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Insurance - What do you carry and does it protect you?

The Insurance Industry has done a phenomial job at inculcating the public that one can not live (or die for that matter) without Insurance.

So, from a business perspective:

  • What types of insurance do you carry?
  • How often do you review your coverage?
  • How often do you bring in a non-aligned, independent consultant to reveiw said coverage?
  • How ofter do you shop your coverage?
  • How often does your Insurance Company lay off audit responsiblites to your staff (instead of sending in their own people)?

Any discussion of insurance requires the us also to discuss the ease in which, should a loss happen, that you have been able to recover.  So...

  • Have you ever made a claim?
  • How easy/hard was it to recover what you felt was your loss?
  • Did the Insurance company then a) raise your rates in excess of what you felt normal) or b) drop your coverage?
  • How helpful was your Broker and did that cause you to find a new Broker?

Answers

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

I renewed 10 policies for one client, resulting in an insurance expense increase of 7.4%. Coverage amounts are reviewed every year; and policies are shopped every year. Claims are only made for catastrophic events. Yes there is a direct link between claims made and premiums increased.

Liz Salisbury
Title: Controller
Company: Warp Corp
(Controller, Warp Corp) |

Having previously worked in a large insurance agency, I make sure all my policies are reviewed each year -- and this year we couldn't avoid an increase averaging about 10%. I was told that Hurricane Sandy was this year's major reason for the increase.

Liz Salisbury
Title: Controller
Company: Warp Corp
(Controller, Warp Corp) |

We are looking into adding cargo insurance coverage, sold by UPS. Since it's a separate policy any claims would not affect our current rates, and it has a smaller deductible ($500). I'm told by UPS that our Business Property policy doesn't cover property in transit by a common or contract carrier - it supposedly only covers property in transit in or on our own vehicles. And that it supposedly does not cover inventory. We do have a standard "Business Personal Property Off Premises" endorsement.

We probably won't add this separate insurance because our products are F.O.B. our warehouse -- they become the property of the customer as soon as they ship. Also, if a carrier mishandles or loses our package, aren't they liable for 100% of the declared value?

Jan Robertson
Title: Managing Partner
Company: SiVal Advisors LLC
(Managing Partner, SiVal Advisors LLC) |

What about environmental insurance for known and more importantly unknown potential liabilities? I understand if there is a claim the amounts can be astronomical and catastrophic for a business. Would love to hear thoughts from CFOs and others involved in managing and planning for enterprise risks on this topic. Thanks!

Brian Benn
Title: Principal
Company: ER&FS
(Principal, ER&FS) |

I would recommend annual risk and insurance reviews by an independent consultant including environmental risk evaluations. We see exposures changing rapidly in areas such as products pollution, indoor air quality, citizen environmental lawsuits, stormwater impacts, and environmental liabilities in transactions, to name a few.

Out of hundreds of environmental risk programs, we find most companies are either uninsured or under-insured relative to their exposures, and over 90% of environmental insurance policies we have reviewed contain major gaps in coverage.

I would also recommend that your insurance consultant advise you on prerequisites to maximize your likelihood of recovery in the event of loss.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

We do annual review/shop. The active hurricane season that hit the east drove our rates up two fold. I about fell off my chair when I saw the GL. I get it though.. FEMA is finally saying they are no longer going to cover people who refuse to either raise their house or move in high risk areas. Can't say I blame them for that either. At least they do have some funding to help people raise their homes. Friends of ours have been on the list over a year though.

Bryan Frey
Title: VP Finance/Corp Controller
Company:
(VP Finance/Corp Controller, ) |

D&O (can't get board directors w/o it), E&O (in case we screw up our website/product descriptions, etc.), EPLI (employment practices for, well, employees), Fiduciary liability (for our 401k), General liability (for the office, auto, etc.) and I'm sure there's more.

We pay a lot, and it's all for peace of mind. We have pulled on a few general liability issues (stolen computers and the like) but I have yet, in over 12 years as a CFO, had to pull on D&O, E&O, EPLI or Fiduciary liability. Unfortunately, various folks pretty much insist on us having those. From board members to equity investors to debt financers, everyone wants you covered in case you are struck by lightning.

We revisit our needs every year. We shop far less than that. I wish the shopping part was more like going on Amazon.com and less like having to call up an old buddy and grab lunch 3 weeks out. The quoting always seems to take a lot longer than I feel it should.

Ernie Humphrey CTP
Title: CEO & COO
Company: Treasury Careers
LinkedIn Profile
(CEO & COO, Treasury Careers) |

Reviewing existing policies and policy needs on an annual basis should be a standard practice. What any company need depends on its addressable markets and its risk tolerance. I had great experience with an insurance broker. Our company was growing quickly via domestic acquisitions and had extensive international operations. Understanding, benchmarking and managing insurance (including claims), requires a certain expertise, and can be a full-time job.

Most companies do not have the expertise in-house to tackle this job effectively. If nothing else many brokers will benchmark policy coverages and pricing to "show you" what they can do. Shopping every year is what a broker can do for you, but it is not necessary. It must be pointed out that having a relationship with a carrier can help tremendously when a claim does arise.Yes, you can look at insurance as a "waste", but not having the right coverage can destroy a company.

TERESA KIM
Title: Accountant
Company: SELF EMPLOYEED
(Accountant, SELF EMPLOYEED) |

As a freight forwarding and warehousing company, we carry General Liability and Business Property, beside of the mandatory Workers Compensation of course.
Every year we compare the costs and review them before renewing.

Regarding audits, they usually send us a form to fill out and later they conduct a phone audit. Most of the premiums are calculated based on salary or gross income. Business Property is based on the coverage amount that WE want.

We had had E&O insurance, but at the time of claims, they were never paid.... So we decided not to renew it.
However, we had learned a great lesson that it is very important that the company must have its written policy, contract forms and term & conditions according to its industry. The contract terms (either employment contract and contract with customers/vendors) are very important at the time of any claim, complaint or legal issues. They can protect you much better than E&O insurance..... That was our big lesson after having paid dozens of thousands dollars per year.... So after that, we have reviewed all our Terms and Conditions.

Topic Expert
Linda Wright
Title: Consultant
Company: Wright Consulting
(Consultant, Wright Consulting) |

Having worked at a P&C company and having responsibility for continuity and risk, we conducted annual insurance reviews, looking at coverage types, attachment points and levels. We had internal analyses of loss triangles to confirm coverage need and then did scenario based analyses before going to market via broker to secure the insurance targeted. We bought property, GL, D&O side cover, E&O, cat, as needed, in most years. We also conducted ex poste buying analyses; I never saw a year when the insurance bought did not generate a positive return.

Anonymous
(VP - FInancial Planning and Analysis) |

We review and bid, with the assistance of a third party, annually. Our carrier is pretty good about handing audit responsbilities. We have made claims and it was not extremely difficult to justify our recovery but it did take a lot of recordkeeping and interaction with the carrier and an independent auditor. Our rates did not change. Our broker was very helpful.

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