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Monthly Archives

July 2014

Reputational management: What is it?

By Risk Management Bulletin

For most businesses, reputation is their most valuable and irreplaceable asset. Building a strong reputation can take years, and done right, it can help a business grow to new and more profitable heights. But reputation can be a fleeting thing, and just one wrong move can send your company’s reputation tumbling from those heights, often never to recover.

A carefully constructed risk management plan can help you avoid these disasters, especially when these three key areas are addressed:

* Have a plan. Don’t make the mistake of thinking “It won’t happen to me.” Take time to carefully plan out how you’d handle a reputation disaster the same way you’d plan out how to handle physical disasters against your business or its operations.
* Think before you post. When a customer complains, it’s easy to ire off a sarcastic comment. But how you react in the face of criticism — especially on broad social platforms — says a lot about your company and can make or break your reputation. Have a plan — possibly even including scripts — for how to respond on social sites, over the phone, via email or though other types of customer contact and make sure your employees know about your policy.
* Plan social media campaigns carefully. When you post on Facebook, tweet, share or post a pic on Instagram, you’re potentially posting to the world. Think through your social media campaigns carefully and be sure to play devil’s advocate to uncover possible ways your campaign could be misinterpreted to otherwise go horribly wrong.

Remember: Complaints can be — and usually are — reposted on multiple social sites, not just the one where the faux pas occurred. In fact, few things cause people to be more vocal than a complaint, and having the world as their collective complaint department makes sharing bad experiences easier and more tempting than ever before. Managing your company’s reputation can be complex and time-consuming, but considering the repercussions, it’s a crucial part of doing business.

Protecting your business from cyber attacks

By Risk Management Bulletin

In the U.S., every year tens of millions of dollars are spent mitigating the effects of cyber attacks on American businesses, and that doesn’t begin to take into account the devastating effects an attack can have on your business’ reputation. While big businesses like target have deep pockets to weather such storms, most small and medium-sized businesses do not. If you fall into that category, here are the steps you need to take to help prevent a cyber-attack on your business:

* Make sure you keep your antivirus software updated at all times and that your data is stored in a secured environment that adheres to the latest ISO security standards.
* Educate your staff about phishing scams and the hazards of clicking on an unknown site or downloading an attachment from an unknown source. Make sure they understand the increasing security risks posed by social media sites.
* If you hire a security consultant, make sure the firm is reputable and experienced so you feel confident you have the best controls in place for your business.
* Make sure you have a strong BYOD policy in place that limits the way personal computing and mobile devices are used with regard to work and work-related data.
* If you use off-site workers, look into a secure cloud computing environment that avoids storage of data on remote workers’ personal computers.
* Make sure your employees have a strong password that does not contain personal information and which features a combination of uppercase and lowercase letters, numbers and special characters for added strength. Change passwords every three to six months, and don’t recycle old passwords. It’s a hassle, but it’s well worth it.
* Make sure your security measures are as user-friendly as possible. Complex protocols like restrictive file-sharing policies are more likely to be ignored, which means more risks for your business.

Implementing these small steps takes time, but in the end, your business will be better protected against the rising tide of cyber attacks.

Early assessment helps ensure risk management policies are custom-tailored for your business

By Risk Management Bulletin

Risk management isn’t always inexpensive, but generally speaking, the costs expended in proactively managing risks can far outweigh the potential costs of liability exposures. Still, there are some steps you can take to help control the costs of developing a risk management policy, and they can also help you gain better insight into your business and its operations and exposures too.
The key to cutting costs is to identify your risks early on so you can begin developing the best policy from square one without prolonged delays that come from long periods of risk analysis and weeks or months of trial and error. Understanding your exposures early means you can devote more time to prioritizing your risks so the policy you ultimately put in place will be more customized to your needs.

So how do you develop an early understanding of your company’s risk exposures? Here are a few ideas:

* Talk to your insurance agent or broker. Insurance professionals are experts at identifying risks and assessing exposure levels, and they can be instrumental in the early phases of developing your risk management policy.
* Network within your industry association. People with experience in your field have unique “real world” perspectives that can shed considerable light on potential areas for review.
* Review customer and employee feedback. Both can yield a surprising wealth of information about your business from perspective you may not have considered. Solicit feedback through regular surveys.
* Read trade magazines and websites geared for your industry to learn about the risks others in your field have faced as well as the steps they took to address them and policy changes they made based on their experiences.

Taking these steps does more than cut costs; it also helps you develop a better understanding of the risks your company is facing, and that can help you run your business more efficiently — and more profitably.

