Mr. Dahm

Insurance

How to Find the Right Insurance Broker for Your Hotel Company

By Richard Dahm, Senior Risk Consultant, National Hospitality Division, Wells Fargo Insurance Services

Purchasing business insurance in today's economy has grown to be a large ticket item on businesses' increasing budgets and diminishing bottom lines. As complicated as insurance coverage can be, the process of choosing a broker can make it even more difficult. With insurance rates drastically fluctuating, more businesses are reviewing their current policies and weighing all options - including whether to keep their current broker or look elsewhere. It is very easy for businesses to get lost in terminology and price comparisons when choosing a broker. Consequently, many end up questioning the value of their coverage for their premium dollar. In years past, package policies and mainstream markets provided more comprehensive coverage. Unfortunately this practice seems to be losing ground towards a much more line itemed cost. In essence, even if we are seeing reductions in cost the reality is that we are spending much more for diluted coverage.

Getting your money's worth does not stop with the insurance companies, but rather with whom you put your trust in, the broker. If you have any doubts, then your answer lies in changing your traditional review process and researching for the best broker available. The following are several essential guidelines to help you become a better informed buyer for selecting the right broker.

A Broker's Inexperience Can Cost You

Risks associated with specific trade needs are susceptible to magnification when businesses contract brokers not specializing in their particular industry. Clients are often surprised by the frequency with which they encounter errors and oversights in coverage made by inexperienced generalists. Such oversights often include written policies with inadequate or disproportionately higher limits, insufficient marketing to carriers, lacking in essential coverage and/or strategy, and coverage modification by the carrier that is overlooked by the broker.

Take Your Broker to Task

Your insurance broker should act as an intermediary between you and your insurance companies. Brokers use their in-depth knowledge of risks and the insurance market to find and arrange suitable insurance policies. Unlike insurance company agents, brokers are independent and can offer products from more than one insurer. This will help to insure that you get the best possible deal available.

Is your current broker periodically performing these tasks for you? If not, they should be.

1. On an annual basis assess your insurance needs through gathering and updating your risk profile.
2. Building and maintaining ongoing relationships with you and your staff through scheduled meetings. This will help to forecast future business and insurance needs.
3. Consistently performs market research for new insurance programs and companies and their various policies in order to find the most suitable program to meet the needs of your specific risk.
4. Arranging specialized types of insurance coverage in complex cases; this may involve preparing reports for insurance underwriters and surveyors and negotiating with insurers.
5. Provide strong risk management through loss control and helping to devise new ways to mitigate risks. Such examples include: adding security measures such as fencing, surveillance cameras or lighting to commercial properties to reduce the likelihood of break-ins.
6. Advising you in a timely manner when you need to make a claim on your policies.
7. Consulting with underwriters, surveyors, photographers, structural engineers, and other professionals in order to advise you properly.

The Value-Added Risk Team

It is important to find a broker that has created a strong risk management team. Specifically, one that is focused on reducing the variable costs of loss-sensitive insurance programs that are greatly affected by repeated claims. Because 60% - 80% of your insurance premium dollars are related to claims and loss control issues, it is important to have a broker that can be proactive in claims management. Utilizing a broker's risk team can drive your costs down significantly. To ensure their success, more experienced brokers provide critical value-added services like claim management, loss forecasting and trend analysis, loss control, and experience modification analysis.

Claims Management

The ultimate purpose of an insurance program is a timely and equitable response to loss. A broker's most important responsibility is to facilitate the claims process and assist clients in claims cost containment and resolution.

With the cooperation of insurers, your broker should conduct claims audits, which will evaluate the quality of claims handling in compliance with general industry techniques and standards. A confidential and comprehensive report with individual case summaries should be provided to you at completion.

Should your insurance program include portions of self-insurance, the broker's staff should provide you with guidance in implementing a claims administration program and assist with requests for proposals, evaluating responses, conducting presentations, and assisting in the selection process.

