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Managing Business Insurance and Risk

When purchasing a comprehensive commercial insurance program, businesses often make several common mistakes and encounter pitfalls related to various types of coverage, such as general liability, auto, excess liability, property, directors and officers liability, employment practices liability, and environmental protection.

Here are some things to keep in mind:

Common Mistakes

• Inadequate Coverage Assessment: Failing to evaluate specific coverage needs for each area, such as general liability or employment practices liability, can result in critical gaps.
• Underinsuring Property: Businesses may undervalue their property, leading to insufficient coverage that doesn’t fully replace assets in the event of a loss.
• Neglecting Auto Coverage Details: Not considering the full scope of auto and truck coverage, including liability, collision, and comprehensive options, can expose the business to significant risks.
• Ignoring Excess Liability Needs: Businesses may overlook the necessity for excess liability coverage, which can provide additional protection beyond standard limits.
• Overlooking Directors and Officers Liability: Failing to secure directors and officers liability insurance can leave executives vulnerable to claims arising from their decisions.
• Not Addressing Employment Practices Liability: Many businesses neglect to obtain employment practices liability coverage, which protects against claims related to wrongful termination, discrimination, and harassment.
• Environmental Coverage Gaps: Businesses may not consider the need for environmental protection insurance, especially if they operate in industries with potential pollution risks.
• Assuming One Size Fits All: Using a standard policy without tailoring it to the specific needs and risks of the business can lead to inadequate coverage.
• Neglecting Policy Exclusions and Limitations: Failing to understand what is excluded from coverage can lead to unpleasant surprises when claims arise.
• Insufficient Risk Management Practices: Not implementing proper risk management strategies can lead to higher premiums and increased claims.

Common Pitfalls

• Poor Communication with Brokers: Inadequate communication can result in misunderstandings about coverage needs and recommendations.
• Not Regularly Reviewing Policies: Businesses often fail to review and update their insurance as they grow or change, leading to outdated coverage.
• Ignoring Claims History: Not considering the impact of previous claims on premiums and coverage options can lead to unexpected costs.
• Focusing Solely on Price: Prioritizing cost over coverage can result in selecting inadequate policies that leave the business vulnerable.
• Lack of Employee Awareness: Not educating employees about insurance policies and risk management can result in practices that increase exposure to claims.
• Misunderstanding Deductibles: Not fully grasping how deductibles work can lead to unanticipated out-of-pocket expenses during claims.
• Failure to Document Everything: Not maintaining thorough documentation of assets, risks, and communications with insurers can hinder claims processes.

To avoid these mistakes and pitfalls, businesses should engage in comprehensive risk assessments, communicate openly with insurance brokers, and regularly review their insurance needs to ensure adequate coverage across all areas.

ARTHUR J. GALLAGHER, REFERRAL PARTNER

If you wish to revisit your insurance and benefits program, we are referral partners with Arthur J. Gallagher, one of the largest in the world, and we are happy to connect you via our network with professionals who will give your company and your insurance, risk and benefits needs immediate attention.

Paul Fioravanti, MBA, MPA, CTP, is the CEO & Managing Partner of QORVAL Partners, LLC, a FL-based advisory firm (founded 1996 by Jim Malone, six-time Fortune 100/500 CEO) Qorval is a US-based turnaround, restructuring, business optimization and interim management firm. Fioravanti is a proven turnaround CEO with experience in more than 90 situations in more than 40 industries. He earned his MBA and MPA from the University of Rhode Island and completed advanced post-master’s research in finance and marketing at Bryant University. He is a Certified Turnaround Professional and member of the Turnaround Management Association, the Private Directors Association, Association for Corporate Growth (ACG), Association of Merger & Acquisition Advisors (AM&MA), the American Bankruptcy Institute, and IMCUSA. Copyright 2024, Qorval Partners LLC and/or Paul Fioravanti, MBA, MPA, CTP. All rights reserved. No reproduction or redistribution without permission.

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