How to negotiate your insurance renewal to get the best value

Business owners purchase insurance based on emotion. Actually, almost all purchases are based on emotion — people think logically but decide emotionally.

For insurance, employers reach out to people they trust — friends, relatives, golf buddies or community and business connections in the insurance industry — to discover where to turn for an insurance relationship. They also typically remain loyal, unless the owner experiences a bad loss or poor service.

As word gets around about the soft insurance market, employers need to guard against getting too price conscious.

“You are buying a service. Not only are you buying insurance to put your mind at ease so you can sleep at night, but you need a partner to work with you proactively to make your risk profile look attractive to the insurance company,” says Kerry K. Gregoire, an assistant vice president at SeibertKeck Insurance Agency.

Smart Business spoke with Gregoire about using the strong bargaining position you have now in the insurance industry to set your company up for the long term.

If business owners constantly shop their insurance, how can it backfire?

Insurance representatives and insurance companies will lose interest in quoting if a business owner shops his or her insurance annually. Most carriers today, although hungry for new business, are seeking long-term relationships and looking for loyalty, including after they’ve paid claims. They look at the whole picture, including how frequently you’ve been shopping your property and casualty insurance.

A business owner needs to be in a position of having an insurance company available and interested to quote when it’s really needed, such as a tough loss history or circumstances that drive premiums up.

Where exactly is the marketplace cycle and what is it doing for premiums?

For the past two years, we’ve been a soft market with 5 to 10 percent increases. That has moved over to flat renewals, and there are reports projecting a 5 to 15 percent decrease for 2015, depending on your risk profile. Cyber insurance, however, continues to increase because it’s new, people are getting hit with cyberattacks and the marketplace is still being tested.

No one has a crystal ball, but a typical soft market tends to hang on one to three years, depending on the outcome of catastrophic losses and market performance. The insurance market is a cycle. Educated buyers understand that eventually everything will go back up, so you don’t want to burn bridges with available insurance companies.

How would you recommend businesses negotiate renewals?

In a soft or hard market, business owners should consider bidding insurance out once every three years, and remember it’s not all about price. Make sure you aren’t losing any coverages if you switch to another insurer. Plan ahead and standardize the process for obtaining all of the necessary documents that pertain to the quoting process.

Also, limit agents who are competing; streamline the process of market selection. If you have more than a couple, agents end up approaching the same markets.

In a soft market, besides reduced or flat pricing, an insurance buyer can request more value-added services from an insurer or its representatives, such as a multiyear rate guarantee program that is contingent upon staying below a loss ratio threshold.

Plus, many insurers have been enhancing their risk management techniques and loss control resources to help customers manage their insurance costs and claim activity. Make sure you express to your agent your company philosophy — you want to self-insure or have higher deductibles for certain coverages. You can take a more proactive approach to try to prevent a claim or lessen its impact. You’ll also want to plan necessary time for loss control visits by insurers.

In the meantime, between shopping your insurance, be involved. Review your claim history so you can implement internal changes, if needed, prior to shopping. You may need to ask for quarterly loss run reports or quarterly claim review — via meetings or conference calls with the insurer — if you have claims activity. Insurers like to see that the business owner is demonstrating good risk management, which in the end controls losses and insurance costs.

Insights Business Insurance is brought to you by SeibertKeck

Why companies should ask the right questions first

Employers can add value to their total benefits package by offering a retirement plan such as a 401(k). High costs and large time requirements, however, prevent many companies — especially emerging entities — from proceeding.

“There are ways to partner with a firm to provide a plan that is easy to implement, low in cost and that can help reduce the administrative burden to the employer,” says Kristina Keck, vice president of retirement plan services for Woodruff-Sawyer & Co.

Smart Business spoke with Keck and 401(k) provider ForUs about how companies can offer an attractive retirement plan for employees.

What are the advantages for the employer to offer a retirement plan?

Employees who are saving competently for retirement feel they are doing the right thing with their retirement and actually function better at work.

