When it comes to safeguarding their operations, business owners may benefit from a more thorough reevaluation of their risk mitigation strategies and insurance coverage. Having an outdated approach is all too common, especially after a business has grown or changed significantly, says Keith Scroggins, chief administrative officer at McGriff, a subsidiary of Truist Insurance Holdings.
That was the case for Daniel O’Dorisio, owner of O’Dorisio Carpentry and Concrete. Prior to working with Truist, he had simply been renewing the contract he’d signed as a one-man business. By the time he met with Truist relationship manager Carin Schneller-Carr, he’d grown his business to a million-dollar operation with a handful of employees—and outdated coverage.
“At Truist, we sit down and review the entire relationship with the client, whether it’s something that we can solve or we can bring in other partners,” says Schneller-Carr. “One of our clients’ biggest expenses is insurance, so I introduced Daniel to an insurance consultant at McGriff.”
It turned out that O’Dorisio’s increases in workforce, equipment, and other factors weren’t covered by his existing policies. After getting to know O’Dorisio’s business better, our McGriff consultant was able to shore up his coverage—and save him tens of thousands of dollars a year.
Here, Scroggins offers insights on how to ensure your company has the protection it needs at every stage in the business lifecycle.
Why go beyond a standard insurance approach?
Many insurance companies do only annual reviews, and their consultants may not be in close contact with their client’s business and financial advisors during the months that follow.
“All too often a business looks at the purchase of insurance as a task or event—simply renewing coverage before expiration. However, as a business moves through the lifecycle, their operations will change and expand, along with their insurance or coverage needs,” says Scroggins.
Because Truist advisors work closely with clients across the business lifecycle, our relationship managers inform our partners at McGriff about important changes to your business. These Truist teammates also discuss your near-term and long-term goals—and work together to provide proactive solutions around risk and mitigation.
“The nature of guarding against risk is having year-over-year conversations where we identify, reassess, prioritize, and adjust the risk strategy.”
Keith Scroggins, Chief Administrative Officer, McGriff
Why you need to reassess policies, not just renew them
Acquiring coverage isn’t the same as maintaining it—and over the extended life of a business, it’s important to do both.
“The nature of guarding against risk is having year-over-year conversations where we identify, reassess, prioritize, and adjust the risk strategy,” says Scroggins. But even that’s not enough.
It’s also important to keep your relationship manager apprised of any significant changes to your business so they can bring in insurance partners as needed.
“Material operational or strategic changes should be communicated to your insurance broker so they can help with any policy adjustments as well as alterations to your risk mitigation process,” says Scroggins.
The power of process reviews in claims reductions
“Beyond brokering an insurance program or policies, a big part of what McGriff does is gain a thorough understanding of a client’s operations—including processes, products, and services—to help identify, analyze, and quantify risks,” says Scroggins. “Then, we can recommend actionable steps to help mitigate issues that have been identified and have a positive impact on a client’s risk exposure.”
In the case of O’Dorisio, for example, the McGriff consultant visited his job sites numerous times. He also sends O’Dorisio regular emails containing insights on how to mitigate potential risks.
“Today, thanks to McGriff, I know more about insurance than I thought I wanted to,” jokes O’Dorisio, who says he has learned about indemnity clauses and waivers of subrogation, among other things.
How can the business lifecycle affect insurance needs?
Established businesses don’t appear out of thin air, and early-stage businesses don’t become established overnight—they operate in a lifecycle. Quality insurance coverage and advisement reflect that reality.
Early-stage businesses and key person insurance
An early-stage company may decide to purchase key person insurance to guard against losses related to the death of an owner or an important executive at the business. In this type of insurance, the company is the beneficiary, and the payout buys time for the remaining leaders to come up with a plan B—whether that’s finding and training a replacement, paying off debts, or exiting the business altogether.
Other types of insurance that can be important for early-stage businesses include property, equipment, auto, and legal liability coverage. There’s also workers’ compensation, which is required by law.
