As a pet peeve of mine I love to check the size of the product containers I buy. Yeah baby living the dream, what can I say. To wit, Tropicana recently reduced the size the of their one gallon jug of orange juice to 59.5 ounces, down from 64 ounces. Yet they maintained the same cost structure for less product, increasing their profit margin by 8%. The best part is only a very small minority of dweebs noticed. I’ll call this technique profit stealth.
For those of you still awake after my riveting first paragraph, let me segway this into the insurance world. I have maintained for years that insurance carriers have gotten very smart , which was the initial motivating factor for me to start insurance mic. The insurance companies have figured out that neither the businesses that purchase insurance, nor the NY Insurance Brokers , NJ Insurance Brokers / Westchester NY Insurance Brokers that sell the policies actually read what they are selling. Certainly I am broad brushing here as there are plenty of Westchester NY insurance brokers /Hudson NJ Insurance Brokers that use caution and care placing the broadest possible coverage over top the business risk; however sadly the vast majority don’t. The insurance companies know this, which is why they insert language in their contracts that in essence reduce the size of the juice jug, by reducing coverage, thereby the business buying the policy transfers less risk to the carrier, for the same premium dollars. Brilliant, for them, you, not so much. Hopefully if I write enough of these articles that will change.
I have a zillion examples, like policies covering a residential general contractor that excludes, condominiums, town homes, e.t.c. . “I build apartments, not condo’s” . Yes , so what you are saying is you don’t need products and completed operations coverage for the 20 condo buildings you built over the last 10 years huh? Oh , you might want to check the “definitions” section of the policy you just bought where they define “residential construction” to include ANY multi unit, multi family building. I hope your policy covers the retainer your going to have to part with to force coverage from the carrier you just partnered with. I could blow out my keyboard with examples just like this one.
What’s so difficult to impart to clients, and potential clients that just look at the premium two insurance carriers are charging is the cost of just making your buying decision on price. Too often clients don’t understand the premium is so much less because they are retaining much more of the risk on their balance sheets. Insurance quite simply is a mechanism to finance a loss, if you loss the ability to finance a broader range of losses than it’s ultimately you that retains the risk and has to pay, usually big wiping out 10 years of premium savings.
I wrote an interesting article for another Blog I run that just focuses on Construction Company Risk awhile back called Insurance Mic that trys to explain how to calculate the cost of an insurance purchase, rather than looking purely at the premium. To understand more about this read :The Cold Hard Realities of the Soft Insurance Marketplace.
Here’s my entire salient point .Please be careful about the insurance contract you purchase, the containers are getting smaller and no one is paying attention. If you are purchasing NY Commercial General Liability Insurance , NJ Commercial General Liability Insurance , NY Workers Compensation Insurance, NJ Workers Compensation Insurance please ask for a sample policy that includes all of the forms and endorsements proposed to you. Have someone with a particular level of expertise read the policy and ask questions before you buy. You have all the leverage prior to binding the insurance, and none once you committed for the year. Give your broker copies of leases and contracts you sign which encumber certain financial obligations upon your business. Ask your insurance broker which contract clauses or obligations the insurance WON’T respond to rather than the ones t won’t. That’s a trap question for the broker and carrier by the way. Asking questions about how certain claims scenarios would be treated prior to the loss is GREAT WISDOM, because it’s actionable. After you receive the phone call from your Project Manager about an accident or event is very difficult to manage as the die has already been cast.
Questions, comments about your policy, please call us as we will be happy to engage in a thoughtful debate about how and if your potential for loss is financed by insurance or your checking account. Click for a free consultation on business insurance today.