Leave It To An Expert

As the economy tightens and oil prices rise…most business owners are looking in every crack to try and find money that may be wasted.

Similar to many Americans, they are always trying to find “the deal.” Big savings, whether found on the Internet or through the “little guy,” usually seem too good to pass up. But when it comes to insurance, what appears to be too good to be true usually is! Today, the Internet offers increasing amounts of information on everything from workers’ compensation to health insurance. However, be careful when searching for insurance coverage on the Internet, as what appears to be the same coverage usually is not.

Property & liability
Today, most business owners will switch property and casualty and workers’ compensation insurance soon after the next lower quote comes in the door. Since the employees are not truly involved with this aspect of business matters, a simple signature moves the company to a new carrier. However, before coverage is moved, certain questions that must be addressed.

When researching new carriers, most will look at the new carrier’s rating; however, do not forget to research the size of the company and its assets. An insurance company taking in $100 million in premiums is not much larger than a decent local broker. Would you base your company’s insurance policies solely on the financial strength of your broker?

It is also important to take note of the type of paper the product is written on. If it is not “admitted paper,” it may not be backed by the state. The State Guarantee Fund for “admitted” products may play a more important role as time goes on. Economic instability, as we have witnessed, does not exclude the insurance industry.

Comparing products offered by various carriers is not always easy. Though the limits may be obvious, what lies behind these limits may not be as easily spotted. Review company descriptions, SIC codes and workers’ compensation plan descriptions, and look for any change in what is presently insured, as these items will give you your difference in premiums. However, be sure to always keep in mind the reason why you have the coverage. If the insurance plan is not written correctly and a claim does occur, the insurance company may not honor it.

If a business switches from carrier to carrier with each rate hike, several concerns must be addressed. Multiple shifts signal instability to the carrier. Eventually, carriers will decline to quote, leaving the substandard market as the only option. Previously, past carriers and length of terms were never taken into consideration. But these days, policy stability counts! From the insurance carrier’s standpoint, whether justified or not, rate hikes come with trends and utilization. Significant rate hikes usually mean large claims have been paid. When a business moves its policy to a new carrier every time a claim is paid, the carrier will view this pattern as a liability and will know this client will only be temporary until the next claim is paid. At some point during this process, carriers with “A” ratings will no longer be available, and businesses will be forced to move to the secondary market.

Group benefits
With regards to group benefits, specifically health insurance, most of the aforementioned issues still apply. Direct comparisons between carriers are not always easy to find. When comparing plans, it is important to thoroughly evaluate co-pays, therapy limits, networks, deductibles, out of pocket maximums and percentages of coverage inside the policy. When the details of two different plans are compared, many will soon realize that two companies offering the same 90/70, $1,000 deductible plan, are, in reality, offering two very different plans.

The other major issue in today’s market is the brokers themselves. Service, availability and product knowledge are the key components demonstrated by every quality broker. Policy process presented to you by numerous brokers should not vary. An honest broker will show you the true cost. The Health Insurance Portability and Accountability Act (HIPAA) laws governing all groups with less than 50 employees state that all insurance carriers must release the same quotes to any brokers quoting the same group. Therefore, no special deals are available for groups containing less than 50 employees, and all commissions are state regulated.

For groups containing more than 50 employees, having multiple brokers shop your benefits out usually reduces your chances of saving money, as opposed to increasing them. Inevitably, the carrier will receive varying information from each broker, causing the carrier to question the validity of the information. Since the market has now been tainted, carriers are less eager to act aggressively regarding quotes and now question a group’s status. This causes the underwriter, who is pricing the product, to become confused and uncertain. When groups are comprised of 150 employees or more, the same health quotes are distributed; however, commissions can be altered. To alleviate this concern, ask about the amount of commissions and money paid to a broker for the year. Maintaining an open understanding will decrease the amount of ill will.

The most important part of the insurance game is to find a broker you trust. Be sure he can handle the type of business you perform and is paid a fair commission. As your business grows and/or changes, be sure the agent is still a proper fit for your needs. Always remember, deals that sound too good to be true usually are! The Internet is an excellent resource; however, an Internet broker is just that. When an issue requiring immediate attention arises, it is imperative your insurance broker is available to take the call. If you consistently receive his voice mail, do not switch your insurance carrier — instead, shop for a true broker.