Colin Rooke and Paul Martin talk about how best to prevent employee turnover within your company and creating a working relationship with your insurance professional, to ensure your policies best suit your needs.
Listen to the full episode here, or read the full transcript below
Paul Martin: Welcome to Risky Business Commercial Insurance with Butler Byers. This is Paul Martin, the host of this program on an ongoing basis and, as usual, my guest in the studio, Colin Rooke, the commercial risk reduction specialist with Butler Byers. Colin, in a previous show we were talking about … let’s say, we went through all the steps that we’ve been advocating, or you’ve been advocating for the last three years or so in this program. They go through the step-by-step plan, really get a solid, deep solid understanding of the inner workings of your business and be able to express that in written form so an insurance underwriter can look at it. And then we ask the question, “Okay, so we do all that, what if the insurance company doesn’t respond the way we expect it?” So, maybe we just pick that up.
Paul Martin: You do all the work that you’ve been talking about and you end up with a price increase anyway. I mean, how do you explain that or is that a possibility? Is it what can actually happen in the market?
Colin Rooke: Yeah, I mean the short of it is, it does happen. We can’t guarantee how the insurance market will respond, and we certainly can’t guarantee what’s going on in the industry. So, you might be in a category where there is a lot of competition, there’s a lot of insurers that are vying for your type of business, and you might be in a category that is less desirable overall, which we’ve talked about in the past.
Colin Rooke: So, if we are in a category, for example commercial real estate, where there’s a lot of insurers that are saying “If we get a well-managed, modern construction property, we could be very aggressive there.” Well, you could say “Okay well, I don’t need to put in any work to save some money in commercial real estate” which, it is true. But if you want to maximize what you save, again our process is still very important to say “Of those that are saving money in the space because the category is doing quite well, I want to save more than Paul.” And so how do I guarantee I save more than Paul? I’ve got to put the work in, I’ve got to formulate a plan, I’ve got to have a story to tell as to why I’m deserving. So, in those cases, we look like heroes either way, but so would your regular broker if you just wanted to save a little bit.
Colin Rooke: But we’ve talked about the band of pricing, you know, the whole range of priceon any given day for any given risk. You know, best case scenario to worst case scenario. Our process is designed to keep you as best case scenario as possible.
Our process is designed to keep you as best case scenario as possible.
Colin Rooke: Now, on the flip side, you’re in an industry where no-one wants you, you know it’s just not a category that people are after.
Paul Martin: And there are those categories, aren’t there?
Colin Rooke: There’s lots of them. And again, those that are in those categories, you’ll hear it all the time, for example if you are doing consulting work in China, there’s not a lot of companies that are saying “I’ll take that all day long.” And so, if you’re in an industry where they’re not fighting over you, there still is savings to be had. And again, back to the band of pricing, in a poorly-performing category, do you want to be the one that gets the 40% increase, or the 4% increase? It’s an increase nonetheless, but again back to the band of pricing, there’s a whole lot of range there, despite knowing you’re going to get an increase because this company … or no insurer is making any money, you’re going to see something, be the one that gets the lowest increase possible by putting in the work, working on the story.
Paul Martin: Is it possible for me as a business owner to find out … My industry, the business that I’m in, am I in a favuored or an unfavored category? Is there a place I can look to get that information, or will a broker tell me, or?
Colin Rooke: Yeah, I mean any broker … You know there’s a lot of fantastic brokers out there, I mean they’ll know right away. And, just like Butler Byers insurance, we are having regular meetings with our insurance markets, and they’re very good at saying “We’ll take this all day”, “Don’t bother with this”, or “We don’t really like this” and then of course they’ll say “We wouldn’t touch that with a ten foot pole.”
Colin Rooke: So, if you’re having regular meetings, assuming that most are, your broker will know right away if this is something that someone wants, and you learn to pick up on things. So, wood-frame rule building in the middle of nowhere with valuable goods, nowhere near a volunteer fire department, highly flammable material, you’re going to pay an arm and a leg for the insurance on that, and as the business over it’s something that you’ve been told over and over and over again. But again, even there there’s something to be done and let’s say you take that wood-frame building in the middle of nowhere, nowhere near a fire department, flammable goods, if the whole industry is performing poorly and everyone is getting increases, you can still be the one that receives less of an increase.
Paul Martin: The way you describe that, I could just imagine you going to a broker’s convention and you guys trying to then … like the make-believe business that is the worst case scenario you can imagine. It’s kind of like a trivia contest.
