In an age of difficult decisions and painful cutbacks, it may seem tempting to reduce your spending on insurance and safety because you haven’t had any recent incidents. But that is dangerous thinking, because what you are paying for is a safer environment and the overall protection for your business.
“When people get into a crunch, it may seem an easy expense to cut, but safety is about prevention and is a vital part of uninterrupted business operations,” says Jonathan Theders, CPIA, president and COO of Clark-Theders Insurance Agency Inc.
Smart Business spoke with Theders about how doing a risk assessment can protect your business from getting hit with big costs.
Why should businesses consider risk assessment, even if they are doing well?
Risk assessment and insurance should go hand in hand. Traditional insurance is very transactional.
From their home and auto policy to a complex business policy, most people spend time going over new exposures in the 60- to 90-day window before their renewal.
Not everyone has a full-time risk manager on staff and those responsibilities will typically fall in the realm of another position. The time they have to spend on risk management, insurance and safety is limited for many to as little as 5 percent. And most of that time is spent in the renewal process with their current broker and not on proactive risk management.
Your broker should provide a year-round, holistic risk management approach that examines all of the things that can happen to a business — not just the fire, lightning, windstorm or auto accident. The broker should become part of your safety team and try to enhance the culture.
With risk assessments, you’re able to ward off potentially major situations, and it doesn’t always have to cost a lot of money.
How does the risk assessment process work?
It’s a cycle. The process starts with identifying exposures and risks. Ask what could potentially cause you harm. Once you’ve identified all of the exposures, develop strategies as a team to address each of those.
Sometimes there is cost involved, so you have to prioritize. Some things you can take care of very easily, others might take more time and planning — but at least you’re aware of them. Next, you implement strategies through policies and procedures, communicating the importance to the staff so there is buy-in.
The biggest mistake people make is not monitoring the process. You have to follow up. You have to keep track. You have to tweak. Then, if you get into a cycle of regular safety team meetings, you can discuss anything else that could potentially be a risk.
Run that cycle: Identify, develop, implement and monitor. That’s the risk assessment process.
How can businesses select the right organization to help assess risks?
You need to get the right partner on board, someone who really listens to what your true needs are and understands your business. Today, in transactional placement of insurance, it’s a lot about the price.
For the majority of individuals with personal policies, their biggest asset is the home they own. For business owners, the biggest opportunity for loss and greatest opportunity for gain is their business.
By improving the overall risk of an organization, you are becoming more attractive to the insurance marketplace.
Your insurance broker should be a trusted adviser, someone who partners with you on the success of your company. That person should be a bridge between the insurance carrier and you, and also an advocate in creating open communication throughout the organization.
How can an insurance broker help a business owner create that culture of communication?
Everyone has concerns, from the top down, and they could be vastly different. To start, your broker should do selective employee interviews asking them questions to truly understand their exposures. If you ask line workers about their biggest concern, they may say the machinery doesn’t feel safe. Management wouldn’t hesitate to fix that problem, but it may never have been communicated.
Employees might not be comfortable talking to their boss about their concerns, but they are more open to talking to a third party. If you ask your kids what they think of you, they are going to give you an answer that makes you feel good. But if I walked up to your kids and said, ‘Tell me about your dad,’ they might say, ‘He drives me crazy.’
It may be as simple as, ‘What keeps you up at night?’ Interviews allow multiple perspectives regarding strengths and risk issues.
The information should lead to a better risk profile, which not only impacts safety and culture but allows you to drive insurance costs down.
Jonathan Theders, CPIA, is president and COO of Clark-Theders Insurance Agency Inc. and CTIA Risk Consulting. Reach him at (513) 779-2800 or [email protected].