One of the most important things you can do when choosing an insurance company is to pick one that is financially secure. As a result of the recent financial environment, financial solvency has probably never been more critical for insurers. There are five major agencies that rate the financial stability of insurance companies.
Insurance ratings are based on financial data that insurers are required to report to the government, as well as information the insurance companies provide directly to the rating agencies. Most financial rating services also post ratings on the Web or publish ratings that are readily accessible to the general public.
It is very important to know what constitutes each agency's high ratings, and stick with insurers that rank highly on a consistant basis. Deciphering the ratings is somewhat confusing, and rating systems can vary quite a bit between each rating service. At first glance all ratings seem equal, like report cards with an "A" as the highest mark and a "C" for average. However, this is not the case. An insurance company touting an "A" rating could have some potential problems paying claims, while one with a "C" rating could be on the fast path to bankruptcy.
The Most Prominent Rating Agencies
• A.M. Best Unlike the other services, A.M. Best rates only insurance companies, and it rates the entire market. Top financial-strength ratings fall in the categories of superior (A++, A+) and excellent (A, A-).
• Standard & Poor's Highest financial-strength ratings are AAA (extremely strong) and AA (very strong). Standard & Poor's also designates certain companies as Security Circle insurers. These companies must rank in the top four categories for financial strength, submit to a comprehensive initial review, and undergo ongoing monitoring.
• Moody's Moody's ratings cover global life, property and casualty, mortgage and title insurers and reinsurers, plus financial guarantors. Look for companies with financial strength ratings of Aaa (exceptional) or Aa (excellent).
• Fitch Fitch Ratings is an international credit rating agency dual-headquartered in New York City and London. It was one of the three Nationally Recognized Statistical Rating Organizations (NRSRO) designated by the U.S. Securities and Exchange Commission in 1975, together with Moody's and Standard & Poor's
• Duff & Phelps This agency specializes in rating small- to medium-size insurers. Companies with a high claims-paying ability get marks of AAA, AA+, AA, and AA-. In addition to its ratings, Duff & Phelps' Solvency Seal identifies companies that have been in operation five years or longer, and show a strong long- and short-term capacity to pay claims.
What to Look For in an Insurer Beyond Just the Ratings
In addition to the ratings, you should also look at how a company ranks across its entire range of services to get a good idea of its overall financial stability. Ratings tell you only how financially sound a company may be on paper. Getting an insurance company to easily pay out a claim is another story. Usually, a personal referral or your insurance agent's advice can help you get a feel for how quickly claims are settled. Another great source for company testimonials is your state insurance department, because it collects complaints from consumers against their insurance carriers.
Still, many insurance companies do go unranked. This isn't necessarily a big cause for concern, but be sure you check with A.M. Best, because its ratings tend to be the most comprehensive. If you see a questionable rating with A.M. Best, and the company you're considering isn't rated with the other services, it's a good idea to obtain a quote from another insurance company as well
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
Wednesday, July 14, 2010
Thursday, June 17, 2010
Buying Insurance: What You Need To Know
Owning and managing a business has many positives and negatives, requiring the performance of varied responsibilities and wearing of many different hats. Most of my clients typically view the insurance renewal process with a sense of dread. Navigating the minefield of carriers, coverages, exclusions, sub-limits, etc. Contracts can be time consuming and frustrating, filled with technical jargon and terminology that can leave you exhausted. After you manage to finalize your renewal, you may still lay awake at night wondering if there is an uncovered claim lurking out there waiting to strike.
What can you do to make the renewal process easier for you and your staff, while also reducing overall insurance costs and maximizing coverage?
Representation
Having a trusted, knowledgeable professional working to secure your interests can make this process much easier. Well trained, professional insurance brokers take their careers and their clients accounts very seriously. Focus on finding a broker that specializing in working with your type of business, and has appropriate designations, such as CPCU. You can learn more about insurance designations and find lists of qualified brokers at http://www.aicpcu.org. Asking colleagues and competitors for recommendations can also prove valuable. Most people are very willing to make an introduction if they are pleased with their broker. They will carefully review your schedules, limits, coverages and exclusions, making recommendations on the package of coverages that will most benefit your account. There are tools available that will confirm your coverages are adequate, such as buildings limits, http://www.marshallswift.com. A good broker will also closely monitor what is happening in the insurance market, tracking trends and carrier appetites.
Alternate Proposals
After you have found a good broker, allow him to select the markets he would like to approach on your behalf. Your broker will work hard for you every year, but the market is fluid and can change quickly. Allowing a second broker to review your account every 3 to 5 years will ensure that your account is placed with the best carrier for your needs.
