By Seth Tarboro, EHD Producer
The Godfather—Terminator—Alien…Paddington… Care to guess what these classics all have in common? Yes, obviously they all share a very rough and tumble, gritty aesthetic. Films made for the whiskey drinking, cigar smoking man. They happen to share an even more important connection however and that is the fact that they were followed by a sequel as good or better than the original.
This time last year, I wrote my first blog for EHD and in preparing for this one, I got to thinking about anniversaries. I’ve been fortunate enough to experience more than a handful of them. Employment anniversaries, Company founding anniversaries and none more important than my own wedding anniversary, of which we just celebrated 10 years (I say we’re still very happy… you’ll have to read her blog to see if she feels the same). When it comes to insurance policies, they have anniversaries too. We in the biz, call those “renewals”. Just like any other anniversary, a renewal should be planned for rather than simply allowing it to come and go like any other day. An anniversary is a time to think back on what’s gone right, what’s gone wrong and how to make the next version even better than the last.
Not unlike your favorite sequels that improve upon an original formula. The greatest sequels are not copy/paste jobs, but instead an exercise in proactive enhancement. The best businesses and their trusted insurance advisors treat a renewal as an opportunity to reassess their coverage, investigate new risks or shifts in operation. Not just renewing a policy but renewing the thinking behind it. Let’s take a few minutes and work through how to make the best “sequel” possible out of your next renewal!
The Characters
There are so many critical factors that go into making a great sequel, but none are more important than the characters. We’ve all seen what happens when a studio decides the character we connected with originally are unimportant—or perhaps you’ve never seen Speed 2. Lucky you. Sorry, Jason Patric, you’re no Keanu Reeves.
Our characters, in terms of a renewal, are the employees of course. THE most important resources a company has is its human ones. Let’s imagine a retail boutique just had a banner year. It’s time to grow. It’s time to hire. Increased payroll means necessary updates to workers compensation coverage. Simply rolling through a renewal with the same figures as last year could lead to an adverse audit and now your carrier is billing you for the additional payroll. Maybe some of the characters have changed roles. An employee who was previously rated as clerical is now in the field, swinging hammers or hauling loads. If their wages are not adjusted appropriately, that’s an audit problem too.
Adding staff isn’t only a worker’s compensation concern, however. This would also increase the exposure for Employment Practices Liability. More employees means more potential for wrongful termination, discrimination or harassment suits. Aside from just reviewing and determining if enough coverage is being carried, this stage in the renewal process should give way to conversations around the employment practices of the company. Are all employees up to speed with company standards? Is the harassment training out of date? How about cyber liability? Are the new employees prepared for all potential phishing and fraud threats? Do they need to be educated on how to avoid bad actors, using Ai tools to perform scams. A thorough review of the insurance program should add value in more areas than just the insurance program.
The Plot
Once we know the players, it’s time to lock down the plot. I know what you’re thinking. Just pick right back up where the previous film left off. No one could screw that up. I too was once that naive. Exhibit A—Jaws: The Revenge… Technically, Jaws 3. A movie about great white shark with a personal vendetta, stalking someone across the Atlantic Ocean with the intent of wiping out the rest of their family. Apparently, this shark understands family trees and can hold a multi-thousand-mile geographic grudge. The lesson: plot matters.
The plot is the protein of the meal. The piece that everything else revolves around. As for a business’ renewal, that would be the exposures. The day in day out operation. While changes in exposure should be updated throughout the year, renewal time is a good checkpoint to make sure nothing has been missed. Perhaps a retail boutique has decided to produce their own products. In that case, we may need to include a manufacturing class code. Is the local laundromat now offering a drycleaning service or perhaps delivering cleaned close door to door for their clients in their brand-new commercial van? They now have an auto exposure that will have to be considered. Maybe a contractor has shifted to having most of the labor handled by subcontractors or recently secured a new contract that has specific insurance requirements, not included in their policies.
It is the responsibility of an insurance advisor to point out when a shift in daily operation may not be accounted for, simply because it is related to the primary or original exposure. In certain circumstances, this review can help a company understand that the cost for a specific operation may not be effective when compared to the revenue they earn by doing it. When it comes to small businesses especially, losses prevented can be looked at as profit. And money not spent on insurance premiums for an unprofitable part of the business can be allocated more appropriately. After all, every good sequel needs a plot the moves the story forward and your business is no different.
The Budget
Many sequels have failed due to mismanagement of the budget. Too often a misunderstanding in what made something successful leads to poorly set expectations. Unfortunately for Jason Partric… Speed 2 finds its way back on our list. While the first was made for a lean $30 million, turning that into a $350 million worldwide haul, its sequel with a budget in the range of $130 million is an epic box office flop.
I like to think the conversation went something like this— “Keanu! The script for Speed 2 is ready, and we think you’ll love it! Everything is bigger! Better! The first time you were on a bus… This time, you’ll be on a cruise ship!” … “But—cruise ships don’t move fast—the movie is called… Speed”. Long story short, they poured an exorbitant amount of money into maritime stunts, like crashing the custom built 300-foot ship into a coastal town. Keanu went on to make The Matrix and the rest is history.
Sometimes however, it works out for a sequel to increase its budget. Just like a business may need to increase the revenue its policies are rated on if they’ve experienced growth. This is also the perfect time to take stock of necessary value points. Is the business personal property figure still enough to account for any new inventory or equipment? Properties values increase year after year due to inflation. Does our building coverage include inflation protection to automatically increase that coverage? These types of annual reviews can spark strategy conversations that aid a business’ overall health. Perhaps digging into the value of the equipment allows an owner to realize some of it is outdated and because of recent growth, they can afford to upgrade.
The Conclusion
A renewal review should not simply be an annual check-in and in fact is a disservice to a business owner if performed that way. This is an opportunity to be proactive rather than reactive in thinking about the health of a business. Insurance already has the esteemed reputation as the one thing people pay for and hope never to have to use. This process should be looked at as another strategy meeting with the intention of helping a company reach their goals. That line of thinking is what will help your next renewal resemble Top Gun: Maverick rather than Speed 2… Sorry Jason Patric.
Finally, yes, Paddington is in fact the movie about the bear with the red hat and blue raincoat, but I’ll not accept any slander about that adorable bear. And my wife doesn’t write a blog, so when it comes to her opinion on our marriage, I suppose you’ll just have to take my word for it.