Loss Forecasting and Trending

New ideas are the most important product the experienced broker will be called upon to deliver to you. Rather than simply reacting to problems as they arise, a broker must be in a position to anticipate your needs and suggest new ideas and new approaches. Creativity is essential to ensuring that the client receives an up-to-date risk management program. An experienced broker should be responsive to both changing business conditions and new risk management concepts.

Your broker should implement a program of providing you with risk analysis, loss forecasting and trending that will help you identify and quantify claims data. Utilizing loss data over an extended period of time can provide you with an in-depth analysis of areas that cause the highest susceptibility for claims and the origins that drive claims frequency and severity rates. Being equipped with this type of information, you can explore a variety of options for alternative loss funding methods, establishing necessary funding, workflow needs, retraining, and be able to focus your loss control program on specific needs which will ultimately reduce the number of accidents or injuries or both.

Loss Control

Loss control should be proactive in reducing both the frequency and severity of accidents. It requires the commitment of everyone at all levels--corporate directors, safety directors, managers, first line supervisors, and employees. Effective loss control--with an emphasis on safety procedures, training, and monitoring--can minimize the potential for property, general liability, and auto claims and losses.

An effective loss control system includes the establishment of a loss control policy, assignment of responsibilities, ongoing review of claims data, periodic loss control audits and inspections, accident reporting and investigation, communication, and development and regular review of emergency and contingency plans.

Your loss control program can benefit by a partnership between you and your broker's loss control consultants and your insurance carrier. The broker's staff of safety engineers should help you develop an effective incentive based safety program, safety training, and incident investigation program. Carrier underwriters rely on these engineers to know your business and better explain the potential risks pertinent to your operations and assist in implementation of their recommendations. This alone can result in significantly reduced premiums.

Experience Modification Analysis

As part of a risk management program, your broker should provide experience modification analysis in order for you to realize the maximum utilization of your Workers' Compensation expenditures. Keep in mind that reported experience MOD ratings are experience are frequently incorrect, resulting in you paying more premium over the course of three years than is justified.

Using mod analysis could enable additional working capital to remain in your business by taking the surprise out of the Workers' Compensation arena. It gives you a budget-today-for-tomorrow approach with a more realistic projection of your Workers' Compensation expenditures. It can project upcoming experience ratings, illustrate separate state experience modifications, depict the effects of pending rate changes, and illustrate the effects of reserve changes or ultimate dollars spent.

Mod analysis should be able to help lower your ultimate cost, minimize any hidden costs, and properly allocate any costs involved in your Workers' Compensation program. Some special ratings may include the utilization of past data to project future trends, justify expenditures on safety programs, illustrate the effects with deductible programs, profile the savings on first-aid payments, and allocate experience modification between states or operating divisions.

SUMMARY

Buying business insurance is getting more problematic each year; issues like property insurance have reached critical mass. As a business owner or executive responsible for the liability exposure of your business, it is critical that you select the right insurance broker--and their broker-team. The word team should be an essential ingredient in your evaluation process.

Once found, utilize the broker-team to develop a risk management program that will drive your costs down dramatically. Also, look for the broker who has developed an effective team-framework of value-added services: claim management, loss forecasting and trending, loss control, and experience modification analysis. In the end, their team of experienced professionals will make a major contribution to your company's continued profitability.

Richard Dahm, Jr. is senior risk consultant for the National Hospitality Division of Wells Fargo Insurance Services, Clearwater, Florida. His expertise includes property, restaurant/hotel facilities, and risk management. He holds a BA in management from Eckerd College and an MBA from DeVry University. Richard is a member of the Florida Restaurant and Lodging Association. Mr. Dahm's knowledge, coupled with his professional staff of claims, safety, and marketing professionals enables him to provide hospitality executives with consultation that reduces insurance risks and premiums. Mr. Dahm can be contacted at 800-282-3343 Ext: 5436 or Richard.Dahm@wellsfargo.com Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.