RISK SOLUTIONS—A Workers’ Compensation Insurance rule that many businesses may not be aware of is that you only have to report 2/3 of your overtime total when calculating your payroll for the year.
When you buy your Workers’ Compensation policy or renew it, you provide an “estimated payroll” for the year. Your premium (or cost) is based on this estimated amount.
Then, after your policy period, an auditor will request records showing the actual payroll paid out.
According to the difference in your estimated amount and the real amount, your company is either going to have to pay more premium or they’ll receive a refund check.
Regular & Overtime Payroll Divisions
When you figure your payroll, have a column for regular payroll and then another column for overtime.
Add up your total payroll and then your total overtime payroll.
Then divide your overtime payroll by 2/3rds. (Note: Figure 66.66 percent.)
That is the amount you will add to the regular payroll for the final total.
For example, if your total payroll was $100,000 and your overtime pay was $15,000, then you would add 2/3 of the $15,000 — which is $10,000 — to obtain a “chargeable payroll” amount of $110,000.
Here’s a sample (BELOW). Please note that office employees and fleet drivers are in two different categories. You will have different Workers’ Compensation classifications for employees according to their jobs and will pay different amounts for insurance based on those roles.
Based on the table shown above, you would report $328,716 to your Workers’ Compensation insurance carrier as your total payroll.
If you had not figured the correct percentage of overtime earnings, you would be paying a higher rate based on nearly $4,000 MORE of payroll.
And since drivers are classified in a more-costly category than office employees, that overpayment amount would have been even higher. (See links at the end of this post for help with correctly classifying employees.)
Take Away The Bonus Amounts
Your auditor or insurance agent may have already made you aware of this Workers’ Compensation savings opportunity. I only recently learned about this rule myself, so I asked a Risk Manager to explain more about it.
“In order to work overtime, the law requires companies to pay time-and-a-half,” said Walter Haney, Sr., of American Risk Managers.
“When you are reporting your total for Workers’ Compensation, you are paying an amount based on the straight-pay time, but taking away the bonus (or overtime) amount.
“You report the straight time, but you take away the extra. You should do this for holiday pay, too, which is sometimes double the regular pay.”
Mr. Walter also said that a good way to double-check your figures is to compare this final total with your tax records.
“Take your tax records and compare the net payroll,” he said. “You are only required to report the net amount for your Workers’ Compensation premium.
“An auditor is going to do their own analysis. But you should also review all these figures for yourself. If you’re writing down the entire payroll without deducting a percentage of the overtime total, you’re going to pay more than you should for Workers’ Compensation.”
You can find more information on Workers’ Compensation problems, solutions and savings by clicking on the following links:
More Savings And Solutions Are Only A Phone Call Away!
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RISK SOLUTIONS—Your business is answering a growing need that’s important to not only its Participants, but their Families and Communities.
And whether it’s called an Adult Day Services Center, a Senior Day Care Center, an Adult Day Facility, or by another term — to ensure that your business can continue its mission — you need to be adequately protected from risk.
We’ve asked an expert Risk Management Consultant to list the policies you need to safely operate your Adult Day Services Center.
Insurance Needed For Adult Day Services Centers:
- Property Policy;
- General Liability;
- Professional Liability;
- Automobile Policy;
- Umbrella Policy;
- Workers’ Compensation;
- Directors & Officers Coverage;
- Environmental Protection Liability;
- Crime Policy;
- Pollution Policy; and
- Cyber Liability Policy.
Insurance Needs Details
A fully-built out building, with safety considerations in place, will — in most cases — result in higher construction costs. Your property should be insured to its true value and on an all-risk basis.
Buildings should also include appropriate alarms, exit plans and other safeguards.
TIP: Slip resistant floors are a must, along with an ample use of handrails.
A basic General Liability Policy, also known as Third Party Liability, is necessary to protect you from claims made by the Participants, visitors and others due to incidents, such as slips and falls or accidental food poisoning.
Your General Liability Policy should include Medical Payments, Coverage of Property of Others, Fire Legal and more.
TIP: Be prepared and have emergency plans in place. It’s not a matter of “if” someone will fall, it’s more a matter of “when.”
Because of the nature of your work and mission, a Professional Liability Policy is needed to protect your staff and your Limited Liability Company from charges of Medical Malpractice.
