By Douglas Freer, CSP
On April 4 we had a fire in our building. It was fairly significant and stopped our business in its tracks for a short while. Fortunately we did not experience a total loss and we began working through the process of putting the business back together.
During the dizzying summer of trying to keep up and catch up, I was notified that our insurance carrier declined to renew our policy. We were given 34 days to find new insurance—not something I wanted to do when I was already trying to get the business back on track.
Ten years with the same carrier didn’t matter anymore. The prospect of not having insurance before the current policy expired seemed unnervingly possible. After digesting the situation, I set aside all other priorities to focus on acquiring insurance to make sure we would not experience an interruption in business. In the process I learned some valuable lessons.
Stay in control
Maintain situational awareness. Don’t wait for your insurance carrier to drop you. I allowed myself to be in a position where I was at a disadvantage—not expecting to be dropped, we did no preparation work to buy insurance. Given the fire and our claim loss I could have anticipated that our carrier might not renew the policy. In hindsight, I should have investigated this possibility before our policy was set to expire.
Like any vendor relationship, what if something happens to your current agent? Where will you go? Consider your alternatives even if you’re currently satisfied. Find at least one or two qualified agents in case your current relationship fails. Mark Twain said, “When you need a friend, it’s too late to make one.” On short notice I contacted two agents whom I knew fairly well. I also called two agents that were referred to me by other contractors. As a result of those friendships, I was fortunate to get on their schedules, and we met less than 48 hours later.
I would recommend starting the shopping process at least 60, if not 90, days prior to the expiration of your policy. Buying anything under a deadline when you are feeling pressured is not advisable—and this certainly goes for insurance.
Changing agents or carriers?
Are you changing agents or carriers and what’s the difference? An agent typically represents multiple carriers and can shop for competing offers for increased value. An insurance broker typically offers the option of the carrier with whom they are employed.
Snow risk
Carriers assess risk differently, and not all carriers want to cover snow services. This industry has an increased incidence of property and vehicle damage, as well as slip and fall and personal injury risk. Carriers may limit their risk by allowing the insured to stay within certain thresholds of snow revenue as a percentage of the whole. Some may decline to quote. In our case, we shopped nine carriers—six declined, some because of the fire claim and others because of our snow revenue ratio.
Understand what you’re buying
Your agent should review the different types of coverage you will need and offer options that are best suited for your business. Do your homework and understand what type of coverage you need and compare it with what you currently have. Talk with agents that know the business better than you do. As a result of the fire, I gained a much better understanding of how the claim process works. When buying my new policy, I found it helpful to go through hypothetical claim loss scenarios to understand how my building, contents (business personal property) and vehicles would be covered.
Buy the right amount of coverage
Buying less insurance may save you premium dollars in the short term, but when you need the insurance you may be short on coverage. Your agent will be able to suggest the appropriate limits and coverage.
There are guidelines about minimum amounts of coverage you must have, otherwise the insurance company may not fully cover your losses. Determine how much you want to self insure against a partial or total loss. For example, if your skid steer cost $40,000 and its depreciated value is $20,000, do you want to insure the depreciated value or the replacement cost?
Understand the process
Once you select an agent, you will need to provide some fairly basic information. The agent will fill out a comprehensive application form that will be submitted to the carriers. If you choose to have multiple agents quote your insurance needs, know which carriers each agent is submitting to since only one agent will be your agent of record. The insurance underwriters will talk with your agent about your business. There may be additional questions. After considering the application and risk, the underwriter will determine whether they will quote the business. Once your agent receives the quote, he or she should compare the new quotes with your current policy. The process takes a minimum of three weeks. At this point, you may wind up starting over with a different agent or carrier if there isn’t a good fit.
Limit your shopping
Carriers may decline to quote your business if you’ve shopped previously and they perceive that you are just shopping again. When you shop, do your homework to find the best value and then make the commitment. Only shop when necessary and when you’re attempting to resolve an issue.
Choosing a carrier
A standard carrier has met more substantial thresholds for solvency and ability to “weather the storm” should a larger or more significant regional catastrophe hit. Using nonconforming carriers may expose you to certain risk if the carrier is unable to meet all of its obligations to all of its insured. What is the carrier’s reputation? Find out how you will be treated if you have a claim. Beyond talking with your agent, ask others insured by the carrier how they have been treated. Get a referral to an insurance subrogation attorney who works with carriers and will know how insurance companies treat their insured.
Be honest
Intentionally being deceitful with your agent, or allowing an agent to misrepresent your business to the carrier in order to lower premiums may hurt you if the carrier decides to take you through the underwriting process again at the time of a claim. Worse yet, if information was deemed to be false or misleading, it may deny the claim.
Monitor your loss run report
Your “Loss Run” report is a claim history with the carrier. Simply put, you are considered a better risk the lower your loss ratio (claims loss compared to premiums paid). Your loss run report demonstrates a pattern of behavior and represents how you run your company. Ask for a copy of this report every one to two years. Ensure the information is accurate and review it with your agent. A low loss ratio may be the basis for negotiating better rates. You will need a copy of this when you shop for new insurance.
Be a good risk
Accidents happen and are often out of our control. However, not all accidents are equal, and some may be preventable. Ever notice some people are more accident prone? In our business, that’s another way of saying “high risk.” Agents that I spoke with reported that underwriters have said the snow services industry has been undercharged relative to the risk we present. Will carriers increase their premiums to cover the actual or perceived risk? The best defense against rising premiums is to be a good risk.
As an industry, we have an obligation to ourselves and one another to be the best risk we can. It means running a good business where you spend time working proactively to prevent accidents. It means developing solid business practices and having the discipline to follow through on the processes consistently. Are we perfect? No, but being actively engaged in the business means constantly scouting for problems and working to resolve them. It means working with your fellow snow contractors to help them improve their businesses and lower the risks they may be taking. While perhaps idealistic, by working to collectively lower our industry risk profile through professionalism and teamwork, we can present a better argument individually as to why we deserve lower premiums.
Douglas Freer, CSP, owns Blue Moose Co., Inc. in Cleveland. Contact him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
