Tag Archives: commercial insurance

Insurance that covers businesses and their possible claims.

Construction Practice Group Content, Food & Beverage Practice Group Content, General Liability Insurance, Human Services Practice Group Content, Risk Management, Transportation Practice Group Content, Workers Compensation Insurance

7 Common Insurance Errors Businesses Make

We recently left a meeting with one of the largest construction companies in the country, whose sales are north of a billion dollars annually. The first comment my counterpart made was, “I cannot believe how poor their systems are…” I turned to him and gave him one of my favorite lines because it still rings true to me on a daily basis, “I’m always amazed, never surprised.” Universally, whether you are a billion dollar construction company, a small manufacturer, a non-profit, or a healthcare company, these are the flaws we see in (over 98%) the companies we are invited into. Here are 7 insurance errors commonly made by any and all types of companies.

1. Wrong Goal: 

Most companies set a goal of lowering their insurance spending every year. They see it as a tax. It’s an expense that doesn’t generate value. We suggest this goal is incorrect. Your claims history and risk-based costs drive your insurance costs; not your broker or the insurance carriers. 80% of an organizations costs are outside the cost of the insurance. Furthermore, the cost of your insurance program tends to be a lagging indicator, reset only once a year. Measuring, preventing, and managing your claims and claims-related costs should be the goal, not lowering your insurance cost. If you can demonstrate to the insurance marketplace that your company is historically profitable (claims to premium ratio) then you will have carriers competing for your business, which will, in turn, lower your costs.

Wrong Goal

2. Insufficient Resources for the Goal:

The best companies at least have a safety budget. Many, sadly, don’t even have that. If you want your arms around your biggest cost drivers, you need to dedicate resources towards the solution. We suggest that you start by setting a Risk Budget, not just a safety budget. It’s helpful if you know how much money you’re leaking due to claims. Having this Risk/Reward context will help you sell your budget number to management. Moreover, if you have solid systems (see 4), you can leverage those systems to bring in other resources in a cost-efficient fashion. This allows you to stretch the budget.

Most companies don’t leverage their carrier relationships or their brokers for resources to help them with their cost drivers. Even when they do, it’s too inconsistent to have much impact. Staffing at most organizations is thin at best, whereby a single staff person is also delegated the risk responsibilities on top of all the other hats they wear.

3. Improper to Absolutely No Data:

When we ask prospective clients how they determine success or failure in their insurance program, they almost always tell us insurance premiums. Again, this is flawed. Premiums by themselves indicate nothing and often are also a false read. Instead, premiums should be converted to a rate per sales, payroll, or vehicle. Also, the insurance contracts themselves might exclude or include more risk which swings costs. Our main point is that companies do not have the proper data to reveal their true cost drivers, hot spots, or success spots in an organization. They can’t benchmark themselves over a year’s time. They can’t benchmark supervisory employees, departments, or locations, nor can they tell you what their ROI is on their safety investment. Or they can’t build compensation incentives around the companies cost savings goals.

Without the proper data it’s nearly impossible to change culture, results, or fix cost drivers that you haven’t even identified. Imagine being a doctor trying to diagnose a patient without running tests, looking at charts, and being able to benchmark vitals. Most companies lack this critical ability to gain insight, let alone the ability to select the correct treatment option.

4. Little Strategy:

Here’s a hint, shopping your insurance with 3 competing brokers is not a sound strategy. Yes, it may have worked for you a few times, but, it’s like shooting foul shots backwards. You may get lucky, but it’s not consistently sustainable. If you set the proper goal, you can then test the marketplace with your (1)broker who can (and will) get you competitive pricing. Set your strategy on controlling and lowering your main cost drivers, your insurance costs will follow.

5. Systems:

The best of these companies use spreadsheets to capture data, and then exchange insights via email. Most don’t even have the spreadsheets! If you have a solid system as a nucleus, you can then build both process and staff around this core system. Further you can leverage the system to hire outside specialties to address thorny issues. In absence of a strong core system, it’s very difficult to get a sustained, consistent effort bent towards solving your most vexing claims issues.

 

6. Lack of Process/Protocol:

There is so much low-hanging fruit that costs so little when it comes to managing claims cost drivers, most of which is just knowing the proper protocol when “x” occurs. Then, it’s all about communicating that protocol organization-wide, with a proper system in place to build in accountability, so it becomes natural.

Note: Having a task list is not a system. Closing the execution loop, holding people accountable, is a system. The loop is closed through a random audit process.

7. Price vs Cost:

This is a big one. Too often, we see companies focus on the price of the insurance against the long term costs. Nothing is more expensive than a cheap insurance contract. You finance your risk with operating cash flows, reserves or worse… loans. Contrary to popular belief the correct answer is not insurance. If you had the correct data, contained within a system, then you would understand the real cost drivers in your organization so you can then attack them strategically. That takes too much work, so folks just look at the premium, write the check and hope for the best.

