March 6th, 2017 by ALBERTO MOYANO
A public multinational company with billions in assets in more than 70 countries was going through an acquisition when suddenly, just two months before its property and casualty insurance program renewals, the entire risk management team resigned.
Instead of relying on its current insurance agents, the company decided to hire the services of INSIGHT to review and complete the insurance renewal process. After a complete review of the company’s property exposures and the insurance policies providing coverage, INSIGHT found that many of the properties included in the statement of values had values way under the deductibles, or were no longer owned or leased by the company. A new property insurance policy with the same coverage, limits and deductibles was purchased for $2.5 million less in premiums.
INSIGHT is in its third year providing On-Site Risk Management Services to this client. This year’s risk management budget is $6M less than three years ago
March 1st, 2014 by ALBERTO MOYANO
Insurance premiums are based on risk. Underwriters for commercial liability policies develop their premium rates based on the company’s risk: the probability of the company experiencing a loss in the future. Previous losses are important, but only if they show a trend for future losses. This is why smokers’ premiums are higher, not because they have cancer, but because they are more likely to get it.
For manufacturers, the premiums are usually driven by product exposures. Underwriters know that most liability claims for manufacturers come from people injured using their products. The problem is when losses are not product related but the result of the company not knowing how to manage the risk of using outside service providers.
In 1996, when our client opened for businesses, it paid about $100,000 for General Liability ($1M limit/$0 deductible) and umbrella ($15M limit/$0 deductible) combined. Ten (10) years later, it was paying about $800,000 for the same coverage. During this period, the company did not have any product liability claims and their revenues more than doubled. Instead, the company had experienced multiple vicariously/contingent liability claims involving uninsured and underinsured contractors.
What happened? One of our client’s best competitive advantages has always been its commitment to constantly reduce its operating cost by keeping the highest standards of quality and safety. Therefore, through the years, our client subcontracted and outsourced most of its non-core operating activities, and hired hundreds of contractors to work on expansion projects. Although it was getting the lowest cost, unknowingly, it was picking up most of the risk that was supposed to be transferred to the vendor doing the work.
After using our Contractual RM©, and implementing a new contractual risk management program developed by INSIGHT, the company was able to reduce its liability premiums by $600,000.
The chart below shows our client’s liability premiums (General Liability + Umbrella) from 1996 to 2013. As you can see, during this period, premiums have not been driven by revenues from product sales or policy limits (umbrella limit was $25M in 2013) but by INSIGHT’s products and services.
September 1st, 2013 by ALBERTO MOYANO
Billing errors from natural gas purchases can be very hard to uncover. A typical purchase could involved multiple contractual arrangements and transactions at different times like futures contracts, basis contracts, transportation agreements, and spot purchases. These transactions may generate billing from multiple vendors like gas suppliers, interstate pipeline carriers, local distribution companies, and balancing parties.
One of the world’s largest producers of orange juice, a Florida company using INSIGHT’s Contractual RM© since 2007, asked ENCORE to perform a billing audit of their natural gas bills back to contract inception in 2006. After uploading all the client’s contracts, budget and usage information in the INSIGHT’s Utility Risk Manager© and reconciling each bill, ENCORE was able to uncover more than $100K in overcharges from the balancing party and over $1.2 million from the local distribution company.
September 1st, 2013 by ALBERTO MOYANO
Several minutes after starting his shift, an intoxicated front-end loader operator working for a temporary agency backed into a pole inside a warehouse bringing the entire roof down. Luckily, before the roof collapsed, he ran outside the warehouse and suffered no injuries. No one else was inside the warehouse at the time. Losses were estimated to exceed $500K, without any “loss of use” assessment.
The first correspondence from the vendor’s carrier was a “reservation of rights” letter requesting a contract copy of the service agreement between the vendor and company. Using our ContractualRM web-based application, the company’s risk manager retrieved a copy of the service contract and vendor’s current certificate of liability insurance with waiver of subrogation. The second correspondence from the vendor’s carrier was a settlement offer of $500K+ to cover the price of a new roof and any improvements to avoid future “loss of use” charges.
The client in the event above is a mid-size US corporation who has been using our ContractualRM software since 2008. Months before the roof incident, our client’s HR department was in a hurry to hire a front-end loader operator. The previous loader had left the job the shift before. Using our ContractualRM, an HR clerk, generated a “labor staffing agreement” (LSA) and sent it to one of company’s vendors. Right after, the ContractualRM alert system sent an email to the company’s risk manager to inform him of HR’s request. The same day, risk management received via email the LSA signed and faxed by the vendor. The signed contract included copies of vendor’s certificate of insurance, copies of the waiver of subjugation and additional insured endorsements. After reviewing the contract and certificates for proper coverage, the risk manager sent an email to HR authorizing the vendor to provide services to company. By the time the roof collapsed, the contractor’s risk had been already been transfered from the company’s property insurer to the contractor’s liability insurer.