Protect & Defend columnist Ed Branam, DVM, is the veterinary and animal services program manager at Safehold Special Risk Inc. A 1977 graduate of the Michigan State University College of Veterinary Medicine, Dr. Branam has worked in the insurance industry for the past 20 years. He is a former Sacramento, California, veterinarian and a former veterinary affairs manager with Hill’s Pet Nutrition.Read Articles Written by Ed Branam
Today’s hypercompetitive veterinary marketplace is filled with savvy, non-traditional competitors developing innovative methods of meeting client demands for services. No longer can veterinarians simply focus on working hard and providing quality medical care to drive revenue and financial success. The successful entrepreneurs of the future will focus on client-centered service delivery while reducing the cost of every aspect of doing business.
In that vein, today’s practice owners and business administrators should pay particular attention to one key area where they can enjoy both direct and indirect long-term monetary savings: insurance costs.
Business owners typically use three strategies to reduce insurance premiums:
- Shop policies with multiple brokers or carriers and pick the lowest premium.
- Increase deductibles or reduce coverage.
- Understand the major risk factors that insurance companies consider when pricing policies and then position the business to exploit those opportunities.
Insurance is a simple concept. In most instances, providers contractually agree to accept a defined amount of an insured’s risk (the insurance policy) for a predetermined amount of money (the premium).
Execution can be difficult. The goal is to write policies at a premium that allows the insurance company to pay its bills (overhead and claims expenses), maintain a legally required amount of capital reserves and deliver profit to shareholders. However, predicting the number and cost of future claims is by its very nature a challenge. Therefore, rates rarely remain fixed for long periods. Changes in the economy, laws and technology and the occurrence of natural disasters can significantly impact insurance costs from year to year.
Here are 13 strategies that policyholders can utilize to lower insurance premiums:
1. Be Responsible
Insurance companies believe that preventable losses are avoidable losses. Policyholders that are proactive about controlling preventable losses save insurance companies money. In return, insurance companies typically can reduce policy premiums well below standard rates. They routinely do that for responsible policyholders.
2. Inspect for Risks
Many insurance brokerages and insurance companies provide on-site risk inspections of businesses’ facilities and operations. Ask your broker to schedule one with a certified risk manager experienced in the veterinary profession. The assessment should include your property, security, maintenance protocols and agreements, safety equipment and protocols, regulatory data management, and staff safety-training program.
Make sure you receive a written summary and a list of recommendations, which are typically presented as essential or non-essential.
Anticipate two possible outcomes:
- The insurer will require you to correct and document the completion of all essential recommendations.
- The insurer will offer premium discounts after the successful completion of the risk-management review process.
3. Answer Everything
Every insurance application asks for some degree of basic risk-assessment data. Unfortunately, many applications are incomplete when submitted. Not taking the time to detail the data might mean the policyholder doesn’t obtain the best available price.
4. Improve Security
Fences, outside floodlights, burglar and fire alarms, video cameras and tamper-proof locks are a few of the many strategies for improving your building’s security. Veterinary medical facilities transmit and store sensitive customer data, so taking steps to prevent cybercrime and back up data to a secure off-site location are important considerations when insurance policy prices are determined.
5. Emphasize Worker Safety
Create a safety plan and enforce it. Documented proof of a robust employee safety-training program is a vital component to achieving lower workers’ compensation insurance premiums.
6. Encourage Safe Driving
Employees using a personal vehicle or a practice-owned vehicle for work-related business is one of the largest liability exposures to a veterinary practice. At-fault accidents resulting in significant property damage or bodily injury or death to others can easily put a business and its insurance company at risk for millions of dollars in potential liability. Having a safe-driver training program can help policyholders reduce their premiums.
7. Do Background Checks
It’s said that “An ounce of prevention is worth a pound of cure.” Likewise, the best way to minimize theft and malfeasance is to conduct a background check before a job candidate’s possible employment. A criminal record does not necessarily stigmatize a person for life, but insurance companies consider such knowledge to be a critical component of an effective risk-management program.
8. Modify Your Deductible
Increasing the deductible will lower the premium. Each practice should evaluate its financial and risk status annually to help decide which deductible amount is best.
9. Keep Detailed Records of Equipment, Inventory and Supplies
In my experience, few veterinary hospitals know the cost of replacing all their business and medical equipment, drug inventory and supplies. Therefore, the amount listed on their policies (the insured amount) is an educated guess. A detailed inventory will help you determine the correct coverage limit so that you don’t pay for insurance you don’t need.
10. Spruce Up the Building
The adage “Perception is reality” applies to the appearance of your property. Insurance companies will “Google map” or physically inspect all properties during the initial underwriting process. A clean, well-maintained building and surrounding property create the perception that the owner takes pride in the business and will take extra steps to ensure that it not only looks good but also operates at a high level. This can significantly affect your insurance premium.
11. Maintain Good Credit
If yours is a new or rapidly growing business, an insurance company probably will consider your personal or business credit history as a major factor in determining the premium. As the risk of financial instability increases, so does the perceived potential for third-party and employee-related liability, and the insurance premiums will keep pace.
12. Fine-Tune Your Workers’ Compensation Coverage
Based on your company’s legal structure and your state’s regulatory requirements, several categories of personnel potentially can be excluded from your workers’ compensation insurance policy. These people typically include business owners, officers, shareholders, general partners and managing members. Since these individuals usually receive the highest annual monetary compensation, they also have the biggest impact on the policyholder’s workers’ compensation insurance costs. Excluding qualified individuals is an important strategy for saving money on premiums.
13. Buy in Bulk
Whether it involves socks or paper towels, a bulk purchase is typically less expensive. The same often is true with insurance. The reason is simple: Purchasing multiple policies from a single insurance company delivers two major underwriting benefits: more total premium dollars and the ability to spread the claims risk. In turn, the policyholder should expect the insurance provider to offer a discount.