January 2009

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Commercial Insurance: Overlooked Details That Will Save You Money

When a business spends a significant portion of their revenues on commercial insurance, there are two important components to be aware of and know how they affect your premiums:

• Workers Comp Experience Modifiers-  After a business carries workers comp for a period of time, they will develop an experience modifier or Emod.  Simply stated, it is a measure the insurance industry uses to benchmark  the claims history of your business to your peers. With 1.00 being the benchmark, you can develop a credit or a debit to your overall workers comp premiums.  In addition to a direct effect to a line item charge on your policy, it can also open the door or slam the door shut to specialized workers comp programs or potential jobs you may bid on.  Two components that are used in calculating an Emod are claims frequency and claims severity.  What is important to understand is that frequent claims of any size  will have a more adverse affect than one large loss on the Emod.  Certain types of businesses will be more apt to have a frequency of claims than others.  A way for these types of businesses to manage their  Emod  is to work on solutions with their broker  and insurance carrier to limit the number of claims
  
  
• Risk Management & Loss Control Services- In the 12 years I’ve been in the insurance business, I have had the chance to work with some very well managed companies and some very poorly managed companies.  One striking observation I have made of some very well managed companies is they take advantage of the resources and programs made available to them.  Most carriers and brokers offer risk management and loss control services.  Some of the better managed companies are proactive in taking advantage of these programs which in turn not only controls the number of claims a client may have but also provides leverage for the client and their insurance broker to use in negotiating renewal rates. 

The advise and counsel of a good commercial insurance broker is critical.  There are a number of other variables that can affect premiums a business pays for their insurance program. Certainly in todays economy, taking time to understand these variables and many others can contribute to savings on your property & casualty insurance program without having to drop coverage or raise a deductible.  Insurance carriers seek businesses to insure that are well managed and sometimes having the correct risk management controls in place require the assistance of a good commercial insurance broker.  As a business owner or executive, partner with your broker.  Identify issues your company faces and work together to find solutions that will control these issues.  You just might save premium on your renewals as well.

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