6 things an underwriter loves to see when quoting commercial insurance.

For most small business owners, purchasing insurance is not one of their favorite things to do. Most business owners would rather be involved in the day to day operations of what their business does to make a profit. Taking a little extra time before you pick up the phone to get a quote can make all the difference in the world when you are offered a quote.  Here are 6 things to keep in mind when speaking with your agent about a business insurance quote.

Small Business Insurance

Have your info.

Everyone wants a quote and they want it quick, but insurance is not a business in which a company can quote a price on the drop of a hat. Proper tax id number, your experience modification rating and accurate payroll figures make the process much quicker for an agent to get a quote from the underwriter. If you don’t have this information a carrier cannot and will not offer you a quote. to save yourself and the carrier some time, have this information ready before you start looking around for coverage.

Safety programs are in place

Safety programs can be expensive and time consuming, but they absolutely benefit your company in many ways. First and foremost, they lower the amount and severity of injuries that occur to your employees. Second they limit the amount of time it takes injured employees to return-to-work. Third it can impact what you pay in premium for commercial insurance. If and when you have an injured employee, your insurance agent can negotiate on your behalf with your insurance carrier to not raise your rate on premium because of the claim. If a detailed safety plan is in place the carrier might see this one incident as more of an outlier and not a sign of how the business operates. If there is not a safety plan in place your business is much more likely to have your rates go up or be dropped by your carrier altogether.

A thorough and accurate website

The accuracy of your website is extremely important. Your agent is going to have a conversation with you about your operations. During this conversation it is important to tell him not only what your business does, but more importantly what your business does not do. Your website needs to match up with this description.  If you run a landscaping business that does not work on trees, but your website offers tree services than an underwriter is going to wonder what else you are not telling them. This is a great way to get a higher premium or more likely be denied coverage altogether.

A detailed payroll history

I know you may not like giving away too much information about your business, but the more accurate this number is that you give to your agent the more accurate your quote will be.  This will all get straightened out during an end of term audit, but it is best to prevent over or underpaying on premium by giving accurate numbers to your carrier up front.

Don’t be a rate jumper

A business who seems to change carriers every year at the slightest drop in premium. Carriers want to establish a long term relationship with a customer. If you have several carriers over the last few years it may be a red flag that those carriers dropped your business or that the carrier may only have your business for one term. Unless your payroll is extremely high it may not be financial sound for them to quote you.

 

Don’t forget, in the end they work for you

If you forget a few pieces of information that are necessary for a quote than it might be expected for the agent or underwriter to be a bit frustrated. But never forget that these people work for you. If they make you feel too uncomfortable do not hesitate to walk out and speak with another agency or carrier. Do what you feel is best for your business.

What is the difference between a Hard market vs. Soft market

Hard market and soft market are terms you may have heard before and they generally are categorized this way due to premium trends on commercial insurance.  We will discuss in more detail below but the main difference and what really dictates them are industry wide or catastrophic claims for insurance carriers across the board. In layman’s terms, a soft market has loosened underwriting restrictions and lower premium. A hard market is just the opposite. Currently the industry is in a Soft Market.

Soft Market:

  • Lower insurance premiums
  • Broader coverage
  • Reduced underwriting criteria, which means underwriting is easier
  • Increased capacity, which means insurance carriers write more policies and higher limits
  • Increased competition among insurance carriers.

A soft market can affect a carriers’ bottom line due to lower rates. A carrier relies on a combination of insurance premiums and investments to make money as a company. This is an area to watch when carriers get downgraded by AM Best because it’s generally due to bad investments and bad decisions on what business to write.

Hard market:

  • Higher insurance premiums;
  • More stringent underwriting criteria, which means underwriting is more difficult;
  • Reduced capacity, which means insurance carriers write less insurance policies;
  • And less competition among insurance carriers.

Are we moving towards a hard market?

Mother Nature and the effects of the economic downturn have been the main causes for change in the insurance industry over the last 18 months prompting some to think we are in or heading towards a hard market. In addition, there are two other areas that can affect business insurance premiums – payroll and revenue. As companies began experiencing a decrease in revenue, employees are let go. Both their payroll and revenue are now lower, which means a decrease in premium to the insurance carrier. This is another way in which the carrier is losing money due to the economic downturn.

What can we expect from insurance carriers during a hard market?

During a hard market, underwriting gets tougher and more stringent. Meaning they are not as likely to quote a business with low payroll or in a risky class code. With each year, underwriters are becoming more sophisticated.  They are looking more closely at losses, safety records and financials. Those in the industry are seeing insurance carriers dig deeper into a company’s financials than in the past. Rates will vary from carrier to carrier and will depend on a business’s inherent risks, claims history and finances. This is why it is important to always being looking for the best price + carrier you can find on a regular basis. Whether that is every year or every couple years you should always make sure that they are earning your business. An independent agent who partners with several carriers can help make this task easier for you as a business owner.

