Key Person Insurance as Part of a Risk Management Plan

by Katie Petersen | Apr 25, 2022 | Risk Management | 0 comments

Key Person Insurance as Part of a Risk Management Plan

Written by Mick Kelly

Within the tree care industry, every business has a few key players on their team that help the business succeed. What happens when one of those key team members moves onto another company or much, much worse, suffers a tragic accident and is no longer around? Protecting the business from losing a key person is a risk management must.

What is a key person?
A key person is an individual within an organization, whether an owner, partner or employee, who makes an essential contribution to a business.

What is a key person policy?
A key person policy is a life insurance policy paid for and owned by the business. The business is the beneficiary of the policy in the event of the death of the key person.

Who can be determined to be a key person?
Any employee can have a key person policy taken out on them so long as they are vital to your business operations and able to produce profits. Typically, the policies are taken out on owners and employees that the company would find difficult to operate without. In the tree care world, this may be the best climber in your company or your crane operator. It could also be your ISA certified arborist, your office manager, or the head of a division such as PHC or HR.

How much insurance coverage is needed?
The amount of coverage will vary from person to person and is dependent on their role within your company. You can figure out the exact amount of profit the company would lose without that person and multiply it by the time it could take to replace them. The cost of recruiting and training should also be taken into account. Keep in mind that the size of the policy will be restricted by the key person’s contribution to the company.

Can I only use it to replace a key person?
The money can be used to offset short term loss of revenue while a replacement is found. It can also be used to fund recruitment. In the current employment market, it may take months to replace a skilled climber or crane driver and it may take even longer to replace the skills of a company owner/founder or office manager.

The benefit may also be used to pay out the family of a partner in the business if there are multiple partners.

Types of key person policies
Like life insurance, key person policies can be term policies or whole life policies. Term policies run from 10 – 30 years and are the most cost-effective way to purchase key person insurance.

Whole life policies cover for the life of the insured. Whole life policies also have a Cash Value account associated with them and a portion of each payment is deposited there. The Cash Value can be counted as an asset of the company and can be used to secure loans or paid out if the policy is terminated.

Are there any tax implications?
Key person policies are paid using after tax dollars in most cases and the benefit is typically paid without income tax liability for the company. The exception to this is with C – corporations where the benefit will be included in your AMT calculation.

There are no tax implications for employees so long as the business owns the policy. If the policy is sold from the business to the employee, it may need to be declared as compensation and discussed with an accountant.

If you have an employee your business will struggle without or if your business will struggle without you – considering a key person policy is essential to the survival of your business.

For more information on key person policies, contact a member of the ArboRisk Insurance team! Eric, Tom or myself are happy to discuss these policies with you and answer any questions you may have. If you need additional help with any risk management concerns, check out our Thrive Risk Management Packages! These packages are available for purchase and can help take your business to new heights!

Driver Risk Management

by Katie Petersen | Apr 19, 2022 | Risk Management | 0 comments

Driver Risk Management

Written by Eric Petersen, CIC

One of the largest employee management issues that we hear about from our clients is that of how to deal with drivers that have bad driving records. With a slim talent pool to choose from, many tree care companies hire individuals on the spot without doing a driving record check. All too often, that new hire has issues on their driving record that either prevents them from being insured or soon after being hired displays undesirable conduct in a vehicle or on the job site.

While not a perfect science, analyzing an employee’s driving record is a great way to predict their future behavior. If you are not running Motor Vehicle Reports (MVR’s) aka driving records on each of your employees and prospective employees, follow this step by step process to get started.

This risk management activity will position you to minimize vehicular accidents, limit injuries, increase productivity and provide you with ammunition to give the insurance company to lower your insurance cost.

