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5 Steps to Creating an Effective Commercial Insurance Program

By October 14, 2020 Business Insurance
Commercial Insurance Program

Traditionally in the insurance process, one of two things happens –  you are frustrated with your annual premium increases or your insurance broker’s lack of responsiveness or you are happy enough with your current insurance broker and the premium rates you’ve been getting.  

In the first instance, it’s easy to see why you would consider hiring a new insurance broker. You’re simply not happy with the product and service you’ve been getting. 

On the other hand, if you’re happy enough with your current broker, you might be asking, “Why should I even think about hiring a new broker?” In general, from your vantage point, things are looking pretty good. 

If that’s you, you’re in the same boat as 90% of all businesses that opt to stay with their current agent. 

But what if staying with your current agent is not in the best interest of your business. How would you know? 

Most businesses have no way to effectively evaluate their insurance broker. Other than expecting their agent to provide a competitive premium quote, most businesses don’t even know the other tools that their insurance broker should be bringing to the table.

At Baily Insurance, we approach the insurance industry in a fresh way. 

I know, I know. Everyone claims that their company is better than the competition and has something unique and impressive to offer prospective clients. And most companies truly believe that what they have to offer is superior.

So, I don’t just want to make claims about our agency’s effectiveness and fresh approach, I want to demonstrate it! You can see for yourself how working with Baily Insurance Agency is different from the experience you’ve had with insurance so far.

5 Steps to a Robust Insurance Program 

Most insurance brokers are a one-trick pony! They gather your information, fill out applications, and hope for competitive pricing on your premium rates. Some even have “Risk Management Resources” or “Claims Management Tools.”

Typically, these brokers will apply to multiple companies on your behalf and then present you with your best options.  

While we are an independent insurance agency that can provide you with quotes from multiple companies, that is where the comparison stops. 

We partner with you to provide a robust insurance program – this means far more than just pricing out your policy to several companies and hoping for a good quote. This means:

  • Determining your risk tolerance
  • Evaluating your loss analytics
  • Reviewing your coverage and exposures
  • Assessing your non-insurance risk transfer
  • Surveying the insurance market

Whoa! That’s a mouthful! What in the world does that even mean? 

Let’s go point-by-point to get a better understanding of just how we help you create a robust insurance program that addresses your current insurance premium rates and long-term insurance outcomes.

1. Determining your risk tolerance

One of the most important steps to creating a customized insurance plan for your business is determining how much risk you want to own and how much you want your insurance policy to own. Far too often insurance companies provide you a policy based on THEIR risk tolerance rather than YOUR risk tolerance.

For instance, would you prefer to pay a higher premium rate so you will not have to pay any deductible before your insurance kicks in? Or would you rather pay less upfront and only shell out extra money if you have claims?

For example, if you have a $1,000 deductible on your policy and a company vehicle receives $1,500 in damage, would you prefer to turn that in to the insurance company or just pay the $1,500 out-of-pocket? 

Another example, if you could save $20,000 each year in premium for each of the next five years with a higher deductible policy knowing that one of those years you will have to pay a $25,000 claim out-of-pocket, what would you do? Would you choose that kind of policy?

These are the types of questions that help to determine how much risk you are willing to take versus how much you want to rely on your insurance policy. 

2. Evaluating your loss analytics

This is a fancy way of saying that we will help you look over your company’s past claims or losses. We look at how many claims you’ve submitted, the types of claims, any repeat claimants, how you handled those claims, what steps you’ve taken to prevent the same types of claims, and several other factors to determine how to address any trends or claim mismanagement to ensure that you will be best positioned when we approach the marketplace on your behalf.

Most insurance brokers help their clients with some of their claims management. But many only scratch the surface of helping their clients with this part of their insurance program.

At Baily Insurance, we help our clients understand what the insurance company is looking at when they assess your losses. 

When writing your insurance policy, insurance companies look at your loss ratio. Your loss ratio is the total number of dollars spent on claims that your company files divided by the total amount of premium you spent.

