Understanding Your Numbers – From an Insurance Perspective

RCS Influencers Seth and Ashley Pietsch say that there are three key numbers that roofing contractors should pay attention to when purchasing commercial insurance.  

1. Coverage Limits: It’s important to ensure that the coverage limits of your commercial insurance policy are sufficient to protect your business in the event of a loss. This includes coverage for both property damage and liability. 

2. Deductibles: The deductible is the amount that you will be responsible for paying out-of-pocket in the event of a loss. Higher deductibles can result in lower premiums, but it’s important to choose a deductible that you can comfortably afford in the event of a claim.

3. Premiums: The premium is the amount you will pay for your insurance coverage. It’s important to shop around and compare quotes from multiple carriers to find the most competitive rate.  

While these terms are common knowledge to most, some of the ways these numbers (premiums in particular) can increase or decrease, may come as a surprise. Below are five reasons roofing contractors might see an increase in premiums, followed by four ways to try to reduce insurance premiums.  

1. Claims – In general, insurance companies use claims history as one of the factors they consider when setting premiums. If an insured has a history of frequent or costly claims, their premiums may be higher as a result. On the other hand, if an insured has a history of few or low-cost claims, their premiums may be lower. 

2. Industry Risk Profile – Insurance companies use a variety of factors to determine premiums, including the type of work being performed, the location of a business, and the risk profile of the industry as a whole.

3. Pandemics/Wars/Political Unrest – These events can create uncertainty and increase the perceived risk of doing business in certain areas. This can lead insurance carriers to charge higher premiums to compensate for increased risk. 

4. Hard Market vs. Soft Market – A hard market in the insurance industry refers to a period of time when insurance premiums are high and underwriting standards are strict. During a hard market, insurance companies may be more selective about the risks they are willing to insure and may charge higher premiums to compensate for the perceived increased risk. A hard market may also result in more exclusions or restrictions on coverage.  
    
   A soft market, on the other hand, refers to a period of time when insurance premiums are low and underwriting standards are more relaxed. During a soft market, insurance companies are more willing to take on risky clients and may offer more competitive premiums. A soft market may also result in more flexible coverage options and fewer exclusions.  
    
   The insurance industry can fluctuate between hard and soft markets depending on a variety of factors, including the overall level of risk in the industry, the availability of reinsurance, and the level of competition among insurance companies.  
    

5. State of the Economy – In general, a strong economy may be associated with a lower risk profile, higher investment returns for insurance companies, and more competition among insurers, which can all lead to lower premiums. Conversely, a weak economy may be associated with a higher risk profile, lower investment returns, and less competition, which can lead to higher premiums. The specific impact on premiums will depend on the type of insurance being purchased and the specific risks faced by the insured.  

There are also several ways that roofing contractors can try to reduce their insurance premiums. 

1. Compare Rates – It’s important to shop around and compare quotes from multiple insurance carriers to find the most competitive rate. 

2. Lower Experience Modification Rates – An experience modification rating (EMR) is a measure used by insurance companies to adjust premiums of businesses based on their past loss experience. There are several ways that roofing contractors can try to reduce their EMR and lower their insurance premiums, including implementing safety measures, accurately reporting payroll and claims data, reviewing and updating insurance policies regularly, and working with a loss control specialist. Reducing an EMR requires a proactive approach to risk management and a commitment to maintaining a safe and accident-free workplace. By taking these steps, roofing contractors can potentially lower their insurance premiums and improve their financial stability.  

3. Bundle Policies – Bundling multiple policies, such as property and liability insurance, with a single carrier can often result in discounts on premiums. 

4. Maintain a Good Credit Score – Insurance companies may consider an insured’s credit score when determining premiums. Maintaining a good credit score can help to lower your premiums.   

Seth Pietsch is the president and Ashley Pietsch is vice president of Integrity Insurance & Bonding Inc. See Seth’s full bio here and Ashley’s full bio here.