Niche commercial insurance provider Liberty International Underwriters (LIU) has issued a stark warning to businesses - you get what you pay for.
Falling premiums, aggressive competition between underwriters and the large number of insurers mean policy prices are cheaper.
But cost savings in the short term may prove costly later, LIU division vice president Richard Head has warned.
Following the $5 billion collapse of HIH Insurance in 2001, many businesses regretted choosing an insurance policy on price alone, he said.
Companies should analyse the risks their business faces and determine the scope of insurance cover required.
"In many instances a cheaper premium reflects a narrower scope of cover and, depending on a company's risk profile, the premium saving may not represent good value," Head said.
When considering selecting an insurance broker companies should also consider experience, reputation, knowledge, industry accreditation and specialisation.
"Ultimately building a long term relationship with a strong insurer will add value to the company's business," Head said.
LIU is part of Boston-based Liberty Mutual Group's strategic business unit, Liberty International.
Liberty Mutual wrote more than US$23 billion in premiums last year and is ranked 95th in the Fortune 100.
