It's no industry secret that previous claims can leave you paying higher premiums for your insurance.
While business insurance providers do not generally offer a no-claims-discount in the same way that you often see with car insurance, if you have a number of claims made against you, or one huge claim, then this can impact your insurance premium negatively or worse still, you may be refused future cover.
Risk management in business is defined as:
the forecasting and evaluation of financial and physical risks together with the identification of procedures to avoid or minimize their impact.
Having a solid risk management process in place protects the reputation of your business, increases stability and decreases the opportunity for accidents.
The first step in using Risk Management to prevent Liability claims is laying out your potential risks and addressing them.
Four types of Risk Management
After the risk identification process, there a four possible management routes:
One of the most obvious answers to any risk is avoidance, also known as "just don't do the thing." It works quite well for many potential risks, however, often you miss out on the gain of accepting those risks would could with.
Risk reduction means to either reduce the severity of a potential incident or level of risk. For example, in the case of the classic Liability claim of a slip, a wet floor sign can significantly reduce the risk of a customer or employee slipping on a wet floor.
Risk sharing is often described as a transfer of risks to a third-party and might refer to an insurance policy or other agreement.
You may also share the risk with another third-party or across an entire group.
All risks that are either not avoided or transferred to a business insurance policy are known as retained risks. Even if you reduce said risk, there will usually be tolerable levels of residual risk which your business is happy to accept.
You own a shop. You can reduce the risk of a wet floor by using wet floor signs or not cleaning it during business hours, however, the only way to avoid the risk factors of slips would be to never open your doors because there will always be a residual risk of a spillage that was caused by individuals out of your control.
Self-insurance also falls under Risk Retention in cases where the cost of a third-party insurance policy for a particular risk would be greater than the cost of factoring the cost of that loss into your business model.
For example, the risk of an automated manufacturing process for plastic dolls might be that 1-in-1,000 products have misprinted faces but the cost of that can be absorbed.
Risks to the Public and Employees
If you have a public-facing business or have staff on-site, you need to carry out a risk assessment for general safety hazards to prevent both Public Liability Insurance and Employers Liability Insurance claims.
Common causes of customer and employee injury include slips, trips and falls.
Other causes of injuries might include:
- Muscle strains and Repetitive Strain
- Objects falling
- Inhaling toxic fumes
- Continuous loud noise exposure
Risk of Physical Products
If you sell physical products, monitoring and controlling quality is imperative to prevent financial losses in the form of compensation claims.
In the event that someone suffers physical injury, property damage or even death as a result of using your product your business could easily be found liable in court for those damages.
Such claims can be made against the retailer, wholesaler, manufacturer or designer of a product depending on the cause of the damage.
For example, you are a small business and you sell organic skincare products online. When running a risk analysis for potential damages you might immediately highlight the risk of allergic reactions.
To protect yourself from legal proceedings for such injuries, you will need to provide a list of all the ingredients on the packaging - that's one risk dealt with.
Similarly, you should fully test your products to make sure that they are not irritating in general.
Carrying out these quality control procedures can both protect your wallet and reputation.
Other items that pose a significant risk include:
- White label products without a clear line of production
- Electrical goods
- Cleaning products containing hazardous ingredients
- Hair and beauty products
How much can previous claims impact my insurance premiums?
If you drive a car, you will probably be aware of the negative impact that a bad claims history can have. While this is not as clear cut with business insurance, with no "no-claims" bonuses etc. multiple claims or one huge claim could have a lasting impact on your premium.
Individual insurers will have their own processes of how the costs of premiums are calculated, typically based on their previous claims experience with similar businesses and/or risk exposures.
Those businesses which can demonstrate a higher level of controls and risk management will be seen more favourably in terms of both accepting to insure your business and/or the premium level charged.
Conversely, a business which cannot demonstrate adequate risk management, or has a history of not confirming to Health and Safety regulation, could be refused cover altogether, or face higher premiums or excess levels.
How can your Insurance Broker help with Risk Management?
For larger businesses it is possible that your insurance broker can assist with a full risk management programme, working hand-in-glove with your management team to ensure suitable controls are in place.
SME businesses can also benefit from risk management advice and assistance, both in terms of general guidance and support, as well as what types of risk management controls a business insurance provider will look for in your specific trade sector.
At Insync, our team of Business Insurance Advisors is on-hand to provide you help and support in identifying risk and obtaining suitable insurance for your business for those risk your do not wish to retain yourself.
Call one of our team today on 01200 309516, or visit the Insync website for more information.GET A QUOTE