Insurance transactions, such as obtaining a quote or securing a general liability policy, are routine at best. It is when a loss occurs that this simple “transaction” actually becomes a means of security and a realization of business confidence. As rates stabilize and potentially increase over the next 12 months, it may be time to consider how to best use your insurance program and its purchase as an opportunity to increase your business confidence. I have listed several suggestions any business owner or insurance buyer may consider when renewing or purchasing a commercial insurance program.

1. Consider your ability to retain some portion of the loss through a deductible.
2. Review your exclusions and ask for any available enhancements to the program being offered by your agent or broker that may broaden your coverage.
3. Obtain a Drug Free Workplace certification in your state. Many chamber of commerce offer assistance in securing this program, which may lead to a discount on your workers’ compensation program.
4. Shop your coverage every few years. Use this opportunity to keep your company apprised of any changing market conditions and premium decreases.
5. Ask to meet your underwriter. In larger companies, it always surprises me on how few buyers have actually met their underwriter…shame on the agent or broker. This development of a true understanding of your business in the eyes of any underwriter is potentially huge to any buyer.
6. Ask for your claims to be analyzed by your agent or broker to minimize claims and identify claim trends that may be plaguing your operations.

Many more suggestions can easily be made, but start with the ones listed above. It will give you and your team a chance to turn a premium into a business confidence booster by getting a real grip on risk.

So why do so many policies go unread?  The answer is simply, because insurance policies are boring and difficult to understand.  That is why it is critical to have an insurance professional you trust and has a high level of knowledge on your side when making such an important business purchase.  Before I move on however, I should note that in some cases, even insurance professionals might not read those policies.  Shocked?  Don’t be.  Unfortunately, it is more common than you would think.

Protect yourself and your business against such potential disasters as not being covered for an exposure that is excluded on your policy that was not picked up.  Or, agreeing to insurance conditions that are completely inappropriate for your company operations.  Here are a few tips to make sure you are managing this risk and that you have the right insurance professional working with you and your company.

1. Review the exclusions section of your policy and ask your agent or broker to review them with you.
2. Read through the insuring agreements of your policy to make sure it meets your needs.
3. Ask about the endorsements attached at the end of your program for clarity and understanding.
4. Verify limits of insurance and the values indicated on the policy for liability and properties.
5. Request your insurance policy to be delivered within 60 days. Typically a policy may take much longer to receive unless specifically requested sooner.
6. Meet your underwriter. They will have a much deeper understanding of your business and overall operation if they can hear your story and learn about your business needs.

By being aware of your insurance policy and its conditions and exclusions, you may be better prepared than most if confronted with a loss. Make it a priority to understand the policy language and challenge your agent or broker to do the same. If you think you know more than they do, it may be time to look for another one.

One of the most common areas where improvements may be made is in the area of Defense Base Act (DBA) insurance on the open market. This differs from the “Monopoly” in place that dictates rates for contracts associated with the US Army Corps of Engineers, USAID, and the US Department of State. For this article, I will focus on the contracts limited to the US Department of Defense.

For new contractors, establishing yourself as a buyer of DBA is not difficult. As a required insurance for all contracts provided funding under the US Government in foreign countries, DBA can be secured simply by contacting your insurance broker or agent. However, herein lies a major problem. Most agents and brokers have no idea about DBA or how it is purchased, let alone what to expect when dealing with an underwriter. Mistakes made at this point will only add to the insurance rate as the agent will likely be unable to clearly articulate exactly what you are doing as a government contractor. This starts a series of events that is very confusing, difficult to deal with, and time consuming as you normally have to educate the broker as to what you are doing as a business. The following are just a few of the proactive steps you can take as a buyer of Defense Base Act Insurance, either for the first time, or on subsequent contracts:

1. Identify which insurance carriers specialize in this coverage. Here are four of the most recognized:
• Chartis
• ACE USA
• Chubb
• CNA
2. Prepare a clear, concise overview of exactly what work will be conducted as part of the contract. Make this the basis of proper classification when seeking DBA Insurance.
3. Ask the insurance carriers you contacted for suggestions on agents or brokers that specialize in this type of coverage.
4. Understand exactly what must be used to determine remuneration or payroll to the workers. This is much more than just “payroll”.
5. Ask where price breaks in the rate may occur as a result of anticipated, increased payroll.
6. Seek a program that may “toss in” insurance coverages such as kidnap and ransom, or accidental death and dismemberment. Although the limits for such “toss ins” will be low, it is better than nothing.

