Jayne Gest

As sustainability continues to gain momentum, business leaders need to address how this movement will influence the way they run their organizations. Doing so can lead to immediate savings in power and other costs, and boosts the market value of the property.

“It’s a change in culture versus something that’s just an on-and-off switch,” says Greg Martin, partner and National Real Estate & Hospitality Practice leader at Moss Adams.

Smart Business spoke with Martin about what’s happening in the field of sustainability and how an accountant or adviser can help.

What’s happening with sustainability today?

Sustainability and Leadership in Energy and Environmental Design (LEED)-certified buildings have been talked about for some time. Early sign of sustainability in practice started out simply with hotel properties putting out signs about reusing towels or unplugging phone chargers. Then, many moved on to using low-flow showerheads or locally sourcing food. That sentiment has crossed over into the expectations of commercial building tenants, many of whom got the idea, at least in part, from attending conferences in energy-efficient hotels.

From a real estate perspective, more and more tenants in a commercial office building want to see sustainable practices followed in their workplaces. Those companies that can show they are concentrated on green living can use that as a competitive advantage. Eventually, sustainability will be part of our everyday psyche, so you want to take advantage of these competitive strengths when you can.

How does going green translate to the bottom line and profits?

It’s expensive to put energy-efficient measures in place, such as those that limit water or power consumption. But in doing so, you can significantly reduce your operating costs from day one and possibly attract sources of capital — some investment groups will only invest in properties or companies that have sustainability policies and procedures in place.

A number of studies found increased operating incomes and higher market values and returns for sound sustainable properties versus non-sustainable properties. A green label such as LEED or Energy Star raised market rents and values of commercial space, including a 16 percent increased sale price, according to a 2010 University of California, Berkeley study of 10,000 U.S. office buildings. A Davis Langdon study estimated upfront costs for high-sustainability design can be $1.50 to $3 per square foot, but those outlays also can bring up to 14 percent reductions in energy costs. In addition, PNC Bank put together a study of their LEED-certified branches compared to non-LEED branches, and found LEED branches had more income, deposit accounts opened and consumer loans.

As more data becomes available on the returns, cash flow and market appreciation of sustainability, we’ll likely see more and more benefits from following these types of policies and practices.

How can an accountant or adviser help with sustainability reports and programs?

CPAs are getting involved in reporting on whether companies are meeting sustainability policies and procedures. Often, an independent and objective CPA will look at the data provided by the management of the company on what they have done in the area of sustainability, referring it back to the company’s policies and procedures. The CPA basically concludes whether they are in agreement or not with management’s assertions. It lends another level of credence and credibility by generating a report based on benchmarks.

Another value-added service that’s gaining momentum is our sustainability consulting group, which consults with companies on setting up green policies and procedures as well as a process to monitor how companies are doing against their goals.

Is this a newer aspect of sustainability — showing that you are accountable?

It’s catching on. Is there some set of rules that say, ‘Thou shalt,’ like the SEC says that public companies shall present audited financial statements? Not really — it’s a best practice. It shows how the company is serious enough that they are going to bring in a credible, objective, independent party to verify what they have represented to others.

Sustainability is not a fad. Ignoring it is not going to make it go away. And because it’s here to stay, it will only continue to gain importance.

Greg Martin is a partner, National Real Estate & Hospitality Practice leader at Moss Adams. Reach him at (415) 677-8277 or greg.martin@mossadams.com.

Insights Accounting & Consulting is brought to you by Moss Adams

Having a driver training or fleet safety program is likely something your insurance company already has on its radar. Companies with five or more vehicles and a history of claims could be required to complete the insurance company’s fleet seminar or safe driving training.

But even if your company has a good driving record, some type of driver safety class and/or additional training benefits your business directly, as well as the insurance company.

“It does have an impact on your rates, only because if you do implement a fleet training seminar, each year or every other year, you will start to see an improvement in your rates because it’s less likely that you’re going to have an accident,” says Todd Winter, executive vice president at SeibertKeck.

Smart Business spoke with Winter about the importance of driver training and steps to consider taking that could help you maintain a motor vehicle safety program in your workplace.

