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Demystifying

Business

Insurance

Rose Gundersen, Small Business Liaison

360-902-4865 [email protected]

Washington State Department of Labor & Industries 2

Insurance – why and what?

State agencies involved with insurance

– OIC – regulatory and consumer protection

– Workplace safety

Q&A

Workshop Goals:


Small Business

Liaison Office

You specialize in your business

We specialize in supporting

YOU

www.Lni.wa.gov/SmallBusiness

http://www.lni.wa.gov/main/smallbusiness

Office of the Insurance Commissioner

September 26, 2017 Demystifying Business Insurance 4

• Independently elected Commissioner

• Regulates Washington State’s insurance industry

• Provides consumer protection and assistance

• Investigates frauds/scams

We can help you with questions, information, and complaints about

all types of insurance, such as:

Call our Insurance Consumer Hotline

1-800-562-6900

www.insurance.wa.gov

• Homeowner

• Auto

• Life

• Annuities

• Health

• Medicare and more!


Risk Management

Hedge

Contingent

Uncertain loss

Equitable

Mandated

1st party

3rd party


Must have (not necessarily by law except contractors)

Defense and damages

– Cause or alleged to cause Bodily Injury or Property Damage

– By you, employees, produces/services

General Liability Insurance (GL)


Protects business building and “personal” business property

– Inventory, office equipment, tools

Optional:

– Business interruption/loss of earning insurance

Property Insurance


A packaged (bundled) coverage

– General liability

– Property

– Non-owned auto

– Crime insurance

– Limited data recovery

Optional: cybersecurity, terrorism,

Business Owner’s Policy (BOP)


Commercial auto – if company vehicles

Directors and officers –

– Corporations, LLC

– Non-profits

– Defense and damages re actions on the job (profitability or operations)

Other:


Defense and damages

– Failure to properly render professional services (with special licensing requirements)

– Lawyers, medical providers, accountants, consultants, hair salons

Occurrence vs. Claim date

Professional Liability Insurance

(Errors and Omission)


Disclosure, notice mandate RCW 19.255.010

Types of coverages

– Disclosure, notice

– Remedy and correct breach

– Defense and damages for failure to take reasonable steps to prevent

Data / Cybersecurity Breach

Business Insurance Options Demystifying Business Insurance

Paul DuBois, Compliance Analyst

(360) 725-7098 [email protected]

What to consider before buying business insurance

Factors that affect finding insurance

• Type of business

• Number of years in business

• Claims history

Things to keep in mind when you shop for business insurance

• Before you choose an agent or broker, make sure they’re licensed to sell insurance in Washington State

• All insurance policies include various limits, conditions, exclusions and restrictions

• Some insurance may require a minimum level of premium

• Discuss your business operations with your agent or broker to determine coverage needs.

• Ask if discounts are available for multiple policies



Consider your coverage options

• Property coverage protects:

• Buildings, inventory and equipment where you operate your business

• Liability coverage, if someone gets hurt or property damage occurs

• Business-interruption coverage, if a loss forces you to close your

business



Consider your coverage options (cont’d)

• Commercial auto coverage on the vehicles you use for your business

• Umbrella or excess liability policies that extend your liability

coverage, giving an added layer of protection

• Health insurance for you and any employees

• Life insurance protects you and/or your business operators


Business insurance costs

How are premiums determined

• Your premium is primarily based on your business’s gross receipts and employee payroll estimates reported prior to your policy’s start date

• At the end of the policy period, your insurer may conduct a premium audit of your business records, to verify the accuracy of your policy’s assessed premium.

• Your premium may increase or decrease, depending on how your business’s receipts and payroll records differ from your initial estimates.

• Tip: If your business experiences growth over the course of the policy year, update your receipt and payroll data with your agent to prevent significant adjustments to your premium at the end of the year.

Additional ways to lower your premium:

• Adjust certain provisions of your policy, such as increasing your deductible.

• Improving the security and safety features of your business


Insurance and your home business

• If you run a business out of your home, you might be uninsured and

not realize it.

• Don’t wait until you have a loss to find out if you're covered. Discuss

your situation with your agent or broker.

• Many insurance companies that offer homeowner coverage may also

offer a rider or extension of your homeowner policy. This broadens

your coverage to include your home-based business.



Types of coverage to consider

• Business-related personal property coverage (covers computers, furniture, etc.)

