In the most simplistic terms, your insurance cost is determined based on two factors: Exposure and Experience. By exposure, we mean what you do, what line of business you are in, where you operate (there are wide variations in legal venues across the Country) and the like. By experience, we mean your actual historical experience in the business, and specifically, what your historical accident and loss history has been. Insurance companies are essentially actuarial forecasters, whereby they attempt to predict what their future claims cost will be based on what your historical exposure and experience trends have been, if they were to underwrite and offer you a proposal for insurance. It’s a highly sophisticated process internally for them, but, in essence it boils down to exposure and experience.
So, as respects exposure, there are a myriad of ways we at Sovereign work to educate our clients on how to best position and package themselves to the underwriting marketplace to ensure they receive the best overall coverage, cost and service offerings. We work closely with each client to tailor risk management programs that fit their operational and fiscal abilities. A “one size fits all” approach simply doesn’t work in our opinion; besides, no one likes to be treated like just another passenger on the bus. In future blogs, we will offer more details on individual services that we coordinate on behalf of our clients that add real value, now and into the future.
As respects experience, we highly recommend that our clients always look for ways to expand their business and industry knowledge to remain at the forefront of their respective field. We also work diligently to ensure we are also at that forefront of knowledge to ensure we are educating and protecting our clients to fullest extent of our abilities.
Let’s now turn the discussion specifically to your historical accident and loss experience. Many times our clients think this is an area upon which they have no control, but they do, and should exercise that control as much as possible. Keep in mind, your future insurance cost will be highly predicated upon your historical losses, and as such there are a few activities you must do to ensure the dollars that get paid are as limited as possible. Again, we tailor claims and litigation strategies for each client, but, in general you must do the following, at a bare minimum, to ensure you control your claims cost as much as possible:
- Promptly notify your insurance carrier of any incident that may give rise to a claim. You may think “well, if I do that on every little thing, I’ll receive a cost increase or worse, be cancelled”. While discretion must apply, if there’s a meaningful probability that a claim will be filed, its incumbent upon you to take swift action, report the incident and get an adjuster assigned who can begin the process of communicating with you and any third parties to resolve the matter as quickly, as amicably, and lawyer free as possible.
- Complete an accident investigation, yourself, and report your findings to your adjuster. The better equipped you make your adjuster, generally speaking the better job they can do in negotiating an amicable solution. Again, discretion must apply, and you should be cautious of sensitive information that you uncover to ensure it remains privileged when advisable. When in doubt, involve your client service specialist and we’ll help you navigate this pathway.
- If your accident investigation yields any procedural or operational deficits in your business, take swift action to correct it so that the same incident probability is mitigated as much as possible.
- Regularly review and question the status of any open claims. It never ceases to amaze us how many times we come into client relationships whereby cases, with large reserves remain open, years down the road only because no one pressed the adjuster to substantiate and/or update the reserve. YOU PAY FOR THAT RESERVE OVER AND OVER, EACH YEAR YOU RENEW YOUR INSURANCE.
We hope that you have found this information insightful and useful, and look forward to serving you now, and into the future!
Author: John Varner