2011 may go on the record as being one of the most disaster prone years in our history. The Federal Emergency Management Agency (FEMA) has recently published their Top Ten Most Disaster Prone states (since they began tracking disasters in 1953).
Wonder where your state ranks?
I have had many people ask me, what I think are the most critical elements to saving money on insurance. After years of negotiating insurance on behalf of my clients….here are my top seven secrets to saving money on insurance:
1. Get Organized!
Ongoing insurance information management is a critical element in reducing insurance costs. Proper organization has a positive impact in the areas of competitive bidding, loss experience rating, and better insurer relations.
2. Know Your Time Constraints
If your information has not been properly managed, you should begin about six months prior to the expiration of your policies. Start no later than 120 days out from the expiration date.
3. Maintain Key Information
Loss data is the single most important type of underwriting information which needs to be maintained. Many business owners do not request this information from their insurance companies, and fewer keep up-to-date- loss information files. Loss data should be maintained for a minimum period of 5 years. Premium and exposure data will prove helpful when bidding your insurance. Files should be maintained for the following:
- Workers Compensation payroll audits
- Experience Modification rating sheets
- General liability exposure audits
- 5 Years of claims data on all lines of coverage
4. Negotiate Common Expiration Dates
Organizations that have numerous expiration dates will find it difficult to bid their insurance policies. Premium volume discounts and multi-policy discounts can add up to big savings (as much as 25%).
5. Choose Key Suppliers Carefully
The selection of a qualified insurance representative is one of the most important factors in reducing long-term costs. Your agent/broker should be your primary source on market information, exposure identification, and risk management ideas. Your agent should assist you in insurance information management (not keep this information from you!). In selecting an appropriate agent/ broker look for the following:
- Industry Experience – Knowledge of an industry’s typical exposures and market availability.
- Experience – A proven track record is important. Ask for a referral list.
- General Insurance Knowledge – Professional designations, years of experience, and education are important.
- Market Access – Access to insurance markets will determine how the agent can meet the goals of broad coverage and equitable premiums. No agent/ broker will have access to all insurance markets but he/she should represent how the markets he/she represents will respond to your needs.
6. Buy Adequate Limits Of Insurance
Many business owners try to lower insurance costs by not purchasing adequate limits of insurance. This mistake inevitably results in an underinsured claim which does not accomplish the goal of protecting your business, which is why, you purchase insurance in the first place . My favorite axiom is “buy adequate limits and use deductibles to lower costs”. The prudent use of deductibles and/or self insurance will help lower premiums while limiting the actual out of pocket cost of claims.
7. Anticipate Changes in The Insurance Industry
The insurance industry is continually affected by climate events and legal trends occurring in the United States and around the world. Business owners must always anticipate the changes in the insurance environment and be prepared to move quickly in response to these changes.
With proper insurance information management, hiring quality suppliers and using the suggestions included in this article, you can reduce your costs and feel confident of your protection against loss.
Sole Proprietors, Partners of a Partnership, or Members of an LLC who devote full time to the Proprietorship, or Partnership, are presumed to be “employees” for Workers’ Compensation purposes and subject to coverage for themselves UNLESS they obtain a Certificate of Non-coverage from the Arkansas Workers’ Compensation Commission. Read more