Insurance is a necessary business expense. Why? Because being a landscape contractor or lawn care operator can be a risky business. Just in the ordinary course of operations, you can easily identify sources of potential trouble – equipment misuse, spills, personnel nightmares, theft, regulatory infractions – you name it.
Even on the business side of things, each area poses its own types of hazards, from paperwork mismanagement to third party liability.
For this reason, insurance is a necessity, but as rising costs continue to become a challenge for small business owners to manage, landscape professionals must understand the current statistics as well as explore their options for cutting their insurance costs.
| HOW TO MANAGE RISK |
Mention “risk,” and the first thought that comes to mind might be gaming in Las Vegas or playing the stock market. But risk is something we face each day. Because we never really do know what tomorrow might bring: from lightening strikes to trips and falls, from accidents to floods, in the office or at a jobsite. Managing everyday job risks is not always easy. It means that every member of your employment team must bring his or her own level of risk management to the table. And it’s your job to make that very clear to your entire staff – through example, posted procedures and, most important of all, a continuous training cycle. An excellent way to approach handling risk is to imagine that you’re NOT protected by insurance – and then do what you think will help minimize the risks that put you in the most jeopardy. Because insurance is no cure-all. It’s designed to protect you from financial disaster, not be a safety net for everyday mishaps that commonsense precautions – and training – could help avoid. And yet your people have to drive, come to work, handle equipment, use strong chemicals, deal with customers, pets and property. That means you must examine your operation carefully, identifying anything that could cause damage, injury or loss; evaluating their potential to do you harm; and taking the appropriate steps to control any possible damage. Remember, troubles can arise from considerations of property, general liability, product liability, business interruptions, disasters, workers’ compensation or the use of motor vehicles. Review your insurance protection, look at loss control as if it were an operating issue, assign responsibility for controlling hazards on the job (or do it yourself). And don’t forget to involve your employees; they are sure to have good ideas about how to protect your business. Managing risk is more than putting up job safety posters. Because it touches every aspect of all your operations, you should: |
SMALL BUSINESS & HEALTH CARE. The percentage of businesses offering health insurance to their workers has declined steadily over the last five years, as the cost of providing coverage continues to outpace inflation and wage growth. That’s according to a recent survey by the Kaiser Family Foundation’s prestigious Health Research and Education Trust.
The survey found that only three in five firms offered coverage to workers in 2005, down significantly from 69 percent in 2000. The drop stems almost entirely from fewer small businesses (200 workers or less) offering health benefits. “It is low-wage workers who are being hurt the most by the steady drip, drip, drip of coverage draining out of the employer-based health insurance system,” according to Kaiser Family Foundation President and CEO Drew E. Altman, Ph.D.
According to the U.S. Chamber of Commerce, more than 45 million Americans are uninsured, with nearly 60 percent of those employed by small businesses. To make health care more affordable and accessible for small businesses, the Chamber promotes passage of legislation that would create federally regulated small business health plans, also known as association health plans (AHPs). Allowing small businesses to arrange their health benefits through associations can make coverage more affordable by spreading risk among a much larger group, strengthening negotiating power with plans and providers, offering insurance across state lines and reducing administrative costs.
| FIGHTING INSURANCE FRAUD |
Adding to already rising costs, health-insurance fraud schemes are running rampant in the United States. They account for $1 out of every $10 spent on health care, amounting to billions in Medicare expenses alone. According to an article in the Journal of the American Medical Association, nearly one in three physicians said it’s necessary to play games with the health-care system to provide high quality medical care. In the past year, approximately one in 10 medical professionals reported medical signs or symptoms a patient didn’t have to help secure coverage for needed treatment or services. Some consumers aren’t blame-free. According to a survey by consulting firm Accenture Ltd., nearly one of four Americans believes it’s acceptable to defraud insurers. This even normally honest people sometimes do by padding legitimate claims, say, or intentionally understating the number of miles they drive each day. As for businesses, experts say owners often list fewer employees or misrepresent the work they do to get a lower premium. Workers’ compensation, health care, auto insurance – some lines of the insurance business are more vulnerable to fraud than others. But the good guys are fighting back. Equipped with anti-fraud technology, internal investigation units and fraud hot lines, many insurers are joining forces with local and federal law enforcement agencies, state insurance fraud bureaus, insurance commissioners and others to help stop the scams. |
Currently, Sen. Mike Enzi (R-Wyo.) chairman of the Senate Health Education, Labor and Pensions Committee is offering the Health Insurance Marketplace Modernization and Affordability Act. Similar measures have passed the U.S. House of Representatives a half dozen times before – but come up short each time in the Senate. In a positive note, the bill has gained the support of the National Association of Health Underwriters.
