electrical manufacturers and wholesalers
TRANSCRIPT
Electrical Manufacturers and Wholesalers: Controlling Costs and Protecting Your Business From Disruptions
May 2013 • Lockton Companies
L O C K T O N C O M P A N I E S
TODD STOVERProducer
Electrical manufacturers and wholesalers face an array of
business challenges. Among the most pressing that we
have identified are commodity price volatility and hidden
enterprise disruption risks that lurk for your business.
In working with manufacturers and wholesalers, Lockton
has developed approaches to help deal with these
challenges. This white paper outlines the challenges and
some practical ways to deal with them. For example,
commodity price volatility has a knock-on effect in your
insurance costs that many firms do not realize.
Controlling Your Insurance Costs—The Commodity Price Volatility Effect
Electrical manufacturers and wholesalers have experienced tremendous volatility in top-line revenue as a direct result of commodity prices. In the past year alone, copper prices have fluctuated between $3.30 and $3.90 per pound. During the past five years, copper has hit a low of $1.40 and a reached high of $4.50.
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One of the key elements of your insurance program is your general liability policy. But many insurers tie the premiums for your policy to your top-line revenue. What does that mean for you and your business? It means you have a knock-on volatility with your insurance premiums, even if your employee count and sales volume remains neutral.
For our electrical manufacturing and wholesale clients, we conduct an audit of your insurance program to make sure your program is tied to payroll,
not revenue. For example, we recently conducted a review and found a 10 percent cost savings on the general liability policy simply by making this change.
Protecting Against Enterprise Disruptions
With insurance underwriters and corporations focusing primarily on standard property and casualty insurance, contingent disruption risks can easily go uncovered.
Those who consider contingent disruptions traditionally only focus on damage to property or inventory resulting from a physical loss such as fire, flood or windstorm. In today’s global economy, it is very important to consider exposure to nonphysical perils which can result in significant business interruption and additional expense.
Examples of Nonphysical Contingent Risks
Loss of Intellectual Property Rights
Intellectual property insurance protects companies for trademark or patent infringement as well as copyright claims arising out of the company’s operation. It will pay defense and any judgement up to policy limits. This coverage is often bundled with technology error and omissions, but can also be purchased on a stand-alone basis.
Political and Credit Risks
Political risk insurance covers operations that suffer a loss as a direct result of political conditions. Examples are political violence, revolution, governmental expropriation or confiscation, and wrongful calling of letters of credit. Credit risk insurance protects accounts receivable from loss due to default, insolvency or bankruptcy.
FIVE-YEAR COPPER SPOT
May 2013 • Lockton Companies
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IT Network Disruption or Suspension Due to Human Error or Cyber Attack
Cyber insurance is one of the fastest growing lines of commercial insurance. It addresses first- and third-party risks associated with networks and informational assets. A sample of risks include privacy issues, intellectual property infringement, loss of personally identifiable information from computer hacking and disruption of network services.
Finished Product That Does not Meet Specifications and Has to Be Removed
This can be a very expensive claim with a majority of the cost embedded in the labor to remove and replace the specified product.
A Negative Media Report Affecting Your Company and/or Executives
A negative media report can damage the reputation of your company. A business contingency plan is very important and insurance can offset the cost of public relations.
Elements of Physical Loss Affecting Goods in Transit
A properly structured inland marine policy is essential. An analysis of your stock throughput and inland marine policy will determine existing coverage gaps.
Marine/Blockage Risks
If your company is unable to receive product due to a marine blockage issue, a continuity plan will quickly get your supply chain back on line.
Your business may not require a program to protect against each of these risks. But conducting a thorough risk review allows you to understand these hidden risks and prepare your business to prevent a business-crippling event.
Lockton has extensive global experience with disruption contingency insurance and our programs offer an insurance solution to protect your balance sheet.
Dealing With Unique Risks
Electrical manufacturers and wholesalers face a unique set of risks. The volatile dynamics of commodity pricing and the challenges of operating in a global environment have made those risks even more challenging in the past few years. Your business will benefit from a thorough review of your risks and your existing risk management and insurance structure. It will ensure that you are getting the protection you bargained for.
Contact your Lockton representative for a
complimentary insurance program evaluation.
Conducting a thorough risk review allows you to
understand hidden risks and prepare your business
Our Mission
To be the worldwide value and service leader in insurance brokerage, employee benefits, and risk management
Our Goal
To be the best place to do business and to work
www.lockton.com
© 2013 Lockton, Inc. All rights reserved. Images © 2013 Thinkstock. All rights reserved.