What’s the first step to driver safety for business owners?

Business auto happens to be one of the bigger exposures to a business because, if there’s an accident, depending on injuries, it can be a pretty significant. So first, you want to start with employee drivers who have a good driving record.

If job candidates are applying for a position that requires them to drive, you can require a check of their motor vehicle report to make sure they are acceptable. Insurance carriers can provide you with what they recommend to be acceptable. Of course, if their record were clear, that person would be a good choice.

What are some conditions that affect auto rates or how much training employees need?

A number of things affect the underwriting, such as the radius of operation — a long distance radius of 200 or more miles could mean a higher rate. Other considerations can depend on the size and weight of the vehicles.

Often companies don’t have a choice with what kind or how much training employees need. Many insurance companies provide it through their loss control department at no cost. A loss control engineer may require drivers to attend a two- to three-hour class and take a test, or just listen to a seminar.

What, then, can employers do to create and maintain a motor vehicle safety program in the workplace?

Having formalized vehicle maintenance and a safe driving program of some kind are must-have risk management tools. However, some employers may feel reluctant to institute them because of the amount of time to set them up in their office. The idea is that improving driver training and fleet safety programs only can help your company, as the business auto exposure is lowered.

Some best practices that could help are:

  • Safety policy statement indicating that the company has established a fleet safety policy to emphasize a commitment to the safety of its employee drivers and the general public.

  • Seat belt use to reduce the severity of injuries.

  • Restrictions on personal vehicles for employees using a personal auto for company use.

  • Driver selection and qualification, including application for employment, reference checks, motor vehicle report investigations and an annual review of driving records.

  • Vehicle inspection and maintenance.

  • Post notices and signs in your building and in the yard reminding drivers to be safe and maintain their vehicle.

  • Driver training annually, either online or conducted by a loss control engineer.

  • Accident reporting and recordkeeping.

Keep up with the latest insurance news and how your company could be impacted by signing up for SeibertKeck's newsletter.

 

Todd Winter is executive vice president at SeibertKeck. Reach him at (330) 865-6572 or twinter@seibertkeck.com.

Insights Business Insurance is brought to you by SeibertKeck

In order to eliminate or mitigate inefficiencies, businesses must take a close look at current processes. This enables employers to uncover pains, such as the amount of paper being routed throughout the enterprise or the time it takes to process an invoice. Being able to recognize these inefficiencies is great, but many times, quantifying the end result is much simpler than isolating the source of the inefficiencies.

“The problem can be anything — accounting, human resources, policies, leasing documents,” says Nano Zegarra, director, Imaging Solutions Division at Blue Technologies. “It also could be a simple fix, but perhaps the company doesn’t recognize an issue because it’s accustomed to doing things the way they’ve always been done.”

Smart Business spoke with Zegarra about the role of a business analyst and how an outsider’s assessment could uncover problems you weren’t aware you had.

How can inefficiencies be uncovered?

It’s tough. These may be hidden from the CEO or COO, who doesn’t realize parts of the process can be more efficient, especially if monetary values aren’t apparent.

The people who catch most inefficiencies are those who hear the griping, such as a manager who handles the time of individuals working in a particular area. CEOs have the vision, but those in the organization who get their hands dirty, or their direct managers, often discover inefficiencies. Pay attention to the negative feedback from employees, then dig deeper to understand the true pain.

It might take a specific problem to start to unmask these inefficiencies. Perhaps an employee has plenty of downtime, and you feel that he or she might be used more effectively elsewhere but are not sure where. Or you missed a large number of early pay discounts in comparison to the previous year, but where was the ball dropped? If a manager can understand the entire process and quantify the roles of each individual, it is much easier to identify the bottlenecks.

What is a good way to begin the process? 

Internal communication is key. Pay attention to the feedback from the process owners. If you identify an area that has more work than another, hold a meeting for open feedback. This is when you should bring in an analyst.

An external analyst can objectively look at the whole business process from beginning to end, using expertise in multiple industries to ask pointed questions about particular processes. A good business analyst will look for inefficiencies anywhere when mapping out work flows and showing where there’s room for improvement. Then, employers can do what they like with the assessment.

