When contractors are in the market for insurance, they may focus solely on cost and coverage level. In fact, most construction businesses undoubtedly look at insurance as a required expense that only delivers value when something goes wrong.
Agents who want to strengthen their long-term relationships with their construction contractor customers, however, can build a solid case for looking beyond the numbers.
The first step is to walk these customers through the services that can make one insurer a better choice than others. The second is to explain how loss prevention is about more than the dollar-and-cents savings from avoiding accidents.
Just as there are four corners for a solid foundation, there are four aspects to consider when writing a construction policy: risk control, claims processing, breadth of coverage and underwriting service.
Each plays a foundational role in turning insurance premiums into a smart investment, in addition to the financial obligation that every business faces.
o Risk Control:
It would be difficult to find an insurer who does not tout risk control advice as part of its package of services. Not only is it an industry standard, but several states require insurers to offer safety guidance.
A key differentiator, however, is the type and quality of risk control service provided. Construction contractors will benefit most from an insurer whose risk control staff has a solid grounding in the construction industry. Even more helpful are risk control specialists who are well versed in the specific construction trade in which the contractor operates.
For example, if the contractor takes on jobs that involve excavation, they will value advice from a risk control specialist who understands soil conditions and proper trench shoring techniques far more than general guidance on worker safety and equipment maintenance.
In addition, risk control services vary greatly in terms of whether an insurer offers a comprehensive, customized program or gets by with prepackaged handouts that treat all contractors in a uniform way.
Generic safety programs may provide good suggestions for training and safety awareness measures, but they are far less valuable than having a safety specialist come on site, observe the contractor's operations, and then deliver services that provide solutions to challenges the contractor is facing.
Finding an insurer that offers high-quality risk control services can provide contractors with a return on their investment, helping them both improve safety and decrease the number of claims, as well as the other costs associated with work-site accidents.
o Claim Handling:
When an accident happens and a construction contractor alerts their insurer, what can they expect about the way the claim will be handled?
At a minimum, the contractor likely will be better off if the insurer has a nearby presence that ensures claims processors are familiar with both the geographic jurisdiction and the many local nuances that can smooth the way to a speedy settlement.
Contractors also will want to know that the claims professional has extensive experience and specialized knowledge about the ins and outs of construction industry claims.
Responsiveness is another factor that contractors should evaluate when they are selecting an insurer. If a tragedy occurs that causes local regulators or law enforcement officials to rush to the scene, and the media converges on the site to cover the event, the contractor is going to be looking for assistance to manage the situation.
An insurance representative can help preserve evidence, manage the accident site and serve as a liaison if necessary, but only if the carrier's commitment includes getting help to the site immediately, without waiting for an initial claim to be processed in some far-away office by a generalist clerk who knows little about the construction industry.
o Breadth of Coverage:
In some ways, an agent may be more directly concerned with the breadth of coverage issue than their customer.
A contractor, no doubt, will need coverage for general liability, commercial auto liability, workers' compensation, excess liability and property, and often may benefit from marine, professional liability and surety coverage as well.
Can the agent find all of the coverage their customer needs with one insurer, or will the agent have to shop from carrier to carrier to build a package that will work?
The scattershot approach to lining up coverage is a behind-the-scenes administrative burden for agents that customers may never notice, but placing coverage with a number of insurers also has a potential impact on the contractor.
When a claim occurs where more than one carrier is involved, the initial process may be slowed while insurers sort out who will handle the claim.
In addition, coordination of coverage is particularly important between different types of policies so that a claim does not fall into a gap that may exist when there are multiple insurers. When a single insurer has a broad enough portfolio of products to take on the span of insurance required by a contractor, there is a cohesion to coverage that maximizes protection.
Other issues may also be a concern for contractors. If the contractor works across state lines, does the insurer operates in multiple states? Are there exclusions that are handled differently by some insurers?
For instance, general liability insurance typically has a pollution exclusion. Most carriers add an endorsement that either strengthens the exclusion to the possible detriment of the contractor, or modifies it to the insured's advantage by extending coverage to pollutants brought on the job site by the contractor.
One example is a spill of concrete-hardening chemicals. Under a standard exclusion, a general liability policy would not cover the pollution cleanup, but a policy with a provision for pollutants brought on site by the contractor would allow a claim.
o Underwriting Service:
No one likes to wait for an answer, and that holds true for both the customer who asks for a premium quote and the agent who is sorting through carriers to find the best deal for the most comprehensive coverage.
Knowledgeable underwriters can get back to agents quickly about the carrier's interest in covering certain types of risk. Insurers who trust their underwriters with the authority to get the deal done without going through multiple layers of approval are much quicker to communicate with agents about their submissions.
While the responsiveness of underwriters may have a less direct impact on the contractor than on the agent, an agent knows that they can best serve their customers when they are dealing with carriers that move quickly to help them write the necessary coverage.
LOOKING BEYOND DIRECT COSTS
Once the optimum insurance coverage is in place, agents can help their construction customers keep safety front-and-center by emphasizing the savings that come from avoiding claims.
While the most obvious savings are in the out-of-pocket costs for deductibles and the role loss records play in future premium levels, there are hidden costs that contractors should be aware of as well. These include:
o Loss of profits. Accidents may bring work to a standstill, delay the completion of contracts and even force deadlines to be missed. Damages caused by the accident may require costly repairs. All of these can cut into a contractor's profit margin.
o Soft costs. In addition to out-of-pocket hard costs, accidents often require resources to be redirected away from the construction job and over to tasks such as completing paperwork, meeting with regulators or law enforcement, and following up on investigations.
o Market image. A contractor whose job site becomes the scene of a tragedy may gain a reputation–warranted or not–for unsafe or sloppy practices. A company's safety track record may eventually factor into the ability to win bids on future contracts.
o Psychological impact. An accident often disrupts the productivity of the contractor's workforce. Employees may be reluctant to return to the site of a fatal accident; they may seek other jobs if they perceive their company as having failed to protect their co-workers; or they may simply take time off to recover from any trauma they witnessed.
This not only can slow a project's progress, but also can threaten a contractor's ability to retain talented workers.
When contractors come knocking at the door, agents have an opportunity to do more than sell them a policy. Agents can help contractors understand which insurers are best positioned to meet their needs, and they can remind them of the benefits of establishing a safety-oriented culture at worksites.
By educating their customers with a two-step approach–first, making the customer aware of the four-corner foundation of high-quality service, and second, focusing on the hidden costs of accidents–agents can see that contractors get the most out of their insurance investments.
Scott Higgins (sfhiggin@travelers.com) is president of Travelers Construction, and John Komidar (jkomidar@travelers.com) is vice president of Travelers Risk Control, both based in Hartford, Conn.
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