When all else fails, look to your competitor in the marketplace and ask what they think.  They may have a great suggestion on a agent or broker and will likely know exactly what to do in order to prevent future headaches and potential disasters.

1. No Knowledge. When the sales professional says, I don’t know insurance. I leave that up to the professionals in the office. You bet he/she does. Not only do they have no idea about risk or how to identify it, they are only there at the beginning, only to be seen at renewals.
2. Price, price, oh, did I mention price? If the key to their initial meeting is all about reducing your premium by X%. This is beautiful. So many agents or brokers come in with the low price pitch. Sounds great, but ties up so much in the process. Look for someone that actually wants to learn about your business or better yet, already knows what types of risks actually drive your costs and lead to losses.
3. Awkward solicitations. Form letters as a means of introduction is a real sign that your company is on a list of many others. Insurance professionals that have a niche or specialty area in which they service business, will normally do a lot of research on your company before making a call or sending a letter. Read between the lines when reviewing a solicitation. Ask the right questions when they are seeking an appointment or information about your company.
4. Happy Anniversary! I love these salespeople. They call right around the 90-day mark before your upcoming insurance renewal, eager to engage and seek out a better price and improved coverage. Why did they wait until 90 days to do this though? Shouldn’t that have been started early, so they can dedicate more time to marketing and less time to catching up on what your company does. Look for the insurance professional that concentrates on your program, not your policy expiration date.

All in all however, it comes down to what does your gut say.  You should be able to tell pretty quick if the person calling on your business is worthy of your time or just a flash in the pan.  Ask for and call on references, client testimonials, and internet searches.  Find out about your prospective agent or broker before signing on the low premium dotted line that comes with little or no professional service.

Myths and misconceptions.

As with any profession, there may be an appearance of complexity. In the insurance field, many consumers assume they know very little about their own policies because the policies are usually written in heavy legal jargon. What the insured needs to remember is that it is just “paper and a promise.” Let’s consider a few “myths” to insurance.

Myth #1:  Insurance covers everything

Not by a long shot. So many people rarely, if ever, read their policies. By reading the exclusion section of your policy, you will quickly and easily see what is not covered. This would be a good place to start reading.

Myth #2: Insurance is expensive

That depends. Right now, we are in the softest market (meaning prices are at an all time low) in the history of our business. (This does not apply to health insurance, but that is for another blog.) Consider seeking out options and second opinions from other agents and brokers to ensure your program stacks up from a price perspective, ensuring you are getting a good value. This is particularly true of commercial insurance risks.

Myth #3: not all businesses require insurance

Businesses may not be required to have insurance, but it should be part of their overall risk management plan. Insurance is intended to help a company or business get back on its feet following a loss. Without it, many businesses fail and never re-open their doors. By simply paying a small premium for a larger limit, insurance allows business owners the confidence and freedom to take calculated risks to grow and prosper.

Click here to view the embedded video.

The end of the year is the time to review your business insurance. That isn’t just my advice. Brian Smith is the InsuranceEdge Advisor to American Express OPEN and has offered a “checklist of changes” for small businesses to consider when reviewing their insurance coverage.
Some of his tips include:
• More money means more insurance: Insurance isn’t only meant to cover your physical assets. If revenue numbers have changed significantly, the level at which your business is covered may need to be revisited. The amount of money your company makes can alter your coverage.
• Expanding (or detracting) the property lines: Opening or closing locations during the course of the year also requires updating your policy. Property insurance premiums depend in part on the type and size of facility you occupy, so be sure the information is accurate. Maintaining an accurate policy can also reduce confusion and minimize payment delays if you need to file a claim.
• Changes of operation and inventory: Variations in the amount of inventory or equipment your business stocks may mean that you need to carry more insurance to fully protect your assets, or that you can reduce your coverage and save money. If you have considerably more or less inventory than last year, update your property insurance accordingly.
• Know the Regulations: Government regulations can have a significant effect on insurance coverage, but insurance carriers may offer very different pricing to accommodate regulatory changes. Obtaining quotes from several carriers each year will help you to stay on top of all of these changes and to be sure you have the coverage your business needs at a competitive price.

Certainly great advice to keep in mind when reviewing your business insurance needs for 2011

Insurance claims from hazards associated with business are completely equal-opportunity…it doesn’t matter what size the business is, claims do not discriminate. Small businesses are vulnerable to large claims and need to be protected just as much as a big company.