How can you accomplish more with less? 

Utilize technological resources. The greatest business expenditure is an individual, so ensure your people are as efficient as possible. Even the smallest solution can help existing employees do more in less time.

Saving time can be as simple as having a centralized multifunction printer with the ability to digitally send documents throughout an enterprise. Or take a look at what is being outsourced and understand what investment would need to be made to eliminate that expenditure. Many times, the ROI can outweigh the initial investment to save time and ultimately money.

Is it always about efficiency?

Not always. There are industries where it is critical for multiple individuals to look at a particular document. An experienced business analyst has industry expertise and knows best practices. This understanding may lead to an additional step in a process that may not make it more efficient, but will improve revenue or customer service ratings. This could ultimately give your company added value and a competitive advantage.

How can an analyst improve processes? 

Business analysts must understand current processes before making recommendations. This entails in-depth digging and information gathering in order to map out on paper what a company is currently doing. Throughout this process, he or she should be identifying and documenting the greatest pains and largest bottlenecks for every process. With a complete understanding, the discussion on potential changes can take place from an objective point of view.

The analysis’s most important part is the written assessment, which maps a more streamlined process and the steps a company must take to reach its ideal efficiency level.

 WHITE PAPERS: For more ideas on how to increase business efficiency.

Nano Zegarra is a director, Imaging Solutions Division, at Blue Technologies. Reach him at (216) 271-4800, ext. 2260 or nzegarra@BTOhio.com.

Insights Technology is brought to you by Blue Technologies

Having a driver training or fleet safety program is likely something your insurance company already has on its radar. Companies with five or more vehicles and a history of claims could be required to complete the insurance company’s fleet seminar or safe driving training.

But even if your company has a good driving record, some type of driver safety class and/or additional training benefits your business directly, as well as the insurance company.

“It does have an impact on your rates, only because if you do implement a fleet training seminar, each year or every other year, you will start to see an improvement in your rates because it’s less likely that you’re going to have an accident,” says Marc McTeague, president of Best Hoovler McTeague Insurance Services, a member of SeibertKeck.

Smart Business spoke with McTeague about the importance of driver training and steps to consider taking that could help you maintain a motor vehicle safety program in your workplace.

What’s the first step to driver safety for business owners?

Business auto happens to be one of the bigger exposures to a business because, if there’s an accident, depending on injuries, it can be a pretty significant. So first, you want to start with employee drivers who have a good driving record.

If job candidates are applying for a position that requires them to drive, you can require a check of their motor vehicle report to make sure they are acceptable. Insurance carriers can provide you with what they recommend to be acceptable. Of course, if their record were clear, that person would be a good choice.

What are some conditions that affect auto rates or how much training employees need?

A number of things affect the underwriting, such as the radius of operation — a long distance radius of 200 or more miles could mean a higher rate. Other considerations can depend on the size and weight of the vehicles.

Often companies don’t have a choice with what kind or how much training employees need. Many insurance companies provide it through their loss control department at no cost. A loss control engineer may require drivers to attend a two- to three-hour class and take a test, or just listen to a seminar.

What, then, can employers do to create and maintain a motor vehicle safety program in the workplace?

Having formalized vehicle maintenance and a safe driving program of some kind are must-have risk management tools. However, some employers may feel reluctant to institute them because of the amount of time to set them up in their office. The idea is that improving driver training and fleet safety programs only can help your company, as the business auto exposure is lowered.

Some best practices that could help are:

  • Safety policy statement indicating that the company has established a fleet safety policy to emphasize a commitment to the safety of its employee drivers and the general public.

  • Seat belt use to reduce the severity of injuries.

  • Restrictions on personal vehicles for employees using a personal auto for company use.

  • Driver selection and qualification, including application for employment, reference checks, motor vehicle report investigations and an annual review of driving records.

  • Vehicle inspection and maintenance.

  • Post notices and signs in your building and in the yard reminding drivers to be safe and maintain their vehicle.

  • Driver training annually, either online or conducted by a loss control engineer.

  • Accident reporting and recordkeeping.

Keep up with the latest insurance news and how your company could be impacted by signing up for SeibertKeck's newsletter.

