Why Risk Assessments Are More Important Now Than Ever
By: Corey Bounds, Continental Underwriters, Inc. Director of Risk Assessment
With the whirlwind of changes that 2020 brought to our industry, it is no surprise that the forestry insurance market is continuing to shrink in 2021. Today, we are sharing some of the best risk management practices brokers can leverage to help their clients adapt to this shift, along with plenty of tips and tricks that insureds can consider, too. We’ll be breaking down what makes an effective risk assessment, the different ways of determining risk appetite, and how Property Conservation Programs can tie it all together to bring value to the business and its employees.
It All Starts with an Effective Risk Assessment
In 2021’s insurance climate, risk assessments are more important than ever before. For the insured, embarking on this process can help illuminate any potential hazards within their business while providing guidance towards implementing systems and best practices to reduce those risks. For our team at Continental Underwriters, Inc., this process is critical to our role as the insurer, of course, but it also serves as an opportunity for us to get to know the potential client a little bit better and understand their needs as a business.
We usually start this process with an initial vetting or “pre-qualification” introduction that’s handled over the phone by me. Once the client is vetted as viable, we send a team of underwriters out for an on-site meeting to validate what we’ve learned from prior conversations and listen closer to gain a better grasp of their business goals. Arguably the most important part of this meeting is establishing the human connection. Knowing we’re working with folks who have good intentions is so critically important to everyone’s success, so we don’t take this introduction phase lightly.
The most effective risk assessment is one in which both parties are fully prepared. For our brokers, this means managing expectations for the upcoming visit and communicating those to the client as clearly as possible, including a list of items they should have ready for inspection. During the assessment, we will identify what’s going on with everything from hazards to programs where there is room for improvement, all while making a real, human connection with the client. It’s important to me to let clients know I started my career in a family-owned feed mill so that they know I have been in their shoes and genuinely care about their business from a risk assessment standpoint.
On the technical side of an assessment, you certainly want to make sure that the insured knows what they’re doing. But an equally essential element for us in these assessments is the humanity of the business – are they going to be a pleasant person to work with? Are they someone we’d trust our own business with? We ask all kinds of questions and from there, put a risk profile together that measures what I like to call the “Four Ps” – processes, programs, protections, and people of a business – to classify whether we’d be willing to insure.
Determining Your Risk Appetite
A business’ risk appetite can be determined through a self-assessment from the owner or by our calculations on their loss expectancy for that year. If determining their own risk appetite, business owners should ask themselves: why does my business exist, what are our goals, how are those goals achieved and more. This will help identify what their business can do in that year and understand how much risk will be involved.
One of the biggest exposures they’ll always have is from a maintenance perspective – if a business isn’t regularly maintaining and servicing equipment, it will increase its downtime when wear and tear issues eventually occur. When a client takes the time to ask themselves these questions, that sense of self-awareness for their business can go a long way.
In the case that a client is not determining their own risk appetite, we will come in and calculate their loss expectancy and help them understand how this is all done – by assessing, you guessed it, the “Four Ps”: processes, programs, protections and people. Whether or not you know if your client knows their risk appetite for this year yet, I advise to start having those conversations now. Between listening to their situation to understand their nuances and tapping into our greater knowledge of the industry and marketplace, we can effectively re-evaluate a business’ risk for 2021 and beyond, while educating each other all along the way.
How Property Conservation Programs Tie it All Together
Our best (and most consistent) advice for a lumber or forestry business looking to lower its risk and stay insurable in 2021 is to implement a Property Conservation Program as soon as possible. Not only can a program like this make a business more profitable, but it can positively transform the business’ systems and processes from the inside-out, making for a lowered risk overall. Another excellent bonus is the improvement of quality of life for the folks that work there. The more a business takes their “curb appeal” into account, the more pride their employees will have for it. A safer and happier workplace results in less employee turnover, which means fewer overhead costs, thus improving profit margins. It’s a win-win-win.
At Continental Underwriters, Inc., we are passionate about educating our clients on the different aspects of Property Conservation Programs and why they make sense, especially prior to their risk assessments. This is because we care about the well-being of these businesses, and perhaps more importantly, the people behind them.
When it comes to any aspect of risk management, at Continental Underwriters, Inc., one thing is for certain – the job is never done. Our team’s success comes from a very high level of discipline, and that includes looking at ways to constantly improve our own people and processes in every step. We feel so much value in what we do, and our hope is to carry that sentiment all the way through in the success we can bring our clients and their employees.