It’s a matter of what an organization can do to better prepare employees for retirement and make them more financially fit. It actually comes back to a stronger bottom line for the company because if employees have forced those worries aside, they feel better financially and will therefore be more productive.

What are some of the immediate concerns companies may have about offering a 401(k) plan?

Emerging companies are often concerned about the cost of starting a plan.

The cost of a plan might average 2 percent per year, but that rate won’t last forever. The plan is going to grow over time, and as it grows the average cost will decrease. For employees, an employer-sponsored 401(k) is a better deal than opening an IRA because if a person opens his or her own IRA, there can be a sales charge as well as higher ongoing costs.

When considering a retirement plan option, it is important to ask the right questions. Many of the startup 401(k) providers will bundle the costs and pass them off to employees. The charges could be as high as 2.5 percent for the employee. If the employer knows that it has the option to pay for some of the costs, it can help reduce the overall cost to employees.

Another consideration is to engage a service provider that can accept some of the fiduciary responsibility. A partnership such as this can remove almost all the day-to-day administrative burdens most employers have when operating a retirement plan.

Is an employer match a mandatory matter?

Whether or not an employer can match contributions is one of the challenges facing emerging companies. If the company is in the pre-initial public offering stage or is still seeking investors, more often than not the employer match simply can’t make it to the benefit package.

Retirement plans can have a discretionary plan for matching contributions. Employers can offer matching contributions depending upon the company’s performance. As revenue grows, the contributions may grow as well.

What about the complexity of setting up a retirement plan?

Employers have many resources to tap into. They should talk to a retirement plan consulting firm that specializes in startup plans for guidance to set up a plan that’s right for their organization and budget.

There are many ways for employers to deliver this valuable benefit, including online platforms that make the plan selection and participation process more accessible.

For example, Woodruff-Sawyer leverages its partnership with ForUs, an online 401(k) platform built for small businesses. It includes the award-winning DAVE virtual adviser that walks participants through their options using easy-to-understand language.

‘Small businesses deserve a plan that is hassle-free at a fraction of the typical cost. ForUs has designed a 401(k) that works right out of the box for small employers and our early results show it’s working with more than 95 percent of employees participating when our platform is made available,’ says Shin Inoue, ForUs CEO and co-founder.

Retirement plans and investments are complicated — there are great tools out there now that offer low-cost, high-quality investment options, support to the employer and personalized advice for employees. ●

Insights Business Insurance is brought to you by Woodruff-Sawyer & Co.

What emerging managers need to know about hedge fund management liability insurance

When investment professionals start their own hedge fund, one of the top priorities is to purchase management liability insurance, otherwise known as directors and officers/errors and omission (D&O/E&O) coverage.

“The insurance is used to pay defense costs and any judgment/settlement amounts the hedge fund may incur when responding to litigation,” says James R. Lopiccolo, vice president, alternatives team leader, Woodruff-Sawyer & Co.

Hedge funds have come under increased scrutiny by their investors and regulatory agencies of late, and D&O/E&O coverage is critically important in protecting the personal net worth of the individuals and the assets of the investment funds.

Smart Business spoke with Lopiccolo about what management liability insurance covers, what it costs and how much is needed.

What is covered under D&O/E&O insurance, and who sues?

The insurance is triggered by claims alleging acts, errors or omissions in the performance of investment advisory services or in the management of the advisory business. Insured parties under the policy include the individual directors, officers, partners and employees, as well as the adviser entity and the investment funds themselves.

Protection for the individuals is most critical in circumstances when indemnification from the funds or the adviser entity is unavailable, such as instances when the fund has been wound down and assets have been distributed, or in the case of bankruptcy.

The policy, however, also pays on behalf of the insured entities their indemnification obligations to the individuals, and for costs associated with their own liability.

This last piece is important, since non-buyers often voice objections about the coverage — that they’re relying on the broad indemnification language in the fund to protect them.

