Why Insuring Through Your
Insurance Broker May Not
Pass the Pub Test
How to ensure compliance with the
best insurance coverage at the most economical cost.
Procuring insurance is unlike procurement in any other industry: you’re often required to go through brokers.
If you believe that insuring through a broker guarantees compliance with having the best coverage at the best price, you might be mistaken—especially if your broker is an agent for one of the insurers in your insurance (risk transfer) program.
Here is how to best solve your problem.
Traps of Procuring Insurance
- Broker Alignment: Insurance brokers are most likely agents of the insurer, rather than you.
- Commission Conflicts: Brokers typically receive a commission on premiums, so a lower premium means a lower income for them.
- Competitive Blocking: Your existing broker can block competing brokers from obtaining a better price with the insurance company through a process known as “reserving.”
- Tendering Pitfalls: Running a price tender for your insurance is a big mistake because of the reserving process.
A Better Way of Procuring Insurance
To secure the best insurance coverage and costs, focus on reviewing and appointing the broker rather than the insurer.
Follow these steps:
- Start Early: Begin the process six months before your insurance renewal. Seek advice from Comprara.
- Risk Profile: Establish an insurable risk profile and conduct a gap analysis.
- Benchmarking: Compare your existing coverage and costs against industry data.
- Broker Panel: Obtain indicative covers and costs from a panel of brokers, including your current broker.
- Review and Appoint: Review the submissions from the panel and appoint a broker to provide an actual insurance quotation.
What is Insurable Risk Profiling?
Insurable Risk Profiling identifies your insurable risks
from your Enterprise Risk Management Framework (Risk Registers).
This process ensures your insurance coverage is fit-for-purpose,
meaning you’re neither underinsured nor overinsured.
In other words, it helps you achieve the right balance
in your insurance policies to adequately protect your organisation.
The more your broker complains, the more likely you’ll save.
If your current broker resists the process of restating their capability, it’s a strong indicator that you could secure better coverage at a lower annual cost.
A competent broker should have no difficulty restating their capability, as this is a fundamental governance requirement for all organisations. In our experience, the incumbent broker is often reappointed but usually on terms more favourable to the client.
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Frequently Asked Questions
-
What is procurement insurance, and how does it work?
Procurement insurance is not a single product but a portfolio of coverages designed to protect businesses from risks that arise when relying on external suppliers. At its core, it transfers critical procurement risks from the organisation to insurers, providing financial resilience when disruption occurs.
Typical instruments include:
- Supply Chain & Supplier Default Insurance – Protecting against the cost of replacing critical suppliers that fail operationally or financially.
- Product Recall & Liability Coverage – Covering the downstream costs of supplier quality failures, recalls, and related reputational damage.
- Cyber & Technology Liability – Protecting against third-party breaches that occur via supplier platforms or digital integrations.
- Professional Indemnity Insurance – Covering errors or omissions from professional service providers.
- Trade Credit Insurance – Protecting receivables if counterparties default on payment.
- Political & Parametric Risk Insurance – Covering supply chain disruptions linked to geopolitical events or natural disasters, with rapid payouts tied to measurable triggers.
- Captive Insurance Models – Allowing large corporates to self-insure part of their procurement risk exposure.
When integrated into a wider enterprise risk management (ERM) framework, procurement insurance strengthens supply chain continuity, protects cash flow, and reassures investors and stakeholders that risks are being systematically managed.
Comprara supports organisations in identifying procurement risks and advising on strategies — including insurance models — that strengthen resilience across supply chains.
-
Why should businesses consider insurance in procurement contracts?
Embedding insurance requirements into procurement contracts is a strategic governance mechanism that aligns risk allocation between buyer and supplier. It ensures each party carries coverage appropriate to the risks they control, and it signals to stakeholders that the organisation manages procurement with rigour and foresight.
Key benefits include:
- Risk Transfer & Allocation – Shifting liability for product failures, operational errors, or environmental harm to the party best positioned to manage it.
- Financial Protection & Cash Stability – Preventing sudden, uninsured costs from hitting working capital and disrupting business plans.
- Business Continuity – Ensuring insurance proceeds are available to fund recovery and replacement sourcing when disruptions occur.
- Governance & Investor Assurance – Demonstrating disciplined risk management to boards, auditors, regulators, and shareholders.
- Tier-2/3 Supply Chain Protection – Pushing coverage deeper into supply chains, where many of the most severe risks often originate.
- ESG Alignment – Ensuring suppliers carry insurance for environmental liability, health and safety, and human rights exposures.
Well-structured insurance clauses transform procurement contracts into resilience levers, reinforcing governance while protecting the enterprise from both operational shocks and reputational damage.
Comprara helps businesses strengthen procurement contracts and governance frameworks, ensuring risk is shared fairly and resilience is embedded.
-
What risks can procurement insurance cover?
Procurement insurance acts as a multi-layered shield against a wide spectrum of risks — financial, operational, reputational, and strategic. Coverage can include:
- Financial Risks – Supplier insolvency, bankruptcy, or default.
- Operational Risks – Delivery failures, logistics disruptions, or contingent business interruption where tier-2/3 supplier issues ripple through the chain.
- Quality & Product Liability – Defective goods, recalls, and the associated investigation, replacement, and crisis management costs.
- Cyber & Digital Risks – Breaches, ransomware, or data loss linked to supplier platforms.
- Intellectual Property Infringement – Legal defence and damages where supplied goods infringe third-party rights.
- ESG Liabilities – Fines, remediation, or damages linked to emissions breaches, modern slavery violations, or diversity non-compliance.
- Regulatory & Environmental Risks – Costs of regulatory non-compliance or environmental clean-up.
- Political & Force Majeure Risks – Losses from sanctions, political instability, pandemics, or natural disasters.
- Reputational Risks – Costs linked to crisis communications and brand protection when supplier failures make headlines.
Taken together, these instruments represent not just cost avoidance, but a continuity and brand preservation strategy that protects the enterprise’s licence to operate.
Comprara works with organisations to map procurement risks and design strategies — including insurance and resilience frameworks — that protect both cost and reputation.
-
How does insurance help protect supplier relationships?
Insurance is not only about financial protection — it is also a relationship enabler that helps strengthen long-term supplier partnerships.
It supports relationships in several ways:
- Mutual Risk Management – Establishing clarity around risk allocation reduces disputes when adverse events occur.
- Financial Stability for Suppliers – Insurance proceeds can fund recovery, allowing suppliers to continue operations and maintain commitments.
- Conflict Prevention – Clear insurance obligations prevent finger-pointing, preserving trust even in difficult moments.
- Tier-2 Resilience – Requiring or supporting insurance for smaller suppliers ensures continuity deeper in the supply chain.
- Innovation & Growth Support – Coverage for liability and product risk gives suppliers the confidence to innovate without fear of catastrophic exposure.
- ESG Safeguards – Ensuring environmental and social liabilities are insured prevents reputational spillover onto the buyer.
- Collaborative Models – Joint insurance programmes or buyer-supported schemes can improve coverage affordability for critical suppliers.
When embedded into supplier relationship management (SRM), insurance becomes part of a trust architecture: reducing friction, encouraging innovation, and enabling suppliers to scale and expand globally with confidence.
Comprara supports supplier relationship strategies by embedding governance, resilience, and insurance considerations into SRM frameworks.
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Comprara Pty Ltd
- ABN: 57 642 065 594
- Level 6, 365 Lt Collins Street,
Melbourne, Victoria 3000
Australia - Tel: +61 3 8547 3940
Comprara acknowledges the traditional Aboriginal owners of country, recognises their continuing connection to land, water and community and pays respect to Elders past, present and future.
