Faced by supply chain and hiring challenges, unpredictable shutdowns, and ever-changing regulations, CFOs are more strapped for time and resources than ever before.
Steve CareyWhile insurance typically falls under a CFO’s large and growing list of responsibilities, it’s often on the backburner. Policies are simply renewed year after year. All is OK—until it isn’t. Along comes a claim or a stratospheric renewal, and suddenly it is time to take a deep dive into coverages and what happens “behind the renewal curtain.” The key to avoiding this, of course, is to have this discussion before circumstances demand it.
To be proactive, today’s CFO needs to analyze and address four key risk considerations that are often overlooked.
Gaining clarity around these concerns gives the CFO choice and control over how they’re addressed—and that directly impacts the balance sheet.
1. NON-INSURANCE RISK TRANSFER
Historically, insurance brokers have often been viewed as policy peddlers, but those taking that approach are living in a bygone era. The modern insurance broker must look at non-insurance risk transfer as well. For instance, are contracts with your clients and suppliers written in a way that transfers the risk to them? Also, what safeguards do you have in place to ensure they have proper coverage – and how can you address this without eating up your team’s time?
2. ALTERNATIVE RISK ARRANGEMENTS
The hard insurance market continues, forcing rate increases even for profitable accounts. To offset this, consider alternate risk arrangements including loss-sensitive programs, captives, and innovative ways to self-insure parts of your organization. While, ultimately, not a fit for every manufacturer, it is a solution that all mid-market manufacturers need to explore.
3. SAFETY, LOSS CONTROL, AND COMPLIANCE
While global accounts rely on experienced compliance officers and a team of safety and loss control consultants to manage their costs, many manufacturers leave this in the hands of a busy CFO, floor manager, or an insurance carrier who walks the shop floor once a year. Outsourcing this function to a broker with a full loss control team and access to digital tools not only gives time back but assures a comprehensive review by field experts. Acting on their proactive solutions and telling the underwriter your full story about safety, will pay dividends during the renewal process.
4. EMERGING RISK
The importance of looking at additional risks has never been greater. Current threats to business profitability have evolved with the times and now include cybercrime, product recall, and professional liability. Even your accounts receivable can be covered by an insurance policy. The choice and control over self-insuring or purchasing insurance should be yours. The first step to taking control is understanding all the risks that face your business. Only then can you make informed decisions about transferring these risks to an insurance policy. Overall, taking time in this area pays off with a more favorable insurance renewal.
If neglected, these concerns often lead to terms that can significantly damage the balance sheet. In short, mid-market CFOs and insurance buyers, must look outside the “typical” insurance buying process to find additional ways to derive value and return on investment from their insurance broker and outsourced risk management team.
Steve Carey, CAWC is an Associate with Oswald Companies in Bloomfield Hills, Michigan. Reach him direct at 248-530-2483 or at SCarey@oswaldcompanies.com
