Entries Tagged 'Commercial Insurance' ↓

Starting a small business is risky enough, but during tough economic times the health and operating practices of others can dramatically impact your bottom line. Recent research by The McKinsey Quarterly found that three-quarters of respondents believed supply chain risk had increased over the past five years. The need to identify weak links is clearly becoming a critical element to attracting new business. 

Traditional Areas of Concern

In the past, supply chain risk primarily focused on the big three areas of cost, quality and delivery. Although these remain important areas of concern, the complexity of doing business in an increasingly diverse environment has led to the realization of new and emerging threats. Today’s risk management experts must address environmental, legislative, economic and geographic factors in order to derive a complete understanding of supply chain risk.

Examples of Emerging Threats

Think your business is insulated from supply chain risk? Following are just a few of the more common examples of emerging threats that could adversely impact your operations when a critical supplier, vendor or contractor is involved.

Environmental: From natural disasters to man-made crises, the disruption of business or distribution patterns can quickly take a toll, especially for those that rely upon technology or just-in-time deliveries.

Economic: Rampant speculation, a volatile stock market and other economic turmoil in one industry can dramatically impact business in other areas. Everything from access to credit lines to buyouts and bailouts may result in unanticipated changes to your own operations.

Legislation: Perhaps one of the most wide-reaching forms of supply chain risk involves legislation. Zoning, taxes, pollution, tariffs and even exchange rates pose substantial risk, not to mention outright violations or other illegal activities.

How to Manage Risk

Managing supply chain risk may seem daunting at first. After all, you don’t have full control over how others conduct business. However, there are practical steps that can reduce risk without breaking the bank.

1. Establish Operational Standards: Make it a priority to review the business practices and insurance status of suppliers, vendors and contractors in advance. Take time to examine rating and credit data, litigation history and D&B rankings. Insist upon proof of insurance for critical areas or staff before doing business. 

2. Have a Contingency Plan in Place: Do a critical evaluation of core business practices and then search for ways to conduct business in the event of a disaster. Common examples may include the ability to work from home for a limited period of time and sourcing temporary/alternative suppliers and other methods of remaining productive during a crisis.

3. Understand Available Insurance Options: Last but not least, ask your insurance agent about specialized forms of insurance that can provide valuable protection against various threats and supply chain risk. Depending upon your specific industry, there are a multitude of policy options available for almost any situation.

Whether your employees telecommute a few days each week or simply need to take work home once in a while, understanding insurance needs is critical to keeping the work-at-home scenario running smoothly. Use these basic business tips to keep your assets and information safe.

Don’t count on homeowners insurance. Standard homeowners insurance sets strict limits on the amount of coverage for business-related expenses; instead, ask about expanding business coverage to include everything from laptops to liability when workers are off-site. Remember, equipment is only one part of the equation; it’s equally important to maintain adequate liability coverage for sensitive data, business use of automobiles and other situations that may impact others.

Ask about discounts. Security measures like encryption, FOB security devices or LoJack computer locks can dramatically reduce the risk of theft or inadvertent data loss when employees work from home. Safe driving records and other commonsense precautions may further reduce the cost of insuring off-site employees.

Provide company sponsored standards. Keep control of security measures and expenses by supplying a standardized protocol and software solutions for dealing with security measures as well as hardware-related issues. Don’t blur the lines by allowing employees to use personal equipment for company business; it’s harder to control the quality of information and may inadvertently lead to security issues down the road. Be prepared to provide full documentation to the insurance company and the tax authorities to justify expenses.

Should you hire a risk manager?

If you’re a small-business owner and not sure how to answer that, the following information might help. It could be one of the most important business decisions you’ll ever make.

Risk Manager Defined

A risk manager helps identify, assess and prioritize the risk and liability associated with conducting business, then plans and prepares appropriate actions to address that risk.

To put it another way, the risk manager addresses the effect of uncertainty on objectives both positive and negative.

What Is Risk Management?

According to the University of Texas (U of T), risk management is the process of making and carrying out decisions that will minimize the adverse effects of accidental losses.

What Is the Risk Management Decision-Making Process?

The U of T says the risk management decision-making process consists of five steps:

• Identifying and analyzing loss exposures
• Examining alternative risk management techniques
• Selecting the appropriate technique
• Implementing the technique
• Monitoring the results

Loss prevention, spreading risk, contractual transfer and insurance are examples of risk management techniques.

