Keith DeCoster is the senior vice president and managing director of Aon Risk Services Central Inc.
Q. How can companies analyze the risk they face?
They need to understand what their risk is and just what they pay for insurance. Their risk is the various risks they may have that are uninsured by a third party that can be anything from financial risks to low limits on their coverage. We have a lot of clients who find out they have a $5,000 deductible and a $25 million limit on their liability, and if they blow through (that) $25 million, they’re on the hook for everything above it. It pays for them to specifically get a grip on what their exposure really is or could be. Small and medium companies tend to insure around the mean they trade dollar for dollar. It’s really a discussion about what they want to do, whether they want insurance to act as contingent capital.
Q. What are some types of insurance that companies should be covered by today?
It depends where they are, but simple acts of God like in the Midwest, you could have a tornado come through and wipe out a warehouse. How are they going to rebuild that? Are they going to go to a bank and ask for a loan? Or are they going to go to an insurance company to pay their $25,000 premium? If you have a higher deductible, it usually allows you to have higher limits at a lesser rate.
Q. What should a company know about risk management planning?
It doesn’t matter if you’re a not-for-profit or a large manufacturer, you have to have a plan, no matter how strong you are financially. Somebody didn’t have a plan at a lot of these large companies; they didn’t have their hands around what their exposures were. Identifying the problem is 90 percent of solving it. That’s where you use your whole staff, even if it’s just one or two people. You identify your major problems, then allow it to trickle down, you spend some time on it. In small companies, it can be just a hiccup and they’re gone.