That may be the case, but in addition to those circumstances where indemnification is unavailable, any litigation costs paid out of fund assets will directly impact the investment return of the fund — which could be substantial depending on the nature and scope of the claim.

Two additional coverage components that can be included are employment practices liability (EPL) and trade error/cost of corrections coverage.

EPL coverage responds to claims by employees alleging wrongful termination, sexual harassment and discrimination. Trade error/cost of corrections coverage reimburses the fund and/or adviser for costs to proactively correct trade errors that could have otherwise resulted in claims by clients/investors.

The type of claimant and nature of the allegations are dictated primarily by investment strategy.

All strategies are susceptible to claims by investors, regulatory bodies such as the Securities and Exchange Commission and employees. But more complex strategies may lend themselves to claims in other instances.

What does it cost?

The cost is influenced by a variety of factors, but the primary drivers are investment strategy and total assets under management (AUM). Other considerations will include experience/pedigree of the investment managers, prior litigation history, etc.

The annual minimum price per million is about $15,000, but that rate is often discounted when purchasing higher limits.

How much coverage is an adequate amount?

Most startup hedge funds with AUM under $100 million are purchasing $1 million to $2 million in coverage. Bigger launches of $200 million and higher will seek $3 million to $5 million and even higher in some instances.

Once the AUM gets above $1 billion, firms generally purchase limits equating to 1 percent of AUM for straightforward liquid strategies and more for more complex, illiquid or hard-to-value strategies.

Notwithstanding the above, there are generally three types of buyers:

  1. “Check the Box,” those only wanting to satisfy minimum investor requirements.
  2. Coverage for Defense Only, those who realize the nature of today’s litigious environment and that anyone can get sued for anything, but they have a straightforward strategy and won’t do anything wrong.
  3. True Alpha Protection, those that realize that litigation is a reality of their strategy, purchasing enough to fund a vigorous defense, with enough left over to pay judgment/settlement amounts. ●

Insights Business Insurance is brought to you by Woodruff-Sawyer & Co.

What emerging managers need to know about hedge fund management liability insurance

When investment professionals start their own hedge fund, one of the top priorities is to purchase management liability insurance, otherwise known as directors and officers/errors and omission (D&O/E&O) coverage.

“The insurance is used to pay defense costs and any judgment/settlement amounts the hedge fund may incur when responding to litigation,” says James R. Lopiccolo, vice president, alternatives team leader, Woodruff-Sawyer & Co.

Hedge funds have come under increased scrutiny by their investors and regulatory agencies of late, and D&O/E&O coverage is critically important in protecting the personal net worth of the individuals and the assets of the investment funds.

Smart Business spoke with Lopiccolo about what management liability insurance covers, what it costs and how much is needed.

What is covered under D&O/E&O insurance, and who sues?

The insurance is triggered by claims alleging acts, errors or omissions in the performance of investment advisory services or in the management of the advisory business. Insured parties under the policy include the individual directors, officers, partners and employees, as well as the adviser entity and the investment funds themselves.

Protection for the individuals is most critical in circumstances when indemnification from the funds or the adviser entity is unavailable, such as instances when the fund has been wound down and assets have been distributed, or in the case of bankruptcy. However, the policy also pays on behalf of the insured entities their indemnification obligations to the individuals, and for costs associated with their own liability.

This last piece is important, since non-buyers often voice objections about the coverage — that they’re relying on the broad indemnification language in the fund to protect them. That may be the case, but in addition to those circumstances where indemnification is unavailable, any litigation costs paid out of fund assets will directly impact the investment return of the fund — which could be substantial depending on the nature and scope of the claim.

Two additional coverage components that can be included are employment practices liability (EPL) and trade error/cost of corrections coverage. EPL coverage responds to claims by employees alleging wrongful termination, sexual harassment and discrimination. Trade error/cost of corrections coverage reimburses the fund and/or adviser for costs to proactively correct trade errors that could have otherwise resulted in claims by clients/investors.

