When Premium Goes Up, Bring Other Costs of Risk Down

Soften rate hike discussions with loss prevention tips

Telling clients about rate hikes is always difficult, but when you need to do it for the third or fourth year in a row, it gets even tougher. And, if you have to deliver this news to clients who have been financially impacted by COVID-19, the task is much grimmer.

One strategy for these discussions is to explain ways to keep other costs of risk down. While clients may not be able to control insurance premium rates or effects of COVID-19, they can take steps to prevent loss, thereby avoiding further financial detriment, such as lost market share due to business interruption and reputation damage.

Human element solutions

While some loss prevention measures come with hefty price tags, others have minimal costs associated with them. Here are five human element solutions to mitigate clients’ exposures:

  • Fire Protection Impairment Management: If a sprinkler valve is closed for a build-out or renovation, the building, or a portion of it, essentially becomes unsprinklered for the duration of the project. Use the FM Global Red Tag Permit System to help manage impairments while bringing the area back to a sprinklered state as quickly as possible and taking extra care to prevent a fire while the system is out of service. To report an impairment, visit redetag.fmglobal.com
  • Hot Work Management: Hot work is any temporary operation involving open flames or producing heat and/or sparks, which introduces an ignition source into the client's facility. If hot work is taking place, proper management protocols should be followed to limit the potential for that ignition source to come in contact with a fuel; to ensure fire protection is ready to respond if a fire does occur; and to have a fire watch to notice any spark that may be smoldering after hot work is completed. 
  • Fire Sprinkler Valve Inspections: Visually inspect each sprinkler control valve once a week to ensure the valve is fully open and locked, or within a secure room. Outdoor valves and backflow preventer valves should also be inspected weekly.
  • Water Shutoff Valve Labeling: Know where all water shutoffs are located, note them in a domestic water emergency response plan (DWERP), and ensure valves are operable. Should clients have a broken pipe or water leak, knowing where to quickly find shutoff valves will help limit the amount of water damage. 
  • Emergency Response Plans: Establish and update emergency response plans annually not just for domestic water, but also for a variety of perils, such as flood. These plans should identify the gas shutoff valves and water shutoff valves (in case there are leaks); a method of securing the building to prevent looting; a list of contractors to help restore operations; data backup plans; and an alternate location to establish operations. 

Long-term resilience

No one knows how long the current hard market will persist, so investing in long-term loss prevention might be the best strategy for many clients. Human element solutions are quick and easy tactics, but clients who invest in risk improvement have the best chance at business resilience, no matter what the future holds.

For more information or to order red tags, hot work permits and shutoff valve tags, visit the FM Global Resource Catalog, or speak to your AFM account engineer.