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Managing Risks and the Increasing Costs of Doing Business
By Gerry Cecil, National Account Executive

The insurance marketplace continues to harden. Prices are increasing while the availability of coverage is decreasing. Many agents that once represented multiple companies for a particular type of business now have few, if any, companies with which they can work. In many cases, business owners are given little warning about impending increases or continuation of coverage. This tightening market, which we haven't seen for over 15 years, has led to higher premiums. You can help control your premium by reducing loss exposures.

Why Is the Market Changing?

Insurance companies and their reinsurers have been delivering lower than expected returns for several years. Their claim costs and expenses exceed their premium and investment income. As a result, many insurance and reinsurance companies determined they must have more premium for their exposure. (This price increase reaction to market condition was happening well before September 11 - that event simply escalated the pace of the increases.)

What Can You Do as a Business Owner?

  • Understand the costs of insurance and risk management. Determine what can be done to control exposures.
  • Review your insurance program and begin the process of obtaining proposals 90 days before expiration.
  • Contact your association or other business owners in your Bottom Line or 20 Group and solicit suggestions.
  • Obtain loss runs from your carrier(s) for this year and prior four years. Review the losses with your agent.
  • Double check your employee leasing arrangement, if you have one, and determine if your agreements are solid and the insurance portions are properly managed and funded. Review the hold harmless and other contractual agreements with your attorney.
  • Insure catastrophic events with adequate limits for replacement cost on real and personal property, as well as adequate limits of liability for your fleet auto and general liability.
  • Retain more risk by accepting higher deductibles - $1,000 or more on property, $1,000 or more on physical damage on vehicles, even liability - $500 or more.
  • Increase your commitment to loss prevention and safety:
  • Review the Motor Vehicle Record (MVR) of prospective employees, and establish strict criteria for what constitutes an acceptable driving record. Remember that your use of MVRs requires strict compliance with all laws, including but not limited to the Fair Credit Reporting Act. Consult with your legal counsel regarding the laws that govern your use of MVRs.
  • Driver Monitoring Programs - Install the 1-800 "How's My Driving?" bumper sticker program (for less than $15 a year per vehicle) to help manage behavior.
  • Name Safety Directors and form a Safety Committee to meet monthly to review losses, discuss how to prevent them, and walk through the operation.
  • Incorporate safety training into technician training.
  • Create and implement incentive programs that reward all workers for a safe, injury-free work environment.
  • Protect inventory, autos and building - increased protection will help reduce rates and enable you to more easily implement higher deductibles.
  • Update statements of value - know what you are insuring and its proper value.
  • Understand what you insure and what you don't need insurance on.

Regardless of the state of the insurance marketplace, the best business owner - who gets the best deal and controls costs - controls exposure to loss. A good, safe environment with knowledgeable and accountable managers and employees is one that will weather any insurance marketplace storm.


Gerry Cecil is the National Account Executive for the Special Account Services division of Universal Underwriters Group.For more information about how Universal Underwriters Group, Special Account Services can help your automotive recycling business needs call 800-840-8842, ext. 4845, visit www.uuic.com/specaccts/ara.asp or email: uuic.specaccts@us.zurich.com.