Coverage should include assisting Participants with the taking of their personal physician-prescribed medication, as well as Sexual Molestation and Abuse, HIPPA Protection and Subpoena Exposure.
TIP: Some Centers use pill packs, with Families and Caregivers required to refill the packs on a weekly basis.
Besides having fully-qualified and well-screened drivers, having an adequate Automobile Policy for your Center-owned fleet is of the utmost importance.
Your policy should have high limits of coverage for Bodily Injury and Property Damage to meet your Umbrella requirements, as well as Medical Payments, and Uninsured/Underinsured Liability.
TIP: Have daily, weekly and monthly maintenance schedules and keep good records, with employee names, dates and times for checking off these requirements.
An Umbrella Policy is the most economical manner in which to reach the higher liability limits required or desired for the best protection against risk.
A true Umbrella Policy provides Excess Liability Coverage for named exposures — such as General Liability, Automobile Policy, Workers’ Compensation and others — and in many cases, will also provide protection for uninsured exposures.
TIP: Make sure the basic policies you’re buying the Excess Liability for are listed and meet the underlying requirements of the Umbrella.
Workers’ Compensation Coverage is required by state law and protects your company from death or injuries to employees.
Workers’ Comp also protects employers from third party lawsuits.
TIP: Make sure your Workers’ Comp Classification Codes are correct to prevent erroneous overcharges.
Directors & Officers Coverage
Also known as D & O Coverage, this type of policy protects the Directors and Officers of your company from personal lawsuits lodged against them for their alleged wrongful acts.
Among all the policies you obtain to protect your business, this is the only one that protects you personally from charges not safeguarded by the corporate shield.
TIP: Some managers can also be included in D & O Coverage.
Employment Practices Liability Insurance
Abbreviated as EPLI, this type of policy protects your business from Employment Liability claims, which are normally initiated by the Equal Employment Opportunity Commission (EEOC).
EPLI Policies provide protection from EEOC claims such as Wrongful Discharge, Sexual Harassment, Age Discrimination and Gender Harassment, among others.
TIP: Create an Employee Handbook and have stringent employee guidelines and reporting policies. Non-harassment training can also be included in your ongoing educational efforts.
A Crime Policy will guard against the loss of business assets through criminal actions, including those involving the internet or phone.
A Crime Policy will also safeguard your company from losses of property belonging to your Participants.
TIP: Along with being required for your operating license, deep employee background checks can help protect your Participants and fellow employees, as well as you and your company.
Pollution Policies secure your company from losses due to the run-off of pollutants or seepage from your facility.
Some Pollution Policies can also be written to include coverage for clean-up costs of pre-existing polluted areas.
TIP: Have policies in place for dealing with garbage and any other refuse.
Cyber Liability Policy
A Cyber Liability Policy will defend your business from losses from computer hacking or other invasive actions taken against you via the internet.
Associated losses suffered by third parties are usually included.
TIP: Have strong anti-viruses, anti-malware and firewalls on all computers, plus a strict data policy concerning sensitive client and employee information.
Protect Your Investment
“To open your Adult Day Services Center; vast efforts, money and time have to be spent prior to seeing any return on investment,” said Walter Haney, Sr., of American Risk Managers.
“In order to protect this investment and other assets, you should obtain all of these important insurance coverages.”
Besides providing the list of insurance needs above, Mr. Walter also shares more risk information and considerations about Adult Day Services below.
General Overview & Considerations
“Most Adult Day Services Centers are, first of all, very specialized small businesses,” Mr. Walter explained. “The product (those served by the Centers) is unusual and requires extreme care and treatment.
“While the insurance requirements are generally the same as for any other small business, the product demands certain changes and accommodations of facilities and insurance programs.”
Mr. Walter explained that the product or “Participants” includes aged human beings, who are being reclaimed from solitary loneliness, dementia and depression.
“Their needs are primarily nourishment and socialization,” he said, noting that social engagement has been credited by some with helping to ward off dementia and other isolation-related illnesses.
“Some Participants will have other needs,” he added, “such as assistance in taking their doctor-prescribed medications. (Centers must have qualified persons on staff that can administer medicines according to the individuals’ doctor’s orders.)
Mr. Walter noted that some Participants may or may not need assistance in moving about. “Or just general assistance in accommodating themselves to a new and strange environment,” he said.
Isolation & Loneliness Have Tremendous Impacts On Seniors’ Health.