Understand Your State’s Law – The rules regarding employer’s viewing driving records for employees or potential employees varies state by state. Check with your state to determine whether or not you, as the employer, can access a person’s driving record. You most likely will need to have received written permission from the driver in advance. Many states allow you to gain access to the driving record directly through an online portal, making this a fairly easy process for your administrative staff to complete. It’s important to note that there typically is a charge for doing so, anywhere between $5 and $15 per record depending on your state. In states where the driver needs to make their own request, make it easy for them to do so with simple directions on how to acquire their MVR. You may also want to consider reimbursing a potential employee for the cost of the MVR.

Create Written Policy – After you know what your company can do within your state for ordering MVR’s, write out your driver policy. The policy should walk through the steps that your company and each driver (or potential driver) must take. Answer these questions to create your policy:

Who will be responsible for pulling and paying for the MVR’s?
What type of violations will be acceptable on an employee’s driving record? (ask your insurance company for help creating these guidelines)
Will you require a Driving Test before an employee is allowed to drive a vehicle?
What will the Driving Test involve and who will be responsible for administering it?
What forms or supporting documents do you need to include? (MVR Authorization Form, MVR Guidelines, Driving Test Scorecard)
What disciplinary actions will the company take upon learning about any violations or accidents?
What personal driving violations are the employees required to inform the company of? (ex. Operating Under the Influence, Reckless Driving, etc.)
Are any positions within the company allowed to take a company vehicle home and or use it for personal use?
Will employee family members be allowed to drive the vehicle?

Verify MVR Guidelines with Insurance Company – Send your company’s written policy with your MVR Guidelines included to your insurance agent for review by the insurance company. Most insurance companies utilize similar standards for driving violations, however, it is always best to ensure that you are both on the same page. This also shows the dedication to proper risk management that your tree service believes in which will help for better insurance pricing throughout your relationship.

Run MVR’s Annually – Your insurance company will most likely run your employee’s driving records about 60 days prior to your insurance renewal. Unfortunately, they will not share any information with you unless a driver is ineligible to drive based on violations or accidents that the employee incurred the following year. Because the insurance company will not share this information with you, we suggest that you run your own set of MVR’s 90 days prior to your insurance renewal. This allows you time to take disciplinary action before the insurance company forces you to and eliminates the potential for a serious accident by putting you in control of the drivers for your fleet. No one wants to have a bad accident occur with a driver who has a subpar driving record. This is a gold mine for any plaintiff attorney who gets involved. They will extort you and your company for negligence in allowing a dangerous driver to operate one of your vehicles.

Enforce Disciplinary Action – Follow your company’s disciplinary process that you established in your written program. Many tree services have difficulty in hiring qualified employees that also meet driving regulations to begin with and then are more lenient when a violation does occur. Doing this opens your company up to more liability exposure and could create an employment lawsuit if you enforce the rules differently between employees. Once you write your disciplinary actions, follow them for everyone within the company, even the owner.

Because every tree care company has a large exposure on the road (traveling daily to and from job sites and driving large vehicles), the management team must take every precaution they can to minimize that exposure. Implementing a driver policy will help you avoid unnecessary accidents and unproductive administrative issues within your company.

For help creating a policy like this or other risk management processes, contact an ArboRisk team member today.

How Marketing is Risk Management

by Katie Petersen | Apr 7, 2022 | Risk Management | 0 comments

How Marketing Is Risk Management

Written by Eric Petersen, CIC

Yes, you read that title correctly. The marketing your company is doing to attract new customers and employees is actually a form of risk management. In a previous article, Building a Risk Management Mindset, we discussed how a business intentionally creates opportunities and avoids problems by installing a risk management mindset. Those same principles are very true when looking at your marketing.

Let’s first define what I mean by marketing. Marketing can be any outward action or impression of your company that is released into the world that will either attract customers or employees to your company. Most people think of marketing in an active sense only, where the sales flyer or social media post that is created is marketing; however, many times marketing happens in a passive way without the business owner truly knowing that it is occuring. The appearance of who you are sets the stage for the customers and employees that will be drawn to your company.

We are going to explore marketing from a risk management perspective to help you intentionally create the business you desire by looking at both external marketing (for customers) and internal marketing (for employees).

