As the economy, technology and politics change, so does the world. There are goods and services offered now that were unheard of even ten years ago. With new business ventures come new challenges to the insurance industry, and the terms “hard to place”, “high risk” or “difficult to insure” are being used more often.
It is a question you may need to ask yourself: How do I know if my business is hard to place? Here are three reasons why you might hear these terms applied to your business.
1. You Have Lots of Claims or Large Claims
Claims are one of the biggest reasons insurance carriers nonrenew insurance coverage. Claims can also make insurance coverage hard to place/replace after nonrenewal.
If your business has many claims over a period of time (frequency) or a small number of claims with large payouts (severity) your business may become hard to place. Why? An insurer will look at high frequency or severity as indications of:
- Inadequate or nonexistent safety procedures
- Failure to implement safety features after a loss
- Poor employment practices
- Unprofitable premium account
If your business has inadequate safety procedures in place or fails to implement more stringent safety procedures after an accident, an insurer is less likely to want to write your policies. Employees with little or no experience or improper training, or employees who shirk safety responsibilities can also cause large numbers of claims. Any or all of these can result in an unprofitable account that few insurers will be willing to touch.
To combat this problem, talk with your broker about having a safety inspection and follow the recommendations for a safer workplace. As your safety increases, accidents will decrease and eventually claims will also decrease.
2. Your Last Policy Was Nonrenewed
Not every nonrenewal can peg an insured as “hard to place”, but here are some reasons why you might be labeled this way:
- High claims frequency or severity
- Material misrepresentation
- Payment problems
- Change in operations
Claims were discussed in the point above. Material misrepresentation most often occurs at application where an insured either fails to disclose pertinent information about their operations that may affect policy or program eligibility or conceals that information with intent to defraud the insurance company. If a change in operations, such as an expansion of duties or services, occurs during the policy period, the insured may be nonrenewed because they are no longer eligible for the policy or program offered. An insured with payment issues is also a red flag for an insurer because they want their bills to be paid, and insureds with money problems typically have higher claims.
3. Your Operations Are Considered Unusual or Dangerous
As the world changes, so does business. New technologies and new challenges bring about new goods and services, and the entrepreneur who can fill a need creates a new breed of business. Many insurance companies prefer to insure the tried and true main street businesses, so they will decline to insure anything new, unusual or dangerous.
Even established industries like trucking and nuclear energy require special types of insurance that are only written by certain insurance carriers. If an insured deals with feral animals, great heights (roofing, window washing) or things of an unusual or adult nature insurance may be hard to find.
Hard to place business doesn’t mean impossible to place, it just means you need to find the combination of the right broker and the right insurance company to meet your needs. Even hard to place businesses need insurance. Hayes Brokers can help you find the coverage you need.