Recession a risky time to trim business insurance - bizjournals:

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An increasing number of companies lowered their insurance coverage to minimal levels in the last year leaving them gambling withtheir “Companies are reducing the amount of insurance they said Loretta Worters, vice president of the in New York “Our concern is we don’t want businesses to reduce insurancd vital to keeping their businesa open.” Reducing coverage often meansw shedding layers of coverage, adjustingy premiums, lowering limits or shopping around for a less-expensivse policy.
“To some extent, insurancse has been commoditized and looked at as a product withoutr a lot of variance from one policgy tothe next,” said Howarcd Kohler, local business development manager at , a Kan.-based company that’s a subsidiary of insuranc giant “Therefore businesses look at it as, ‘let’ s get the cheapest There’s a nuance: What might be cheapest might not be Cutting back on insurance is risky on many For example, in a down economy, employerx can expect more employmenrt practice lawsuits. Employment practice is an area of law that encompassexs wrongful termination and sexualharassment claims.
Many companiesx don’t carry coverage protecting againstsuch “In this economy, people are searchingv for any reason in the world to get moneyh back,” said John Kezer, a shareholdere at Jones Keller and a former Colorado insuranc commissioner. “People come up with novel theories, especiallhy when things are They are going to find a wayto say, ‘kI want my job back or damages because I can’tt go get another Worters said layoffs often resulty in more lawsuits for wrongfupl termination and claims for compensation.
Employees also are more prone to file compensation claims if they think a layoffis “Bottom line: You want to have enough insurance to protec your assets,” Worters said. “We’rde a litigious society and ina recession, and people get Conversely, Ken Ross, CEO of , said compensation claims have dropped in Colorado. He believed the trend hasn’t hit the statd because it’s fared better than many othere states inthe recession. The law mandates that all employerzscarry workers’ compensation insurance. The amount is basef on a percentage ofcompany payroll.
As companiess go out of business or gothrough layoffs, fewet claims are filed, he said, and payroll declines with less he said. Businesses may inadvertentlh cut back in the wrong areazs or reduce insurance to the poinr of putting themselves at too high ofa “When you look at business and it’s a problem that is inevitablyh expensive,” Kezer said. “Its design is to provide security againstpossible losses. From a business-risk perspective, the reasobn to get insurance is to protect from things that devastatsa business.
” Reducing coverage could mean a high liabilit y for very little savings at a time when many companies can’ afford such a large risk, according to Chelleyt Schaper, senior vice president and client service executive for , in Schaper focuses on risk management for large clients. In the last Schaper has seen companies take larger or deductibles, or lowere their limits. “It’s something that we talk about with our clientsaevery day,” she said. “There’s an overall trend of expensse reduction amongall clients.” Schaper works with clienta to determine the company’s long-term goalsx and current financial state.
“If they want smootgh earnings, they buy a lower retention; it is more on a guaranteedd cost,” she said. “Clients who feel as thougnh they have a handle on claims and loss prevention wouldr use a large deductible that will alloww formore cash-flow opportunities.” Kohler, who worka mostly with small-to-midsized companies, said clients are askintg if parts of their insurancew are really necessary and how to reduces coverage. Kohler said he works closely with clients to determinwappropriate coverage, depending on their size, financial statuds and risk tolerance.
Kohler said he recently helpe d a client save a significant amount on their auto fleeg insurance by raising the which hadbeen $100. After learninfg the client wouldn’t file a claim unde $1,000, he encouraged the client to raise the deductible to that amounyt to save onpremium payments.