INSURANCE: Feeding Insurance Hikes

When it comes to insurance, the waste industry certainly is feeling the squeeze of fewer choices and the sting of increasing prices.

It seems like yesterday that many waste firms benefited from a “soft insurance market,” where fierce competition and intense premium price-cutting resulted in lower insurance prices. Today, however, it has become more difficult for waste companies to acquire insurance as easily and for the same costs.

Insurance companies have been financially frustrated by an abundance of claims. For example, many insurers have been hit hard by workers' compensation. As a result, many insurers are looking to boost their reserves and improve their financial position.

Poor financial results and inadequate plans for improvement also have caused some agencies to downgrade some insurers' ratings. Ratings provide an analyst's view of an insurance company's stability. If downgraded, insurers will take steps to improve their financial situation, such as being stricter with underwriting procedures.

Reinsurance also has constrained how much risk insurers can assume. To spread liability, insurance companies purchase their own insurance, or reinsurance. The reinsurance industry was hurt by September 11 and is taking precautions to avoid extensive future losses. Thus, reinsurers have been reluctant to provide coverage to companies that are unqualified or lack specific expertise in their underwriting field. As insurance carriers exit the market and competition decreases, waste companies inevitably will see price increases.

Renewals have presented challenges, too. Many insurers are reluctant to renew all of their clients and are making careful decisions about the businesses that they underwrite.

When seeking a renewal, waste companies should set themselves apart by making insurance companies aware of their risk management strategies. A risk management plan should be a well-written comprehensive document. Additionally, insurance companies will want to see this strategy in every day practice.

Waste companies need to work with insurers to gain proper coverage. When deciding whether to renew or sign a new policy, an insurer will ask itself:

  • Is the waste company taking steps to reduce employee turnover?

  • Is there a company-wide commitment to ongoing employee training?

  • Are there onsite safety and driving records?

  • How much attention is paid to recordkeeping?

  • What is the loss record for the past several years?

  • What is located around the facilities that could cause a business problem, such as a chemical plant?

  • How does the company handle accidents?

  • How successful is the business?

  • What is the company's financial outlook?

  • Who's running the company and what is that person's training and background?

Today, insurance underwriting is especially risky, which is causing insurers to carefully scrutinize their customers. And this new atmosphere will require waste companies pay maximum attention to minimize their day-to-day business risks.