Reviewing businesses Property and Casuality Insurance Needs

By: Mary Thompson, Capstone Brokerage President, November 21, 2014

Effective risk management always starts with insurance. Companies need to regularly review their existing insurance coverage. There are two key components to auditing your coverage; reviewing past claims and determining potential future exposures.

When looking at past claims, a company is able to identify potential need for increased insurance coverage. Identifying the areas that a company is most vulnerable will aid in understanding if more coverage is needed. For example, a company that has had several injuries on the job that resulted in claims may need to set higher limits on their worker’s compensation coverage. This may also mean that a company should evaluate their safety standards and procedures to determine if changes need to be made to ensure better safety for employees.

If a company has had property insurance claims, it may be smart to take a look at exposures to determine if more coverage is needed. In many urban areas, what was once a “safe area” can change over night making the risk of crime higher from one year to the next. Higher crime means businesses need more property protection perhaps with increased policy limits.

Cyber Insurance is a major risk for businesses and is often not evaluated on a regular basis, if at all. Many businesses now operate on the internet which creates an exposure for cyber content liability. Doing business now in today’s digital age leaves many businesses vulnerable for cyber attacks. It goes beyond just protecting the business itself when a cyber attack results in a data breech The cyber exposure a company has may surprise most businesses. This particular coverage should be evaluated for potential risks. If a business is operating a website, they have content liability risk and auditing this coverage is dire.

Once all past claims and exposures have been evaluated, businesses need to look at potential future risks. Is the company expanding into a broader range of services, opening a second location, or planning to have a large increase in employees? All of these situations warrant a need for insurance changes. It is important to know the direction of the business when evaluating risks.

There is a difference between the type of internal audit mentioned above and a forced audit. Sometimes an insurance company will force an audit on a business. This is especially common with general liability policies, perhaps because, general liability is based on revenue. Underestimating payroll or revenue carries risk for a business during a forced audit. Having proper knowledge of exposures prior to placing insurance coverage is one of the most important factors when evaluating a companies risk.

Periodically, it is smart to have a comprehensive insurance audit of all exposures guided by a knowledgeable and experience insurance agent. Many employers do not even know what potential risks exist in their own workplace. There are many tools to assist in determining risk; the most important is a knowledge insurance broker. A company should request reviews on legal documents such as contracts, leases and employee handbooks and complete a risk management analysis with their insurance broker annually.