Managing franchise risk is key in today’s quick-to-sue culture. Problems with customers and employees are not uncommon and can result in claimed damages and injuries for which the franchisee is often blamed. Lawsuits that follow can take years to resolve, even when the franchisee is ultimately found not at fault.
It may seem daunting to take on such odds and attempt to control your risk exposure. But there are a number of simple procedures franchisees can follow that make risk management for your business more effective.
It starts with your insurance coverage, understanding how that coverage works and following its terms and conditions closely. Manage your risks actively, and don’t let things run on autopilot. These five best practice secrets are how to do it.
1. Know How and When to File a Claim
With serious problems few and far between, knowing how and when to file a claim is not always easy. You may not have filed a claim in the past or not filed a claim with your current insurer. Or, it may have been so long since your last claim that you’ve forgotten what you need to do.
Yet while the claim process can be daunting, it’s important to act as soon as you become aware of a potential problem. Insurers rely on prompt reporting, something that often helps minimize overall claim costs due to faster processes and simpler resolutions. Additionally, the conditions of your coverage may also require reporting a claim within a certain timeframe.
Often, it can be hard to determine if an issue needs to be reported or if it will resolve on its own. But from an insurer’s perspective, it’s always best to err on the side of caution. To minimize the risk, report any situation covered by your policy that may result in a claim as soon as you know about it.
2. Understand Your Claims-Made Policy Rules
Understanding your insurance policy is always a big key to managing risk as a franchisee. But that’s particularly important when it comes to certain types of insurance policies. Many today are written on a “claims-made” basis, meaning that coverage is only provided for claims that both occur and are reported within the policy’s active policy period (usually a one-year period).
You must report your claims-made policy claim within the same policy period in which you became aware of the problem. If such a policy’s coverage lapses or is modified or cancelled between when you found out and when you filed a claim, your claim may be denied, exposing you to significant risk.
Many businesses also purchase tail coverage if they switch insurance providers or policy types. Tail coverage can be purchased when a policy is terminated and extends the time period of the policy’s claims-made coverage. This helps ensure you are protected if a claim needs to be filed after the policy has been canceled or otherwise ended.
3. Track Your Policy Expiration Dates
All insurance policies come with expiration dates and it’s important to keep track of them on your business’s calendar. Usually, this is the one-year anniversary of when you last purchased or renewed your coverage. Your policy documents will give the exact date for your records.
Expiration dates are very important in insurance for a couple of reasons. First, you don’t want to miss a renewal, go without coverage and face exposure to unnecessary risk. Secondly, you’ll want to make sure all claim matters and potential claim matters are reported to your insurer before your next coverage renewal or modification. There’s usually a grace period specified in the documentation for policies renewing exactly as-is without modification, but this perk varies, so the dates still matter a lot.
With a claims-made policy nearing its expiration date, time is of the essence. You’ll want to ensure that you have processes in place to identify any potential claims and follow the proper procedures for getting the necessary information to your insurer in the days and weeks before your policy expiration date. You may also want to consider purchasing tail coverage.
4. Establish Claim Reporting Procedures
Because it’s so important to identify and act on claims and potential claims in a timely manner, it’s important to establish some claim reporting procedures to minimize risk to the business.
Often the person at your franchise who first becomes aware of an issue is not the one who will need to handle the claim. Miscommunication, failure to escalate and lost messages can result in a claim not being reported or reported late. Some insurers consider an old email that shows prior knowledge of the claim as grounds to deny a claim which has been reported after the end of a policy period.
To reduce the risk of a denied claim, it’s important to have a reporting system in place. Team members can then report the claim internally through the proper channels so that you can meet all the necessary terms and conditions of your policy.
5. Train Your Team on Risk Management
Good communication can go a long way toward reducing the risk your business faces. But it’s important that everyone in your franchise knows what to do in certain situations. A miscommunicated plan will leave you open to unnecessary risk.
Everyone on your team should understand that problems can and do occur. Give your team leaders examples of questions or statements from customers and employees that could indicate a problem. Provide documentation of the procedures to follow to ensure claims and potential claims are immediately reported. Make sure everyone knows what channels of communication to use and how to confirm important messages are received.
Insurance Protection for Smoothie King Franchisees
In today’s world, the right insurance coverage is key. With products to cover your business assets, property, vehicles, employees and more, Lockton Affinity’s Smoothie King Insurance Program has everything you need to protect your franchise, complemented by best-in-class service. Whether you have a simple question or need a full policy review, we’re here to help. Visit us online or call (866) 222-2649 to learn more and get started today.
