Save money
If you’re concerned about the cost of managing risk, there may be good news on the horizon. A recent survey by the Risk and Insurance Management Society found that the average total cost of risk — which is composed of insurance premiums, retained losses and risk administrative costs — fell 9.4 percent per $1,000 of revenue in 2008.
Still, you can’t afford to pay for coverage you don’t need, so it is imperative to create a risk management plan that works for your company. If you’re willing to put in the time to calculate your options, it’s likely you can save money on premiums and avoid loss events altogether.
While some minimum levels of insurance may be mandated by your state, it’s up to you to decide how much additional coverage you require. By bulking up your policy in areas that are most prone to loss and by peeling back your insurance on more stable items, you can devise a plan that optimizes coverage and minimizes your cost.
However, if you choose to reduce your premiums or take on higher deductibles, you must ensure you have accounted for the potential gaps in your budget.
“All insurance is math,” Grigas says. “It’s expected loss plus insurance company expenses. If you can take a larger deductible with a procedure in place to cover a loss or if you can manage your place better, that’s how you win.”
A common way to reduce risk exposure is to transfer the obligation to a third party, such as requiring tenants to provide their own insurance. You may also want to consider implementing safety measures in your business plan, such as employee workshops. These actions can improve your risk profile and make you more attractive to a carrier — and more apt to get a better rate.
“We see firms that in workers’ compensation have saved literally millions of dollars by implementing good risk management practices, both in terms of direct cost from the employees to indirect costs like morale,” Calonge says.
To ensure you have the proper coverage in the adequate amounts, you should step back and review your strategies at least once a year. It’s recommended that you reanalyze your plan each time a major change occurs, such as a new acquisition or new product.
And don’t hesitate to reach out to your agent or carrier any time you have questions or concerns. Regular discussions help build a meaningful relationship that ensures the broker has your best interests in mind.
In the long run, maintaining a stable partnership with your insurance provider makes sense for both sides: You benefit from receiving better service and pricing, and the broker is saved the time and effort of cultivating new clients.
“You have to have confidence in your broker that they’re able to deliver a good solution regardless of the economy and insurance marketplace,” Belden says.