Here’s the good news (sarcasm). There is a new class of competitor coming to your space that understands these seven points and are executing them with ambitious zeal. They understand that to truly lower their unit cost structure they need to look at their cost of risk rather than the price of their insurance. Having this ability is truly an overwhelming marketplace advantage as they will be cost efficient and cost consistent year in and year out. You will know them by their tale tell signs, high growth, more market share, lower costs and higher profits.

Wash, rinse, repeat.

Other

Coverage Impact From Coronavirus Relating To Business Income Within Your Commercial Insurance Policy

With the number of people infected by the Coronavirus growing every day, customers are voicing their concerns about how their insurance coverage will protect them from potential closers and lost revenue. 

 

We’ve had a number of clients ask what coverages will protect them from losses resulting from the COVID19 virus. Organizations that rely on physical locations for their business like manufacturing plants, schools, nursing homes, daycare facilities, and bus companies, aren’t sure what protection they have from business interruption. 

Unfortunately, it appears that the ISO Business Income and Extra Expense Coverage Form, CP ​00 30 10 12, coupled with the Causes of Loss – Special Form, CP 10 30 09 17, will not cover these losses for three reasons:

  • ​Coverage applies only if there is “direct physical loss of or damage to property.” The virus is wreaking havoc on people but not property.
  • The “Causes of Loss” form excludes coverage “for loss or damage caused by or resulting from any virus, bacterium or other microorganisms that induce or is capable of inducing physical distress, illness or disease.​”  The Coronavirus fits this description.
  • The form also excludes losses resulting from “delay, loss of use or loss of market.” There is no coverage for losses resulting If a homecare operation has to stop sending aids or clients start to cancel because the virus has caused people to stop traveling. (Big I Insurance)

Your organization has a number of decisions to make if unable to shift operations from a physical location to a remote opportunity. Some organizations can continue operations remotely, while others may be forced to close due to the Coronavirus. We recently published this article on how to keep your business operational during the outbreak. 

The Insurance Services Office (ISO) announced on Feb. 7, 2020, that they’ve published two advisory endorsements to the Business Income & Extra Expense Coverage Form for insurers to adopt and file if they wish According to the blog post on Verisk’s website: 

The first endorsement provides limited coverage in the event that a business suspends operations due to closure or quarantine ordered by a civil authority. This endorsement also provides coverage with respect to dependent property that is named in the policy and for vehicles and mobile equipment, where applicable.

 

The second endorsement also provides coverage when a business is forced to suspend operations due to the closure (or restricted use) of the public bus, rail, or ferry lines by civil authorities.​ (Verisk)

 

Workers’ Compensation is another coverage that can be affected by the COVID19 virus if a hypothetical worker can prove that they were exposed to the virus at their place of employment.

Lorraine Lee Explains The Business Impact Of The CoronaVirus
 

Commercial General Liability coverages can be applied in cases where an employer has allegedly neglected to remove an infected employee from the workplace, thus facilitating the further spread of the virus. Be aware, ISO offers an endorsement, CG 21 32 05 09, Communicable Disease Exclusion. This endorsement excludes coverage for bodily injury, property damage, and personal and advertising injury arising out of the actual or alleged transmission of a communicable disease. It also applies to alleged negligence in:

  • Supervising, hiring, employing, training or monitoring of others that may be infected with and spread a communicable disease;
  • Testing for a communicable disease;
  • Failure to prevent the spread of the disease; or
  • Failure to report the disease to authorities.

For more information on whether your organization is prepared for the potential losses coming from the Coronavirus outbreak contact a Risk Advisor or Call 914-357-8444. 

 

https://www.insurancejournal.com/news/national/2020/02/26/559383.htm

https://www.biginy.org/newsfeed/Lists/Posts/Post.aspx?ID=778

Commercial Auto, Commercial Property, Construction Practice Group Content, Directors & Officers, Food & Beverage Practice Group Content, General Liability Insurance, Human Services Practice Group Content, Line of Insurance, Transportation Practice Group Content, Vlogs, Workers Compensation Insurance, Workers Compensation Premium Audits

Commercial Insurance 101: An Introduction to Insurance

Commercial Insurance is one of those things that every company has but not every company understands. In some cases, a person is chosen to be put in charge of the insurance buying process and this person is usually an HR person who has a very little understanding of what goes into the insurance buying process.

 

To recap the video, commercial insurance is essentially when a person, business, or group of people transfer a risk that could cost money in damages to an insurance carrier. To transfer the risk, the business will pay a flat fee – a premium – that changes in cost every year based on the previous year’s claims. There are also difference types of insurance as well, including workers compensation for worker injuries on the job. There is also auto liability, general liability, property damages, and others.

