Jan. 1 is the date many companies renew their business insurance. With the renewal season only two months away, businesses should now be reviewing their policies with their brokers.
Insurance is usually relationship-driven. Brokers leverage the relationship so that clients think the broker is providing information that is in the companys best interest. If this is truly the case, a broker will not be concerned about being reviewed. If, however, the broker is directing business to a carrier or not effectively marketing the opportunity, then a review will shine a light on the deficiencies.
The idea of a thorough review of the company's current risk management program and insurance policies might be met with reluctance because insurance can be confusing and a review can be time consuming. But business changes and a company should make sure its insurance program keeps up. Its also a way to reduce your costs.
When reviewing your policies with your broker consider the following:
1. Risk assessment
What risks affect your organization's ability to achieve its objectives? What risks would have the greatest impact on cash flow? See what opportunities might arise if your organization had less risk.
2. Gaps/Overlaps in Coverage
There may be gaps in coverage. After the recent storms, many businesses found that they were underinsured. Alternatively, companies may have overlapping or duplicate coverage which is an unnecessary expenditure.
3. Brokers Compensation
Some insurers pay brokers contingent commissions based on the volume and growth and/or profitability of the business the broker places with an insurer. When a broker shares in the profits of the insurer, it is not in your best interest. Ask your broker or agent how they are compensated.
4. Appetite for risk.
Risk appetite" is the degree of risk your business is willing to accept in pursuit of its goals. Identify and prioritize key projects and operational risks, then allocate those risks, including the use of insurance.
Risks are dependent upon the nature of your business. Exchange rates, bids and contracts, legal compliance, real estate, inventory, freight, human resources and even terrorism can present risks to businesses.
Deena Kaye is a director in New York, Connecticut and Rhode Island with Expense Reduction Analysts, a worldwide network of consultants specializing in finding extra profits by reducing expenses in non-core categories. She can be reached at 800-656-7270, ext. 136; 203-550-2094 (cell); or DKaye@expensereduction.com .
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