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Category: Loss Prevention

Mitigate Risks and Save on Insurance Premiums

Posted on by Ownby Insurance Service

Risk is an inevitable part of running a business, but the way you manage it can greatly impact your financial stability and long-term success. For small businesses, risk mitigation can also lead to something even more desirable – save on insurance premiums.

Let’s explore four key strategies that every small business can implement to mitigate risks and potentially lower insurance costs.

1. A Comprehensive Safety Plan
A well-crafted safety plan is the foundation of any risk management strategy. Workplace safety should be prioritized, not just for the well-being of your employees but also to minimize potential liabilities.

Steps to develop a safety plan:

  • Identify Hazards: Walk through your workplace to identify hazards that could harm employees, customers, or visitors. Focus on common risks like slips, trips, falls, ergonomic injuries, or equipment failures.
  • Implement Training Programs: Train employees regularly on workplace safety procedures. Ensure they know how to use equipment, handle hazardous materials, and respond to emergencies effectively.
  • Regular Audits and Updates: Revisit your safety protocols to account for changes in your business operations. Conduct regular safety audits to protect all involved.

2. Strengthen Cybersecurity Practices
Cybersecurity is critical, especially for small businesses where digital vulnerabilities can quickly escalate into expensive breaches. A single cyberattack can cost thousands in recovery efforts and permanently damage customer trust.

Effective cybersecurity practices include:

  • Update Software Regularly: Update all hardware, software, and firmware regularly to fix security flaws as soon as they’re discovered.
  • Implement Multi-Factor Authentication (MFA): Add an extra layer of security to your business accounts, making it harder for hackers to gain unauthorized access.
  • Educate Employees: Conduct regular training for employees on common cyber risks such as phishing and scams. Consider third-party “tests” of your team’s awareness.

3. Invest in Loss Prevention Programs
Proactively seeking to prevent losses before they happen can make your business more resilient. Loss prevention not only preserves your operational integrity but also makes you a lower-risk client in the eyes of insurers.

Examples of loss prevention measures include:

  • Install Security Systems: Use alarms, surveillance cameras, and access control systems to protect your physical assets.
    •Maintain Equipment Regularly: Stay on top of maintenance schedules to minimize accidents caused by faulty machinery or infrastructure.
    • Emergency Response Planning: Develop a clear plan for handling emergencies such as fires, floods, or natural disasters. Equip your workplace with emergency kits and conduct regular evacuation drills.

4. Assign Risk Management Responsibilities
Effective risk management often comes down to human oversight. Assigning dedicated personnel to identify and tackle risks ensures this critical area of operations doesn’t fall by the wayside.

Key tips for managing risk responsibilities:

  • Appoint a Risk Officer or Manager: Designate an employee or team responsible for observing and managing risks across your organization.
  • Document and Track Incidents: If a minor incident occurs, document the details. Tracking these enables proactive fixes before a pattern of larger risks emerge.
  • Use Risk Management Software: For smaller businesses without a full team, affordable tech solutions provide deeper insights into operational risks.

The Connection Between Risk Mitigation and Insurance Savings

Insurance companies assess the likelihood of a claim being made when assigning premium rates. By implementing robust safety measures, managing losses, and using technology to prevent risks, you’re actively reducing the probability of incidents. This lower risk profile directly translates into potential insurance savings.

Looking for more insights on how to protect your business? Talk with Brandon Patterson on our team about how these practices can go hand-in-hand with your insurance coverages and the resources that may be available to policyholders.

How Claims Impact Your Insurance Premiums

Posted on by Ownby Insurance Service

Your insurance premium is based on many factors, from the type of coverage you choose to your overall risk profile. But one aspect that often surprises policyholders is the impact of claims on their premiums. Whether you’ve recently filed a claim or you’re thinking about it, it’s important to understand how claims can influence the cost of your coverage.

