Want to put a cap on soaring premiums and restore your status as a “most favored account”? Here are five tips from insurance brokers and underwriters.
1. Create a First-Class Safety Program
Well before your policy is up for renewal, invite your carrier’s loss-control department to come by and advise you on safety improvements. “All the carriers have safety engineers who can analyze and improve your current safety programs,” notes Maitland, FL, broker Bob McPherson. “Doing this could be the single most positive thing that a contractor can do to enhance his insurability.”
You should already be well along in a safety program by now anyway. Make sure it is fully up to date, has a high profile, is comprehensive, and is strongly enforced.
Sometimes overlooked in dirt-movers’ safety programs is the auto fleet. Losses here have soared, as have premiums. CAN National Program Director John Tatum suggests, “Make sure you only let people drive who are qualified.” Screen motor vehicle records of new hires, establish criteria for acceptable/unacceptable drivers, and implement a no-tolerance policy on bad drivers. With all of your safety efforts, document what you do in training, policy-making, and statistics-keeping so that you have tangible figures to show agents.
2. Become More Proactive
Don’t just sit back and wait for the next unhappy form-letter notice from your carrier. Industry regulations require that they give 45 days’ notice of cancellation – but you really need more time than this. Start the renewal ball rolling well before your policy anniversary date. Luke Laborde of Willis Group suggests preparing to seek bids at least four or five months out. If you delay until just a month or two before renewal date, your chances of getting better rate quotes are really minimized, he points out.
McPherson adds, “Pay closer attention to insurance than you ever have before.” Ask your broker now for a candid reassessment. Will you be renewed? “A lot of times you can answer your own question,” he says. “Especially if you’ve had any bad losses – you can anticipate having a problem with renewal – . We’re probably in one of the hardest markets for buyers and sellers that we’ve ever been in.”
If the broker’s opinion is discouraging, ask whether anything you might do can forestall cancellation, such as embarking on a dramatically expanded safety program, correcting possibly false information the insurer might have received, or telling the carrier your side of the story on how well managed and safe you really are.
More positively, if your agent expresses confidence about your renewal chances – and you trust his or her opinion – ask for projected estimates on rate increases. A good broker already will have a handle on what’s happening with grading and excavation contractors’ policies. Strategize together on how to make a strong approach in your bid request. Calculate, for instance, the “what-if?” dollar impact of raising deductibles and/or lowering coverage limits.
3. Factor Any Insurance Increases Into Your Estimating and Bidding
Both insurance and surety bonding are ever-increasing chunks of your cost and estimating structure. Thus, Laborde stresses, it’s more critical than ever to forecast future increases accurately and to include them in bids, particularly on projects that are going to go beyond six or 12 months. Accurate cost projections will help protect you against cash shortfalls and a host of other problems.
4. Look for Ways to Transfer Your Risks; Avoid Having Others Transfer Risks to You
As Ralleen Ratzlaff’s experience illustrates (see article), earthmovers sometimes are obliged to sign contracts loaded with onerous clauses. Tatum also notes, “A lot of these are too one-sided, and contractors assume liability for virtually anything that happens.” Naturally, this risk scares away underwriters.
Tatum advises, “You have more room to negotiate these terms than you think you do.” Moreover, taking an aggressive stance is looked upon favorably by insurers. Show project developers your track record of doing good work. Argue with them against clauses that seem unfair. In summary, minimize your liability any way you can and, if necessary, hire a lawyer to negotiate these points for you.
By the same token, try to transfer risks away from your business to others, wherever possible and appropriate. For example, if you have a grading and site-preparation contract that includes digging water and sewer lines but that you’re subcontracting to someone else, make sure you select a financially sound, reputable, and adequately insured subcontractor who has as much insurance as you do, if not more, Tatum counsels. Name the subcontractor as an additional insurer on your policy. Have him sign a hold-harmless agreement absolving you from any problems on his portion.
5. Use Your Brokerage Relationship – or Reevaluate It
George Sullivan, vice president of finance at S.T. Wooten, advises, “If you have a good relationship with an insurance company, now is the time to take advantage of it if you can.” Remind your agent or carrier that you’ve gone through the good times together – and now you’d like to go through the hard times together too. “You can expect some type of consideration for a long-standing relationship,” Sullivan says.
Tatum also points out that you have little hope of gaining much by jumping to a new broker or underwriter these days. At the very least, administrative costs will increase for both of you. Moreover, staying in a relationship through thick and thin sometimes will accrue to your favor. “If you’ve been with a carrier five, six, or 10 years and then you experience one large loss, that company will be more willing to stay with you and not cancel you than if you’ve jumped around from year to year. Of course, if the premium differentials are quite significant and other factors are right, it makes sense to move on,” Tatum says.
Your best move in the current tough market is to locate a broker or an agent who is primarily a construction insurance or surety bonding specialist. These two experts can give you better options, service, and pricing, McPherson believes, “primarily because they will have greater access to more carriers for your type of operation.” If your current agent is an all-purpose generalist who seems less than knowledgeable about your highly technical commercial needs, perhaps you will be better served by someone else. Ask for referrals from trusted industry groups such as the National Underground Utilities Association, www.nuca.org, or Land Improvement Contractors Association, www.lica.org.
