Well-crafted insurance and a robust risk management program create a wall of protection that allows your business to function while taking on risks and decreases the chance of them putting you out of business while keeping the costs under control.
There are four common mistakes that I have seen in insurance that cause the most headache.
- Not understanding the exposures: This is probably the most common problem. You cannot insure against an exposure you are unaware of. You cannot expect basic Liability and Property Coverage to take care of all your unknowns. Understanding these exposures and identifying them within your organization is critical to an effective insurance program. You cannot insure against an exposure if you don’t know it exists.
- Not having the right coverage: This problem is related to the first problem. I have seen it time and again; businesses think they are covered because they have purchased an insurance policy. Insurance policies are complex legal documents that are full of exclusions, limitations, and conditions. A one-size-fits-all policy can be ineffective when there is a claim. There are many different kinds of insurance coverages that need to be in place to have an effective insurance program. They vary from company to company, sometimes dramatically. NOT ALL POLICIES ARE CREATED EQUAL.
- Relying too much on Insurance: Insurance is there to protect in the event of a loss, but it should not be relied on as the only remedy. A robust risk management program should be a key part of every business. Enterprise Risk Management is a new form of risk management. It follows Walter A. Shewhart and Edward Demming’s Total Quality Management that seeks for quality in every phase of production. Every employee, department, and team member in the company is part of ensuring that risks are identified and taken care of. This requires training, education and commitment from top management.
- Updating Information: Companies and the environments they operate in are constantly changing. So then should their approach to risk management. This includes updating insurance policies. To keep pace with the changes in your company, the agent needs to be continually aware of these changes. There have been many times that an insurance policy that was adequate 3 or 4 years ago has become outdated because the information was not updated.
The most effective way to handle these mistakes is to have an agent you trust to help you navigate these issues. Your agent should be there not only at the inception of the policy and the subsequent renewals, but as well as throughout the policy year. Insurance is meant to protect your business.