PL Insurance

[SteelPE]

Well, it’s that time again; time to renew my liability insurance. My insurance is up in a little over a month and I began the renewal process about 2 months ago. After two months of waiting I have been informed that my premiums are going to increase by 50% (seems like it took too long of a time). Why, well according to my agent, it’s because I am doing more work than I was last time. In reality, I’m not doing an overly large amount of work (billings about $170k/year) compared to some in the business. The rates I have been quoted are 10% of my yearly income/year for $2M in coverage with a $1,000 deductible and no prior incidences (they only time I talk to the agent Is when I need a certificate).

I am starting to think that my agent really isn’t acting like my agent (not looking out for my best interest) and am considering going out and finding another agent. I’m not really experienced with this end of the business. Am I going to run into problems if I try and solicit another agent? Am I going to run into problems if I switch carriers? I have been lead to believe this will not be a problem, but I do not want to mess things up from where they are currently.

I have looked at reducing the amount of coverage (which only slightly reduces my payment) and increasing my deductible (which I was told wasn't going to happen as my billings were to small when I last renewed). I am considering soliciting ASCE too, but I am not a member, and again, I don't want to mess things up.

 

[JedClampett]

You should absolutely not get in a trouble if you talk to other agents or ASCE? It's business, not a personal relationship. You're not your agents biggest client so he's giving you his minimal level of service. My only caveat is that sometimes carrier jumping might reduce your level of service.
My ASCE membership costs about $235 a year. With that, I get free pdh's, a magazine, and other benefits. If you get any kind of discount from them, it looks like your tax deductible membership is paid for. Plus supporting your engineering society is a good idea.

 

[jdgengineer]

10% sounds high to me. Ours is 3-5% I believe but we have more billings so there may be some economy of scale and risk management associated with it. We also have $10k deductible.

We have our insurance through ASCE program. If I remember correctly it was ~30% savings. Although your results may vary as it's dependent on the type of work you do.

We bought our membership for the policy. We were able to get a quote before having our membership.

Only problem with getting quotes from other brokers is that they will black each other out. Once an insurance provider is contacted by a broker they won't prepare another quote for a different broker. So you are somewhat married to the broker that solicits the quote. If you don't want to switch brokers you may just want to ask your current one to solicit additional quotes for you.

 

[berkshire]

Remember a quote is only blocked by a particular insurance company for you. Not the agent, to prevent you from getting different quotes from different agents for the same coverage. There is absolutely nothing to prevent you going to an agent for a different insurance company and getting a quote. However if your new agent goes to a company already contacted he/she will be blocked there. The major malfunction these days is that there are too few carriers willing to underwrite the coverage.
Also if you do not like your current agent , but you know another agent who works for the same company who does a better job , you can write a " Broker of record .", letter to the insurance company asking them to transfer you to the better agent.
B.E.

You are judged not by what you know, but by what you can do.

 

[SteelPE]

Good to know, when I talk with my agent I'll ask Hume to send me which companies he's has solicited. My current carrier in CNA and I thought their rates were high 3 years ago when I renewed.

You would think if the agent was asking me to purchase $51,000 of product I would have great service... Their service is OK, but then again all I ask of them is to forward insurance certificates to the client (I don't like the answer of "well your invoicing more now" when last time it was "well, there is a minimum amount of billings they accept and your policy reflects that"). However, when asked about the dramatic rate increase or other questions I have in regards to the renewal process I feel that I'm buying a used car in the way that I'm getting the run around.

 

[Ron]

SteelPE...yes, 10% is way too high for insurance. First, your insurance is too high for the level of work you are doing. You're only making yourself a target. 1 million is a common policy for consultants, particularly if you are a sole practitioner. I know some consultants who have less that that. I carry 1 million and our fee level is about 1.3 million per year.

Keep in mind that PL insurance is based on gross revenue, so if you subcontract work and bill it through your company, you are paying for insurance you don't need.

PL insurance should be in the 2 to 3 percent of fees range.

 

[SteelPE]

Ron,

This policy was set up by my old mentor/business partner. When I renewed three years ago I told the agent that I was paying too much. They said that my fee was based upon a minimum amount of billings. Switching to 1,000,000 frm 2,000,000 isn't that much of a savings (I would end up paying 9%). Some clients require the $2,000,000.

I design mostly building less than three stories, nothing special. I usually run about 1/2-3/4% construction costs. Maybe that's why it's so high.

I'll find out more on Monday, but it's good to know where I should be.

I appreciate the help.

 

[jdgengineer]

I just reviewed on our insurance quotes from last year. Our $1/$2 mil policy was 1.8% of billings from ASCE. We had a quote from CNA which was 2x higher.

 

[SteelPE]

jdgengineer,

You hit the nail on the head with that comment.

 

[SteelPE]

So, I received a preliminary estimate from ASCE and I was in total shock. For the same coverage I have with a much higher deductible the proposal was a little over a 1/3 of what I am currently paying

So my next question is, for those of you who have insurance through the ASCE, are there any drawbacks to the coverage. It doesn't look like it, but the proposal was almost too good to be true.

 

[jdgengineer]

We have the insurance and have had it for 2 years. We haven't had any claims (hopefully that's not when we see the downsides). We had assumed since it's the ASCE program that it was somewhat screened and pretty good policy, hopefully that's the case. I'm not sure if we had our lawyer review the policy specifically.

Downsides we've seen:
1) I believe Pearl is only broker that offers policy so you have to deal with them. If you have someone you like working with you are out of luck (I think). With that said Pearl has been ok. We have all our policies that require certificates with them (benefits are with another broker)
2) Our lawyer had some reservations with policy being underwritten by Lloyd's of London. I believe it was hearsay but he didn't like them. In asking Pearl they were not aware of any issues.
3) we've contacted their 1 hour free advise council early on. As could be expected advice was too general to be of any real use to us.

 

[SteelPE]

So as I am wrapping up this process or renewing my insurance I am wondering if the process is fair. I ended up going to two agents and the ASCE for proposals.

At first I asked my original agent (agent #1) for a proposal and the came back with Something ludicrous. I then asked them to do better and also contacted the ASCE. A few days later I asked another agent (agent #2) for a proposal. In the end a agent #1 came back with similar ludicrous proposals and agent #2 wouldn't give me a proposal because they were "locked out" by agent #1. This left me to choose between proposals from agent #1 and the ASCE.

With this "lock out" system there was no way for my proposal to be competitive. Agent #1 gives a high proposal then goes out and locks up other avenues so the proposal can remain high. Who knows what the received from the underwriter, the agent could be putting huge markups into his proposal because he thinks I won't/can't check.

Seems like a flawed system.

In the end I selected the ASCE and saved 75% over the my original proposal.