• Inventory

• Off-premises coverage for business-related personal property located somewhere else

• Business property of others

• Accounts receivable (up to a specified limit)

• Liability coverage, which may include personal injury, products and completed operations, incidental contractual liability, and general commercial liability

• Electronic data-processing coverage

• Valuable papers provides coverage for your business records and other essential information

• Business interruption

• Extra expenses



When to consider buying commercial insurance for your business

• If you employ full-time workers or you generate a sizeable income, you may want to buy a commercial policy for more complete protection. Commercial policies are separate from your homeowner policy.

• Your insurance agent or broker can help you decide your coverage needs and what coverage is available to you.

Where to go if you can't find coverage

• If your agent or broker can't find other coverage, they can get you an insurance quote through the Washington FAIR (Fair Access to Insurance Requirements) Plan (www.wafairplan.com). It provides basic property coverage up to $1.5 million for people who can't get coverage.


Other types of insurance for your business

Health insurance

• If you have a small business (1-50 employees), you’re not required to offer your employees health insurance. But if you do, you may qualify for tax credits.

• There are a few options for where you can buy a health plan: • Small employer market – you can buy directly from an insurance company

or an agent or broker

• Association health plans – coverage available if your business is a member of an association

• Don’t buy a health plan – you can decide not to buy group health insurance and let employees buy their own individual health plans


Other types of insurance for your business

Flood Insurance

• Commercial or business insurance typically doesn’t cover flood damage.

• You can buy coverage from an insurance agent and company through FEMA’s National Flood Insurance Program (NFIP)

• Coverage Limits: • $500,000 for the structure

• $500,000 for the contents

Where to find more coverage

• Talk to your insurance agent or broker. You may need to buy it through surplus line. This is a segment of insurance we don't regulate, so make sure you know what the policy does and doesn't cover.

• If your agent or broker doesn't handle surplus line coverage, you can get a list of brokerage firms from the Surplus Lines Association of Washington (www.surpluslines.org).


Coverage for Marijuana businesses

If you’re operating a licensed marijuana business, you are required to buy insurance to protect your business from potential losses.

Who may need to buy marijuana business-related insurance

• Marijuana retail stores

• Marijuana producers

• Marijuana processors

• Landlords who rent to marijuana business owners

Your coverage must include:

• Commercial general liability coverage

• An insurance carrier rating of an A-Class VII or better – The insurer must have good financial stability, claims service and customer satisfaction ratings.

• Additional insured – This means you must add the state and its employees, agents, and volunteers to your policy as an additional insured to protect them in the event your business is negligent.


Coverage for Marijuana businesses

What isn’t covered

• Your business liability and property coverage may cover some interests, yet exclude marijuana products due to the conflict between federal and state laws.

• If your business is located in your home, be aware there could be exclusions under your homeowner insurance policy for running a marijuana-related business.

Where to find coverage

Although the sale of marijuana is legal in Washington state, some insurers may not want to offer you insurance coverage because the federal government considers it an illegal substance. Coverage may only be available from surplus line insurance companies.



History & Purpose

Rate Setting

Payments

Common errors

Claims

Control rates

Workers’ Compensation

(Industrial Insurance)



A Brief History….. Economic Boom (1890 & 1910)

Lumber employs 75% workers

in WA

Frequent injuries followed by

lawsuits

1910 Governor Marion Hay –

Business & Labor collaborated

1911- Industrial Insurance

established



KEY benefits…..

For injured workers

‒ Medical treatment

‒ Wage replacement

For employers

‒ Pay premium; not actual claim

cost

‒ Liability protection: no fault


Video: Rate Setting 101

http://youtu.be/v5yTbYavh-A

Approximately 6 minutes






Your L&I account manager determines your

risk class

Framing $5.5511 RS: 0510

Clerical $0.1441 RS: 4904

Logging $18.1767 RS: 5001

Auto Repair $1.5384 RS: 3412


What determines your rate?

Experience Factor

Like car insurance driving

records

Your Rate =

Risk Class X

Experience Factor X

Hours reported


Liabilities may include:

‒past due taxes (premiums)

‒high experience rate

When purchase includes:

‒some assets,

‒equipment,

‒customer list or

‒business location

Buy/Merge existing business

Best practice: review injury & premium history


PLAN GROW Buy/Merge existing business

(cont’) CLOSE

Tale of Two Roofing Businesses

Risk Class Rate

Experience Rate

10 FTE Hours

Annual Premium

7.6753 1 19,200 $ 147,366

7.6753 1.5 19,200 $ 221,049

Extra Premium $ 73,683

Extra cost: lose customers


Workplace Safety Builds Business Equity

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