How Business Owners Can Save Money on Commercial Insurance and Reduce Risk

What bothers business owners are things that fall to the side of their commercial insurance policy, but are all related to risk. Reputation risk, cyber crime, turnover, cash flow issues are some that come to mind. In this episode, Colin and Paul talk about how to lower the total cost of risk to a customer, and secondly, to make sure that the company you’re insuring is more attractive to the insurance market.

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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, business commentator here on CKOM. And you’ve heard me and Colin Rooke, the commercial risk reduction specialist with Butler Byers commercial insurance speaking about all issues related to commercial insurance and how a business owner can make plans and actually be proactive in not only improving their insurance program, but probably saving some money along the way. So we’re gonna pick that up again today. And Colin, welcome. It’s a new year, and I thought, “You know, with the new year upon us, it would be good to just maybe go back to basics.” And just reflect back on what we’ve talked about for the past couple of years. What the step by step risk assessment program is that you guys have pioneered, you’ve created, and you’ve taken to the commercial community and business owners right across Saskatchewan are embracing this concept, because first, it arms them. And secondly, it’s just prudent business. It’s about taking a look at one of your cost items and saying, “Can I do something about it?” Lower the cost and improve the product at the same time. So Colin, talk to me about that. When you go talk to business people, let’s say for example they really haven’t heard about what your plan is. How do you explain it to them?

Colin Rooke: I guess what we start by discussing what the traditional role of a commercial insurance broker has been. And so really for years, I guess I’d say even since the broker was introduced, the bulk of the focus has been on what we call traditional reactionary services. So making changes, preparing certificates, claims reporting, break/fix type of issues, things that come up throughout the year. Each policy is usually a one-year term. So again, it’s just, we put the policy in place, we wait for you to need something, and then we react to help our clients. And that would be the service component. The other 25% has traditionally been purchasing, all the paperwork involved with the purchase and placement. So any sort of remarketing efforts, negotiating back and forth with insurance companies. There is quite a bit of work involved, but it’s really been about a 75%-25% split. You’re not negotiating or remarketing, as we call, every single year. And again, that’s traditionally how the commercial insurance brokers operated.

Colin Rooke: But we’ve changed that. And we’ve changed that substantially. We looked at our clients, we looked at the risks that they were facing, the problems that they had. The questions that the underwriters were asking, the rising costs of insurance premiums, and we said, from talking to our clients, what’s keeping them up at night is not … This definitely doesn’t fall under the reactionary services, and it’s rarely anything to do with purchase and placement, unless maybe we’re saying, “Unfortunately we’re delivering a sizeable rate increase in premiums.” But what concerns them is what we have now termed risk reduction preventative strategies. So what’s bothering our clients are things that fall side of the insurance policy, but are all related to risk. Reputation risk, cyber crime, turnover, cash flow issues. So we would have these conversation with our clients and realize we call ourselves risk managers, but if we’re only focusing on the insurance policy, and we’re only helping our clients in a reactionary way, are we really doing the best job we can for our clients? Are we really helping them with their risk? How does this strategy, for example, mitigate risk? Or how does it help our clients avoid risk? And we decided that it didn’t, so we made major changes.

Changing the Model of Commercial Insurance

Paul Martin: You know, that’s something that probably every business owner thinks about, goes through in their own minds: How can I improve the product delivery? My product, my service, for my customer In a way that I become, and I guess that current terminology is, a disruptor. The person who’s changing the marketplace by just retooling and asking myself real hard questions, goes something like this: Is my product or service fundamentally meeting the needs of my customer? And I guess that’s what you’ve done at Butler Byers with your step by step assessment program. You said, “These are the kinds of questions we get from the underwriter, these are the kinds of questions we get from the client. Why do those questions come up? Let’s go and address them.” And you’ve actually changed the whole model in order to do that.

Colin Rooke: We did. And if you talk to other companies, they’ll tell you that. We focus on risk as well, and we have risk reducing strategies. But I’m gonna challenge that because again in our industry, if you don’t change the way you think, when you say risk, we are referring … We being again, the industry, we’re talking about physical loss. Property losses. Liability claims. Something has to happen before anything is triggered. And again, that’s only one part of risk management. And we’ve expanded again our approach to say … Well okay, in addition to helping our clients when there’s a loss, in addition to going out to their buildings and saying, “If you’d sprinklered this area, from a fire protection standpoint, you’d be a little safer and you might save in the process,” or getting advice on the proper way to build a building. Backing it up and saying … Okay, if we look at all risks, and say that any risk causes a loss, whether we insure it or not, then we focus on those. We can again, truly reduce risk for our clients, and then through our process, our clients will ultimately save on insurance premiums.

