Changes to Experience Mod Worksheets Could Help Some Massachussets Contractors

Kudos to the Mass Division of Insurance (DOI), and the Mass Workers Comp Bureau (WCRIBMA) on agreeing to make changes to experience mod worksheets.  I had written in a prior blog about whether or not it was fair for a subcontractor to be disqualified to bid due to their experience mod being over 1.0.  If a subcontractor has a mod over 1.0, it doesn’t necessarily mean they don’t run a safe operation.

For instance, when payrolls go down, X mods go up.  When rates go down, mods go up.  What about claims that are going to be subrogated due to the fault of others?  When any of the aforementioned happens, X mods go up – through no fault of the subcontractor.  It’s this last point where subcontractors could see some relief.

The DOI wrote to the WCRIBMA concerning “that bidders on public and private contracts sometimes may be harmed by a failure of prospective contractors to understand the limitations of workers’ compensation experience rating as a proxy for employer safety.”

Starting on May 1, 2013, the WCRIBMA will, when requested, promulgate an illustrative experience mod taking out any claims that are being subrogated.  It’s important to note that the mod calculation is purely for illustrative purposes, and meant to be used to help subcontractors when bidding.

When requested by the client and/or insurance broker, the WCRIBMA will contact the insurance carrier to confirm whether or not a claim is being subrogated.  Within 10 days time, the WCRIBMA will recalculate the “illustrative mod” with the subrogated claim(s) taken out of the mod calculation, and then forward to the person(s) who made the request.

Starting on September 1, 2013 when a mod worksheet is produced, the following language will be on the mod worksheet “Experience Modifications should not be used alone as a test for workplace safety.  Experience modifications may not reflect the possibility of future recoveries for accidents which are ultimately determined to be the liability of another entity, and third party recoveries, when received, may retroactively reduce both experience modification and employer premiums.  In addition, while Massachusetts ‘balances’ its experience ratings at 1.00, some other jurisdictions do this ‘balancing’ at a number less than 1.00 will look lower but produce the same policy premiums due to counterbalancing offsets in basic classification rates in those jurisdictions.”

So, there you have it.  Finally some good news for subcontractors on the workers compensation front!

This information brought to you by Chris Sheppard of Smith Buckley & Hunt Insurance Agency, your Massachusetts contractors insurance agent and Massachusetts business insurance resource.

What to Expect in Insurance Pricing for 2013

I read an article, 2013 Insurance Forecast.  It was written by Jeffrey Cavignac, and I found it to be very informative, and mirrors exactly what I’ve been saying, and seeing over the last yr or so.  It starts out talking about what is happening in the industry right now – that being a definite firming of the market.  Translation – a definite upward shift in the price of insurance with the biggest increases in the workers compensation line.

There are several reasons why we are now seeing price increases.  They are:

1. Return on average net worth is subpar
2. Poor underwriting results
3. Insufficient investment returns
4. Change to the NCCI Experience Mod formula

Jeffrey states “the industry needs five to ten points of rate to achieve the returns to continue attracting capital.”  One question many contractors have is, how does this affect overall insurance premiums?  As stated above, and espoused in this blog, the biggest increases are being seen in the workers compensation line, anywhere from 5 – 20%.  For those contractors with an NCCI (interstate) mod, the mod formula changed on 1/1/13, and many contractors could see, and have seen, significant mod increases as a result of the change.

Massachusetts contractors have been fortunate on the rate side because we haven’t had a rate increase in several years.  However, that’s not entirely true.  Even though we haven’t seen an actual increase in rates, we have seen significant scaling back of “rate deviations.”  For those of you that do work in other states, you most certainly have seen WC rate increases.

How are the other lines being impacted?  GL, Property, Auto, Inland Marine and Umbrella policies can expect increases in the 5 – 15% range.  The increases seen by many contractors are not as a result of poor loss history, it’s just what is going on right now.  For those contractors with losses, many of you will see bigger increases than that.

It’s even more important now to get a handle on your insurance program.  What are you and your broker doing to drive your costs down, and profitability up?  Dropping off a policy, returning your calls, and getting COI’s out aren’t helping you get your costs down.  Isn’t it time to demand more?  I certainly think so.

This information brought to you by Chris Sheppard of Smith Buckley & Hunt Insurance Agency, your Massachusetts contractors insurance agent and Massachusetts business insurance resource.

 

The Ever-Changing Needs of Contractors

The insurance needs of contractors are complex and ever changing.  The insurance program put in place at the beginning of the policy period will, in most cases, look different at the end of the policy period.  What do I mean? 

Oftentimes, I’ll meet with an insured and find out that they bought a new piece of equipment that they forgot to tell me about.  Or, maybe payrolls have changed significantly from the original estimate, which will impact the GL & WC policies.  Should you adjust those policies mid-term?  How about knowing what your WC experience mod will be 6 months in advance?  Will a shift in the mod, up/down, impact your future bids?  Maybe there is a new location?  Are you reviewing loss runs on a regular basis?

