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Friday
May282010

Is Your Disaster Plan Sound?

DateFriday, May 28, 2010 at 04:35PM AuthorChris Moxley

As I have discussed, a good Disaster Plan is critical to reduce your total cost of risk.When we ask clients about their disaster plan, I usually hear, “no we need to work on that” or, “yes our computer guy has us taken care of”.  The problem with the first response is obvious but when I dive into the latter scenario,  I often find many holes in their program.  As we know, having your computers backed up is very important and most of us think and expect that that is being done properly.  Even though you may find that the backup is not being done as good as it can be done, a bigger problem is what are you going to do with that data if your building is a total loss due to a fire, tornado, or ice storm?  Even if your data survives, most businesses never recover from a total loss at their property.  Below are some important elements of a complete Disaster Plan:

  • Data Backup and Recovery – This includes software and not just data.
  • Written plan with procedures,  and contacts.  Copies of relevant data for each key employee  should be kept at their houses.
  • Facilities & Power - If you are shut down, for many types of disasters, so is your power.  Who will provide power, computers, office space, warehouse space, and internet or phone connectivity if these are out.  A disaster can include a major cut in your internet service without any type of natural disaster being the cause.  We partner with firms that provide these services to our clients.
  • Testing – If you plan has not been tested, it will probably fail or not obtain it’s desired result.  Everyone we know that has tested their plan has found huge problems they had to fix after the test. When you test, you should simulate a complete loss and restore just like you would have to do in a disaster.
  • Funding – Now that you have the plan to take care of all of this, who will pay for it?  It’s important that your Risk Advisor structures your insurance to properly fund your plan.

Chris Moxley, CIC, CRIS

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Thursday
May062010

Workers Compensation Total Cost of Risk

DateThursday, May 6, 2010 at 11:55AM AuthorChris Moxley

We have all heard about the "iceberg" effect of claims.  OSHA has spent considerable time and resources to research what these dollars actually are.  According to the study the smaller the claim is, the higher the indirect costs associated with that claim are.  This makes sense as there is a common cost to setting up a claim, doing associated paperwork, etc for all claims and this would certainly cost more as a percentage for smaller claims. 

According to the study for claims under $3000 the indirect cost are 4.5 times the amount of the claim, 1.6 times for claims from $3,000 to $5000, 1.2 for claims between $5000 and $10,000 and 1.1 for claims above $10,000.  Even though this is fairly easy to spreadsheet these numbers,there is a worksheet on OSHA.com that does the work for you.  It goes a step further to show you what sales are needed to cover your claims.  When we have done these in the past for clients, they are very surprised when you show them the number, but the amount of sales to cover the claim is where it really hits home. 

What makes up these soft costs or indirect costs?  Loss of use, loss of productivity, lost customers, damage to brand, lost contracts, investigation expenses, administration, bad morale among employees, time to attend hearings, etc.  The list goes on and on.  I would challenge those of you who have changed your culture to a more safe workplace to look at  your financial statements and give the credit for the improvements to the reduction of these direct and indirect costs.   For those who may struggle to get upper management to look at something besides sales, use the worksheet to show them the importance of safety and loss prevention. 

Chris L. Moxley, CIC, CRIS

Professional Insurors Agency, LLC

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Thursday
Feb112010

Real Cost of Property Insurance

DateThursday, February 11, 2010 at 09:30PM AuthorChris Moxley

What is your TCOR (Total Cost of Risk)?

Many Businesses look at their Insurance Premiums as their cost of risks from year to year and do not take into account what their real costs associated with their property exposures are.  You hear a lot of discussions about Workers Comp and Liability when talking about Total Cost of Risk but very little is said about your property exposures. 

The Total Cost of Risk (TCOR) is defined as the overall costs associated with running corporate risk management program.  These include such items as:

  • Insurance Premiums
  • Deductibles
  • Uninsured Losses or Losses exceeding Insurance Limits
  • Risk Control or Safety Expenses
  • Management's time in dealing with issues (claims, contractors, moving tenants)
  • Reputation with Insurance Companies (future premium increases)
  • Loss of Reputation in Community
  • Fines (City, State, Federal)
  • City or State Mandates (ordinances) that force upgrades after a loss

When looking at these issues, most would have to agree that avoiding the loss is by far the best way to lower your TCOR and a key component of risk management.  Even though many say that there is not much they can do to lower their risk cost or, “it is just luck” that could not be further from the truth. 

Here are some items that can lower your TCOR for your property exposures:

  • Inspections of Property to identify problems to prevent losses
  • Fire safety equipment such as extinguishers, alarms, & sprinklers
  • Properly Value Properties before loss
  • Contractor Hiring & Risk Management Transfer
  • Proactive improvements to property such as electric, roofs, plumbing, etc.
  • Disaster Recovery Plan
  • Tenant Screening where applicable

We will explore these in future articles.

Chris Moxley, CIC, CRIS, Professional Insurors  www.pi-ins.com

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