Many Facets Of Care, But One Primary Aim
Mr. Walter noted that Adult Day Services Centers have many facets of care for the elderly, but their primary aim is to get Participants out of situations that can lead to severe depression, dementia and other mental conditions, which, he said, can and do lead to decayed living conditions and an early death.
“Various Senior Care Facilities may have other points of treatment goals,” he said. “But a common goal is to take these Participants out of their singular lifestyles — where they may be dealing with a lack of social interchange, unhealthy eating habits and incorrect use of medications.
“All of these activities can change a vibrant individual into a depressed and disease-ridden person,” he said.
Pleasant Surroundings & Activities
To correct these problems, Mr. Walter noted that Adult Day Services Centers get Participants out of their homes, with their possibly depressing auras, into more pleasant surroundings.
“Participants are introduced to persons of similar age brackets and encouraged to engage with the other attendees in devotions, group singings, exercise classes, television viewing and group discussions,” he said.
Toward those ends, Mr. Walter noted that property for Adult Day Services Centers must be purchased and refurbished to a high level of habitational accommodation.
He stressed that buildings used for Adult Day Services Centers must provide adequate floor space for all the persons using the facility. He said efforts to ensure safe and amiable environments include having large spaces, which can then be used as separate assembly places.
“Having activity areas qualified by floor areas allows Participants to have cheerful spaces to engage in for exercising, singing, devotional activities and other group mingling,” he said.
He also noted that designated areas are easier to keep clean.
“Separate spaces also help to reduce the transmission of communicable diseases, such as colds and flus, and cut down on the possibility of falls,” he said. “Plus, spacious atmospheres also improve the mental attitudes of Participants.”
Social Activities Help Seniors Feel Valued & Treasured.
Must Match Medicaid Requirements
Mr. Walter said a vast majority of Participants are provided with the necessary funds to attend Adult Day Services Centers through their Medicaid Policies.
“Medicaid places requirements on the education and experience of the staff,” he noted. “Qualified staff must be employed prior to the facility being opened to become eligible to accept Medicaid-sponsored Participants.”
Regarding transportation, he explained that most Participants are normally picked up from their residences and transported to and from the Centers by vans owned by the Centers.
He stressed that these Center-owned vans should only be driven by highly-qualified drivers employed by the Centers. Drivers should also be well-supervised and managed, with motor vehicle records closely reviewed by Center personnel.
A Typical Day Includes Lots Of Activities
At most Centers, Participants are usually served a couple of meals per day and snacks, which include a nutritious breakfast and a healthy lunch.
Staff and Participants are encouraged to mingle and interact during the numerous activities scheduled throughout the day, with guidance provided by designated Activity Directors.
“Specialized programs must be developed to provide for the Participant’s comfort and security,” he said.
“The aim of these activity programs is to prevent the destruction of quality lives, to foster an atmosphere to recover Participants who have regressed into depression, dementia or drug and alcohol dependency, caused by being cut off from social interaction and malnutrition.
“All of these destroy a precious resource — our elderly parents, kinship and friends every year. Center activities help rescue senior adults from failing atmospheres as they enter what are supposed to be their golden years.”
Mr. Walter concluded his remarks by asking others to share the benefits of Adult Day Services to those in need.
“If you know someone who is elderly and who has limited social access, you are encouraged to help them reclaim their place in society,” he said.
The Name Game
You’ve probably already named your Adult Day Services Company (let’s abbreviate to ADS for this section).
But if you are reading this as part of your research before opening your Center, you might be interested in what Brahna Trager shared with the United States Senate in a special report dealing with the rising need for ADS back in the late 1970s.
Since that time, many states have gotten onboard with ADS and provide some sort of funding, realizing that services of this type help wave off elderly decline and cost much less than nursing home care.
But it was Ms. Brahna who helped lead the way all those decades ago.
In her report, she said many businesses were hesitant to use the term “Day Care” in an effort to avoid “The simplistic application of the childcare concept to a set of community services for adults.” She mentioned that the services provided involve “choice and full participation.”
Ms. Brahna noted that one facility objected to the comparison by stating, “We are not a place where people are left in safety as children are left, until someone is ready to ‘pick them up’ again. Our services have an objective, and those who are consumers are not children.”
She also emphasized that persons using these Centers should be called “Participants” rather than “Patients” in order to emphasize their ambulatory status and their need for a variety of services.