Who Needs a Risk Manager?

In theory at least, nearly every business could benefit from the advice of a well-trained risk manager. In reality, though, it’s not always cost-effective.

Big business entities routinely invest in the services of a risk management consultant or even a full-time department to handle such needs, but small-business owners may not be able to afford the same services despite the disproportionate importance of avoiding litigation.

Commonly Encountered Situations

For those that think their small business is immune from risk, think again.

A quick glance at the most common types of risk should provide more than ample proof that risk is unavoidable.

• Damages due to fire, water or other natural disasters, including the loss of use and amount of business lost until business is able to resume.
• Lawsuits or litigation due to accidents, injury or other situations.
• Criminal activities, key person loss, business interruption and even competition from other providers.

Attractive Alternative

One method many small-business owners use to circumvent the cost without exposing their business to undue risk is to use the services of a knowledgeable insurance agent.

Agents have the advantage of constantly dealing with claims and commonly encountered liability situations, and they’re also required to be informed about the legal, social and fiscal environments surrounding their clients and insurance products. 

Employee theft results in an estimated $40 billion in losses annually and is increasing by 15% each year, according to research conducted by the U.S. Chamber of Commerce.

In fact, workplace-related theft is now considered a major risk to large and small business entities alike, with average losses of nearly $500,000.

Following are some tips to help you prevent and protect your small business against employee theft:

1. Establish Written Procedures

Every business should have a written policy regarding the proper way to report suspected theft and a clear, concise plan of action to investigate all claims. Make sure that all employees are given a copy when hired. Take time to review job descriptions and separate high-risk functions. For example, require one person to enter payment activity and another to reconcile accounts. It’s a simple way to discourage dishonesty by implementing a check-and-balance system.

2. Prevention Is the Best Policy

Perform pre-employment screening and background checks and then implement security features and verification checkpoints to discourage dishonest behavior. High-risk industries may find installation of surveillance or other equipment cost-effective compared with loss ratios, while low-tech options like periodic audits may be sufficient for others. Experts agree that prevention really is the best policy, especially when it comes to finding the perfect fit for your company. High-risk employees or those with a track record of prior problems can put your entire financial future at risk. Unfortunately, most small-business owners wait until a loss has already taken place before seeking relief. Instead, carefully screen employees and implement a zero-tolerance policy for those with a history of theft or dishonesty.

3. Purchase Employee Theft Policy

Small-business owners are often surprised to learn that their traditional property insurance doesn’t cover the cost of losses related to employee theft or dishonesty. Whether it’s embezzlement or the literal theft of physical assets, misconduct and dishonest behavior by employees can result in significant loss for small-business owners. It’s possible to purchase an employee theft policy that protects against these unexpected losses either “upon discovery” or on a “per theft basis.” Speak with my office to determine which form meets the needs of your small business.

4. Follow Up

Depending upon the type of policy, company organization, type of claim and other specifics, it is important to comply with all legal mandates when a suspected loss has taken place. For example, it may be necessary to involve law enforcement or other authorities when employee misconduct is evident; however, civil and criminal outcomes may vary dramatically. It’s important for small-business owners to take proper corrective action without impinging upon the rights of the employee or other involved parties. Ask my office what type of proof is required to file a formal claim, how the loss is quantified and what type of evidence is needed to facilitate the case.

Be sure to keep complete records to expedite the process, and notify my office and the authorities as soon as possible. 

The media is filled with articles about legislation that’s designed to reduce the impact of environmental pollution.
 
Unfortunately, the media tends to focus on the impact on large corporations, leaving many small-business owners under the mistaken impression that environmental pollution risk is nothing they need to think about. However, the actual situation is much more complex.
 
Pollution liability is a growing concern for owners of businesses of all sizes. From contractors to industrial manufacturing, your business could be at greater liability risk than you ever imagined.
 
An environmental pollution policy helps protect against a wide range of potential issues, including bodily injury and property damage as well as remediation costs both on a primary site and off-site or non-owned locations. 

Environmental pollution protection can be purchased as a primary policy, a rider on another policy, per project or on a multiyear basis. Other popular options include the ability to protect against completed projects or projects in operation as well as owner-controlled or prime contractor/sub-contractor options.
 