Colin Rooke: We all talk. Again, it’s a very large but still very small industry, and it’s not uncommon to say “I’m really struggling with this guy in the middle of nowhere with flammable material made out of wood, no volunteer fire department, no way to put out a blaze quite frankly, and there’s 25 million worth of material.” So, we’ll help each other there.
Colin Rooke: But I also wanted to talk about okay so, you’re going to get an increase anyway, and if you’re not happy about that and then Colin is still saying that “Well working with us will save you.”
Colin Rooke: So I want to talk a bit about direct costs versus indirect costs. So, our process is not designed purely to save you money on your insurance. That is a result of our process. The more we learn about the companies that we work with, the better we can negotiate on your behalf. We can shed you into a better light, and that certainly helps get the most favorable terms available to you. And as you work on risk, we’re going to keep pushing and pushing and pushing. And as you work on risk, it’s going to open up doors that weren’t previously opened.
Our process is not designed purely to save you money on your insurance. That is a result of our process.
Colin Rooke: But the main purpose of our approach are the indirect costs. And so as part of our process, we do a lot of quantification saying “Okay well, we’re talking about employee turnover today”, we have a calculator that will let us work together and determine the cost to our clients of one employee leaving. And depending on the industry, the size of your organization, it varies all over the map, but we’ll come together using your number and we’ll say “Okay so using your number, the direct cost to the company would be $34,000 every time an employee leaves and statistically you’re turning over 100 employees a year.”
Colin Rooke: So, if we can work on this, now that we’ve addressed it together … this is a business risk to your company and we’re here to help you mitigate risk as part of our plan working together. Yes, we’re going to share that to the insurance market, but if we save you a couple thousand dollars on your insurance premium, but we’re able to work together by identifying, organizing, prioritizing, and quantifying the fact that we’ve got a serious turnover issue … let’s say we can get that down to 50 in a year, look at the indirect savings of working with us, that have nothing to do with your insurance policy, but nevertheless are putting
hundreds of thousands of dollars back in your pocket because you had someone actually sit down and say “I’m in the risk business, we’ve sat down, we’ve identified this together, we’ve quantified it, we’ve put together a plan and we’re working on it, and that’s saving far more money to the organization, improving performance, than you ever would on the insurance policy.”
Paul Martin: We can quantify some of that too, and we’re going to take a little break here. Maybe when we come back we can dig into that if you don’t mind.
Paul Martin: You’re listening to Colin Rooke, the commercial risk reduction specialist with Butler Byers Commercial Insurance. This is Risky Business, back after this.
Paul Martin: Welcome back to Risky Business Commercial Insurance with Butler Byers, this is Paul Martin and joining me in studio Colin Rooke, the commercial risk reduction specialist and sales guy extraordinaire from Butler Byers Commercial Insurance, and Colin before the break you were talking about constant turnover of staff, and if you can cut your turnover down maybe you look like a more stable organization and you might get a reduction in your insurance premium … and let’s say for example, just picking a number out of the sky, you might save a couple grand … but here are all kinds of studies and research in the HR world that said “Loss of an employee … to replace them, think double their salary.” So if you’re paying somebody $60,000 a year, you lose them it’s $120,000 … if your step by step plan actually eliminates that problem, not only do you save me the $2,000 that the premium … which is what he customer’s looking at … but it’s the $120,000 that they really can’t attribute to the insurance policy but, darn it, it was your work that made that happen.
Colin Rooke: Well, and using that rationale, if we go from 100 to 99 people, that’s an overwhelming success from a financial perspective, and so again, it’s our job to point out the risks that are there each and every day, the ones that have always been there, the ones that are new and emerging, and saying “There is a cost of doing nothing.” And if you say “In my space, it’s not uncommon to have 30% turnover, and we’re doing fantastic, we’re at 26% turnover, so we don’t need to put in the work.” Well, you just identified that a $60,000 employee could cost $120,000 to replace, and to say that “We’re fine because only 26% of our people are leaving compared to the industry, it’s at 30%” is still not okay to me. And so, when we’re having those conversations it’s “These are the indirect costs to you of putting the work in, of going through our process, of having these conversations.”
Colin Rooke: I don’t want to talk about the why behind having a disaster recovery plan, but we have several clients that have less than five customers. The whole company serves less than five customers. We have more than several. So, if you think about the lack of having a disaster recovery plan, the lack of knowing how quickly could you be up and running in the event of a loss, from small to major, that could spell the end of the business. If you think without any prep work at all, maybe thirty days by the time we’re up and running, and in reality it could take you eighteen months because you haven’t formulated a plan, you really don’t know that. You’re not open in 18 months.
