Why Risk Transfer?
Presented by Christopher F. Hawthorne, CPCU, CIC
Insurance premiums fluctuate annually due to sales and payroll activity of a contractor and also due to loss history. The insurance policy provides money to rebuild damaged property, to defend in a liability suit, to pay settlements as well as take care of employees when they are injured on the job. These combined costs are labeled as losses.
An insurance loss has the potential of driving insurance premiums up for four or five years as well as limiting which carriers will wish to work with a contractor. When an insurance carrier is determining what it will offer in term of premiums, it will incorporate the prior four years of losses as part of the pricing mechanism. The fewer and smaller the losses, the more carriers will be interested and the carriers can justify offering lower premiums.
An available risk management technique to lower the size of a contractors losses arising from working with a sub-contractor is Risk Transfer. Risk Transfer can protect one party’s insurance program and future premiums by transferring the cost of a loss to another party. Conversely, it can increase the future costs of the other party’s insurance program.
The major types of protection in risk transfer agreements are as follows:
Hold Harmless-Party A holds Party B harmless for a loss when Party A has caused part or all of a loss.
Indemnify– Party A agrees to reimburse Party B for damages (settlements and judgments).
Defend– Party A agrees to pay the cost to defend Party B after a loss if Party B is named in a claim or suit.
Additional Insured Status– Party A provides coverage for Party B under Party A’s insurance program for Operations and Completed Operations.
Primary Coverage-Party A states that it’s coverage is primary should Party B be brought into the suit.
Non-Contributory– Coverage-Party A states it’s policy disallows Party B’s policies from sharing in the loss.
Waiver of Subrogation-Party A disallows its insurance company from pursuing Party B’s insurance carrier for any amount due to Party B’s negligence that may have contributed to the loss.
In short Party A is highly protected by Party B.
When is it appropriate for one to agree to these terms? While this question is to be answered on a case by case basis, in general if accepting work from a General Contractor (GC), it is the norm that the GC will expect the terms to be agreed to, to some degree. The economic value of the relationship should be considered before agreeing to adding this exposure to one’s liability.
When is it appropriate to ask for these terms? Whenever possible, as it greatly enhances the protection for an operation.
Not all agreements are the same and not all insurance policies can back them up. It is critical both parties involve their attorneys as well as their agents before signing. As always, a team approach and communication will put everyone is a better position to succeed and survive a loss.
Ways to Foster Workplace Wellness
Managing an office that promotes a healthy work-life balance is a trial-and-error process. Between constant accessibility as a result of technology and the pressure to meet deadlines, employee and workplace wellness is too often compromised.
It may not seem like your responsibility, but you want to encourage your employees to balance their personal and professional wellness. Some of the most successful companies in the country are investing in their employees’ wellness.
We’re here to help. Below are five ways to implement workplace wellness in your office.
Get up and active
Identify a workout studio that is close to your office location and attend a class as a group. Encourage people to initiate fitness groups within the office, or opt for walking meetings. Apps like Eventbrite and Groupon sometimes post special deals for companies looking to explore fitness.
Professional and continuing education
Employee and workplace wellness is not always about physical health – it includes mental, intellectual, and emotional. Remind your employees that their careers and growth are important to you. You can show that you mean it by going the extra mile and getting your employees in touch with wellness professionals from the likes of LeggUp (https://www.leggup.com/) or similar coaching platforms, and help them unload mentally to stay sane. Furthermore, you can offer to cover the cost of educational workshops and classes that will help people improve the work they do and strengthen their confidence in their trades. You can read up on blogs such as https://www.edenhealth.com/blog/what-are-employee-benefits/ to learn more about the aspects of employee benefits that could be integrated into the corporate culture.
Keep hydrated and improve workplace snacking options
That third cup of coffee is doing nothing to hydrate you. Water is extremely important to keep your body healthy – from your skin to your kidneys to your blood pressure – and often goes by the wayside during the busy day. Design company water bottles as a friendly reminder to your employees to prioritize hydration. If the budget allows, invest in a flavored water dispenser like this one.
Mandatory mental health days
Well, maybe not mandatory, but employers can do a much better job emphasizing the importance of mental health days. Your employees are hard-working and don’t want to be seen as slackers, though they might very much need a personal day every so often. Drop hints that you are understanding as an employer and encourage your staff to take time when they need it.
Modernize your desk and other office furniture
The research is in: desks are not healthy. Employees are often seen to be complaining about the issues in the office’s furniture, poor utilization of workspace, and absence of recreational places. For the employer, sometimes, these problems might not seem genuine, however, when ignored for a long period, it can affect the productivity of the employees. An office interior design expert might help with easy solutions for problems such as these. Also, did you know that some companies are replacing their chairs with a yoga balls as a way to fix employees’ posture and burn calories? Others are opting for adjustable desks, which allow workers to sit or stand. Both of these options often result in an increase in productivity and decrease in back pain. All in all, one must know that good office equipment and furniture could prove to go a long way in improving posture and overall health!
Get some sunshine
Encourage your employees to get their daily dose of vitamin D when the weather allows for it. Set an example by eating lunch outside or making it known that you are going for a walk.
The bottom line is this: employee and workplace wellness is not optional, it’s essential. Not only will it help your employee retention, but an increase in productivity and workplace happiness will only benefit your business.
Study Shows Majority of Boston Area Small Businesses Are Overexposed to Risk
56-percent of companies failed a business risk assessment, operating without basic safeguards against damage caused by cyber-attacks, HR issues and other common operational realities
This past summer, we conducted a study to see just how aware Boston area small business owners are of their overall insurance coverage. This was the first study of its kind; we call it the Cleary Small Business Risk Index.
The results were scary.
The Index shows that more than half (55%) of Boston area businesses failed a risk assessment that probed 19 areas of risk management including cyber security, professional liability, employment practices and more.
So what does this boil down to?
“This proved what we have always assumed – most business owners don’t understand how to properly assess or account for risk,” said Bill Cleary, president, Cleary Insurance. “The answer isn’t always ‘more insurance.’ There are many ways to offload, avoid or manage risk. But in order to succeed, you need to understand the basic situation, and too many business owners just don’t.”
The Boston-area wide survey (including businesses on the North Shore, South Shore and Metrowest) was conducted online questioning 100 business owners, operators and employees spanning a variety of industries including healthcare, retail, financial services, and more. All respondents had a significant influence on the operational decisions of each company.
Could you pass? Take the Cleary Small Business Risk Assessment today to test your understanding of coverage. Also, check back for the next few posts which outline and answer some of the greatest areas for risk.