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Picking Up the Insurance Tab

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Your broker will help you determine your insurance needs, go out to market, and obtain competitive quotes. She’ll guide you through the buying process, price negotiations and policy terms. She might even take you out to a nice lunch and introduce you to the key players at your carrier. There’s no debating it – your broker is a great help when you’re purchasing insurance.

But the one thing your broker won’t help you with is paying your insurance bill. For that, you’ll need a budget.

Preparing an insurance budget is a lot like splitting the tab after an expensive meal. You’re pretty sure that everyone sitting at the table should pay something, but how much? Should the bill be divided evenly? Should each person pay according to what he ordered? Should you skip all the awkwardness and just pay the thing yourself?

The answer, or course, depends on your company’s structure and costs.

Chances are, you’ve purchased multiple lines of coverage, and your broker or insurers have billed you for each.

Furthermore, unless you’re running full speed ahead with a full guaranteed-cost program, you have claim expenses as well. For each line of coverage, then, you need to somehow allocate the costs of claims and premium among all your dinner guests, even the one who somehow always manages to make it to the restroom just as the bill is coming out.

Normally, at a restaurant, the bill is split up after the waiter drops it off. But when making an insurance budget, many items need to be forecasted. Future premiums are best estimated by your broker, using either her expectations for your own policies or general market trends. Future claim costs, on the other hand, can be estimated based on past activity and an adjustment for inflation or growth. In most cases, it’s better to slightly overestimate than underestimate.

Once your forecasting is complete, the next thing you should determine is just who should be at the table. Should your bill be divided by operating companies, divisions, brands, cost centers, locations, groups or in some other manner? Can you provide a general allocation that will further be subdivided by each participant, or will you need to get to a more granular level of detail? Figuring out the best way to do this may be more work than just doing it “however it was done last year,” but in the long run, it will save you time and aggravation.

Once you’ve settled on just who is going to pay for the bill, you’ve got to determine how much each should pay. For most companies, insurance is a significant expense, and you must be prepared to answer questions from disgruntled division heads about their charges.

Your initial temptation may be to divide costs based on headcount, and for many lines of coverage this is both simple and practical. If one division comprises 20% of the company’s employees, that division is charged 20% of the cost. But allocating all your costs on this principle runs into a couple of pitfalls. First, your insurance utilization may not agree with your headcounts. For example, a division without a single car will be charged a portion of the automobile liability premium. Second, this does not reward divisions that have better loss experience.

Premium costs are best charged to the division that actually generates the premium. In the breakdown of each premium bill, you should be able to see how the premium was calculated. In all likelihood, your workers compensation charges are based on your payroll; your auto may be based on vehicles or listed drivers; product liability may be based on sales; property may be based on building values. This methodology better matches the costs of insurance to the divisions that benefit from it.

For insurance premiums billed at a flat rate – well, pick a methodology, be it sales, headcount or something else – and stick with it as long as it makes sense.

If there’s enough data to support it, claim costs may be best distributed based on loss history. This both assigns the costs to the divisions that are creating the risk and creates accountability. A particularly troublesome division may grumble about this, but the explanation is an easy and effective one: tell them to reduce their claims. For lines of coverage without sufficient loss history, claims costs may best be distributed in the same manner as premium.

Making your insurance budget doesn’t need to be a highly-choreographed version of the check dance. Pick the bill up, tell each person what he owes, and be prepared to explain why. And when one of your guests starts complaining about his portion, remind him that if wants to order the triple-chocolate almond crème brulee, he has to pay for it, too.

The ABCs of Ultimate Bridge Building

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Photo courtesy of the California Department of Transportation

A trend in bridge replacement is in full swing in the Hudson Valley, New York. The second bridge, being installed on eastbound Interstate 84, will be completed over the course of just a few days. This keeps motorists happy, lowers the auto accident rate and creates a safer environment for bridge workers.

It will only take about a day to slide a pre-constructed bridge into place. This is an amazing feat, especially considering that a bridge that was recently replaced where I live required the town’s main road to be closed for about two years. Traffic had to be rerouted onto several convoluted routes.

Early Saturday morning a portion of I-84 will be closed and it will take crews about 18 hours to remove the old bridge and simply slip the new one into place. That portion of the highway will be closed for five days.

The first bridge replacement, for westbound traffic, took place in September. the process, called “accelerated bridge construction” (ABC), has been used internationally and in a number of U.S. states to minimize the length of time a highway is out of commission and to lower the risk of injury to workers.

A project like this is the ultimate in planning. ABC has been promoted by the Federal Highway Administration (FHWA), which issued a report with the California Department of Transportation (Caltrans) and several other entities.

According to the report, there are many advantages to ABC:

“Proven benefits include minimized traffic disruption, improved work zone safety, and reduced on-site environmental impacts. Related traffic impacts derive from both expedited congestion relief projects and minimized traffic disruption due to reduced on-site highway construction activities. Safety enhancements benefiting the motoring public and highway workers, as well as lessened environmental impacts are directly attributable to limiting in-situation work requirements. For these reasons, European and Asian countries have already embraced the ABC philosophy for many of their urban construction projects.”

