How to turn your insurance policy into a business strategy

In today’s fast-paced business environment, finding ways to control and maximize costs is the name of the game. While insurance expenses may seem like a fixed cost beyond your control, shifting your perspective from simply purchasing insurance to strategically financing risk can make quite the difference.

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The insurance industry is inherently cyclical, subject to various external influences that can cause significant market fluctuations. This volatility often leaves businesses struggling to manage one of their top operating expenses. However, this challenging landscape presents an opportunity for forward-thinking organizations to take a proactive approach.

Savvy business leaders recognize that collaborating closely with their insurance agents and carriers is not just about securing coverage, it’s about crafting a comprehensive, well thought out plan to turn risk into a competitive advantage. Now is the time for your operation to embrace this proactive approach and leverage risk management to set your business apart in the marketplace.

Risk strategies

After working with hundreds of crane, rigging and specialized carrier operations over the years, there are two distinct mentalities on insurance. Some companies purchase a policy and put insurance out of their minds for the next 365 days. While these companies are doing and expecting nothing in return for purchasing insurance, others actively manage risk throughout the policy year.

To illustrate these two mentalities let’s take two fictitious operations – John Smith’s Crane and Richard Roe’s Rigging. Both are experienced and well-known operations in the industry. They are both working hard to run a profitable business despite the myriad of challenges they face. One of the main differences between these companies is how they handle insurance.

John understands insurance to be a commodity, something beyond his control. He likens it to fuel costs, often looking for the cheapest price. To John accidents are more or less an unlucky event. And losses? They are simply a cost of doing business in this industry. As you would expect, John’s least favorite time of the year is when his insurance renewal is approaching.

Conversely, Richard recognizes the potential to manage his company’s risk effectively. He has successfully engaged employees at all levels in adopting a proactive approach to risk and accident reduction. By implementing a Return to Work program, utilizing Automated Event Recorders, and enhancing the overall safety program, Richard has significantly decreased claim frequency, positioning his company to thrive in the future.

Competitive advantage

After reading the tale of two companies, do you find yourself aligning more with John, but you want to be more like Richard? It may seem like an uphill, never-ending battle but turning risk into a competitive advantage is entirely possible. Here are a few steps many successful company owners have taken to make it happen:

■ Adopt a proactive, holistic approach: Secure support and commitment from senior leadership to actively work on managing risk throughout the policy period, not only around renewal time.

■ Implement risk mitigation tools:

Utilize strategies and tools that fit your operation and reduce your risk for both accidents and Workers’ Compensation claims.

■ Take calculated risks: The insurance industry has evolved significantly, offering innovative options for risk financing. Evaluate different loss-sensitive risk financing strategies, such as captives, risk retention groups, and large deductibles. Regularly consult with an insurance broker who possesses deep expertise in these programs, so they can help you explore and reassess the best solutions for your needs.

■ The long game: When choosing insurance, determine the most efficient way to finance risk over a three-to-five-year period. Purchasing insurance in the short-term often leads to large collateral burdens, poor claims outcomes and sudden premium increases at renewal.

■ Maximize Carrier Resources: Many companies remain unaware of the innovative programs available, and some even perceive loss-control visits as an inconvenience. However, the most successful operations recognize the value of these services and actively leverage them to improve safety and reduce risk. Ensure that you fully utilize the loss-control services offered by your insurance carrier.

Risk can be managed more effectively than many realize, transforming it into a significant competitive edge in the industry. Adopting a disciplined, proactive approach to risk management isn’t just theoretical – it’s a proven strategy that modern business owners should seriously consider to maintain their success.

THE AUTHOR

Rose Augustin is senior marketing manager for National Interstate Insurance Company based in Richfield, OH. National Interstate Insurance is rated “A+” (Superior) by A.M. Best.