10/ 28/ 2004
by Jeffrey Moses
Since Sept. 11, the cost of business insurance has been rising. One of the best ways to combat this is to focus on risk management, which reduces potential losses by putting certain procedures into place within a company's operations, or by adding safety factors to a company's premises. By working with your insurance agent to reduce risks, it's likely that you'll be able to reduce your insurance premiums. Risk management often requires up-front costs, but by lowering premiums and by having a safer business overall, a company can readily recoup its initial expenses.
Insurance premiums are determined primarily by the type of industry, the track record of a business, its location, its number of employees and the kind of system it has in place to reduce risk. One of the most effective ways to reduce insurance costs is through risk management.
Risk management can address the following categories of potential loss:
Damage to premises. If your facility doesn't meet fire safety standards, consider remodeling to reduce fire risks. You can reduce the risk of fire by upgrading your electrical systems and heating/cooling systems. In addition, smoke detectors and sprinkler systems can reduce the risk of loss by fire. Upgrading your plumbing can minimize the potential for water damage You can make your premises more resistant to natural disasters such as windstorms, hail or extensive rain by installing window shutters and by reinforcing roofing materials.
Crime. Even one incident of crime can increase your premium. Many insurers offer discounts if you install sophisticated burglar alarms that connect with police or private agencies, enabling them to respond immediately. Insurance discounts may be received by implementing 24-hour security surveillance (by a security firm, not video only); installing monitored access to premises (such as those used by high-end jewelry stores, in which employees must press a button to allow customer access through a front door) or by installing physical barriers to off-hours entry (gates, window barriers, metal screens, etc.).
Credit history. The credit history of a company and/or the company's owner may affect insurance premiums. Work with your agent to make sure that you are not adversely affected by a negative credit history. Pay bills on time, avoid securing too many lines of credit or having open credit cards, keep credit balances at a healthy level for your business and check your credit record regularly.
Business interruption. Often the installation of a generator can limit business interruptions in cases of storms, flooding or general power outages.
It's impossible to address all the types of risks that a business can attempt to minimize before applying for insurance. Work with your agent to focus on risks specific to your business, your location and your industry. Not all physical installations to your premises will qualify for insurance discounts, so make sure that your agent contacts insurance companies to find out what types and models qualify. Also, always consider the intangible benefits of risk management that cannot be financially measured: greater safety and well being of employees, smoother running operations and fewer business interruptions.
