Fix it before it breaks
Preparation ensures top quality insurance program renewals
By Jack Gagliardi
In unyielding market conditions, bus and motorcoach operators are casting a wide net in an effort to strengthen performance and improve the bottom line. One area executives can make improvements is in commercial insurance programs.
Companies often take the if it isn’t broken, don’t fix it attitude with regard to insurance. However, as many insurers tighten their underwriting requirements and only offer insurance to higher-quality companies, an organization may want to review the way it prepares information for insurance program renewals.
A direct correlation exists between the quality of the risk information a company submits to its underwriters and the quality of insurance it receives. A well-executed submission can move a company to the top of the stack and gain favorable pricing, terms and conditions. An inadequate submission creates delays and is often set aside. The best way to start is to understand how underwriters view a renewal submission, and to know the specific information they request.
How to work with an insurance broker
- Present a complete overview of the company. The overview should offer a general description of products and services, as well as a concise history of the business including length of time in operation, ownership succession and financial growth. Do not rely strictly on the consumer-oriented information on the Web site, as it is not specific enough for what an insurance company needs to see.
- Describe the factors that distinguish this company from the competition. Include brief statements on the company safety culture, driver selection criteria and training, safety-related driver programs, equipment and technology that help to reduce loss, such as electronic warning systems. The company must think in terms of what would interest an insurance underwriter and not the customer.In separate sections provide bios on the principle officers, and a list of major customers.
- Note all safety ratings. Provide the Safe Driver SEA score, Vehicle SEA score, current ISS score and Department of Transportation (DOT), Motor Carrier (MC), Federal Employee Identification Number (FEIN) and State Identifying numbers. If the current ISS score is above .49 and/or in between .49 or .75; or above .75, an explanation of corrective measures being undertaken to lower the score will be helpful.Keep in mind the lead time for underwriters is at minimum 60-90 days. Set a deadline or action date for the underwriter to provide the proposal, allowing ample time to go back for necessary pricing and coverage adjustments, or to consider other proposals from competitive insurance companies or brokers.
Critical information in a submission
Financial information for the companies’ two latest years should include audited annual financial statements or Annual Reports, and unaudited interim financial statements, 10K or 10Q reports.
Outline at least five years of historical information. Give a summary of losses with consistent and current valuation dates for each line of business (i.e., Bus Liability, Passenger Accident Liability, Physical Damage, Workers’ Compensation) and for each named entity. Include paid, reserved, loss and ALAE (Allocated Loss Adjustment Expense) amounts.
Also provide descriptions of losses (one paragraph on each loss in excess of $25,000) for each line of insurance under consideration. If the loss is open (not settled), can the company offer any information that will help underwriters evaluate the current reserves and/or the potential for settlement?
Explain why the company is self-handling any losses or lines of business, and include copies of any agreements with the current insurer, a description of the level of self-handling, and a copy of the claims manual stating reserving practices (particularly on Liability/Bodily Injury). Also provide the review of the internal loss reserves for any third-party actuarial.
For internal claims department and self-handled claims either on a QSI (qualified self-insured) basis or under a large deductible program, provide brief professional biographies of key claims handlers, and contact information in case the insurer wants to perform an audit of those claims operations. Advise the levels of self-handling currently allowed, and on what lines of coverage.
It is important to answer questions beforehand. Disclose current driver turnover ratio; list terminals (addresses, occupancies, square feet and fire protection), and equipment such as software and media. Also list bus liability attorneys and firms the company utilizes. Include the amount of collateral the current insurance company requires by line of coverage and if there is any collateral outstanding from prior insurance companies’ policy years.
Copies of existing policies (with pricing removed) may help to ensure that the underwriting company is duplicating all existing coverages, endorsements, terms and conditions. In addition, copies of the driver hiring and training manual, safety and loss control manual, hazardous material handling procedures, and names, phone numbers and addresses of a safety manager are helpful.
Additional information requested
Typically the broker submitting the underwriting information requests the following information from the company. Where there is no broker involvement, a direct-writer also is interested in information having to do with:
- Incumbent producer and carrier and length of service.
- Other competing brokers and insurers.
- Broker-client relationship, and the level of officer at the access point.
- Other collateral business that could influence the buying decision.
- A rationale to support existing and target pricing.
One final point: the practice of shopping around frequently, at least once a year, for insurance could prove detrimental to a submission.
Although this information is not all-inclusive, it does provide some suggestions for areas of potential improvement in the gathering and submitting of information to insurance companies through your chosen insurance broker.
In general, the better the quality of information, content and presentation, the greater the likelihood of a well-structured and competitively priced insurance program.
Jack Gagliardi serves as vice president, Transportation Practice, Marsh Insurance.