The contract and insurance disconnect: A risk you can control
17 September 2025
Contracts create obligations. Insurance should absorb them.
Every contractor agreement you sign transfers risk. Indemnities, liability caps, exclusions and performance obligations all generate exposures that may outlast or outstretch your insurance.
The challenge is timing as contracts are often entered into outside of the insurance renewal cycle, i.e. procurement finalises contracts and agreements in April and the insurance program renews in December. In the gap, your organisation may be carrying uninsured liabilities.
As Rouen van Eck, Executive General Manager, Insurance/Risk/Strategy, explains, “Too often, contractual commitments are made without reference to insurance. By the time a renewal comes around, the organisation has already accepted obligations that sit outside the policy. That’s where financial and reputational risk multiplies.”
Why alignment matters
All Professional Indemnity, Public Liability and Environmental Liability policies are not created equal. It is essential that your broker negotiates the right endorsements, extensions and memoranda to ensure that your policy structure matches both your contractual obligations and your actual business exposures. Without this, coverage gaps can remain hidden until a claim arises.
A Certificate of Currency is only a piece of paper. It can create a false sense of security if the underlying policy has not been correctly structured. True governance goes beyond collecting certificates, it requires careful wording review, policy tailoring and contract-specific negotiation.
Contracts also include several clauses which insurers won’t support such as broad indemnities, uncapped liability or obligations to insure third-party risks. By reviewing contracts in sync with insurance, you can negotiate carve‑outs, cap liability and prevent uninsured exposures.
Risk remediation is the first step in the risk treatment process and that involves detailed engagement between broker and customer to understand risk profile, exposures and appetite. By conducting reviews and applying remediation at the contract stage, organisations can ensure their insurance program is fit for purpose and achieve secure, cost‑effective cover at acceptable premiums. Effective risk mitigation is built in early in the process.
Rouen van Eck reinforces this point, “Governance isn’t just about signing off a contract. It’s about ensuring obligations are backed by credible insurance. Otherwise, the risk isn’t transferred but retained by your business.”
The payoff
- Reduced disputes: Obligations and coverage are clear from the outset.
- Predictable premiums: Insurers can price accurately when the risk is transparent.
- Stronger governance: Leadership can approve contracts knowing obligations are covered, not carried.
The real risk isn’t what’s written into the contract, it’s the uninsured gap it leaves behind.
Your checklist
Download the Contract and Insurance Review Checklist – a practical tool for aligning your contract and insurance cycles to ensure risks are transferred, not absorbed.
Next steps
At DKG, we believe contracts and insurance should never be reviewed in isolation. Aligning both isn’t just risk management, it’s sound business strategy. Let’s have that conversation.
Rouen and the DKG team are ready to help you prepare and mitigate the risk, not just protect. Contact DKG Insurance Brokers today by calling us on 1800 252 926 or email us at insurance@dkg.com.au.