Insurance Credit Repair?

By Rob Schild

If you ask the average business owner about their personal credit, most would tell you pretty quickly where they stand. When you ask them about their business credit, they will just as quickly cite Dun & Bradstreet or Experian Business Credit. But ask those same business owners about their ‘Insurance Credit’ and most wouldn’t be able to tell you. Insurance credit is very similar to consumer credit.

What is consumer credit? The simple answer is being able to acquire goods or services from a supplier based on the expectation that the same will be paid for in the future as agreed.

Some consumers are very good about paying their creditors as agreed and others are not. The conscientious and responsible consumers are awarded a credit score the represents how well they met the expectations of their creditors. The reward for their diligent efforts is represented by lower interest rates, better terms, and more favorable conditions on future credit purchases.

In the real world, you don’t get a trophy for just showing up. In other words, why should a creditor offer the same rates, terms, and conditions to consumers who aren’t responsible or weren’t willing to make the necessary sacrifices to meet their obligations? These consumers pay higher interest rates.

What is Insurance? Basically insurance is a product that compensates for a loss, damage, illness, injury, or death as a result of an accident or covered event.

Most people will agree that an accident is just that, ‘an unforeseen event or condition’ resulting in a loss or injury. When a known condition exists that results in an accident, it was not an accident – it was an inevitability.

It would be difficult to describe an injury that occurred as a result of failing to maintain or repair equipment as an accident. Insurance carriers simply consider claims such as this a failure on the insureds part to meet their obligations.

What is Insurance Credit? Insurance credit is the expectation of the insurance carrier that the insured will make every effort to avoid or correct conditions that would inevitability result in a loss.

Like consumer creditors, insurance carriers consider many factors when determining whether or not to offer coverage to an applicant. For instance, one factor a consumer creditor will consider when reviewing a loan application is how well the applicant has met their past obligations to repay their debts as agreed.

Similarly, an insurance carrier will consider how well an applicant has avoided or corrected conditions that would have inevitably resulted in a loss. This measurement is referred to as an Experience Rating. Basically, the Experience Rating (ERM) is a business’s Insurance Credit Score. Your MOD!

The Experience Rating (ERM) ‘modifies’ the final premium a consumer pays just like a Credit Score modifies the final price paid for products or services purchased on credit. A company with a low ERM will pay less in final premiums as compared to a company with a high ERM.

What are ‘best practices’? Remember hearing your mom say, ‘tie your laces, you’re going to trip and fall’? Who is more likely to trip and fall, the child that doesn’t tie their shoes or the child that does?

Responsible consumers make every effort to manage their credit. These efforts include paying on time, not utilizing more than 50% of limit, managing the number of inquiries, and so on. These efforts could be referred to as ‘Best Practices’.

‘Best Practices’ is simply a term used to describe the prudent steps or actions that would be taken to achieve a desired result. An example of a Best Practice in business might be the consistent use of an application for employment. Another Best Practice might be to have the job application reviewed by a Labor Law Attorney at least every 5 years to make sure that it remains current with state and federal guidelines. Using up-to-date applications can help reduce claims costs involving EEOC or EPLI related suits; at the very least, the resulting claims costs won’t be increased due to a company’s failure to utilize or keep their applications current.

Imagine all the other Best Practices a company could use to reduce its exposure to a loss? If your company is conscientiously employing Best Practices, the result should be lower premiums as compared to companies that don’t ‘tie their laces’.

However, these results are not going to happen by accident. They happen as a result of hard work. And Insurance carriers recognize the companies that employ Best Practices and refer to those companies as ‘Best-In-Class’.

Insurance Credit Repair? The methodical steps taken to identify operational weaknesses or deficiencies and applying corrective actions to reduce exposure to loss.

Those companies considered ‘Best-In-Class’ receive the best rates, terms, and conditions from the insurance carriers in the same way that consumers with high credit scores receive the lowest interest rates, terms, and conditions from creditors and suppliers.

This is where our RiskScore® comes to play.

RiskScore® is a tool used to evaluate a company’s Best Practices. The company’s operations are methodically evaluated, Best Practices are validated, deficiencies are paired with corrective actions and improvements are implemented, results are communicated to the insurance carrier and competitive premiums are advocated on the company’s behalf. Repaired!

Is that all?

No! Employing Best Practices is just the beginning. Accidents are still going to happen and when they do, claims will still be filed. There are techniques that you can use to reduce the claims costs and the subsequent indirect costs that will adversely affect your profit margin. A good risk manager can help your company implement accident investigation procedures and claims handling best practices to achieve optimal claims resolutions. Profit margins increased!

Insurance is much more than an annual transaction. Regardless of where you stand now, the first thing you should do is identify an experienced ‘Advocate’. This person will help you become ‘Best in Class’ and tell your story well.