Minimize Business Losses and Insurance Costs as Natural Disasters Rise

It's no secret that natural disasters are occurring more often across the US. As these events become more common and intense, the costs to properly insure homes and businesses can increase significantly.

Although insurance costs have escalated with this surge in natural disasters, there are several tactics you can implement that may help you reduce the risks and expenses of insuring your business. Here are 10 disaster insurance strategies you can put to work at your organization this year. Each can help you demonstrate to insurers that your business is a lower-risk investment.

1Review and update coverage at least annually

Regularly assessing your insurance needs and coverage with your advisor can help ensure that your costs are commensurate with your coverage. At a minimum, annual insurance reviews give you the opportunity to confirm that your policy reflects any new risk mitigation measures you've implemented during the year.

2Conduct a disaster risk assessment

Engage with an experienced insurance advisor to help identify and rank the natural disaster risks that are prevalent in your location, such as floods, hurricanes, wildfires or earthquakes.

Once you understand the disasters that have a high likelihood of affecting your business, you can work with your advisor to assess the vulnerability of the following elements:

• Company buildings and property
• Operations
• Supply chains

3Implement risk-mitigation measures

After completing your risk assessment, you'll have a clearer picture of the steps needed to safeguard your business from the interruptions, damage and potentially dangerous scenarios caused by natural disasters. Here are some straightforward tactics that are used to help reduce the likelihood of costly harm caused by disasters.

• Strengthen building infrastructure. Reinforce roofs, windows and walls to withstand high winds, floods and earthquakes.
• Install protective systems. Use fire-resistant materials, storm shutters and flood barriers.
• Elevate critical equipment. Move essential equipment and inventory to higher floors or elevated platforms in flood-prone areas.
• Perform regular maintenance. Ensure your property is well-maintained by clearing gutters and trimming trees to reduce damage risks.

4Develop and communicate your business continuity plan

A fully documented business continuity plan is essential for your business to continue operations both during and after a disaster. When developing your continuity plan, it's a good idea to work with business department heads to ensure the plan is pragmatic, granular and comprehensive.

As you develop your continuity plan, address evacuation procedures, data backup systems and alternative supply chain options. Once it's complete, ensure the plan is well-communicated and made accessible to the right parties throughout your organization. In addition to safeguarding your operations, a comprehensive business continuity plan can demonstrate preparedness that may help lower your premiums.

5Invest in early warning systems

With the emergence of technologies like cloud-based monitoring solutions, modern disaster warning systems have become less costly to buy and maintain. Commercial warning systems that have made significant technological advancements include flood sensors, fire detection and alarms, and earthquake early warning devices.

Reach out to your insurance advisor or agency to understand the most effective areas to implement or enhance the warning systems at your business.

6Use technology to actively monitor risks

Innovative Internet of Things, or IoT, devices can also provide enhanced risk monitoring at your business. These devices can scrutinize environmental data like vibration and air pressure changes and have proved to be cost-effective for mitigating risks using advanced predictive analytics. Talk with your insurance advisor to learn how innovative technologies can help safeguard your business.

7Choose higher deductibles

Opting for higher deductibles on your business policies can help lower your monthly premiums. However, you'll want to ensure that you have sufficient cash reserves to cover the deductible that arises if you need to make a claim.

8Explore alternative risk financing for your coverage

If your business has the financial ability to absorb some risk, you may want to consider self-insurance, captive insurance or parametric insurance programs to lower your costs. Here's an overview of the three options. They each have their own advantages and disadvantages, so it's best to speak with an insurance advisor to understand the best approach for your business.

• Self-insurance: Instead of relying on third-party insurance providers, the company maintains its own pool of funds that are designated specifically to cover unforeseen losses.
• Captive insurance: With this type of self-insurance, a business establishes an in-house subsidiary company to insure the parent company.
• Parametric insurance: This alternative to traditional insurance pays a predetermined amount based on a fixed set of external circumstances, instead of individual policyholder losses.

9Demonstrate a strong claims history

Another straightforward approach to minimizing insurance costs is to avoid small or frequent claims. Submitting frequent insurance claims may cause your insurance provider to label you as a higher-risk client and subsequently raise your premiums. Try to make claims only during catastrophic events to help avoid increases in your total insurance costs over time.

10Provide disaster preparedness training

Educating staff on your latest disaster preparedness and response protocols can help enhance the safety of your business for your clients and employees. By taking this step, you may reduce your business's exposure to natural disasters and demonstrate to insurers that you're a lower-risk policyholder, which can potentially lead to lower premiums.

The bottom line

Even with the prospect of more frequent natural disasters, these approaches can help you mitigate insurance costs at your business. Develop a close working relationship with an advisor who's well-versed in the nuances of commercial insurance. They'll become a valuable business partner as they work with you to strategically evaluate your risks and costs.