Minimizing Risk

These days it seems everything costs a little more than it used to. I don’t know about you, but my homeowner’s insurance has just about doubled. The rising cost of insurance has ramifications for manufacturers, as well. ?

As Shalin Johnson, Senior Risk Consultant for the Marsh McLennan Agency, explains in this week’s Industry Today feature, rising insurance costs are due in part to increased litigation, plaintiff-friendly judgements and skyrocketing jury awards. In addition, employment and labor disputes are primary sources of increased risks insurers anticipate. These all contribute to what is known as “social inflation.”

“Since the average costs of a jury award have nearly tripled in recent years, the threat of liability insurance being out of reach for most manufacturing companies is real,” Johnson writes.?

How can manufacturers minimize risk and associated rising costs?

“Underwriters want to see that [manufacturers]?have risk mitigation, risk transfer, and hold harmless agreements in your insurance contracts,” Johnson says. Manufacturers should review all their supply agreements, particularly with subcontractors. The purpose of this review, Johnson explains, is “to be sure there is a ‘wall’ protecting you from all outside partners if a subcontracted item or business service is at fault for something going wrong and calls for a lawsuit.”?

He adds that, “A way you can manage risk across your contracts is solidifying who is responsible for what in the contracting process and how that will impact key resources, marketing, legal departments, and IT. You should carefully analyze their processes to make sure you are surrounded by the right resources and people.” ?

For complete details, see Social Inflation is Shaking Up Manufacturing.

How is your organization affected by social inflation and what strategies are you employing to minimize your risks? Please see our editorial guidelines to share your experience.

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Tags: social inflation, insurance, risk mitigation, Susan Poeton, #SusanPoeton, #SuePoeton, Sue Poeton, Industry Today