Roger Murphy

FOR MANY BUSINESSES, including those in the waste industry, the cost of insurance is one of the top five line items in the annual budget. Therefore, even modest insurance cost fluctuations can have a significant impact on the bottom line.

Given the size of the insurance expenditure, it's surprising to see how little attention companies devote to developing a relationship with their insurance carrier. A company's relationship with its insurance carrier can ensure a better understanding of what is important to both sides of the transaction, guarantee better account and claims servicing, and promote a greater understanding of industry concerns. Neglecting the relationship, however, can often lead to problems.

How a company is perceived by their insurance company, as well as how it is perceived in the insurance marketplace, can have an immediate and significant impact on the bottom line. For instance, a company that implements processes and procedures that help minimize its potential risks demonstrates its commitment to safety.

Both waste companies and their insurance companies have expectations. Developing a mutual understanding of these expectations can help establish, maintain and improve a relationship that, in the long run, can have a positive affect on risk management efforts.

A company's success depends upon the services it provides, and the perceived value for these services in the marketplace. Customers perceive the value of a waste firm's service and thus are willing to enter into a mutually beneficial business arrangement. This is a basic tenet of any business relationship.

How does this apply to property and casualty insurance? Just as any company must demonstrate its value to customers, the company must also sell its value to the commercial insurance market in order to find a company willing to provide products at a reasonable price point.

Consider the following suggestions when seeking to renew coverage with your current insurance company or seeking coverage from another company.

Meet regularly: Insist on regular, face-to-face meetings with your current underwriter, as well as other representatives involved in decision-making. It is absolutely critical that your underwriter be physically present on a regular basis at your facility. The underwriter needs to talk to drivers, management and safety personnel. If you are going to market, as time consuming as it is, underwriters new to your organization should also be willing to meet immediately preceding or following the sale. Your underwriter's personal knowledge of the operation is perhaps the most important leverage point in your relationship with your insurance provider. Situations may get distorted in the communication process. If you need to directly reach the decision maker, you should be able to do so.

Get to know the claims department: The relationship with your insurance carrier goes beyond the underwriter. Insist on meeting the claims folks handling your account. Insist on semi-annual claim reviews for example, even by phone. This is where the rubber meets the road, and if a claim is mishandled due to lack of communication or lack of pro-active involvement on either side, it can adversely affect both sides of the transaction.

Tap into risk control resources: Consider how risk control fits in. An insurance company's risk control personnel are the eyes and ears of the underwriter. Risk control personnel are trained to assess what an organization does well and where it may be falling short. Their goal is to improve the operation, drive down losses and help clients manage their potential exposures, thus helping to justify better pricing in the long run. So it is in your best interest to work as closely with them as possible.

The common thread here is communication. All communication with your insurance carrier should be:

Meaningful

A social relationship is commendable, but you should expect, as should the underwriter, to dig deep so as to better understand the exposures and properly design an adequate risk management program.

Candid

Believe it or not, you and the underwriter have a common goal: to see your company operate safely and profitably. Be open and insist on openness from the underwriter as much as possible.

Extensive

Involve everyone: underwriters, claims adjusters and risk control personnel.

Regular

Be it monthly, quarterly or annually, whatever the agreed upon contact level is, make it routine and regular.

The annual cost of insurance ebbs and flows, but it remains one of the larger line items in the budget. Like any other vendor relationship, it is not something to be commoditized, but rather, looked upon as a valuable asset to the organization.

Roger Murphy Vice President, XL Specialty Insurance Company, Exton, Pa.