 

Marc McTeague is the president of Best Hoovler McTeague Insurance Services, a member of SeibertKeck. Reach him at (614) 246-RISK or mmcteague@bhmins.com.

Insights Business Insurance is brought to you by SeibertKeck

When Congress passed the American Taxpayer Relief Act, it came with just enough time to give a clearer picture of expectations for the year ahead.

“There was a lot of anxiety and uncertainty in the last quarter of the past year as the deadline got closer and people had no idea what to do about their tax planning,” says Rick Applegate, president and CEO of First Commonwealth Financial Advisors.

Smart Business spoke with Applegate about the changes and how they impact your tax and financial planning.

What are some of the tax law changes? 

The act avoided higher ordinary income tax rates for most Americans, but higher-income earners — $400,000 per year for single filers or $450,000 per year if married and filing jointly — will have their tax rate revert back to 39.6 percent, the highest ordinary income tax rate in this country before the tax reductions instituted by President George W. Bush. This impacts approximately 1 to 1.5 percent of Americans.

The biggest overall impact is the 2 percent increase in the payroll tax back to 6.2 percent, which might slow the economy’s growth rate in the first six months of 2013. In the year ahead, the Social Security tax tops out at incomes of $113,700 — therefore, an individual could pay up to an additional $2,274 and a working couple even more. It’s estimated that the 2 percent increased payroll tax will generate about $125 billion for the Social Security system, but that’s money that reduces discretionary consumer spending, which has otherwise helped to drive a U.S. economic recovery.

Another notable change is the 5 percent increase in capital gains and dividend rates for higher-income earners to 20 percent. This increase was not as bad as it could have been — capital gains rates on dividends were scheduled to go to ordinary income tax rates, which could have been as high as that top income tax bracket of 39.6 percent.

Investment income also gets the new Medicare surtax of 3.8 percent tacked on for anyone making more than $200,000, or $250,000 if married and filing jointly. It’s not a killer, but people at these income levels who rely on investment income will pay.

Some other changes are:

  • Estate tax exemptions and rates. Congress extended the $5 million exemption and adjusted it for future inflation, and upped the top estate tax rate to 40 percent.

  • Permanently indexing the Alternative Minimum Tax to inflation. This fixed the problem where more and more middle-class Americans were paying a tax originally meant to catch high-income earners who used deductions and loopholes to avoid paying any taxes.

  • Reinstituting phase-outs of certain deductions for those with higher incomes.

If anyone was a winner in the tax bill, at large, it was people with educational loans and families trying to pay for college. The act extended certain credits and deductions for qualified taxpayers.

How do investment advice and tax considerations go hand-in-hand?

You don’t want your investments to be ruled by tax decisions — you want investments to be made based on the projected economics of the deal and its potential returns.

That’s why it’s an adviser’s job to get people past their fears and emotions, and focus on making money. If investors can’t get past it themselves, they should sit down with a trained adviser who has a perspective on why there are always opportunities out there.

What are some strategies that can add value in the year ahead?

The average investor shouldn’t be too intimidated by these adjustments because, by and large, they mostly impact those in very high-income brackets. High-income earners may benefit from tax-exempt income from municipal bonds, tax deferrals like low-cost annuities, and/or decreasing their ordinary income by deferring more taxable income today into a retirement plan.

Until Congress permanently deals with the debt ceiling, headline volatility will likely be a fact of life. However, we still think that 2013 will be a fairly good year for the stock market. We would advise taking advantage of market declines that are likely to occur and to buy into opportunities such as the emerging markets. Investors shouldn’t let headlines make decisions; smart investors take advantage of market dips because, long-term, the stock market offers good value.

Rick Applegate is the President and CEO of First Commonwealth Financial Advisors. Reach him at (724) 933-4529 or rapplegate@fcbanking.com.

To connect with First Commonwealth Bank, visit our Facebook page.

Insights Wealth Management is brought to you by First Commonwealth Bank

If you surveyed 100 people about the recent tax changes, 95 of them probably will mention the capital gains and income tax rate increases at a certain level, but those are the two changes that may have the least effect, says Bruce Friedman, CPA, director in assurance at SS&G.