 

The one part of insurance many do not understand is: Why do carriers agree to this? The damages may be 10x the insurance premium. It turns out that out of the hundreds of millions of premium policies carriers write every year, they will lose money on only a very small fraction of them. When insureds (those buying insurance) pool their risk into a small group of carriers, many of them pay for a premium. However, much of the time it turns out that their were no damages or claims to need compensation. That does not mean they should not pay for insurance the next year. Insurance is for the protection against the unpredictable. A driver with a perfectly clean record can skid on ice one day. Those damages can cost tens of thousands of dollars.

Learn about the different types of commercial insurance and the role it plays inside of your business. This is just a starting point to learn some of the basics of commercial insurance.

 

Still have questions? Call one of our risk advisors today at 914-357-8444. Or, visit our website here.

 

Line of Insurance, Risk Management, Vlogs

Do Insurance Carriers Know Too Much?

Do Commercial Insurance Carriers Know Too Much?

It wasn’t too long ago when the worst run companies thought they could escape their poor claims results by shutting down and starting another company to try an outrun their loss history and insurance past.

How about the construction company who thought they would be slick. They tell the insurance company they were carpenters instead of roofers to get the lower rate.

Unfortunately, as clever as companies trying to save a buck think they are, large insurance carriers are 100 times better run and always thinking three steps ahead. Insurance carriers are always on top of companies they are insuring. They are constantly investigating claims, asking for updates, and sending their own consultants,. This video can show you not how to get away with fraudulent claims but to show you how every single one of your “Ferris Buellers Day Off” schemes has already been dealt with 1,000 times with the same insurance carrier. Unlike your company, they deal with other companies every single day.


The game has changed folks. In this quick little video, we share the why and how. Being forewarned allows you to be prepared.

 

Still, have questions? You can contact one of our professional risk advisors right now at 914-357-8444. Or, you can visit our website here.

Other, Workers Compensation Insurance, Workers Compensation Premium Audits

Questions On The Guarantee Insurance Company Liquidation?

 Do you have questions on the Guarantee Insurance Company Liquidation?

On November 27, 2017, Guarantee Insurance Company ordered into liquidation by the Second Judicial Circuit Court in Leon County, Florida. The Florida Department of Financial Services is the court-appointed Receiver of the company. The Florida Receiver began working to transition claim files and claim data to the New York Workers Compensation Security Fund. As of January 03, 2018, the Ancillary Receivership Order has not yet been approved. This has caused a delay in the transition as well as processing of open and new claims.

Employers insured through GIC began receiving notifications from the New York Liquidation Bureau (NYLB) on specific claims.

They advised the delayed transition and employers would be responsible for providing WC benefits. However, payments made by the employer may get reimbursed if the claim is subject to the WCB rates and covered.

This focuses on those unequipped on deciding which claims to pay, how much to pay, and what documentation is enough to seek reimbursement. To assist folks struggling, contact New York Liquidation Bureau for instructions on employer responsibilities pending the transition.

By January 25, 2017, we learned that the Ancillary Receivership Order expects to become approved by a judge at a hearing. The recommendation is that employers handle existing and also new claims as follows:

  • New claims should be reported through the normal channels to get the claim on record.   If the employee is losing time from work the employer should seek medical documentation on the disability.  If the disability exceeds 7 days, we recommend employers pay at the smallest rate of $150.00. You should do this until the transition takes place or until the Workers Compensation Board establishes the appropriate rate.  Paying the least ensures payments made are timely to the injured worker but limits the risk of overpayment.
  • The injured worker already receiving compensation benefits will continue to get paid for a period of time on existing claims where benefits were being disbursed. It wasn’t specified who is making those payments, but it seems the employer doesn’t need to start disability payments on these claims.
  • It is possible some of these claims need investigations completed and a controversion filed (formal denial). To protect employers from potential fines/adverse consequences, it may be necessary to hire an independent adjuster to conduct a compensability investigation.  If the investigation warrants a controversion, clients may need to hire an attorney to assist with filing the forms with the Workers Compensation Board. Contact your claims advocate for help. We can suggest an independent adjusting firm and law firm. We will ensure only necessary work is getting done however, still assisting with the assignment. Reimbursement for expenses is not clear once the transition takes place.
  • Our contact @ (NYLB) indicated employers are not expected to pay medical bills. Moreover, if the order becomes signed by late January as expected, medical bills will be processed by an assigned claims administrator.

Still want more info? Feel free to contact us if you have further questions or concerns by CLICKING HERE.

Claims Management, Construction Practice Group Content, Food & Beverage Practice Group Content, General Liability Insurance, Human Services Practice Group Content, Risk Management, Transportation Practice Group Content, Workers Compensation Insurance

Why The Commercial Insurance Marketplace Fails Your Business

Simply put, the insurance claims goals between most commercial insurance buyers and the carrier / brokers heretofore named the insurance marketplace are misaligned.