4 Tips to Avoid Public Liability Claims

By Risk Management Bulletin

Research shows public liability claims — and settlement amounts — are on the rise. Here are four things you should be doing to protect your business:

Making sure you have a safety plan in place for identifying and fixing problems

It’s easy to get caught up in the day-to-day management issues of running a business, and often, immediate issues can seem to take precedence over long-term planning. But overlooking safety measures can cost you big in the long run. Be sure to consider your business and its potential risks from all angles and develop a robust safety plan to limit exposures to liability claims.

Seeking advice from peers and professionals

Especially if you’re just starting out in your business field or offering a product to a new audience, it can be difficult to understand your risk exposures. Being proactive in networking with peers and insurance brokers provides you with a rich source of information and insight from others who have “been there, done that.”

Being proactive in reviewing risks

Chances are that over time, your business will go through certain changes. Review your safety measures and policies several times a year to make sure they cover everything that needs to be addressed and review them again whenever something new occurs.

Making sure you have enough insurance

Few people care to spend hours poring over their insurance policies, but unless you take the time to really understand your coverage levels as well as the limitations and exclusions of your policy, you could be leaving your business open to major losses. Another typical mistake: Thinking the coverage a similar business has in place is “good enough” for your needs. Make sure your agent understands your business as well as its potential — and unique — risk exposures.

Keeping your business safe from costly public liability claims should be a priority. Make time in your schedule to take the steps necessary to ensure you’ve identified your business’ potential risks and have the safety plans and insurance coverage in place to avoid major losses.

Best Loss Control Methods: return on safety investment

By Workplace Safety

Create a safety culture within your organization. Let every employee know safety is the number one employee benefit. The top executive takes the lead and mentions some safety news in every company meeting. Simply talking and promoting safety is time, it does not cost a great deal of money.

Some specifics:

Drivers must use seat belts, must be sober and drug free, not use cell phones or text while driving, and not pick up unauthorized passengers. At least semi-annually, drug test every driver and check their driving records. Randomly test one quarter of the drivers every three months. Establish a threshold for tickets and accidents, and stick to that standard. These minimum safety standards cost about as much as a tank of gas in a pick-up.

Supply personal safety protective equipment for employees. Although this requirement comes from OSHA regulations, it’s a great investment too. One eye wash at the local doc in the box costs about as much as a hundred pairs of safety glasses.

Harnesses to tie off workers at heights cost little next to broken bones and death from a fall.

Hard hats are about fifteen to twenty dollars each. Closing a head wound runs about five thousand.

Reflective vests or coveralls, again, cost much less than a man versus loader collision.

Now, suppose you could save five percent of your workers’ compensation premium for the next three years from reduced experience mod or lower premium rates. You can afford to make the investment in safety equipment.

Consider an incentive program like this: quarterly bonus for no injuries and perfect prompt attendance. Perhaps pay everyone who meets those criteria an extra fifty cents per hour for the quarter. This extra pay amounts to about one hundred dollars per month. Wouldn’t it be worth everyone earning it? Or, maybe one quarter the earners get a pair of Red Wing boots, a gift card to their favorite tool store, a gift card oriented towards their spouses, a flat screen television or use your imagination.

Small investments in safety awareness and loss prevention do pay large dividends in reduced losses.

What is retrospective rating? Self-insurance?

By Workplace Safety

Insurance companies offer loss sensitive pricing plans for risk tolerant clients. In the most fundamental case, the client pays a standard premium, and receives a dividend or return premium based on losses.

More sophisticated pricing plans are available for clients willing to assume more risk. Retrospective rating plans (retros) provide an incentive for companies with excellent internal loss control processes.

Retros begin with a basic premium. This portion of the overall premium reflects the fixed cost of the program. The insurer charges administrative costs, some premium tax, loss control services, sales commissions, and underwriting costs in this premium. Basic premium is about twenty-five percent of the standard premium.

Added to the basic premium are the reserved losses multiplied by a loss conversion factor – usually about 1.15 – which includes claims and legal expenses. Total retro premium is basic plus converted reserved losses, with two other factors.

Retros generally have a minimum and maximum premium. Higher minimums and maximums allow less long-term risk transfer to the insurance company. The companies will reward this decision with lower basic premium, lower loss conversion factor, or better cash flow options.

Lower minimums and maximums will cost the insured in higher basic premiums, loss conversion factors or cash flow.

So how does a consumer use this information?

Do not consider a retro program unless your premium is at least two hundred thousand dollars.