Keep clear records*
Use Microsoft Excel or another spreadsheet program to keep clear and current details of your building(s), vehicles, drivers, and other account schedules of information. Retain clear and current records of contracts and certificates of insurance from all sub contractors and third parties you do business with in the event they cause any damage or claims. Ask your broker and attorney to review these documents for proper wording and limits. You should also keep details of past claims if you have any. This will make it easy for a potential carrier to assess your account quickly.
* This item is very important. Most underwriters are overworked. They will eliminate some of their workload by taking all of the accounts that are lacking information or are poorly prepared and instantly decline them. Your broker will play a big role in making your submission as attractive as possible.
Housekeeping
Some carriers prefer to pre-inspect risks prior to offering a quote. The easiest way to clean up your account is to take care of visible debris, make sure handrails are secure, and move items away from burners and boilers. Take a look at past carrier recommendations to see if there are any items suggested that you may not have completed. Typically these things are not expensive and can make a big difference in the way you present to a carrier.
Quote review
Once your broker produces all of the quotes you will be reviewing together, consider all the factors, not just the price. It is easy to produce quotes that are cheap, but you usually get what you pay for. Compare your coverage forms and exclusions; make sure the quotes are basically the same. If there are differences, confirm that they are reflected in the price.
Ask to see the AM Best rating for the quotes your broker provides. AM Best provides financial ratings of all insurance companies, and their indications can help offer some guidance on the strength and longevity of the carrier with whom you are doing business.
Check your deductibles. If you have some frequency in claims, you may want to take a lower deductible to reduce your annualized risk management costs. However, a risk-free insured may be willing to take a higher deductible to reduce insurance costs. This allows you to keep more cash on hand in the event the occasional claim comes along. Again, your broker can help you analyze your claim history and provide some claim scenarios to assist in determining which plan makes the most sense.
Throughout this article, you will note a recurring theme: the assistance provided by your broker. I cannot stress enough how important a knowledgeable broker is to your business, coverage and profitability. There are many insurance professionals who genuinely care about providing the best services to their client. If you don’t feel you have one of these professional working for you, I urge you to find a new broker. They are out there and not hard to find.
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
What can you do to make the renewal process easier for you and your staff, while also reducing overall insurance costs and maximizing coverage?
Representation
Having a trusted, knowledgeable professional working to secure your interests can make this process much easier. Well trained, professional insurance brokers take their careers and their clients accounts very seriously. Focus on finding a broker that specializing in working with your type of business, and has appropriate designations, such as CPCU. You can learn more about insurance designations and find lists of qualified brokers at http://www.aicpcu.org. Asking colleagues and competitors for recommendations can also prove valuable. Most people are very willing to make an introduction if they are pleased with their broker. They will carefully review your schedules, limits, coverages and exclusions, making recommendations on the package of coverages that will most benefit your account. There are tools available that will confirm your coverages are adequate, such as buildings limits, http://www.marshallswift.com. A good broker will also closely monitor what is happening in the insurance market, tracking trends and carrier appetites.
Alternate Proposals
After you have found a good broker, allow him to select the markets he would like to approach on your behalf. Your broker will work hard for you every year, but the market is fluid and can change quickly. Allowing a second broker to review your account every 3 to 5 years will ensure that your account is placed with the best carrier for your needs.
Keep clear records*
Use Microsoft Excel or another spreadsheet program to keep clear and current details of your building(s), vehicles, drivers, and other account schedules of information. Retain clear and current records of contracts and certificates of insurance from all sub contractors and third parties you do business with in the event they cause any damage or claims. Ask your broker and attorney to review these documents for proper wording and limits. You should also keep details of past claims if you have any. This will make it easy for a potential carrier to assess your account quickly.
* This item is very important. Most underwriters are overworked. They will eliminate some of their workload by taking all of the accounts that are lacking information or are poorly prepared and instantly decline them. Your broker will play a big role in making your submission as attractive as possible.
Housekeeping
Some carriers prefer to pre-inspect risks prior to offering a quote. The easiest way to clean up your account is to take care of visible debris, make sure handrails are secure, and move items away from burners and boilers. Take a look at past carrier recommendations to see if there are any items suggested that you may not have completed. Typically these things are not expensive and can make a big difference in the way you present to a carrier.
Quote review
Once your broker produces all of the quotes you will be reviewing together, consider all the factors, not just the price. It is easy to produce quotes that are cheap, but you usually get what you pay for. Compare your coverage forms and exclusions; make sure the quotes are basically the same. If there are differences, confirm that they are reflected in the price.