The type of claimant and nature of the allegations are dictated primarily by investment strategy. All strategies are susceptible to claims by investors, regulatory bodies such as the SEC and employees. However, more complex strategies may lend themselves to claims in other instances.

What does it cost?

The cost is influenced by a variety of factors, but the primary drivers are investment strategy and total assets under management (AUM). Other considerations will include experience/pedigree of the investment managers, prior litigation history, etc.

The annual minimum price per million is about $15,000, but that rate is often discounted when purchasing higher limits.

How much coverage is an adequate amount?

Most start-up hedge funds with AUM under $100 million are purchasing $1 million to $2 million in coverage. Bigger launches of $200 million and higher will seek $3 million to $5 million and even higher in some instances.

Once the AUM gets above $1 billion, firms generally purchase limits equating to 1 percent of AUM for straightforward liquid strategies and more for more complex, illiquid or hard-to-value strategies.

Notwithstanding the above, there are generally three types of buyers: 1) “Check the Box,” those only wanting to satisfy minimum investor requirements; 2) Coverage for Defense Only, those who realize the nature of today’s litigious environment and that anyone can get sued for anything, but they have a straightforward strategy and won’t do anything wrong; 3) True Alpha Protection, those that realize that litigation is a reality of their strategy. They purchase enough to fund a vigorous defense, with enough left over to pay judgment/settlement amounts.

Insights Business Insurance is brought to you by Woodruff-Sawyer & Co.

 

How your business is impacted by new ACA reporting requirements

The Affordable Care Act (ACA) has created a few new reporting requirements, and many employers have questions. They want to know what reporting they need to do, when it has to be done and whether fees are involved.

“Companies need to be sure their team understands what is required to satisfy these new ACA regulations,” says Tobias Kennedy, executive vice president at Montage Insurance Solutions.

Smart Business spoke with Kennedy so he could clear up the overwhelming amount of disparate information on ACA reporting and its related fees.

What are Patient Centered Outcomes Research Institute fees?

Patient Centered Outcomes Research Institute fees are also known as PCOR, PICORI, PCORI or CERF fees. This is a relatively small fee that fully insured companies don’t need to worry about — their carrier handles it automatically. But companies who are self-funded and companies who have a Health Reimbursement Account (HRA) are responsible for it themselves.

If your company is self-funded, has an HRA or is unsure, ask your broker, other consultant or CPA about the second quarter Form 720, which is due by July 31.

Depending on the plan anniversary, the fee is either $1 per year per covered life or $2 per year per covered life with most companies using a ‘snapshot average’ method of calculating the figure of lives covered in the fee — although there are a few different safe harbors.

How does the reinsurance fee work?

The reinsurance fee is also calculated off of the number of covered lives but at a substantially higher amount.

The fee for 2014 was $63 per year per covered life and can be paid in two installments. The first installment of $52.50 was already due by Jan. 15, 2015, and the second installment of $10.50 per covered life will be due no later than Nov. 15, 2015.

The 2015 fee will be $44 and can be paid at once, of course, or you also can pay it in two installments of $33 and $11 respectively.

The proposed amount for 2016 is $27 per member per year.

The calculation for the number of covered lives has to be submitted to the Department of Health and Human Services. Similar to the PCOR fees, fully insured groups will have this done for them by their carriers, whereas self-funded companies need to take action.

Also, similar to the PCOR fees, there are a few different safe harbors. Companies will want to work with their consultants to correctly apply for the one they deem most suitable.

Within 30 days of submitting the count to the department, companies will be notified of the amount they owe, and that payment will be due back within 30 days of the company’s receipt of notice.

What do employers need to know about Forms 6055 and 6056?

Forms 6055 and 6056 are also new reporting measures. The first time this comes into play is in 2016 for the 2015 health plan year, so companies have a little more time on this.

Form 6055 is to be used by insurance carriers and self-funded companies to report all of the people they cover. It deals with the individual mandate. Basically, it is a resource for the government to double check that people who claim to have satisfied the individual mandate are indeed covered.