“They are adults who may be limited for shorter or longer periods of time in their capacities for total self-care,” she said. “But they are Participants in their own care programs, with everything that the term implies.”
She stated that ADS are a health care resource that is just as essential in communities as Hospitals, Rehabilitation Centers and other facilities.
Her report reflected positively on the need for ADS, and the importance of allowing an individual to sustain their relationship to their home environment and continue using their own bed each evening.
Your Local Area Agency On Aging Is A Great Resource For Senior Services.
For More Information
If you are seeking more information on insurance, an Independent Risk Management Professional can work with a broker as your advocate and help design the best program to fit your needs. And they’ll probably be able to save you some money in the process.
If you’re starting an ADS Center or are running one now, you may want to join the National Adult Day Services Association to find lots of resources.
And if you’re looking for material to help Participants and Families who are considering ADS, HelpGuide.org offers suggestions on how to find a center, more details about services and benefits (including benefits for Caregivers), questions to ask ADS providers, a site visit checklist and more. They have given us permission to link to one of their extensive articles here.
Please Contact Us If We Can Be Of Service.
(Photo Credits: Feature Photo of Smiling Man and Woman; rawpixel.com/Pexels; Man With Hand On Face – Gerd Altmann/Pexels; Lady In Isolation – Isabela Naiara Matlide/Pexels; Lady Smiling & Watching Participants – Luizmedeirosph/Pexels; Man in Hat Smiling – Brett Sayles/Pexels; and Hands – rawpixel.com/Pexels.)
RISK SOLUTIONS—The saying, “If it sounds too good to be true, it probably is,” does turn out to be correct in many instances. However, sometimes—as with all sayings—the opposite can be true.
Sometimes, something that sounds good IS good.
Author Richard Carlson agrees with me on this one. He added to this quote by saying, “In fact, the suspicion, cynicism, and doubt that are inherent in this belief can and does keep people from taking advantage of excellent opportunities.”
(Carlson wrote “Don’t Worry, Make Money: Spiritual and Practical Ways to Create Abundance and More Fun in Your Life.”)
But why am I talking about this quote?
Because I work for a firm that offers services that sound too good to be true.
I work for an Independent Risk Management Company that has a track record of saving its clients 25-35% on Property & Casualty Insurance.
So, my answer for you on “How To Save 25-35% on YOUR Commercial Insurance” is “Get a Risk Manager.” Or even better, “Hire us!”
My bosses like to keep that 25-35% percent figure AS a percentage. But to me, when I see 25%, I see a fraction. I see these savings as cutting at least ¼ of your business insurance cost!!
One-fourth is A LOT to me.
And when you realize that insurance of this type is usually the third-largest expense that your business has (after payroll and supplies), saving 25% or more makes a HUGE difference.
We’re talking thousands and hundreds of thousands of dollars. And for one company, my bosses even saved approximately $1.4 million in premiums!
Of course, results will vary depending on what type of company you have and the services or products you produce, but here are a few examples:
BUT… How Do They Do This?
How do Risk Managers save clients such amazing percentages on their Commercial Insurance costs?
Risk Managers reduce rates and premiums by:
- Reviewing your coverages to detect gaps and overlaps;
- Checking for accurate limits and adequate deductibles;
- Designing an insurance program JUST for your company;
- Creating bid specifications tailored to match your needs; and
- Bidding out your account to multiple brokers for the best value.
PLUS, there are many other Risk Management Services where additional savings can also be found, such as your Workers’ Compensation Program.
AND, for even more Commercial Insurance savings tips from our staff, see “Renewal Reductions: How To Get Lower Insurance Rates & Premiums.”
Take The First Step Toward Savings
Our Risk Managers have room to take on a few clients right now. Should you be among them?
Why not take advantage of our Free Cost Benefit Survey to find out how much savings you could expect. That’s a good first step!
Risk Managers are experts in the fields of risk and insurance—and you can take advantage of their expertise to help your business save money. Our Risk Managers are always going to find enough savings to more than cover their fees, so you’re assured a return on your investment.
My bosses compare themselves to companies using lawyers in court and accountants for tax needs. I’ll add two more examples. Do you cut your own hair or do you go to a cosmetologist? How about your car? Maybe you fix it yourself, but most probably you use a mechanic.
Why would you NOT want to get someone involved in helping your company who specializes in helping companies just like yours? And Risk Managers don’t just help companies save money—they ensure that their clients are protected from all types of risk, so they can focus on business.
