So, you've just gone through a loss control inspection with a representative from your insurance company and have received a set of recommendations.. what now??
Some of the recommendations are very expensive and complicated, or may seem targeted at risks that you view as low likelihood- do you have to implement them?
The word "recommendation" can be misleading, so we sat down with our experts to discuss exactly what the term "carrier recommendation" means.
There are two different kinds of carrier recommendations.
1. Mandatory: these recommendations must be completed to maintain your insurance or to get a policy with that insurance carrier.
2. Advisory: recommendations that are not required to maintain your insurance but strongly recommended to improve your company's risk exposure. If you comply with these recommendations, you may receive reductions in your premium at the next renewal or potentially avoid future increases.
What are they basing these suggestions on?
- Occupational Safety and Health Administration (OSHA)
- Department of Transportation (DOT)
- Federal Motor Safety Administration (FMCSA)
- Local fire and building codes
- National Fire Protection Association (NFPA)
- Industry best practices
How do carriers determine recommendations?
Every time your policy comes up for renewal your risks will be assessed, and your policy will be updated to reflect those risks. Your companies' unique risks are often determined based on a Loss Control Survey. The survey does not happen every time you renew but will likely occur on a set schedule of some kind, typically every 1-3 years or whenever you change carriers.
Loss Control Surveys are common practice within the insurance industry and are an essential part of managing risks and preventing claims. The survey is done by an inspector and entails a detailed review of your organization's risks and exposures from the property itself (indoor and outdoor), to your safety procedures, operations and more. The goal of a loss control survey is to highlight any risks and give your organization a chance to address them before they become potential claims.
You should alert your broker anytime you receive notice of a loss control survey. Your broker will be able to help your organization better understand the scope of the loss control visit and prepare you. After the survey, your broker will be able to assist you in which advisory recommendations you may want to prioritize and how to implement any required recommendations.
How should I prepare for a loss control visit?
To make the visit more productive you should request an agenda and specific topics to be addressed ahead of time.
- Make sure that all the correct team members are involved.
- You as the insurance buyer may need to bring in your sprinkler expert or team members on the floor to help discuss certain aspects of the property or safety protocol. Do not catch them off guard. Make sure they are prepared and ready for the visit.
- If you have had expensive or complicated claims, be sure to have someone involved who can speak to the details of the claims.
- Make sure that those not involved directly in the visit are aware of the inspection being done. You should not try to cover anything up, but you should make sure that your place is shown in a good light when the inspection is being performed. It is important to prove that you are following your own protocol and safety measures.
- Be ready to address any past claims and your solution for preventing them in the future.
- How did the claim occur?
- What was the outcome?
- What was done to fix it/ keep it from re-occurring?
- How quickly did the person return to work?
Sometimes the inspector is just there to discuss your property, however, if they write coverage for multiple lines for your organization, you should be aware that they may want to review your other lines as well (e.g., safety procedures for workers' compensation, risk transfer practices for general liability, etc).
Other things the Loss Control Surveyor may request to review:
- Driver / vehicle list and policy
- Annual sales figures
- HR Records
- Your financial statements
- Injury reports
- Information about your products and services
Examples of common recommendations:
- Improvements or replacements to fire suppression systems
- Physical Maintenance to the interior or exterior of your facility
- Updates to Employee safety policies and training procedures
- Maintenance on your equipment and machinery
- Employee handbook updates
What happens after the survey:
Once your survey is complete, your organization will receive a letter reviewing the visit. Depending on the inspector's findings, the letter may call attention to certain hazards that should be addressed or updates to policies / procedures / facilities that may reduce risk. These findings are considered "recommendations," and the carrier will often require either compliance with the recommendations or a written response.
What if I disagree with the recommendation?
With a tight Property Insurance market, it is important that you consider implementing any property recommendations your insurance carrier provides even if you don't agree. Doing so will help address your level of risk exposure and could help your organization keep premiums under control. That said, not all recommendations are created equal: some may be as simple as fixing a few steps or lighting, others could be as complicated as replacing a sprinkler system or creating new fleet maintenance programs. If you disagree with a recommendation (e.g., you believe your existing process accomplishes the same risk reduction goal as the carrier's recommendation), your broker may be able to work with the underwriters to modify or waive the recommendation. If you do not disagree with the carrier's recommendation but choose not to implement it (e.g., due to cost), you should still provide a written response to the carrier's recommendation outlining the existing processes you have to address the hazard they've identified.
What happens if I don't implement the carrier recommendations?
If you don't implement the mandatory recommendations, your organization runs the risk of being non-renewed with the carrier or experiencing a significant increase in premiums.
You should work with your broker to determine which recommendations you should prioritize and to develop a plan for addressing as many as possible. That said, some of these recommendations can be very costly. In some cases, it may be worth it to bear the higher premiums over implementing a prohibitively expensive recommendation. That said, ultimately the carriers' rationale for making recommendations is to reduce the risk of a severe loss, so their recommendations should receive serious consideration. In cases where you aren't able to fully implement loss control recommendations, you can work with your broker to develop a strategy for responding to the carrier and strengthening existing risk controls.
I've completed the recommendation: now what?
Once you have completed a recommendation you will be asked to submit proof to the insurance carrier. This can include photos, contracts, or receipts. In some cases, the underwriter may be able to offer enhanced coverage or remove exclusions based on successful implementation of loss control recommendations. On some occasions the carrier may come for a follow-up visit.
How much time do I have to implement recommendations?
The carrier will be specific in the timeline they require your organization to address any recommendations. However, generally you have between 30-60 days to respond to the carrier with what you have chosen to implement and the timeline for finishing the project. Some recommendations are simple and can be completed within 30 days, other recommendations are more complicated and may require 3rd parties or quotes before getting started, in these cases you should contact the carrier with your plan for addressing them within 30 days.
Note:
The goal of a carrier recommendations are not to punish your organization. These standards are designed to reduce the level of risk and prevent future claims. It gives your organization the opportunity to showcase what you are doing well and to find opportunities to reduce risk.