“There were a couple of items that the publicity focused on, and therefore the general public focused on, which, based on my experience with taxes, aren’t necessarily going to be as big of an issue as some of the subtle items out there,” he says.

Smart Business spoke with Friedman about some overlooked tax changes that could really have an impact on your 2013 tax bill.

What has been emphasized that won’t necessarily have a large impact?

The higher tax bracket at certain income levels and the new capital gains rate will likely affect people less than they think.

A taxpayer calculates tax in two ways — on normal income tax rules and the alternative minimum tax (AMT) — and then pays whichever is higher. The higher tax bracket and increased capital gains rate both apply on the income tax side to those earning $400,000, or $450,000 if married and filing jointly. However, generally speaking, people whose incomes are between $150,000 and $600,000 likely already pay at the AMT rate, and these two changes, therefore, aren’t likely to raise their income taxes to more than AMT. Those who have closer to $1 million of income will be affected.

What should taxpayers know?

Certain phase-outs have been brought back — the phase-out of itemized deductions and the loss of personal exemptions if your income is more than $300,000 for those married and filing jointly. However, many people who itemize on their returns aren’t aware because it hasn’t been publicized. It’s not dollar for dollar, but you lose some.

Also not renewed was the payroll tax ‘holiday.’ In 2011, all employees had their Social Security tax withholding rate decreased from 6.2 to 4.2 percent, which was renewed through 2012. Nonrenewal means reductions to your regular paycheck.

Is the health care reform surtax a concern?

This year there are new surtaxes on wages and unearned income because of health care reform, where AMT has no impact.

For the wages portion, if you’re married, filing jointly and your adjusted gross income exceeds $250,000 ($200,000 if you’re single) you pay an added 0.9 percent on the excess. For a married couple making $300,000 annually, it’s an added $450 per year.

The bigger impact is the unearned income tax of 3.8 percent, which applies to interest, dividends, capital gains and passive net rental income for the same $250,000 and $200,000 of adjusted gross income. As the owner of a business that generates a Schedule K-1 tax form relative to a passive activity, this could be a concern because that K-1 may have taxable net rental income, which could be included in this calculation. A typical example is where the business pays rent to the business owner who owns the property; many owners set up separate rental activities because it was a method to get cash without paying payroll taxes.

Here’s how the unearned income surtax could work: A married, filing jointly couple has $200,000 of earned income and $100,000 of unearned income. They are only taxed on unearned income that put them over $250,000 — $50,000, but that’s an additional $1,900 in taxes per year.

What can be done to lessen the impact?

There’s not much to be done aside from perhaps adjusting your business’s rental income. Many business owners may have charged on the high side of rent, but now — especially with lower real estate values — it might be worth revisiting the rent the business is paying.

The key point is to know the true dollar amount of your 2013 taxes. For example, the person who has a taxable income of $425,000 might be thinking, ‘No change in rates, I’m good.’ But if that taxpayer has $200,000 of unearned income, it’s another $7,600 in taxes.

What’s the good news?

Some positive business-oriented things were continued, such as accelerated depreciation, which lets you write off up to $500,000 in assets, up to $2 million in expenditures, as well as extending the R&D credit that can offset against AMT.

Bruce Friedman, CPA, is director in assurance at SS&G. Reach him at (330) 668-9696 or BFriedman@SSandG.com.

 

Website: For detailed 2012-2013 tax planning tips, see our online WebTaxGuide.

 

Insights Accounting & Consulting is brought to you by SS&G

Integrating a comprehensive behavioral health plan into the medical health plan your company sponsors is a win-win. Employees are able to improve their health mentally and physically, and the employer can track cost savings related to direct health care costs and indirect costs through more productive, healthy employees.

“One out of every four adults will experience a mental health disorder in a given year,” says Tom Albert, manager, Behavioral Health Services at HealthLink. “I think few people, in general, realize the rates are that high.”

Smart Business spoke with Albert about how integrating behavioral and medical health allows employers to better coordinate their members’ care.

How do behavioral and medical health impact employers?

