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1) Many businesses do not properly evaluate their insurance needs and options, often relying too heavily on brokers who may not have the businesses' best interests in mind. 2) Key mistakes include not performing risk assessments, not thoroughly reviewing policy details and exclusions, and not focusing enough on safety programs to reduce long-term costs. 3) CFOs should take a more active role in their risk management and insurance procurement to avoid overpaying or having coverage gaps by seeking multiple competitive quotes and ensuring brokers are representing the business's interests alone.

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5.5 Most Expensive Mistakes CFO’s, CEO’s, COO’s, Business Owners, and Board Members Face When Reviewing Insurance Options by: Scott Wolff, Premier Risk Management, LLC James King, Premier Risk Management, LLC and agents are the sales force of the insurance Insurance is something you deal with companies. every year and for the typical Most state regulatory employees are plucked from consumer the world of insurance can within the insurance industry and once that job is be filled with confusion, aggravation over they typically go back to the sell side of insurance thus it is a very closed industry group. and even heartache. CFO’s we speak with are frustrated with their insurance. There are no real consumer perspectives to balance out the many industry voices pushing for They don’t have time to thoroughly the industry policies. evaluate what they are getting… they The only real advocate a corporation has is one don’t fully understand the coverage that is Independent and represents only their especially the exclusions and how they interest. may affect a loss… they are not even "An error doesn't become a mistake until you certain that they are getting the “best” refuse to correct it." – Orlando Battista deal. The Mistakes of Going at It Alone The Statistics The US Department of Labor estimates that forty 1. Not Performing a Risk Assessment – The percent (40%) of businesses never reopen after biggest assumption CFO’s make is that the experiencing a disaster. Twenty five percent current insurance program is set up properly. (25%) of surviving businesses will lose their The real problem is that an assessment has market and shut down within two (2) years of a not been performed to evaluate what are the misfortune. true risks and exposures of the company business operations. Often they focus on the According to a report of nearly 400 CFO’s and premium not the coverage. Without knowing Treasurer’s of some of the world’s major what the true risk and exposures are you can’t corporations by leading institutions found that 85 intelligently purchase the property insurance. percent of the respondents indicated that they Thus, the insurance program is flawed from view risk management as an investment. the start. Sorry to say, but this error is discovered when an underinsured or Outnumbered and Outspent uncovered loss occurs. In the haste to sell When it comes to understanding the insurance products coverage issues and exclusionary industry consumers have few options and language contained in policies are often resources available to them when looking for missed by brokers. assistance or guidance, meanwhile insurance companies have an army of resources. Brokers PREMIER RISK MANAGEMENT, LLC 110 Warren Ave, Suite 3, Ho-Ho-Kus, NJ 07423 * 201.573.1100 ph * www.premierriskmgt.com
Beyond the insurance product often More time and devotion should be focused on overlooked is the risk transfer mechanism a sound pro-active safety and loss control during contract review. Many organizations program for the long term cost savings to be rely on their lawyers to advise in this area … realized. Safety and loss control programs the problem is lawyers tend to use boilerplate should be instituted with the big picture in language or do not fully appreciate the mind which is geared toward the protection of insurance language as it relates to the company assets and human capital. operations and associated liabilities. 4. Competitively Market the Insurance The CFO acting as the risk manager and not Program in a Professional Fashion. CFO’s being an expert in insurance can miss these explain to us that their brokers solicit quotes finer points as well. from multiple insurance carriers, they market the insurance program by bringing in a few 2. Not Reviewing Insurance Coverage in brokers, or they are just simply happy with Detail – insurance policies are contracts. their broker. Insurance companies and their claims adjusters know the significance of every word We know that not all brokers can deliver the in the contract and it is important for you to same price and product thus to get the best know how the policy will respond to a claim. results from a marketing effort it must be You have an expectation that a loss is managed and controlled properly. Remember covered. Unfortunately, exclusions are not that a Brokerage is a business just like you … discovered until a loss occurred. motivated by profits. Coverage gaps, underinsured and even over- In the property and casualty world only one insured issues exist … the policies were not broker can work with a particular insurance reviewed properly or with an eye toward company... all brokers do not represent the recovery. CFO’s need to validate their same carriers or even all of the carriers… insurance; if the policy is not written correctly some brokers say they can deal with all the from the start then you are just wasting money carriers… but in reality they do not. … it will not respond the way you assumed it Typically a substantial amount of money is would. Remember the statistic. “left on the table” and the best bottom line 3. Not Focusing on Safety Programs and the results are not achieved. Big Picture – Many companies use the 5. The Right Insurance Broker – a False purchase of insurance as the only approach to Truth. The insurance business is about their formal risk management program... Big relationships and we tend to do business with Mistake… not paying attention to safety and people we like and trust though organizations loss control is where many companies miss place too much faith in one broker. In an the boat in terms of the ultimate savings. insurance brokerage relationship CFO’s place CFO’s are caught up in too many details of their trust and guidance in the hands of an their daily business to pay close attention ... insurance broker who becomes their sole sometimes this responsibility is given source of information. We should also internally but the real problem is that they do understand that brokers are the marketing not have an eye for the bigger picture. arm of the insurance industry. Page | 2
