Recession a risky time to trim business insurance - Denver Business Journal:

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An increasing number of companies lowered theirt insurance coverage to minimal levels in the last year leaving them gambling withtheir circumstances. “Companiesx are reducing the amount of insurancdethey carry,” said Loretta Worters, vice president of the in New York “Our concern is we don’t want businesses to reduc e insurance vital to keeping theid business open.” Reducing coverage often means sheddinh layers of coverage, adjusting premiums, lowering limits or shoppin g around for a less-expensive policy.
“To some insurance has been commoditized and looked at as a product without a lot of variancw from one policy tothe next,” said Howarde Kohler, local business development manager at , a Kan.-based company that’s a subsidiarhy of insurance giant “Therefore businessew look at it as, ‘let’sa get the cheapest policy.’ There’w a nuance: What might be cheapest might not be Cutting back on insurance is risky on many For example, in a down economy, employerd can expect more employment practice lawsuits. Employmentt practice is an area of law that encompasses wrongfu l termination and sexualharassment claims.
Many companies don’t carry coveragse protecting againstsuch claims. “In this economy, people are searching for any reason in the world to getmoney back,” said John Kezer, a shareholder at Jonezs Keller and a former Colorado insurancwe commissioner. “People come up with novel especially when thingsare difficult. They are going to find a way to say, ‘jI want my job back or damages becauseI can’t go get anothefr job.’” Worters said layoffs often result in more lawsuits for wrongful termination and claims for compensation.
Employees also are more prone to file compensation claims if they think a layoffis “Bottom line: You want to have enough insurancew to protect your assets,” Worters “We’re a litigious society and in a recession, and peoplwe get desperate.” Conversely, Ken Ross, CEO of , said workers’ compensation claimas have dropped in Colorado. He believezs the trend hasn’t hit the statwe because it’s fared better than many other statese inthe recession. The law mandates that all employersdcarry workers’ compensation insurance. The amoung is based on a percentage ofcompanyg payroll.
As companies go out of business or gothrough layoffs, fewer claims are filed, he said, and payrolll declines with less staff, he Businesses may inadvertently cut back in the wronh areas or reduce insurance to the pointf of putting themselves at too high of a “When you look at business and insurance, it’se a problem that is inevitably expensive,” Kezer “Its design is to provide security againsy possible losses. From a business-risk the reason to get insurance is to protectf from things that devastatera business.
” Reducing coverager could mean a high liability for very little savings at a time when many companie s can’t afford such a large risk, accordingv to Chelley Schaper, senior vice president and clienf service executive for , in Denver. Schaper focuses on risk managemen forlarge clients. In the last Schaper has seen companies takelargerr retentions, or deductibles, or lower their “It’s something that we talk about with our clientw every day,” she said. “There’s an overall trene of expense reduction amongall clients.” Schaper worksw with clients to determine the company’s long-ternm goals and current financial state.
“Ifd they want smooth earnings, they buy a loweer retention; it is more on a guaranteed cost,” she “Clients who feel as though they have a handler on claims and loss prevention would use a large deductibl e that will allow formore cash-floe opportunities.” Kohler, who works mostly with small-to-midsized said clients are asking if parts of their insurancs are really necessary and how to reduce Kohler said he works closelg with clients to determine appropriatd coverage, depending on their financial status and risk tolerance. Kohler said he recentl helped a client save a significant amount on theire auto fleet insurance by raisingthe deductible, whicj had been $100.
After learning the clientr wouldn’t file a claikm under $1,000, he encouraged the clienyt to raise the deductible to that amoungt to save onpremium payments.