In our opinion, there is no better time to consider alternative risk transfer as a strategy to get more cost-efficient with respect to your current commercial property insurance, commercial liability insurance, workers compensation insurance, & commercial auto insurance.
As I write this the country and the world are about to exit the covid pandemic. If we frame the current conditions in terms of where we are in the property insurance, liability insurance & workers compensation insurance buying cycle; conditions couldn’t be more favorable to give your company a significant competitive advantage.
Taxes :
Since all 3 branches of government have changes hands in the last several years there are strong tailwinds pushing for significant tax increases which will erode corporate resources. We suggest utilizing a Captive Insurance strategy can give you significant tax efficiencies allowing you to keep the dollars inside your company to help reduce your variable cost structure. DOWNLOAD our Guide to Utilizing Captives by CLICKING HERE.
Coverage Availability & Rates :
Currently, we are in the through of a “HARD MARKET”; where conditions favor the insurance carriers as they restrict coverage and increase rates. Insurance buyers are frustrated because they have limited options. Further, they feel squeezed, and rightly so. The carriers are pointing to the “Social Inflation” of liability and commercial auto claims due to the insane jury awards. Buyers are pointing to “profits” earned and surplus growth to counter that claim. We think the buyers have a legit gripe.
Risk As Strategy :
Smart forwarding thinking CFO’s and C-Suite Executives understand that if they can leverage their balance sheets by increasing their retentions EFFICIENTLY, they can gain significant cost advantages that they can bake into their COGS (Cost of Goods & Services). If done properly they can reduce their insurance program costs by 35% which allows them to grow profits, market share, or both. Remember every dollar you save in your insurance program falls directly to the bottom line.
To understand if your company could benefit from a partial or full-on program restructuring CLICK HEREto schedule a 15-minute call. In 5 questions we can figure out if the strategy has legs for your org.
Director and Officer insurance is protection for the leaders of a company for when something goes wrong involving them. Some examples include wrongful acts, improper management, or errors in judgment. Many private companies aren’t familiar with this insurance.
A few things to keep in mind as D & O insurance becomes more prevalent in corporations:
To start, a lot of policies exclude cyber issues and antitrust problems but might make an exception upon request. Another interesting piece of information is that most D & O insurers won’t insure companies going public or they will tighten terms on these types of corporations. Finally, most companies will be very specific about what types of public relation items they will cover; most will only cover certain events and only up to a certain dollar amount.
Not a lot of private businesses understand the importance of Director and Officer insurance, but it is especially important for the higher ups of a company to understand the intricacies. All of these notes are important to understand when purchasing D & O insurance because it will allow the buyer to be more selective in seeking out exactly what is fitting. D & O insurance is very important to have; however, if the terms are not favorable, it can be like not having insurance altogether. Therefore, it is critical to read through a policy carefully before committing.
All of the points mentioned previously are critical when determining what policy is fitting. It is also important to know exactly what coverage your company needs for its directors and officers. For example, a small manufacturing company with not a lot of contact with others likely won’t need a lot of public relations coverage. However, this company might need errors in judgement coverage as a lot of decisions about expanding the company might have to be made. A D & O policy all depends on the situation a company is in, but one thing is for sure. D & O insurance is extremely important and can help protect individual assets if anything ever goes wrong.
For more information contact one of our Risk Advisors or call 914-357-8444
Too much of a good thing is a very real thing when dealing with insurance.
Sometimes less is better when dealing with repair work coverage. What makes it even worse, is that a lot of people struggle to understand the complexities of endorsements.Seen as work coverage enhancements, repair work endorsements oftentimes provide no additional benefit. Repair work coverage often protects against bodily injury and property damage resulting from repairing something that has already been completed. A problem occurs when this coverage is in use concurrent with a products-completed operation (PCO) extension, which is the same thing. When an injury occurs, an insurer often selects the coverage that benefits them the most, hurting the company.
Since insurance companies often take this approach, it begs the question, “Is repair work coverage even beneficial?”
The answer is a little more complicated than a yes or no. First, it depends if a company already has a products-completed operation extension. If a company doesn’t, then it would make sense to buy repair work coverage as one should always have some protection when repairing finished products. If a company does have a PCO, a company should only get repair work coverage if there is a glaring hole in the PCO or if there is no detriment that can arise from conflicting terms between the two plans. As mentioned before, these plans are pretty complicated, so they should be read over with diligence and scrutiny to catch any conflicting terms.
Many problems can arise if these separate coverages are not implemented correctly. To start, having no coverage at all can result in hefty payouts as there is no protection for workers. Yet, having both plans can be a waste of money that doesn’t provide any extra benefit. Thus, it is important to find a happy medium between repair work coverage and a PCO extension. Doing so can ensure a company for repairs while spending the least amount of money possible.
