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RISK MANAGEMENT STREET SMARTS for CEOs and CFOs

Street Smarts defined:   “Having the shrewd awareness, experience and resourcefulness needed for survival in a difficult, often dangerous environment.”

The world of risk and insurance is indeed a “difficult, often dangerous environment.”  Executives:     have street smarts and survive;        be naïve and …oh, oh!

Many in the insurance industry are there to “help” you.  But who is really on your side, and part of your team with your interest only at heart?

Insurance – It’s like magic

The one contract you never negotiate

Your broker sells you an insurance program based on a five- page proposal, a smile and a handshake.  Then, a month or so later what shows up?   500 pages of fine print!  SHAZAM

Takeaway:  terms and conditions need to be negotiated in advance of binding (the whole gory mess of exclusions, conditions limitations).

 “No-one will do
that.”

You want a certain coverage or specific language in the insurance and your broker says “no-one will do that” (translation: not available in the market).  In the absence of real competition that will be the answer.  Multi-broker competition will change that dynamic…. and have a remarkable effect on price as well.

 
Pile of un-negotiated! and un-read! insurance terms

See how to improve coverage

Contracts: “Don’t worry, just sign it.”

Non-insurance contracts need just as much attention as insurance contracts.  Liabilities are constantly being transferred by contract to the passive party.  Don’t be the passive party!  Have someone who will work with you to:

Understand it’s a chess game!

Loss Control: “Macondo is a nightmare well that has everyone all over the place.” (See article below)

Ignoring loss control makes financials look good in the very short term.  But lack of a risk management culture catches up very quickly.  Have a risk management culture – it will pay off hugely in all the following: cost (direct and indirect via insurance premiums), public relations, customer relations, employee safety and good will, and avoiding personal liability.

See http://licatarisk.com/cms/the-bp-gulf-oil-spill-a-risk-management-debacle/ to see how total lack of a risk management culture cost BP over $40 billion in direct costs, over 100B in total  cost.  These scenes are reenacted on a smaller scale on a daily basis, causing countless companies to founder and/or sink.

Claims:  “Say no and see if they go away.”

You don’t accept a claim declination unless you agree with the insurer’s explanation, and you  can’t agree unless you really understand the insurance contract and all the case law surrounding it.  Have an expert on your side and get what you paid for.  Even if a denial is justified based on policy language, was there an error leading up to the situation which leads to recourse from other parties – either brokers or the parties who caused the loss?

Have a risk manager on your side

The largest companies have entire risk management departments reporting to the CFO.  You need risk management too.

Think the following:  “I love my broker, but I love my company more.”

(c ) Licata Risk & Insurance Advisors, Inc. 2020

Frank Licata

[email protected];   617.718.5901

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Feb 12, 2020

Licata Risk Licata Risk & Insurance Advisors, Inc.
137 South Street, Second Floor
Boston, MA 02111-2848
617-451-2140     [email protected]
LicataRisk Advisors is an independent risk management and insurance consulting firm. We are not brokers and we do not sell insurance. We are not connected to any insurance company or product in any way and do not receive commissions. This is an important difference as you will have an expert on your side who is only committed to you.

Licata Risk is not a law firm and does not practice law. General advice and contract input by the consultants, including those who are attorneys, is to provide insight into the risk and insurance aspects. Your attorney should be the final authority on any legal matter.