Take a close look at risk management
If you own commercial property, one of the most important things you can do in hopes of avoiding premium increases in your insurance policies is to take measurable steps to show you make an effort to reduce the risk of claims. Doing things like developing a well-thought-out occupational health and safety program, conducting and documenting regular mechanical equipment inspections, and hiring professionals to do infrastructure inspections to electrical systems and water/sewage system call all help. So too can raising your deductibles.
In an article written for Canadian Underwriter by Greg Meckbach recently, he quoted Canadian member of the board of directors of the Risk and Insurance Management Society, Tina Gardiner, as follows: “One of the biggest things you can do to reduce your premium – or at least keep it in check – is make sure you stand out as best-in-class.”
Experts suggest solid risk management programs be put in place in place and commercial clients “sell” their safety programs to underwriters. “Tell them what you are doing and all the programs you have in place. Tell them how you handle claims,” Gardiner suggested to Meckbach.
Some commercial property clients might mitigate risk by reinforcing the sprinkler system or having adequate management of hazardous materials. Holding safety meetings regularly and ensuring adequate documentation can help too.
While this may seem counter-intuitive, insurance companies would rather have clients who pay lower premiums but take risk management seriously than clients who pay more but have far greater chances of making claims. Companies with poor safety programs or who don’t conduct regular equipment maintenance and inspections tend to have more claims.
If companies are inspecting equipment every 30 days, 60 days, 90 days and have documented proof of that, it shows they are very proactive in their risk management. Clients should keep inspection records for all infrastructure systems for the as well as repairs, and maintain a contact list of professionals who can make repairs in a timely manner.
Another way a client might reduce their premium is to have a written water prevention plan they can provide their insurer. Such plans will identify potential problem areas during incidents of heavy rain or snow and things like roof inspections, and storm water drainage inspections.
Speaking with a forensic engineering specialist, Meckbach was told that “storm drains can become clogged with debris over time and regular maintenance is required to ensure any blockages are identified and removed. This is especially problematic in commercial properties with catch basins in the parking lots and laneways.”
One simple way to reduce water damage risk is to ensure that whoever is in charge of facilities knows: 1) how to shut down the water; 2) where the valves are located; and 3) whom to contact in case of emergency. This also applies to those in charge of facilities after normal working hours.
Water damage claims are hitting the commercial market particularly hard, driving up premiums and even prompting the Insurance Bureau of Canada hiring its own risk manager, whose job will include advising corporations on how to reduce their risk.
Keep in mind, while every dollar spent on risk improvement many not translate into a dollar reduction on premium, there is still value in conducting risk mitigation. Losses can have impacts that insurance cannot cover, such as loss of market share.
Meckbach also wrote that commercial property owners should meet with their brokers once a year to ensure that coverage reflects any changes the business has made. This will not only help to ensure you are still accurately covered, but could save money in certain aspects depending on the changes.
Property underwriters are also looking at how clients deal with their business partners, such as tenants and construction contractors. If a contractor is on site doing renovation work, they should inspect the property after they finish the work. Also, the client’s contractors should have their own insurance policies in place that will cover the client in case of property damage.
Risk management is important work, and when conducted properly, can lead to savings, if not in premiums, then at least in potential losses and business disruption.
Source: Canadian Underwriter