Business Insurance Costs
Besides worrying about the
daily responsibility of running their business, commercial insureds may have
other concerns such as rising insurance costs, reduced insurance availability,
the impact on coverage due to experiencing recent losses, etc.
Businesses price their products to cover the costs of
production as well as their sales and marketing expenses. Prices also reflect
some post-sales costs such as repair or replacement under warranty. At one time
many industries used a pricing strategy for their products that failed to
reflect their true costs. They assumed that lower prices would promote
increased sales and the higher sale volume would make up the cost difference.
The strategy wasn’t successful. It hasn’t worked for the auto industry, the
computer industry or the insurance industry.
The problems of the insurance industry became apparent within
the turn of the century and were drastically exasperated by the events of
September 11, 200. That catastrophe substantially affected the insurance
industry. Workers Compensation, a coverage that had never experienced a loss of
that magnitude, was struck by a catastrophic loss. Property losses, business
income losses, liability losses, life insurance claims, every category of
insurance coverage affected by that man-made event.
The insurance industry’s beginning attempts to gradually
correct their faulty pricing practices was replaced by the need for a sudden and
violent change. For much of the current decade, insurance companies have had to
handle many more claims being presented many years after their policies have
expired. In the case of pollution, asbestos and employment practices, the industry
is being asked to handle losses that policies weren’t designed to even cover.
Well, what can a business owner do to minimize their high
insurance cost? Before considering sacrificing the amount of protection a
business carries just to save money, consider alternatives. Some other
solutions would be:
1.
Review your coverage:
a. Take
a close look at your insurance. Could you increase the deductibles to lower
your premium?
b. Are
you carrying physical damage coverage on commercial vehicles that aren’t worth
it?
c. Are
you insuring items you could replace out of pocket? Are there pieces of
equipment that are insured when they could be replaced from operating funds
without submitting a claim?
2.
Review your exposures:
a.
Could you reduce the premium by installing an alarm system or fire protection
system? Would these premium savings offset the cost of the system?
b.
Could you implement safety programs that would reduce the cost or make the
insurance company more interested in providing coverage? For example: driver
safety programs, back to work programs, safety training in proper use of
equipment and job functions.
3.
Identify your insurance goals:
a. Do
you need an insurance company that can provide loss control services?
b. Do
you need an insurance company that can provide claim-handling services for your
Workers Compensation insurance?
c. Do
you need an insurance company that will allow you to make payments by phone or
on-line 24/7?
d. Do
you need an insurance company that has a local agent/representative that can
assist you in your insurance solutions?
Shopping and price are not the only issues in insurance.
What you don’t know can cost you more in the long run than you could ever save
in premiums. Discuss your situation with an insurance professional and make the
choice that works for you.
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Plus, Inc. 2003, 2008
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