Risk Management and Insurance

As an insurance and risk management professional for the last forty years, I have had countless conversations with clients and prospects about their risk and insurance programs. It didn’t take me long to realize that, for most people, the topic is not one of their favorite things. Most people would rather talk about growing their team, launching a new product, or celebrating a big win. And, for those that do enjoy talking about it, well, let’s just say we’re an interesting bunch.

We all know the most basic reasons to have insurance. Sometimes it’s a legal box we have to check. For instance, certain licenses require professional liability coverage, and if you have employees with a savings plan, the Department of Labor mandates crime insurance. Lenders also won’t hesitate to require adequate insurance for any physical assets, like real estate, equipment, or vehicles, they hold as collateral. And my clients? They often have their own insurance requirements spelled out in contracts — things like general liability, workers’ compensation, pollution, and professional liability.

But for me, the crucial reason for protecting your company’s assets is the difference between sustaining a minor setback and failing after a catastrophic event. Your insurance is what helps ensure that your business can keep generating revenue, no matter what curveball gets thrown your way.

But insurance is only part of the solution. Every business needs a well-developed risk management program. The primary purpose of which is to identify potential risk and find non-insurance means of minimizing or eliminating risk. Each business needs to understand the risks that are common for their industry and those that are unique to them. This should be obvious to most of us but sometimes the tree can get lost in the forest. Here is a quick example:

ABC Company buys a worker’s compensation policy believing it will take care of an injured employee. One day, out in the shop, a maintenance employee is severely injured while repairing a piece of equipment. He is taken to the hospital where emergency surgery is performed. Ultimately, after a 10-day hospital visit, he dies.

It’s true that the worker’s compensation policy will pay for the employee’s transportation to the hospital, the hospital and physician’s bills, his lost wages while he was off work, and the statutory death benefit. However, the worker’s compensation policy will not pay for all of the soft costs incurred by ABC Company associated with this incidence (loss of management time, lost shop productivity, liquidated damages for delays in the contract performance, labor replacement cost, etc.)  Additionally, there will likely be a significant negative impact on ABC Company’s future worker’s compensation experience modifier and premiums.

Wouldn’t it have been great if ABC Company had also implemented a robust safety program that included a lock-out/tag-out procedure. Something as simple as that could have prevented the entire incident. It could have avoided the pain and suffering of the employee; the difficult call home to his wife; all the medical expenses and soft costs; and the impact of employee morale.

So, they are right. It is a lot more fun talking about growth and new opportunities. But, looked at from the right perspective, proper risk management and insurance can make those things easier to achieve and celebrate.

If you should have any interest in discussing your insurance and risk management program, please reach out to me.

Stay Safe,

Rick Tucker, ARM
Managing Member
Associated Insurance Managers