The rate of one in four adults experiencing a mental health disorder annually goes even higher for those with chronic medical problems. Furthermore, employees with untreated psychiatric or substance use disorders can be at a higher risk of on-the-job injuries. This can lead to missed time from work, expensive treatment and a decrease in quality of life for the individual.

Absenteeism is not the only concern for employers. Presenteeism, or the loss in productivity of employees who come to work sick, can also be costly for employers. The Institute for Health and Productivity Studies at Cornell University found that depression and other mental health problems are among the illnesses that have the most significant decrease to productivity.

What’s the advantage of integrating behavioral and medical health management?

Ninety-three percent of Americans believe a health care plan should cover behavioral health treatment, according to a National Association of Psychiatric Health Systems survey. Some workplaces don’t cover behavioral health. Other employer groups cover it but carve out the management, which makes it difficult to coordinate care.

Having one organization manage both medical and behavioral health benefits is gaining popularity among employers. With integration, the health plan’s medical and behavioral clinicians collaborate and ensure that individuals and their families have access to care that best meets their needs.

What are the overall goals of utilization and case management for behavioral health?

Utilization management ensures that health plan members have access to the care they need; that care is delivered in the right setting; that the quality of care meets high standards; and that resources are used efficiently in order to help control costs.

Case management involves case managers communicating directly with members and their families to assist them in navigating the health care system; addressing any obstacles to accessing treatment; and empowering members and their families to maintain an optimal level of health and functioning.

Case management helps the member to stay well so he or she doesn’t have to keep using the same services and missing work.

What is the Mental Health Parity Act?

The Mental Health Parity and Addiction Equity Act of 2008 doesn’t mandate that employers of 50 or more employees offer behavioral health coverage, but it does require that if the health plan covers behavioral health services, the financial requirements and treatment limitations are no more restrictive than medical and surgical benefits.

Prior to parity, employer groups often relied on treatment limits to control costs by limiting the number of days in a hospital or the number of visits for outpatient mental health treatment. Parity is good because the limits often were arbitrary, but it does mean the best way to control costs is to ensure care is only approved when medically necessary.

What are the results of formalized behavioral health management and review?

A Milliman case study of a large private manufacturer found a 10 percent reduction in members with chronic medical and psychological conditions saved $1 million annually and another $750,000 from reduced absenteeism, fewer and shorter disabilities, and increased productivity. An effective behavioral health management organization ensures members receive the right treatment in the least restrictive setting, which reduces costs and time missed from work, while improving overall health.

Tom Albert is manager, Behavioral Health Services, at HealthLink. Reach him at (314) 923-6288 or Thomas.Albert@wellpoint.com.

Insights Health Care is brought to you by HealthLink

As your business needs and values change, your insurance policies need to be updated to ensure your company is properly covered.

A comprehensive risk assessment should be conducted at least every other year. This need often comes up when you’ve been with a broker for a long time, or if you switch brokers based on pricing and not added value, and the new broker copies incorrect information, says Eric Kerensky, sales executive at Momentous Insurance Brokerage.

“When I make an assessment appointment, I gather their current policies and review them line by line to make sure the values are up to date, such as personal property, building values, locations, fleet list, driver’s list and any operation changes that may have occurred,” Kerensky says.

Smart Business spoke with Kerensky about what’s included in a comprehensive risk assessment and how it helps your insurance bottom line.

What are the major advantages of an insurance assessment?

It gives you peace of mind that your broker is doing his or her job, properly covering all the risks in your particular field. It’s the worst feeling in the world when you pay for insurance and find out later a claim is not going to be covered. These assessments help safeguard you against that. You may want to have a specifically designed insurance plan, not just the standard issue insurance policy for the overall type of industry.

The assessment could also lower your insurance costs, especially if you might unknowingly have double coverage. You could even get a different line of coverage that covers something for which you currently pay extra. For example, each time a distribution company ships, it buys insurance through its common carrier, as opposed to buying a cargo policy. The cargo policy could be cheaper, depending upon how much is annually shipped, or broader, providing cover on the job location — eliminating the need to put it on the property policy — and for earthquakes.

What are some broker services that the assessment checks?

