Welcome to the ClearRisk Blog. This is our first posting. ClearRisk is a web-based risk management company. We are an early stage company, started September 20, 2006. This blog is about how we manage risk at a company that helps other companies manage risk. I’m angry at myself for not doing this sooner! If you work at a start up or an early stage company, or if your company isn’t new but you want to keep up on risk issues in a technology company, then I hope you will find this blog useful!
Today, in addition to writing this blog post I am preparing an application for insurance for ClearRisk. When you spend the last ten years or so giving people advice on how to market their company’s insurance in a way that will get the best possible terms, there’s a lot of pressure to practice what you preach! If you’re on TV selling BowFlex you’d better be buff! Technology companies, start-ups in particular, have a common problem with insurance: the risk is unknown to insurance companies. When the risk is unknown you can bet that if they quote the business, they will err on the side of caution which means higher deductibles and premiums and more restrictive coverages and limits.
I’ve always advised that companies view their role in the insurer/insured relationship differently. The insurance company isn’t selling you insurance; you are selling them your risk. When an insurance company is deciding whether to insure you they look at it the same way that you look at an investment: “Where can I put my money where the principle will be secure and where I can make a reasonable return on my investment?” Once you understand that, then hopefully you will have a better understanding about how you need to communicate your risk to the insurance market. Don’t let them assume what you do and what your risk is. Make sure you clearly communicate that to them. Here’s a list of tips to do that:
- Take it seriously. How much does your company spend a year on insurance? How much time do you spend on preparing your insurance application/renewal? Now consider how much time you would spend going after a customer that paid you annually as much as your insurance costs. The amount of time should be the same, but I’ll bet a nickel you spend a fraction of the time on insurance as you do on the sale.
- Start early. Contact your insurance broker 90 days before your renewal date and start working with them to get your application/renewal documents together and ask your broker what their renewal strategy will be for this renewal.
- Brokers. There are good ones and bad, don’t settle for substandard service. It is a very competitive business so if your broker doesn’t want to make the effort there are a hundred lined up behind him that will. Make sure your broker has the experience and access to plenty of insurance markets that write your type of insurance coverages.
- Get your hands dirty. No matter how good your broker is he will never know your business as well as you do. That being the case, how can he be expected to communicate your company’s risk effectively to the insurance market? Work together. Your broker can add a lot of guidance and value but you are your company’s best salesman!
- Make it personal. Write an executive summary for the insurance companies and give it to your broker to include with the marketing submission he prepares. The letter should give an overview of your risk, why you are a good risk compared to others and the highlights of the things you do to mitigate the risks in your business. It will let the insurers know you care about your risk and leave them with a positive impression of your company. Remember, people make these decisions, not computers, so the impression you make is important.
- Get organized. Everyone hates insurance renewal time because you have to fill out forms, collect data and go through the whole agonizing process every year. Yes I hate it too, but it is worthwhile. This is the computer age, take advantage of it. Keep electronic files in a dedicated folder on your computer. Scan and keep copies of all insurance renewal applications that you fill out. Ask your broker if they have electronic forms that you can edit, so you can save them and just update them annually. Every risk management policy, safety policy, contract wording, sales agreement, marketing materials, and anything else that helps show the insurance market what you do and how good you are at managing risk should be in this folder. By keeping this information up to date, renewals become much easier, less time consuming and more effective.
- Risk improvement. Constantly work on improving your risk and document your efforts. Saying to an insurance company, “here is our risk management plan and here are all the things we implemented to improve our risk”, is a lot better than saying, “we wing it”. Every successful company manages risk whether they know it or not. You are already doing a lot of the right things to mitigate your risks. Take it a step further by formalizing it into a risk management plan and formal policies and procedures, and then communicate that to the insurance market. Try it and let me know how you do.
I will be making regular posts as new issues come up. There will probably be more frequency in the short term because we’ve been in business 2 ½ years and I have some catching up to do on issues we’ve dealt with. I plan on writing soon about the impact of the economy, IT security, raising capital and a bunch of other things from a risk management perspective. The cobbler’s shoes are usually the most worn, but we are trying to eat our own dog food as much as possible so we can lead by example. If my rants are of use or amusement set up an RSS feed so you don’t miss any. I’m told I am a straight shooter so I may not be right, but you’ll always know what I think!!