YOUR Advocate In The Insurance Marketplace
There are some business insurance coverages you might not fully understand. And there are important coverages you may not have yet. Risk Managers work in the Insurance Marketplace every day. They understand the multitudes of coverages and can match the right policies to your unique business needs.
My bosses are available to discuss any of your concerns prior to the No-Obligation Cost Benefit Survey. So, feel free to reach out to us via email (firstname.lastname@example.org) or phone (800-548-0117 or 205-921-9029).
Our Risk Managers ENJOY acting as advocates for their clients. American Risk Managers was actually founded on the idea that companies need someone “sitting on their side of the table” during insurance negotiations.
We’ve even designed our website to provide you with information about Risk Management processes and Common Risk Management Issues.
If you have a medium to large-sized company, you REALLY do need a Risk Manager. They can save you lots of time, lots of worry and lots of money! And the most cost-effective way to do so is by using a consultant like us. Only truly “independent” firms can offer completely unbiased advice.
We would love to help you out if your business is located in any of the five states we serve—but if you choose a competitor that’s okay, too. We just have your best interests at heart. Why shouldn’t you have less risk and more savings?
Sometimes things that sound too good to be true turn out to “really be true.” Like how Risk Management (that you didn’t even realize you needed before) can turn out to save you thousands of dollars in Business Insurance costs.
What’s YOUR Possible Business Savings Percentage?
(Photo Credit: Pixabay)
RISK SOLUTIONS—Your company probably just renewed its commercial insurance policies in January, unless your renewal date is in July.
Property and Casualty insurance premiums are big bills to pay—usually the third-highest cost associated with doing business after payroll and supplies.
So, you were alerted that it was time to renew and you renewed.
Did you get a better insurance rate? Did you get a lower premium than the previous year?
Did you even know that a company has any power at all in these situations?
Well, if you had an Independent Risk Manager working with your company you wouldn’t have to worry about any of those concerns—you’d get plenty of “bang for your buck,” plus a whole lot more.
But, let’s say you don’t have one yet. What else can you do?
How about we just interview a 40-year-veteran of the Risk Management World and ask him for some tips? Why not?
Here are five insurance renewal cost-saving tips from Walter Haney, Sr., the founder of American Risk Managers, that you can use for your business.
Insurance Renewal Rate & Premium Reduction Tips:
1) Bid out your insurance account;
2) Negotiate a pre-renewal rate reduction;
3) Review coverages and remove items that do not require insurance;
4) Delete unneeded or previously required coverages after mortgages are satisfied; and
5) Increase deductibles for large premiums and low loss coverages.
Before we explore more about these tips, be aware that Mr. Walter has provided this information on an “opinion only basis.” He strongly urges persons to seek expert advice for the best results.
“The simplest and surest way to achieve the results that you’re looking for—more coverage and less premium—is to hire an Independent Risk Management Consultant,” he noted.
Bidding Out Your Insurance Account
To bid out your insurance account, you’re going to need to provide some pretty detailed specifications, complete numerous applications, determine which agents to include, and assign markets.
But… before you do all that, you might want to review this posting regarding setting proper limits on your commercial property insurance.
During the bid process, you may also have to answer numerous questions from all the agents involved, as each company has different procedures.
Lastly, after receiving your policies from the company of your choosing, make sure to check your new insurance policies to ensure that they match all of your specifications.
Negotiating Rate Reductions
If you meet with your current insurance agent to discuss a possible rate reduction, make sure to explain that you’d prefer to receive a rate reduction in lieu of bidding out your account.
Some agents may say there is nothing they can do about your rate—until faced with competition. And then, not-too-surprisingly, a little room may be found for reduction.
Also, remember that “business is business.” Don’t just stay with your current insurance agent because he is your golf buddy.
And, although 50% of our clients ultimately remained with their current agents after a bid process (that STILL got them a lower rate), that means that the other half of our clients moved on to “greener agent pastures.”
Again, Mr. Walter noted, “You might want to look at the employment of an Independent Risk Management Consultant, simply because they will know how much you should ask for. They won’t leave anything on the table.”
Reviewing & Removing Items
You would be amazed at how much money some businesses spend on paying premiums for items that don’t actually need insurance coverage.
And nearly just as many times, we find overlaps in coverages—where items are listed on more than one type of coverage—meaning you are needlessly paying double the amount you should be paying.
