Product Trends: Insurance - A Premium Price

This year’s Easter weekend was a tough one for the owners of Columbus, Ohio-based Five Seasons Landscape Management. When they returned to work the following Monday, they discovered about $150,000 worth of equipment and supplies had been stolen from their storage facility. Fortunately for them, within 24 hours the company’s insurance covered most of their losses. Five Seasons Vice President Steve Woods attributes the quick recovery to finding a provider who knows the landscape industry and its needs rather than simply going with the lowest bidder.

“The lowest premium wasn’t really a factor,” Woods says. “I think it’s the relationship. It’s having someone who’s going to be there for you, who’s going to go to bat for you and give you the right advice.”

Although cost is always a consideration, there are other key issues to inquire about before deciding on coverage. Does the provider specialize in coverage for the landscape industry, or are they at least familiar with it? What other services do they provide? Are they going to reduce total risk cost rather than simply offer low premiums?

“If you’re going to look at an iceberg, for example, what you see sticking out of the water are the products and price,” says Mark Shipp, executive vice president of Ogilvy Hill Insurance, Santa Barbara, Calif. “What you see below is everything that we focus on.”
Below the surface is the insurance provider’s ability to act as an advisor who is familiar with a company’s infrastructure, regulations compliance and employee work habits, according to Shipp. Training, such as power tool safety, responsible driving and following Occupational Safety and Health Administration guidelines can dramatically reduce risk.

“It’s the attitude of your employees that bears out in loss ratios,” Shipp explains. “If you have poor loss ratios, there’s something wrong with your culture because it’s people who are doing it – not only from a worker’s compensation perspective but a general liability perspective. If the employees don’t care, they’re going to get into dumb accidents. They need to understand the global issues of the green industry as a whole.”

BIDDING WARS. When contractors seek out an insurance provider, they sometimes pit one broker against another in a bidding war to reduce the price, according to Shipp. But that can sometimes backfire because the contractor often settles for lower quality. Besides, brokers today are more focused on writing business than generating quotes, Shipp says. “There’s a saying in our business that there is no practice quoting, and insurance carriers are looking at the same methodology because if they’re quoting 10 different accounts and only getting one, then 90 percent of their efforts are on things that they’re not able to garner any results on,” he explains. 

The end result can mean less coverage and greater liability for the contractor when only price is being considered, according to Michael Weisburger, president of B. & D.A. Weisburger Insurance, White Plains, N.Y.

“My biggest fear is that when we speak to contractors looking for coverage that they’re only looking for the lowest price and that all these other factors really don’t come into play,” Weisburger says. We realize that price is important, but you should be looking for a good and fair value. The real value is when you have quality coverage at a fair price, and when you have a claim, the claim is treated fairly and you have open access to your agent, the company and the claims people to be sure that they’re holding up their end of the bargain. I would recommend that you consider paying more for your coverage if the coverage itself is better and it’s backed by a more financially strong carrier.”

When premiums are a concern, there are steps companies can take to reduce their current rates. Five Seasons invites its insurance agents to training sessions to show they are taking steps to make a safer workplace, and every Tuesday the company sends a copy of its training agenda to its insurance provider, Woods says.

A company can also ask a provider if it can reduce premiums by accepting more risk. But keep in mind that claim payments will increase in this situation, Weisburger points out.

PLAY DETECTIVE. Contractors should ask questions and do a little of their own investigative work before choosing an insurance provider. Check out a company’s rating through rating services, such as A.M. Best, Weisburger advises. A.M. Best assigns “financial strength ratings” of A++ to S. Weisburger suggests contractors look past the agent and select a carrier with an A rating or better. Once a plan is selected, contractors need to accurately tell the agent the scope of their work. The agent needs to know the type of work contractors are performing to evaluate risk and to determine the proper coverage, explains Weisburger.

“For instance, on workers’ compensation the contractor needs to give the insurance company correct payroll information because if they don’t, they’re apt to get socked with a large additional premium when they’re audited if they haven’t provided their payroll accurately,” Weisburger explains.

Contractors also should ask potential insurance providers what they see as possible pitfalls in the risk management area, Shipp suggests. “Ask what the company’s focus should be, and where it should start,” he says.

When Five Seasons wanted to switch from a provider that specialized primarily in homeowner’s insurance to one more familiar with landscaping, Woods says he contacted his current provider’s references. He also made sure the company understood liability issues for his industry, including chemicals, vehicles and machinery. 

A SECOND GLANCE. Evaulating your insurance program annually is also a good idea. For instance, Five Seasons meets once a year with its provider prior to the policy’s expiration. At the meeting, they review the entire policy from vehicles to liability issues. The company then makes adjustments, depending on its needs.

“There’s something to be said for maintaining a long-term relationship with y our provider, but it’s still probably appropriate to reevaluate coverage on an annual basis,” Weisburger stresses.

Companies that are growing dramatically may want to conduct quarterly reviews of their policies, according to Shipp. Companies that are fairly static should examine their contracts every six months to a year.

“What you want to review are consistency of equipment values,” Shipp says. “Does it make sense? Where does it make sense for me to carry some of my own risk? Because the more risk you carry, the lower your premiums are going to be. Gone are the days when you can use your insurance program as an HMO type of vehicle. It’s not something for maintenance. It’s meant for that type of catastrophic loss that you’re not able to withstand yourself.”

The author is associate editor of Lawn & Landscape magazine and can be reached at jkatz@gie.net.