What you can do in a hard market when you are seeing rates increase?

While you will most likely need to be prepared for some rate increases due to the insurance industry’s hard market, there are several things you can do to help minimize the impact until the cycle turns back to a soft market:

  • Because the market and underwriters are becoming more restrictive, it is imperative that as a company you are more involved with your safety programs.
  • Take a more active, strategic approach to managing your company’s risks and claim activity.
  • Start your insurance renewal process earlier.  Some carriers want at least 30 days to quote your business. Starting 60 to 90 days before your term ends can really help this process.
  • Be even more cognizant of your company’s financials – most insurers are looking at whether bills are being paid on time and many carriers are using third party companies to conduct credit scores.

Types of Business Insurance

The other day I was going through my emails at work and I notice something that I hadn’t really noticed before. In the past couple months, I have received numerous emails from clients asking what different insurance policies cover and what additional coverage they need. After replying to each individual email, I came up with the great idea to create a template that briefly explains the different kind of business insurance policies a business owner might need.

 

What Types of Business Insurance Are Available?

The main types of business insurance you should consider include:

  • Property and Casualty Insurance: Property insurance covers the physical location of the business (even if it is rented or leased) and its contents from things like fire, theft, flood, and earthquakes—although read the terms carefully to make sure they include everything you need. Casualty insurance, on the other hand, covers the operation of the business, but the two are usually grouped together in policies.
  • Commercial Auto Insurance: Commercial auto insurance covers your business for loss or damage to vehicles used by your business and for damage to others caused by your business vehicles. Note that vehicles used for business are not covered under your personal auto insurance policy even if a vehicle is used for both business and personal purposes.
  • Liability Insurance: Liability insurance covers you in the event someone sues you for negligence, which can occur, for instance, if someone falls on your property.
  • Product Liability Insurance: Product liability insurance covers your business for damages caused by a product designed, supplied, or manufactured by your business.
  • Business Interruption Insurance: Business interruption insurance can make up for lost cash flow and profits incurred because of an event that has interrupted your normal business operations.
  • Health Insurance: Health insurance provides health coverage for you and your employees.
  • Life and Disability Insurance: Life and disability insurance covers your business in the event of the death or disability of key owners, partners, or employees.
  • Workers’ Compensation Insurance: If you have employees, you must, by law, participate in workers’ compensation programs; workers’ compensation insurance covers employees if they are injured on the job.

 

            I get it! Trying to find the perfect coverage at an affordable price is extremely difficult. If you are a new business owner or even a business owner who hasn’t gotten any insurance before, it can be complicated. Not knowing what each term means in a policy is frustrating. That is why I provided a brief description of the basic policies that business owners frequently purchase. Never be scared to call a professional and ask them for more advice. And always make sure you are reading the exclusion page on your policy. You want to make sure you are properly covered for your job. The last thing you want is for something to happen, and realize something isn’t covered under your policy.

Should you Price Check a Flat Renewal Quote?

In meeting with carrier representatives frequently, I always get updates on the marketplace from a broad array of perspectives. Recently, one of the common themes in the current marketplace is that many renewal quotes are a similar price to what they were in the last year. However, carriers are often pricing quotes for new business to that carrier at very low rates in an attempt to win additional business in a flat market.

For example, as I was price checking my upcoming renewal accounts recently, I was able to save one client around 20% on their policy even though their renewal quote with their carrier had not changed from the prior year. By having their renewal policy price checked, this client saved 20%. It’s not to say you should move your business insurance every year as there are advantages to having continuity with one carrier in case claims or service issues arise. However, potential savings can exist even if your renewal pricing is the same as last year’s pricing.

The current marketplace has several carriers notably pricing aggressively to compete for new business opportunities. One of the carriers that comes to mind right away for workers’ compensation insurance is The Hartford. They are discounting their base rates up to 40% for certain business types and in certain states. It is a hard to beat combination when an A rated carrier with excellent customer service is pricing as low as any carrier in the marketplace for certain businesses.

Another carrier that comes to mind is GUARD Insurance. They are another A rated carrier that is affiliated with insurance giant, Berkshire Hathaway. GUARD has been rapidly expanding into the marketplace for small and mid-sized businesses. If you haven’t shopped your business insurance in a few years, GUARD may not have been an available option at the time you decided on a carrier. Now, they are the leading carrier for many industries (particularly certain artisan contractors) in the marketplace and also offer excellent customer service.

There are so many variables that it is hard to write generally about some of the best carriers in the marketplace for particular businesses. However, AmTrust, Employers, FirstComp and Travelers are all highly rated carriers which offer great customer service and are pricing certain industries very aggressively to attempt to grow their business.