Colin Rooke: So, you could be in a hard market, put in some work, still get an insurance increase, but if we say “At the end of the day, we’ve done our job, and we can guarantee that a business value at forty-fifty million dollars would remain open following a major loss because we’ve worked on this”, do the potential savings or the savings you did not get in the insurance market really matter in comparison? And again, at the end of the day, you’re hiring us for our risk advice, and our risk advice and the plan and working on a plan, it translates to the insurance market, but it’s not the main purpose. We want our clients to improve performance.
Paul Martin: It’s an interesting phrase you just used. “You hire us for our risk management expertise”. And I’m guessing most business owners would say “No, I hire you to go talk to six underwriters for me.”
Colin Rooke: Yeah, you know, the best conversations I have with prospects, insurance doesn’t come up one single time, and that’s when I know they’re seeing it, they’re believing it. We don’t address the coverage whatsoever, we don’t talk about the policy, we talked risk the whole entire time, and they’re asking questions about risk, and “Give me some examples of risks you’re seeing now”, and “What have you worked on?”, and “Where are the top ten new and emerging risks that you’re seeing in my industry?” Those are the best conversations, because the client is truly understanding what we’re trying to do here.
Colin Rooke: Insurance is one of the tools we use for risk management, not the tool, one of them, and we do not look at our clients through the eyes of the insurance policy. And what I mean by that is, we don’t look at the coverages that are available to your industry and say “From a risk management perspective, you are completely covered because you are currently buying all the insurance that I could offer you.” Again, that’s one tool, and that’s only certain defined risks that are covered. It’s not all your risk, not even close to all your risk. The costliest risk that you are facing on a day-to-day basis, you aren’t buying insurance for. We talk about those. That’s the focus of the conversation. That’s the more important part.
Paul Martin: At the end of the day … and maybe we’re kind of skirting around this, I want to make it as easy to understand or express as possible … is you’re not just selling me insurance or access to insurance, you’re helping me be a better business, is that…
Colin Rooke: Exactly.
Paul Martin: And insurance is just to cover off some problems that we can’t get solved.
Colin Rooke: Exactly. We deal in risk management. Proactive risk management services.
Paul Martin: Now at the beginning of this show, we talked about some categories of business are out of favours at certain times with the insurance industry. If I happen to be a business that falls into one of those categories that’s on the dark side right now, is it even more imperative for me to get involved with this step-by-step plan to make myself better?
Colin Rooke: Yeah, if you think about it, if the insurance companies don’t want to give you, or do any favours for you to earn your business, it’s because you’re in a category that they deem far riskier than others. And so what they’re saying is, the frequency and severity of loss is a lot higher than, you know, working in an office scenario downtown. So, they’re saying “You need to work on risk more than someone in an office.” In fact, if you’re working in a small office and you’re listening right now, you probably haven’t seen an increase in your premium in ten years unless you bought more stuff. But that’s not a rate increase, that’s just the limit going up. For most offices it’s set and forget because you’re pretty low risk.
Colin Rooke: But if you are in a category that is deemed unfavorable, just think of all the associated costs, all the downtime, that if you’re in the restaurant industry, you have a fire, statistically, you’ll never be profitable again. We know that. The insurance market knows that. They also know that they’re going to spend a million dollars on business interruption insurance as you struggle to ever open the doors again, and then it’s going to continue on, covering your lost profits, until you ultimately close the doors because the customers have all gone somewhere else.
I mean, I’m not saying that’s a guarantee, but it’s the position of the market, it’s what we are thinking, it’s what they are thinking. So, claims are very costly, and so, it’s so important to say “I have a plan. I’m not in a great category, which means I have to do this. It’s very important that I think very realistically about risk, and even though I’m paying a little more in insurance, all the other associated costs of those risks are really going to amount to a lot, or they’re really climbing. There’s a lot more of a threat to me than someone else.” So you are the one that has to take this more seriously.
Paul Martin: Colin, as always, very insightful and great thoughts on this, thank you for joining us again, we’ve ran out of time.
Colin Rooke: Thanks Paul.
Paul Martin: My guest has been Colin Rooke, the commercial risk reduction specialist with Butler Byers Commercial Insurance. I’m Paul Martin, you’ve been listening to Risky Business, join us again next time.