Form 6056 is a report where companies list the employees that are offered coverage to help the government track subsidies. This is required by all applicable large employers — fully insured or self-funded — because subsidies are only available to people not otherwise offered affordable coverage. Form 6056 also helps to track those who might be applying for subsidies but who are actually ineligible because of their employer’s offering.

Insights Business Insurance is brought to you by Montage Insurance Solutions

How to determine whether to buy extra insurance for a rental car, or not

When you rent a car, you’d better be prepared for the rental insurance offer — where the rental agency wants you to buy supplemental coverage.

But people are generally divided on this issue. The National Association of Insurance Commissioners found that only about 20 percent of all consumers actually purchase rental insurance. The remainder didn’t want added costs or believed their car insurance or credit card would cover any damages.

Smart Business spoke with Ryan Clugston, client advisor for the Select Unit at SeibertKeck Insurance Agency, about what you need to know before you make your decision of whether to buy coverage or not.

Does a personal auto insurance policy provide coverage when you rent a vehicle?

Yes, your personal auto policy provides several coverages needed when you sign the rental agreement, which include:

  • Liability coverage. This is protection for you. If you injure someone or damage their property, your policy extends the same liability protection you have on your owned vehicles to the rental vehicle.
  • Medical payments. This is coverage for you and your family members in the event you are injured operating the rental vehicle.
  • Physical damage. This is coverage for the vehicle you are driving. This will extend from your policy if you have collision and comprehensive coverage on at least one of your vehicles on your policy.

However, all drivers, even if they drive for a short break, must be listed on the rental agreement in order to drive the car. The rental car agreement is considered void if they are not listed upfront.
Also, there is likely to be an additional charge.

When does your credit card provide coverage when you rent a vehicle?

Most major credit cards offer secondary rental car insurance, picking up costs not covered by your personal auto insurance policy, if the rental is wrecked or stolen. But this coverage varies, even among cards within the same network, according to msn.com.

So, call your credit card issuer before you rent the vehicle, and ask if the issuer will cover ‘loss of use.’ This is the cost the rental car company incurs while the vehicle you rented is being repaired or relocated if it’s stolen, according to msn.com.

Generally you’ll need to use the card to book the rental, and you also must decline the collision damage waiver when you rent the car, according to msn.com.
Many cards don’t provide coverage in all overseas countries, so you’ll need to check on that, too.

Why is it often a good idea to buy supplemental rental insurance, even with these other types of coverage?

There are always issues with rental cars, and therefore many insurance professionals recommend that you buy the insurance sold at the rental car agency for both liability and physical damage. There are many reasons for this.

Insurance with many companies follows the driver, not the car. This means that your insurance may or may not be primary for your friend depending on what both of your insurance policies say. It can get messy in a claim.

If there is an accident, most rental car agreements state that they have the right to put the damages on your credit card immediately, and they sort out the loss after all policies are reviewed. That can put you in a bad situation until all is resolved.

If your insurance does respond to a loss, your personal auto policy will be surcharged for a full three years. You can avoid that if the rental car company’s insurance pays.

Rental car companies also can charge you for ‘diminished value’ in the event of a claim. Even after repairs are made, rental companies can state that they can’t get as much money when they later sell a car because it’s been in an accident. Insurance policies exclude this and the rental agreements will hold you responsible.

If you buy the insurance for liability and physical damage through the rental company and keep your insurance out of it, you will face fewer problems if there’s a claim later. It’s always a good idea to review your options and coverage with your trusted insurance provider before taking a chance.

Insights Business Insurance is brought to you by SeibertKeck

How to keep the lights on, even if you must temporarily close your doors

The unexpected happens — there’s a fire, a natural disaster or your machinery breaks down and the new part is weeks away. Sometimes, you don’t have a choice — you must shut down your business.

But if you’re closed, you still have to pay the bills.

