5 Commercial Insurance Best Practices to Help Lower Your Premiums

What is the best kept business secret in America?

Over the years I’ve picked up nuggets of business insights. Some like the use of business ratios were introduced formally in school, some informally from media, interviews, or other sources.

When I was young, Shell oil hit struck oil on the family farm (Taratuta 34A) in the north-east corner of what is known in geologic terms as the Michigan Basin. We were going to be rich!

Unfortunately, after several drilling attempts, due to high gas pressures and the likelihood of a blowout, the well was sealed off, capped, and cemented, and life became ordinary again. But it was a nice dream while it lasted.

One thing I did learn, at that time from a wildcatter, was that more money went into the ground searching for oil, then came out of the ground, in the form of profits. Yes, back in the day, the oil business could be quite speculative.

I later heard this same concept from a stockbroker: investors can easily put more money into stocks then they ever take out—not a good strategy to build wealth. This same theme would emerge, again and again. Other examples run the span from the airline to biotech industries.

For example, in 2007 Warren Buffett mentioned in one of his famous letters to stockholders, that the airline industry, as a whole, is unprofitable, saying, “if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.” He then later forgot his own foresight, buying billions of dollars airline stocks in 2016, only to quickly dump all of them at the onset of the Covid pandemic.

The fact that many businesses are marginal and struggle to break even is no secret. Most famers, for example, need to work full time jobs outside of the farm. The book publishing industry gambles on dozens of new authors, before one might hit the bestseller list.

The real secret, the best kept business secret in America, I believe, is that profitable businesses strive to incorporate proven best practices in their operations. 

Are there best practices for commercial business insurance? From my experience, I would say, yes, there are. There are proven ways that will help lower or at least stabilize the cash outlays for your insurance, without sacrificing coverage. And many don’t take a lot of time or effort to implement.

The cost of insurance is not fixed. They are things you can do to make the cost go up. And there are things you can do to lower or stabilize the cost. Here are five more commercial insurance best practices, in our continuing series.

5 Commercial Insurance Best Practices to Help Lower Premiums

2021 Insurance Saving Tip #20

Retain legal counsel who can provide you with proactive legal services.

What are proactive legal services?

If you own an asset like a building, machine, or vehicle, you likely do your fair share of preventative maintenance (PM). PMs are seen as a good investment, not an expense.

Likewise, proactive legal services are preventive, providing legal guidance to avoid potential legal issues from happening, or having plans in place to mitigate conflict, if such issues arise.

Proactive legal services can help with:
• Regulatory issues
• Reviews of contracts
• Risk reduction

For example, some insurance companies may have “Lawsuit Limitations” in the policy (in a provision labeled “Suit Against Us”) of one year from the time of the event in question, while a claim is being adjusted. Proactive legal counsel could help preserve your rights before the deadline expires.

The end goal of proactive legal services is to avoid potential conflicts and costly litigation. Ask your legal counsel if they can provide you with proactive legal services or recommend someone who does.

Disclaimer: This is not legal advice, only insurance-savings information. Seek any legal advice from qualified legal counsel.

2021 Insurance Saving Tip #21

Firm up your insurance firmographics.

What in the heck are firmographics?

Yes—firmographics is a real word. Firmographics describe businesses and organizations like demographics describe people. Firmographics help insurance underwriters and actuaries to stratify risk by grouping it together, resulting in competitive quotes.

‘Firm up your insurance firmographics’ means to verify the information your insurance company has is correct.

For example, some businesses have several lines, which can fall under different industry codes. Fact: According to Verisk, a firmographics provider, “52 percent of high-level industry codes (defined by 2-digit NAICS) are typically inaccurate in an insurer’s book.” (July 2020 ISO survey)

Bad codes can result in under or over-charges of premiums. If you are undercharged, upon discovery, insurance companies can go back several years later and recoup the money. Overcharges directly affect your bottom line.

  • Be sure to check how your organization is coded. Update the information, if necessary.
  • Carefully go over any confirmation paperwork. Sometimes property, equipment, or vehicles can be listed on the policy for years after having been taken out of service.
  • Look at your list of drivers. Is it up to date and current?
  • Does your website or Facebook page reflect current operations? Insurance companies get information from many different sources. Update them, if necessary.

Some previous tips to ensure accurate insurance information include: (#4) Verify loss runs every six months, (5) Read the policy/dec sheet, and (12) Make reasonable disclosure to all insurance inquiries.

2021 Insurance Saving Tip #22

Hire drivers based on their driving experience.

According to a recent study driving experience is more important than a driver’s age when considering risk. Over 9,000 drivers were studied to determine how age and experience affect driving safety and performance.

The study noted, inexperienced drivers (with one year or less experience) have higher “crash rates, crash involvement, and moving violations, regardless of age.” And inexperienced over age 55, in fact, have even higher crash rates and greater “odds of being involved in a crash than their younger, inexperienced counterparts.”

The study recommended companies have a training strategy, mentor inexperienced drivers, and use technology as Lytx DriveCam system to coach and train drivers.

Many insurance companies require one or more years of driving experience. Some (for example, Protective) require proof of attending a CDL school, with at least 24 hours of in-cab training.

Underwriters have known this for years: experience matters, and drivers with at least one year of verifiable driving experience at hire can help reduce your premiums.

2021 Insurance Saving Tip #23

Choose a real human over a bot when interacting with insurance companies.

Consulting firms are currently pushing the concept to insurance companies that, ideally, 50% of their business should be totally automated. This is sold as another business best practice.

Part and parcel to insurance automation and digitization is the deployment of so-called digital employees, electronic avatars, or ‘bots,’ which are apps using conversational artificial intelligence (AI) or natural language processing. The apps or bots can gather information and perform certain tasks, saving labor costs.

Can a bot be deposed in court? What can a bot recall under cross-examination? And in this age of rolling brownouts and blackouts, and failed backups, what happens if critical information is lost or insurance policies cancelled? By then, likely the consultants will be long gone. Who will be left holding the bag?

For critical insurance information and tasks, make it your policy to deal primarily with humans as much as practically possible. This can help in keeping misunderstandings from happening and your insurance premiums from rising.

2021 Insurance Saving Tip #24

Have a driver pet policy.

Pets in a cab are seen by plaintiff attorneys as a possible driver distraction in a post-crash investigation, according to transportation counsel and legal expert Cassandra “Mad” Gaines, Esq.

This suggestion doesn’t mean pets in truck cabs should be outright banned, according to Gaines. Drivers keep pets as companions, sometimes as early-warning systems at night when parked in peripheral or unlit locations. In most cases, the benefits outweigh the risks.

Gaines advises a driver’s pet policy should:

  • Favor smaller pets over larger pets.
  • Include a barrier to the driver cockpit area so the pet cannot become a driver distraction when the vehicle is in motion.
  • Deploy outward/inward facing cameras

Driver pets are a reality in transportation. A sensible pet policy can help keep your insurance premiums from rising. ■

Thank you for reading this. What ways have you found best to save money on your insurance?