CFO’s should consider the following questions: The Brokerage service is vital but like other 1. How do you view Risk Management … an business dealings organizations should perform a Expense or an Investment? due diligence study on the broker you are going to do business with … the carriers they represent … 2. Can you internally duplicate long term industry their ability to provide needed services. Ultimately knowledge and expertise? organizations should receive Stewardship Reports 3. Understanding of the business model of both that outline standards of excellence that a broker broker and insurance carrier to ascertain certainty will adhere to when servicing your account. that the Best Price and Coverage was achieved. We’ve seen clients who have had the same broker 4. What is your company’s risk appetite? If might be for many years only to find out that they (the client) larger than you want. were paying the highest insurance rates for many 5. Corporate Governance & Duty of Care … What is years while still not having the right coverage. you comfort level in this area? The insurance brokerage income is based on sales Conflict Free commissions, fees and contingent commission all based on a contractual relationship with an With the CFO wearing so many hats and because of insurance carrier. There are great insurance resource constraints priority is given to top initiatives, brokers out there… but the services provided are abandoning many other meaningful savings programs, geared toward the sale. including insurance opportunities that could lead to significant cash savings. However, these opportunities Has a broker ever given you advice at the same can be captured - an Independent Advisory can bring time telling you to buy from a different Broker? greater transparency and deal experience to the process. 5.5 Lack of Negotiation in the procurement process. There is a misconception that the insurance Advisors have developed strategies and solutions to product is standard and an even greater erroneous ensure risks are mitigated, major problems are avoided, time is managed, and cost reduction is a priority. belief that prices are somewhat fixed. This is simply not the case … insurance coverage How we get Started and premium is negotiable and by utilizing a professional competitive marketing effort managed by an independent advisor not only can coverage be enhanced but premium 9 times out of 10 are reduced. About Premier Risk Management Premier has offices in Ho-Ho-Kus, NJ and White Plains, NY providing middle market firms throughout the US and internationally with fee based risk management and insurance advisory expertise in the areas of commercial insurance and employee benefits. As risk management professionals, Premier Risk Management brings to the table technical skills that enhance the risk management process, proper competition, independence and uncomplicated advice. Their principals are guided and proven by the multitude of everyday practical business experiences spanning from every type of market scenario. Equipped with a combination of current market understanding and deep industry knowledge, they bring a hands-on approach, knowing that careful attention to your unique operations is the key to successful risk management which results in value creation. Their goal is to create true value for you the client. The outcome is an established track record of success and with Premier as your advocate you can focus on the business you know best. Contact www.premierriskmgt.com Scott Wolff James King 201-573-1100 x100 201-573-1110 swolff@premierriskmgt.com jking@premierriskmgt.com Page | 3

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5 5 mistakes

  • 1. 5.5 Most Expensive Mistakes CFO’s, CEO’s, COO’s, Business Owners, and Board Members Face When Reviewing Insurance Options by: Scott Wolff, Premier Risk Management, LLC James King, Premier Risk Management, LLC and agents are the sales force of the insurance Insurance is something you deal with companies. every year and for the typical Most state regulatory employees are plucked from consumer the world of insurance can within the insurance industry and once that job is be filled with confusion, aggravation over they typically go back to the sell side of insurance thus it is a very closed industry group. and even heartache. CFO’s we speak with are frustrated with their insurance. There are no real consumer perspectives to balance out the many industry voices pushing for They don’t have time to thoroughly the industry policies. evaluate what they are getting… they The only real advocate a corporation has is one don’t fully understand the coverage that is Independent and represents only their especially the exclusions and how they interest. may affect a loss… they are not even "An error doesn't become a mistake until you certain that they are getting the “best” refuse to correct it." – Orlando Battista deal. The Mistakes of Going at It Alone The Statistics The US Department of Labor estimates that forty 1. Not Performing a Risk Assessment – The percent (40%) of businesses never reopen after biggest assumption CFO’s make is that the experiencing a disaster. Twenty five percent current insurance program is set up properly. (25%) of surviving businesses will lose their The real problem is that an assessment has market and shut down within two (2) years of a not been performed to evaluate what are the misfortune. true risks and exposures of the company business operations. Often they focus on the According to a report of nearly 400 CFO’s and premium not the coverage. Without knowing Treasurer’s of some of the world’s major what the true risk and exposures are you can’t corporations by leading institutions found that 85 intelligently purchase the property insurance. percent of the respondents indicated that they Thus, the insurance program is flawed from view risk management as an investment. the start. Sorry to say, but this error is discovered when an underinsured or Outnumbered and Outspent uncovered loss occurs. In the haste to sell When it comes to understanding the insurance products coverage issues and exclusionary industry consumers have few options and language contained in policies are often resources available to them when looking for missed by brokers. assistance or guidance, meanwhile insurance companies have an army of resources. Brokers PREMIER RISK MANAGEMENT, LLC 110 Warren Ave, Suite 3, Ho-Ho-Kus, NJ 07423 * 201.573.1100 ph * www.premierriskmgt.com