The lower your loss ratio is, the more your insurance broker can negotiate on your behalf. A good insurance agent will help you address the underlying causes of your claims. A good broker will also explain to the insurance company the steps your business has taken to address any problems.

Insurance companies want to know why your business filed claims and what is being done so that your business doesn’t continue to file claims. 

3. Reviewing your coverages and exposure

This is one of the most significant ways that we help our prospective clients. Many times, our prospective clients have a very basic understanding of what their policy covers. What they are missing is a clear understanding of what their policy won’t cover. 

It’s in the fine print of your policy where you find how your insurance will or won’t respond to a claim. 

As a result, we have developed a 125 point coverage checklist that we use to review our clients’ and prospective clients’ policies to determine the likelihood of an uncovered claim.  Some of the coverage gaps we find can be eliminated for free!  (If you think you are due for a deep dive into your insurance policy, let us know.)

We also look closely at our clients’ and potential clients’ hiring and safety practices to find gaps that could leave them exposed to an avoidable claim. We review how they handle their claims management program. Handling claims promptly and effectively keeps claims from spiraling out of control and negatively impacting their insurance rates. 

4. Assessing your non-insurance risk transfer

Do you generally lend your insurance coverage to other businesses?  The reality is that most businesses actually do lend their insurance without even realizing it. 

Have you ever had your insurance broker review your contracts with other General Contractors or Subcontractors?  Tenants or building owners or rental companies? Far too often, we see businesses taking on extraordinary amounts of risk and essentially lending their insurance to others.

Did you know that if you hire people or a firm without workers’ compensation, according to case law in most states they will be able to file insurance claims under your workers’ compensation? 

Placing risk where it belongs is a tool that many agents don’t offer to their clients. At Baily Insurance, we assist our clients when they sign contracts or hire outside contractors.

While we are not attorneys, we work with some of the best. Moreover, many attorneys cannot keep up with all the constant changes within insurance policies, so we are uniquely positioned to help you, or your attorney, ensure that you avoid an ever-evolving list of landmines that could cripple your business in this area of risk management.  

And best of all, it won’t cost you a dime, because we provide this service for free for our clients!.

5. Surveying the insurance market

Before we begin the application process for any of our prospective clients, we do a lot of digging with the insurance companies who have likely seen a submission from an agent in previous years. It is EXTREMELY important to understand how those companies perceive your business based on previous submissions from agents in the past.

The insurance companies that we partner with understand our process and are generally very willing to share information about how they feel about your business as well as prior applications. All too often, we find that only partial information was submitted just to “block a market” and, as a result, you did not get their best pricing. 

The information we gather from our insurance partners helps us know how they perceive your business. This allows us to submit your application in the most favorable way tailored to what the insurance company wants to see happen in your business – what kinds of policies and safety programs you should have in place to limit the number of claims best position your business to receive their lowest legal pricing.

A typical commercial insurance application can typically require between 40-60 submitted pages of applications (sometimes even more). More often than not, it’s the intangibles outside of the information on those pages that most influence your insurance premium rates.

One unusual caveat in the insurance world is that insurance companies will only allow one insurance agent to submit a proposal for your business to them. The insurance company will only consider the first application submitted on your behalf. So it is extremely important to have a trustworthy and reputable agent represent you to the insurance company.

Broker of Record letter

If you are working with a new insurance agent, your new agent will most likely ask you for a Broker of Record letter. This letter will ensure that the insurance company will only acknowledge the application submitted by your new agent. 

If you don’t have a Broker of Record letter, your former agent may try to submit an application to prevent the new agent from being able to get quotes.

Tired of the traditional insurance quoting model? Ready for something new?

Having a new insurance agent quote your insurance is a lengthy and in-depth process. Before we ask you to engage with us, we ask for a few hours of your time to determine if we are a good fit for your company. We don’t want to waste your time if we are not able to help you.

To gauge if teaming up with Baily Insurance makes sense, we invite prospective clients to explore the possibility through our “Blueprint Process.” This process includes a series of three meetings that will help us evaluate your current insurance program and also learn about what is most important to you.

If you’re interested in learning more about the resources we can add to your insurance program, we’d love to start our “Blueprint Process” with you.