Ask to see the AM Best rating for the quotes your broker provides. AM Best provides financial ratings of all insurance companies, and their indications can help offer some guidance on the strength and longevity of the carrier with whom you are doing business.
Check your deductibles. If you have some frequency in claims, you may want to take a lower deductible to reduce your annualized risk management costs. However, a risk-free insured may be willing to take a higher deductible to reduce insurance costs. This allows you to keep more cash on hand in the event the occasional claim comes along. Again, your broker can help you analyze your claim history and provide some claim scenarios to assist in determining which plan makes the most sense.
Throughout this article, you will note a recurring theme: the assistance provided by your broker. I cannot stress enough how important a knowledgeable broker is to your business, coverage and profitability. There are many insurance professionals who genuinely care about providing the best services to their client. If you don’t feel you have one of these professional working for you, I urge you to find a new broker. They are out there and not hard to find.
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
Wednesday, May 12, 2010
Admitted versus Non-admitted insurance companies
Admitted Insurance Companies vs Non-Admitted Insurance Companies
AdmittedAdmitted carriers are licensed and governed by the laws of the state they are in, and their rates and forms (coverages) are reviewed and approved by that state. This is very good because each states insurance department is charged with protecting the interests of the consumer. They review the rating to make sure there is no price gouging, and they review the coverages (forms) to make sure there are no egregious exclusions on the policy being sold.
Also, Admitted carriers are protected by their state guarantee fund (if one exists). Here in NY , the state agrees to back up an admitted carrier in the event that carrier becomes insolvent and is unable to pay claims.
Non admitted
Non-admitted carriers on the other hand are not protected by any state guaranty funds. They also are free of rate and form. They can, in effect charge any price they want, and can provide any coverage or exclusion they want, leaving it to the carrier and insured to negotiate terms of coverage, typically through a broker. This may seem initially very bad on the surface, however non-admitted carriers exist for a very specific purpose.
Example #1
If there is a sudden spike in arson related apartment building fires, insurance companies who write on admitted paper only have two choices: Keep writing policies at a loss, or stop writing the class altogether while they wait for a rate change approval from the State department of insurance, which can take many months. Non-Admitted carriers can step in, increase the pricing to a level that will allow them to continue writing the class profitably. While no one likes higehr insurance premiums, this is certainly better than leaving the building owner uninsured.
Example #2
Your particular set of buildings keeps experiencing water damage claims & all admitted carriers choose not to offer coverage. They can not exclude water damage, and they cannot charge enough rate to operate your policy profitably. A nonadmitted carrier offers you a competitive rate, with a standard deductible of $1,000, and then adds a Water Damage Deductible of $25,000. While you dont like such a high deductible, you can see the sense of the carriers offer, it keeps your premium down, and is this offer is again better than no coverage at all.
The ability to offer a custom made policy is very useful to risks that are hazardous or have experienced a bad claims history. Nonadmitted policies are not designed for the lay person. They exist to address specific needs of special classes of business that are having problems in one form or another.
Solvency Concerns
Some insureds are fearful of doing business with nonadmitted carriers due to insolvency concerns as described above. While this fear is reasonable, it should and can be managed and planned for. In addition to being admitted or non admitted, carriers are also given ratings of their financial strength. There are plenty of carriers that are admitted that have a B (or worse) financial rating. I would probably not reccomend my client buy such a policy. Alterntaively there are many non-admitted companies that can provide financials that position them as A-XV and better. These companies are very strong and the likelihood of their failure is very small.
Find a reputable, knowledgable broker who can help you navigate the many types of carrier policies available and you may be suprised at what you find.
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
AdmittedAdmitted carriers are licensed and governed by the laws of the state they are in, and their rates and forms (coverages) are reviewed and approved by that state. This is very good because each states insurance department is charged with protecting the interests of the consumer. They review the rating to make sure there is no price gouging, and they review the coverages (forms) to make sure there are no egregious exclusions on the policy being sold.
Also, Admitted carriers are protected by their state guarantee fund (if one exists). Here in NY , the state agrees to back up an admitted carrier in the event that carrier becomes insolvent and is unable to pay claims.
Non admitted
Non-admitted carriers on the other hand are not protected by any state guaranty funds. They also are free of rate and form. They can, in effect charge any price they want, and can provide any coverage or exclusion they want, leaving it to the carrier and insured to negotiate terms of coverage, typically through a broker. This may seem initially very bad on the surface, however non-admitted carriers exist for a very specific purpose.
