By Jared Perkoski
Do you know and understand your business and its operations? What about your insurance company - do they know and understand your business? That depends on you and your insurance agent.
A risk assessment is a powerful tool to help you educate the insurance marketplace. It is a series of questions that pertain to various risk areas in your business.
Businesses typically only undergo a risk assessment when they start the business or when they change insurance carriers. However, some businesses never go through a risk assessment, which can lead to exposure to unidentified risks and potential harm to the business.
The risk assessment helps the insurance agent and carrier gain a better understanding of your operations and also enables them to make suggestions or requirements to help the business operate in a safer manner. A risk assessment should be performed at least once every three years, or more if operations have changed. It can take from one to four hours depending on how in depth you and your agent want to get.
Once you and your agent have gone through the assessment, what’s next? Devise a plan to address those risks and execute that plan throughout the year. The plan and the execution will have an impact on your premium. This plan can be shared with the insurance marketplace to show that you are being proactive in addressing risks in your organization. Following are examples of the areas you should be reviewing with your insurance agent, as well as examples of how they can impact your snow and ice management company.
Insurance certificate management
If you subcontract any of your work, you know that you need to get certificates of insurance. But, are you ensuring that the businesses performing snow removal operations do not have exclusions on their policies? Are you sure that the limits of their insurance match yours?
Some insurance policies will not provide coverage if the subcontractor’s limits are less than yours. It is important to understand that the certificate only guarantees that the company has insurance at the time it gets processed. The policy could cancel at any time for many reasons, leaving the contractor responsible for any claims.
One way to help prevent this is to require that all of your subs list you as an additional insured so that you are notified of any cancellations. You should also request all endorsements and exclusions to ensure that certain operations, such as performing work at condominiums or gas stations, will be covered in the event of a loss.
If you have a large successful business you may want to consider alternative risk financing. If your snow and ice management company is paying around $1 million in insurance premiums or more, it may be time to evaluate alternative methods to finance your risk. One method to look at is a high deductible policy. This method will allow you to control claims up to $25,000, $50,000 or more, and only insure against the larger claims.
Another method is a captive insurance product, which is a self-insurance product where the insured or a group of insureds basically create their own insurance company. Before any decisions can be made on alternative risk financing it is important to complete an actuarial analysis to see if it would be beneficial.
Typically no two contracts are the same. The amount of liability you assume can vary greatly from one contract to the next, which is why it is so important to review new contracts you are entering into with your insurance agent.
The two areas where your agent can help are the indemnification section and the scope of work section. Understanding these sections before you sign is vital. It is important that you are not taking on too much of the liability and that the scope of work is clearly defined.
You and your agent should also be reviewing the contracts you have written for your clients as well as your subcontractor agreement. Disclaimer: Insurance agents are not lawyers. All contracts should ultimately be reviewed by a trusted lawyer with knowledge of your operations and contractual obligations associated with snow and ice management.
How do you recruit new employees? Do you have mandatory pre-employment physicals? Are you hiring an employee or an independent contractor? Do you know the difference? Answers to these questions can have a significant impact on your workers’ compensation premium.
Finding good employees is always hard, especially seasonal ones. Background checks and physicals are important to ensure you are not hiring your next workers’ compensation claim. It is also important to know and understand your state’s laws on the definition of an “independent contractor.” Failure to classify your workers properly can lead to a large, unexpected increase to payroll at the time of an audit.
What are your driver hiring guidelines? Are you checking the driving records of your employees yearly to ensure they are safe drivers? Do you have a documented driver safety policy? Addressing these factors will decrease the likelihood of one of your drivers getting into an accident while on the job. It will also impact your premium.
A thorough risk assessment will include many more areas of potential risk. The areas mentioned in this article are those that most impact the snow and ice management industry. If you regularly assess these areas and take time with your insurance agent to set up a plan to address identified risks, you will be rewarded. You have created a safer and more productive work environment, and you will also become more attractive to the insurance marketplace and will ultimately see an impact on your premium.
- Conduct a risk assessment with your insurance agent to ensure you have proper coverage for your snow and ice management operations.
- Being proactive can make your company more attractive in the insurance market.
- Make sure your agent is reviewing your contracts to ensure you aren’t assuming too much risk.
Jared Perkoski, PWCA, CRIS, ASCA-C, is a risk advisor with FB Insure in Massachusetts. Contact him at email@example.com or 508-695-1441.