5 Questions to Ask Your Construction Insurance Broker Before You Renew
Posted January 16th, 2020
The construction industry is poised for a bit of a shock in 2020, as rates across multiple lines of insurance — including General Liability, Automotive Liability, and Umbrella or Excess Liability — are set to increase. According to Willis Towers Watson’s Insurance Marketplace Realities 2020, the rate increase predictions land anywhere between 5% to 30%, depending on the coverage line.
To get a better understanding of these changes and how you can prepare for them, we sat down with Dylan Burns, Senior Associate in Corporate Risk & Broking at Willis Towers Watson.
“The commercial insurance rates have been down for the past 3 or 4 years, but as the insurance market has changed, especially in the construction industry, rates are up across multiple lines of coverage. Many contractors may not be aware of this. If you’re not working with your broker and discussing alternative strategies, you’re probably already behind the eight-ball.”
Burns shared five questions you should bring to the table when you sit down with your broker.
1. What are my options? What are we doing to prepare for my renewal?
You may be used to relatively “easy” renewals, but with the marketplace constricting and carriers making dramatic changes to policies that is no longer the case. “Even if you’ve known your broker for years and have a good relationship with them,” says Burns, “now is the time to sit down and review your policy together. You need to build a sustainable strategy. Not just for 2020, but for the next two or three years.”
What can you do?
Get proactive. Prepare for your renewal by scheduling a meeting with your broker and bring all your necessary documentation for review. The following is a short list of what will be needed for review:
- Change of address, if applicable
- Number of employees
- Number of vehicles
- New equipment purchases
- New service or product offerings or other changes to business practice
- Claims data – including detailed information about larger claims and what the company has done to mitigate those types of incidents in the future
Failing to prepare for your renewal can have costly consequences. Not being prepared, delaying information to your broker/carrier and not scheduling pre-renewal loss control meetings all delay the process and limit the time underwriters will have to work on your renewal. This typically leads to less than favorable renewal terms for your company and potential premium increases. Ouch.
It also doesn’t hurt to shop around. Your broker may only have access to a select group of carriers, and there may be other carriers that offer better plans for your business. “Checking what’s out there for you can save you a lot of time and stress in the long run. Even if that may be with another broker,” Burns says.
2. Does my current carrier have discounts for fleet tracking and other safe driving measures? Are we taking advantage of those?
Rising third-party litigation and skyrocketing verdict outcomes have kept Auto Liability rates on the rise for years now, and according to the experts 2020 is no exception. The good news is many carriers offer discounts for safe driving technology and programs.
What can you do?
Implement a safe-driving program at your company. “Brokers and carriers can actually help with that,” says Burns. “Carriers want to work with companies that take pride in their safety. By leaning on their broker, a business can show how they’re taking control of their safety which is attractive to carriers and can afford potential premium discounts.”
Your safe-driving program should include continuous education around distracted driving, fatigued driving, and aggressive driving. If you haven’t already, install fleet tracking in your vehicles. Modern fleet tracking systems do a lot more than just GPS — they can detect and record speeding, aggressive driving, fast braking, and other no-no’s on the road. Some even have historical playback capabilities, which can be useful in claim disputes. This may seem like you want to micro-manage them and perhaps you do, however, the real benefit is the cost savings to the business. Make sure you TELL your employees why you are implementing this program and what the benefits are to your employees so you can manage the message the right way!
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3. What is my company’s Workers’ Compensation Experience Modification Factor (E-Mod)? What does that number mean? How can I improve it?
Workers Compensation is one of the few insurance lines not experiencing a rise in rates. In fact, the prices are so low that it has some carriers worried about profitability. But that doesn’t mean you shouldn’t be paying attention to it.
“Some carriers are looking at Consent to Rate policies rather than the state-filed rates, in order to improve profitability,” says Burns. “Regardless, knowing and improving your Emod is important to your business. For one thing, the higher your Emod, the more you’re going to pay for Workers Compensation. Also, many General Contractors won’t even consider bids from companies with an Emod over 1.00. That’s especially true for government contracts.”
Work with your broker to understand your Emod factor and how you’ve gotten to that number. Each claim affects your company’s Emod, but how each claim is characterized influences the potential impact.
What can you do?
“Talk about safety every day,” advises Burns. “The more you can do to increase employee safety and reduce incidents, the better.” Wellness initiatives, improved communication methods, mental health counseling and substance abuse recovery programs can all make your team safer and reduce the chance of an accident.
Getting employees back to work — even to a light-duty job while they recover — is good for everyone. Employees experience quicker recoveries and less morale decline. Employers can better control the costs of absent employees, and shorter work restrictions can improve your Workers Compensation rates.
4. Are you aware of additional premiums carriers are looking to receive in 2020?
Construction umbrella and excess liability policies are facing some of the biggest changes in 2020. Carriers experienced an excessive number of claims break the umbrella or excess limit. To course-correct and remain profitable, carriers are now raising minimum premiums much higher, from an average of $1,000 per million to $2,500 per million or more.
“The General Contractor has umbrella or excess liability, but more and more are requiring that subcontractors match their umbrella policy,” says Burns. “At the same time, those policies are becoming more expensive and more challenging to acquire.”
What can you do?
Reviewing your coverage plan is good advice no matter which line of insurance we’re talking about.
“Insurance policies are like an encyclopedia,” says Burns. “They’re long, and they’re full of industry and legal jargon. Ask your broker to walk you through it. Find out how your policy responds in the event of an incident. What factors can you control? Which are fixed? What is negotiable? If this coverage is going away, what are my options? Your broker can walk you through all of this.”
5. What can I do from my carrier’s perspective to help with my coverage and rates?
This is the golden question. As the insurance marketplace becomes more constricted, carriers are looking for best-in-class risks. That means you need to put your best foot forward during the application process. You’ll need to provide thorough documentation, including loss experiences and historical exposure. “The carriers don’t want any surprises. They want to understand your business, its history and the outlook for the next couple years. Underwriters understand losses occur, but they want to know the story of why those incidents had occurred and what the company has done to mitigate those types of claims in the future,” says Burns.
Your first step is to get all your documentation together and schedule that check-in with your broker. “Carriers rely on data more and more to predict risk. You need to provide as much information as you can, and in the best context possible,” Burns says. “We as brokers help with that. We dig a little deeper. We say, ‘You have had this loss. Tell me about that.’ It allows us to tell the best story to yield the best possible result for you.”
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