Risk Mitigation – The Broker's Approach To Risk Control

What approach does your agent or broker take in reducing your losses/claims, if any?

Insurance policies cost money.  Money that is supplied by the bottom line, that is considered an expense and in some cases, an obstacle to profitability.  Then what I ask is, what does your current insurance broker do to help curb these costs?  Anything?

Not surprisingly, many commercial insurance brokers are not schooled in the ways of claims management and loss control.  Most have time in the field, but it is routinely limited to establishing relationships and obtaining information in support of underwriter applications without ever leaving an office.  Many have never toured a facility, spoke to a supervisor or employee, or learned the importance of claims management techniques.

Well, this author has.

Thought that all brokers understood these concepts?  Think again.

It may surprise you to know that many are just interested in closing deals and moving on to the next piece of business-leaving the service work to their account teams and insurance company staff, only to be seen at renewal time or for an occasional lunch.  Sound familiar?

There are several aspects to risk reduction and cost containment that I would like to share from my 12 years as a risk control consultant working with insurance companies and brokerages alike.  Now that I am among the ranks of insurance brokers, it has become crystal clear to me on how minimal their involvement is and continues to be in the overall reduction of costs and losses to their clients from interviews and prospect calls.

•    Tour your facility with your insurance professional-make sure they understand your concerns and look to them for advice and counsel on minimizing or eliminating hazards.
•    Manually calculate your experience modification factor.  Workers’ compensation insurance is a very price sensitive program that is easily modified by good or poor claims experience.
•    Engage in claims management practices and work to close your open claims as quickly as possible.  This too is important in the cost reduction and containment strategies for workers’ compensation programs.
•    Administer an early return to work program.  The faster a worker returns to work the better for all parties involved.
•    Look to employ a deductible when possible to offset the costs of premium associated with insurance programs.  Furthermore, speak to your broker about deductible levels based on historical losses and risk appetite.
•    Benchmark your company’s safety performance and successes to cost reduction.
•    Engage your supervisory staff on the costs of insurance programs as it relates to time or products produced.  In other words, if your company makes metal brackets, explain the cost of a workers’ compensation loss in terms of the number of brackets that must be produced in order to pay for the cost of the claim.  When doing so, take into account the overall profit margin of the good sold for the truest measure.
•    Perform quarterly or semi-annual claims review meetings with your insurance carriers and insurance broker.  Demand their involvement.
•    Ask for a quarterly loss analysis identifying areas of common or frequent loss along with those associated with high costs.
•    Invite your underwriter out for a tour of the facility or office.
•    Review common areas for slip, trip and fall hazards in order to minimize exposure to general liability claims.
•    Investigate all claims with the oversight of a safety committee or supervisory group.
•    Reward positive behaviors in the workplace with incentives or rewards.  When doing so, ensure they are random and unpredictable.
•    Review your Human Resource practices to minimize exposures to employment related liability claims.  Have legal counsel review and determine needed areas of improvement as necessary.
•    Minimize accidents with random, but frequent safety assessments.

The list is is exhaustive and can run on for a long time.  Point is, ask yourself if you have a broker in place that understands the concept of risk and cost reduction, but more importantly is familiar with how to engage the process.  If yours doesn’t, consider another broker to take their place.

Remember, its easier to replace a broker than it is to manufacture enough brackets to pay for a substantial claim.