There are many situations – both known and unknown – where a small-business owner may need an environmental pollution policy. One example could be when a company-provided vehicle spills hazardous materials and contaminates the surrounding area. Another could be when a builder inadvertently installs toxin-containing materials in new construction, leading to serious illness or injury among the occupants. Whatever the source, environmental pollution insurance is increasingly viewed as a valuable addition for transportation providers, including truckers, shippers, air and sea cargo vendors, construction industry professionals, manufacturing plants both small and large, disposal vendors, chemical suppliers and service industry providers.
 
The advantages of obtaining an environmental pollution policy go beyond the obvious risk factors. It’s an increasingly common option used by owners of businesses of all sizes to help reduce risk when purchasing a new property or business, obtaining funding or even attracting top talent.
 
For example, in most instances the directors’ and officers’ liability insurance will not cover litigation arising from environmental conditions. The addition of pollution insurance can dramatically reduce the uncertainty surrounding serving on the board of a growing company. Likewise, the purchase of a new business property or concern is an exciting time, but it also requires a leap of faith as the buyer is usually required to assume the environmental concerns – both on-site and off-site – of the acquired company.
 
The addition of environmental pollution protection is a great sales tool and also provides an increased level of protection against financial uncertainty.
 
Finally, financial institutions and private venture capitalists alike are becoming increasingly aware of the risk of legislative changes that could cause a property or company to lose value or restrict use and development in the future.
 
Environmental pollution policies are increasingly used as proactive measures to decrease the risk of a business being negatively impacted by future legislative changes.

Flood insurance might be one of the most important forms of protection the average homeowner ever purchases.

Unfortunately, it’s also one of the most easily overlooked. A standard homeowners policy does not offer flood protection.

Following are some of the reasons flood insurance should be at the top of your insurance portfolio:

1. Revised FEMA Maps

Millions of homeowners across America have been surprised to learn they need to purchase flood insurance for the first time. New homebuyers and even sellers should make a point of obtaining up-to-date plot maps to determine if they fall within the new  flood zones implemented by the Federal Emergency Management Agency. Find out whether you are affected. Otherwise, the mortgage company is likely to purchase a policy on your behalf.

2. High Risk

Even if your property doesn’t fall within a known flood zone, it’s often a good idea to purchase a flood insurance policy. Flooding is one of the most frequent high-dollar claims submitted. In fact, flooding is more likely to take place than is fire or other named hazards.

3. Big Damage Claims

Many homeowners make the mistake of thinking they are covered for flood-related damages when, in fact, they are not. Flooding is caused by more than merely rising water. Other common causes of flood-related damage are broken pipes, storm surge, rain and, of course, flash flooding. Unfortunately, the time to obtain flood insurance is before it’s needed. Don’t wait until storm season to obtain quotes, as it’s often too late. Most flood policies go into effect 30 days after purchase.

To determine if you’re fully covered in the event of flood-related damage, simply call my office.

Remember, flood-related damage is the single most common cause of additional property destruction after a hurricane, storm surge or even earthquake.

Nearly every item in your home is subject to water damage, including drywall, electrical systems, furniture, and other belongings and household items. Don’t wait until the weather channel says a named storm is one state away and you’re now on the watch list.

Beginning April 22, 2010, the EPA rule 40 CFR Part 745 will go into effect requiring the use of Lead Safe Practices and other actions aimed at preventing lead poisoning.  Under the rule, contractors performing renovation, repair and painting operations that could disturb lead-based paint in homes, child care facilities, and schools built before 1978 must be trained and certified to follow specific work practices to prevent lead contamination. Contractors will have a significant pollution exposure. To meet the needs of this potential liability, some insurance carriers are offering a Lead Safe Contractors Pollution Liability program.

This program is designed specifically to address pollution-related exposures for artisan contractors that are performing renovation, repair and painting operations that could disturb lead based paint in pre-1978 homes and buildings. Call my office to get the details of this program; find out how it pertains to you, or to get a quote.

Small-business owners frequently encounter increased liability concerns during the course of day-to-day business.

So do start-ups, not-for-profits and others engaged in business.

In most cases, general liability coverage provides a level of protection suitable for most unanticipated situations.

However, it might fall short in some instances.

General liability coverage often specifically excludes criminal activity or other omissions of directors or officers.