The Old Model for Commercial Insurance is Broken

Paul Martin: I think you’ve argued the old model is broken. Right? That’s why you’ve gone from a 75-25 to a 50%, 25% and 25% kind of breakdown of the way you attack a client’s needs.

Colin Rooke: It is. And I think that our industry’s really bad for change. To say that it’s been done the same way forever, so let’s keep going, doesn’t make it right. Doesn’t make it relevant. And again, what our clients are after, when they challenge us, or when we’re discussing, or if we’re prospecting and trying to obtain new clients, again the questions that they have aren’t related to the policy. How will you help us become a better business as a result? And I believe we have the best answer for that. And it all stems from our risk reduction workshop, which is the focus of these shows. It’s a, again, a different way of looking at your business. It’s a different way of looking at risk.

Paul Martin: You call it discovery, going and meeting with a client and it’s actually a physical sit down, and say, “Let’s walk through this step by step.”

Colin Rooke: Yeah.

Paul Martin: You have a questionnaire they have to fill out. I mean, you have plenty of questions.

Colin Rooke: Yeah. So the first part we call a discovery. That’s our risk reduction workshop. And what that entails is getting the decision making team together. Anyone that has a say in how an organization is ran, we would invite them to this meeting. And what we do, is we sit down and we have a conversation about risk. And as you mentioned, yes we’ve got tons of questions. And we move quite quickly, because what we’re trying to do is just get an idea of where you’re at now, and where you’ve been. So we cover a lot of ground quickly. And again, the point of that is just to give us a barometer. Where can we go from here? And it’s that session that will direct where we go with this account in the future. So big part of that discussion is risk identification. So again, our questions are designed to identify risk for our clients. Once those are identified, once we’ve had a chance to ask, we organize those risks for our client. We place ’em in to various categories.

Business Risk, Strategic Risk and Prioritizing Risk

Colin Rooke: So the three in which we use the most options are one, business risk. Does it affect the day to day operations? Two, strategic risks. Does this risk affect the long term viability or the sell ability of the business. Or hazard. Does it cause a physical loss to the company? Now, when we refer to hazard. Again, I’m not talking about fire and flood. I’m talking about any loss to the company. An employee leaving is a hazard risk to us. A gap in coverage is a hazard risk to us. Claims history, again. From there, we work together on quantifying the risk. So what is this risk costing the company now? And essentially, we’re saying what’s the cost of doing nothing at all?

Colin Rooke: And then from there, and part of the next step of our procedure, is we work on prioritizing risk. So risk prioritization. Based on what we’ve learned, based on where the company needs to be, based on where the industry is going and based on where we can provide the most value, we’re gonna come together and say, “Look, we need a plan in place. We need to start working on some of these topics.”

Paul Martin: Colin, we’ve got to take a little break. I’m just gonna interrupt us for a second. And we’re gonna come back and I wanna sort of pick it up. Once you’ve made the identification and you’ve kind of laid out the road map, just what do we do after that? So you’re listening to Colin Rooke, the commercial risk reduction specialist with Butler Byers commercial insurance. And this is Risky Business. We’re gonna be back after this commercial break.

Building a Commercial Insurance Roadmap

Paul Martin: Welcome back to Risky Business. This is Paul Martin sitting in with Colin Rooke, the commercial risk reduction specialist with Butler Byers commercial insurance. And Colin, just before the break, we kinda were talking about how you sit down with a client in your initial contact in the step by step assessment product, you identify a lot of things. Then what do you do? You build a roadmap. And walk me through sort of the next steps. There’s a couple of other steps. It’s not just, “Well, here it is, buddy.” And so over to you, you actually then just take charge of this plan.

Colin Rooke: Yeah. So from there, we get together as a team at Butler Byers and we build the risk map. We call it the risk reduction plan. And really, the point of that is … Okay, so once we’ve identified the risk, once we’ve quantified the cost to our clients and we, internally, prioritize where we think the clients needs to be. We say, “Okay, so what can we do?” And we talk about ways that … How can we avoid these risks altogether as part of that plan? What strategies can we implement to just eliminate that risk if possible? And if we can’t do that, what can we do together to mitigate that risk? Reduce the daily impact. Maybe it’s employee turnover. So if we work on turnover, can we mitigate it as part of the plan?