Another new wrinkle is the health savings account (HSA), designed to put consumers in charge of health care decision-making while curbing rising health care costs.
Folks with a regular health insurance plan or who are on Medicare don’t qualify for a health savings account. But for those who do qualify, both employees and employers can contribute. This year, the limits on contributions, which are tax deductible, are $2,700 per individual and $5,450 per family. The money grows and can be withdrawn tax free, and may be spent on qualified expenses such as drugs and checkups. There is one catch – to get an HSA, you must also buy catastrophic health insurance with a high deductible – about $2,000 for family coverage.
From the employer’s point of view, HSAs are generating savings on payroll taxes for companies that adopt them that mirror gains made in the shift to 401(k)s. On the other hand, while HSAs offer employees greater flexibility, they could hasten a shift of health care costs from companies to employees, increasing their financial burden and risk.
CUT YOUR PREMIUMS. Since insurance premiums are a part of all of our budgets, here are some ways to cut the cost of that line item.
Increase Deductibles. You can save money by increasing your deductible: Going from a $500 to a $1,000 deductible per general liability claim, for example, could save you hundreds in premium dollars each year. Raising auto or home insurance deductibles can save you from 15 to 30 percent, according to the Insurance Information Institute (III). And, with increased deductibles, some insurers have been willing to hold the line on their ever-rising health care premiums.
Reduce Limits. Similarly, reducing the amount of your coverage will also cut your premium. Go from a $1 million to a $500,000 general liability limit, and savings could range from a couple to a few hundred dollars. On older cars in your fleet, consider dropping collision and/or comprehensive coverage which, the III says, may not be cost-effective to continue on cars worth less than 10 times what you would pay for the coverage.
Share Costs or Self-Insure. Raising deductibles and reducing or eliminating certain coverages are really examples of self-insuring; you take on the risk, you save money. Many companies these days, large and small, are also sharing insurance costs – especially in health care – by raising employee annual contributions to individual programs and/or by increasing their per-visit co-payments.
Audits. Most general liability policies permit insurers to audit their books to see whether, based on their company receipts and/or payroll, they’ve paid too little in premiums. If you’ve done significantly less business than usual, you can request an audit and perhaps qualify for a refund.
More Rigorous Employee Screening. Technical advances have reduced the costs of background checks, making it cheaper to check somebody’s record beforehand rather than to fire them later – not to mention the lost time, payroll expense and management attention involved. Drug testing, motor vehicle record reviews, checking references – all can also save you money in the long run.
Garage Locations. Auto insurance rates vary depending on where you house your vehicles. Since each vehicle in a fleet is rated individually, make sure your policy accurately reflects where each one is garaged.
Review Loss Runs Annually. Take a moment to look back at your insurance loss record over the past 12 months. Try to figure what you might have been doing wrong. Making corrections now can help limit future losses.
Comparison Shop. Prices vary from company to company, so comparison shopping can sometimes pay off. Ask your broker, approach various companies directly, or access information on the Internet. Your state insurance department may also provide comparisons of prices charged by major insurers. Or the state authority that regulates your industry may keep a list of insurers who specialize in your field.
Another tip: Many companies offer discounts for placing multiple lines of coverage through them. Other things to consider: The expertise of your agent, what you’ll pay compared with the actual coverage you’ll receive (the value), the insurer’s industry rating and their claims service track record. Always ask around.
The author is president, Weisburger Insurance Brokerage, White Plains, N.Y. He can be reached at 800/431-2794, ext. 224, info@weisburger.com or via www.weisburger.com.
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