External Marketing – This is what most people think about when they use the word “marketing,” which is the action taken by a company to attract new customers or sell more products/services to existing customers. All too often we see tree services advertising or promoting a unique one-time job that they did for someone, that, while they are really proud of that job, chances are they won’t be doing it again for a long time. This could be a removal job on an island or large crane job or a project in a remote area. Whatever the job is, when the company advertises it, their potential customers begin to connect that unique job to the expertise of the tree service.

Those unique jobs typically are not ones that you want to rely on as a business and more often than not don’t fit into your Sales Sweet Spot. Your Sales Sweet Spot is where your Specialty Service intersects with your Ideal Customer. (To learn more on the Sales Sweet Spot read our article here). When you are operating outside of your Sweet Spot, the risk to your company increases dramatically.

Therefore, it is the goal of your marketing to showcase the type of work that you are truly experts in and the type of work that you want more of so you can continue to operate within your Sweet Spot. To help your marketing team utilize a risk management mindset, ask yourself these questions:

Have you defined the Sales Sweet Spot? (For one-on-one help in developing this, enroll in our Thrive Sales & Marketing Package)
Does your entire team, including the marketing team, understand your Sales Sweet Spot?
What type of jobs are you attracting through your marketing materials?
Do your social media posts talk about and show the type of work that you want more of?
Does your website accurately depict what type of work you want more of?
Have you ever run a marketing campaign that focused on a product/service that was outside of your Sales Sweet Spot? If so, how did the results end up?

Internal Marketing – Internal Marketing is the action or inaction to get new, quality employees interested in your company. This can be more difficult than external marketing, because it often happens without your conscious thought, yet is one of the main drivers for whether or not you are actually attracting quality employees. It goes without saying, but the better, more professional employees you have, the lower the risk of injury and accidents happening within your company is.

Therefore, by intentionally marketing to the type of employee that you want, you are practicing risk management. To subjectively look at the internal marketing that is happening within your company today, ask yourself these questions:

Have you defined what your ideal employee’s characteristics are? (For one-on-one help in developing this, enroll in our Thrive Hiring & Recruiting Package)
What type of employee are you attracting through your external marketing? The adrenaline junkie or a professional arborist?
Are all of your marketing pictures and messages focusing on projects or jobs outside of your Sales Sweet Spot?
Does your messaging align with your staffing needs, today and into the future?
What do your trucks, equipment and uniforms say about the professionalism of your team?
Do you promote employee appreciation in your social posts and on your website?

Simply put, marketing, both external and internal, is happening every day within your company. How intentional you are about getting your desired customer and employee is what separates the good companies from the great ones. Employ a risk management mindset when thinking about your marketing and your company will be miles ahead of others in your area.

If you’re struggling trying to implement a risk management mindset within your marketing, reach out to an ArboRisk team member today or enroll directly into our Thrive Sales and Marketing Package for one-on-one help.

Building a Risk Management Mindset

by Katie Petersen | Apr 7, 2022 | Risk Management | 0 comments

Building a Risk Management Mindset

Written by Eric Petersen, CIC

I’m sure you’ve heard the phrase, “safety pays” before. In fact, the Occupational Safety and Health Administration (OSHA) has a website, with that very name, that allows you to calculate how much an injury will cost your company. While figuring out the cost of an injury can be a great addition to an internal safety meeting, the larger message here is that when everyone within your company possesses a risk management mindset, your organization can truly reach new heights.

So what does it mean to build a risk management mindset within your company?

Simply put, it means to be intentional with any decision you make by contemplating the potential outcome(s) before you act and how that outcome will affect the company at large.

It could be from an injury/accident standpoint, where taking a moment to think about what could happen to you or others if you follow through with your decision. It also could be from a sales or marketing view as well. How many times have your salespeople sold a job that was out of your comfort zone and now your production crew has to find creative ways to get the job done without the proper equipment, experience or workforce?

