Whether you are starting a new business or run an existing business, you will always be subject to a certain amount of risks, such as workplace accidents, fires, floods, theft or product liability, just to mention a few. Having the right kinds of business insurance will help reduce these risks, but at the same time, insurance companies expect you to do your part in reducing your liability in the work environment.
Many times identifying those risks can be difficult for a business owner or president. That's when insurance companies may step in and take an active role in risk management, often assigning risk managers to inspect a policyholder's facilities and operations.
As a result of these inspections, an insurance company may make recommendations to correct any workplace problems. Not only will they identify potential liabilities, but they could require you to make safety changes as a condition to continue your insurance coverage or require you to pay higher premiums.
Inspections
The actual inspections are usually conducted when an insurance company 1) writes a new policy; 2) has set an inspection schedule over a certain number of years of the policy; or 3) during the renewal process. Sometimes companies will use their own risk managers or, if the insured is a smaller business, they will use a third-party inspector.
Upon completion of the inspection, insurance companies will provide recommendations if they see unacceptable risks. They look for potential hazards, particularly those that involve specific exposures in your business category. The guidelines for most inspections are based on the following:
- Regulations from federal agencies, such as the Occupational Safety and Health Administration (OSHA), Department of Transportation (DOT) and the Federal Motor Carrier Safety Administration (FMCSA);
- Local building and fire codes;
- Industry standards from organizations such as the American National Standards Institute (ANSI), the American Society of Mechanical Engineers (ASME) and the National Fire Protection Association (NFPA);
- Best industry practices.
Purpose
This insurance strategy, also called loss control, risk control or loss prevention, is designed to reduce the level of risk an insurance company is taking on when writing a policy. But this is also to the benefit of the policyholder in that the recommendations can improve safety and limit the problems of disrupting the business and avoiding costly claims.
Failure To Implement Recommendations
If a business fails to implement recommendations, the insurance company has the right to either cancel the policy, refuse to renew the policy or increase the policyholder's premiums. When this happens, some businesses will seek another insurer. However, most all insurance companies are going to go through the same inspection process and find similar results. But a critical aspect of failing to address a recommendation is the fact that the business is aware of a problem and won't fix it, setting up an additional argument for negligence.
The first step to reducing your business risks is to call in a commercial lines representative from J.P. Perry Insurance. Our experienced professionals have seen and handled almost every type of business exposure imageable. Why guess how to protect your business when you have a resource like J.P. Perry who know how to guide you through the insurance maze?