Posted by Robert Phelan on Wed, Jan 27, 2010 @ 07:46 AM
You probably don't realize that the more you focus on safety the more you could be helping your competition. That's right. If you buy what we call "Guaranteed Cost" insurance, and you have an excellent safety record, you're actually subsidizing the premiums of your unsafe competitors.
You don't believe me? Think about how insurance works. All the contractors in a given state pay premiums to their respective carriers. Those who focus on safety are profitable to their insurance company. The best ones (what you want to be) might make their carrier 30-40 cents on the dollar. Most aren't in that category. Most are marginally profitable or worse, unprofitable. In an average year they could cost their carrier 20 cents on the dollar. If they have a catastrophe, one claim could be worth 2 to 3 to 4 years' premium.
The insurance companies are publicly owned and have to meet Wall Street expectations of profitability. So what happens? They take the money from the bucket of profitable contractor clients and use it to subsidize the unprofitable clients. You don't get any money back as a reward for your safe record, do you? Not a nickel. It goes to your competitors. If the insurance companies couldn't use your money to subsidize the losers, they would be out of business. How do you like them apples!
So what can you do? Get out of the Guaranteed Cost market and get into a Loss Sensitive program. A Loss Sensitive insurance policy is one where your premium floats with your loss levels. If you feel confident in how you manage safety and know that your loss levels will be better than your competitors, this is the only way to fly. The insurance company won't keep your insurance profits. You will.
To learn more about this concept see this special report: "How the Smartest Contractors Pay the Least for Insurance".
You don't help your competitors with their bids. Why would you help them with their insurance? No more Mr. Nice Guy. You win. They lose. As it should be.