If you own or manage a business, you already know that your insurance expenses are rising. Property and casualty insurance premiums were increasing in the U.S. even before the Coronavirus hit but there’s no denying the fact that the uncertainty that the Coronavirus has placed on the economy has exacerbated the situation. As 2020 progressed, business insurance pricing continued to increase in the U.S. largely due to reduced capacity in response to a surge in frequency and severity of natural catastrophes, rising litigation expenses, and social inflation. These increases, which are expected to rise to double digit increases in 2021, are most prevalent in the Property Casualty realm (Directors & Officers Liability, Excess Liability, Property & Commercial Auto Insurance) while Group Benefit rates are increasing, but at a much more modest rate. Some reports attribute the Group Benefits more modest bump in rates to postponed elective surgeries and routine well visits. If these reports are accurate 2021 could see a surge in these rates as well when the routine well visits & elective surgeries resume. Despite all of this, it’s important to remember that you do have other tools in your arsenal as insurance is just one component of a true risk management program. There are ways to help control your own business insurance costs and the sooner you put them into practice the better. Below are our top 9 recommendations:
- Implement an effective safety program – Even though Workers Compensation insurance is the one of the few lines of coverage that hasn’t seen much of an increase in rates in 2020, it’s an area that you have more control over and can therefore potentially reap some savings to offset higher premiums in your other insurance coverage lines. Almost every business has a safety management program, even one that is written, but very few hold employees accountable to it and update it regularly. Make sure you have a return-to-work program, a well–executed training & safety program (including adequate personal protective equipment gear), a drug & alcohol testing program and the ability to track your claims to determine where your risks lie. Although your current insurer has resources at your disposal to use for this, if you need more specialized assistance, some insurance agencies such as HDB have a loss control specialist that can provide expert guidance step by step and even implement it on your behalf if you so choose. One of the best ways to gain organization-wide support of your safety program is to tie it to department budgets and managers’ performance reviews. It is important that you show managers that workers compensation insurance is not just a fixed cost of doing business. They must understand that self-insured liabilities or premiums can be affected — for better or for worse — by their actions. If managers know that their performance will be judged in part by how their actions affect that premium or claims expense, they will be motivated to take steps to improve their department’s performance. Automobile insurance is another coverage that can benefit greatly by a well-executed safety program. A fleet safety program should include at a minimum pre-hire driver motor vehicle record checks, annual driver motor vehicle checks, post-accident drug & alcohol testing, driver training programs and fleet maintenance checks. Telematics will continue to gain in popularity as more businesses see how their benefit in premium savings outweigh their cost over the long term so if your auto insurance is one of your biggest insurance costs, you should start familiarizing yourself with them now.
- Practice Risk Transfer – Most businesses do a terrible job at this and take on risks they don’t even realize they did simply by not reading the contracts they are signing carefully enough. The hold harmless and indemnification clauses embedded in these contracts need to be mutual rather than one sided so that you are not assuming liability of the other party’s actions or inactions. Alternatively, if another organization is providing a service for you, including construction repairs, delivering goods and manufacturing a component product, making sure the contract reflects the fact that their insurance policies should respond on a primary basis via an additional insured provision without any contribution from your policy shields your policy from receiving these claims which helps keep the costs of your insurance coverage down over the long term. Having the contract provide a waiver of subrogation on your behalf provides additional protection so that your policy limits aren’t eroded, and your loss experience isn’t negatively affected.
- Take Advantage of Telemedicine/Virtual Care – Telemedicine is a great way to increase productivity and push claims away from your health insurance plan. Having an option for your employees to visit with a doctor virtually at any point throughout the day may keep them from missing a day of work. It may also keep them from catching a more serious illness while at the doctor’s office that could possibly keep them out of work longer. Many employees do not have a primary care physician and if they get sick, they may choose to go to the ER or Urgent Care. Many illnesses can be treated via a telephone/video call therefore removing those large ER/Urgent care visits from your claims. This could impact your annual health insurance renewal. Offering a low or $0 copay telemedicine plan would also lower the out-of-pocket cost for the employee and drive them to use this service more often.
