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Real Estate Firm Self Insures and Saves $1.5 Million


As Seen in BizTalk in the St. Louis Business JournalBill Goddard, Principal, Insurance Advisory Services, recently discussed the rising cost of workers' compensation insurance in the St. Louis Business Journal. Learn how Goddard helped a multimillion-dollar commercial real estate firm save $1.5 million on their workers' comp insurance. 

Workers’ compensation insurance is currently difficult to buy because insurance companies are experiencing high loss ratios and low investment returns.

A multimillion-dollar commercial real estate firm noticed that after three years of progressive growth in its business, its workers’ compensation insurance premiums had escalated from $800,000 to $1.5 million to $2 million annually.

When the real estate firm’s premiums reached the $2 million mark, executives at the firm examined loss reports with an insurance consultant at Brown Smith Wallace. With losses of about $400,000 a year, executives at the real estate firm had tried to negotiate a lower premium, but the insurance company would not budge. They went to other insurance companies and their premiums were similar — around $2 million annually. The renewal premium was going to be $2.5 million for the following year.

Consider all alternatives

After consulting with Brown Smith Wallace, the real estate firm changed course and started looking for a large deductible program. With a large deductible plan, the real estate firm would pay the first $250,000 of every loss instead of an insurance company being responsible for all losses. Based on the $400,000 reported loss from the previous year, a large deductible made a lot of sense for the company. The firm saved $1.5 million since they now pay $1 million ($500,000 in insurance and administration cost and $500,000 in losses) rather than $2.5 million in premiums.

Lesson to learn

You don’t have to be a multimillion-dollar firm to realize significant savings. If a company is paying more than $500,000 for workers’ comp insurance, its executives should be examining their alternatives. Even companies that pay less than $500,000 should realize that the insurance market is very competitive — just because Insurance Company A says you should go up 5 percent, doesn’t mean Insurance Company B wouldn’t go up just 2 percent, for example. That’s true for insurance in general. Some companies never reach the point of recognizing there is an issue because they are satisfied with a slight increase when they really shouldn’t be satisfied with their situation at all.

Bill Goddard, CPCUAn insurance plan review may save your company money. Request an independent assessment with Bill Goddard today by filling out the adjacent form.


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