Risk & Business

As a business owner you will be exposed to the insurance marketplace in various ways as you buy and use insurance. You will hear from your insurance professional terms like "standard market", and "surplus market" , and you may wonder what all this means?  So I thought I will go through this briefly to give you some clarification. The insurance industry is regulated by the states. Each state will  license and monitor the activity of insurance companies that want to do business in the state. These companies are "admitted"  into the state and generally are determined to be "standard markets".  The state backs up the buyers of insurance from  "standard markets" if they cannot  pay claims. This is usually done with a guarantee fund set up by the legislature. "Standard markets" usually insure the risks that are considered normal risk or lower risk and cover the majority of the insurance needs for business. Now when a business is a...

You have built your business from the ground up.  You worked hard, and many hours without a day off have been the norm to get your business where it is today. You insure your buildings, equipment, autos, and employees,  however do you insure you ? The majority of business owners do not insure themselves. What happens to the business when something happens to you? Most business owners do not even think about this scenario. In reality most business will fail when the owner or "driver" dies or becomes disabled. It is only fair to the employees, vendors, and customers to make sure your business can go on without you. This can also apply to your best employees or managers that help your business run. So what is the answer to this risk?  Life and disability insurance.  Key Man life and disability  insurance is a necessity for a business owner. You are the "Key Man" (or Woman) that make the business work,  so insure "you"!!  The premiums are deducted as an e...

Most business owners cover their loss of business income. This coverage is included in most business owners policies and is easily added to Propery & Liability package policies. But what happens when the business loses income because their main supplier cannot supply the products or services the business needs? This type of coverage is called Contingent Business Income. In today's "just in time" inventory supply lines, businesses do not stock as much as they use to. A business can order online at night and by the next day have thier supplies from their favorite vendor. However if a main supplier has a claim that prevents this "just in time" delivery, the business owner could lose money. This is especially true with specialty products or supplies that come from only one or two vendors. It does not take much for a business to lose income when their shipments of inventory are delayed. Customers do not want to wait for a new order to come in from other vendors t...

So, you have to submit a claim on your business insurance. You call your insurance agent and or company and go through the process of getting your claim resolved. Depending on the type and the size, this process can be quick or it can be drawn out. Sometimes it is a pleasant experience and sometimes it is not. I do feel that the industry tries to make the claim experience with their policyholders a good one, but the insurance contract is complicated and it can cause tension between you and the insurance company. Most of the time claims are paid and you are able to move on to get back to business as usual. This is where we start the conversation about reserves. What is a reserve?  A reserve is a sum of money that the insurance company adds to the total claim paid out just in case more has to be paid later. These added amounts can increase rates as they are counted when determining the loss ratio of a business. Many times these amounts will be held against policyholders years after t...

Many business owners do not know that their general liability policy will cover for libel, slander, copyright infringement, and defamation. Here are some examples. In the course of business you may have a claim from a competitor that accuses you of libel or slander.  This usually happens in competing for sales or bringing on new customers. Another  company in a similiar industry as you, may feel that your business ad slogan  or marketing campaign, is a violation of their copyright or their "trade dress" and this could initiate a lawsuit.  Now add social media and the ease of posting on the internet, and this risk has gone to a whole new level. The general liability policy covers these claims under Personal Injury and Advertising. This coverage is in Part B of the general liability insurance policy. Limits of insurance for this coverage usually match the bodily injury and property damage coverage of Part A, which is the liability coverage most everyone is familiar wi...

I have been in the insurance business as an agent for over 23 years. As long as I can remember, so called experts have been predicting the demise of the insurance agent. Now in 2017 this cry of extinction is louder than ever. They even have a word for it, "disintermediation", or in layman terms, "replacing the middle man". The thought is that technology will make buying insurance so easy and uncomplicated that insurance companies can go directly to the customer and by-pass the need to use agents as their selling arm. The advancement of this technology will allow customers to buy insurance anytime , anywhere, and for any risk, in real time. Now I think this actually may be happening. Websites that I have seen from some very sophisticated insurance companies, make buying insurance look like buying anything else online. However, when it comes to insurance,    the real issue is after the sale. The insurance contract is just that a "contract", and a complicated...