“Make sure the policy limits are sufficient to cover your company for more than a few days. After a disaster, it can take more time than anticipated to get back on track,” says Todd Winter, executive vice president at SeibertKeck Insurance Agency.

Smart Business spoke with Winter about what you need to know about business income coverage.

What is business income insurance and what does it cover?

Business income is the net profit or loss that would have been earned or incurred if the suspension of the business had not occurred, plus any normal operating expenses that must continue during the suspension of the business.

With business income insurance, also known as business interruption insurance, you can cover the actual loss of business income sustained because of a necessary suspension of your operation.

The suspension, however, must result from direct physical loss or damage to real or personal property. Coverage is provided against the same causes of loss covered under your property policy.

Most businesses underestimate the amount of time it takes to return to normal operations. It can take one or two months for investigations and debris removal; two to three months to secure permits for repair; and upwards of a year to reconstruct the property and replace machinery and equipment.

What additional coverage does business income insurance provide?

The business income and extra expense form provides the following additional coverages:

  • Extra expenses are any expenses over and above those that would have been incurred during normal operation of the business. They include expenses incurred to avoid or minimize the suspension of operations; to repair or replace property; and pay for overtime work to speed up the restoration of the business.
  • Civil authority is when access to your premises is denied by civil authority as the direct result of damage or destruction of a neighboring or adjacent property belonging to others. If the damage or destruction is caused by a cause of loss covered by the insured’s policy, this coverage applies. Your premises would be covered for the loss of income during the period of suspension, up to two weeks.
  • Alterations/new buildings provides coverage for loss of income resulting from a delay in beginning operations. The delay must be the result of damage to new buildings or structures, either completed or under construction. Damage to additions or alterations to existing buildings also are covered. The damage must be the result of a covered cause of loss.
  • Extended business income provides the time needed for your former customers to return once the business suspension is over by providing coverage for loss of income until sales return to normal, or up to a maximum of 30 days.

What optional coverages may be included to customize the policy to your company?

Business income coverage is not sold separately; rather it is added to a property or package policy and can be adjusted to cater to specific needs. For example, extended period of indemnity is an option that extends the ‘extended business income coverage’ over the standard 30-day period, to 60 days or up to a maximum of 360 days.

The selected time would depend on the time you estimate it would take for revenues to return to normal after a suspension of the business.

Business income coverage increases a business’ ability to survive a substantial loss, because of this, it is important to have the correct coverage in place before a loss. An experienced agent will be able to walk you through calculating the correct coverage limit and options needed for your unique risk.

Insights Business Insurance is brought to you by SeibertKeck

How to cover fire legal liability in your property lease agreement

It’s a new year, and if you are a business owner leasing space, this is the perfect time to pull out your lease agreement and review the insurance clause, especially the fire damage legal liability.

“Better yet, send this agreement to your insurance adviser for evaluation to be sure your insurance program meets the contract requirements,” says Shelley C. White, assistant vice president at SeibertKeck Insurance Agency.

The purpose of a contract is risk management, which is why it defines the obligations and benefits of each party — risk acceptance and avoidance issues.

Smart Business spoke with White about fire damage legal liability insurance clauses in property lease agreements.

What is the purpose of the insurance clause in a lease agreement?

This clause establishes the rights and obligations of each party with respect to insurance covering leased premises and the activities of the business owner. It identifies who must purchase the insurance, what coverage is required, limits of insurance to carry and each party’s rights to waive or not waive subrogate for losses.

Older lease agreements often make the tenant responsible for their negligence resulting in fire loss to the ‘occupied’ leased premises. The business owner is, therefore, liable for damage to real property in his or her care, custody or control.

What exactly is fire damage legal liability?

Fire damage legal liability, also known as damage to rented premises or fire legal liability, is an important provision under a commercial general liability (CGL) policy when a business is leasing either the building or partial space within a building. It provides coverage for property damage due to a fire to the leased or rented premises as a result of the insured’s negligence.