For more information contact one of our Risk Advisors or call 914-357-8444
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.
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.
In today’s evolving marketplace, many best practice firms are leveraging their vendor partners for extra services, driving extra value to their organization. The insurance brokerage relationship is one of the primary areas these firms are mining in order to drive down their unit costs and gain a competitive advantage.
Listed below are a few examples of the services these companies are leveraging through their insurance brokerage relationship.
Three services you should look to take off your plate next time you’re in the market for a new insurance broker.
One of the most frequent questions we get is, “What is the difference between risk management and insurance?” In this video, we will focus on the difference risk management makes for real estate owners. In New York, these owners have tremendous exposure to Labor Law 240/241, “The Scaffold Law.” If a contractor or vendor gets seriously hurt on your investment property you as the owner have absolute liability for that worker’s injury. If it goes to trial, the only issue for the judge is, “How much is the award?”
“If insurance picks up for such an event, why should I be concerned?”
Because a million-dollar claim will end up costing you approximately $600,000 over a 4 year period. A huge net income loss! Do we have your attention now?
Watch the video to see how you can transfer that risk from your P&L. Send us an email or give us a call with any questions and check out Risk Rocket.
We have all seen the solicitations from ADP, PayChex and the like relating to linking your workers’ compensation insurance to your payroll system. While I do not dispute the immediate benefit of such an arrangement, in most instances the cost/benefit analysis reveals that the costs are significantly higher for most businesses.
Here’s a quick breakdown :
Administration Costs:
Linking payroll processing cuts down on admin expenses in terms of managing, preparing and executing workers’ compensation audits. This is a big benefit here… Every time you process payroll the workers’ compensation premium is charged based upon your actual payroll figures, thus no more workers compensation audits as the numbers are known, verified, and substantiated every processing period.
While this is certainly true for larger organizations the workers’ compensation audit process can actually be beneficial.
1. It allows your company to hold on to and deploy cash internally to get a rate of return rather than give it to the insurance carrier. Manage your cash flow, budget properly for the audit so you have cash on hand down the road.
2. It allows you to watch for, exclude, and allocate payroll to lower insurance premium classifications rather than have all your payroll allocated to the higher-rated classes. The audit process allows you to at least once a year take a deep dive into your organization’s job descriptions, payroll classes, and workload distribution to create better cost efficiencies. If you simply run payroll and pay workers compensation premiums you lose the benefit of this analysis.
Rates:
The payroll companies tell you that they are so huge they have negotiated preferential rates with companies like Hartford where you can leverage their buying power. This may be true in certain instances in the FIRST year. The reality is they have really negotiated better commission structures for themselves since they are leveraging their marketing and payroll platform, delivering clients to their preferred insurance carrier in droves.
What both the insurance carriers and the payroll companies don’t tell you is that rate creep sets in soon thereafter. The renewal rates for workers’ compensation policies done through payroll companies are almost double the national average. Knowing this, insurance rates rise incrementally over a period of months and years beyond what you might pay through your agent or broker who manages the purchase each year. The payroll companies and the insurance carriers are taking your customer malaise right to the bank.
Claims:
This is the biggest cost differentiator for me. If you’re a small mom and pop with less than ten employees who never put in a claim, perhaps the simplicity of linking workers’ compensation insurance and payroll is worth the additional costs noted above, as time is money.
If you are a larger organization greater than ten employees who does have one or more workers compensation claims every year or two then this is a very bad deal for you. Workers’ compensation insurance is essentially a very expensive credit line. When you have a workers’ compensation claim it’s your checkbook, but it’s the carrier who writes the check as most of the claim is charged back to you the customer. Sometimes with small comp claims under $15k, you will pay more back in premiums than the claim is worth.
Thus over 3 years that $15k claim cost your company $17,400 in additional premium charges as workers compensation premiums use claims experience as one of their significant pricing variables. There needs to be a workers’ compensation claims process in place that can help manage the additional costs which are substantial. In the absence of this process, your company’s cost structure becomes imperiled which hurts your competitive position.
In short, there is no workers compensation claims process in place with the payroll companies. They are experts at processing and passing the costs and fees down to you.
Bottom Line:
We believe that for organizations that have higher labor costs, higher injury rates, or have more than three labor-oriented job classifications linking payroll to workers compensation insurance has a much higher cost structure long term. It’s critical that when it comes to workers’ compensation insurance you need to have an advocate or risk advisor on your behalf that knows the system, the rules, and can help manage the claims process to an effective outcome. To simply ignore these critical functions, and sign on the dotted line with the likes of ADP or Paychex is essentially doing your strongest competitor a huge favor as your fixed costs just took a large increase.
