When beginning a new year, it’s traditional to think of how we can make fresh beginnings and improvements in all phases of our lives. Usually these thoughts go to how we can improve ourselves personally. As an insurance professional (geek? nerd? egghead?), I have 5 New Years’ Resolutions to consider for your property and casualty business insurance program.
  1) Review your 2012 Sales and Payroll Projections and Make Appropriate Adjustments to your Policies.
   Do you expect your sales to increase or decrease vs 2011? How about payroll? Liability and Workers’ Compensation premiums vary with sales and payroll. If sales and payroll are down significantly from 2011, consider asking your broker to adjust them to the appropriate levels even if you are in the middle of your policy term. This will reduce your insurance cost.
  2) Update Property Values
   It’s easy to forget capital equipment you’ve purchased during the year. Inventory values may have also changed due to a unique purchase opportunity or changes in business flow. Increasing property values to reflect increasing assets is a good new year’s resolution. The cost for property insurance is reasonable. It would be tragic to have a $200,000 claim and only have $100,000 of coverage!
   The same thought process goes for Business Interruption coverage. If sales are up, secure full income protection by updating your limit. Your broker can provide a worksheet that will help you determine the amount of coverage needed.
   Conversely, if inventory, equipment and sales values are down vs 2011, there is an opportunity to adjust these to current levels and save on your insurance premium.
  3) Evaluate and Improve Driver Procedures
   Those of you who have businesses with vehicle fleets (distribution companies, contractors, sales organizations, etc.) have huge potential accident (and claim) exposure. Insurance companies always check driver records when quoting or renewing auto coverage. Despite this fact, it is rare that I review a client driver list that does not have at least one driver with a suspended license, DUI, or multiple traffic violations.
   Checking your driver’s motor vehicle records annually and establishing procedures and penalties for poor driving performance is a key to keeping auto premiums low and keeping your company name off of the evening news! You broker or insurance company should be able to help you establish a safe driver program.
  4) Review your Cyber Liability Exposures
   The great success of “Cyber Monday” is evidence that the internet continues to drive retail purchasing. If your company sells a tangible product, you are either selling over the internet or will be in the future. Protecting your customer’s personal data (credit card information etc.) presents special risks for internet merchandisers. Even if you don’t sell a product, businesses that operate a website face exposures such as copyright/intellectual property infringement. A number of insurance companies now offer “Cyber Liability” policies to cover court costs and awards for infractions in these areas. Reviewing your exposure with the people who are responsible for the creation and maintenance of your website is a great New Year’s Resolution for your risk management.
  5) Consider Non-Insurance Methods to Manage Risk
   Not all risk exposures have to be dealt with by purchasing insurance! Using careful controls and procedures, many financial risks can be either avoided or reduced to the point where the risk can be retained (self-insured) without causing any anxiety.
   Computer data, for instance, can be backed up at off site facilities, rather than being insured. Raw materials located at offsite processors can be made the responsibility of the processor under your contract with them (confirmed through an insurance certificate), saving you the cost of insuring these goods. Even some of the cyber liability exposures described above may be avoided through a carefully written contract with your web site provider.
   For each financial risk your business faces, first consider how the risk can be eliminated or minimized before turning to the purchase of insurance!
   Happy New Year to all of you who read Southern NJ Business People and best wishes for a successful 2012!
 
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 Article provided by Joseph L. Pilato (pictured), CPCU of  Maran Corporate Risk Associates
http://mcrainsurance.com/