Insurance Limits

[SteelPE]

It is that time of year again. I have to renew my PL insurance. I am a solo engineer working on relatively small projects (single story warehouses, 3 story and under office buildings, residences etc). I used to work with another engineer years ago who started this PL policy, but he unfortunately passed away over 10 years ago and I have been on my own since. I currently have $2M/$2M limits on my insurance which my old colleague set that up years ago and I have continued on with ever since.

Recently I have started to receive requests from clients who are insisting that my limits go to $3M/$3M.... or I can't do business with them anymore. In the grand scope of things, these clients are not big, so I have not given it a second thought. If they want to raise their limits to a point I can not provide services to them then it's not my problem (as I am usually brought in to solve issues for these clients that other engineers refuse to do). I have solicited my provider to see if I can increase my limits to $3M/$3M and they state that I don't do enough work to justify the additional insurance limits. Unfortunately the list of clients that are requesting these limits is growing and I am starting to get nervous that it my spread over to my other larger clients.

Is anyone else noticing that clients are now requesting higher insurance limits? I am thinking that this might begin a slight push of squeezing smaller consultants out of projects.

 

[XR250]

I have not had this experiance. Honestly, most of the time, the inquiry for my PL info does not even happen until I send an invoice.

 

[SteelPE]

I have had issues with your method in the past.... usually from larger more corporate clients. I've had it happen a few times that once I complete the project, the client requests that I sign a "standard agreement" with them. This agreement will usually require some odd insurance I don't have or some limit that I can't obtain. Then they refuse to pay because I refuse to sign their agreement. It typically turns into a huge problem because they have my sealed design leaving me with little to no leverage. This really pisses me off.

These clients requesting the $3M limits are usually the more corporate types.... and it's the bean counters making the decisions... At least they are being up front about it so I don't get into a bad position as outlined above.

 

[phamENG]

You could talk to your provider about project riders. It allows you to add additional coverage just for that project. Get a quote from the insurance agent, and tack it onto the fee for that project. If they want you to have that extra coverage, then they have to pay the direct costs for the privilege.

 

[XR250]

and it's the bean counters making the decisions.

I would bet their insurance company is heavily influencing this policy.

 

[JAE]

We sometimes have done what phamENG states - getting a rider but including it in our fee.

 

[human909]

I'm in a different market to you but surely the premium increase from $2mil to $3mil isn't that big? Have you tried shopping around with other providers? Sure insurance is often one of our larger yearly costs, but percentage wise it is hopefully less than 10% of revenue.

I started on $2/$4m when I launched 1.5years ago . One client, a multinational, required $-/$5m so I got a rider to give me $2/$4+$2m that kept their paper work requirements happy. Another client I'm currently working for needs $5/$5m min so my next jump will be to $5/$10mil solely due to this one client. The premium costs for me aren't crazy. Currently less than 10% and that is with me working only part time on this venture as I current where two hats.

 

[phamENG]

working only part time

That's probably a big part of it. When I started part time, my insurance was a pittance. As soon as it became my primary income and my revenue started climbing, rates went up disproportionally fast. But there's probably a bit of a difference between the Australian and US insurance markets.

For instance, working part time I doubt any insurance company would have given me a $10M policy.

 

[XR250]

I'm in the same boat as the OP. My provider will not increase my limits. I imagine they might do a rider as Pham suggests as we share the same provider.
But honestly, unless it is a super client, I am inclined to tell them to go pound sand.

 

[gte447f]

@SteelPE I am surprised to hear that "small" projects are being dictated by large "corporate type" clients. That seems like a disconnect to me. If I have to incur special cost and put up with a lot of red tape for a client, it better be well worth it ($$), or I would just be inclined to replace that client with a more normal/average client.

 

[XR250]

That's probably a big part of it. When I started part time, my insurance was a pittance. As soon as it became my primary income and my revenue started climbing, rates went up disproportionally fast. But there's probably a bit of a difference between the Australian and US insurance markets.

For instance, working part time I doubt any insurance company would have given me a $10M policy.

Also, 1M in US dollars be like 1.54M AU - so there is that.

 

[SteelPE]

gte, I have had these issues pop up with 2 clients

Client A: A steel fabricator who I used to help design stairs for. I would preform engineering calculations on the stairs to be submitted with the shop drawings to the EOR for review. This client came up with a $3M/$3M limit a few years ago.... and once I told them I couldn't meet those limits I haven't done work with them since (about $5k-$10k per year).

Not a big deal but still a bit of a bummer as I could work on their projects at my leisure and they would be in 7 days.... so not a bad client to work for. They also never balked at an invoice or argued with me once about a request I had for their stair designs.

I think I as asked the insurance company for a rider on this companies projects and it just wasn't worth the hassle or the cost.

Client B: A large millwork company that renovates high end homes. I am talking $20M+ homes throughout the country. I would be called in to design some headers or move a bearing wall on project within an hour or so of my office. Would visit the site to verify existing conditions and either write a letter or provide a repair detail. Invoice would be for my hourly rate x hours it took to complete the project (including all travel time, phone conversations and letter writing). One project I remember had me designing a support for a massive sliding door in a penthouse unit of an existing high-rise building.

It would take a while for this client to pay.... but again, they never balked at a bill or argued with me about what I wanted to do as long as I was being reasonable as my fee was even a small drop in the bucket of the overall project costs.

Bummer that they are now requesting such large limits.... and I am OK if they seek engineering services elsewhere. At this point, it's not worth even bothering asking for a rider on my current policy (which I believe I did for client A and there was some pushback from the agent. I have asked to have my limits raised and the agent said NO!

 

[SteelPE]

For me, currently insurance is running about 4% of my gross billings..... but it has increased by a lot over the past few years (from about 2% a few years ago).... and the questionnaire this year is a bear to fill out as a sole proprietor. I can only imagine what they are going to charge this year with a 3 year steady decline in billings partially due to them not raising my limits.