“15 minutes could save you 15% or more.” We’re all familiar with this famous Geico promise. Their campaign hits on a reality most everyone feels. It’s about time and money!
Nobody wants to waste time! Everybody wants to save money!
One of the biggest arguments against having insurance quoted is the amount of time it takes to get everything together. It’s no small undertaking!
And for many municipalities, getting all of that info together doesn’t end up producing the savings that they hoped for.
As an insurance agent, I have spoken with many boroughs, townships, counties, and authorities who are jaded about the insurance industry, believing that there is no answer to their insurance issues.
I’ve also met with many municipalities that have very low expectations of their insurance agent, not realizing that their agent should have numerous tools to help them control their insurance costs.
Before wasting time meeting with a new insurance agent, this 10-minute article surveys the key areas you must address to have an effective, cost-reducing insurance program.
The best insurance programs have a long-term plan that addresses these 5 key areas to lower costs and keep them low!
- Risk tolerance – How much risk is your municipality willing to take?
- Claims management – Do you know how your claims are impacting your insurance premiums?
- Coverages and exposures – Are there gaps in your insurance coverage or risk management program?
- Risk transfer – Is your municipality unknowingly “lending” their insurance coverage to others?
- Quoting your insurance – Is your agent fully prepared when applying for insurance on your behalf?
1. Is your insurance policy customized to the amount of risk your borough or municipality wants to own?
One enormous misconception most people have about insurance is that it is a one-size-fits-all product. Your municipality’s insurance should reflect your municipality.
Let me explain this in more detail.
When considering risk, your municipality needs to determine how much they are able and willing to pay out of their resources for a claim. For instance, if one of your borough’s vehicles has a $2,000 fender bender, would you pay your $500 deductible and turn the claim in or opt to pay for it entirely out of your funds?
To avoid higher premiums, we often choose to pay for a claim rather than turn it into the insurance company.
At a minimum, your insurance agent should advise you on how to set your deductibles based on the amount of “risk” you are willing to pay for out of your funds. You may prefer to choose a higher deductible, lower premium policy. You purchase this policy knowing that you will have a larger claim to pay for once in a while but generally saving money most years due to the lower premium.
Or you may want to pay for a lower-deductible, higher-premium policy and know that you will have no surprise claims that you will need to pay for out of your municipality’s budget.
Your insurance agent should help you assess the amount of risk your municipality is willing to own and how much risk they want the insurance company to own.
This is just one of many ways we see a lack of alignment with risk tolerance, but we will save that for another day.
2. Are claims driving up your insurance costs?
Did you know that one of the biggest factors that cause insurance premiums to rise is the amount of money insurance companies have had to pay on claims that your municipality has filed in the past?
Insurance companies divide the total dollars spent on your claims by the amount your municipality spent on premiums. They call this your “loss ratio.”
If your municipality has a low “loss ratio,” you should expect better insurance rates than your peers. If you have a high “loss ratio,” you can expect premium increases or possibly even a cancellation notice.
What all of this means is that addressing your insurance claims is incredibly important to creating an effective insurance program – one that will reduce claims and keep premiums low.
Your insurance agent should help you formulate a plan addressing your claims before they actually quote your insurance. Insurance companies want to know what steps you are taking to lessen and eliminate claims so you don’t continue to file claims that they will have to pay.
You should also expect your agent to help you analyze your claims throughout your fiscal year and help you with solutions to lessen the likelihood of future claims!
3. Are their gaps in your insurance and risk management program that you don’t know about?
Do you have a complete grasp of what your municipality’s insurance policy will cover and will not cover? For instance, do you know what kind of coverage you will have if a storm drain clogs near your municipal building and water flows into the building? Will the damage to furniture, equipment, drywall, etc., all be covered?
Or, what if your computer gets a virus and your system is locked up? What if your data is being held for a ransom? Do you have coverages in place to protect you in this instance? Or would you have to pay for this out of your municipality’s funds?
To help our clients determine the likelihood of an uncovered claim, we take them through a 125 point coverage checklist to review ALL OF THEIR COVERAGES. There is a reason insurance policies are often hundreds of pages long. The devil is definitely in the details!
Some of the biggest issues we find are not in the limits or what IS COVERED, but rather what IS NOT COVERED. The insurance term for this is exclusions. This is the fine print that no one reads. Using this tool we have helped prospective clients identify and eliminate coverage gaps like the scenarios above.