But let’s return our focus to reviewing and removing items that do not require insurance.
“For instance, vehicles that are currently on the automobile vehicle listing, but are parked and never used—need to be removed,” said Mr. Walter
“By the same token, vehicles that have depreciated (accumulated enough age) that their value is not worth replacing—it’s not worth it to insure them.”
Mr. Walter also noted that, even if vehicles have depreciated to the point of no real value, businesses should still keep liability coverages.
“Any vehicle that goes off the lot and is on any public road or private road—anything other than company premises—needs to be insured,” he said. “I would just remove physical damage and keep liability.”
Deleting Unneeded Coverages
Another way to save money on insurance costs is to delete any coverages that you no longer need or are no longer required to have. (Banks require insurance coverage until loans are fully repaid.)
“You could look at items that have been insured, but that have no real exposure to loss and remove the coverage on them,” Mr. Walter said. “If you’ve got block or metal objects—items not likely to be destroyed—you could consider not insuring them.
“With other insured items, if you have mortgages on them and the mortgage has been satisfied, you are not required to keep the insurance.”
An example of a mortgage-free situation might be your company’s delivery fleet—after all the vehicle loans have been paid.
“If you have a large fleet of vehicles—tractors and trailers—you might choose to insure those against a catastrophic loss and assume the responsibility for the payment of a single vehicle loss,” Mr. Walter said.
“Let’s say your current automobile premium is $600,000 or $700,000. By going to a catastrophic loss policy, you might reduce that premium to $100,000. That leaves you $500,000 or $600,000 to pay for any losses that you have on those vehicles.”
Increasing Certain Deductibles
If you have large values of property and your policy has a $5,000 deductible on it AND you have low loss levels, Mr. Walter said you’re really not getting any real value for your money.
“For instance, if you have a building that’s worth $1 million, and you have contents (machinery and equipment) that’s worth $2 million, and raw materials and finished goods in there worth $3 million—all at once, you’ve got $6 million in property exposure there,” he noted.
“And, if you have low or no losses, we can probably find you significant savings in all those areas.”
Using just the building coverage as an example, Mr. Walter explained, “Let’s say we’ve got $5,000 deductible on the $1 million building and we’re paying—just for property—we’re paying about $25,000 in premium.
“If we make the deductible $50,000, we could end up paying 50% less in premiums, which would equal $12,500. And that’s just one year’s savings.”
(Explanation: Premium of $25,000 divided by 50% equals $12,500, resulting in a new premium amount of $12,500—or $12,500 LESS, which is half of your original premium.)
But that’s not where the savings ends when a professional is helping you find even more ways to cut business insurance costs.
“Then, of course, you’ve got all the other policies to consider,” Mr. Walter noted. “You’ve got general liability, fleet coverage, umbrella policies and business interruption. You have a whole bunch of policies in there, but some of those you won’t want to apply a deductible to.
“You only want to apply higher deductibles to large premiums and to low losses.”
Mr. Walter also noted that deductibles of more than $50,000 can also be applied to some policies.
“Well, you would just price it up,” he said. “Anywhere from $50,000 to $100,000 to $250,000. You just move up the ladder on the amount of the deductible and the insurance company will give you a price for it all the way up. And you’ll hit a point to where that’s what you ought to take.”
Risk Management = Less Risk And Best Results
Mr. Walter has already noted that—for the best results—you should get help from an Independent Risk Management Consultant.
“They’ll be able to find even more savings in all of these categories,” he said. “You’ll obtain the best results in rate reductions, premium reductions and have LESS RISK OVERALL for your business.”
What The Pros Know
Mr. Walter also gave us several reasons why having a professional bid out your company’s insurance account is a great idea.
A Risk Manager:
- Will be able to help you pick the brokers that you’ll need—brokers who are aware of the coverage needs of your particular industry;
- Will know a number of brokers that are large enough to handle the account and who are well-versed in the type of insurance that you will need and its requirements;
- Will be able to draw up bid specifications, help you with the selection of brokers and furnish the brokers with the required underwriting information;
- Will handle the bid process for you, and at the completion of the process, design a spreadsheet that will tell you exactly what you’re being offered; and
- Will order binders and upon the issuance of the policies, will review the policies to make sure that you’ve bought what you wanted to buy and that you’re paying for what you thought you were paying for.
