Multiline Insurance: What It is, How It Works

What Is Multiline Insurance?

Multiline insurance can refer to complex insurance instruments that a company may use to bundle the risk exposures of multiple corporate insurance obligations into one insurance contract.

The term also comes to refer to an insurance agency that writes policies for several different lines of insurance products. These various products will include coverage for a variety of risk categories.

Understanding Multiline Insurance

Individual customers may decide to bundle their coverage for auto, marine, and homeowners insurance into a multiline contract. Commercial clients may bundle several different, but equally necessary, business policies into a single multiline contract. Bundling should reduce the overall premium and make it easier for year-end accounting. At the same time, the liability limits can increase, much like it would under an umbrella policy. 

While each particular risk would still have coverage limits and deductibles, all the policies aggregate into one monthly premium bill. Beyond the convenience of one-stop shopping, the value for the consumer is a possible discount in return for the bundled coverage.

For commercial insurance, the company faces a portfolio of risk, including loss or theft of physical property, theft of intellectual property, loss of life, officer malfeasance, and many others. Instead of creating a portfolio of stand-alone insurance policies to manage all those exposures, a company can use a single multiline contract for all risks. One insurance contract is then more efficient and considerably cheaper than many individual contracts.

The risk exposures bundled together often have a general relationship, such as business property and casualty risks. The deductibles are typically aggregated into one dollar amount per claim, regardless of the claim type.

For example, when deductibles combine into a single high number, a company with only one claim will probably pay more in deductible than they might have with separate policies. Conversely, multiple losses arising from the same covered hazard could mean a company saves on its overall deductible costs due to the aggregation.

Multiline Insurance Agencies

A multiline insurance agency might offer insurance to commercial as well as individual clients. Individual policies may include homeowners, auto, marine, renters, life, disability, and long-term care insurance. Commercial insurance may consist of professional liability, worker compensation, product liability, business interruption, and other coverage types.

For the multiline insurer, advantages include building a long-term relationship with the customer, who will then be unlikely to shop for competitive deals.

Multiline Insurance and Moral Hazard

One concern with multiline corporate policies is moral hazard. A business may become disinclined to monitor and remedy risk factors if they realize too substantial a savings from a comprehensive multiline policy.

And of course, outright fraud is also a possibility, with criminally inclined management incentivized to manufacture claims. Multiline insurance policies attempt to mitigate these possibilities in contract language detailing claim procedures and deductible rules.