Like drivers ignoring road signs on an unfamiliar stretch of highway that happens to be a speed trap, businesses that don’t look at their insurance until it’s time for renewal can pay a hefty price.
The rates for commercial insurance rose throughout 2021, with a 7% increase in the fourth quarter, according to Marsh-Berry. The fast-paced process of finding and choosing coverage can lead to higher premiums, ongoing risk management issues, and benefits that don’t align with the business’s needs — an insurance trap.
“The insurance trap is a trap not only for the buyer, but also for agencies and brokerage firms,” said Todd Burns, director of business development with BKCW, an Austin-based risk management company. “We have to get everybody off the hamster wheel where you’re getting your quotes about 30 minutes before you have to have insurance. You have no time to make decisions. There’s no advocacy, and there’s really no process.”
To determine whether your business is stuck in the insurance trap, Burns recommends watching out for these three signs.
1. You don’t hear from your insurance agent until about 90 days before your policies need to be renewed.
The problem with obtaining coverage on that 90-day timeline, Burns said, is that both the business and agent will have to focus primarily on price. “That’s quote-driven and transactional, both of which don’t really add value to the client,” he said. “It’s a race to the bottom.”
Instead, Burns recommends businesses engage in ongoing conversations with their insurance agents and consultants throughout the year. This allows time to identify risks within the organization that are contributing to higher costs, create strategies to mitigate those risks, identify quick wins and ways to improve the business’s risk profile, and explore policies that best fit the business needs.
2. Your insurance agent doesn’t come to you with a clearly outlined strategy.
If you meet with your insurance agent and receive a rate increase without any recommendations for how you can adjust, you may be caught in the insurance trap. At BKCW, the team uses the PIVOT risk management process, a five-step system for creating a long-term plan for managing property and casualty risk and containing costs related to employee health care and benefits. PIVOT is a process-based approach to risk management – the insurance being procured as part of the process is just another tool for transferring risk and protecting your balance sheet.
The PIVOT process begins with identifying risks with a risk management audit, then designing strategies to mitigate those risks and executing those strategies. Those first three steps are critical and the focal point of Burns’ work with new clients. It’s not until step four that BKCW procures coverage.
A risk management process often leads to a better environment for employees and lower insurance premiums for the business, particularly when it comes to workers’ compensation coverage.
For example, BKCW worked with one business that operated a fleet of 200 Ford F-250 trucks and was experiencing a high number of ankle injuries. By interviewing employees as part of the PIVOT process, they learned that the injuries were occurring when people got out of a truck and stepped onto a curb a little off balance. The solution: install an extra step onto the trucks to eliminate the long drop that was causing the problem. The result was a win, not just for the business, but also for the workforce.
“When you start talking about a culture of safety, it directly impacts workers’ comp premiums,” Burns said. “It also gives businesses an advantage in the marketplace. A culture of safety has a direct correlation to a culture of health and wellness.”
3. Your relationship with your insurance agent feels transactional instead of personal.
Insurance agents can provide a wealth of valuable information for businesses. In addition to risk assessments, they can support a leadership team with relevant data about the insurance market as well as how a specific business compares to its peers on such matters as loss control and claims. Additionally, they can help forecast next year’s rates for budgeting purposes and advocate on your behalf for overcharged or misclassified claims. A good agent can also provide the human resources team with safety materials and talking points for employee communications.
The key, Burns said, is to have regular communication. As the final step in the PIVOT process, the BKCW team monitors claims and provides ongoing risk management strategy support. This includes visiting its clients’ sites every quarter, walking through the work areas, looking for ways to reduce injuries and having conversations about other business risks.
“It could be a five-person oil field services business that puts out oil field fires, or it could be a large technology company that primarily has cybersecurity risks,” he said. “Those are completely different discussions, but, at the end of the day, every company needs some sort of risk management.”
BKCW takes clients out of the insurance trap by implementing the PIVOT risk management process. Learn more.
BKCW is a full-service independent insurance agency providing business insurance, employee benefits, and personal insurance using a proprietary approach to risk management. BKCW has been rooted in Central Texas for over 70 years, with clients branching out across dozens of states.