By Kari Dybdahl
Have you ever felt as if it would be a full-time job to keep up with all of the changes in the insurance market? That is because it is!
The insurance market is everchanging. Liability policies and appetites of insurance carriers can change monthly and are driven by many factors; however, these changes are mostly driven by litigation within a particular industry as well as geography. For example, contractors in Wyoming might have the luxury of lower rates and broader insurance coverage; whereas, a contractor in New York has to fight rates and coverage every renewal.
Risk appetite, insurance rates, coverage exclusions, and endorsements seem to change regularly, especially in the excess- and surplus-lines market, which is where you get your pollution insurance coverage. With all the changes, it can seem impossible to keep up and like your insurance coverage could slip through the cracks, leaving you vulnerable when you really need it.
In this article, we will go through significant recent changes seen in the insurance industry and how they relate to your business and insurance, including what to expect with your insurance renewals and what to look out for with certain coverages.
A recent report said that the insurance industry as a whole has been experiencing a downturn in losses. This includes all insurance sold in our economy: Homeowner’s insurance, personal auto insurance, business auto insurance, commercial property insurance, and many more.
It almost seems hard to believe given the increasing number of intense storms and catastrophic events such as wildfires and floods. When the insurance industry pays less out in claims, they require less funds coming in to offset those losses, resulting in lower premiums for insurance buyers. This is good news for all insurance consumers, both personal and commercial.
Although the number of losses has recently gone down, the amount paid per loss has been increasing exponentially. Recent increased assessment on the value of a person’s life has caused insurance companies to pay out millions in damages; whereas, in the past, they would have paid out a fraction of the current payout for a similar loss.
Consider the recent litigation against Monsanto and its related cancer claims: In May, a man was awarded $289 million in damages, and after just three jury trials against the company, more than $2 billion in damages had been awarded.
Let’s examine some lines of insurance coverage that cleaning and restoration professionals customarily purchase to get an understanding of the current climate.
Commercial auto insurance
As the awards for damages increases, so will the rates of auto insurance. Another factor contributing to the increased rates on auto insurance is the ever-growing amount of technology in vehicles. Technologically advanced parts like built-in mapping systems and Bluetooth technology are more expensive to replace or fix and, therefore, more costly to insure. Unfortunately, we do not see the rates on business auto insurance for contractors reducing in the near future.
The rates on property insurance depend heavily on your location. If your area has been affected by recent weather events such as a storms, flooding, wildfires, or other natural disasters, rates on your insurance could very well increase due to the risk profile.
We have not seen or heard of rates increasing (the way the auto insurance line currently is), but we have certainly heard of rate reductions in locations that have not been affected by a catastrophic event. So, look forward to potential reductions in costs if you’re located in these areas.
General and pollution liability
Over the past few years, there has been a steady increase in claims from restoration contractors on their operations-based liability policies—anything from an upset customer who didn’t like the build-back work to asbestos accidentally disturbed in a building. Insurance companies have determined that the bulk of claims are coming from the commercial general liability exposures, especially those related to build-back work.
In the past year and a half, we have seen insurance carriers pull out of the restoration class altogether; however, not all carriers have exited the space. Many of those that remain have increased rates in order to account for the uptick in claims and loss payouts. If 20% or more of your revenue is derived from build-back work or any work other than direct restoration or remediation work, you should expect a rate increase on your operations-based liability insurance such as your commercial general liability, contractor’s pollution liability, and professional liability insurance policies.
To help with rate increases on loss-leading lines of coverage, I suggest having a good risk-management plan in place that you can share with your insurance company. Even if you haven’t had a loss, a risk-management plan shows your insurance company you are doing your due diligence and actively taking steps to reduce everyday risk in your company.
Always remember that insurance is in place to transfer catastrophic risk that would threaten the longevity of your company onto another party (i.e., your insurance company) through a contract. Your insurance should never be so expensive that it is uncomfortable to run your business. If this happens, be sure to contact an insurance professional right away that specializes in insurance for the cleaning and restoration industry.
Kari Dybdahl has a decade of experience in the environmental insurance industry assisting clients from carpet cleaners to municipalities. She has received multiple awards and recognition for her work placing compliant insurance for Crawford Contractor Connection members, ICRA members, and many others. Dybdahl designs custom insurance programs alongside Dave Dybdahl. Please reach out to her with any questions at 608-824-3341 or firstname.lastname@example.org.