The Delaware legislature just passed a new bill that would prohibit insurance companies form using certain aspects of credit scoring when pricing auto insurance. For many years the insurance industry has used credit based scoring to determine rates. Many jurisdictions have questioned the validity of this practice and few have even called it discriminatory. Now, in Delaware , insurance companies will no longer be able to apply certain credit scoring parameters to their insurance auto rates. C redit based scoring on income, gender, education, address, race, ethic group, marital status, etc. is now prohibited. In addition the insurance companies cannot cancel or non renew due to lack of credit information or credit worthiness.  Consumer groups are applauding this measure, however, this may be a future problem for the auto insurance marketplace in Delaware.  Insurance companies are reeling with increasing claims in auto and the profits in this line of insurance is dropping na...

What in the world is Social Engineering Fraud?  If you own a business you need to be aware of this potential risk. So let me explain. Social Engineering Fraud is a type of fraud where fraudsters target their victims with fake domain names and make money request, usually through email and with the application of some sort of social pressure. Business employees take the bait and the next thing you know, money is being stolen from the business. This type of fraud is becoming more and more frequent. Business owners are more at risk because they may have unaware employees who think they are working with a vendor or customer and click the link in the email, which is usually the method of delivery for carrying out the fraud. So what is a business to do? First take a risk management approach and educate your employees on how these schemes work and what to watch out for. If it doesn't seem right, don't click !  The next thing to do is to buy some insurance. The best...

Most business owners have not heard of the concept of "Total Cost of Risk". Knowing this metric, however, can be vital to the success of any business. So let me explain this a little and maybe, you  will be able to use it in your business.  Every business has risk. These risks are unique and some are more common.  A business owner can buy insurance policies to cover most of these risks. The insurance industry is full of products and policies that protect businesses. The cost of the insurance you buy is the first cost to be added as part of the Total Cost of Risk.  The next cost would be the claims you have to pay out of pocket because, there was no insurance, or you had to pay a deductible, or you did not turn it in for a claim. These are called self funded losses and they are added to the Total Cost of Risk. Nowadays , every business has some sort of loss control or safety programs to reduce risks in the business. The cost to have these programs in place, and t...

From time to time I have discussed in this blog the issues with the flood insurance program run through the NFIP.  Those issues are at the forefront as Congress gets ready to reauthorize the program in the new budget. There are committees meeting as we speak trying to determine how much of the program can go into the private insurance market. The reason for this is to offset the losses the program has each and every year. Also there is talk about updating and improving the risk management profile of the program. In other words, many properties that are more exposed than others will need to comply with some risk management directives in order to participate in the flood program. Looking at the rates and the flood maps, which have been recently updated, is also on the table. Charging the appropriate rate for the exposure is paramount in fixing the continual losing of money and subsidizing of the costs. As the reauthorization approaches, getting it right is p...

Every business owner has heard from their insurance professional that they should buy an umbrella policy. For those who have one , you are better protected. For all the owners reading this blog that do not have one, lets take a few minutes to try to convince you to buy this important policy. Your business is exposed every day to risks that could occur in your operations, work force, autos, and your products. Your general liability policy and your other liability limits in your auto and work comp policies, are your first line of defense. However what happens when the limits in these policies run out? This is where an umbrella policy kicks in. It provides the back up limits you need to cover the unexpected claims that could exhaust your first line of defense in your underlying policy limits. In addition this policy is 1/4 of the costs of your other policies. You can also add layers with higher limits and each layer costs less the higher you go. Many of thes...

Every business owner at one time or another find themselves having to request a certificate of insurance from their agent. This could be to show coverage for adding a new vehicle, equipment, property, or complying with contract terms, etc... However what most do not know is that a certificate of insurance is not part of the policy. The certificate is just a summary document of what coverage could apply in the actual policies. The certificate itself has bold language on the top of the form stating that the document is issued " as a matter of information only" and "does not amend, extend, or alter" the coverage in the policies. So why are certificates requested and issued so frequently when they are not part of the actual insurance policies? The main reason is that most people do not understand  nor have the time to review insurance policies to determine if there risks and interests are covered. The certificate of insurance was the creation of the industry. It was...

Many business owners get a shock when they find out their general liability policy will not cover damage to their work or product. Unfortunately, many owners find this out after a claim. There are some circumstances that give rise to coverage but in most cases there is not. So let's break out how a general liability policy is put together and how you can expect it to respond to a claim. The policy provides coverage when your business is liable for  property damage and or bodily injury of others. In the course of your business  if you cause damage to another's property or injury to others, then you can expect the general liability policy to respond. However if the property damage is to your own work or product, or the injury is to you or your employees, the policy does not respond. This distinction is what business owners need to understand. When you buy a general liability policy, you are buying protection that your business activities may pose on others,...