Liability coverage for directors and officers, commonly referred to as D & O coverage, bridges the gap by protecting both directors and officers as well as the organization itself from damages.

The liability coverage also protects officers and directors from the defense fees associated with criminal or regulatory allegations.

D & O insurance is especially important when attempting to attract quality directors and officers into companies that deal with cutting-edge areas of research and development.

It’s also important for attracting them to:

• Industries undergoing rapid legislative changes
• Companies that routinely do business in several states or a global setting
• Companies with employees where relationships could potentially be considered a conflict of interest

D & O coverage provides some peace of mind for the individual directors or officers.

It also provides a valuable level of additional protection to insulate individuals from personal loss in the event of a claim.

Contrary to popular opinion, D & O insurance does not encourage malfeasance since it excludes deliberate acts of fraud or intentional illegal activity.

Instead, it provides protection required to operate in complex industries without fear of reprisal should an accidental omission, mistake or other oversight take place.

With more than 95% of Fortune 500 companies citing D & O insurance as a core component of corporate insurance, it is no longer considered an “add-on” policy.

In fact, given the number of corporate scandals and an increasingly litigious environment, D & O insurance is increasingly considered to be imperative for companies of any size that plan to:

• Seek venture capital funding
• Initial public offering
• Other investment opportunities that involve shareholders

Research indicates that more than 30% of all companies can expect at least one claim against directors or officers.

Average defense costs of a claim exceed $1 million.

The process of trying to understand workers’ compensation hinders the ability of some small-business owners to obtain the best rates. Here are some tips that can help you keep insurance premiums as low as possible.

1. Work closely with your agent to properly identify and classify codes: Improper classification codes can be very costly. They’re a common problem for some small-business owners.

2. Review and update your policy on a regular basis: Take time each year to carefully review your policy and make any modifications or updates well in advance. Ask about any rate increases you don’t understand and be sure that information is up-to-date and accurately represented.

3. Keep up with premiums: Never allow your policy to be canceled, as it leaves a coverage gap that may place your company at increased risk. Expired insurance often results in higher reinstatement rates.

4. Implement a safety policy: One of the most significant contributions to workers’ compensation premiums will be your claims history. Implement a safety policy and then put it into action. Provide adequate training to new employees and perform annual safety evaluations to ensure that everyone understands the proper process and protocol for your company. Most important of all, make sure that all Occupational Safety and Health Administration and other regulatory requirements are completely followed, and carefully document all accidents, injuries or illnesses as soon as possible.

5. Avoid uninsured subcontractors: Never assume that the business or individual you are working with is properly insured. Verify it first and keep a copy of the company’s insurance policy on file.

In 2007, the State of Delaware signed into law Senate Bill 1 reforming Delaware’s Workers’ Compensation System for the construction industry. I have been sure to contact all clients who are insured through my office and offered explanation to those who requested information. With the new year upon us, I felt it time to remind those affected that your Workers Compensation policy needs to be reviewed. First off, the new law is mandatory. I have reviewed the details with the Department of Labor, the Delaware Insurance Department, the Delaware Compensation Rating Bureau, and Senator Anthony DeLuca’s (sponsored the bill) office.

To simplify the issue, I’d like to provide the following summary:

1)All contractors, subcontractors, partners, sole proprietors, and independent contractors in the construction industry are required to carry Workers Compensation Insurance.

2)Four executive officers of a corporate entity or four members of a limited liability corporation may elect to be exempt from coverage provided the election is in writing.

3)General Contractors (which include any entity hiring a subcontractor) are subject to fines up to $250/day levied by the Delaware Department of Labor.

4)When hiring a subcontractor, the general contractor has four options:

a)Secure an exclusion form from the existing corporation or limited liabilty corporation and keep the form in record for 3 years. (Up to four officers or  partners may be excluded)

b)Obtain a Certificate of Insurance from the subcontractor showing proof of Workers Compenstion Insurance. Be certain to update this certificate annually.

c)Add the subcontractor to your existing Workers Compensation policy. This option will increase your premium.

d)Do not hire the subcontractor.

Sole Proprietors can form a Limited Liability Corporation and exclude themselves.

The full text of this bill can be found at www.legis.state.de.us. Any further clarification can be obtained by calling my office or the Delaware Department of Labor at 302-761-8200.