Which Way ?

The goal of a savvy insurance buyer is to transfer as much risk to the carriers for the least amount of insurance premium. Most forget the first part, but that’s a whole other blog article. The goal of the insurance carriers is to charge as much over par as they can get from each insured ultimately driving their profits up. The brokers who place most of the policies are on the same food chain as the insurance carriers as their commission increases with the insurance premium. This classic tug of war is centuries old and describes most functioning marketplaces irrespective of the product or service.

Here’s the difference; you can gain much more control over the system that has been tilted for years against you. What drives your insurance premiums are your claims . Understand that when your premiums go up you are in effect rewarding your insurance broker for mishandling your account as they get a raise and you lose valuable profits. This happens because no one is focusing on the root causes and frankly why should they when the stakeholders on the other side are richly rewarded . Understand that when you have insurance claims you drive up  your cost by allowing the insurance carriers to surcharge you , which in turn drives up your insurance brokers  compensation. Hence the misaligned goals ; yours versus the insurance marketplace.

When we meet potential new clients many  make the same statements in our initial meeting. Our insurance costs have risen dramatically from last year to this year which took us completely by surprise. Further our previous carrier has cancelled us, our broker gave us 2 quotes that were substantially higher and said “there is nothing they can do, you have too many claims”! You are forced to make a six figure purchasing decision usually within 48 hours of losing your coverage.

Whose fault is that? We would argue it’s the buyer that continues to purchase their insurance from the same brokers instead of demanding more. More data , quicker so you can proactively manage the risk components inside your business that are driving your costs. Having this information faster , more timely then allows you to deploy resources up front fixing the pain points in your business before your cost escalate dramatically , impairing your competitive position.

Understand insurance premiums are a very poor lagging indicator. They reset only once a year and are underwritten based on your companies 5 year historical claims data which moves up throughout the year ; silently. Generally over time reserves and payouts increase which is called loss development. What we see sadly time and time again is the folks who purchase the insurance look at this data only once a year, at renewal time which is way too late. That’s like applying for a mortgage on a home only to find out once your in contract that your credit score is a mess. Too late as your stuck with the mess and all the increased cost.

Unfortunately most businesses only look to their brokers to process a transaction rather than helping them build systems , metrics and accountability that drive results and not simply poor outcomes. The good news is really well run organizations have figured this out and have put these systems in place which is giving them a huge advantage in their risk based costs making them more competitive than the also rans.

The vast majority of the insurance broker community has failed their clients simply because it’s not in their best interest to help them prevent and manage claims. The commercial insurance buyers have failed themselves because they haven’t realized how their goals and the insurance brokers goals are misaligned , and have not held either their insurance brokers or carriers accountable for helping them manage risk , not buy insurance.

This November as you head to the polls we urge you to hold your lawmakers and politicians accountable instead of complaining about how incompetent and dysfunctional Congress is. While your at it don’t simply complain about how high your insurance rates are, vote for yourself and chose a broker that has a strategic plan and resources to help you prevent and manage claims rather than simply let you purchase overpriced insurance policies. It’s your future, just sayin…..

Construction Practice Group Content, Food & Beverage Practice Group Content, General Liability Insurance, Human Services Practice Group Content, Risk Management, Transportation Practice Group Content, Workers Compensation Insurance

6 Commercial Insurance Myths It’s Time to Debunk

We hear misconceptions every day regarding commercial insurance. It’s no one’s fault really as commercial insurance can be extremely complex, and organizations with complex insurance are truly underserved by the insurance community. We’ve been taking note of the most common myths we’ve heard this month and included them below. We will continue to add to this list every month.

1. “The proposal with the lowest premium is best.” (Price vs. Cost)

I don’t know if this one really needs much explanation. Premiums are determined by a combination of risk profile, exposures, coverage, contract terms, and your company’s individual loss history. It’s quite common that your upfront “price” for the insurance may be quite low, however (1) uncovered claim can and will drive your ultimate cost significantly higher than perhaps other insurance proposals you may have evaluated but did not choose because the price / premium was too high. Value buyers evaluate insurance by how much risk is transferred for what premium. Price buyers simply jump at the lower premium selectively listening to the broker who presents them that option instead of evaluating the coverage terms first.

2. “I should shop my insurance every year.”

Not true because carriers will flag this. It makes you less attractive to the marketplace because they know they are likely to lose you as an account the following year. They hate price shoppers and look for value buyers. It takes the carrier time to underwrite and price your account. Often the first thing they evaluate is, “Do we want to work on this quote?” If they see you were with your prior carriers for a year or two before you jumped ship they know they are renting your account and they will pass.  Think of a job applicant who has had ten different jobs in the last ten years. I’m sure you would have some hesitations about his/her loyalty to your company.

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