There can be other reasons that it may make sense to price check your business insurance. For one, your claims history may be more favorable than it was several years ago.   Other insurance carriers may offer more favorable payment plans than you currently have. An example in the workers compensation arena is that pay as you go insurance might be available. Over time, different carriers happen to prefer certain industries more or less than they do at other times. That can lead to better pricing in some cases than may have been available at different points in time.

Without checking prices, it’s hard to know whether or not there might be better options out there than your current carrier.

The Importance of Your Company’s Website for Getting Business Insurance

The web presence of a business dramatically affects the business insurance options available for that business.  Much of the insurance buying landscape for businesses is shifting to the online/e-commerce environment. This often offers businesses faster service, better prices and the opportunity to get quoted by more carriers. Many of these transactions are conducted exclusively over the phone and by email.   An agent seeing a business face to face is becoming less and less common. Thus, underwriters are increasingly relying on a company’s website to assess whether they want to insure a company or pass on the opportunity.

For some industries, such as contractors, many insurance carriers will require evidence of a business online before they will quote that business (even if a formal website is not be required).  This gives the insurance carriers more confidence they know what business they are insuring. A good web presence helps businesses obtain better business insurance by getting quotes from more carriers.

Websites are generally used as a marketing tool for businesses. They often are over-expansive in the services they list they will offer.  That is good for marketing, but can make it more difficult for businesses to get insured.   Insurance company underwriters often rely on information contained on a website more than any other resource available. Thus, they will often decline quotes if services are offered which are ineligible for coverage. The rub is that often the businesses don’t really offer all of the services listed on their websites. Many times websites are created by a vendor the business owner contracted with, and their only goal was to make the website the strongest it could be from a marketing perspective. Additionally, the business owners may not always monitor their website on an on-going basis or update the website for changes in business operations.

However, when it comes to getting insurance, it is important that your company’s web presence most accurately reflects your business operations. Editing your company’s website is one way to accomplish this task. Sometimes, it is possible to explain why websites advertise services which are not really offered. However, sometimes it is not. Furthermore, sometimes carriers might price insurance more conservatively due to their potential doubt of the company’s operations based on an inaccurate website. An accurate website puts a good foot forward with insurance carriers.

There are many persuasive reasons to have an accurate and current website. Ease in obtaining business insurance (and potentially better priced business insurance at that) is another reason to add to that list.

OH NO! AUDITS!?!

This past week I went to a training seminar on workers’ compensation insurance. I showed up to this event expecting to learn about claims,  class codes, and all the new products coming out. When I got to the seminar I first sat down at the table I was assigned to. While I introduced myself to all the other insurance agents, I asked them, “What do you expect to learn this week?” To my surprise, everyone wanted to learn about audits. Everyone wanted to learn about things like how an audit works, who does the audit and why do we need to do them? I really was shocked that so many agents didn’t know much about an audit.

What is an audit?:

Workers’ compensation policies are issued with estimated payroll figures for the policy period. An audit is completed at the end of the policy period in order to determine the final policy premium. It can be completed either by phone, mail, or physical visit.

How to prepare for an Audit:

Assemble all financial documents that you have accumulated throughout the year. You should really start at the beginning of each policy year. Things that will be helpful/needed: payroll books, 941s, SUTAs, 1099s, checkbook (which is best if you have a separate checkbook for personal and business), general ledger, or tax records and lastly all Certificates of Insurance. It is very important to know that all grossed wages are used, for example wages for all payroll, commissions, bonuses and lodging allowance.

Who does the audit?:

Typically it is the actual carrier that will do the audit. Your agent will be able to assist you, but it will be the carrier that will proceed with the actual audit. There are times where the carrier can use a third party as the auditors.

When do audits take place?:

Audits typically take place at the end of the policy year. Your agent can request a quarterly, monthly or semi-annual audit for your company. The reason they might suggest that you do one mid-term, is to check on your payroll. It is always best to get the most accurate payroll, but sometimes we might have to actually estimate what an employee will make in a year. When we estimate the payroll, it is always nice to check to see if you are close or going over the estimated payroll. It is a lot easier to adjust payroll during the policy term, than to do it after. It is also a lot nicer to not have to pay any additional premium at the end of the term.

I understand that audits can be stressful and just a pain in the butt, but they are necessary. But if you are prepared for the audit, then you will be okay. The auditor isn’t after you or after your business. They just want to make sure you are paying the correct premium. They also want to make sure that you are classified correctly. So don’t think that audits have to be the end of the world, just breathe and relax. With this advise you will be all set for the audit. You can always call your insurance agent and they will gladly assist you with any additional information you might need.