Businesses in the chemicals, coatings, adhesives, lubricants and the polymers industry require more specialized coverage than that afforded in a standard package policy. They also need experts who can help them manage their risks and dig a little deeper because the product liability, propensity for bodily injury and property damage, the environmental concerns and the transportation risks are critical.
“An insurance policy isn’t a replacement for a solid risk management program. We work closely with our clients to develop loss control, contingency and emergency response plans prior to a loss happening,” says Jessica Kerrigan, Client Executive at Hylant.
“When there is a chemical spill or release, time is not your friend. You need to handle it immediately with a team of professionals behind you who know exactly what to do,” says Michael Baumgartner, Client Executive at Hylant. “Responsiveness is a huge factor in mitigating the environmental impact.”
Smart Business spoke with Kerrigan and Baumgartner about how chemical companies can build a customized risk management program.
How might an insurance broker who acts like an extension of the internal risk management help a chemical company?
The current changes in the property insurance marketplace are causing issues across all industries, especially the chemical and related industries. For a company to distinguish itself with underwriters, the property submission needs to be significantly more detailed and the risk management program should be robust and clearly articulated to the underwriting community.
For one company with seven locations across the U.S., that meant getting its broker’s loss control team together to visit each facility and generate a risk profile report that described areas of strength and opportunities for improvement.
The company addressed weaknesses or, if the change wasn’t in the capital budget, put together a strategy to do so in the future. The intimate knowledge gained and the commitment of resources turned the property renewal into a competitive advantage from a pricing perspective.
In this market environment, this kind of proactive approach must be executed to achieve optimal pricing and coverage terms, but it’s even more important for the chemical industry, which is far more customized and under tremendous pricing and coverage pressure from an insurance and risk management perspective.
Beyond property, what other risks are especially important for these businesses?
As far as trends go, insurance rates also are rising in the umbrella market as well as continual increases in automobile liability. Again, that’s why it’s critical to have a proactive risk management culture.
Cyber is a risk that may not seem inherent to chemical companies, but no business is immune. Computer systems are used in the majority of the manufacturing process — from filling tanks to heating or cooling chemicals — and those are vulnerable to attack. With cyber risk, as soon as a company builds a 10-foot wall, the cybercriminals will build an 11-foot ladder.
Environment risk requires expertise and brokers with experience. There can be ambiguity in general liability policies, so insurance buyers and risk managers need to make sure they meet regularly with their broker and explore all risks to ensure their exposures are covered as expected. In the chemical industry, it’s also important to closely examine the operational aspects.
For example, at the end of a two-hour session with a prospective client, going through the raw products and how the products were being used, a CFO and broker discovered more than 10 percent of the company’s products weren’t covered because the current insurance carrier had an exclusion for those chemical makeups.
When it comes to insurance and risk management, don’t fall into the trap of thinking, if it’s not broken, don’t fix it. It may be time to get a second opinion with a policy audit to ensure your company hasn’t become complacent.
Businesses need an insurance broker who thinks creatively about how to mitigate risk — visiting locations, helping design a custom loss control and prevention program with emergency response procedures and ensuring the company has a tailored insurance solution with the broadest coverage at the most competitive price.
Insights Business Insurance is brought to you by Hylant