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What a Commercial Insurance Claim Reveals About Your Business


Key Takeaways

When businesses acquire insurance coverage, they will immediately notice that this is vastly different from enforcing risk management strategies in their companies. In fact, many coverages require a business to have some risk mitigation plans in place already, like employee training and workplace safety standards. However, insurance and these strategies intertwine as part of a company’s safety structure. When one fails, the other can come to the rescue. Let’s see what slips through the cracks when a business files a commercial insurance claim.

What Your Insurance Claim Can Tell You About Risk Management

Risk management ensures a company is always on top of possible threats by identifying, assessing, and controlling them timely. High-growth companies, like startups, face ever-evolving challenges that demand an even more evolving risk management strategy. For example, a fintech must constantly take the pulse of new cyber attack trends to update their cybersecurity and protect vital assets.

In tandem, filing an insurance claim exposes gaps in risk management processes and shines a light on future risks the company might face. While no business leader wants to see the day they file an insurance claim, these situations always bring a positive: making a company even safer the second time around.

Let’s take the case of a healthtech platform that connects institutions with patients by allowing them to schedule appointments and see test results. Due to technical issues, the company’s software voids datasets that lead a hospital to lose many test results. Consequently, essential patient information is lost, and the hospital files a malpractice lawsuit that triggers an Error and Omissions insurance claim. Here, the healthtech begins enforcing a more rigorous risk management strategy to foolproof their system against underlying bugs, making them less prone to data losses.

Identifying Operational Gaps: Insights From Analyzing Your Insurance Claim

Just like the healthtech example, operational gaps arise in any company due to policy changes, new hires, system updates, new target markets, and other internal and external changes that naturally occur in growing companies. Thus, company processes can become faulty in the blink of an eye, resulting in subpar service or low-quality products.

Risk management strategies help smooth out these bumps on the road, but even these processes aren’t 100% effective at times. That’s when operational gaps appear and often result in insurance claims, leading insurers to work their magic to help companies spot and fix issues. This way, they process the claim and help the company improve to avoid future incidents, saving themselves and their customers any headaches.

While business leaders know their competitors to an extent and the ins and outs of their industry, insurance companies may have a wider scope to spot operational inefficiencies based on the countless claims they receive. These cases help them learn the state of several companies and take the pulse of the industry. To get to the root of the problem, insurers compare a company’s claim with others, subject them to industry standards, and analyze claims history and company practices to help find operational flaws.

Once they process a claim, insurance companies will make recommendations for their customers to beef up their risk management strategies and make tweaks where necessary.

Financial Health Check: Using Insurance Claims To Assess Your Business Stability

A business’s insurance claim history can help uncover patterns of inefficient practices and inform its financial performance. One of the main factors influenced by insurance claims is premiums, which increase over time depending on the frequency and severity of the claims. Right off the bat, these escalating monthly payments can become a detractor in a company’s finances.

Mitigating the possibility of a commercial insurance claim before it happens is also an investment worth making. For example, if a company has filed for a property insurance claim more than once, this might point to a necessary infrastructure revamp or relocating altogether to avoid rising insurance costs and more damage in the future. Likewise, this could uncover office management malpractice, like a manager choosing to patch water damage (the leading cause of commercial real estate claims) instead of fixing the problem from the root. 

So, claims can tell a whole story about a company’s cash flow management, potential savings on coverage and wasted money on flawed risk mitigation strategies that stall business growth.

Here’s where insurance providers come in again to lend a helping hand by analyzing a company’s claim history to assess pain points and areas of improvement through Claims Management Systems, data visualization and stats analysis.

Proactive Prevention: How Claims Data Can Predict and Prevent Future Losses

Insurers aren’t just there when things go wrong. Companies can approach their insurance brokers to help improve their risk management strategies, including social risk management, foresee pitfalls based on previous claims, and simply put, save businesses some money by future-proofing processes.

The digital transformation has allowed insurance companies to become data-driven—with 2023 becoming a transformational year for the industry. Now, brokers are using smarter and more accurate tools to provide companies with useful risk prevention strategies based on hard facts. Perhaps all a business needs to up its safety protocols is scheduling more frequent software maintenance or enforcing more employee training programs. Sometimes, all it takes is the support of an insurance broker and their deeper historical claims analysis.

Optimizing Your Insurance Coverage: Insights from Past Claims Experience

Lastly, an insurance claim could indicate that business needs are changing and it’s time to add extra coverage or an endorsement to the current plan. Staying with the same line of coverage might just become a leak of financial resources in the long run, increasing costs that aren’t always easy to weather.

This is where business leaders must contact their insurance provider and lay out their current needs to compare what is working and what needs a major redo in their coverage. Brokers can then provide package policies for lower premiums or more coverage, increase limits or broaden coverage, or dig deeper into applying more specialized insurance for very specific industry needs.

Commercial insurance claims shouldn’t be seen as a company failure but rather a lesson to learn from (a glass half-full type of perspective!). And if business leaders haven’t done it yet, it’s an opportunity to strengthen their relationship with their insurance broker—the best insights can come from their analysis and suggestions. So, by studying their past claims and connecting the dots, founders can build more resilient and risk-averse businesses, which can make or break a high-growth startup.

We’ve been down the startup road at Founder Shield and know the trials and tribulations of growing a business against all odds. Schedule a meeting with one of our Specialists to review your policies, check for coverage gaps, and identify areas where creating a customized package would benefit your business.

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