Four Ways to Protect the Carrier Relationship After a Catastrophic Loss
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Staffing Companies & Catastrophic Losses
One of the biggest fears staffing agency owners have is a catastrophic loss, which could be anything from a serious workers’ compensation claim or theft of company assets to a third party injury caused by an employee. Regardless of what the loss is, there’s a strong chance that it would be insured as long as the agency’s broker understands the risks inherent in the staffing industry and properly insures the agency for those exposures.
But how would a catastrophic loss impact the future of your insurance program?
Staffing companies, like you, often take precautions in order to minimize their exposure to catastrophic losses. For example, you place employees in safe occupations; you have financial controls in place so employees cannot embezzle significant assets; you review contracts and don’t accept unnecessary liability. You may have all the necessary precautions in place, yet a catastrophic loss could still occur.
Ultimately, it’s the actions you take after the loss that will dictate the impact on your insurance program.
In my 12 years of insuring the staffing industry, my clients have experienced multi-million dollar liability claims, severe employee injuries, theft of millions of dollars of client property and theft of the agency’s own assets. Yikes, I know. But in every case, that agency has been able to secure coverage at their next renewal. In almost every case, the catastrophic loss had no impact on the availability of coverage or the cost of the insurance because of the actions taken after the loss.
There are key actions that you must take after a catastrophic loss in order to preserve the insurance carrier relationship.
- Communicate and cooperate with the insurance carrier immediately after the loss and during the investigation and adjustment of the loss. Provide the adjusters with critical information necessary for them to minimize the amount of the claim.
- Have open and honest communication with the decision-makers at your insurance carrier. Proactively request a meeting with your underwriter and their manager. These are the people that hold the keys to the coverages, pricing and availability in the future for your organization.
- Identify why the loss occurred. Was this a result of an unexpected assumed contractual liability? Were your financial controls not strong enough? Were your computer systems’ fire walls not strong enough? Did the loss result from an unsafe work environment? Were machines modified or guarding removed or changed? Was an employee asked to do something they were not trained to do? Identifying the root cause of the incident will then allow you to…
- Take corrective action. This is the most important part of the process. Once the root cause has been identified, you must take corrective action and eliminate the possibility of a similar loss happening in the future. You can be forgiven once, but not on a regular basis.
Insurance companies are in the business of taking risk. However, they try to take calculated risks. Carriers expect catastrophic losses to occur, and they price their product expecting a certain number of these in their portfolio every year. Having a significant loss does not necessarily mean the end of your insurance carrier relationship if you take the steps identified above.
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