Year-end insurance planning: review for strategic risk management.

• Author: Evans, Eliza
• Position: INSURANCE ESSENTIALS

For many small business owners, today's economy can be overwhelming. It's unpredictable, volatile, and filled with ever-changing challenges and complexities. It can feel like the risks associated with small business are higher than ever. But these risks can be mitigated through strategic risk management planning that includes business insurance.

The State of Alaska requires small businesses--with some exceptions--to carry business insurance. The intent of business insurance is to protect investments from financial risks. Business insurance should be enough to cover a business from losses and ensure it can remain solvent and keep the doors open even in the face of unexpected circumstances such as lawsuit, death, or natural disaster. While some insurance types are required, others require common sense; insurance coverage exists for every conceivable risk. It's up to business owners to determine what coverage is appropriate for their business. It's also up to business owners to review their insurance coverage on a regular basis to ensure it is appropriate in the ever-changing world of small business in America today.

Risk Management Review

The purchase of coverage is not where risk management ends, however. According to Christopher S. Pobieglo, president of Business Insurance Associates Inc., "Ultimately, though, you have to really broaden it to a risk management systems review and strategic analysis. It would be a mistake to purchase insurance and think you are covered and do nothing else to identify, analyze, and form strategies to manage organizational and operational risk."

Conducting insurance reviews on a regular basis is an essential step in mitigating risk. At a minimum, according to the United States Small Business Administration, small businesses should assess their insurance coverage annually. As well as an annual review, many insurance agents recommend reviews throughout the year.

"Industry best practices generally recommend reviewing insurance policies with your broker on an individual basis approximately ninety days prior to renewal/expiration of current policies," Pobieglo says.

The purpose of an insurance review is to ensure that the information business owners are using to underwrite risks is current and accurate, and that coverage is--at a minimum--adequate to the needs of the business. Pobieglo stresses that insurance review should be completed as part of an organization's strategic risk management plan, making certain the...