In my many years working with business owners of large and small companies, one thing rings true…they all need solid insurance and risk management practices. I have listed several key areas that a small business owner may consider when reviewing their current business insurance policy or obtaining their first one.

1. Values – The amount something costs to replace is a key to obtaining the correct level of insurance. Too little or too much translate into reduced recovery after a loss occurs or higher premiums. Taking the time to have an appraisal of property values is the best way to minimize this mistake. Do not assume that the values from last year’s insurance policy are accurate to the conditions your business faces today.

2. Exclusions – When it comes to a claim, what matters most is not necessarily what an insurance policy will cover, but what it will not cover…look and understand the EXCLUSIONS on your policy. A commonly overlooked section of commercial insurance policies for a buyer is the exclusion section. Here you will find, clearly outlined, what the insurance policy will not cover. Understanding the exclusions section is another key to breaking the code of insurance policies.

3. Business Interruption/Extra Expense – What? This is the amount that an insurance policy will pay out in the event a covered loss shuts down your business and requires an alternative means of operation and additional monies to continue. Again, a critical area to be taken seriously is the best assumption of how long your business will be out of service and the associated value of that time. Although it may be a bit of a task, take the time to properly evaluate the income levels and associated expenses of a shut down. In my experience, I see a large percentage of businesses under insured in this area.

Now, go pull your current business insurance policy and read it! Take a look at the sections I mentioned and ask yourself, then your insurance agent, if you should consider changes or modifications.

Insurance pricing is crazy low right now.  Insurance markets are continuing to see profits all along each product line from property to international casualty.  At the same time, however, insurance program buyers are NOT taking full advantage of the services and improved terms offered by competing markets.  That being said, today’s article will focus on the first point, services – in particular, risk control or risk prevention services.

What are risk control services?  Well, risk control services are those activities aimed at reducing or eliminating loss exposures in and around your workplace.  Elements may include physical safety assessments, safety program evaluation, ergonomic studies, industrial hygiene analysis (workplace environment exposure analysis), noise level testing and evaluation, claim review/loss analysis, fire protection storage analysis, emergency evacuation study, and those listed are just to name a few.

But Brian, our company has an excellent OSHA compliance program.  We have minimal lost time accidents and our programs audit very well according to our safety team.  That is great, but it is not nearly enough.  Here is why…

When it comes to OSHA compliance, it is the MINIMUM.  OSHA compliance does not take into consideration the cost of loss to the company.  It only considers programmatic elements of safety activity – all measured by metrics or performance standards.  Risk control and risk prevention looks at the loss picture provided by a thorough analysis of your company’s operations.  Risk control will consider the cost of each loss in terms of actual dollars from the claim costs to indemnification of the injured worker.  Take for example the cost of a broken wrist due to poor housekeeping in and around a stairwell.  An employee trips and falls over boxes that have been placed there as a staging area.  This fall result in the worker falling forward, fracturing the right wrist.  The actual cost of medical treatment, rehabilitation, lost time, worker replacement, and lost wages all easily exceed the fine likely imposed by OSHA for a violation.  But many companies still look at OSHA as a measure of success and comply as a fear of fine.  All of which is valid, but off the mark when it comes to reducing the cost of loss and prevention of injuries.

How could risk services helped in preventing such a loss?

1. Physical walk thru of the workplace.
2. Assisting the company with a safety committee and inspection team to ensure routine, consistent inspection.
3. Claim review to identify whether or not similar losses have occurred in this area before.
4. Interviews with the shipping manager on staging areas and overall process flow.
5. Safety committee notes review to uncover outstanding items listed and identified from previous assessments.

How could OSHA inspections helped in preventing such a loss?  It likely couldn’t.  OSHA inspections look at activities and programmatic elements.  Physical site assessments may be present, but may limit its scope to written policies and procedures.

In conclusion, consider the services offered by your agent/broker/insurance carrier from their respective risk control consultants.  Cost for these services are typical minimal, if not free.  Many insurance programs will consider 1.5% to 2.5% of the premium as the amount they may consider for risk control services.  For a company paying premium in the range of $100,000 that translates into $1,500 to $2,500 in service fees that may be left unused.  The typical cost for such services is $150.00/hour providing anywhere from 10 to 16 hours of risk services.  All you have to do is ask.