Thinking through the potential outcomes before a decision is made can also help you take reasonable or calculated risks for your company that move everything forward. Just by starting your business or joining the leadership team where you are right now, you utilized a risk management mindset to decide to embark on your new professional journey in hopes that you would find a better opportunity for yourself and your family. You intentionally made that decision as you felt it was the best chance to improve your situation. The intentionality of your decision, the fact you thought about the outcome of your career switch before you made your decision, is how you use a risk management mindset for the positive.

Being intentional in your decision making also creates an opportunity to have meaningful conversations with your team based on your thought process before acting – and we all know the power of open conversations between team members. Good tree services become great when communication has been encouraged amongst every person within the company.

To begin installing a risk management mindset within your company, start your next safety meeting by explaining something that you did without much thought that led to a near miss. Then talk through with your team how, if you took a few extra moments to think through the outcomes of your action (both positive and negative), it could have changed your decision. Ask for participation from your team so they become involved in the conversation and begin to understand the topic. Don’t forget to bring in the larger picture at play as well. If your decision led to an injury or accident, how does that affect the entire organization? What do others need to do to help overcome that injury?

Then use a positive example to illustrate the opposite effect of a risk management mindset. Discuss the latest business decision that may have seemed risky (starting a PHC division, opening up a new location, buying a larger piece of equipment) and how you strategically thought through the risk of that decision by understanding the outcomes to arrive ultimately at your decision to move ahead with it.

Getting your team to begin to think just a little bit into the future by using a risk management mindset can dramatically shift the experience your company faces from having things happen to you, to making them happen for you.

We all have a risk management mindset at times when making decisions for ourselves and company, however, the companies that grow the fastest and are the most profitable have been able to consciously replicate that mindset within everyone inside of their organization. If you are struggling with this concept, our Thrive New Heights Package and Thrive Safety Package will help you realize the potential of a risk management mindset within your organization.

Lower Auto Insurance with Fleet Telematics

by amandascale | Jun 21, 2021 | Risk Management | 0 comments

Lower Auto Insurance with Fleet Telematics

Written by: Eric Petersen, CIC

We all know that in today’s world, data is king.

Fortunately, tree services have access to so much more data now than they ever did before. This data can help business owners make sound decisions to improve their company. By using a fleet telematics system, a tree care company can gather vital statistics and data on their vehicles and their drivers thereby improving their bottom line in a number of ways, especially by lowering their auto insurance.

With auto insurance costs on a steady rise, I want to look at three key ways a strong fleet telematics system can help lower your business auto insurance cost.

1. GPS Tracking

The more data an insurance company has, the more confident they feel in the prices that they offer to their customers. Tree care companies that install Global Positioning System (GPS) tracking software can summarize their data and give it to the insurance company to show how they manage their fleet and how they deserve lower auto insurance pricing.

I do want to mention that, there is often a misconception that installing GPS tracking software within your fleet signifies a lack of trust between you and your employees. To quickly dispel any negative feelings about GPS tracking software, explain to your entire team the reasons for using the technology and how it will benefit them. Knowing where your vehicles are will help you provide more accurate information to clients regarding estimated arrivals to job sites, thereby increasing customer satisfaction. If a crew gets a job done faster than planned and has time to do another (more hours=more money for the crew), GPS can identify which vehicle to send to the next job based on current locations. Lastly, this will help you ensure vehicles are being used within company guidelines (which of course are described in the vehicle use section of your employee handbook, right?) limiting the liability to the company and helping to avoid an unsafe situation.

2. Vehicle Maintenance

A strong fleet maintenance program shows the insurance company how serious the business takes preventative maintenance by attempting to avoid issues with their vehicles. This obviously will lessen the number of accidents and therefore claims an insurance company needs to pay out.

Of course, the benefits of improving your fleet maintenance stretches beyond just lowering your business auto insurance. Limiting vehicle downtime maximizes your crew’s efficiency. A good telematics program will monitor things like engine hours, total mileage, as well as potential faults within the vehicle that your employees may not be able to see during the pre/post-trip inspections. Speaking of which, these inspections should be done as well as logged for DOT compliance. Check out this article for more information on DOT COMPLIANCE.