Why is this so important to review?

This is a frequently overlooked coverage. Insurance professionals are likely to focus on the major coverages within the CGL policy.

Fire damage legal liability is giveback coverage and limited. It covers only fire losses, and applies only to the leased or rented premises ‘occupied’ by the tenant. Limits are usually written at $100,000 or less, but you can increase the limit up to $1 million for a nominal charge.

How is coverage determined?

It’s always difficult to know what limit to show on the policy, but there are options. For example, if a tenant is leasing 25 percent of a building valued at $400,000, a limit of $100,000 is reasonable; if the tenant is leasing the entire building, he or she is underinsured.

How can you insure for this exposure?

There are several coverage options:

  1. Amend the lease to a triple net lease agreement, which requires the tenant to insure the building. This normally requires tenants pay for other expenses like real estate taxes, maintenance, repairs and utilities. A tenant leasing a portion of space doesn’t have this option.
  2. The tenant’s agent also can provide legal liability coverage on the property policy by endorsement, which can be written on an all risk or special (not just fire damage) form for broader coverage.
  3. The landlord can insert a waiver of subrogation clause into the lease agreement in favor of the tenant. This risk reduction method waives the subrogation clause in the landlord’s insurance policy so it doesn’t apply to claims against the tenant. The landlord’s carrier cannot seek restitution from the tenant for fire loss.

A waiver of subrogation is the most desired method of transferring the risk back to the property owner and least costly to tenants.

What if the tenant causes damage to other parts of the building?

The property damage limit under a CGL policy covers damages to ‘other’ parts of the building not occupied by the tenant for loss by fire due to the business owner’s (tenant’s) negligence. If the business owner has an umbrella policy, this limit will go above it for additional coverage. The umbrella limit, however, doesn’t go over the fire legal liability limit, which could create problems.

A periodic review of lease agreements is a key part of risk management, so be sure to provide these documents to your agent. It might prevent future financial problems.

Insights Business Insurance is brought to you by SeibertKeck

How HR plays a vital role in change management

Human resources is at the heart of the company, touching all employees and helping spread the message of the C-suite. However, many times these employees are the last to know about upcoming business changes, instead of the first.

Smart Business spoke with Danone Simpson, CEO of Montage Insurance Solutions about business change and HR’s role in shepherding it along successfully.

Why is HR the last to know about business change?

By working with many human resource leaders, I have often found their common statement is that they are ‘the last to know.’ They are the last to know when change is coming, whether that’s layoffs, mergers, acquisitions, financial difficulties and/or business decisions that can alter a company’s culture.

To begin with the end goal in mind is noble and important along with the understanding that ‘the most well-designed departmental communication program will not tear down silos unless the people who created those silos want them torn down,’ Patrick Lencioni says in his book, ‘The Advantage: Why Organizational Health Trumps Everything Else In Business.’

The well-developed HR professional understands this, because they are the change agent. Along with ensuring compliance measures are met, employee management and communication is critical.

What’s one of the biggest problems with change management?

Often the C-suite of small and midsize companies creates the plan, and then hands it off to HR to implement. Some even give it to supervisors who discuss it with staff members — a handoff that may have started above the C-suite level.

Lencioni, however, states that the success of top-down communication starts with building a cohesive leadership team and creating clarity. ‘Without these,’ he says, ‘no amount of communication is going to be effective.’

Every CEO could agree they have had plans thwarted due to breakdowns in the message — either it was not clear enough or the subculture of important departments did not accept the change because they were not a part of it.

How can the C-suite ensure the message is clear?

Lencioni shares his philosophy of the thematic goal. He recommends ‘every organization that wants to create a sense of alignment and focus must have a single top priority within a given period of time.’

This tight focus should be scheduled for three months to one year. Then, the leadership team has clarity around how to spend its time, energy and resources. ‘The thematic goal must become the responsibility of the leadership team,’ Lencioni says.

Where does HR fit into this focused way of doing business and making changes?

