Posted by Robert Phelan on Mon, Jan 04, 2010 @ 08:01 AM
If I were to guess, most construction firms have a vague goal for 2010 about saving money on insurance. Sadly, there is probably no plan connected to this goal. We business owners all know that it's very difficult to hit a goal without a plan.
Let's pretend for a moment that you did have a plan to lower your insurance costs. What would it look like? Let's also pretend that you consulted a Risk Advisor. What might they suggest?
Our team recently met with a team of specialists (underwriters, claim and risk control) from the largest construction insurance company in the U.S. In rank order, these are the characteristics that they said would make a "Best of Class" contractor.
1) Commitment and willingness to learn how to become better. This commitment needs to be accompanied by full support of top management. Far and away, this is most important of all. Even if you have had problems in the past, your commitment to change is what a good insurance carrier wants to see. The good insurance carrier can help you and wants a long term relationship. They are willing to invest in building a foundation for the future. The bad ones can't really help you because they don't have the tools or the trained personnel. They will judge you purely on your loss history. If it's been good, they'll sell you cheap insurance and then dump you when things go bad.
2) Commitment to run a safe workplace. For the best contractors, safety is ingrained in the culture just like quality and productivity and profitability. This doesn't mean you have a safety manual and quarterly safety committee meetings. It means that safety takes priority over everything.
3) Loss History. How safe have you been for the last five years? Many contractors have the mistaken impression that all their peers have losses just like they do. They would be surprised to see the records of some very large contractors who can operate with minimal losses over long periods of time.
Obviously, you can't change your past loss history but you can change what it will look like in the future. That's what #1 and #2 are all about. If you want to save money on insurance, learn to reduce operational risk and improve safety. A good Risk Advisor can begin helping you tomorrow. Call us for a test drive today.
Posted by Robert Phelan on Fri, Dec 18, 2009 @ 10:03 AM
In its simplest form, a COI is a single sheet document that describes the insurance 
coverage of a contractor. It includes such details as the insurance carrier(s), policy term, limits of coverage, the agent providing the coverage, notice of cancellation provisions and other pertinent coverage details.
Unfortunately, insurance policies have become very complex documents and it is impossible to represent them properly on a single sheet of paper. (As I wrote that last sentence, I realized that maybe that's the problem. The COI form has not kept pace with the complexity of construction contracts.)
Maybe at this point you say, "Big Deal! I've been providing/receiving COIs forever and it hasn't hurt me yet." I'll promise you this. It will if you don't change and you should care because your business is at stake. Giving or receiving a bad COI is like the iceberg was to the Titanic. By the time the problem is spotted, the disaster (uncovered claim) has already occurred.
Here's what a COI won't tell you:
- Whether one or more of the insurance companies being used is financially unsound
- Almost 100% of the time, one or more parties are required to be added as Additional Insureds on one or more policies. In most cases, a COI won't tell you if the right Additional Insured endorsement has been used. There used to be one or two of these endorsements. Now there are dozens.
- If coverage is required to be kept in place for one or more years after project completion and you don't get a new COI every year, you won't know if the party providing the COI has maintained the required coverage.
- Specialty coverages like pollution, professional and builders risk are all written on non-standard forms. A simple COI tells you nothing other than the limit. The limit is meaningless if the coverage is non-existent due to exclusions.
- Lastly, but maybe most importantly, nothing on the COI will tell you whether the coverage is in compliance with the contract specification. Only a trained human being can tell you that.
In my next post I'll describe the three reasons all contractors struggle with COIs.