Anyone who manages business risk should have a few books in the reference arsenal. One book I highly recommend is insurance coverage guru Chris Bogg's new tome, Property and Casualty Insurance Concepts Simplified. Called the "Ultimate 'How to' Insurance Guide," Boggs gives the newcomer to insurance or the seasoned professional a step-by-step guide to reading and understanding any personal or commercial insurance policy.
The first chapter outlines the rules to apply when reading an insurance policy. Chris offers twelve common sense guidelines to help you quickly find the answers you need from your coverage documents. For example, if a business owner reads only the policy form without understanding which endorsements or changes to the policy apply, it is easy to misinterpret coverage. The book's glossary defines standard insurance terms, as well. The main highlight to the first chapter includes this recommendation: "Pay attention to key words and phrases….These words and phrases create, delete, or alter coverage and limits." Boggs then explains key phrases that greatly impact coverage. For example, "Not" can "change or limit whatever grant or denial of coverage preceded it," sometimes a critical distinction to coverage interpretation.
Why are words and phrases that important? Because when an adjuster denies a claim or limits coverage, he or she may have misinterpreted the policy. Unless an exclusion is completely straightforward, adjusters can make mistakes when denying or reducing coverage. The well-informed consumer should understand exactly how adjusters apply coverage to your loss. Bogg's book can help.
Boggs covers a critical element of risk management─total cost of risk. Premiums you pay, Boggs correctly reminds you, are only a fraction of your total cost of risk. Why should you care about your cost of risk? Because losses cause specific financial damages, but the piece of the financial iceberg hidden below the surface can sink even the best-sailed ship. Here are other components of the total cost of risk.
Deductibles and self-insured retentions. Everyone carries a deductible or retention on his or her insurance, the cost out-of-pocket the insured pays before insurance kicks in. (I oversimplified the concept, but you know that if you back into a pole, $500 or $1,000 comes right out of your pocket. This cost is an incentive to practice safe backing techniques.)
The cost of uninsured or self-insured losses. Insurance is not designed to cover every loss. For example, if you own a tavern and you serve a minor who then later wrecks her car after she leaves your bar, a coverage exclusion may apply. Exclusions keep insurance affordable and help limit "morale hazards," an attitude of, "I have insurance so why should I be careful?"
Legal costs are a cost of risk. If you fail to purchase enough coverage or have an uninsured loss, you will need counsel. How does $250 or $350 an hour sound? Legal fees are a devastating cost of risk that often fly under the business owner's radar until it is time to write a check.
Loss control and safety costs. Safety professionals see it happen repeatedly. When times are bad, business owners think they will save money if they reduce safety training. Risks inherent to your organization but not well managed can produce unexpected costs. If OSHA arrives at your door or an expensive piece of equipment is damaged and out of production for weeks while repairs are made, costs can be devastating.
Claims management is another cost of risk. When your worker is seriously injured, how much administrative time does it take to report the claim, calm your employees, and manage the ongoing medical and return-to-work issues? By some estimates, the indirect costs of a worker's compensation claim may be as high as seven times the amount actually paid to your employee and his or her medical providers.
What about opportunity costs? If your star salesperson is critically injured in an auto accident, who can step in and help her customers? Did I hear you say "No one"? Then you must scramble to hire from a competitor, or hope someone in your organization can meet the challenge. Without key employees at work and highly functional, your organization cannot respond to market opportunities when they occur.
Boggs' book covers many other topics, for example, the differences between a claims-made policy and an occurrence form, understanding commercial auto symbols, how reinsurance fits into your coverage, and how coinsurance clauses work.
No well informed consumer should be without this book, especially if you own a business. Most of the time, you can depend on your adjuster to correctly interpret coverage and respond appropriately to your loss. Hedge that other small percentage with a little help from this book. It is available in paperback or PDF at Insurance Journal.
The first chapter outlines the rules to apply when reading an insurance policy. Chris offers twelve common sense guidelines to help you quickly find the answers you need from your coverage documents. For example, if a business owner reads only the policy form without understanding which endorsements or changes to the policy apply, it is easy to misinterpret coverage. The book's glossary defines standard insurance terms, as well. The main highlight to the first chapter includes this recommendation: "Pay attention to key words and phrases….These words and phrases create, delete, or alter coverage and limits." Boggs then explains key phrases that greatly impact coverage. For example, "Not" can "change or limit whatever grant or denial of coverage preceded it," sometimes a critical distinction to coverage interpretation.
