Family business owners complain about rising insurance costs. A few owners, however, are taking very proactive approaches to insurance cost reduction. Here are a few ideas implemented by savvy companies:
Self-Insurance — Some companies have opted to take on a portion of their previously fully insured risks. This concept is most often used in general liability, but some progressive companies have begun self-insuring in the medical area as well.
Your best source of self-insurance information is not your insurance carrier, but with other self-insured companies and independent agents who specialize in self-insurance. Your local Chamber of Commerce may be a good start for finding other local companies that self-insure.
Please note that with self-insurance, you never “go naked.” There is always a catastrophic policy in place so that you don’t gamble your company’s stability and future in the event of a large claim. A self-insurance professional can help you analyze your claim history and determine the correct breakpoint for a catastrophic policy to take effect.
Higher Medical Deductible Paid by Company — We recently learned of a clever company that increased their employees’ deductible to $1,000 per year, and then paid that extra deductible themselves as the employees incurred the costs. The reduction in premiums more than offset the deductibles they paid. In fact, they found that many of their employees did not even come close to spending $1,000 per year.
Bid Out Insurance (Use RFP) — It’s easy to get comfortable with a particular carrier, but could be costing your company dearly. We have found most companies reporting at least $10,000 annual savings when they use a bidding process. For best results, prepare a Request for Proposal (RFP) that spells out your exact requirements. If you don’t have time for this, there are risk management specialists that will come in, analyze your current insurance, design a cost-effective new plan, then prepare your RFP and see it through to your final selection. Many of these folks work on a contingency basis where their fee is based upon your final net savings.
Implement an Incentive Reward for Safety — If workplace accidents are driving up your premiums, it’s time to get serious about promoting safety. To focus your people on safety, however, it may not be enough just to talk about it and train, you may need to offer safety rewards. From drivers to store personnel, many companies are incorporating “accident-free” into their bonus program criteria and seeing good results. If an employee’s bonus check depends upon no accidents, you can bet they are going to be careful and help eliminate accident causes.
So, in summary, if insurance costs are eating you up, don’t just accept that as a fact of life. Get aggressive. A great resource is the professional group called RIMS, Risk and Insurance Managers Society. If you actively reduce risk, you will lower costs.
