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The Metal Worker

The following is an outline of a recent case involving a company based in the Niagara Region. The company details have been altered slightly to protect the identity of our client.

The Company

  • Niagara Region based manufacturer
  • Metal stamping, machining and die-casting
  • Annual Revenue – $20,000,000 +
  • Employees – 150
  • U.S.. Sales – Significant
  • Product Line includes some integral auto components

The Project (brief outline only)

  • Audit Existing Insurance Policies
  • Review for errors, omissions and accuracy
  • Analyze coverages, definitions, conditions, terms and exclusions.
  • Provide explanation of existing scope of coverage.
  • Identify potential pitfalls, deficiencies and problems.
  • Recommendations on possible enhancements, additional coverages, coverages not required and retention levels.
  • Analysis of operations, assets and income exposures
  • Determination of Essential Insurance Needs
  • Review various contracts for potential liabilities
  • Preparation of Insurance Specifications, and information package for possible tendering.
  • Provide Written Report

The Details (sample elements from interim report)

  • Property Insurance rates had escalated 77% in the past four years in spite of an impeccable claims record with the same insurer.
  • Liability Insurance rates had increased 43% in the same period.
  • Various coverages were underinsured, exposing the company to potential insurance penalties, and erosion of .corporate assets, in the event of a claim.
  • The amounts of protection had not kept pace with recent acquisitions, expansion and increases in replacement cost.
  • Inadequate Business Interruption values exposed the company to a potential 50% coinsurance penalty, in the event of a loss of business income.
  • There was no provision in the policy to pay non key employees in the event of a revenue abatement or reduction.
  • Serious coverage gaps existed in areas such as Product Recall, and Directors & Officers Liability Insurance and Environmental Impairment.

The Results (a few examples)

  • Insurance coverages were negotiated to fill the holes that were uncovered.
  • Values were updated to avoid penalties.
  • Self Insured Limit was increased to realistic level, and reduced insurance pricing utilized to offset updated amounts of protection.
  • Coverages were deleted where the potential for loss was low, or presented minimal exposure.
  • Products Recall, Directors and Officers Liability Insurance, Environmental Impairment and other coverages previously omitted were explored.
  • Various policy definitions were amended by the insurer to reflect the client’s needs, i.e. old and obsolete equipment that couldn’t be replaced, but was still functional was now insured under a modified replacement cost clause, to avoid imposition of terms that were unreasonable.
  • All policies were amended to have concurrent dates, in sync with the fiscal period for ease of administration.

The Followup (The start of a well managed program)

  • A Risk Management Manual is being prepared for the client, to assist in providing better control of insurance details including records maintenance.
  • Preparation for tendering of the insurance program has begun.
  • Quarterly meetings have been scheduled to maintain up to date awareness of the client’s operations and changes.
  • Periodic attendance in management and planning meetings has been arranged, so that risk management and insurance implications can become an integral part of the planning and management of company affairs.