Manufacturing businesses face unique risks, from equipment failures to employee injuries, making insurance a critical expense. However, high premiums can put a strain on operational budgets. While insurance is necessary, there are strategies manufacturers can adopt to lower their premiums without sacrificing coverage. Here are key strategies manufacturing businesses can use to reduce insurance costs.
1. Improve Workplace Safety Programs
A strong workplace safety program is one of the most effective ways to reduce insurance premiums. Insurers often provide discounts to businesses with lower claims histories, and improving workplace safety can significantly reduce the risk of costly accidents. A successful safety program should include:
- Regular safety training for all employees, including hazard recognition and safe equipment usage.
- Routine safety inspections and audits to identify and mitigate risks.
- A culture of safety that encourages employees to report hazards and near-miss incidents.
Manufacturing environments are particularly prone to injuries from heavy machinery, falls, and repetitive motion. Implementing comprehensive safety protocols, such as the use of personal protective equipment (PPE) and machine guarding, can lower the frequency of claims, resulting in reduced premiums over time .
2. Invest in Risk Management Technology
Incorporating risk management technology, such as sensors and automated monitoring systems, can improve safety and lower insurance costs. For example, IoT (Internet of Things) devices can be used to monitor machinery for early signs of malfunction, preventing costly breakdowns or accidents.
Fire detection systems, temperature monitoring, and real-time safety alerts can further reduce risks in a manufacturing environment. Many insurers offer premium discounts to businesses that demonstrate proactive risk management by investing in such technologies .
3. Maintain and Service Equipment Regularly
A well-maintained manufacturing facility is less likely to experience equipment failures that could lead to business interruptions or accidents. Regular maintenance reduces the risk of equipment breakdowns that could cause workplace injuries or damage to property, both of which are costly for insurers.
Scheduled equipment servicing should include inspections, preventive maintenance, and repairs as needed. Documenting these maintenance activities can demonstrate to insurers that the business is taking steps to reduce risk, potentially leading to lower premiums .
4. Implement a Return-to-Work Program
A return-to-work program can help injured employees return to their jobs as soon as medically possible, reducing workers’ compensation costs. Insurers often offer discounts to businesses with such programs because they help lower the overall cost of claims. A return-to-work program typically includes modified duties or reduced hours while the employee recovers, allowing them to stay productive while reducing lost workdays.
This not only cuts down on the length and cost of workers’ compensation claims but also demonstrates to insurers that the business is committed to minimizing the financial impact of workplace injuries .
5. Bundle Insurance Policies
Another way to reduce premiums is by bundling multiple insurance policies with the same insurer. Most insurers offer discounts for businesses that combine various coverages, such as general liability, property insurance, and workers’ compensation, into a single package. Bundling not only lowers premiums but also simplifies the insurance management process, as all policies are handled by the same provider .
6. Raise Deductibles
Opting for higher deductibles is another straightforward way to reduce insurance premiums. By assuming more risk upfront in the event of a claim, businesses can often negotiate lower premiums with their insurer. However, it’s essential that the manufacturing business has sufficient cash reserves to cover the higher deductible if an incident occurs.
Businesses should carefully consider their financial stability and claim history before choosing this option, but for manufacturers with low claims rates, raising the deductible can lead to significant savings .
7. Improve Fleet Safety for Commercial Auto Insurance
If a manufacturing business has a fleet of vehicles for deliveries or transporting goods, improving fleet safety can lower commercial auto insurance premiums. Fleet safety programs should include:
- Routine vehicle maintenance to prevent breakdowns and accidents.
- Driver safety training, including defensive driving courses.
- Implementing telematics or GPS tracking to monitor driver behavior and ensure compliance with speed limits and safe driving practices.
A safer fleet means fewer accidents and claims, which can directly lead to lower insurance premiums for businesses that rely heavily on commercial vehicles .
8. Review and Update Insurance Coverage Regularly
Manufacturing businesses should regularly review their insurance policies to ensure they are not over-insured or paying for unnecessary coverage. For example, if the business has sold or replaced machinery, adjusted production levels, or expanded operations, insurance needs may have changed.
Work with an insurance broker to assess the current coverage and explore any opportunities to adjust policies or find alternative providers offering better rates. Keeping policies up to date and accurately reflecting current risks can prevent businesses from paying for coverage they no longer need .
9. Prioritize Fire Safety and Property Protection
Property insurance can be costly for manufacturers, especially for those that deal with flammable materials or heavy machinery. However, improving fire safety measures, such as installing sprinkler systems, fire alarms, and fire extinguishers, can help reduce the cost of property insurance.
Additionally, enhancing building security with burglar alarms, surveillance cameras, and secure entry systems can further reduce the risk of property damage or theft, resulting in lower premiums .
Conclusion
Manufacturing businesses can significantly reduce their insurance premiums by taking a proactive approach to risk management and safety. Strategies such as improving workplace safety programs, investing in technology, maintaining equipment, and reviewing insurance coverage can all lead to lower premiums. By demonstrating to insurers that they are committed to reducing risk, manufacturing businesses can keep their insurance costs manageable while maintaining comprehensive coverage.
Sources:
- “Reducing Workers’ Compensation Costs: Return-to-Work Programs.” U.S. Occupational Safety and Health Administration (OSHA). Link
- “Managing Machinery Safety and Maintenance.” UK Health and Safety Executive (HSE). Link
- “Insurance Bundling Benefits.” Insurance Information Institute (III). Link
- “Strategies to Reduce Manufacturing Insurance Costs.” National Association of Manufacturers (NAM). Link
- “Risk Management in Manufacturing: IoT Solutions and Benefits.” Risk & Insurance Magazine. Link