Navigating today's hard casualty market is difficult, frustrating and certainly expensive. From the insurance company's prospective, the solid waste industry insurance marketplace has been extremely competitive in the past 10 years. The soft marketplace was characterized by the insurer's failure to focus on the basics — underwriting risks and ignoring the lack of an individual risk's commitment to safety management. No matter what loss or safety records looked like, prices went down.
Now, all that's changed. Today's insurance market is characterized by a capacity shortage and a limited number of insurance companies willing to underwrite business. Conservatively, there are perhaps a half dozen underwriters who will consider looking at a refuse-related account. And when they do, they now pay close attention to safety management, loss records, the operating radius of the driving fleet, quality initiatives, the management's philosophy and perhaps most importantly, employees' driving records. For many haulers, insurance price increases range from 10 percent to 200 percent based on the individual merits of each operation.
Uncertain times have been perpetuated by severe underpricing, catastrophe losses, challenging regulatory environments, medical cost inflation and staggering jury awards. Add the dramatic stock market decline and losses related to Sept. 11th and we see a considerable decline in capital.
These following tips can assist companies in preparing information for agents or brokers to use in an insurance submission for review by prospective underwriters.
Do Your Homework
The information presented to an underwriter by your agent or broker should clearly and carefully identify the activities of a operation. For example, one of the first things an underwriter likes to see is a “mission statement” from the client to the underwriter, setting forth management's business philosophy and its role in safety management. This letter tends to set the tone for the rest of the submission and establishes a high-level of interest and commitment.
Take The Extra Steps
In addition to including standard information such as payroll estimates, sales projections and fleet schedules along with your loss experience, an underwriter now wants to see a detailed description of claims in excess of certain threshold amounts and a narrative of what management has done to eliminate these larger claims in the future. Losses do occur, which is why businesses buy insurance, but underwriters want to see that steps have been taken to mitigate future occurrences.
In today's uncertain economic environment, many businesses fail. Underwriters want assurances that they are providing coverages for firms that are successful and profitable. Underwriters may now require you to include current company financial data. The underwriter needs to know that you have the ability to pay the premiums on time and also are able to pay deductible amounts that may be part of the terms and conditions offered.
Choose Your Partner Wisely
While strong insurers are enjoying modest profits, many fell by the wayside in 2002, with more than 25 companies being taken over by regulators and many others on the brink. Insurance companies tend to conservatively build reserves to sustain them through the next soft market cycle.
Always remember that insurance companies need to make a profit, something they haven't done in quite some time. So make sure to choose an insurance partner that has weathered financial difficulties well.
The EIA Insurance Programs offer insurance products for the solid waste hauling industry through Zurich North America, an A XV-rated carrier that is internationally recognized as a leader in providing coverage for companies in the environmental arena.
Keith George is a managing director with American Program Underwriters and administers the Environmental Industries Association Insurance Programs. E-mail the author at [email protected].