Colsa Insurance Agency, Inc. Blog
One of the keys to managing risks when you first start a business is getting the right insurance to cover your operations, property and potential liabilities.
Unfortunately, many business owners fail to update their policies and just renew them year after year even if the company has grown, expanded operations and facilities, and added new equipment and property. If this is the case, the old coverage would be insufficient.
Business owners should review their policies every year to catch any omissions and make sure they are not underinsured. It is common for smaller businesses to secure a basic business owner's policy (BOP) and workers' comp when they first get started. A BOP includes:
Outgrowing BOP coverage
As your business expands, you may outgrow the BOP and need additional coverage to manage your risks. Some examples include the following:
Depending on the business, some or most of these insurance options may be required for adequate protection. Annual reviews with us are ideal for discussing your options. Make sure these elements are considered:
As the economy continues expanding, companies need to be careful about properly managing their risk, according to a report by Advisen Inc., an insurance research and data firm.
Increased activity typically means proportionally additional losses. For example, more trucks driving more miles will inevitably result in more accidents. However, there are other kinds of risk that can actually increase more than the jump in business activity. We look at three such areas here.
Workplace injuries can increase as firms hire workers that have less experience. Typically, when employers expand their workforce to meet the growing demand for their products and services, the number of workers' compensation claims tended to rise disproportionately.
New employees with less experience typically are more likely to sustain a workplace injury. At the same time, experienced staff may look for new job opportunities as compensation begins to take priority over job security.
What you can do: One option is to hire a temporary-staffing firm to fill positions. In these relationships, the client company is not responsible for covering temporary workers.
But you should be aware that OSHA requires what is known as the "dual employer doctrine", under which temps are considered employees of both the agency and the company using them. And you are also not off the hook for providing them with a safe work environment and safety training specific to their job.
And remember: Check to make sure the temp agency has workers' comp insurance.
The risk of being sued rises as employees make mistakes due to pressure on existing staff to increase production, and again when less experienced workers are added to the payroll.
Your workers may be putting in extra hours. But fatigued workers make mistakes. For example, some of the worst industrial disasters have been in part the result of tired workers. Bhopal, Chernobyl and the Exxon Valdez oil spill all involved decisions made late at night or extremely early in the morning by people working long hours.
In addition, inexperienced employees are more like contribute to incidents where outsiders are hurt.
What you can do: Conduct thorough interviews, check references and carry out background investigations when appropriate to avoid hiring people with known problems. You are responsible for the actions of your employees.
Also, make sure that you are not overworking your staff. Provide proper breaks so they can rest, especially in jobs that require attention and strength.
Labor law violations
Trends in litigation and regulation make it more likely that companies will be charged with labor law violations. Employees are braver now about filing complaints, thinking they have a good chance of landing a new job if they are fired.
In addition, the federal and many state governments have cracked down on wage and hour law violations.
As well, some companies may try to add to their worker pool by using more independent contractors, in order to avoid hiring new workers. But the federal government has mounted a serious crackdown on companies that inappropriately classify employees as independent contractors.
What you can do: Pay close attention to your payment systems and audit your systems to make sure you comply with wage and hour laws as well as meal and rest break laws.
The lesson is to increase your vigilance in managing your risk and review your existing risk management strategies for gaps due to business growth.
You can take the following steps to reduce your chances of increased claims:
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