It can be hard enough for a homeowner to figure out if he or she has enough insurance to make sure the home and family are adequately covered. It can be even harder to make sure a business has adequate coverage. “Insurance on the commercial side is not all equal,” says Bob Scullin, vice president-sales at The Graham Company in Philadelphia. “For a consumer or homeowner, there’s a lot of standardization of forms. While there’s standardization on the commercial side, there’s also a tremendous amount of modification.”
Smart Business talked to Scullin about the importance of business owners knowing ahead of time what they need and how to find the right coverage and insurance broker.
What kind of modifications do business owners need to be concerned about?
As companies get larger and their business expands, their exposures increase. Commercial insurance gets more and more complex and with that comes a lot of modifications, conditions and endorsements on insurance coverage.
If a company is growing or involved in a high-risk industry, there are more policy changes and situations where an underwriter modifies the coverage to specifically address the exposures of your company.
Does an insurance company have to alert the business owner that changes are being made?
Not necessarily. The changes happen as your policy renews. If the company does alert the business owner, the owner might not understand what the changes mean or how they might affect their business. The policy will be issued with the changes, but it is up to the business owner to understand what the changes are and how they relate to his company. The policy holder may not understand a change until he suffers a loss.
Buying insurance can be a hard thing to do. It’s a complex product, not like a consumable that you can take back if it doesn’t work. With insurance, you might not know it doesn’t work until it’s too late. That’s not the time to find out that there are inadequacies or deficiencies or conditions that restrict your rights.
Is there recourse for a loss suffered due to modification?
The insurance company issues the policy. It’s the business owner’s obligation to understand what he or she is buying and to carefully read the policy. That’s why insurance brokers are important. It’s our responsibility to negotiate a policy and structure it in the best interest of our client.
How can business owners make sure they are properly covered?
First you need the right broker, one who goes beyond merely presenting quotes. Look for someone who takes the time to understand your business. A prospective broker should evaluate a client’s particular risk, look at his or her plants, job sites and operations and get a real feel for what that company is about before he starts thinking about how to put together an insurance program that is right for the client.
As your company grows, your insurance needs will change. You need a broker that can recognize the changes required and be able to offer services that will reduce your overall cost of risk. These include claims management, contract reviews, and safety and loss control. This seems like a common-sense approach, but in our industry common sense doesn’t always happen.
What’s the best way to find a good broker?
Referrals are probably best. Find people in similar industries to yours, check their experiences and interview them. Take time to understand the broker’s true capabilities and get beyond the marketing hype.
If possible, look into the broker’s operation. Physically visit their location instead of having brokers always coming to your office. That way you can get a feel for the depth of the operation.
This is not a one-time effort at renewal time but an on-going process. While the broker is evaluating your exposures he should also be working with you to figure out what limits are right for your company and what deductibles make sense. What’s your appetite for risk? Understanding all of this is critical if you want to be sure your insurance coverage is not an unpleasant surprise.
BOB SCULLIN is vice president-sales at The Graham Company in Philadelphia. Reach him at firstname.lastname@example.org or (215) 701-5345.