We get paid pretty well, shouldn’t we work for it?  Is your agent “dropping off” a policy at the beginning of the year, and telling you he’ll see you in 11 months?  Answering your questions when you have them, and getting COI’s out in a timely fashion, are minimum standards.  Are all your interactions with your agent initiated by YOU?  If so, I’d hardly call that pro-active?  Shouldn’t you expect more?

The point is, the days of “dropping off” a policy are over.  At a minimum, your agent should be meeting with you three times a year  – policy inception, mid-term, and renewal time (this may be overkill for smaller contractors).  It’s especially important nowadays, because insurance pricing is on the rise, and the rise in premium can have an effect on your companies’ profitability.  Make us work for our commission!!

This information brought to you by Chris Sheppard of Smith Buckley & Hunt Insurance Agency, your Massachusetts contractors insurance agent and Massachusetts business insurance resource.

The Workers Compensation Survival Guide

I’m participating on a panel discussion about “The Workers Comp Survival Guide” on 4/10.  The event is sponsored by the ASM (Associated Subcontractors of Mass), and will take place from 7:30 AM to 10:00 AM at the Westin, Waltham.

We’ll be providing information on the current state of the workers comp marketplace, both in Massachusetts, and nationally.  As part of this, we’ll be hitting on many topics, including: 

1. Experience Rating
2. Alternate Financing Mechanisms – like Group Captives, and Retro’s.
3. Various Credits (QLMP, Deductibles, Construction Credits, etc)
4. Assigned Risk Pool
5. Rates
6. WC Claim Cost Containment
7. WC Fraud

Many employers feel there really isn’t much to do to affect the cost of their WC insurance.  In fact, WC is a line of coverage where the employer has a significant impact on what they will ultimately pay in premiums.  This discussion will give you valuable insight on how best to control your costs. 

I hope you can join us on 4/10/13. 

http://asm.affiniscape.com/associations/8185/files/WorkersComp2013.pdf

This information brought to you by Chris Sheppard of Smith Buckley & Hunt Insurance Agency, your Massachusetts contractors insurance agent and Massachusetts business insurance resource.

Be Careful of Cyber Criminals on Free WiFi

I thought I’d get off the construction talk for a week and talk a little bit about “cyber crime.”  I read an interesting article online today from The Star, a Canadian media company.  The article warned people to be careful about cyber crime while using public WiFi.

All too often, when we’re out of our “home” area, we get notified on our mobile devices about “free WiFi.”  Unfortunately, these WiFi’s are just an easy way for criminals to gain access to your personal information on your mobile phone or tablet – like bank account information.

The cyber criminals are very sneaky and disguise themselves in a way that makes them look legitimate.  For instance, some will send text messages with a link to receive a voice mail.  Once they gain access to your phone, now they have access to everything on that phone, like pictures, documents, or personal information. 

Is there anything to do?  Yes, some possible solutions are:

1.  Password protect your mobile device
2. Think about adding specific security software for mobile devices
3. Don’t access free public WiFi

A lot of this is common sense, but unfortunately, we’re not always paying attention.  There are a lot of crazy people out there, and they’ll go to no end to rip you off.

This information brought to you by Chris Sheppard of Smith Buckley & Hunt Insurance Agency, your Massachusetts contractors insurance agent and Massachusetts business insurance resource.

 

Is Now the Perfect Time to Start Exploring Captive Insurance Programs?

I recently attended an annual meeting with three of my clients for a group captive I have them in.  It was my first meeting, and I found it to be very beneficial.  Sure, it was in a nice sunny location, but it was also serious business.  The 90+ (and growing) business owners who make up this specific captive, run the program with as much enthusiasm, and intensity as they do running their own companies.

I’ve written in a few prior posts about group captives, and how for the right company, it can be a very beneficial move.  Group captives are not for everyone, but certainly something well run companies should consider.  Companies who join captives do so for various reasons. 

Some of those reasons are:

1. More insulated from the volatility of the insurance market (hard & soft markets)
2. Availability of certain coverages
3. Premiums are based on your OWN loss history
4. Can be significant premium savings
5. Underwriting profit and investment income go to you

Another added benefit is the sharing of information amongst captive participants.  Companies who join captives are typically those that are well run and capitalized, and therefore are run by smart people.  It’s amazing the things that can happen when good business people meet with good business people.  Many members told me one of the biggest benefits, and not one they anticipated, was getting feedback from other members on different ways to manage their business; you really can’t put a price on that.

With insurance pricing on the rise, there is no better time to consider a move to the “alternative market.”  At the very least, it’s certainly worth exploring – it may be one the best business decisions you could make.  Aren’t you sick and tired of generating income for insurance companies?

This information brought to you by Chris Sheppard of Smith Buckley & Hunt Insurance Agency, your Massachusetts contractors insurance agent and Massachusetts business insurance resource.