Reducing your risk
Diving deep into an insurance program should include assessing proper limits for buildings and property, HR protocols, claims management procedures, and safety practices. Your agent needs to look closely at these elements to determine if you are exposed to claims.
Beyond determining the amount of coverage you need for your buildings and property, your agent should be asking about your hiring procedures to assess if you might be vulnerable to a discrimination claim. They should be asking about your drug testing policies to make sure you are protecting your public entity from preventable claims related to drug use on the job.
Your agent should have many tools in place to minimize the likelihood of your municipality needing to file a claim.
4. Are you lending your insurance to subcontractors?
One major problem for municipalities is one that they don’t usually even know is a problem! They, in essence, are lending their insurance coverage to third-parties!
See if this sounds familiar to you. A public entity needs a few updates on their municipal building. There is some older electrical wiring that needs to be addressed. To fix their problem, the municipality hires Johnny Electrician. Johnny has a fine reputation, bids the job at the right price, and begins the work.
After working for two weeks, Johnny falls from a ladder on his way down from the building’s attic. He injures his back and will need to be off of work for several weeks.
Now, remember, Johnny isn’t employed by your municipality; he’s only a subcontractor. Can he file a work comp claim on your policy?
In Pennsylvania and most other states, case law states that Johnny can file a claim on your insurance. Essentially, Johnny can “borrow” your workers’ compensation insurance.
And when he does so, be assured that your insurance premiums will go up!
That’s where your insurance agent comes in!
How does my agent have anything to do with our municipality hiring subcontractors?
Your insurance agent should have tools available to you to ensure that you are taking every precaution to prevent a subcontractor from using your insurance.
Your agent should advise you before your public entity offers any contract to a subcontractor. In that contract, you can set parameters to protect your borough or township from having to pay claims that belong to your subcontractors.
5. Is your agent prepared before quoting your insurance?
While most insurance agents start with this step, quoting your insurance is actually the least effective means of reducing your premiums.
This is counterintuitive in our culture where shopping around for the best deal is the norm. In insurance, if you have not taken care of the above factors, shopping around is a game of chance. You simply end up hoping for the best renewal costs!
Before your agent quotes your insurance, they should help you fully assess your insurance and risk management program.
It is only after this assessment that your agent should begin applying for insurance on your behalf.
When your agent is finally ready to enter the quoting process, they will be able to use the information gathered to help them as they represent you to various insurance companies.
Your agent should also communicate with the insurance companies regarding their perception of your municipality. This will help your agent to identify areas that you most need to pay attention to if you want to begin reducing your costs.
They will also be able to answer the insurance company’s questions about how your municipality IS addressing issues that have led to previous claims. Insurance companies look much more favorably on municipalities that have a plan in place to address and mitigate their risk.
Can you spare 15 minutes to start your municipality’s journey to long-term savings?
At Baily Insurance, we approach insurance with a different philosophy than most insurance agents. Rather than start with quoting, we work to assess how we can best help each prospective client.
Just as it would be reckless for a doctor to begin treatment without first assessing a patient, it is equally negligent to quote a municipality without first conducting a thorough evaluation.
We know that consistently rising premiums point to deeper problems in an insurance program. And it is our goal to help our prospects find and address those problems.
At Baily, we recognize two things:
- Some townships and boroughs already have an incredible insurance program in place.
- Baily Insurance Agency is not the best fit for every municipality.
With that in mind, we set up an initial 15-20 minute meeting with prospective clients to determine if we are potentially a good fit for their municipality. In those brief minutes, we walk through the various areas of a solid insurance program to identify if there are ways that we might be able to help your municipality.
Our priority is to take an honest look at your current insurance program. We act as a second pair of eyes to make sure that you are getting the care and coverage that you are paying for.
What will you gain from this meeting?
When you meet with us, you can expect:
- An opportunity to express any concerns you have about your current insurance program
- A thorough explanation of our process and philosophy
- Examples of other municipalities similar to yours that have benefitted from our help
Who should be present at this meeting?
Ideally, anyone who will be involved in making your insurance program decisions should be present at this short meeting and especially any board members who could ultimately impact these insurance decisions.
If you’re ready to survey your municipality’s current insurance program, we’d love to schedule an introductory meeting with you.