With the economic challenges facing most businesses today, many business owners are searching for ways to cut costs and improve their bottom line. Commercial insurance premiums in California often represent a significant expense for most businesses. Skyrocketing workers’ compensation costs in the early part of this decade forced many businesses to relocate outside of California. In contrast, some businesses have seen these same costs decrease by as much as 80 percent.
Despite market fluctuations in insurance premiums, what can business owners do to reduce their costs and eliminate such severe price swings being delivered by insurance companies or insurance brokers?
Smart Business spoke to Griff Griffith, a principal with GMGS Insurance Services, about how to ensure that you are not paying too much for your insurance protection.
What most affects a company’s rates?
The most significant factor affecting insurance premiums is a company’s historical claims. Insurance companies provide the largest discounts to the businesses with the fewest and lowest amount of claims over a five-year period. It is relatively simple for an insurance broker to obtain low rates if a company has had no claims. Premiums increase when your company has claims and your broker does not have the necessary risk management skills to address them. A true risk management-broker is not only able to explain to competing insurance companies the nature of such historical claims but can also present the plan of action your company has implemented to prevent future claims. If you and your broker are not reviewing your open claims regularly then you are not receiving proper risk management service.
At a company, who should make the choices regarding risk management?
As a risk manager for hundreds of companies, we have seen business owners control insurance premiums through personal hands-on collaboration with their risk management broker. Too often, business owners choose to delegate this ‘insurance task’ to someone in their office and designate that person as the ‘insurance coordinator.’ It is shocking that a business owner will invest years of time and money to build a company and then delegate the protection of the company to an employee with no ownership in the company. If a business is an owner’s greatest asset, then the owner should not delegate its protection to someone with no financial stake or someone who lacks the experience necessary to make critical risk management decisions.