Dangers of Carbon Monoxide Poisoning

Many of us spent the last couple of days digging out from Blizzard Nemo.  Winter weather can be dangerous, but most think the dangers are the treacherous roads, power outages, or downed lines.  Few of us think about the dangers of carbon monoxide poising.

During this last blizzard several people died of carbon monoxide poisoning.  Most of the deaths were a result of being in an idling car that had the tailpipe blocked by snow.  Carbon monoxide is a deadly, odorless gas with symptoms such as headaches, dizziness, drowsiness, or nausea.  One of the main problems is that it mirrors other conditions, and people don’t realize that it’s carbon monoxide until it’s too late.

Death from carbon monoxide poisoning can come in minutes, or hours – dependent mainly on the concentration of gas.  OSHA recently issued a warning about carbon monoxide poisoning during winter months.  OSHA recommends:

“To reduce the risk of carbon monoxide poisoning in the workplace, employers should install an effective ventilation system, avoid the use of fuel burning equipment in enclosed or partially enclosed spaces, use carbon monoxide detectors in areas where the hazard is a concern and take other precautions outlined in OSHA’s Carbon Monoxide Fact Sheet.”

This information brought to you by Chris Sheppard of Smith Buckley & Hunt Insurance Agency, your Massachusetts contractors insurance agent and Massachusetts business insurance resource.

OSHA 300A Posting Deadline

It’s that time of the year when companies must post their OSHA 300A summary document.  The OSHA 300A is a summarization of the previous year’s injuries/illnesses that are listed on a company’s OSHA log (OSHA 300).

The document must be posted from February 1 through April 30.  For those companies that aren’t maintain an OSHA log?  No better time than the present!  Nothing worse than being needlessly fined for not maintain an OSHA log – when it’s so simple to do.  This link from OSHA details the specific penalties for not adhering to OSHA rules (http://www.osha.gov/doc/outreachtraining/htmlfiles/introsha.html).

This information brought to you by Chris Sheppard of Smith Buckley & Hunt Insurance Agency, your Massachusetts contractors insurance agent and Massachusetts business insurance resource.

Snow Removal and the Role of Property Owners

Very often I get informational pieces from various insurance carriers, some more interesting than others.   I recently received one from Acadia Insurance that was very interesting, and one I thought would be valuable to share.

It was titled “Snow Removal Best Practices for Property Owners.”  They make a distinction between those who self perform snow removal, and those who contract out those duties.  I’m not going to list all the duties, but some of the more important ones.  I’d be happy to share the entire document to anyone interested (email to: chris@sbhins.com).

When Self Performing:

1. Maintain a snow log
2. Maintain a complaint log in the event of an accident
3. Have written guidelines which define areas to be plowed
4. Be available at all times
5. Make sure an ample supply of salt and/or sand is available

When contracting out the snow removal it’s good risk management practice to have an agreement/contract drawn up by an experienced attorney.  It should include (partial listing): 

1. Areas to be plowed, shoveled, etc.
2. Specific scope of services
3. A requirement that the snow removal contractor keep a log (any subs too)
4. A provision that the contractor will be responsible for BI or PD caused by their own negligence.
5. A valid hold harmless, defense and indemnification agreement.
6. Requirement that the owner is listed as an additional insured on the GL & auto policies for completed operations and ongoing operations on a primary and non contributory basis.
7. Make sure subcontractors adhere to the same requirements as the primary.

Good food for thought.  Again, if anyone would like the entire document, drop me an email.

This information brought to you by Chris Sheppard of Smith Buckley & Hunt Insurance Agency, your Massachusetts contractors insurance agent and Massachusetts business insurance resource.

Commercial Insurance Pricing On the Rise

If you haven’t already noticed, the cost of your business insurance will be more this year than last.  For Massachusetts contractors, the primary increases will be experienced in the property, GL, auto, umbrella, and inland marine policies.  Just because workers comp rates haven’t increased in Mass, for contractors in multiple states, that isn’t the case – out of state WC rates are rising too.  Although the WC rates in Mass haven’t increased, we are seeing much tougher underwriting, and many contractors are now being put pack in the assigned risk pool (even co’s with low X mods).

The increases have varied from a low of 6% to a high of 30%; the carriers are increasing whether you have a good loss history or not.  Obviously, the contractors with suspect loss histories are seeing  the biggest increases.  Couple this with the change to the NCCI’s experience mod formula, some companies can expect significant rate increases.

It’s even more important to get a handle on what your carrier is thinking for rate increases sooner, rather than later.  Equally important is to know if your experience mod will be affected by the formula change, and to know what the mod is going to be six months prior to your renewal date.

The insurance industry is cyclical, and we haven’t seen price increases since 2004.  Historically, firming or hardening markets don’t last that long – then again, historically, the stock market averaged nearly 10% returns.  We don’t know how long it will last, but its here now.  Are you factoring these cost increases into your cost structure?  If not, you should seriously consider doing so.

This information brought to you by Chris Sheppard of Smith Buckley & Hunt Insurance Agency, your Massachusetts contractors insurance agent and Massachusetts business insurance resource.

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