Monday, December 15, 2014

Know Your Quote

Dealing with insurance can be a pain.  And figuring out how your quote is created can be even worse.  We sat down with Matt Peterson, Snow Magazine's insurance expert, to unravel what goes into your quote and how you can get the best rates possible.

1.  Matt, walk us through the typical process that goes into generating an insurance quote for a snow contractor? In essence, how you determine that monetary figure? Is there a formula or equation, and if so what is it?

This question sort of reminds me of the Schoolhouse Rock cartoon about how a bill becomes a law. Seriously, though, I can best answer this from the perspective of the process Mill’s Insurance Group goes through when assessing a snow and ice management professional for insurance coverage.

First, we verify that we are working with an ASCA member, and if so are they certified (ASCA-C). If they’re a member but not certified, then how far along in the process is the member to earning their ASCA-C and ISO 9001/SN 9001 certification?

Next, the contractor completes the SRIB application, which is a six-page questionnaire that helps us get a good understanding of operations, industry standards and other insurance factors or indicators. The application is important and will demonstrate a level of knowledge about the operations and the risk awareness that a member may have.

If the account is a fit for the Snow Removal Insurance Brokerage, the ASCA endorsed insurance program, then underwriting Process may be extensive. As we all know, the snow and ice management industry is a unique and complicated industry, so the underwriting will encompass the review of accident info from claims history for the past 5 years as well as a review of the contracts to identify how much risk is assumed in the contracts that a member has with its clients. We are looking at the jobs the insured has, but it is just as important to the carrier’s the type and quality of those contracts. At this time, the contractor or the agent should explain to the underwriter why this contract is good bet to insure. The type of contract the snow removal company signs can fit into different categories which helps determine premium. Underwriters will also identify if operations are in line or out of step with industry standards along with other risk factors we identify from the snow application that is completed. The amount of risk assumed in a contract is also an aid in determining the possible severity of future losses a carrier may experience.

Following this review, either a quote is offered or a declination is made or further clarifications are needed. If a member qualifies, we will rate the account using actuary governed rates, and applying any credits or debits based on the information gathered and the unique attributes of that company.

As ASCA members hear about all year long, we will review the contracts that they sign, which is the most time consuming part of the underwriting process, and a new area in which the carriers are placing a heavy focus.Our efforts in working so closely with the ASCA and the snow and ice management industry has allowed greater insight to the operations and the problems the industry faces. We take the time to educate and work with the insurance carriers, claims personnel, inspection companies and underwriting departments to make sure that everyone is up to date on the real issues.

2.  What’s the most common misconception contractors have about the quote-generation process?

There are so many common misconceptions about this process. One, is that a member is not ready to work with us. The snow and ice management company that calls us for insurance help is not going to be perfect. We understand this. And you don’t need to clean your house to get it ready for the cleaning company, right?

The insurance program was designed for ASCA members, it has been well thought out and with both insurance carrier and the snow and ice management industry in mind. It will only improve and we know that the operations of each ASCA member will make improvements as well.

Another big misconception is that an ASCA member is getting the preferred products, when in fact they didn’t. If you are an ASCA member and you didn’t get insurance through our office, then you are not with the program. We can reward and underwrite a member based on its own merits, but have a product that was developed for the snow and ice management industry. Our underwriters, staff, claims personnel and company is on the front line of the changes in the industry.   

3.  What can a snow contractor do to positively influence this process/formula to produce a more financially feasible figure for their company? 

That’s a great questions, and one snow and ice managers inquire about on a regular basis. Here are some tips to any contractor doing business in this industry:
  • Operate in accordance with the Industry Standards
  • Subscribe to a reputable weather service
  • Avoid signing unfair service contracts, Instead, develop a contract that the property owner signs instead of the other way around.
  • Take the initiative to change internal operating procedures in response to past claims to prevent them from happening again
  • Become ASCA-C and earn your ISO 9001/SN 9001

4.  If a contractor has the periodic slip-and-fall claim against his operation, how long is an incident a blemish on his record, and thus a negative factor in determining their insurance quote? Can anything be done to circumvent any financial penalties due to a slip-and-fall claim?

The pain associated with a severe claim can hang on the insured for up to 5 years with respect to reviewing the claims history, as we stated earlier, we require 5 years of loss runs in order to underwrite a file. Having a devastating claim can effect an insurance premium but it is also good to have something on file from the insured advising what they have done to avoid that type of claim in the future and what types of additional safety measures have been put in place to ensure a safer and less claims-prone worksite for the future. How did the insured learn from the mistake if any mistake was made? Was a certain property responsible for the loss?  

5.  When a contractor in good standing is looking to grow his business by taking on additional work/properties, does this growth impact their insurance quote? (ie, additional properties = additional risk = higher insurance) And if so, how can they work with their insurance provider to make the new quote manageable?

Growth will impact the insurance quote, not in terms of additional properties per say, but from the increase in the amount of sales they would have previously accounted for by adding on those additional jobs. The additional contracts can also affect the pricing, depending on how they are slotted in terms of contractual obligation on the insured vs. property owner. The premiums are proportionate to the loss probability, more specifically relating to the chances of a slip and falls from a third party from the increased growth.

We would never want the insured to feel discouraged to grow their business out of fear of higher insurance premiums, but we do need them to understand that there will be an increase if the likely hood of claim has increased. To make anything work long term, all sides must have a voice at the table, which includes the insurance carrier’s side. However, as sales increase, our rate reduces; this will aid the insured come audit time if they have higher sales basis from the beginning of the policy. If the insured reports a lower sales figure to save money at binding, the rate would be higher than it would’ve been had they used a higher sales figure, and the audit would then be based on that higher rate.

The snow and ice management contractor is faced with a tough decision and a new normal for insurance premiums and processes. We understand this difficulty and are working hard to improve the overall product for this industry. I can tell the industry first hand, that behavior is changing and this industry is working harder plus smarter today based on the work from the ASCA and its members.

Matt Peterson is president of Mills Insurance Group in New Jersey.

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