Find cost-saving solutions
Insurance is one line item that hasn’t been immune to budget cuts. But before you start scaling back coverage, keep this in mind: We’re still in a soft commercial insurance market — meaning insurance is a cheap form of risk capital.
A 2009 benchmark survey by the Risk and Insurance Management Society Inc. shows a lower average in premiums contributed to a 9.4 percent drop in the average total cost of risk per $1,000 of revenue.
If you’re worried about the size of your insurance allotment, call your broker now, review your contracts and review your risks. You don’t have to wait until your renewal in order to find savings or renegotiate your contract. Just remember, before you can responsibly lower costs, you need the details of what you are and aren’t covered under.
“People worry about being overinsured, but it’s scarier to be underinsured,” MacNab says. “I think in today’s economic climate it’s a good exercise to go through and really analyze the coverages and see if there are any that could be scaled down if cost savings is important.”
Immediate savings can be found by passing risk to others, such as tenants or vendors. You also can play around with increasing deductibles to lower premiums or scaling back nonmandatory insurance. If the latter two are options, first weigh whether you can financially assume the risk or if the cost of managing the risk is cheaper.
One of the only ways to decrease the costs you can control is by reviewing your claims. You should have regular claims review meetings with your broker to see where prevention methods can be put into place. Your insurance carrier can help with loss control, such as safety training.
Some brokers say clients recently have seen cost savings of 20 percent.
Part of the answer is building a long-term relationship with your broker and even carrier. Share with them details of your operations. Invite them to tour your facility. The more your broker understands your business, the better he or she will be able to provide holistic advice. And a lasting relationship with an insurance carrier can mean more flexibility and negotiation.
In the end, it’s your choice as to how comfortable you are with your risk.
“That’s part of the discussion, understanding well how much (does) the insurance costs and is that a good investment, is that a good use of our dollar to transfer the risk,” MacNab says. “And honestly the answer to that question is very personal. It depends on the individual business and the people running that business and what their real appetite for risk is.”