Six steps commercial insurance buyers can take to contain costs
By Tom Baer, for SBT
Since the fourth quarter of 1999, insurance prices have been undergoing a market correction that continues today. As a result, commercial insurance rates keep rising, terms keep tightening and insurance companies keep asking for more and more information about your company’s operations.
A few of the reasons why insurance companies continue to alter the way they do business and have returned to stricter underwriting basics include:
" Insolvencies and consolidation among insurance carriers has reduced competition. There are fewer companies that are able to, or seek to insure commercial accounts.
" Investment income can no longer be counted on to offset underwriting losses.
" Double-digit inflation is impacting claims-related expenses such as medical and repair costs.
" Claim amounts continue to increase due in part to large court settlements.
While these factors propel insurance premiums upward, Wisconsin business owners can implement tactics to combat unnecessary increases. Here are six things commercial insurance buyers should focus on to contain insurance costs.
1. Have a detailed, five-year claim history available for your agent or broker. Understand what caused your losses and be able explain what your company has done to reduce or eliminate similar losses in the future.
Providing a clear financial picture of your company for your agent is also beneficial. "Financials unavailable" can cost you.
2. Improve safety programs. Work with risk managers to reduce loss expenses and document tangible improvements.
To have a positive impact on insurance premiums, safety programs need to be more than just "lip service."
3. Relationships count. Find an agent you trust and feel comfortable with and then work closer than ever with that person. Remember that you’re on the same side.
4. Work with your agent to evaluate the potential benefits and pitfalls of increasing deductibles, purchasing excess coverage and self-insuring some areas of risk. You may find that you’re able to eliminate some coverages all together.
5. Understand that any change in your business structure can impact your insurance needs and costs.
Changes in facilities, workforce sizes, equipment, inventory buildups and other factors need to be constantly monitored and relayed to your insurance carrier. Have a system in place to make sure this happens.
6. Get certificates of insurance and hold-harmless agreements from vendors.
Keep in mind that anything you can do to protect your property can have an impact on insurance premiums. For example, sprinkler systems can protect your inventory and lower your rates. Proper security and supervision of your property can have a positive impact, as well.
If possible, avoid sharing a facility with another tenant. And make sure you have adequate separation from potential exposures such as storage tanks containing flammable/explosive materials.
Begin collecting data and evaluating options as early as possible – at least 120 days before your existing policy expires. That will give your agent time to call in professional risk mangers to help evaluate your risk management position and obtain competitive quotes.
Tom Baer is vice president of AIS Group, an independent insurance agency in Menomonee Falls.
Sept. 19, 2003 Small Business Times, Milwaukee
