Employee Benefits
The average IMB allocates 20-25% of their expense budget to employee benefits, with the company health plan driving the majority of this expense.
A health plan designed by a publicly traded insurance company will naturally prioritize their own shareholders, where a health plan designed solely for the benefit of the employer can direct all funds to employee compensation and well-being.
What is “risk” as it relates to the health plan?
A company’s total health plan risk is simply the total of expected and unexpected healthcare expenses during the plan year. If a plan is suboptimal, they are either:
- Using more healthcare than they could be
- Paying more for healthcare than they should be
- Both the above
Mitigate
A plan should incentivize behaviors that lead to fewer and lower cost claims. Naturally, this goes hand in hand with creating a healthier population.
This means eliminating barriers to care, providing guidance and education around potential therapies, and making it easier and less expensive for members to pursue earlier, more conservative intervention.
Once a plan begins to optimize utilization of predictable and controllable care, we focus on the infrequent, significant, unpredictable losses.
Transfer
Catastrophes and “black swan” diagnoses happen. Sometimes we can improve cost or outcome to reduce the financial liability – sometimes we cannot. In this small percentage of scenarios, it makes sense to transfer the risk via Stop-Loss insurance.
Stop-loss contracts are complicated, with many policy options and bells and whistles to choose from. It is important that you partner with a trusted insurance advisor to help you understand the risk you are retaining and the risk you are paying to transfer.
Please note that there is no free lunch, and we cannot transfer known risk. Large claims that carry over from one policy year to the next will eventually be priced into your contract. To protect against multi-year risk requires thoughtful planning and preparation prior to placing the original contract.
Finance
When you’ve done all that you can to improve utilization, and you’ve successfully transferred any unknown risk beyond your comfort level, you pick up the tab.
Claim financing is no different from any other type of borrowing. The more cash flow protection you require, the higher your financing costs.Risk Management
There are three foundational ways to manage risk. Subsequent sections will address how these three techniques can be successfully applied to boost performance.
- Reduce/Mitigate: The most cost-effective claim is a claim that doesn’t happen. Taking measures to reduce the frequency and severity of losses will yield better terms in the form of lower premiums and greater coverage.
- Transfer: The purpose of insurance is to transfer financial liability associated with an unexpected or low-probability scenario. Insurance products are priced such that $1 in premium will always represent less than $1 in expected claim payments. For this reason, it makes sense to retain smaller, more predictable losses, and purchase insurance only for costly low-probability losses.
- Finance: For significant known or expected losses, how a company chooses to pay for the losses can significantly impact cash flow and the total cost of remediation.
Business Owner’s Policy
- A business owner’s policy (BOP) bundles general liability insurance with commercial property insurance. It typically costs less than if the policies were bought separately.
- A BOP covers common risks and business property.
- A Business owners policy protects Mortgage Professionals from third-party liabilities and property damage by combining General Liability Insurance and Property Insurance. Since mortgage industry jobs are typically low-risk, your business may qualify for a BOP.
Errors & Omissions Insurance
- Errors and omissions insurance (E&O) helps cover the cost of a lawsuit if a client claims your work was inaccurate, late, or never delivered. It’s sometimes called professional liability insurance.
- E&O protects against mistakes and oversights
- An error on a title or an oversight in closing documents could lead to a lawsuit. Whether you are sued by a litigious client or you’ve made a genuine mistake. Errors and omissions Insurance can help cover legal costs that might otherwise impact your business.
- This policy provides liability coverage related to:
- Accusations of negligence
- Professional mistakes
- Failure to deliver promised services
- E&O protects you from client accusations, whether or not you're to blame. It's a key policy for mortgage professionals – and it's even required for brokers in some states.
Cyber Insurance/Social Media Liability
- Cyber liability insurance, also called cybersecurity insurance, protects small businesses from the high costs of a data breach or malicious software attack. It covers expenses such as customer notification, credit monitoring, legal fees, and fines.
- Cyber liability covers breaches in cyber security, and can be endorsed to provide Social Media Liability as well.
- Mortgage businesses handle sensitive customer data and perform sizable transactions. That translates into a high risk of cyberattacks. If electronic data is stolen or compromised, your customers are at risk of theft — including identity theft — and they could sue your company.
- When data is stolen or compromised, Cyber Insurance can cover legal fees and provide vital resources, such as credit monitoring for affected clients.
- Partnership with FRSecure
By partnering with FRSecure, CCIG brings you a compressive cyber security management solution, linking carrier priorities with implementation programs to keep premiums in line with your overall cyber health. FRSecure is a full-service information security consultancy, helping businesses and organizations understand their security risks and how they can make the right decisions, improvements, and investments to mitigate them.