The best time to enter a retro is after a bad claims year when your modification rises and will remain up for three years. A retro allows you to recapture some of that higher premium. But you must have losses under control.

Many retro plans are based on reserved losses. A reserved loss is an estimate of costs to be paid over the life of the claim. This number is not discounted. The company sets the reserves based on claims history. This number can obviously adversely affect the final premium without the insurance company actually paying a claim out.

Retro audits resolve this issue by resetting claims reserves annually and recalculating premium accordingly. So, expect three annual audits to reset the premium. It’s a long-term partnership between the insurer and the insured.

Forecast your own losses for the next three years. Decide what retro factors work in your favor – can you risk a higher maximum premium? Negotiate with the insurer about paid loss accounting rather than reserved losses, especially on medical only claims.

Negotiate a deductible on medical only claims to avoid the loss conversion factor add-on.

The self-insured program is the ultimate retro. You act as your own insurance company. Know your premiums will be above one million dollars per year for the foreseeable future before considering this funding method.

You will still encounter some fixed fees, like actuarial work, taxes, filing fees, and administrative costs. It still costs legal and investigation time to handle claims. The biggest advantage is cash flow on claims. Since you control reserves, you control cash flow.

The biggest disadvantage is when you decide to stop self-insuring and purchase insurance commercially. Be certain you will self-insure for a very long time.

Review Class Codes and Descriptions: technology changes operations

By Workplace Safety

Technology associated with construction has dramatically changed operations. Carefully check the class codes and their descriptions to assure proper premiums.

Years ago, 5606 – contractor supervisors – served to describe on site personnel who actively performed construction activities while managing the site. The rate was equivalent to site carpenters. That code has evolved into the computer carrying, service providing construction managers and executives who document the construction process. The rate is closer to outside sales representatives now.

Even excavation and site work is being dramatically changed by GPS technology. Now computers design a cut and fill pattern with efficiency. Labor is more involved in checking the geotechnical and environmental properties of the soils rather than the actual movement of them.

As production technology improves, new sub-codes develop to reflect the decrease in risk. Painting, carpentry, electrician and other trades now use a selection of eight or ten separate codes to describe exact activities. More components are built in shops and brought to the site. This process can change the class code of the installers and the builders.

The trend is towards more computer driven operations. Less labor, more specialists. As this trend continues, class codes will be added, deleted and the descriptions changed. There are currently over seven hundred class codes. Some are antiquated with new meanings – like a ship chandler is now a hardware store.

It pays to become familiar with the classifications. If your business has been active for many years, the “governing code” may be incorrect. The governing code is the catch-all for your business which best describes the overall operation, more obvious in manufacturing. Corrugated box manufacturing has been reorganized into several class codes. Technology has separated the manufacture of cardboard and corrugated cardboard into laminating processes, cutting and folding processes, and fully integrated operations.

Read your relevant class codes and think about which one reflects your operations. Or ask your agent to do it for you.

Workers’ Compensation Audits: why it pays to manage overtime and independent contractors

By Workplace Safety

Workers’ compensation requires an end of the policy year audit to assure proper premium is charged. This process protects both the insured and insurers.

Think through this process to make it easier, and cost saving. First, choose a policy year that creates an easy audit. The calendar year works for many companies. You already must report payrolls to the US government, the paperwork is essentially done. Calendar quarters work for the same reason.

If you prefer to use your corporate tax year, go ahead. If you complete quarterly profit and loss, you can use a financial quarter. But choose an annual period which already has an audit trail.

Keep payroll records separate for each workers’ compensation classification. Normally, this record keeping is straightforward. The same people specialize in certain tasks: clerical, sales, labor, or drivers.

Some operations can be more complex. If labor crosses from one specialty to another, perhaps a carpenter helps pour a concrete slab, that payroll should be split on an hourly rate. The higher rate applies otherwise.

Demand any subcontractor, for example a hood cleaning crew for a restaurant, provide a Certificate of Insurance (COI). Technically, insurance companies can charge for the payroll portion of any contracted work in the absence of a COI.

If you use to a non-covered contractor, keep those records to properly assign a discount for premium.

Lastly, keep records to isolate overtime pay. Overtime payroll receives a discount for premium purposes.

Make audits easier. Choose a convenient policy period. Keep records for independent contractors with COIs, and payments to those without. Isolate overtime pay. Segregate individual payroll by classification if that individual works in multiple job descriptions.

Your premium will be more accurate with a minimal additional management effort. And, the default position is always to increase payroll, and therefore, premium.