By: zach Granata, aai, rue insurance
he ubiquitous Geico call to action of “15 minutes can save 15%” has created a perception that insurance is a commodity product and cheapest price rules. However, being a part of a firm that has been providing insurance advice for 100 years, I am surprised by the number of business owners that have fallen into that perception trap. This moniker is even more problematic when considering the complexity of insurance policies for those in the construction industry. We find that insurance generalists that lack experience or expertise in the construction industry often make mistakes that could cost business owners significant dollars. The following is a list of the top six all too common mistakes we find in construction insurance programs.
Misclassified Payroll As most business owners know, your annual Workers Compensation and General Liability Insurance premium is determined largely by the amount of payroll your company has in each of your “Classifications”. Depending on the size of your business and the primary duties of certain employees, you may be missing out on more accurate classifications that offer - Zach better rates. For instance, New Jersey has three different types of paving classifications, each with a significantly different rate associated with it. The generalist insurance agent may not be familiar with the many classifications that are available. This is one benefit of working with agents active in the UTCA. Agents in the UTCA not only know the industry, but also know how to structure your program to prevent mistakes that inflate your costs. Job functions and duties should be reviewed regularly to ensure that the most appropriate and cost-effective classification is being used. Payroll classification is not just a mistake at inception, it can also happen after expiration of a policy when an auditor is looking through your books.
six (all to common) mistakes in construction insurance programs In addition, your general liability audit should be treated differently from your Workers Compensation audit. Each policy has a defined set of rules that allow for specific payroll exclusions. Examples of these savings can include: overtime, fringe benefits, drivers, insured subcontractors, and many others. The best way to prevent errors made at audit is by scheduling a time to sit down with your agent prior to providing the data to the auditor. This could help avoid a costly overpayment to the insurance company! Improperly Valued Equipment Equipment is often a top asset of a construction operation. With that in mind, when was the last time you updated the current values on your Inland Marine policy with your agent? In the event of a claim, if a piece of your equipment is damaged by a covered loss and it’s a “total” loss, your insurance carrier will only pay you the depreciated value of that machine and NOT necessarily the dollar limit that you have listed on your policy. That means you may be paying for insurance that you won’t even be able to collect at the time of the claim. Reviewing these limits or exploring the additional preGranata mium required for Replacement Cost coverage can resolve this issue. Make sure your agent is reviewing this with you annually.
“Mistakes you don’t want to be made because of dollars you don’t want to spend”
Errors Made at Audit It may seem easy enough to prepare your payroll figures for the past year and hope that you’ll be getting money back from the insurance carrier. Unfortunately, solely providing your raw payroll records to the insurance company auditor does not guarantee that you will receive the best possible results. When it comes to calculations or rules that decrease costs, most insurance auditors will not seek them on your behalf; they expect you, the insured, to identify and present all applicable credits at the time of the audit.
Missed Payroll Credits You do not have to be a union shop to be eligible for a credit on your Workers Compensation policy. Most companies performing prevailing wage work are eligible for a credit ranging from 5% 25% of premium. The most important aspect in obtaining this credit is the payroll data that you submit. The New Jersey Workers Compensation and Insurance Bureau (NJCRIB) gives you the option to select the time period you use, so be sure to report one that maximizes your credit opportunity. The paperwork associated with this credit may be confusing, and accuracy is crucial. For example, if your Workers Compensation policy costs $100,000 and you submit an inaccurate or late credit application, you could cost your company up to $25,000. Most agents that work in the construction industry know all about these credits and will often assist you in completing the applications to ensure accuracy and punctuality.
Utility & Transportation Contractor | october | 2017 97