By handling the bid process, Risk Managers will not only save you money, but also an enormous amount of time. And they provide you with the peace of mind that you’re completely covered—a very valuable asset.
“Most business owners and managers are just not well-enough versed in the insurance terminology and insurance underwriting requirements needed to go through the whole bid preparation and process necessary to make sure that you don’t leave out something,” Mr. Walter said.
‘If you leave something out, it won’t be covered. And it can be devastating to your business to have an uninsured claim.”
YOUR Best Interests
Mr. Walter always has YOUR best interests in mind. That’s why he’ll always recommend hiring an Independent Risk Management Consultant.
And that’s why he created American Risk Managers—to help businesses just like yours and to advocate for them in the Insurance Marketplace.
“Only truly independent firms will have your company’s best interests at heart,” he said. “Companies that SELL insurance are not truly independent.”
If you’d like to learn more about risk-reduction and cost-saving, Mr. Walter has four decades of Risk Management experience—and he loves to share.
“I’ve provided some simple tips here that any company can understand and implement,” he noted. “I hope you find them helpful in your next renewal.
“But there are many more ways we can assist in negotiating rate reductions, reviewing coverage needs, checking for gaps or overlaps, determining safe deductible amounts, and getting you lower premiums. So, give us a call.”
Let An Expert Review Your Insurance Rates & Premiums!
(Photo Credit: Pixabay/Pexels)
RISK SOLUTIONS – If your commercial insurance premiums end up being more—or even double—the amount quoted by your broker, you certainly want to understand why this happened.
And you also want to learn “how” this happened, so you can prevent it from EVER happening again.
We frequently get calls asking why insurance companies charge “audit increases” after audits by independent insurance auditors or by company auditors within the insurance company itself.
I spoke with three Independent Risk Managers about this issue to get some answers for you.
The top three reasons why audits increase commercial insurance costs are:
- Your company’s sales have gone up;
- Your company’s payroll has increased; or
- There were errors in the audit.
But, before we move on to learn more about these reasons why audits increase commercial insurance costs, you should be aware—if you’re not already—that most companies are only paying “an estimated premium” for certain types of insurance policies at the time of purchase.
Commercial insurance coverages with estimated premiums include:
- Workers’ Compensation;
- General Liability; and
If you didn’t know about this, then you’ve probably been blindsided by your audit increase estimate. And even if you did know—you’ll still want to make sure that you’re not paying any more than you should be paying.
Whether it’s a company auditor or an independent auditor, all three Risk Managers also told me that unintentional errors are frequently made—not just on the company’s side—but on the auditor’s end.
Your next best step is probably consulting with an Independent Risk Manager immediately. But continue reading for a few reasons that might give you hope that your audit increase total could be lowered significantly.
For example, one of our Risk Managers recently helped a client with an audit problem where they were facing a $17,000 audit increase charge.
After investigating, this Risk Manager found a common payroll-related error, which he quickly straightened out. The final audit charge for this client was less than $15.
Sales- Or Payroll-related Audit Increases
Your sales have gone up. Or your company has gotten so busy, you’ve had to hire more staff. Congratulations! These are some of those “good problems to have.”
But even if your sales have taken off or your payroll has grown in size, you still have some options to help ward off a big audit increase.
- Alert your consultant Risk Manager to the increase in business activity;
- Ask your Risk Manager to go ahead and track what your increased insurance cost might be; and
- Go ahead and start budgeting now for your projected audit increase.
But don’t stop there. It’s great to know a ballpark figure on how much you’ll have to pay. But you also want to ONLY pay the correct amount.
If you’re not already working with a Risk Manager, there may STILL be errors in your system that are affecting your premium costs.
Minor Errors Can Cause Major Problems
You shouldn’t have to pay extra premiums because of miscalculations and wrong classifications.
Your Risk Manager can perform a thorough investigation into ALL of the areas that are involved in ALL the different types of audits.
They know the correct procedures to follow and the essential information that needs to be checked. They’ll ensure that only accurate figures are used to define your company’s chargeable exposures.
They can not only prepare you for your audit, they can also check your past audits for common errors.
Some common errors to check include:
- Incorrect code classifications;
- Inaccurate sales records;
- Inaccurate payroll records, and
- Not establishing proper “limits” on executive payroll.
These are only a few of the many items that need to be checked and updated while preparing for your audit. This is the type of information that your Risk Manager can help you handle—ensuring that all necessary records are kept current and updated when needed.
