Carol Frank with guest Pam Adams
Business liability insurance saved my company from bankruptcy.
Several years ago a competitor sued me for the sole purpose of putting my company, Avian Adventures, out of business. The charges had been trumped up and falsified; yet I still had to spend the money on legal fees to fight the lawsuit. The first month after the suit, my legal bill was $17,000. That’s A LOT of money for a small company. Thank goodness that one of the attorneys I consulted told me to submit the lawsuit to my insurance company to see if it would be covered under my business liability policy. Sure enough, they did agree to defend me against this bogus lawsuit. And thank goodness they did, because the lawsuit would definitely have put me out of business.
Ever since, I’ve been the poster child for business liability insurance.
Insurance is kind of like going to the dentist. You’ve gotta have it, but you don’t much like the process of getting there. There are so many questions to ask yourself: How do I know how to pick the right agent? Do they offer the products I need? How can I compare premiums? Since having insurance coverage in key areas of your business is critical, I asked a business acquaintance, Pam Adams, CEO of ISU insurance in Denver, to share key considerations when choosing an insurance agent/broker. Pam is the CEO of ISU Insurance, a 130 year-old independent insurance brokerage firm that provides business, personal and life and health insurance protection throughout the United States and several foreign countries.
Here are her suggestions for what to consider when selecting an insurance broker:
History of the firm and the personnel that you’ll be working with. Service and knowledge: if they are important in business, they’re vital in insurance. How long has the firm you work with been in business? How long has the service staff been there? How long has the service team been in the industry? Knowing the answers to these questions and the history of the firm you are dealing with help a business owner to feel comfortable in knowing that the firm will be there when you need them.
What insurance carriers does the firm represent? Some insurance brokers specifically represent one particular insurance company. Other brokers – independent brokers – have access to multiple insurance companies. Having access to multiple insurance companies means that an independent
broker can do the “shopping” for you, with the companies that they represent, in order to provide a specific program, tailor made to your business needs.
What are their areas of expertise and niches? Does the broker that you’re working with insure other businesses in your industry? Pet product manufacturers have unique exposures to their operations and products sold. Selecting a broker that has experience with similar organizations will increase the understanding of your business by that broker. This typically saves time during the insurance quoting process, as the broker will know what characteristics and questions that the underwriters will want to know about your business. It may also mean that the broker has substantial relationships with the insurance carriers best suited for your organization, and thus able to negotiate the most favorable pricing.
What types of continuing education are provided to their service staff? Most business owners count on their insurance broker to keep them up to date on the types of coverage that they should consider for their business. Insurance brokerage firms that emphasize and require continuing education of their employees stay on the cutting edge of new products in the marketplace, and claims examples to help explain these coverages to you. Cyber Liability, Computer Fraud, and Computer Funds Transfer coverage are relatively new types of protection that all businesses should be considering.
What value added services do they provide? An insurance policy is a piece of paper with a promise to pay – a promise that you hope to never collect on and use. Services that you can use proactively from your insurance broker and insurance carrier include:
- Loss Control – guidance to help you prevent losses before they occur.
- System Design – this includes items such as the creation of safety and fire protection systems, implementation of a safety culture, and development (or fine tuning) of your employee handbook.
- Access to Resources – legislative materials, OSHA reporting logs, and access to claims consulting hot lines are a few examples.
- Analysis of Claims History – using this to help prevent additional claims in the future, as well as to help select specific deductibles and coverage limits is key to the success of your program.
What will their involvement be at the time of a loss? Your insurance broker should be your advocate at the time of a loss. They should be there to educate you on the process, help you communicate best with claims adjusters, and ensure that the claim settlement progresses as efficiently as possible. Discussing this up front allows you to understand what to expect in the event a claim occurs.
We all hope there will never be a fire that burns down your building, there will never be an employee that steals money from your bank account, your product will never cause injury to a pet or their owner, and you will never be sued by a competitor under false charges. But if any of those unfortunate events ever do occur, the fact that you’ve taken the measures with your insurance program to ensure your business survives will definitely allow you to sleep better at night.
Carol Frank of Boulder, CO, is the founder of four companies in the pet industry and a Managing Director with BirdsEye Advisory Group, where she advises pet companies in M&A transactions and Exit Planning. She is a former CPA, has an MBA, is a Certified Mergers and Acquisitions Advisory (CM&AA) and holds Series 79 and 63 licenses. She highly values and incentivizes referrals and can be reached at cfrank@birdseyeadvisory.com.