Finding a home for hard to place insurance risks

You’ve spent the last 6 months preparing your business plan. The last 6 weeks crunching all the numbers for your big launch date. Now you’re a few days away from signing your lease and the grand opening of your new business, BUT WAIT! They require insurance and we got declined??

Many business owners go into opening their business with the assumption that underwriting a commercial insurance policy will be as painless as insuring your home or auto. While that might be accurate for a small office, often there are many considerations that must go into the underwriting for your company policy.

This thought holds true when you’ve come up with a unique or ground-breaking idea. While fantastic for your business, underwriting needs to scramble and fit your risk into the complex and highly regulated insurance world. Interactive activities, room size ball pits, and other potentially risky activities can quickly cause your business to be declined by all major insurance players.

Why do insurance carriers do this?

Let’s stop and think of it from their perspective for a moment. While insurance carriers certainly will pay for a covered loss, they DON’T WANT to pay for a covered loss. Carriers look at each risk as a ratio of coverage, to premium, to likelihood of a claim situation arising.  They’re playing the game with an aleatory contact where you might pay $20,000 in premium, but with one claim situation they might need to pay out more than $1,000,000! Now you see the dilemma.

My message to all new and existing business owners looking for insurance is this:

  1. Allow at least thirty days for your quoting process. This will give companies a relaxed time frame to underwrite everything appropriately and you the ability to quote surplus lines if you’re declined by the standard markets.
  2. Be upfront with your broker and disclose all commercial actives up front. You don’t want to spend two weeks quoting a policy only to later mention your 50ft rope swing or environmental based consulting and need to start over.
  3. Trust your broker. I know it can be daunting while waiting for quotes to arrive, but their hands are tied by the speed of carrier underwriting! Trust they are working in your best interested and be patient while due diligence is done to obtain appropriate quote options for you!

If you’re a new or existing business, call ZRM now for a fee consultation. As always, it is our mission to help you select the right coverage at the best price.

Have you experienced a situation where you were declined coverage?

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