Mather Risk Management Services
Companies continue to complain about the rising cost of doing business. Mather Risk Management Services provides assistance to management teams struggling with not enough time or expertise in developing training and work practices to address areas discussed in this article. Our objective is to help companies provide a healthy and safe workplace environment for their employees while trying to reduce their overall cost. I hope you enjoy the article.
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Business insurance premiums are based on two predominant factors:
- The History and Risk in Your Industry– If your company works on rooftops, then you will pay more than a tailor. Tailor’s rarely fall and suffer grievous injury and that industry’s risks are lower.
- The History and Risk of Your Company– You company will build a “claims history” over time and injuries, property damage, law suits, and potential claims are required to be revealed when shopping for insurance.
These are the top ten things that businesses do or fail to do that increase business insurance premiums:
- Failing to provide ongoing training to employees. All employees need regular, scheduled training in safety, customer relations and inter-office procedures. Such training should be required and documented for all. Failing to do so results in litigation, bad claims experience and, thus, raises future premiums.
- Failing to maintain workplace safety. When a business ignores workplace safety including workplace hygiene, compliance with laws and regulations and regular safety reviews, workplace injuries will occur. A history of non-compliance and injuries raises rates.
- Failing to document. In business today, everything must be documented. Do you train your employees? Could you prove it? Do you use sign in logs? Is maintenance documented? When a business cannot prove its individualized history, the default for the industry is often factored in, resulting in higher premiums. By documenting, your business can prove its entitlement to premium discounts often offered by insurers.
- Not purchasing insurance. Gaps in coverage can result in problems securing coverage later on and higher premiums.
- Not fully insuring or appropriately insuring. Business owners that do not fully insure for their risk or cut corners can expose themselves to “underinsurance” penalties that are often higher than the premiums they were attempting to evade.
- Ignoring specific risks. Certain geographic locations require special insurance for things such as: earthquakes, flood, wind and other geographic anomalies. Some business locations are more prone to crime. Whatever the unique risk, the premium will be higher; but, failing to insure or cover that risk in hopes it “just doesn’t happen” results in gaps in coverage and higher rates once the business attempts to secure the coverage.
- “Self-insuring” certain risks without the ability to do so. Businesses seeking to escape rising premiums, often prematurely attempt to “self-insure.” This happens most often in workers’ compensation. Most states have specific laws regarding the amount of funding a self-insured retention must have. These limits are often lower than the actual risk faced by the company and a retention pool can be wiped out. Getting back into coverage after being self-insured can be difficult and will result in higher rates.
- Failing to follow employment laws. If your business claims employees as “contractors” to escape workers’ compensation premiums, if you business acts in a discriminatory fashion, hires illegal workers, or ignores federal employment laws, eventually the result will be increased claims and premiums.
- Working with contractors that are not insured or do not follow the law. When a business without insurance is sued, claimants will look for a reason to add your company to the litigation. Insist that your contractors follow the law, are insured, and can prove it.
- Not working with an insurance professional and purchasing substandard insurance. There are bad insurers with shaky finances. One way to drive up your rates is to be continually shopping for new insurance. Make sure your business is placed with licensed, stable insurers that the business can develop long term relationships with (thus, building “good” history).
There are two other items I can add to the list, but I would like to assume that these two are obvious:
- Not paying premiums and allowing policies to lapse. If there are policy lapses for non-payment, securing coverage will be expensive and involve increased premiums.
- Not reporting claims and/or false claims reporting. When in doubt, report. If a customer falls in the store, document it and report it as a potential claim. Failing to report is always a mistake. Submitting false claims or inflated claims is also a mistake.
Both actions will result in higher premiums.