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Deciphering insurance

  • SIMA
- Posted: September 27, 2016
By Bill Buonauito and Bernadette Exley

A company’s insurance program is a key component of a sound business plan. It is meant to protect the business, the owner and both business and personal assets. Business owners need to invest the time in building their insurance program and to work with their broker to truly understand and evaluate the insurance options available based on their business.

That program will look different for every company and will depend on several factors, including company size, business segments, run loss history, etc.

Standard carriers
A standard carrier is an insurance company that has received a license for the authority to write specific lines of insurance. They are bound by rate and form regulations and are strictly regulated. Standard carriers can be national or regional.

National carriers are often more well-known and benefit from economies of scale; but smaller regional carriers can offer flexibility to deal with specific conditions in the local marketplace.

Standard carriers often can be more competitive; offer broader coverage forms; have internal claims and loss control divisions; and have a higher likelihood of combining core and non-core business segments under one insurance program. The caveat is that consumers often have to live with more marketplace volatility, which can influence premiums.

Snow businesses can make insurance companies skittish, given the high level of risk and potential liability. Choosing to lump your core business and snowplowing operations will limit the number of carriers who will quote both since a growing number of carriers are excluding snow-plowing. Standard carriers may also decide that they are no longer comfortable with the snow exposure and not renew your policy.

Snow-only companies face even more of a challenge in securing coverage. Excess & Surplus (E&S) lines, therefore, may allow a business to get insurance when standard carriers won’t provide coverage.

E&S insurance lines
Excess & Surplus lines allow policyholders, agents, brokers and insurance companies to design specific coverage and negotiate pricing based on the risks to be secured.
However, some lines are unlicensed and non-admitted; in this case, there is more risk because these will typically fall outside of the state insurance department’s authority, leaving no leverage to assist if a loss occurs and coverage is declined.

There is a preconceived notion that E&S insurance is the lowest-tier policy in the insurance world, which can leave owners feeling undervalued, underserved or out of options. But the role E&S lines can play in your insurance program is often misunderstood. In fact, there often are very sound business reasons for placing your company in the E&S market.

E&S carriers can fill a void in the market and can be, at times, more flexible than a standard carrier by having the ability to customize forms and language.

E&S lines of insurance are only bad when your experience isn’t good. The good operations can survive in the excess markets. E&S lines tend to share the pain with higher deductibles or self-insured retentions; but for many, it is an everyday part of what we deal with.

Where do I fit?
Businesses with a strong safety culture and good claims history across all business segments may find that national and regional standard carriers are the way to go, both for the best cover-age and from a financial standpoint.

Businesses with a strong safety culture and good claims history across its core business segment (e.g., paving or landscaping) and with more claims in snow may find that it’s best to in-sure its stronger core business segment with the regional standard carrier and turn to the E&S carriers for their snow exposure.

Businesses with a poor claims history across the board, have weak or no contracts, only have snowplowing exposures, or have exposures that concern underwriters (such as a snow business that is heavily weighted with big box stores or municipalities) may find E&S lines are the only option.

Look at the end goal

Whether the carrier is a standard or an E&S carrier is less important so long as it is the appropriate carrier for your program. If you feel confident you have the most appropriate insurance program available to you and an E&S carrier is part of that program, there is nothing to be embarrassed about.

Keep in mind that your insurance program is not a collection of policies. It is part of your over-all risk management strategy. Reviewing and evaluating your insurance program to ensure it is keeping up with your changing needs is a necessary part of your yearly business planning. 

Build a stronger program
  • Talk to your broker about your exposures and why the carriers/policies in your current pro-gram are the best option for you.
  • Review your policies’ exclusions and your current exposures to see if there are unidentified risks that can be covered. Exposures can change from year to year.
  • Evaluate whether it makes sense to keep all of your business segments on one policy or if you have better options by keeping them separate.
  • Develop a strong safety culture and a proactive approach to avoid claims. When claims occur, thoroughly investigate and manage them aggressively.
  • Review your contracts. The more the contract is in your favor the higher the likelihood an insurance carrier will consider insuring your business. Make sure all contracts are signed before the first snow falls!
  • If E&S carriers are your only option, ask why and outline the steps that can be taken to in-crease your options. This may take time (e.g., improving safety and reducing claims) so the sooner you identify problems and focus on improvements, the sooner you’ll see results.
  • Invest the time to meet with your broker and evaluate your insurance program yearly.
William Buonauito and Bernadette Exley are client executives with Smith Brothers Insurance. Contact Bill at and Bernadette at
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