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WasteAdvantage
The Advantage in the Waste Industry
Before making any changes to your insurance carrier or agent, make sure the agents and carriers have suBstantial industry knowledge, experience, carrier relationships and service capaBilities.
Insurance agents are often asked: what are the pros and cons of switching an insurance carrier? It is important to note that not all insurance carriers, and polices for that matter, are equal in what they offer their policyholders. Just like the variety of options you have when selecting what type of power unit you are purchasing or the tires for your fleet, you have options in insurance providers. Some of the most important items to keep in mind when considering a switch from one carrier to another is their experience with your industry and the amount of premium they currently handle. A company who is just getting into the industry might incur a substantial loss and be forced to exit just as quickly as they entered, or they might not provide all of the necessary forms you need to be protected. Beyond their existing experience, one of the most important factors is the financial strength or rating of the potential carrier.
who carry a rating of A-VII or better. This is not only for your protection, but for your agent as well. While there is technically nothing wrong with a carrier who possesses a rating less than A- VII, they simply dont offer the peace of mind other companies with a rating of A- VII or higher offer. Furthermore, insurance agents purchase Errors & Omissions (E&O) insurance should a mistake be made and a lawsuit be filed. Many E&O carriers will not offer coverage to an agent/agency for insolvency if the carrier has less than a specified rating. If you are dealing with a smaller agency that is carrying minimal E&O coverage and a claim is not covered, they could go out of business and leave you holding the bag for the uncovered claim. Anyone can gain access to the A.M. Best database by visiting www.ambest.com, registering and entering in the name of the insurance carrier in question. They will not inundate you with spam, and it can prove to be a valuable resource. The financial ranking of an insurance carrier is based on the current review of their financial position, as well as their long-term financial outlook, etc. This is especially important since a majority of contracts with both municipalities and private companies contain a stipulation regarding not only the limits of insurance provided, but also that coverage is in place with a carrier who possesses a specific financial rating. Insurance carriers/companies who carry a rating less than A (in any fashion) might get more competitive with their premiums, but in the event of a catastrophic event, such as Hurricane Katrina, in which a lesser rated carrier sustains a massive loss, the possibility of their going out of business and leaving their policy holders without coverage are greater than those with an A rating. In some states, there is a possibility of the carrier being backed by the state in such an event, however, this will depend on several factors including, but not limited to: the carriers financial rating, whether they are Admitted vs. NonAdmitted, if your state has such a policy of stepping in and picking up coverage, the conditions of which
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the carrier went out of business and the amount of the claim in question. Some states also differentiate between coverage lines such as Workers Comp, Auto or GL.
An Admitted Carrier
An admitted carrier tends to be one with a household name; youll see commercials for them on television. An Admitted carrier is one whom the state has approved for business and is willing to back you up in the event of such a loss. These losses tend to be capped at a specific amount per claim, and the guarantee is for policyholders from the time the carrier goes out of business to the expiration date of the policy. Again, it is important to find out the laws in your specific state to determine how this is handled and to what amount of a claim.
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A Non-Admitted Carrier
A Non-Admitted carrier is one who is not backed by the state and might not have a recognizable name. They are typically known as Excess & Surplus, or E&S carriers. There are some industries, such as Waste Hauling and Recycling where a majority of the carriers who are willing to entertain the policy terms are Non-Admitted. There is nothing wrong with a financially strong, NonAdmitted carrier as long as you understand you are placing a bit more skin in the game. In some cases, you may not have a choice. For this industry you will typically have to consider E&S carriers unless your premiums are quite large, usually in excess of $1,000,000 annually. There are exceptions, but as a general rule this will typically hold true.
