When working with a group of experienced professionals, thinking outside the box should be the norm not the exception. Below are some examples.
Situation #1: A wholesale distributor of shoes with locations in 5 states and 150 employees has been funding a deductible plan for their workers compensation. While reviewing the deductible plan they see that a very large portion of their cash is being used to fund loss reserves. Further investigation shows reserves are over 80 percent of what was paid out in the previous year to fund the plan. Compounding the problem, the distributor is losing the investment opportunity on these reserved dollars. Overall the loss experience is excellent. The combination of loss prevention and claims management has kept the overall losses low.
Solution: Starting with the end in mind, two outcomes to achieve are improved cash flow and receiving investment income. Adding this to the positive attributes of the deductible program, we will be looking at several different captive arrangements.
Situation #2: A start up Software Company is in negotiations with a large manufacturer. Their software application allows the manufacturer to lower its inventory values by 50 percent without losing its ability to meet client demand. Through the software, suppliers are connected with the manufacturer and automatically know when raw materials are low and need to be shipped. The manufacturer’s clients are also connected, so now the manufacturer knows when finished goods should be shipped. This is a great software solution for the manufacturer! The potential client is a multi-national manufacturer. Landing this account could put the software company a year ahead of their financial projections. The software company owner receives the contract wording from the manufacturer. The insurance requirements include for the software company to carry protection for intellectual property, including patent infringement with an insurance limit of $5 million and to name the manufacturer as an additional insured to the coverage. The software company is not carrying any intellectual coverage other than the limited coverage provided by the Commercial General Liability section of their package. Cash flow is tight, so the software company owner is concerned about buying additional coverage at this time.
Solution: The client obtained the name and phone number of the manufacturing company’s in-house risk manager who put the insurance requirements together. After obtaining information on the availability and cost of the coverage, we convinced the risk manager to drop the patent infringement insurance requirement, reduce the intellectual insurance limit to $3 million, and waive the requirement of being added as an additional insured.
Situation #3: At our third meeting with a potential client, the HR Director of a regional bank informs us of a directive to cut the department’s cost by 25 percent. The bank has 6 offices and 80 employees. Part of the director’s analysis determines that her assistant is spending 10 hours a week dealing with employee questions on the bank’s employee benefit program. Questions mostly are focused on either coverage or claims. The assistant is calling the insurance carrier to resolve the employees concerns and get answers.
Solution: We become involved with the existing employee benefit program. A notice goes out to all employees providing contact information for Riviera Insurance Services, LLC, along with a directive to contact us for any claims issues. We find a solution to provide on-line coverage information for all employees. During the next renewal, we oversee the enrollment process for each of the offices. As part of the enrollment process, at the direction of the CEO, we survey the employees and discover a need to add additional coverage for which the employees are willing to pay the cost. After reviewing with the HR Director, we prepare a proposal to add a Section 125 plan and offer the additional coverage on a voluntary basis. The plan is approved. We introduce the plan and sign up the interested employees through payroll deduction. Through the first 6 months of involvement we eliminated the 10 hours HR was spending on employee questions. This helped meet the cost reduction directive. In addition, the number of coverage questions was significantly reduced and claims issues were resolved faster. The adding of the voluntary coverage was perceived as an additional benefit without adding additional cost to the bank.
Situation #4: During our pre-renewal meeting we are discussing the market trends with the CFO on a hardware component wholesaler. The premium trend for the employee benefits is between 8-15 percent increases. The CFO tells us that they will not be able to pass the cost along to clients and that we will need to come up with a renewal premium that will not have any increase and still keep the employees happy.
Solution: In reviewing the utilization of the various plans, we find that the employees are infrequently using the dental coverage. Also, we compare the co-pay for doctor visits and see that it is lower than industry standards. We put together specifications for the renewal to include options for partially self-funding the dental and increasing the co-pay on the doctor visits and hospital stays. Overall costs with the changes results in a 5 percent decrease over last year. The company agrees to pay the difference in an employee’s out-of-pocket hospital stay should the event occur. Projecting the potential additional cost to the employer adds a worse case scenario of an additional 7 percent. Realizing this is a variable cost, depending on utilization of the hospital, the CFO is happy with the solution. We prepare a letter outlining the changes in the program and this is used as a format for communicating to the employees.
Situation #5: One of our affluent clients has just had an appraisal of their personal possessions. The appraisal is an update from the last one done three years ago. As the appraiser is leaving, she decides to call our office. There is a brush fire within 20 miles of the property. The appraiser realizes the personal property values have increased substantially since the last appraisal and is concerned about the insurance.
Solution: We call the branch manager for the insurance company providing coverage for our client advising her of the situation and requesting increasing coverage for both the unscheduled and scheduled sections of the homeowner policy. The branch manger agrees to do this, knowing of the potential loss from the fire. We follow up with an e-mail documenting the agreement. Yes, the house was destroyed.