A former client’s unfortunate story provided Marc Eagan with a lesson to pass along to current customers of his insurance firm on the importance of risk assessment and communication.
These are two areas where business owners commit some of the most costly coverage-related mistakes, he and others in the insurance field say. But with the proper emphasis and guidance, they can also account for the most savings.
The lesson that Eagan’s former client, who owned a tire store, learned the hard way came when he filed a claim to cover losses from a burglary. It was only then that Eagan, president of Eagan Insurance Agency in Metairie, learned that the client was selling jewelry out of the front end of the store.
“The biggest problems are when business owners don’t pay enough attention to their coverage until a loss occurs,” Eagan said.
While there are probably few other shopkeepers who purvey steel-belted radials and keepsake bracelets under the same roof, all businesses benefit when they are forthright and realistic about their coverage needs, brokers say.
It begins with engaging the broker in a process that extends beyond the paperwork involved in renewing policies.
Anderson Baker, president of Gillis Ellis Baker in New Orleans, said agents only get as involved as much as the client allows, and the relationship must be more interactive for the customer to realize cost savings.
“If the business owner sees insurance as part of a larger risk management program, the results will be much better than if insurance is seen as a necessary evil,” Baker said.
In addition to the risk service his employees provide, Eagan said insurance carriers often provide assessment services if a customer’s needs require it.
Even if your business goes years without filing a claim, there is still a need to keep your insurance company plugged into the latest changes and developments. Mark Pennebaker, executive vice president with Brown & Brown Insurance in New Orleans, reports that most small businesses overlook deductibles on their liability policies that could save them thousands of dollars in premiums. Small business owners need to take
the time to make educated choices on how much risk to transfer, he said.“Business owners are usually risk takers by nature, but you wouldn’t know it by examining their insurance programs,” Pennebaker said.
He cited as an example a new customer who has not filed a general liability claim in 10 years. By adding a $10,000 deductible to his policy, he saved $2,500 a year.
“The business owner held $10,000 more risk, but he could be rewarded with $25,000 of savings over the next 10 years,” Pennebaker said.
But such decisions should not be made in a vacuum, especially because most small business owners face the same exposure to risk as their large counterparts, said Frank “Buddy” Seeling, president of Aparicio, Walker and Seeling in Metairie
The first step in conducting an accurate risk assessment with the guidance of an insurance professional, he advises, is identifying exposures that pose a financial threat to the existence or profitability of a business. The process begins with separating exposures into four classifications: property, liability, human resources and net income.
“Once this is completed, a program can be designed around those exposures and priced accordingly,” Seeling said. “This will also answer the question: ‘Why am I buying this?’”
Seeling said business owners should also ask themselves a critical question: “What am I getting from my agent other than the placement of the policies?”
Business owners also raise the probability of higher rates when they file frequent claims. Baker suggests they use insurance as a backstop for emergencies only.
“If the business ‘nickel-and-dimes’ the insurer, the response from the insurer will be the same,” he said.
He and Pennebaker also stressed the importance of workers’ compensation, which also offers savings opportunities.
Baker urges companies to provide accurate information for their experience modifier, which takes into account losses over a three-year period when calculating premiums. For a company that has few to no claims, it stands to reason that its premiums could be lowered.
Pennebaker said business owners should be sure to include themselves in a workers’ comp plan to take advantage of the “great value” of its disability, medical and death benefits.
“The exclusion of owners may leave them completely without medical coverage if there is a workplace accident,” he said, “Many health (insurance) providers will exclude employment-related injuries.”
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