To Audit Or Not To Audit
Just like your company is unique, all insurance companies are different, too. And all the different insurance companies have different policies and procedures for their audits.
Many companies believe it’s just their Workers’ Compensation and General Liability policies that get audited. But there are all types of audits, so it’s best to be prepared for all circumstances.
I asked for a few examples and then shared them below to hopefully help clarify this tricky-to-understand dilemma.
Examples Of Policies That Are Audited
Automobile Policies – An audit of your automobile policy will normally be based on the number of vehicles in your company’s fleet.
The number of vehicles you started with at the beginning of the year will be compared to the total number of vehicles this company is now providing coverage for at years’ end.
If you’ve increased your fleet size, this factor is an understandable reason for an increase in premiums.
If you have vehicles on your property that are not running, or have been declared as surplus or that have been sold—and they are STILL listed on your policy—these need to be deleted.
Property – Adding more property or equipment to your asset list during the year will cause a Property Value increase during a Property Audit.
Just make sure all of your records and books are checked for accuracy and that there are no properties or equipment on the list that shouldn’t be there.
General Liability – These types of premiums are driven by an increase or decrease in payroll or sales. Increased sales or payroll will lead to audit premiums being added.
Decreased sales or payroll should result in lower insurance premiums. If not, your audit needs to be re-checked by a professional.
Workers’ Compensation – One of the most common types of audit errors can be found in your company’s Workers’ Compensation codes.
You certainly don’t want to be paying higher rates for office employees who’ve been mistakenly classified as telecommunications tower repairmen.
Of course, this is just an example. But Risk Managers find errors in code classifications FAR too often. Both on the company-side and the auditor-side.
Having a professional double-check your codes and classifications could mean the difference in thousands of dollars in savings.
Payroll Audit – Another less well-known—but equally costly area—that drives up insurance costs deals with a company’s payroll.
Many companies add up their entire payroll and provide that total to their insurance company as the basis for their insurance coverage.
But, that’s not how it’s supposed to work.
The payroll amount for some of your higher-salary employees—your Directors and Officers—can be “limited” or “capped.” If your insurance company is not doing this, you’re going to be very surprised at the difference in cost.
For example, your Directors and Officers may make $400,000 a year. BUT, your insurance carrier can only charge you a premium on a much smaller portion of that amount.
Again, just for an example, the amount you’re required to pay on $400,000 could be around $175,000. So, you could have been paying premiums on $225,000 more than you should have been.
Another important note: You will also need to make sure all of your Directors and Officers are declared as such in the bylaws of your company.
There are many more considerations involved in audits than we can cover in a posting of this type. But to obtain the best possible rates for all of your company’s operations, it is essential that your records reflect only chargeable exposures.
Some areas of concern include:
- Sales – Records must be accurate for General Liability and assigned by the correct code classifications;
- Payroll – Records must be accurate for Workers’ Compensation;
- Auto – Will be based on unit numbers and increases in same;
- Workers’ Compensation – Based on accurate payroll, correct code classifications and Experience Modification Factors;
- General Liability – Based on sales and classifications records (should cross-reference back to the classifications for payroll and Workers’ Compensation); and
- Umbrella – An audit in this area will be based on sales or payroll records.
If you feel this is starting to become confusing, you are more than justified. Your time is better spent running your business than trying to figure out very-hard-to-understand insurance and Risk Management issues.
Risk Managers can investigate ALL of these types of insurance audits for you and ALL of your company’s records. They’ll ensure that you are prepared for increases in any areas. And most importantly, that you are protected against any unfounded increases.
So, why not consult with an expert?
Get a Risk Manager to:
- Review the hundreds of code classifications for you;
- Help you create an accurate payroll and sales record; and
- Ensure that the proper limitations have been placed on your executive payroll.
Now, you may be thinking, “But I can’t afford a Risk Manager.” Well, I have a nice last surprise for you. A true Independent Risk Manager is not only going to help you sort out all your audit issues, they’ll also help you get the lowest possible coverage prices.
And usually increased and enhanced coverages for LESS cost.
AND they frequently find hidden savings in MANY different insurance- and risk-related areas.
The Risk Managers I know—and who helped me with this post—have ALWAYS found enough savings for their clients to MORE than cover their fees.
To learn more about several other ways that your business can benefit from Risk Management services, please visit our Common Types of Risk Management Issues section.