  • 2. Beyond the insurance product often More time and devotion should be focused on overlooked is the risk transfer mechanism a sound pro-active safety and loss control during contract review. Many organizations program for the long term cost savings to be rely on their lawyers to advise in this area … realized. Safety and loss control programs the problem is lawyers tend to use boilerplate should be instituted with the big picture in language or do not fully appreciate the mind which is geared toward the protection of insurance language as it relates to the company assets and human capital. operations and associated liabilities. 4. Competitively Market the Insurance The CFO acting as the risk manager and not Program in a Professional Fashion. CFO’s being an expert in insurance can miss these explain to us that their brokers solicit quotes finer points as well. from multiple insurance carriers, they market the insurance program by bringing in a few 2. Not Reviewing Insurance Coverage in brokers, or they are just simply happy with Detail – insurance policies are contracts. their broker. Insurance companies and their claims adjusters know the significance of every word We know that not all brokers can deliver the in the contract and it is important for you to same price and product thus to get the best know how the policy will respond to a claim. results from a marketing effort it must be You have an expectation that a loss is managed and controlled properly. Remember covered. Unfortunately, exclusions are not that a Brokerage is a business just like you … discovered until a loss occurred. motivated by profits. Coverage gaps, underinsured and even over- In the property and casualty world only one insured issues exist … the policies were not broker can work with a particular insurance reviewed properly or with an eye toward company... all brokers do not represent the recovery. CFO’s need to validate their same carriers or even all of the carriers… insurance; if the policy is not written correctly some brokers say they can deal with all the from the start then you are just wasting money carriers… but in reality they do not. … it will not respond the way you assumed it Typically a substantial amount of money is would. Remember the statistic. “left on the table” and the best bottom line 3. Not Focusing on Safety Programs and the results are not achieved. Big Picture – Many companies use the 5. The Right Insurance Broker – a False purchase of insurance as the only approach to Truth. The insurance business is about their formal risk management program... Big relationships and we tend to do business with Mistake… not paying attention to safety and people we like and trust though organizations loss control is where many companies miss place too much faith in one broker. In an the boat in terms of the ultimate savings. insurance brokerage relationship CFO’s place CFO’s are caught up in too many details of their trust and guidance in the hands of an their daily business to pay close attention ... insurance broker who becomes their sole sometimes this responsibility is given source of information. We should also internally but the real problem is that they do understand that brokers are the marketing not have an eye for the bigger picture. arm of the insurance industry. Page | 2
  • 3. CFO’s should consider the following questions: The Brokerage service is vital but like other 1. How do you view Risk Management … an business dealings organizations should perform a Expense or an Investment? due diligence study on the broker you are going to do business with … the carriers they represent … 2. Can you internally duplicate long term industry their ability to provide needed services. Ultimately knowledge and expertise? organizations should receive Stewardship Reports 3. Understanding of the business model of both that outline standards of excellence that a broker broker and insurance carrier to ascertain certainty will adhere to when servicing your account. that the Best Price and Coverage was achieved. We’ve seen clients who have had the same broker 4. What is your company’s risk appetite? If might be for many years only to find out that they (the client) larger than you want. were paying the highest insurance rates for many 5. Corporate Governance & Duty of Care … What is years while still not having the right coverage. you comfort level in this area? The insurance brokerage income is based on sales Conflict Free commissions, fees and contingent commission all based on a contractual relationship with an With the CFO wearing so many hats and because of insurance carrier. There are great insurance resource constraints priority is given to top initiatives, brokers out there… but the services provided are abandoning many other meaningful savings programs, geared toward the sale. including insurance opportunities that could lead to significant cash savings. However, these opportunities Has a broker ever given you advice at the same can be captured - an Independent Advisory can bring time telling you to buy from a different Broker? greater transparency and deal experience to the process. 5.5 Lack of Negotiation in the procurement process. There is a misconception that the insurance Advisors have developed strategies and solutions to product is standard and an even greater erroneous ensure risks are mitigated, major problems are avoided, time is managed, and cost reduction is a priority. belief that prices are somewhat fixed. This is simply not the case … insurance coverage How we get Started and premium is negotiable and by utilizing a professional competitive marketing effort managed by an independent advisor not only can coverage be enhanced but premium 9 times out of 10 are reduced. About Premier Risk Management Premier has offices in Ho-Ho-Kus, NJ and White Plains, NY providing middle market firms throughout the US and internationally with fee based risk management and insurance advisory expertise in the areas of commercial insurance and employee benefits. As risk management professionals, Premier Risk Management brings to the table technical skills that enhance the risk management process, proper competition, independence and uncomplicated advice. Their principals are guided and proven by the multitude of everyday practical business experiences spanning from every type of market scenario. Equipped with a combination of current market understanding and deep industry knowledge, they bring a hands-on approach, knowing that careful attention to your unique operations is the key to successful risk management which results in value creation. Their goal is to create true value for you the client. The outcome is an established track record of success and with Premier as your advocate you can focus on the business you know best. Contact www.premierriskmgt.com Scott Wolff James King 201-573-1100 x100 201-573-1110 swolff@premierriskmgt.com jking@premierriskmgt.com Page | 3