July 11, 2017

Insurance audit: peace of mind & potential savings

Running and growing a business require many talents, not the least of which is engaging professional service providers with specialized expertise to support your operations, management responsibilities and leadership decisions. Here’s the key: Whether you are building a new relationship or have received many successful years of service, you need to ensure your advisors continue to match your company’s evolving needs regarding industry and service area regulatory changes, best practices and pricing models.

This is particularly true with risk management. Regardless of the size of your enterprise, successfully managing risk is an ongoing and dynamic process that is much more than purchasing a policy and filing away a pile of paper once a year.

Your insurance broker and risk management advisors should be proactively working with you to reduce, eliminate and transfer as much risk as possible, while minimizing the total annual impact to your budget, inclusive of insurance premiums, applicable deductibles, self-insured retentions and self-insured exposures. Conducting an insurance audit is the best way to ensure this outcome.

Features & benefits of an insurance audit

An insurance audit takes a fresh look at your current insurance policies coverage, identifying any gaps and noting limitations, exclusions and warranties, conflicting terms, and unscheduled underlying policies. This process should take no more than a couple hours of your time. Even if third parties, including lenders, deem that your coverage is adequate, other exposures outside of their interest may be uninsured or under insured. The audit process will provide you with additional peace of mind and potential for savings; it will be time well spent.

Here’s what to expect from a comprehensive insurance audit:

  • Review of Standard Contract(s)/Lease Agreement(s); Schedule of Values/Locations
  •  Review Completeness and Accuracy of Named Insureds
  • Review Coverage Observations by Policy Type
  • Adequacy of coverage (scope/depth matching their business)
  • Sufficiency of limits
  • Levels of deductibles and retentions
  • Territory of coverage
  • Concurrency of coverage
  • Coordination of coverage limits
  • Suitability of coverage forms (especially when existing forms are non-ISO)
  • Material coverage problems (exclusions, limitations, conditions, warranties, subjectives)
  • Additional Coverage Recommendations
  • Missing coverage(s)/policy(ies)
  • Added-value services provided by the agent of record
  • Portfolio or a Master Program vs. Individual Policies (provides great leverage)
  • Comparison of Current Pricing vs. Market Competition (resulting in reduced premiums)

Depending on your risk tolerance, you may consider self-insuring part of your risk. Risk sharing through the purchase of insurance is often advisable, but an audit will provide the cost benefit. Standard placement of insurance is both experience and market driven. A complete analysis of all factors typically provides great coverage protection and financial benefit.

Bottom line

As your business expands, your risk increases. Additionally, industry regulations may change over time and insurance products and pricing respond to regulatory and market changes. Your risk advisor and insurance brokerage experts specialize in protecting assets. Take the time to meet with them to identify creative insurance and risk management opportunities on a regular basis.

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