In an effort to improve tracking of workplace injuries, OSHA will be requiring business owners to submit injury records online. Prior to this year, most business owners would post at their OSHA 300 logs at their place of business. Effective this year in 2017, those logs will have to be electronically submitted to OSHA.  According to OSHA, this requirement is to "nudge" employers to focus on safety, by making injury information publicly available.  The rule went into effect on Jan 2017, however as of this date the portal is still not up and functioning to meet the July 1 deadline to send in your reports. Not all businesses have to report this year, so check the OSHA website to determine if your business is required. This is going to be a big change for business owners. Having their injury records posted for competitors and the public to see,  could be problematic. Many injuries that happen on jobsites are not necessarily an indication of lack of safety....

If your business suffers a water damage claim, do you know if your property policy will cover it?  Well it depends on whether the water damage is considered a flood, which is usually not covered. Check out our video blog to learn more . https://youtu.be/ee4h8V1dC-U G. Kevin Nemith , President CNC Insurance Associates & The Business Insurance Center www.cncinsurance.com www.bizinsurancetv.org 

Every business owner sign numerous contracts during the course of business. One of the major provisions in most contracts is transfer of risk and or responsibility. What is common is the person or entity that lets the contract is trying to pass risk and liability on to the signer. So before you put your signature on another contract read it and look for  key words that will clue you in on what your agreeing to. Here are just a few. "Any and all": when you see these words it usually is not good for a business owner. Someone in a contract is trying to make sure there are no issues you the signer won't be responsible for. "By any cause whatsoever" : this is easily understood that what ever liability or risk that was being referenced in the contract , you the signer, are on the hook no matter what the cause of liability or risk is. "Hold Harmless" :  this is a fancy way of saying you the signer are going to have to protect the entity that is having you...

It seems that everyday in the news another large company or financial institution is being hacked. Do to the large scale of these cyber breaches many small and middle sized businesses feel that their company would not be the target of professional hackers. This is simply not correct. Many small businesses get cyber attacked every day but never make the headlines. That is why a Cyber insurance policy is so important. I thought I would outline the "meat and potatoes" of this important coverage and then make a pitch on why you should buy a policy for your business.  The basics of cyber insurance coverage is to protect the business (First Party) and the business customers, (Third Party). Protecting the business from unauthorized access, virus transmissions, theft of data, loss of business income,  and cyber extortion are just some of the first party protections a cyber insurance policy can offer. The policy can also cover customers who were financial...

The process of hiring and firing employees has become a risky endeavor for business owners. Employers are finding out the hard way that by not following good risk management protocols, their chance of lawsuits from disgruntled employees increase. The risks also increase if you have over 50 employees as this triggers many federal laws and rules that could trip up employers. So what does a business owner do to better protect themselves?  Along with a good risk management process, the next step,would be to buy a Employment Practices Liability policy (EPL).  This insurance policy will protect the employer from hiring and firing claims. For example, if a fired employee sues their employer for wrongful termination, this policy will pay defense costs and also cover any judgements. Another example would be if the business was being sued because it hired one person over the other, again the EPL policy would cover the employer. In addition to the protections of hiring and firing,  ...

One of the biggest gaps in coverage occurs when business owners have vehicles on their fleet policy that do not match the name insured on the policy. How does this happen ?  Here is the scenario. A business owner buys a new vehicle for the company and they title the vehicle in their name personally. They decide they want to use it for personal and business. They call their broker to add it on the business policy but never mention that the vehicle is titled personally. A potential coverage gap can occur if the business auto policy is not endorsed , or set up , to cover vehicles with different titles.  Other situations occur when titles are changed for various reasons during the year but the business owner forgets to tell their broker. The fix is fairly simple as there are many endorsements and change requests that can be added to a business auto policy to cover vehicles with different titles. The lesson here is to make sure you communicate with your insurance professional when...

Here is the scenario, your best driver in your company got a DUI on the weekend after leaving a restaurant and blowing a .08 at a checkpoint. This driver has had a excellent record up till this unfortunate situation. Now he has lost his license and cannot drive for your business for 6 months. Its a tough burden on your company but you make arrangements and keep the driver on as an employee waiting for the suspension to end. Finally the day arrives and he gets his license back. You notify your insurance company that you wish to add him back on as a driver in your fleet. The insurance company refuses to allow it and tells you he cannot be a covered driver for another 2 years!! This scenario is happening more and more as insurance underwriting standards have become tougher than state driver licensing laws. This usually adds up to more headaches and higher premiums for business owners. The reason for this can be found in the courts. Insurance company claim payouts...