Colin Rooke: Thirdly, is there a way we can transfer that risk to a third party? So we spend a lot of time reviewing contracts and leases, and any risk that we’ve identified together that we can transfer to someone else, we’re gonna do that. We talk about again, financial ways of dealing with risk. So to us, financing risk is the insurance policy itself. It’s basically paying a portion to buy the policy to then spread out the risk among a group. And so we talk about is that the best way to approach? Because the most expensive way of dealing with risk is risk assumption. Doing nothing. Or self-insuring it. But when you think about it, financing risk is the second most costly way of risk management. So again, if we can avoid, if we can mitigate, or we can transfer risk, we’re gonna focus on those areas first. We’re gonna rely on some risk financing, and again make our clients very aware of what they’re assuming.

Paul Martin: Colin, the client is not isolated in all of this in the sense that you just sort of walk in and drop it on them. This is … You’re back and forth with them. They’re part of the process. There’s conversations going on all the way along, because at the end of the day what you’re trying to do is to make them a better perspective customer for the insurance company.

Colin Rooke: Exactly. So in addition to improving the bottom line by identifying these risks, working together on those, we share this information. It’s not just kept internal. A big part of what we do, of course, is the purchase and placement of insurance. And just imagine if you were working with a company that had the whole story, just imagine if they knew where you’ve been, where you are now, and where you’re going. And just imagine if they could lay that out to the insurance market. Well, at the end of the day, the underwriters, those that are determining the price you pay for insurance really, they’re betting on you. If it’s a new piece of business, especially, and if you have a checkered past, and what I mean by that is claims. They’re gonna judge you based on those. But if you don’t have any, and you’ve just filled out an application, they’re gonna judge you as below average. And the reason for that is, they have no reason to even grade you average. Average is for those businesses that again, there’s some story. And the above average are the ones where they have a complete understanding of how the business operates inside and out. And that’s what we are able to deliver by coming together and working on risk. So again, we use what we’ve learned to negotiate on behalf of our clients, and ultimately save on cost of risk and insurance premiums.

“We use what we’ve learned to negotiate on behalf of our clients, and ultimately save on cost of risk and insurance premiums.”

Paul Martin: Now we’ve talked about the design and the implementation of the program. Once you’ve secured a client and you’ve got them in the hands of an insurer, the program doesn’t end there, and we’ll see ya next year. There’s an ongoing maintenance to this thing, a continuation of the relationship between you as the broker and your client as the customer.

Colin Rooke: Exactly. And again, that’s where that additional 50% really comes in. So we don’t just have this conversation once. We don’t just say, “Well here’s your risk plan, if you implement this thing, you’ll save some money and you’ll be better off.” And then we divert back to the way it’s always been. No. Risk changes every day. Really, it’s the purpose of this show, and we’ve talked in the past about how difficult it is to prep for these shows, because by the time I have my notes in place, I can check the world news and realize that something has changed in the past half an hour. So our goal is to make our clients aware of risks they need to know about. Things that are changing in their business environment, but in turn, I need to know what changes they’ve made. Did they get through it? Has there been challenge? What new initiatives are they taking on? Where is the company going? Are they getting into a different line of business? Which, if they were, would uncover a whole other list of risks that we would need to discuss. So again, it’s an ongoing partnership with Butler Byers and our clients. And again, each year we rinse and repeat. We revisit, we keep working, we provide the necessary resources, we come up with a plan, and it just goes on and on that way.

Paul Martin: Well there’s a completely new phrase, “Rinse and repeat.”

Colin Rooke: Yeah.

Paul Martin: We’ll have to learn how to use that in the future as we go ahead, Colin. But basically, we’ve only got maybe a half a minute left before we run out of time. But at the end of the day, you’re looking for two primary objectives, if I understand this correctly. And one is to lower the total cost of risk to a customer, and secondly, to make sure that the company you’re insuring is more attractive to the insurance market. Make him a better looking customer.

Colin Rooke: Exactly. We’re just ensuring that our clients have their best foot forward, because at the end of the day, if you hire us, any broker, we are representing you to the insurance market. And if we aren’t armed with knowledge, how can we be doing that job effectively?

Paul Martin: Colin, as always very informative. And welcome to the new year. I know I look forward to continuing this conversation as we go ahead in the weeks in front of us. So thanks again. You’ve been listening to Colin Rooke, the commercial risk reduction specialist with Butler Byers commercial insurance. This is Paul Martin. And you’ve been listening to Risky Business, commercial insurance with Butler Byers.