3. Driver Behavior

Distracted driving has destroyed the auto insurance results for insurance companies in recent years. There are so many small fender benders today that insurance companies are raising their prices to keep up with it and distracted driving is the main culprit. Simply put, if a tree service can monitor the driver’s behavior the chances of an accident get reduced dramatically.

When your drivers know they are being monitored, they are more likely to drive with increased awareness and limit their distractions (texting or eating). This intentional focus on better driving is actually a good thing for them as no one wants to get in a car accident, but we all get over-confident in our driving abilities and take unnecessary risks while driving. Consider different ways to reward your drivers for strong driving habits to show them you support their safety. A good telematics system will also provide you with more data to show how/why accidents are happening, giving you the data to help prevent future accidents from occuring.

It is without a doubt that fleet telematics is here to stay and will have a significant impact on your bottom line, especially with your business auto insurance. Telematics provides the proof to the insurance company that a tree service will be a profitable risk for them and highlights reasons why that individual tree service should get lower auto insurance rates. I should also mention that as far as I’ve seen, tree services are not being penalized by insurance companies for poor driving habits.

I encourage you to check with your insurance agency and see if there are any options available directly with your insurance provider. If not, I encourage you to reach out to an ArboRisk team member to discuss how we can help you set up a telematics program free of charge.

Hiring an In-House Mechanic

by amandascale | Jun 14, 2021 | Risk Management | 0 comments

Hiring an In-House Mechanic?

If you’re contemplating hiring an in-house mechanic, you already know the decision is not an easy one. So many factors go into it that it often paralyzes the owner from making a decision.

While there is no magic number that fits every tree service perfectly, we typically do not see companies hiring a full-time mechanic until they have at least…

10 vehicles. That does not include trailers and mobile equipment, although definitely factors into the workload of the mechanic.

So, how do you determine if your company is ready to hire a full time mechanic? Ask yourself and your leadership team these questions to guide your decision making.

Future of Your Fleet

This is often the starting point for deciding whether or not to hire a full-time mechanic. Depending on where you see the size of your company and fleet going in the future should determine when to hire an in-house mechanic.

Do you plan on growing your company and adding more vehicles or equipment?
Are you planning on getting more tech-heavy vehicles or equipment?
Would your production crews become more efficient with newer vehicles or equipment?
Are you considering using fleet management software?

Current Cost of Repairs

Many tree services do not pay close attention to the cost of mechanical repairs, though knowing this or at the very least having an idea of the cost to your business for repairs can quickly justify the extra expense of an in-house mechanic.

How much did you spend on vehicular repairs last year?
How much production downtime have you suffered from a vehicle or piece equipment that needed repairs?
How many jobs did you lose because of an out-of-service vehicle or piece of equipment?
Could any of that downtime or lost jobs have been prevented with regular maintenance?

In-House Mechanic Logistics

Assessing whether or not your company has the capacity for an in-house mechanic is another important factor to consider.

Do you have enough physical space for a mechanic to operate fully within your current shop?
What additional tools (hand tools, diagnostic tools, lifts, etc.) are needed to allow the mechanic to perform the work needed?
Do you have the management team in place to support an in-house mechanic?
Are you able to comply with the environmental regulations that come with operating a repair facility?

Additional Items to Consider

How are you currently ensuring compliance with your state and federal DOT?
Do you currently have vehicles and or any specialized equipment that cannot be serviced by an in-house mechanic and need to be worked on by certified technicians?
Do you have a recruiting strategy set up to find the best mechanic possible?
What employee benefits are you able to provide to the mechanic?

While these questions are by no means an exhaustive list of all that needs to factor into the decision making process, they will help you begin to answer the question for your tree care company.

If you are struggling with this part of your business, contact an ArboRisk team member today to learn about how our Thrive program can help your business Become Extraordinary!

Written by: Eric Petersen