Why are words and phrases that important? Because when an adjuster denies a claim or limits coverage, he or she may have misinterpreted the policy. Unless an exclusion is completely straightforward, adjusters can make mistakes when denying or reducing coverage. The well-informed consumer should understand exactly how adjusters apply coverage to your loss. Bogg's book can help.
Boggs covers a critical element of risk management─total cost of risk. Premiums you pay, Boggs correctly reminds you, are only a fraction of your total cost of risk. Why should you care about your cost of risk? Because losses cause specific financial damages, but the piece of the financial iceberg hidden below the surface can sink even the best-sailed ship. Here are other components of the total cost of risk.
Deductibles and self-insured retentions. Everyone carries a deductible or retention on his or her insurance, the cost out-of-pocket the insured pays before insurance kicks in. (I oversimplified the concept, but you know that if you back into a pole, $500 or $1,000 comes right out of your pocket. This cost is an incentive to practice safe backing techniques.)
The cost of uninsured or self-insured losses. Insurance is not designed to cover every loss. For example, if you own a tavern and you serve a minor who then later wrecks her car after she leaves your bar, a coverage exclusion may apply. Exclusions keep insurance affordable and help limit "morale hazards," an attitude of, "I have insurance so why should I be careful?"
Legal costs are a cost of risk. If you fail to purchase enough coverage or have an uninsured loss, you will need counsel. How does $250 or $350 an hour sound? Legal fees are a devastating cost of risk that often fly under the business owner's radar until it is time to write a check.
Loss control and safety costs. Safety professionals see it happen repeatedly. When times are bad, business owners think they will save money if they reduce safety training. Risks inherent to your organization but not well managed can produce unexpected costs. If OSHA arrives at your door or an expensive piece of equipment is damaged and out of production for weeks while repairs are made, costs can be devastating.
Claims management is another cost of risk. When your worker is seriously injured, how much administrative time does it take to report the claim, calm your employees, and manage the ongoing medical and return-to-work issues? By some estimates, the indirect costs of a worker's compensation claim may be as high as seven times the amount actually paid to your employee and his or her medical providers.
What about opportunity costs? If your star salesperson is critically injured in an auto accident, who can step in and help her customers? Did I hear you say "No one"? Then you must scramble to hire from a competitor, or hope someone in your organization can meet the challenge. Without key employees at work and highly functional, your organization cannot respond to market opportunities when they occur.
Boggs' book covers many other topics, for example, the differences between a claims-made policy and an occurrence form, understanding commercial auto symbols, how reinsurance fits into your coverage, and how coinsurance clauses work.
No well informed consumer should be without this book, especially if you own a business. Most of the time, you can depend on your adjuster to correctly interpret coverage and respond appropriately to your loss. Hedge that other small percentage with a little help from this book. It is available in paperback or PDF at Insurance Journal.
In addition, make sure to read these articles:
- Entrepreneurial activities in human resource management.
- Centralized versus Decentralized R&D: Benefits and Drawbacks.
- Understanding General Liability Insurance
- Insurance Terms Can Be Confusing
- Business Insurance 101: What Types of Coverage Do You Need?
- Hospitals become cost centers in managed care scenario.
Abstract The changing nature of human resource management fostered the development of entrepreneurial activities in human resource management. Some of these changes were forced on ......
Centralized versus Decentralized R&D: Benefits and Drawbacks; EIRMA Working Group 56 Report, 2000; Available to IRI and EIRMA members from EIRMA, 34 Rue de Bassano ......
Liability insurance protects the assets of a business when it is sued for something it did (or didn't do) to cause an injury or property ......
Insurance terms can be confusing. For example, do you understand the difference between a deductible and a self-insured retention (SIR)?
Examine these basic insurance types to determine what you need to do to protect the business you've built.
MANAGED CARE In a risk-bearing managed care enterprise, acute-care facilities will change from being profit centers to being cost centers, and this transformation will require ......
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