When conducting the comprehensive insurance review, you can discover if your broker is providing services like helping put a disaster plan in place. As another example, it may be worthwhile to have your broker and carrier do a site risk appraisal to lower re-occurrence of property claims or slip-and-falls.

Additionally, does your broker conduct a semi-annual client review? You don’t want a broker who just comes out at the end of the year to pick up the check. He or she should review your sales activity, which affects your general liability premium. If sales have increased, you don’t want to be faced with a large, year-end audit, or if your company is not hitting anticipated sales, you have the ability to adjust the policy and increase your operating cash flow.

How does the assessment audit the business operations?

The review will look at all business operations. If you’ve added or discontinued a service or business activity but haven’t communicated that to the insurance carrier, a claim could be denied.

It’s very important that your insurance carrier knows every time your company is named as an additional insured by another entity, usually in the form of a certificate of insurance they provide to you. This reassures underwriters and could lead to lower rates on your policy. For example, as the distributor, named as an additional insured on the manufacturer’s policy, your company isn’t liable for product malfunctions or recalls. Copies of all additional insureds on record should be passed along to your broker.

How does an assessment of claims impact the cost of risk?

The assessment should examine your claims activity. One important example is with workers’ compensation. Because rates are projected to increase, you want to ensure claims are getting closed promptly so they don’t get stuck in your reserves. Since many insurance carriers reserve more than what will likely be paid out, this inflates your claims amount and increases your overall workers’ compensation premium costs.

Eric Kerensky is a sales executive with Momentous Insurance Brokerage. Reach him at (818) 933-2711 or ekerensky@mmibi.com.

Blog: For more information, take a look at our blog at www.momentousins.com/blog.

Insights Business Insurance is brought to you by Momentous Insurance Brokerage

As regulations are established and laws get more complicated, you and your company face more exposure to lawsuits. And with any lawsuit exposure, the judgment is often not as significant as the defense — a victory could come at a high financial cost, which comes out of your pocket if you’re without insurance.

“Insurance is a mechanism that is designed to help you avoid huge legal defense costs and the financial burden that accompanies them,” says W. Reed Moraw, president of Cadence Insurance, formerly Town & Country Insurance Agency, an affiliate of Cadence Bank.

Smart Business spoke with Moraw about how the right management liability policy limits your exposure to certain claims.

Why should a company consider this type of insurance in addition to standard property and casualty insurance? 

Private companies have considerable exposure to one or all of the following — management liability, employment practices, crime and cyber claims. Therefore, you can purchase a management liability policy that bundles a broad mix of insurance coverage, such as directors and officers liability, employment practices liability insurance, fiduciary, crime, cyber liability, employed lawyers, and kidnap and ransom coverage.

What’s the benefit?

Premiums have historically been low in relation to the way exposure and claims are trending. It’s recommended that all private companies have a detailed review of their exposure as well as the costs of the coverage.

You want a comprehensive insurance policy that will pay for the cost of defense as well as a settlement or judgment, if there is one. The cost of defending yourself, whether you win, lose or settle a case, can be very high. There are always exclusions and limitations to policies, but your agent can work with you to identify your risks and find a policy designed to mitigate your exposure.

How does this type of coverage work?

The insurance underwriting starts with an application and supporting documentation such as financials, loss history, company employee handbook, etc. There are numerous insurers that underwrite management liability policies, but the quality of coverage is not uniform. Every company has a unique exposure, and therefore the agent or broker should create a risk profile and seek the best policy to fit the client’s need.

How’s the market for this type of coverage?

In terms of premium, retention and breadth of coverage, the market is shifting. From 2004 to mid-2012, insurance rates have gone down significantly on a year-on-year basis. Currently there’s pricing pressure in the marketplace. Most carriers have stated they will be looking to increase premiums, moderately restrict underwriting and potentially reduce coverage.

Driving these changes is insurance carrier loss experience arising from employment practice liability claims. In addition, directors and officers’ claims are becoming more significant, some of which can be attributed to increased merger and acquisition activity. The costs to settle and/or litigate those cases are averaging around $225,000 — with some approaching $5 million.

As a result, many within the life sciences, real estate, banking, financial services, oil and gas industries, etc., are finding it difficult to secure coverage or are seeing their existing program renew with coverage carve backs, restrictions and price increases.

