes wrong. Thousands of other tradespeople pay into that same pool, and that collection of funds helps insurers cover costs if something goes wrong and a claim is made.

What are the potential costs of a claim from that trade?

Different trades face different risks; some claim more often than others, and some claims are more expensive than others. Insurers look at both sides. A trade that rarely claims but, when it does, the claims are significant, can have equally high premiums as trades that claim frequently, but have low-cost claims.

What types of work does that trade carry out?

The type of work carried out plays a big part in the risk level associated with a trade. If a trade works in hazardous locations, such as railways or airports, then the likelihood of a claim being made increases, and the trade is deemed riskier. Similarly, many accidents happen when working at height, with heat, or with water systems. Should you belong to one of these trades, then the price of your premium will reflect that.

Take a plumber, for example. They may be fitting a new bathroom in a flat and fail to tighten a fitting correctly. Water begins to leak, and it not only damages the customer’s property but also the flat below. In contrast, a painter drops a tin of paint on a customer’s rug, and the cost of repairs is significantly less than that of the plumber.

Does that trade have a history of making claims? And what’s the severity?

Insurers use historical data to better understand the likelihood and severity of past claims. The more frequently claims are made, the riskier your trade is rated. Equally, if claims are deemed severe, i.e. the cost of the claim is high, then that too will affect the risk level of your trade. This helps build a better-rounded picture of the risks trades face and helps determine how your premium is calculated.

How can Rhino help?

Rhino provides tradespeople with competitive insurance prices for their trade. Whether you work in a high-risk trade or a lower-risk one, Rhino can help protect your business with the right insurance. You can get a quote online or by calling 0116 243 7904.