Insurance: getting the right cover
12 January 2016
IC talked to industry experts about insurance premium costs, claims, damage statistics and how clients can reduce their total insurance costs
“Insurance premiums for annual policies covering contractors’ plant and equipment have decreased in the last two to three years resulting from the soft market we are in and the oversupply of capacity,” Michelle Cafferty, partner at Alesco Risk Management Services says. “Previously there were two to three main markets offering insurance for this line of business, but as a result of the environment this number has increased to approximately 13 carriers globally, which drives the premiums down giving clients more choice. We can anticipate in excess of US$ 150 million of capacity currently available in the London market for this class, making us a more competitive insurance hub.
“There are not any specific claim trends as they are client dependent and vary across territories, but there are some common causes of claims. Fire is a frequent cause of claim, especially to types of machinery in remote areas, where there is a lack of surveillance and housekeeping. In an effort to try and reduce this risk, we have seen companies trying to implement safety procedures where the machine’s operator will wait for 30 minutes for the engine to cool down after turning it off and before leaving the equipment idle.
“Tandem lifting is another delicate operation because if not precisely controlled then you risk having two very expensive cranes totally lost in addition to potential human casualties. To reduce this risk, tandem lifting warranties have been drafted to require the operation to be in accordance with the manufacturer’s manuals, as well as carefully planned and supervised, amongst other specific technical requirements.
“Thirdly, there are the claims resulting from losses underground, such as mining plant that gets trapped due to landslides and tunnel collapse, incurring extra expenses for such plant or equipment to be rescued and brought back to the surface. In addition, damage to machinery caused through drug and alcohol use is another common cause in construction sites, so insurers tend to implement stringent policies to minimise this risk i.e. drug and alcohol tests.
“Other losses can arise out of riots and strikes in the work sites when employees intentionally cause damage to the insured items. Finally, catastrophic perils, such as windstorms and earthquakes, will always represent a risk to losses depending on the location. For that reason, underwriters may require the fitting of wind speed indicators in order to prevent any major damage with casualties. In light of the above, it becomes easy to conclude that a client’s loss experience is extremely relevant to determining prices and policy deductibles. A clean loss record indicates a high quality risk management undertaken by the client and vice-versa.”
“Risk management is vital and something that clients need to prioritise, particularly as this information, coupled with the loss experience, affects the company’s insurance premium. Insurers will assess the risks that they face and impose strict terms, conditions and warranties in order to make certain risks acceptable when there is poor information on risk management or the lack of. For example, ensuring that the machine operators have the minimum training hours required and are licensed in accordance with the local regulation, by including operators’ or tandem lifting warranty clauses as aforementioned.
“We also see lots of clients split up their insurance programme in the belief that it is cheaper and easier to place most of it locally and then seek cover for the most hazardous elements to the London market, but this ultimately makes the premium more expensive. We can offer a bulking premium discount if the whole programme is placed in one policy or even more aggressive terms as it means markets have a better understanding of the risk across the portfolio without fearing an anti-selection. This way, adding to the cost saving, further extensions in coverage are more easily obtained, for instance inland transit including cover for licensed road vehicles used as tool of trade and loss of revenue,” Michelle Cafferty explains.
In response to the changing nature of crane insurance, insurance companies are offering customers with customised insurance programmes. Allied Insurance Brokers, for example, has partnered with ProSight Specialty Insurance to launch a new insurance programme for the crane industry.
The new all-lines insurance programme has been tailored for the crane industry and offers risk management tools, loss control solutions and specialty claims management services, a spokesperson said. The insurance programme is customised and coverage is available nationwide within the continental United States.
“The all-lines insurance and risk management solution addresses the complexities of this industry’s risks and meets the actual industry needs and concerns of today’s crane industry professionals,” a company spokesperson explains. “With our one-stop all-lines approach, Allied and ProSight's Crane Program eliminates any claims confusion due to multiple insurance carriers and provides a better customer experience overall.”
The product offerings include general liability, workers’ compensation, riggers coverage, property, excess and crime. Marty O'Brien, Allied chairman and CEO, says, “With over 20 years of experience, the crane industry is one that is very near and dear to us here at Allied. Our passion and knowledge for the crane industry, along with ProSight’s specialty resources, allowed us to assemble a programme that covers all facets of crane risks. With this programme, we are looking to help strengthen crane companies by making them safer and more profitable organisations. This is what Allied is all about… being solutions driven and contributing in very impactful ways that benefit the entire industry.”
Jake Morin, programme executive for several of ProSight's Construction programmes, added, “We are very excited about partnering with Allied and customising an insurance offering which is tailored to the crane industry. With construction at its highest point in years, it is the right opportunity for ProSight and Allied to bring a customised all-lines approach to the table.”