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How to Cut the Fat Out of Insurance Costs
Judy A. Jacobs
Running a business can be a major balancing act—and it usually
is. No matter the industry or type of business, higher operating
costs pull in one direction, while thinner margins exert pressure
the other way. As every business owner and manager knows, the bottom
line gets caught in the middle.
Business insurance is one of those operating costs. To reduce your
insurance costs, it may seem as if there is not much that can be
done other than increasing deductibles, trimming coverages, getting
in on lower rates because of a “soft market,” a particular
insurance company’s move to “buy” business, or
if all else fails, browbeating your agent.
Yet, nothing could be further from the truth. There are a number
of proactive steps a company can take to help cut the fat—unnecessary
costs out of its insurance program.
1. Make sure your insurance company knows your
business. There is a good reason why the emphasis is on
your business. Insurance companies know the classes of
business they insure. They benefit from both accumulated experience
and in-depth data. Together, they understand the risks. In other
words, they know what they’re looking for and they ask questions.
If they have been providing coverage for a particular class of business—metal
working companies for example—they’re comfortable with
their underwriting for new applications for coverage.
While they may have a thorough knowledge of a particular class
of business, what they don’t know is your business.
While you may be in the metal working field, on a scale of one to
10, your operation may be a nine. Unless the information about your
company is communicated by your insurance agent to the company,
you are just one of many.
2. Make sure your agent knows your business. There
are several reasons why your agent should be thoroughly informed
about your business. First, you want your agent to be proactive
in presenting your operation to the insurance company in the best
possible light. You want the agent to show, if it’s true,
that you, for example, have programs in place that make your business
a very good risk. You may have an active safety program, you maintain
your facilities and equipment properly, your employment checks are
thorough, you are active in your trade association and you have
a good claims history.
Don’t assume your agent will automatically take the time to
learn about your business. If you’re interviewing agents,
one point of evaluation might be how much interest is expressed
in reviewing your operation.
3. Make sure your agent helps you position your business
for the best possible presentation to the insurance company.
If you’re passive and your agent is passive, you’re
very possibly going to pay more for your insurance. It’s very
much like getting ready for an IRS audit. You expect your accountant
to outline what needs to be done before meeting with the auditor.
It’s the same with your insurance program.
If there are facility issues, they should be addressed. If equipment
is being operated without the required safety devices, changes should
be made. A review of accident reports may reveal instances where
there are patterns that can be investigated to identify and eliminate
the risks. Do your pre-hiring practices include a thorough background
check to identify issues that raise red flags, whether it’s
Workers’ Compensation claims, behavior issues or theft problems?
You want to be sure your agent makes the best presentation possible
to the insurance company underwriter. It’s worth the time
and effort to make this happen because it’s another way to
cut the fat out of insurance costs.
4. Make sure your agent proactively offers recommendations
and suggestions for both protecting your assets and reducing costs.
There was a time when insurance agents thought that it was best
if they operated under the client’s radar, only coming into
view when absolutely necessary.
Today, more insurance buyers expect a continuing high level of service
from agents. This can range from periodic insurance review meetings
to determine if the insurance program is performing as required
to helpful information for avoiding unnecessary losses.
Business operations must change more quickly than they did in the
past and companies are constantly modifying their operations. All
of which can have an impact on insurance coverage.
Some agents take a defensive approach and notify clients of particular
issues primarily to protect themselves from Errors and Omissions
claims. At the same time, other agents seem to also be motivated
by being perceived as a valuable resource for their clients. They
sponsor seminars, send update bulletins on current issues, and perform
periodic insurance program reviews in a continuing effort to educate
clients and help them run more efficient businesses.
While many insurance buyers seem to think that the most effective
way to cut the cost of insurance is to demand lower rates and move
their accounts to whoever comes up with the lowest price.
What’s the bottom line to these four steps? First, business
insurance buyers must be more involved if they want to cut the fat
out of their insurance costs. Second, they should expect their insurance
agent to play a key, proactive advisory role in the cost control
process. It’s this partnership that produces positive results.
Judy Jacobs is sales manager for Mosinee Insurance Agency, Inc.,
306 Water Street, Mosinee, WI. A Certified WorkComp Advisor, her
insurance career covers 25 years. She may be contacted at judyj@mosineeins.com
or 715-693-2100.
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