Growth-stage businesses and employee benefits
When it comes to the recruitment and retention of employees, your insurance isn’t just a risk mitigation tool—it’s also an asset. This is particularly true in the growth and established stages, though HR benefits should be part of the discussion for any company, says Scroggins. “A comprehensive benefits plan—such as one including medical, dental, and vision—not only is important to attract and retain employees, but also can lead to a healthier and more productive workforce. For companies that are growing or established, offering and communicating a benefits package tailored to the needs of your employees can positively impact your business, in both the near- and long-term.”
Established businesses and the total cost of risk
If you have an established business with a large staff, the statistical likelihood you’ll be filing claims increases. So, you’ll want active, ongoing risk mitigation that comes in the form of knowing the total cost of risk (TCOR).
“Facing a significant claim—or many claims at once—can derail a company,” says Scroggins. “However, claims alone are not an accurate indication of a risk program’s effectiveness. TCOR provides a more comprehensive view of your risk program. In addition to claims, it could include risk financing costs, transfer costs, or administrative costs related to risk control. Therefore, at every subsequent stage of the business lifecycle, it’s important to review the business across all risks, including strategic, operational, and financial, not just hazard. As a result, a business can better manage exposures to all risks, while mitigating claims and the total cost of risk.”
Transition businesses and tail coverage
When orchestrating a business transition, it’s tough to satisfy all the stakeholders and family members involved, and any resultant discontent can lead to lawsuits. Claimants may suggest that the directors and officers failed to protect the interests of the company, misrepresented the value of the business, or engaged in criminal activity, for example. Bankruptcy can also trigger such a suit. (It’s typically not ideal to buy a business and have it close soon after.) Claims can also happen around promotions or terminations, such as when one family member gets promoted and others don’t.
Some types of directors and officers (D&O) insurance policies protect the personal assets of the directors and officers and their spouses by covering legal costs and settlements of these types of suits. Other D&O policies protect the corporate assets—if there are claims related to criminal or regulatory problems, for example.
You might want to strongly consider D&O insurance if any of these are present: family disharmony (especially around the business), lack of a clear succession plan, a high risk of bankruptcy, a heavily regulated industry, an employee ownership plan, or previous shareholder-related lawsuits. Your Truist relationship manager can bring in a partner from Truist’s transition advisory group to further discuss how to protect yourself and your legacy.
What emerging risks can impact businesses at any stage?
As the speed of technological advancement increases, recalculating your insurance approach also means keeping processes and risk mitigation strategies ahead of that fast pace. This is especially true when it comes to risk blind spots that are complex and outside your area of industry expertise. One example is digital security or cybersecurity risks.
Depending on your business focus, you might not give too much thought to cyber liability insurance. But with cybercriminals capable of penetrating 93% of company networks, it’s not just industries like finance that are vulnerable.Disclosure 1
“Let’s say your company centers on making products in a factory, but internal processes like accounting and customer sales are digital,” says Scroggins. “Cybersecurity isn’t likely to be your main focus, but if you hold digital data—such as customer information—it absolutely puts you at risk of a breach or cyberattack.”
His advice? Have an expert in this area walk you through how an attack could impact you and help you identify policies and process changes that reduce vulnerability. McGriff uses this information to develop a customized cyber insurance solution for your business that can protect against costs resulting from a cyber incident such as breach responses, business income loss, digital asset recovery, legal liabilities, and regulatory investigations.
Beyond the transaction
Insurance provides security, and security is a function of trust—which is another benefit of working with a team of advisors who stay by your side throughout your business lifecycle, not just until the transaction is complete.
“In the instance of a claim, we obviously can’t guarantee a result. But we will be your advocate from the very beginning and throughout the process, seeking a quick, fair resolution,” says Scroggins. “That sort of relationship might seem above and beyond the sale of any product or service, but the truth is that sort of ongoing advisement and advocacy is where the rubber meets the road in our business—it has to, because what we do is a process built on a relationship.
“At the end of the day, we’re just problem solvers.”