Anybody who has been paying insurance premiums over the last few years has noticed that there has been a shift in the property/casualty insurance world. Obtaining insurance today has a few more hurdles, but there are ways to increase your chances of success.
Market changes: “Hard Market” Vs. “Soft Market”
Insurance agents undoubtedly have talked to you about the “hard market” cycle – the flip side of the “soft market” cycle. During the soft market years, from around 2000 to 2011, insurance companies wanted your business – and worked hard to get it. Insurance companies offered lower premiums to attract new business and reduced premiums on renewals to keep the account. Underwriters weren’t asking too many questions about your business, either. You didn’t have to jump through hoops to come up with the dates that you had your roof replaced. No one wanted to see the contents page of your safety manual or insist that you have a central station alarm to get your contents covered for theft.
Understand How Market Changes May Impact You
With the shift to a harder market, things have changed significantly. Premiums have increased 3 to 5 percent, and companies seeking insurance are under more scrutiny. Additionally, insurance companies have narrowed their “appetite guides,” the list that they give their agents about the types of businesses they want to insure.
If you are a plumbing company doing residential work, good luck. Very few markets will insure that exposure. Grading lots for a residential sub-division? You are a hot potato! Insurance carriers don’t want any part of a potential class action lawsuit. It’s their worst nightmare.
As always, there are exceptions. If you are a large enough company, carriers might bend the rules in exchange for a hefty premium. There are also surplus lines insurance carriers in business to write the accounts that the standard markets avoid.
Your Contracts Matter
Many of the larger carriers—CNA, FCCI, Travelers, and others—are beginning to evaluate the subcontracts utilized by a prospective insured. In the good ole’ “soft market” days, carriers rarely requested this type of documentation, and even less frequently made waves about how it was written. Now carriers want to see subcontracts that are well drafted, up-to-date, and in compliance with applicable rules and statutes governing construction contracts. Indeed, a bad subcontract can put you at risk of losing or being denied coverage. For example, an HVAC contractor in Central Texas recently had its subcontract agreement sent back for revisions by its insurance company not once, but twice, with the threat of non-renewal!
At the end of the day, carriers want to see subcontracts that they can defend in the event of a loss. While there is no hard-and-fast rule (i.e., less may suffice), a well drafted subcontract that includes at least the following key items should be considered defensible and is likely to garner the blessing of any insurance company: (1) an indemnity/hold harmless clause that complies with the “express negligence” rule as well as Chapter 151 of the Texas Insurance Code; (2) an additional insured provision which complies with Chapter 151 of the Texas Insurance Code; (3) a waiver of subrogation clause; (4) a flow down clause; (5) a nodamages for delay provision; (6) a cross-default provision; (7) a time is of the essence provision; and (8) a merger clause.
Summary: Our Best Advice In Your Quest For Insurance
Follow the tried and true Boy Scouts’ creed and BE PREPARED!
- Be prepared to answer questions about your business
- Be prepared to provide detailed information about your business
- Be prepared to accept conditions to obtain the coverage you desire
- Be prepared for additional cost – higher premiums are the norm
- Be prepared to provide contract documents that are well drafted, up-to-date, and comply with applicable rules and statutes