So, what should a company do?

A company needs an insurance agent well versed in these areas to evaluate exposures, secure coverage and service a private company’s needs. Companies should seek an agency with knowledge of coverage forms and enhancements, changes in insurance company appetites and broad access to the insurance marketplace.

It’s also helpful if your employee handbook is comprehensive and up to date, and you’ve kept up with changes in the laws as they relate to your employees. The time to talk with your insurance agent is when you are thinking about making a change within your company, not after the change has been made, just as you would consult your banker or attorney. It’s important to have a good agent who keeps up with trends impacting the industry in an effort to ensure exposures are mitigated and gaps are covered.

W. Reed Moraw is president at Cadence Insurance, formerly Town & Country Insurance Agency. Reach him at (713) 461-8979 or rmoraw@cadenceinsurance.com.

Website: To learn more about the types of insurance that could help protect your business, visit www.cadenceinsurance.com.

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Many businesses may have taken a step back from hiring, especially when faced with uncertainty from the fiscal cliff changes, health care reform and overall budget costs.

However, Sarah Finch, business development manager at The Daniel Group, says even if you’re not hiring right now that doesn’t mean you should lose track of planning for the future.

“The current landscape of your business environment may not dictate adding to your work force, but it’s important to be proactive and plan accordingly with a staffing company if that’s the route you choose to go,” she says. “Communication is key so be very open and honest with your staffing company. They can help save you time and money by creating a plan that fits your budget and then sourcing qualified candidates to stay within that budget.”

Smart Business spoke with Finch about how to create long-term relationships so your staffing representative is always aware of your company’s hiring needs and can build a strong candidate pipeline accordingly.

Why should you always be aware of the current talent pool in your industry when planning for future needs?

It is a tough market right now for finding qualified candidates. While the demand for jobs is there, the supply of strong candidates actively seeking new jobs is low. Candidates who are actively seeking new positions move quickly, so forecasting what your future needs may be in advance and discussing that with your staffing representative gives you an advantage when it comes time to hire. Staffing companies will be aware of the current market and supply based on location and industry.

Working with a staffing firm allows communication lines to stay open between the candidate and the client. This can easily prevent losing excellent candidates because of delayed feedback or lack of candidate involvement.

How critical is it to hire quickly? 

It’s imperative to acquire the talent your business needs quickly. Strong job candidates, especially for higher-level positions or with niche industry experience are always in high demand. If the candidate is interviewing elsewhere, he or she is more likely to take another offer if they do not hear a response from the hiring manager in a reasonable amount of time.

Therefore, be open and honest — ‘that position is on hold,’  ‘we’re looking to fill it in two months,’ or ‘the position was canceled or filled by someone else.’ If working with an agency, it can be as simple as letting your representative know the candidate is a top choice, but that the hiring manager isn’t available to make a decision.

What can employers do to leverage the best relationship with their staffing firm?

It goes back to keeping the candidate warm and being open with your staffing firm. Let the staffing company know every step of the hiring process so they can relay the feedback to the candidates. In all aspects, communication is most important. The staffing firm will also try to gain as much information from the candidate to relay back to the client.

Having a relationship with the staffing agency, even if not currently hiring, allows the agency to know your business and what type of people you typically target. Once each division has created its budget, meet with your staffing firm, even if just for a few minutes, to discuss your goals and evaluate your upcoming needs. The agency can work with you to help create different options to build the best candidate pool while staying within budget. Doing this in advance also allows the staffing firm plenty of time to build a strong pipeline specifically for your industry needs.

What if you are unsure of whether your budget allows for the assistance of using a staffing firm?

The staffing agency can discuss alternate options to accommodate your budget, such as hiring a contractor and allowing the agency to cover workers’ compensation, unemployment and benefits. Staffing firms deal with companies of all sizes and budgets so firms will do their best to suit your needs and cut costs simultaneously.

Sarah Finch is business development manager at The Daniel Group. Reach her at (713) 932-9313 or sfinch@danielgroupus.com.

Website: Visit www.danielgroupus.com to access more information on this subject.

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