Friday, September 18, 2009

A good time to Take Stock!

In my role as a business insurance advisor, I am often asked when insurance coverage should be reviewed. Most people assume the best time is at renewal and this tends to be the time most do. However, the renewal is often the time we are the most price sensitive, for obvious reasons and thus we tend to be blinded to the coverage needs by the potential costs. Also, the renewal date itself creates an arbitrary deadline that all parties involved (insured, agent & insurance carrier) feel they have to meet and have all decisions about coverage made. This is another barrier to a good evaluation of exposures and coverage, creating an atmosphere for potential costly mistakes by everyone involved.

A better time to evaluate your insurance coverage is at some point in the middle of the coverage period; when you can make a careful, fully informed assessment of your coverage needs. This should be a time when the insurance decision maker with the assistance of the insurance agent/risk manager can take the time to make a sound risk management analysis of their operations. I understand this is often easier said then done, but there is usually some point in the year that this can happen if planned for properly. The initial review can be somewhat involved, but if it done right the process can become fairly streamlined for subsequent years. Based on the complexity of the business, a complete risk management audit every 3 to 5 years is fairly adequate. In the intervening years one only need to review changes and trends in operations in order to make the necessary adaptations to the overall insurance program. The establishment of review protocols can assist this process greatly

The analysis concept itself is fairly straight forward; current and new exposures are assessed against established coverage to see if and where any gaps may be. Various alternative solutions can be investigated and discussed and applicable coverage can be adapted to meet the realized situation. This may involve simply amending policies that are already in place or seeking out new coverage through additional policies as needed. What’s more, in this manner premium dollars can be truly evaluated from a sense of priority as opposed to a sense of urgency often brought on by an impending renewal date. This also provides the additional bonus of knowing when it does come time to actually renew coverage and you decide to test the insurance market you can make an evaluation of competative alternatives strictly on price.

The bottom line is to get a risk management review process into your overall business planning and management activities. Making it part of your normal operations and moving it to a time when it can be given the attention it deserves will move you a long way along the road to a sound and secure business.