AESOP'S FABLE, “THE ANT AND THE GRASSHOPPER,” can be applied to many situations, including how a waste business handles concerns about its insurance costs.
In the fable, the ant works hard in the summer heat, building his house and stashing away supplies for the winter. The grasshopper, on the other hand, thinks the ant is a fool and teases him while he enjoys his summer frivolously. When winter arrives, however, the ant is well fed and warm, while the grasshopper has no food or shelter. To stay alive and healthy, the grasshopper must beg to receive humiliating charity from the ant he teased.
The moral of the story is that it is thrifty to prepare today for the wants of tomorrow. Likewise, if a waste company wants keep a tight control on future insurance coverage costs, it's advisable to prepare today.
Similar to how the ant and the grasshopper faced seasonal changes, waste businesses must contend with the cyclic nature of business, the highs and lows of the economy, and, of course, the rise and fall of insurance premiums.
Some questions waste business executives should consider are:
Is your company prepared to handle future challenges?
How does your waste firm react to lower premiums?
Is there a tendency to slack off on proactive risk management?
How does your firm handle increasing premiums?
Does your company forgo insurance coverages or higher limits to save money?
In answering these questions, management will prepare the company to manage future insurance expenses. Exercising control — over day-to-day operational risks, from slipping into complacency or over making hasty choices — can have a significant impact on controlling insurance costs over the long run.
Consider the following:
Make managing risks routine
Even if premiums are relatively lower now than in the past, monitoring and seeking improvements to internal processes and risk management plans is always wise. For instance, maintaining a strong employee training program is important to keep risks under control.
Write it down
The infamous paper trail will come in handy when you want to prove to your insurance company that you are taking active risk-control measures. Documentation of maintenance schedules and procedures, training and safety meetings can be reported to your insurance company to show proof of risk management procedures.
Take advantage of available resources
Brokers and insurance companies often offer advice and reviews of documents such as contracts. Companies can take advantage of these risk-control services to demonstrate their commitment to smart risk management.
Consider all possible options
Companies have options in their insurance coverage. They can add an endorsement of coverage or opt for lower limits by retaining more risk with higher deductibles or self-insured retention. By retaining a greater portion of risk, however, the company also is making a commitment to keep that risk in check. If something happens, the company's financial loss will be a larger burden to bear. That alone is an incentive to step-up risk management efforts.
Talk more often to your company's broker and insurance carrier
Creating a greater comfort level between a company and its insurance carrier doesn't hurt, and it may help reduce premiums. When companies relay their effective use of risk management strategies, it can make an insurance carrier more comfortable to take on risk. Even after a claim, waste firms should communicate how they have learned from the loss and what they are going to do to prevent it from happening again. Educating the insurance company about how your company intends to manage risks is important in managing insurance costs.
— Kate McGinn
XL Specialty Insurance Co.