Systems Work
As a franchisor, you have created systems to help others grow. Insight into efficiency is part of what makes the franchise model work. At Moody we are bringing focused attention to the benefits of creating systems for your insurance and risk management. The insight and efficiency created will increase value across the franchise.
Your Franchise Disclosure Document no doubt contains specifications for insurance. And a lot of ink has been spilled after the creation of the FDD to address how franchisees comply with those specifications. Increased liability can be created by mandating franchisee’s utilize certain insurance avenues. But not providing guidance on where and how to procure the proper insurance creates significant cost and inefficiency by having to track and verify from multiple sources. Additionally, liability can be increased for both the franchisor and franchisee if the insurance obtained is inadequate.
Franchisors can strike a “both and” approach to help franchisees with this critical business need. Instead of mandating usage of certain insurance companies or brokers, franchisors can work with expert brokers to create voluntary programs that franchisees will want to use. Franchisees appreciate well designed proven systems; it is a key reason they want to invest in the first place. Insurance purchasing and insurance compliance can be one of those proven systems. A voluntary system can be created that will reduce the friction and sticking points for purchasing and complying with FDD insurance requirements.
Sticking Points For Franchise Insurance Purchasing and Compliance
- Equitable and understandable pricing
- Correct policy language within required policy types
- Correct limits for required policies
- Efficient and fair claims handling
- Properly licensed and financially rated insurance companies
- Identification and proof of proper additional insured status
- Correct application of endorsements that may be required by FDD
- Certificates can be wrong
Confirming Coverage
Franchisors must designate time and resources to the process of confirming franchisees have correct coverage in place. Often, at the core of this process is a person reading Certificates of Insurance (COI). Coverage names and limits are listed on the certificate. But certificates can be wrong. Just because the certificate lists a coverage name does not mean it is exactly what a franchisor would want or has prescribed in the FDD. We have seen claims occur that revealed the coverage on the certificate was not accurate or adequate.
By a franchise having access to the actual policy information and not just the certificate they can more accurately confirm coverage. A centralized insurance program allows confirmation that franchisees are utilizing a uniform policy language and both franchisor and franchisee are current on what coverage is and is not included. A voluntary centralized program can provide the clarity into coverage that all parties desire as they work together. Some centralized programs have become so successful that the franchise created a Captive Insurance company. In short, this is their own insurance company designed specifically to handle their franchisee insurance, with potential cost savings and profits being plowed back into the Captive. Franchisees have benefitted from this well designed type of system.
Starting the Process
Creating a successful system requires planning. At Moody, we have developed some systems of our own. Our proprietary VisiRisk process can lead franchises through the process of identifying risk and opportunity. Creating a centralized insurance system to benefit the entire organization.
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