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Risk Management And Insurance In A Recession
By Thomas A. Green, ARM
We are in a recession and my business premiums keep going up! Have you asked yourself this question lately, or worse, have your premiums stayed the same but now represent a greater percentage of your operating budget? It is just as bad or worse when your protection plan does not keep pace with your growth (and resultant increase in exposure to loss).
For the most part, your commercial liability and workers compensation premiums are derivative of your sales and payroll, respectively. If you had a down year and are not on a retrospective rating plan your premium basis should be less if your sales have gone down (if they have gone up, great for you – you are ahead of the game and should make sure you have considered your increased need for risk control).
Purchasing your personal can become routine if you do not move or purchase a new vehicle but your business is dynamic and, in most cases, sensitive to the general economic environment and your protection plan should be evaluated at least yearly by you and your agent.
Agents do not just sell insurance. Your agent is (or should be) a valued advisor to your business in the evaluation of risk and the implementation of risk control, transfer and retention. Much of your risk is
controlled by purchasing but the management of risk does not end with the renewal of your insurance.
Have you implemented adequate safety measures? Do you have contingencies in place should key suppliers go out of business? Do you have a solid employment practices plan (recessions mean layoffs and terminating employees can expose you to legal actions if you act in a discriminatory manner – even if the action is inadvertent)? These are but a few of the issues a good agent can help you identify and plan for. If your agent is a Chartered Property & Casualty Underwriter (CPCU) or an Associate in Risk Management (ARM) you can have confidence that he or she has the knowledge to assist you in fully managing your risk plan. If your agent is and experienced provider of commercial and consultation you should be in good care as well.
Make sure you review your exposures and risk control needs whenever you experience significant changes in your operations or sales, but in any event at least every year, with your risk management professionals (many firms now employ specialists in this field) and your agent.
Thomas A. Green, ARM, is the President of Angel Assurance Int'l, Inc. He has been an agent and executive for over 19 years.
www.angelassurance.com
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