Loss History: A Snapshot of Your Risk

Your loss history, or claims history, is a critical factor insurers use to determine your premium. This is essentially a record of all the claims you’ve filed in the past. Insurers view this as a representation of your risk level – policyholders who have filed multiple claims are generally seen as more likely to file additional claims in the future.

Each insurer has its own thresholds for how claims history impacts your premiums, but generally, past claims can lead to higher premiums.

Why Does Your Loss History Matter Impact Your Insurance Premiums?

Your loss history paints a picture for your insurer. For example:

  • If you’ve experienced multiple incidents, it could indicate a higher likelihood of future claims.
  • A long history of claims, even if they’re for relatively small amounts, can label you as a higher-risk policyholder.

While you can’t change your past claims, being aware of how your loss history is assessed can influence your approach to future claims.

Claim Frequency and Size Matter

Number of Claims

In insurance, the old saying “the fewer, the better” rings true. Filing multiple claims within a short time – even for small amounts – can signal a higher risk level to your insurer. Insurers often see frequent claims as an indicator of risk-prone behavior, even if the claims themselves are low-cost.

To manage your premium effectively:

  • Avoid filing claims for minor damages that fall close to or just above your deductible.
  • Consider whether the cost of repairing or replacing an item out-of-pocket is more affordable in the long run.

Claim Size

The size of the claim matters just as much as the number. Large claims require significant payouts from the insurer. When an insurer has to pay a big settlement for a loss, the chances are your premium will move upward to reflect the cost.

For instance, a single high-value claim – such as a major accident or property damage – might have a bigger impact on premiums than several smaller claims.

The Impact of Your Deductible Choice

Your insurance deductible – the amount you agree to pay out-of-pocket before your insurance kicks in – also plays a major role in claims and premiums. Filing claims for damages that barely exceed your deductible can lead to higher premiums in the future, meaning you’re left paying more overall.

The Value of a Claims-Free Credit

Insurance providers often reward policyholders who don’t file any claims over a certain period. This is commonly known as a claims-free discount or credit. Maintaining a claims-free record demonstrates a lower risk level, which insurers may reward with a reduced premium or special discounts.

Filing a claim could result in the loss of this credit, which can significantly increase your premiums in the long term. Depending on your provider, the impact of losing a claims-free credit can sometimes outweigh the benefit of filing a minor claim.

“Then Why Do I Even Have Insurance?”

All this doesn’t mean you should avoid filing claims entirely. Insurance exists to protect you in situations where the losses are too great to bear out-of-pocket. However, carefully evaluating the situation and considering the long-term implications can help you balance coverage with premium stability.

Smart Tips to Manage Insurance Claims and Premiums:

  1. Review Your Policy Carefully
    Understand your deductible amount, what types of incidents are covered, and how claims may impact things like claims-free discounts.
  2. Weigh Filing a Claim Against Out-of-Pocket Costs
    If the repair or replacement cost is close to your deductible, it may save you money long-term to pay out-of-pocket rather than file a claim.
  3. Keep Your Loss History in Mind
    Evaluate how additional claims could impact your overall risk profile and premiums.
  4. Focus on Preventative Measures
    Take steps to avoid future incidents, such as securing your home, maintaining your property, or installing safety features. Proactively reducing risks can help keep your premiums manageable over time.
  5. Bundle Your Insurance Policies
    Many insurers offer discounts for bundling, which can offset increased premiums due to claims.
  6. Ask About Claims Forgiveness
    Some insurers offer “claims forgiveness” features, where your first claim won’t impact your premium. Consider whether this add-on is available and worth adding to your policy.

When to File

Ultimately, balancing the cost of a claim versus the long-term implications for your premium is key. By thinking strategically and being proactive, you can ensure your insurance remains both effective and affordable. If you’re unsure, discuss the deductibles and potential impacts of filing the claim with our team and we’ll help you understand your options – but we won’t make the choice for you. That’s your decision!