HR is the heartbeat of the company.

At a recent HR organization meeting with roundtable discussions, one person stated, ‘I need advice on how to help my CEO, and other executives, understand I can’t be the last to know about layoffs and other decisions that impact employees.’

Another HR executive/consultant shared how she found the same thing in her startup company, so she asked the leadership team to agree to read one article per week, or month, that she would send them. They agreed, and she sent an article about poor employment decisions similar to ones her leaders handed down to her. It was results based, stating facts of court cases and liability payouts for poor decisions. Another article was on employee engagement or team building exercises to help promote better communications down to the trenches. Her method worked, and now she is on the executive team.

Anita Gorino, owner of Creative Resources, says of HR executives, ‘First of all, don’t be the police. Ask good questions of your executives and then come up with a few key ideas that may lead to a deeper brainstorming session. Be a part of the strategy. Don’t find one million ways why new plans and ideas will not work.’

HR executives are needed to help create and implement employee management strategies, beginning with the ‘why.’ No longer can they be the last to know.

Insights Business Insurance is brought to you by Montage Insurance Solutions

The company holiday party — what could go wrong?

Deck the halls with boughs of holly and don your ugly sweater because ’tis the season to be jolly — at the company holiday party.

You want to show appreciation to your employees with some relaxation and merrymaking, but along with the fun comes some added insurance exposure. This is particularly true if you plan to serve alcohol.

Smart Business spoke with Andrew Rowles, vice president at SeibertKeck Insurance Agency, about how to plan ahead to ensure your company has a safe and covered holiday party.

What do employers need to know about liquor liability?

Liquor liability is coverage for the consumption of alcoholic beverages, so you want to make sure this is in place if you plan to serve alcohol. Some points to keep in mind are:

  • Be careful when selecting a caterer and venue. Ask if they have experience with handling liquor exposures, such as over serving, TIPS (training for intervention procedures) program, etc.
  • Check to see if your current insurance policy will include coverage for host liquor liability — that is if you provide the alcohol for free.
  • Some parties have a cash bar, so confirm that the caterer has a policy and contract that is in favor of you if a guest or employee is over served.
  • Make sure you discuss if your holiday party is only for employees or also includes customers/vendors.

When might your employment practices liability policy kick in?

Coverage for a hostile work environment could be created at a holiday party, if there is harassment or inappropriate games or jokes. So, make sure you have this in place before a fight breaks out over who got the bigger Christmas bonus.
Also you may need coverage for third-party liability. For example, a claim could arise if a non-employee, such as someone working the holiday party, accuses an employee of an inappropriate act, such as making an unwanted advance.

How are temporary or leased workers covered?

To cover short-term demand around the holiday seasons, many companies engage temporary or leased workers to assist with the extra workload. In every insurance policy, there are specific definitions that will define ‘who is an insured.’ It is important to clearly understand the difference that is outlined in your policy and review if they are covered under your liability insurance.

Many companies overlook the importance of properly structuring the insurance policy, but having your insurance policy cover the actions of a temporary or leased employee could be important at a holiday party, or at your company, if things get out of hand.

What are other kinds of coverage that could be useful to consider?

Event liability insurance protects you if someone causes property damage to the venue or is injured at the event. Many commercial general liability policies have minimal coverage for leased/rented facilities, with limits typically at $100,000. Special events policies can be purchased for a minimal charge — sometime as low at $150 — depending on your party attendance. Purchasing a special events policy could help reduce your liability for a holiday gathering.

Event cancellation insurance is coverage to reimburse the company due to a canceled or postponed event for unforeseen events, such as bankruptcy, vendor issues, weather, etc.

Hired and non-owned auto liability is coverage written to protect your company if you are named in a lawsuit because of an employee driving on your behalf.

It’s important to think about what possible business exposures your holiday brings — before the fun starts. That way you can plan, with the help of your insurance agent or broker, how to minimize the risk so your merriment isn’t spoiled.

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