The FHWA explains that structural components of a bridge—prefabricated bridge elements and systems (PBES)—are built offsite, or near the site of the bridge to be replaced. The components include features that drastically reduce the length of time for onsite construction for new bridges or rehabilitated or replacement bridges. The components are built away from traffic areas, transported to the site and quickly installed.

Photo courtesy of the Federal Highway Administration

 

The Cost of Intellectual Property Theft

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Intellectual property is the lifeblood of any organization. It is what distinguishes one company from another and is the main reason customers buy the products and services that they do. This is why IP theft is so important and can have such an impact on individual businesses and the economy as a whole. In fact, reportedly, IP theft costs the U.S. economy more than $300 billion every year. The infographic below, created by software provider i-Sight, takes an interesting look at the scope of the problem and the efforts to prevent it.

For more on the topic, be sure to check out our special section on IP risks in the latest issue of Risk Management magazine.

Copy(right) Cats: How Intellectual Property Theft Affects Everyone, Including You [INFOGRAPHIC]

 

Copy(right) Cats: How Intellectual Property Theft Affects Everyone, Including You from i-Sight

Online Exclusive: How to Protect Yourself on Social Media

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Add Friend on Social Media

In the October issue of Risk Management, social media and eDiscovery expert Adam Cohen chatted with me about the biggest corporate risks in sites like Facebook and Twitter, and outlined some best practices for developing and enforcing a social media policy. But behind every account sits one major risk that’s hard to control: a person.

Not all of Cohen’s advice could make the magazine, so here are some of his extra tips for how to mitigate the risks of personal social media – both to protect your company and to protect yourself.

What should employees know about their personal social media accounts?

All employees need to recognize one thing: they shouldn’t have any expectation of privacy in information that they post on social media. Even if they think they’re limiting information to a select group of friends, this stuff can all be disclosed in litigation and there are many cases where courts have required so-called non-public social media information to be disclosed. It’s fairly routine at this point.

Many employers – certainly all the major companies – have specific social media policies that give very particular and clear direction to employees on what they can and can’t do when it comes to company information on social media. That extends beyond just corporate social media and includes anything they’re doing on social media that could impact the company. And many employers are going to take the position that they have the right to monitor employees’ social media.

How can employees protect themselves?

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One of the key things employees need to do to protect themselves is only disclose information they would be comfortable disclosing to the entire world and they should not to go anywhere near business information. Being safe on this front may include publishing a disclaimer that an individual is not representing the views of the company. What else can they do? Follow the employer’s social media policy to the letter and, any time they have a question about whether one of their social media posts may be affected by the policy, they should ask. Most policies will provide a resource for questions, whether it’s a general counsel or a compliance officer or immediate supervisor.

Those are probably the main things: not having an expectation of privacy on social media and treating everything you post like it’s private, and following the policy to the letter and getting clarity and permission on anything that you think could be a violation of the policy.

As we’ve used social media more, do you think employees are using social media any more wisely?

I think it’s still too early to say that there are any improvements there. Litigation that involves social media as a factor in one form or another is just exploding. There is no information that would suggest in any way that employees have increasing awareness of this and are taking that into account when they go on social media.

What is the first thing you look for when trying to evaluate a social media account for potential liability or wrongdoing by an employee?

The first thing I would look for is the nexus between the social media and business information. Personal social media may be a concern from the perspective of the employee being seen as representing the company, even if it’s just sullying the reputation of the company – and that’s especially true the higher-ranking the employee is – but the first thing to look for is whether the employee discussing matters within the scope of their employment. And that’s difficult to monitor – the social media world is a big world, especially for a company with a lot of employees.

So then general personal misuse is relatively benign to you?

The other stuff is not benign at all. An employee who behaves in an inappropriate way on social media or is violating intellectual property rights, copyright or trademark of some other company – or, say, badmouthing a competitor – well, that’s not benign. If they’re engaged in criminal activity on social media or they’re defaming someone, that’s certainly not benign because they work for a company and that can impact the image of the company or lead to serious repercussions. That only gets more serious if you’re a prominent or higher-ranking executive.

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Is it benign? No, but you can’t control that.

Although, I should note, the National Labor Relations Board has said that employees have to be permitted to discuss their working conditions with other employees and that the employer can’t really control that, and if the social media policy purports to prohibit that discussion, the policy is not valid.

What is the most useful evidence in building a case against an employee?

Well, it depends on the kind of case, but social media has now been used as evidence in hundreds of cases. The most devastating use of it so far has probably been in the personal injury arena.

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Plaintiffs have made claims of disability and emotional distress and the defendant has been able to obtain discovery or has retrieved public social media that completely contradicts those claims – for example, a video of the complainant surfing. There are a lot of cases like that and that’s just an example of really devastating use of social media.

Who do you friend at work?

Well, you don’t friend subordinates – that’s a no-no. You can get yourself into all kinds of trouble there with people making claims about what kind of a relationship you have with them. You don’t friend people at work whom you don’t know – just as you don’t in your personal life. You shouldn’t assume that, just because this person works with you, they’re the kind of person with whom you want to be associated. You also don’t want to friend somebody who you don’t want to have access to your social media. If you have privacy concerns, you want to maintain the upper limits of your reasonable expectation of privacy, so don’t friend people you’re afraid might use that access against you in an invasion of privacy.