Environmental Insurance – Reducing Risk, Reducing Costs

September 24, 2020

Monitoring vapor intrusion system, which enables safe development on properties with a past, and eliminates health risks.

“An ounce of prevention is worth a pound of cure.” We’ve all heard that proverb before, and it’s true – it’s generally easier to stop something from happening than to repair the damage after it has happened.

This is almost always the case when it comes to environmental incidents – it is cheaper to prevent the incident from occurring than paying for the cleanup and impacts the incident caused. Many of SCS’s service areas are specifically focused on prevention and optimization – doing the job in ways that are better, safer, and more protective of human health and the environment.

Environmental insurance is a product that most SCS clients likely have in place in some form to protect their facilities, employees, and neighbors from the harmful impacts of incidents that can introduce contamination into the air, soil, groundwater, or surface water. The types of coverage provided by environmental insurance policies vary in both extent and cost, and many factors, one of which being risk, drive those costs. When an insurance company is underwriting coverage for a new or existing client, the risk associated with that coverage is carefully evaluated. What the client (insured) does, how they do it, their safety record, their history of previous environmental issues, and other factors are all taken into consideration when writing an environmental insurance policy and the associated premium and deductible are determined.

 

The bottom line for both the insurer and insured is that risk is closely related to the cost of coverage. Generally, the higher the risk, the higher the premium and deductible; the opposite also holds true.

 

To reduce the up-front costs (the premium) associated with carrying the necessary and appropriate amount of environmental insurance, the insured can do several things.  One is to increase their deductible, but in the event of an incident, that could end up costing the insured more on the back end (i.e., costs expended to investigate and remediate an incident).  Insureds, their brokers, and the insurers will work closely to balance premium costs and deductibles so that the costs associated with addressing an incident are not detrimental.

An insured shouldn’t reduce the type and amount of coverage – that could put them in a bad financial (and legal!) position. A more prudent choice, one that has many potential positive aspects and makes sound business sense, is reducing risk and therefore the costs associated with an environmental insurance policy that is based on coverage and risk.

 

Technology can provide risk reduction and operational efficiencies.

 

SCS Engineers develops proprietary remote monitoring and control software for landfills, manufacturing, and industrial facilities called SCS RMC®. The software provides remote real-time viewing, analysis, and control of equipment and systems critical to safe operations and production. A network of sensors and Machine-to-Machine (M2M) applications enable operations teams to be alerted immediately (via cell phones, computers, tablets) of any operational issues that could potentially result in an environmental incident.

Technology greatly reduces risk to employees and infrastructure, shown here is SCS RMC® on a cell phone.

The application reduces reaction time, labor costs, and potential associated impacts. In this case, SCS RMC® puts the client’s decision-making in front of a problem rather than reacting to potential aftermaths, proactively reducing the potential environmental risks of their operations.

SCS’s service areas, including those listed here, are particularly focused on providing our clients with assistance in designing, building, and maintaining sustainable solutions, reducing risk, and helping to foresee and adapt to environmental, social, and regulatory changes:

SCS’s professionals are available to assist our clients in their discussions with brokers and insurers regarding how our environmental services and technologies can potentially reduce risks associated with their operations. We do this by providing creative and cost-effective solutions and guidance that can prevent environmental incidents from occurring and reducing the nature and extent of associated impacts.

We can help you select and implement the “ounce of prevention” so that you won’t have to face the “pound of cure.” This will proactively reduce operational risks, which can, in turn, help facilitate the positive brokering of more favorable environmental insurance coverage, premiums, and deductibles.

 

About the Author: Michael Schmidt is an accomplished leader with nearly 30 years of progressively-responsible experience in the environmental consulting and environmental insurance industries, with specific experience focusing on the evaluation of environmental risks and liabilities associated with insurance claims and underwriting, site investigation and remediation, due diligence, and project management.

 

 

 

 

 

Posted by Diane Samuels at 6:02 am