Example #1
If there is a sudden spike in arson related apartment building fires, insurance companies who write on admitted paper only have two choices: Keep writing policies at a loss, or stop writing the class altogether while they wait for a rate change approval from the State department of insurance, which can take many months. Non-Admitted carriers can step in, increase the pricing to a level that will allow them to continue writing the class profitably. While no one likes higehr insurance premiums, this is certainly better than leaving the building owner uninsured.
Example #2
Your particular set of buildings keeps experiencing water damage claims & all admitted carriers choose not to offer coverage. They can not exclude water damage, and they cannot charge enough rate to operate your policy profitably. A nonadmitted carrier offers you a competitive rate, with a standard deductible of $1,000, and then adds a Water Damage Deductible of $25,000. While you dont like such a high deductible, you can see the sense of the carriers offer, it keeps your premium down, and is this offer is again better than no coverage at all.
The ability to offer a custom made policy is very useful to risks that are hazardous or have experienced a bad claims history. Nonadmitted policies are not designed for the lay person. They exist to address specific needs of special classes of business that are having problems in one form or another.
Solvency Concerns
Some insureds are fearful of doing business with nonadmitted carriers due to insolvency concerns as described above. While this fear is reasonable, it should and can be managed and planned for. In addition to being admitted or non admitted, carriers are also given ratings of their financial strength. There are plenty of carriers that are admitted that have a B (or worse) financial rating. I would probably not reccomend my client buy such a policy. Alterntaively there are many non-admitted companies that can provide financials that position them as A-XV and better. These companies are very strong and the likelihood of their failure is very small.
Find a reputable, knowledgable broker who can help you navigate the many types of carrier policies available and you may be suprised at what you find.
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
Friday, February 5, 2010
What is Risk Transfer?
http://www.investorwords.com/ defines this as: "Shifting risk from one party to another; examples include purchasing insurance coverage or issuing debt."
The whole basis for insurance is risk transfer. You can move known, definable risks from you to a third party who is more capable of surviving the risk, if a negative event occurs.
Insurance companies were formed to pool the risks and the monies charged(premium) so that they can pay for the repairs in the event any of the insured parties suffers a covered claim.
Almost any type of risk can be transferred to another party. This is good and bad. It is good because no matter how exotic the coverage needs to be, it can be purchased. It is bad because the flexibility of the policy structure allows policies that seem similar to provide very different coverages, which may cause confusion for an insured over what is and is not covered.
The cost of risk transfer (insurance policies) is determined by a few things:
1) How common is your risk? Usually, the more of them there are, the more comfort a carrier will have with the risk, leading to reduced pricing.
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
The whole basis for insurance is risk transfer. You can move known, definable risks from you to a third party who is more capable of surviving the risk, if a negative event occurs.
Insurance companies were formed to pool the risks and the monies charged(premium) so that they can pay for the repairs in the event any of the insured parties suffers a covered claim.
Almost any type of risk can be transferred to another party. This is good and bad. It is good because no matter how exotic the coverage needs to be, it can be purchased. It is bad because the flexibility of the policy structure allows policies that seem similar to provide very different coverages, which may cause confusion for an insured over what is and is not covered.
The cost of risk transfer (insurance policies) is determined by a few things:
1) How common is your risk? Usually, the more of them there are, the more comfort a carrier will have with the risk, leading to reduced pricing.
- Homeowners insurance is very common. It is fairly easy for insurance companies to predict the statistical averages for claims and payments so they can rate their policies pretty tightly. There is also a lot of competition between insurance companies, so this helps keep prices down.
- On the other hand, if your in a business that is a completely new field, finding a carrier willing to provide a quote will become very difficult. This wil llimit competition, and also because there will be many knowns for the insurance company, the pricing they provide may be reflective of their uneasiness with your business.
- Do you shine shoes for a living? How likely would you to be sued?
- What if you operate a playground, where there are children running around all day long?
- Do you manufacture dynamite? Even if your product is used as its designed, you may still generate claims with this class of business. I would imagine insurance for a dynamite factory will be a touch more expensive than for a shoe shining business.
- If you operate a business and are paying a very small amount versus your friends in the same business, I would be very curious to take a look at yur poicy wording and see if there are any substantial restrictions that you should be aware of.
- It would be very bad if your dynamite factory had an exclusion for fire and explosion.
____________________________________
Jonathan S. Carroll, ASLI, CRIS
Bradley & Parker
320 S. Service Rd, Melville, NY 11747
O - (631) 981-7600
D - (631) 650-4034
C - (917) 376-0075
F - (631) 981-7681
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