What is your role in helping business owners make sure their companies are adequately protected?
Each business is different, but we try to put a long-term plan in place for each individual business, based (on) their specific risks and exposures. We put services in place to address each one of those specific risks. Our goal is to ultimately eliminate those risks, but as much as we can, mitigate or minimize those risks, and also to make (the companies) look more attractive to the insurance marketplace in the meantime.

How would you characterize the insurance market right now?
All business owners should be aware that the insurance market is hardening, which means rates are going up. We’re seeing that in almost every line of business, and there are a couple of reasons why. Historically, insurance companies have tried to operate at about break-even on the insurance part, because their reserves were able to make money in investment income. Right now, their investment income is low, and their losses are more than they’re bringing in from premiums. So they’re having to increase their rates to bring in more premium dollars to make up for that shortfall. At the same time, we’re seeing a tightening in underwriting. For the last six to eight years, underwriters pretty much wrote to be competitive on price. Now, they’re taking a much closer look, and instead of just focusing on the bottom-line price, they’re actually underwriting to specific risks. So it’s also harder to get insurance placed.

What’s a key issue right now for business coverage?
Property is a big hot-button [issue] for the insurance underwriters, because of the recent storms we’ve had in the Midwest and all over the country. What the insurance carriers have found is that replacement costs for properties have continued to go up through the years, and insured [parties] have not kept up with that pace. In other words, their property, from a replacement cost standpoint, is underinsured. A lot of companies look at their property and say, “I can go out and replace this for X amount of dollars, because the market is down right now.” But market value is one thing, and replacement cost is another. And replacement cost is most generally higher than market conditions.

Are there practical steps that can help cut companies’ risks?
From a business risk standpoint, take a look at the contracts you’re entering into as a business owner. Contracts are becoming more complex, and businesses are being required to assume more liability, so make sure you have someone qualified – a broker – to look at insurance and indemnity requirements to make sure that you’re not in breach of contract by signing (another) contract, and to make sure you’re not assuming something that you can’t insure. We recommend that (business owners) have an attorney review every contract that they enter into.

Are there types of coverage that may be overlooked?
The largest percentage of increase in claims that we’re seeing in any area is employment practices liability. That includes discrimination claims, harassment claims, wrongful terminations, hiring and firing. That’s something that often goes overlooked. First, (that coverage) will defend you. A large percentage of these policies are paid out for defense costs to handle frivolous claims. If there is something that an employee, manager or owner has done in the way of a wrongful termination, sexual harassment or discrimination, then there’s also money to pay for judgments that are brought against them.

With economic pressures, are companies cutting coverage for cost savings? And if so, how does your company respond?
We run into it a lot. We tend to look at it on a long-term basis. Not that price isn’t important, because price is one thing, but value is another. A broker should give more than just the placement of the insurance and the servicing. You should be able to look at your insurance program and have milestones and goals in place for how to reduce your costs during a two-, three- or four-year period. That’s going to include addressing losses that you’ve had, exposures that you’ve had that are uncovered. Some people just look at the bottom line price of their insurance as, “That’s my cost of risk,” when really, they’ve got that, plus any deductibles they’ve got to pay (and) uncovered claims because they’ve cut insurance. When you look at that whole cost of risk, sometimes by removing coverages, they actually increase their risk, and if they do have losses, their costs become more.