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Vulnerable Ratings
B, B-: Fair C++, C+: Marginal C, C-: Weak D: Poor E: Under Regulatory Supervision F: In Liquidation S: Rating Suspended
This provides the certificate holder Financial Size Categoris* amnesty from having their insurance Class I: 0 to 1 reimburse your carrier for a claim Class V: 10 to 25 involving both parties. If the form is not Class X: 500 to 750 on a blanket basis, ask how much it is Class XV: 2000+ going to cost you every time you need a certificate with this endorsement. You Chart 1: The financial ranking might find it is more advantageous to spend of an insurance carrier is based an extra $750 (or whatever the charge is) at on the current review of their the beginning of the policy term as opposed financial position, as well as their long-term financial to paying $250 every time you need it. After outlook, etc. the third certificate you are wasting money that could have been easily saved if you had taken the time to ask this question.
Defense Costs
This is extremely important. Are these inside or outside of the limit of coverage? The optimal answer here is outside the limit. If you have a claim and your policy has $1,000,000 per occurrence on GL or combined single Limit (CSL) on auto, and your defense costs are within the limit, your total amount of coverage is reduced by the cost of your legal defense. Unfortunately, good attorneys are not typically inexpensive and if the defense costs are inside the limit of coverage you have available, it could be quickly eroded. As for the Umbrella or Excess coverage, most carriers will exclude pollution coverage here as well. There are some carriers who do offer coverage in their Umbrella for pollution, but it needs to be requested. In some instances it could be necessary to select a different Umbrella carrier from the Auto and GL provider.
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December 2010
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While they are providing a service, and you as the consumer have every right to shop around, they want to find companies they can establish a relationship with. It might sound absurd to you, but would you want to hire a driver who had worked at five different hauling companies in five years? The driver is going to require training, benefits and other expenses above and beyond payroll. Why would you waste money on someone who is just going to leave as soon as they think they can make 25 cents more an hour, when you could invest in a driver who is committed to being with you for a long period of time? Independent insurance agents should be viewed the same way you see your CPA or Corporate Council. While they do sell something, good agents are experts in their field. If you are dead set on shopping your agent, consider broker selection. This is essentially a process where you interview several different agents and determine which agent and agency bring the most benefit to you and your company. Keep in mind, the selling and issuance of the policy is the easy part. Industry knowledge, access to viable carriers/ markets and service/claims handling are going to really separate the various candidates. Important questions to ask the prospective agents are: How many accounts in this industry do you currently represent? Asking for referrals is not uncommon. How many carriers do you currently represent who are interested in this class of business? What volume of premium do you and your agency handle in my industry? This is important as agents who have more premiums in a specific class of business tend to have better relationships with their underwriters and can get more favors when needed. What services does your agency provide once a policy is written? Do you offer in-house risk management and claims handing via your employees, or do you rely on the carrier to provide these services? If they offer the services via their own employees, ask for copies of the biographies or resumes of these individuals. You dont want someone with no real world experience to be your only resource should they be needed. Do you provide claims tracking software or a Web site I can access from my office should the need arise? If so, is there a charge for this service? These are just a few examples of questions you might consider asking. Keep in mind, these are the people who are going to represent you and your company. Their experience in your field could be crucial to your success or the reason for your demise. Sure, company owners, officers and directors would rather floss their teeth with a chainsaw than deal with the insurance renewal, but it is a crucial part of your business and how you are protecting your assets. There is no harm in exploring the marketplace, especially in the current economic climate. The manner and frequency in which you do this however is going to be crucial to your company, not only this year, but also as you move forward and grow. This is a complex industry that requires agents and carriers with substantial industry knowledge, experience, carrier relationships and service capabilities. These are all
items which should be seriously considered prior to and before making any changes to your insurance carrier or agent. | WA Nathan Brainard is Vice President of the Environmental Division at Insurance The Advantage in the Waste Industry Office of America (IOA) (Longwood, FL). Nathan has been with IOA for six years and specializes in Environmental Insurance with an emphasis on insurance for the Waste, Recycling, Remediation and Demolition industries. He can be reached at (407) 9985287 or via e-mail at nathan.brainard@ioausa.com.
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