Gathering Storm By Daniel Walker Guido
Here are some steps you can take to lessen your insurance risk.
1. Work with an insurance brokerage firm that cares about its clients. According to Blake Johnson of Minard Ames Insurance of Phoenix, finding such a broker "can be a challenge. But if your broker doesn't care about its business, it is simply going to get what it can get with little effort spent to make certain [the policy cost] is the best price out there."
2. Work with an insurance brokerage firm that has good market selection, such as an independent insurance agency. If you deal with an insurance agency that is more limited, "chances are good that they are going to get whatever their renewing carrier is willing to offer," with no flexibility on price or coverage exclusions, Johnson says. Then, if the carrier who is writing policies covering builders bails out of the business, you, the builder, could end up in the much more costly excess and surplus insurance market.
3. Find out how much business your insurance agency has with the carriers that continue to write builders. "Now is the time for the builder to do some research," Johnson says. "You need to find out who is writing the construction business and where are they placing it. Find this person and use his relationships with carriers. Good, solid representation to the market is critical in getting the best deal."
4. Adopt the same loss control philosophy as the big builders. "Keeping a clean loss record in this market is critical," Johnson advises. "Now more than ever, it is so easy for underwriters to say no. If you give them any reason, they will say no. There has to be a reason for them to write an account beyond the premium. It must make good underwriting sense."
5. Review all of your insurance coverage with your agent--property, liability, commercial auto, group life, health, benefits, business interruption, workers compensation, and key man coverage--to make sure you have the right coverage at a competitive price, advises Bob Rusbuldt, CEO of the Washington-based Independent Insurance Agents of America. Explore options like increasing deductibles and implementing effective risk management programs to lower premiums.
6. Keep abreast of actions by Congress and the White House as they address the insurance crisis to determine the effect on the reinsurance and insurance industries. Then call the NAHB and request information and direction on how to respond. The contact at NAHB is construction defect issue attorney Dave Jaffe at 202-266-8317.
BUILDER Magazine, February 2002