IRMI Update—Issue #79
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
December 16, 2003
In This Issue
Colleague,
A recent nationwide survey by Safeco Corp. found most small-business owners
are ill-prepared to recover their loss of business income or incurred extra
expenses if disaster strikes, and aren't well informed about business income
insurance. As you know, these costs collectively represent the most expensive
losses businesses face following a disaster. According to the survey of 500
small-business (less than 100 employees) owners:
- More than half (55 percent) said they do not have business income insurance.
- Even more (63 percent) say they are unfamiliar with business income
insurance.
- Many may underestimate their risk. Nearly half (45 percent) estimated
it would take them less than 3 months to recover to their current level
of operations if their business were totally destroyed—about half the time
that it seems to actually take most businesses.
- Six out of 10 say they don't have the information they need to determine
their business income insurance requirements.
Risk managers are certainly aware of the importance of handling time element
loss exposures, but this has long been a difficult issue for insurance buyers
with smaller organizations. They look at the cost, which is quite significant
in comparison to the premium for the direct loss, and often decide to forgo
the coverage or purchase a reduced limit. I remember reading about a study many
years ago which found that most businesses that failed to purchase business
interruption insurance never reopened their doors after a severe loss.
Do you see this as a problem? How do you educate management about the exposure
so they can make a wise purchase decision? Can you share a horror story about
a business that failed because it didn't have the coverage? Conversely, can
you share a story about how business income coverage saved the day for an organization?
[See reader comments].
Best wishes for a happy and healthy holiday season.
Jack
Jack P. Gibson
President
IRMI
Use Employee Evaluations To Review Risk—Employee
performance evaluations are a great opportunity to identify risk. Ask, "Is there
anything keeping you from doing your job the way it should be done?" The answer
might uncover a risk exposure.
A stockroom employee might say it takes too long to stock shelves because
he has to make many trips up the stepladder to place containers on high shelves.
Here you have an issue of productivity, a fall hazard, and an inventory damage
hazard. If the employee must reach around or under things to pick stock, it
is an issue of productivity, a possible back or shoulder injury, and a tripping
hazard. To solve the problem, you might decide to store inventory differently
or obtain materials-handling equipment.
An accounting department employee might say, "I don't know what we would
do if Sid got sick. He's the only one who knows how to do his job." Rotate and
segregate accounting duties to minimize the risk of embezzlement.
A sales rep might fear losing a customer because she can't get a product
to them. Is there a single vendor you are depending on for a component in that
customer's product? If so, consider arranging a backup vendor. The sales rep
(and service staff, too) also might report customer complaints. Customers who
complain identify a risk for you—the risk that you might lose their business
if you don't address their problem. The sales rep also might worry that a competitor
could learn too much about your products or processes. Is the information in
your marketing materials or on your Web site good "competitive intelligence"?
Tone it down.
Listen to your delivery personnel. You might learn that your salespeople
are making unrealistic promises about delivery times, or that your vehicles
won't pass the next inspection.
By listening carefully, you can help your employees, and reduce risk throughout
the organization.
By: William R. Henry Jr., ABC
Vice President
Corporate Insurance Management, Inc.
Alexandria VA
E-mail:
www.cimaworld.com
Suggest a Risk Tip. Future issues of IRMI Update will include more risk tips from our readers. Send
us a practical tip (less than 300 words) for identifying and managing risks,
buying insurance, managing claims, or filling gaps in insurance coverages. We'll
give you credit for your contribution.
There are now 482 articles on IRMI.com, and many more are in production.
Below you'll find summaries of some recent additions with links to the articles.
Construction
Risk Conference Handouts Available Online—The speakers' handouts
from the 23rd IRMI Construction Risk Conference are now available on IRMI.com.
Over 30 handouts covering such topics as workers compensation trends and developments,
mold—the new asbestos and risk management solutions, hot topics involving liability
issues, responding to insurer insolvency, managing construction workforce issues,
and more, may be downloaded at no cost.
Classification Cross-Reference Updated—IRMI's
popular Classification Cross-Reference has just been updated and is now available in print and electronic form. The
new twelfth edition has been updated to reflect classification code changes
in the last few years, expanded to include more entries, and the cross references
have been refined. The handy book cross indexes NCCI, ISO, NAICS, SIC, and seven
independent workers compensation state classification codes. It is an invaluable
tool for underwriters, premium auditors, CSRs, and rating technicians.
Time Is Running
Out To Get 2003 CE—If you're still scrambling to fulfill your continuing
education (CE) requirement for 2003, IRMI has the answer with online courses
that are easy to take and informative as well. One new course is IRMI Commercial Auto Insurance, which provides
an introduction to commercial auto insurance. In addition to explaining the
coverage provided under the policy, it examines some of the motor vehicle statutes,
the public policy issues behind them, and their effect on various types of commercial
auto coverages. For more information or to order one of these or other CE self-study
courses, see the Training and Education section of IRMI.com.
Gary
Bausom has written for IRMI.com since its inception in 2000 on the
topic of Insurance Rx for the insurance industry. He is president of Bausom
& Associates in Alamo, California. Prior to this, he was a senior executive
of InterVenture Partners, was the founder and former managing principal of Risk
Solutions Group, served as a a senior consultant with Towers Perrin, and was
a vice president at the Bank of America. In his career, Mr. Bausom developed
approaches to selecting, evaluating, and managing insurers, service providers,
and business partners which he now shares with IRMI.com readers. For more information
on Mr. Bausom, see his full biography and a list
of his articles.
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