SafetyCorner From the desk of David Mack, Senior Account Executive of Schechner Lifson Corporation. www.schechnerlifson.com
Time To Renew? “What is difficult to endure is sweet to recall.” A French proverb captures a year that most of us are happy to see come to an end. What have we learned? What will we do differently in 2010? How will we respond to important changes in the marketplace to ensure our stability and profitability? We need to ask ourselves these important questions and respond with dynamic changes that will increase our efficiency and ability to not only compete but grow, learn and prosper in the New Year and well beyond. If you are anything like me, you are ready to throw common sense and conventional wisdom out the window! Let’s talk about “risk transfer.” When you buy an insurance policy you are paying a premium to transfer risk to a third party – your insurance carrier. Are your insurance premiums going up or down lately? What can you do to influence the cost of your insurance? Did you know that in many cases the cost of your insurance coverage is directly related to your operating procedures? Insurance premiums are only part of the cost your organization will absorb at the time of a loss. Self insured retention or deductible is an example of an additional cost you agree to share with your carrier at the time of a loss. How much are you willing to pay out of pocket in order to reduce your annual premiums? Loss of productivity is another unexpected cost above insurance premiums when there is an accident. If you are serious about loss control and safety you may be spending a significant amount of money on driver training, protective equipment, safety meetings and presentations. Did you know that companies are more willing to finance your installments for a small service fee and provide additional installments to spread payments out? What about “pay as you go” options on workers compensation? This option is very helpful for cash flow because there may be no deposits and no audits, but watch out for hidden payroll processing fees. There are several different ways to rate your operational exposures in determining your annual premium. The most common way is rating based on annual sales. When your sales are up, your premium follows. When sales are down are you getting a reduction? In some cases we may be able to rate your policy on payroll or number of employees. Your agent should be exploring these options for you to determine the most cost-effective way to rate your policy. If
they are not, you are not in full control of your insurance costs. Dividends are another important part of consideration when purchasing insurance. Some insurance carriers offer a dividend based on loss experience. Is the dividend based on your individual account or part of a group program? If it is based on a group, what is the average dividend paid out over the last three to five years? If individually calculated, take a look at your own loss experience over the last three to five years dropping out any large claims that are not expected to occur and use the average to compare. Dividends cannot legally be guaranteed by an insurance carrier, so one should be wary of placing too much emphasis when considering their impact on your premium. Obviously, there are many different concepts to take into consideration when purchasing insurance. Have the industry associationapproved agency do a complete risk analysis and evaluation of your current program. Once exposures have been identified, you will be able to decide how much risk to retain and how much you will need to transfer. You can do this at any time during your policy period, but is critical when considering other proposals. Compare services that will be provided with your coverage. What loss control services are available and who will provide them? What other services are available like safety management? Who will handle claims and follow up on the process? Does the carrier have experience in your industry? You should understand the financial strength of the carrier; will it be there when you need them? Once you understand the price relationship from a coverage and service standpoint, you will be able to make an educated and informed decision. Once you have made your purchase you are probably thinking you can file it away and not have to think about it for another nine months. Don’t try it! Managing risk and controlling losses are paramount every single day in successful businesses. I N T E R N AT I O N A L S U R FAC E FA B R I C AT O R S A S S O C I AT I O N
David Mack joined Schechner Lifson in 2006, before which he managed a small insurance agency in Plainfield, N.J. He has a BA in education from Kean University and is a New Jersey certified Teacher of the Handicapped. He worked as a volunteer for Youth at Risk as a team Leader in charge of training and fundraising. He can be reached at 908-598-7875 or davidm@slcinsure.com
12 • Vol. 3, Issue 1, 2010 • International Surface Fabricators Association