As your business needs and values change, your insurance policies need to be updated to ensure your company is properly covered.
A comprehensive risk assessment should be conducted at least every other year. This need often comes up when you’ve been with a broker for a long time, or if you switch brokers based on pricing and not added value, and the new broker copies incorrect information, says Eric Kerensky, sales executive at Momentous Insurance Brokerage.
“When I make an assessment appointment, I gather their current policies and review them line by line to make sure the values are up to date, such as personal property, building values, locations, fleet list, driver’s list and any operation changes that may have occurred,” Kerensky says.
Smart Business spoke with Kerensky about what’s included in a comprehensive risk assessment and how it helps your insurance bottom line.
What are the major advantages of an insurance assessment?
It gives you peace of mind that your broker is doing his or her job, properly covering all the risks in your particular field. It’s the worst feeling in the world when you pay for insurance and find out later a claim is not going to be covered. These assessments help safeguard you against that. You may want to have a specifically designed insurance plan, not just the standard issue insurance policy for the overall type of industry.
The assessment could also lower your insurance costs, especially if you might unknowingly have double coverage. You could even get a different line of coverage that covers something for which you currently pay extra. For example, each time a distribution company ships, it buys insurance through its common carrier, as opposed to buying a cargo policy. The cargo policy could be cheaper, depending upon how much is annually shipped, or broader, providing cover on the job location — eliminating the need to put it on the property policy — and for earthquakes.
What are some broker services that the assessment checks?
When conducting the comprehensive insurance review, you can discover if your broker is providing services like helping put a disaster plan in place. As another example, it may be worthwhile to have your broker and carrier do a site risk appraisal to lower re-occurrence of property claims or slip-and-falls.
Additionally, does your broker conduct a semi-annual client review? You don’t want a broker who just comes out at the end of the year to pick up the check. He or she should review your sales activity, which affects your general liability premium. If sales have increased, you don’t want to be faced with a large, year-end audit, or if your company is not hitting anticipated sales, you have the ability to adjust the policy and increase your operating cash flow.
How does the assessment audit the business operations?
The review will look at all business operations. If you’ve added or discontinued a service or business activity but haven’t communicated that to the insurance carrier, a claim could be denied.
It’s very important that your insurance carrier knows every time your company is named as an additional insured by another entity, usually in the form of a certificate of insurance they provide to you. This reassures underwriters and could lead to lower rates on your policy. For example, as the distributor, named as an additional insured on the manufacturer’s policy, your company isn’t liable for product malfunctions or recalls. Copies of all additional insureds on record should be passed along to your broker.
How does an assessment of claims impact the cost of risk?
The assessment should examine your claims activity. One important example is with workers’ compensation. Because rates are projected to increase, you want to ensure claims are getting closed promptly so they don’t get stuck in your reserves. Since many insurance carriers reserve more than what will likely be paid out, this inflates your claims amount and increases your overall workers’ compensation premium costs.
Eric Kerensky is a sales executive with Momentous Insurance Brokerage. Reach him at (818) 933-2711 or [email protected].
Blog: For more information, take a look at our blog at www.momentousins.com/blog.
