Just imagine that one day you open up a letter from your insurance company. It states that your policy is being canceled or your rates are skyrocketing because of [insert pathetic excuse here]. You scratch your head wondering, “What am I going to do now?” A couple other companies offer quotes for your business. You literally fall out of your chair when you see the price. A similar scenario may await you as insurance companies scramble to cover losses.
It partially comes down to a simple supply and demand problem. The number of companies willing to underwrite insurance for higher risk industries, such as sawmills and pallet operations, has dropped to just a handful. Less competition results in higher premiums. According to one insurance industry expert, prices for liability and workers’ compensation coverage consistently went down during the 1990s as insurance companies turned profits off high return on investments. As the stock market tanked, insurers looked to offset losses by raising premiums. Over the last 18 months, insurance costs have steadily risen.
Insurance companies claim the 9-11 event caused unforeseen financial problems. At the same time, health care costs continue to rise. Many underwriters have stopped offering large policies for national associations. Thus, even more avenues for relief have been eliminated.
There are five major types of insurance that pallet companies may carry – workers’ compensation, liability, property, fleet and health. The law requires companies to carry workers’ compensation. The others (except for automobile liability coverage in some states) are optional. Most companies carry at least liability and property coverage to protect the enterprise from a catastrophic event. Some companies give health coverage as a paid benefit or offer a plan that employees can choose to buy.
The bad news is that there is no immediate remedy in sight. Prepare yourself for insurance costs to keep going up. Your best defense is a good claims history. Start by evaluating your facility for risks, training staff and providing necessary protections to reduce your risks. I can’t tell you how many facilities that I have visited throughout the years where guards have been removed from saws, employees have no eye or ear protection, and forklift drivers act like kamikaze pilots. Management must set the tone — safety first!
When looking for insurance, obtain quotes from several companies. Check the financial strength of your carrier by looking at the historical average rating over the past five years. The A.M. Best Company publishes the annual Best’s Insurance Reports, which rates insurers. Read the fine print when it comes to exclusions, definitions and coverage provisions. Make sure to find out what is not covered. You may be able to reduce premium costs by eliminating unnecessary coverage. Finding a good broker can reduce your headaches. Certain loss control methods, such as sprinklers or improved safety guards, may lower your insurance cost in the long run.
Comparing quotes can be difficult if the insurers hide details in the fine print. Deductibles lose their efficiency as they get higher. Ask for the rate per thousand per hundred and per million of coverage. Insurance experts encourage buyers not to get hung up on the premium. The rate of coverage tends to provide a more accurate measure of what you are really getting for your money.
Find out what the insurers’ policies are in case you have to make a claim. Do you have to jump through a million hoops to get reimbursed?
Our company has drawn the line in the sand when it comes to health coverage. Management has told our staff that the company will not pay more than a certain amount each year for coverage. If rates go up over the specified amount, employees will have to shoulder the extra cost. This may help our experience ratio by eliminating the tendency to run to the doctor for a lot of unnecessary procedures and medication. We’ll see what happens over the next year.
Whether or not you are talking about health care, liability, workers’ compensation or any other type of insurance, having a plan can make a big difference.
