If you are a contractor you are aware of the untold risks your firm faces.
Most brokers would advise you to treat these risks with insurance. When you take the time to deal with insurance you are faced with the questions of what insurance to buy, not buy and how much? In some cases, what insurance to buy is required either by lenders, a law or by the contracts you sign.
The construction industry is the riskiest industry in America, every company faces significant insurable and uninsurable risk that could extinguish already slim margins. IMA’s construction risk register contains 225 different risks and that only scratches the surface. When you think about it, the risk-reward formula for construction firms seems inverted.
Insurance brokers are built to sell you the insurance policies you need and then whatever else they can tack on. Not all brokers are adept enough to design and market those insurance policies they’ve sold specifically to construction firms. Contrary to most insurance brokers, the IMA National Construction Team believes insurance is the last, most reactionary, most expensive and least desirable way to treat those risks. We want to help you mitigate risk with as little insurance, and cost, as possible.
To do this we created the Construction Encompassed Risk Management Framework (CERM) to methodically walk through our client’s business to:
– identify key risks
– create a personalized risk register
– establish a baseline Total Cost of Risk
– assist in streamlining risk administration processes
– develop Key Risk Indicators
– assist in discovering risk tolerance and appetite thresholds
After identifying the key risks, we walk through the combination of the SIX WAYS TO TREAT RISK BEFORE INSURANCE which include:
1. AVOIDANCE
This process identifies which jobs and projects fit the risk tolerance profile and what are go-no go parameters. Avoiding work may seem counterintuitive to some, but given the high cost of risk for contractors, it should be a serious consideration every time.
2. ASSUMPTION
Assuming the level of risk that fits your appetite is key way to turn risk into a competitive advantage. We want to help you consciously identify and understand the risks your company is taking. We refer to contractors who unknowingly assumes risk as “accidental self-insurance.”
3. AWARENESS
Sunlight is the best disinfectant and making people in your company aware of issues goes a long way to naturally modifying employee behavior for the better. IMA’s approach goes beyond surface level awareness, our teams embed themselves with clients to ensure their employees, from top to bottom, understand their personal involvement in risk mitigation.
4. NON-INSURANCE TRANSFER
The ability to subcontract a risk or have a better understanding of the indemnifications you are assuming is a legal way to transfer risks to others or have risk transferred to you. IMA Contract Review group are attorney’s who will work on your behalf to review and help negotiate contracts with the understanding that we are not the tail that wags the dog.
5. MITIGATE FREQUENCY
The cheapest claim is the one you do not have, especially if the consequences of having the claim are out of your direct control like liability claims. The old insurance adage of “frequency leads to severity” holds true.
6. MITIGATE SEVERITY
The severity of some uninsurable losses are felt gradually. In ability to attract and retain qualified workers is an example. IMA has specifically crafted our Total Rewards consulting service with the idea to get better results for the same amount of money or less than you are spending now.
INSURANCE SHOULD BE YOUR LAST RESORT
BY METHODICALLY WALKING THROUGH THE IMA CONSTRUCTION ENCOMPASSED RISK MANAGEMENT PROCESS
we can identify and address risk without the use of insurance or alternative risk financing vehicles (i.e. captives). But when we do utilize insurance or other financing mechanisms, we are in a position to lower the insurance premium and make it better.