- Increase Deductibles – This can mainly assist a business in reducing their property, workers compensation and health insurance expenditures. Depending on where you’re located, increasing the wind deductible may result in a sizeable premium decrease. Although we recommend that you view your business property policy as one for catastrophic losses only, this is only effective if you have run the numbers to determine what losses you can pay with liquid assets and budget accordingly. If your workers compensation premium is sizeable enough, you could also reap significant gains in taking on a large workers compensation deductible such as $50,000 – $250,000. Taking on a larger health insurance deductible can also provide significant savings in your group benefits costs. By moving to a high deductible health plan, you shift more of the first dollar exposure to the employee which would lower the health premiums and discourage poor healthcare choices. When the employee has more “skin” in the game they will be more aware of how they spend healthcare dollars.
- Implement a “Secondary” Health Insurance Program – Also known as a “supplemental” or “gap” plan which effectively acts as a buffer to mitigate the out-of-pocket costs created by having a larger deductible in your health insurance program. Health insurance plans with low deductibles (under $1,000) typically come with high insurance premiums. When implementing a secondary health insurance program, the first step is to raise the deductible attached to your primary health plan. When you do that, two things happen. First, the rates for the primary plan come down, often significantly. Second, the out-of-pocket exposure to your employees goes up. The secondary health strategy involves taking a portion of the savings incurred by raising the deductible and using it to purchase the secondary health plan. The secondary health plan provides a stated benefit to cover part, or even most, of the increased out-of-pocket exposure created by the higher primary plan deductible. The secondary plan, when implemented properly, pays towards the primary plan’s deductible and coinsurance on the employee’s behalf. This strategy also protects the primary health plan by shifting claims away from the primary plan insurer. This can positively affect the claims utilization of your primary plan, ultimately resulting in greater rate stability going forward.
- Captives – The number of captives was increasing even before rates started rising but they’ve exploded in popularity in 2020. They are much more affordable now and since they enable a business to capitalize on their good loss experience, the businesses that are well run and are using proper risk management and risk transfer techniques stand to gain the most from using them. Now more than ever there are different types of captives that could meet your company’s specific needs.
- Self-Insurance – Yes as an insurance agency we can provide you with the best insurance protection available; but we know that when running a business, you need to keep expenses in perspective and sometimes self-insurance makes more sense. For instance, auto physical damage rates have soared over the past five years due mainly to distracted driving and the steeper repair costs associated with our more high-tech-cars. Consider self-insuring the physical damage on your older auto units to help decrease the cost of your business auto insurance.
- Classify Your Workers Correctly – Rates charged for workers compensation coverage may vary widely from one classification to another. So, make sure your clerical, sales & other employees that can be segregated out according to the National Council on Compensation Insurance rules are or you may be overpaying. Also, often as a business changes the class codes need to be changed too so be sure to bring it to your agent’s attention.
- Communicate with Your agent Regularly & Start Your Renewal Early – If your agent doesn’t understand your business you could be paying for coverage you don’t need. As your business changes be sure to keep your agent updated. A good agent will recognize ways to combine coverages where he or she can that could result in discounts to you. They can also find savings in introducing you to a trade association or other organization that offers insurance programs to its members. The agent may have in-house loss control support, such as HDB, that can help you implement good safety practices and a claims department that will review your loss reports with you to see if any reserves on open claims should be decreased and even find claim errors that benefit you. Starting early with these processes BEFORE your renewal will help put you in good shape to secure the best terms, conditions and pricing available in 2021.
Harmon Dennis Bradshaw, Inc. is an independent insurance agency offering a comprehensive suite of insurance solutions to protect you and your business from the unexpected. Based in Montgomery, AL with a satellite office in Birmingham and active licenses in all 50 states, we have helped our clients navigate the complex world of insurance for over 40 years. We pride ourselves in designing and implementing custom solutions to meet your company’s precise dynamics and preferences. Our forward-thinking solutions reduce risk exposures and cost while enhancing your ability to compete and win. Please contact us at 800-239-5512 or e-mail us at firstname.lastname@example.org and we’ll have a Risk Advisor reach out to you.