Perform a due diligence study when acquiring or merging with a company, buying property or forming a new company.
 
Scenario: Recently we received a call from a company that was looking at a 50% increase in their workers compensation insurance. They were moving their company from New Jersey to New York. They were surprised to learn at the last minute that the rate in New York for the classification of their business was double as compared to the rate in New Jersey. This situation might not have been avoidable but at least it should not have come as a complete surprise.
 
A more compelling example might be that after an acquisition has been made it is only then that you find out what the true cost of the insurance and risk management program really is along with the fact that the liability assumed is way in excess of that which was disclosed or recognized on the balance sheets. Of course when the extra insurance costs are discovered it obviously will have a direct impact on the purchasers return on investment. This situation skews the profit margins assumed when the acquisition was pending.
 
Bottom Line: It is vitally important to a company's balance sheet and projected profit margins that due diligence analyses be performed by an insurance professional, as a part of the due diligence team, prior to an acquisition, merger, purchase of new property or contemplation of forming a new company. Doing so will provide you with complete disclosure and have a positive impact on your long term return on investment.

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