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7 Ways to Prepare Your Construction Firm for the Hard Market


I know. We are still in a recession and you're more worried about getting your next job than you are about how to survive a hardening insurance market. However, chances are highly likely that the construction market will still be depressed when insurance prices spike. Here are seven steps you can take to be sure your company doesn't get hammered when the market turns:

1) Have a safety culture firmly in place and supported by senior management. This is what every underwriter looks at first. Even if you have had a rough patch with significant losses, insurance underwriters will be willing to hear your story if you are sincerely committed to focusing on safety and working with them to turn it around.

2) Understand your contracts, both upstream and downstream. Insurance companies don't want clients who get left holding the bag, particularly if it's due to sloppy language in a contract. It's important that you transfer as much risk as you can and not accept risk that isn't covered by insurance.

3) Make sure your website accurately represents what your company does. Don't brag about jobs that may look alarming to an underwriter.  Like that one time your Rigging Company trailered a space shuttle!

4) Do brag on your website about safety awards your company has received as well as your commitment to a safe workplace.

5) Commit to a return-to-work program for all injured employees. Insurance underwriters want to know that workers comp claims will be minimized.

6) Develop a Risk Management Philosophy that you can articulate. Insurance underwriters want to know that you aren't just out to buy cheap insurance. They want to know you care about preventing and minimizing losses. Here's ours

7) Work with your broker or Risk Advisor to write a three year plan to improve your company in all areas of risk management. This will truly blow the underwriters away.

This may sound like a lot of work and it probably is if you attempt it by yourself. Test drive our services or hire us as your Risk Advisor and we'll have you looking like a shiny new penny to the underwriters. Your premium may still go up but you'll be on the low side and beating your competitors when the construction market improves.  If you want to avoid the market swings of the insurance industry entirely, we have a great solution for that too. And here is a special report about 'How the Smartest Contractors Pay the Least for Insurance'.

To Test Drive or Not to Test Drive


First of all, what do I mean by a Test Drive. Test Drive what? Test Drive the Risk Advisor's service program and the team that will deliver it. Depending on how many of my posts you've read, it might be unclear what I mean by Risk Advisor. Since my company is the first Risk Advisory firm dedicated to the construction industry, I will explain.

There are over 30,000 property/casualty insurance agencies in the U.S. The people who work in these companies are defined by the BLS (Bureau of Labor Statistics) as follows:

Property and casualty insurance agents sell policies that protect individuals and businesses from financial loss resulting from automobile accidents, fire, theft, storms, and other events that can damage property. For businesses, property and casualty insurance can also cover injured workers' compensation, product liability claims, or medical malpractice claims.

The operative words in that definition are, "sell policies". Insurance companies produce/manufacture polices and their agents sell them. That's all they do. There is a very small % of progressive agents (less than 1%) who provide a wide array of services to their clients. I don't know of any that provide free services before they sell some insurance.

A Risk Advisor provides insurance (25% of their role) but their primary functions are to:

1) Design and execute Risk Reduction PlansTM to reduce your Total Cost of Risk (TCOR) 

2) Make you more attractive than all of your peers in your industry/niche to the insurance marketplace

So what you will Test Drive is the Risk Advisor team's ability to design and execute a Risk Reduction PlanTM. And you do this for FREE. In our model there is no cost for the test drive. What that Test Drive will consist of, and how long it will run, will be determined by mutual agreement.

What makes this so sacrilegious to the insurance industry is that valuable services are being provided by the Risk Advisor for FREE. You will rarely see this business model from anyone other than a Risk Advisor for the following reasons:

1) Small agents don't have the professional staff or the services to Test Drive

2) Larger agents/brokers are publicly-owned, bank-owned, private-equity-owned or just plain big insurance agencies without any distinctive services. With those guys you pay to play.

At this point you are probably saying to yourself, "How is a Risk Advisor able to do anything of value for free?" There is an easy answer to that. Our relationships are long-lived. We feel confident enough in what we do that we're willing to work for free until you recognize how different we are from insurance agents. This might take a week or it might take a year. We'll invest our time and resources in your success to earn the privilege of being your Risk Advisor.

In my next post, I'll tell a great story about how a Risk Advisor made a difference in the future of one of its clients.

Take Our Insurance Program for a Test Drive


Have you ever bought a suit without trying it on? Have you ever bought a car without a test drive, without really putting it through its paces, checking the stereo quality, making sure the skis or golf clubs fit in the trunk? Or a TV? If you're like most of us, you stare at the techno wizardry from Asia, all lined up neatly on the wall of the "home theatre" display and try to be the clever one who can discern the nuances of picture quality. You probably even test drive cell phones before you buy them; reviewing and watching the young geek explain all the bells and whistles, even holding it in your hand to try yourself.

When it comes right down to it, is there any significant purchase you make without a test drive?

If not, then you have to answer this simple question and solve a mystery that has confounded me for my whole career. Why on God's green earth do you buy insurance for your business with no test drive or try out whatsoever??

Your ANNUAL insurance budget is 5x the expense of the car, maybe 100x the expense of the phone but you virtually buy it sight unseen. Sure you've met the agent and you've heard of the insurance company she is offering but what else do you know about how they will perform. More importantly, how do you know how well they will design and execute a plan to reduce your risks and make you more attractive to the insurance marketplace so that you are GUARANTEED to pay the lowest possible premiums in the future?

Sadly, because the average insurance agent has given you no better buying process, all you end up comparing is the price of one insurance company vs. another. In most cases, you know nothing about the capabilities of the carriers being compared or the agents representing them.

Why don't you treat your commercial insurance program like the other purchases you make in your personal and business life? WHY???? Simple answer. Until now, you have never been offered a Test Drive of the service program that will accompany the insurance policies.

In the old days of selling, this test drive concept was referred to as the "Puppy Dog" close. It was based on the premise that once you took the puppy home you owned it. Once the kids saw the puppy you were never bringing it back.

I used to joke about a puppy dog close for insurance. "Here Sam, take these polices home for the week-end and see if you like them. Tell me how they perform if the house burns down." Ha, Ha. Obviously, that wouldn't work. Most people and businesses can go years without an insurance policy responding to a claim.

Here's the problem. The insurance industry presents itself to the public as a product business. If you're buying car insurance from GEICO or Progressive, maybe you should focus only on the price. When they tell you "Save 15% in 15 minutes or less' it would seem they are saying they are a commodity and you should compare them to their peers based on price alone.

But you and your associates and maybe your father and grandfather and brothers and sisters and sons and daughters have devoted their working life to building a successful construction company. For all of you, that business represents a major part of your net worth. And you're going to choose the people and the companies that are going to protect it the same way you buy your personal car insurance? Isn't it time to re-think this process? Shouldn't you at least devote the same attention to buying business insurance and risk-reducing services that you do to other purchases that you test drive?

I'll take you off the hook on this. It's not your fault. I'll repeat that. It's not your fault. It's our fault. It's the fault of every representative of the insurance industry that hasn't offered you a better way.

Well, we're changing the model. It's way overdue. Now you are going to get what you deserve, a real Test Drive. In my next post I'll explain what this is and why it will change your thinking forever.


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