Risk Management and Insurance Review Tips for 2016

Howard A. Miller, L/B/W Insurance & Financial Services, Inc.
ERAI, Inc.

Being adaptable is the key to survival. Your ability to review and adapt to changing and emerging threats is critical to your long term success. The world changes and so does your business. This is why you need to review your risk management and insurance program every year. Has your business grown or contracted over the past year? Here are a few things to consider:

  1. Audits: Update your sales, property values and workers compensation payroll figures. Workers compensation and general liability policies can be auditable. Insurance carriers have the right to inspect your books and records to verify you are paying on accurate sales and payroll values. If you are getting bills from your insurance companies based on audited figures that you underestimated from the previous year, you can avoid this by reviewing and updating your payroll and sales figures. If you know you are in a growth mode, and you would rather pay over the course of the policy term, follow this advice and update your insurance carrier so you don’t get stuck owing money on last year’s policy with limited or no options for a pay plan.
  2. Property: Maybe you need to reduce your insurance coverage – why overpay for coverage you cannot use. On the other hand, some policies will penalize you if you are not insured to value on your buildings and property at the time of the loss. Understand your co-insurance and valuation terms and conditions and make sure you are insured to value. You will thank yourself after a loss and, in some cases, there is not that much difference in price for being insured with the correct limits. If you own property, you can usually determine a certain value for the cost of replacement. What about obsolete inventory that is no longer being manufactured? How will you value this so you are adequately compensated in the event of a loss?
  3. Liability: Review your operations and products. Has anything changed? Are you providing new services or products that you have not done in the past? Professional advice and analytical services can create new exposures. Insurance is a puzzle. It’s about getting the right pieces. I had a client once tell me they just wanted an insurance policy, with no exclusion, that covered them for everything. A couple comments about this: One, you would not want to complete the application. Two, you would not want to see the price. Get the right coverage for your unique exposures and what you feel are priorities for your organization. One main trigger for your general liability policy is bodily injury and property damage. Professional services that cause a third party to sue you for financial damages are not typically covered under general liability. Another great question might be to ask: What am I not covered for? I recommend looking at your exposures to loss and the causes of loss, not just your existing insurance.
  4. Emerging Risk: The world is changing. Information is a new currency. To take a holistic view of your risk requires looking at your digital exposures as well as traditional analog risk. A few things to consider: What are the ramifications of digital risk? Could a virus infect our network and disrupt our operations? What about a denial of service attack? How much money could be lost due to this disruption? Digital information can be copied, transmitted, modified or destroyed in a matter of seconds. Three questions to ask before you review your insurance in this area: How would the breach of confidentiality of our communications or data impact our organization? Could the destruction or inability to access our data disrupt our operations? When you look at any exposure you need to consider certain variables. One variable to be conscious of is your custody and access of the information of others to whom you may be liable either by contract, industry standards or regulatory compliance. Are there other third parties who are relied upon to maintain the confidentiality of your information in their care, custody or control? Which leads to the next point.
  5. Review your contractual and legal obligations: How much liability insurance should you purchase? It depends on how much you could be legally liable for. A discussion with a knowledgeable attorney who has a risk management mindset could offer real life examples of the cost and ramifications of potential liability to your organization. This may influence your insurance buying decisions and your risk control strategies.
  6. Review your risk control plans: These are plans that are put in place to control the frequency or severity of a potential loss. Review your policies, procedures, training and incident response in areas such as: human resources including key executives, workplace safety and the security of digital and intellectual property.
Taking the time to look back and focus on the negative impact of risk once a year could make you much more confident in your ability to meet your goals for the year to come.

If you have any questions, please contact Howard Miller at HowardM@lbwinsurance.com.