Recession a risky time to trim business insurance - bizjournals:

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An increasing number of companies lowereds their insurance coverage to minimakl levels in the lastyear — leavingg them gambling with their circumstances. “Companies are reducinvg the amount of insurance they saidLoretta Worters, vice president of the in New York “Our concern is we don’ty want businesses to reduce insurance vital to keeping theirt business open.” Reducing coverage often meanse shedding layers of coverage, adjusting lowering limits or shopping around for a less-expensive policy.
“Tlo some extent, insurance has been commoditized and lookeds at as a product without a lot of variancer from one policy tothe next,” said Howards Kohler, local business development manager at , a Kan.-based company that’s a subsidiary of insurance gianf “Therefore businesses look at it as, ‘let’s get the cheapes policy.’ There’s a nuance: What might be cheapesty might not be best.” Cutting back on insurancer is risky on many For example, in a down economy, employers can expectg more employment practice lawsuits.
Employment practicwe is an area of law that encompasses wrongfulp termination and sexual harassment Manycompanies don’t carry coverage protectingb against such claims. “In this economy, peoplr are searching for any reason in the world to getmoney back,” said John Kezer, a shareholdee at Jones Keller and a former Coloradoo insurance commissioner. “People come up with nove l theories, especially when things are difficult.
They are going to find a way to say, ‘I want my job back or damagesx becauseI can’t go get another Worters said layoffs often result in more lawsuitz for wrongful termination and claims for workers’ Employees also are more prone to file compensation claims if they think a layoff is “Bottom line: You want to have enough insurancse to protect your assets,” Worters “We’re a litigious society and in a and people get desperate.” Conversely, Ken Ross, CEO of , said compensation claims have dropped in Colorado.
He believed the trend hasn’t hit the state because it’s faref better than many other states in the The law mandates that all employersxcarry workers’ compensation insurance. The amount is basexd on a percentage ofcompanu payroll. As companies go out of business or gothrough layoffs, fewer claims are filed, he and payroll declines with less he said. Businesses may inadvertently cut back in the wronhg areas or reduce insurance to the poinf of putting themselves at too high ofa “When you look at business and it’s a problem that is inevitablg expensive,” Kezer said. “Its design is to providre security againstpossible losses.
From a business-risk perspective, the reason to get insurancw is to protect from things that devastatea business.” Reducing coverage coul mean a high liability for very little savingzs at a time when many companies can’t affore such a large risk, according to Chelley senior vice president and client service executive for , in Schaper focuses on risk management for largew clients. In the last year, Schaper has seen companies takelarged retentions, or deductibles, or lowedr their limits. “It’s something that we talk abouft with our clientsevery day,” she “There’s an overall trend of expense reductio among all clients.
” Schaper works with clients to determine the company’ long-term goals and current financial “If they want smooth earnings, they buy a lowefr retention; it is more on a guaranteedr cost,” she said. “Clients who feel as thougnh they have a handle on claims and loss prevention woulde use a large deductible that will allow formore cash-floqw opportunities.” Kohler, who works mostly with small-to-midsized companies, said clientx are asking if parts of their insurance are reallhy necessary and how to reducw coverage.
Kohler said he workzs closely with clients to determineappropriate coverage, depending on their financial status and risk Kohler said he recently helped a client save a significantg amount on their auto fleet insurancse by raising the which had been $100. After learning the clienft wouldn’t file a claim under he encouraged the client to raiswe the deductible to that amount to save onpremiuk payments.