Insurance Program Audit

The objective is to evaluate identified risk of the insurance buyer against the technical content and quality of their current insurance program. The disparity is often appalling. Some common examples are listed below.

1.	A significant percentage of property is often omitted from insurance schedules. The omitted property is often multiple locations and may be millions of dollars in value.

2.	Contractual obligations are frequently overlooked. Compliance with property lease requirements are a common omission.

3.	The interest of different owners is not addressed.

4.	Opportunities to reduce premiums are overlooked.

5.	Insurance requirements in loan agreements are handled poorly.

6.	Many small business package programs omit important coverage elements.

7.	The interest of the individual business owner is not properly addressed in the insurance program, or integrated with the owners personal account.

Let me provide an example:

A diamond dealer in a major city owned a three story restored historical building in prime retail space. The owners had real concern about a large fire in the historical area that could engulf their building but had never thought about the cost of site clearance. The building had been appraised and insured for the full cost to replace, but their program had $5,000 coverage for debris removal. The estimates of the cost to clear the site of debris approached $500,000.

The retail sales area was on the first floor. The firm had an elaborate security system with guards in the retail area and access to the office areas. In 1993 the firm had well over $12,000,000 in diamonds in several safes on the top floor. During store hours all of the safes were open to provide retail employees access to the inventory. I asked how much an employee could steal if they filled their pockets or purse with diamonds and walked out the front door. After some thought the owners said $4,000,000 would fit into a purse or pockets. The firm had a $50,000 employee fidelity bond.

As a result of this conversation, the firm changed their safe configuration to keep one open at all times with a reduced amount of inventory. The other safes were kept closed but opened at intervals during the day to shift inventory to the working safe as needed. They also raised their employee fidelity bond.

The building was owned by a family partnership and was leased to the corporation. The family partnership was not named in the policy for property or liability coverage. This was a very nice prestigious account insured by a major insurance broker.

Buyer needs are determined through the Risk Identification survey process. The next step is to review the technical content of your insurance program against identified risk.

We provide a list of discrepancies along with recommendations for change.

CONTACT INFORMATION:
	James R. Mahurin, CPCU, ARM	Phone: (615)790-0083
	207 Third Avenue North	Email: jimmahurin@aol.com
	Franklin, TN 37064	Website: www.risk-guide.com