If COVID-19 has taught us anything, it is to be prepared for the unexpected. Change is inevitable and our ability to adapt is paramount.
By Nathan Brainard

COVID-19 created a new catch phrase applicable to pretty much all walks of life: “The New Normal.” Whether it was related to social distancing, Internet-based conference calls (as well as conferences), wearing face masks or ordering take out from restaurants we previously frequented only in person, this term has become commonplace. We have had to adjust to so many different changes all at once it can often be hard to keep track. Further complicating matters was the “new normal variance” from one state to another. Every news outlet used, “The New Normal” phrase ad nauseum.

As we start to see the light at the end of the tunnel for a majority of COVID-related procedures, there are some changes that are likely going to stick around for the foreseeable future. This is certainly true when it comes to insurance.

Adjusting the Renewal Process
If we are being honest, when going through an insurance renewal there are copious amounts of data to gather and provide. Sadly, this is the beginning of the journey. Underwriters will come back, ask for clarification, perhaps require a supplemental, conduct loss control and additional data for their review and consideration—all of which is done so you can attempt to obtain quality coverage at an affordable premium. This is not new, and it is necessary for a carrier to truly understand your operation and whether they are willing to stick their neck out and offer terms of coverage. Afterall, their decision can only be made based off of the data provided.

What is new, however, is the extent of the data being requested as well as the time-frame in which the data was produced. In some instances, COVID was chaos on haulers who dealt primarily with the hospitality industry (hotels, restaurants, cruise lines, etc.) as well as those who do collection for businesses such as restaurants or entertainment facilities such as theme parks, stadiums and theaters. Here again, the guidelines in one state could be drastically different from neighboring states. As an example, Florida was among the first to “reopen” in many facets of their economy, giving companies an opportunity to pivot if they primarily worked in hospitality to find additional revenue streams until their primary business focus was back to full operation. When compared to a state such as California or New York, haulers who focused in this same area had little, if any, revenue steam to access, and if they were not in possession of equipment needed to adequately pivot, found themselves in a hole that was not their fault and nearly unpredictable.

Situations such as these have caused insurance carriers to start asking for items during the renewal period that many are finding out of the ordinary. It is safe to say, however, that many, if not all, of these items being requested are likely to stay as part of the, “new normal underwriting process.” Here are a few of the changes you can expect at your next renewal.

In my personal opinion, financials have and always will be a sticky wicket when it comes to insurance. Many companies simply do not feel that their financials are anyone else’s business and, therefore, are reluctant or refuse to provide them. We have had clients tell us that they do not want to provide the financials because, “once the insurance carrier knows how much revenue we are making, they base their premium off our financials and that is ridiculous.” This sentiment often comes for the family run or smaller sized businesses, and while this is not true, it is certainly easy to see how a hauler may come to that conclusion. To be fair, we have worked with larger haulers running several hundred trucks who felt this same sentiment. The point is that financials are a tricky item for many companies.

Financials are required for companies seeking Alternative Risk Management type options such as Captives or Loss Sensitive programs for the carrier to review. After all, if you are taking on a program where you have skin in the game, they want to know you have the financial wherewithal to cover your end of the transaction. Given many of these types of programs, start with a retention in the $250,000 per claim range and go upward from there. This was always viewed as a necessary part of the submission. However, companies who were traditionally seeking a standard insurance policy with a $5,000 deductible were rarely, if ever, asked to provide the financials.

We are now seeing this request on almost every account we send to market regardless of their size or desired program structure. In some instances, if they are not provided, the carrier will attempt to secure a Dun & Bradstreet (D&B) rating, but rarely, if ever, do smaller companies report to them as it is expensive to do so. If they cannot get a D&B report and financials are not provided or are refused to be provided, the underwriters are simply declining the account and moving on to the next one. Keep in mind that we are still in a “Hard Market”, meaning demand is outpacing capacity, so they have lots of opportunities to pursue businesses who are willing to provide the requested data.

Some carriers are also more willing to find creative solutions to this request such as going to a hauler’s yard and sitting with the CFO to review the financials in-house, so a hard or digital copy is not out of the insured’s hands. While providing financial data may not be an issue for you when going through your renewal process, there are many companies out there who are not comfortable doing so, but need to understand it is likely going to be required going forward.

For the record, financials are important for several reasons. As stated previously, one reason is to ensure that the company can cover their exposure related to deductibles. Carriers also want to see that the company has enough funds to keep the fleet in good running order as well as the ability to invest in training and new technology that can foster a safer working environment.

CAB Report Data
Carriers asking questions about your Central Analysis Bureau (CAB) Report is nothing new. This report has been an area of focus for several years, where your loss runs provide a picture of your past history and accidents. The CAB report is considered to be forward looking optics and provides insight to the carrier and their actuaries as to where your claims are likely to come from in the future.

What is new is how the carriers are digesting the data and the related questions they are posing around this report. Once the carrier receives and logs the submission, they start doing their research that includes a review of the submitted data, checking the company’s website and social media sites, and diving into the CAB report. We have seen a hyper focus on questions around Out of Service (OOS) violations as well as maintenance. It is safe to say that if your OOS rating is above industry average, there will be far less suitors than if you were at or below the industry average.

Further, we have seen multiple requests for written responses on specific violations such as Load Securement. Carriers want to see their policy holders becoming more involved with implementing written programs to combat violations such as this and many other violations common to the industry (Tire Tread Depth, Brake Alignment, Lighting, etc.). Further, they are wanting to see written progressive discipline policies for drivers who continually fail to properly complete and turn in their Pre- and Post-Trip reports.
There are several violations that constantly pop up, but load securement is an easy one to use as an example. Ask any Safety Manager who has a fleet of roll off-trucks what their number one violation is and it is likely to be load securement.

The point here is that carriers are digging deeper into the data provided by the CAB report and are expecting to see more formidable processes and procedures in place to curtail the OOS violations. Candidly, if your employees are bought into the Pre- and Post-Trip documentation process and everyone is trained on how it works and they understand there are repercussions for failure to properly follow these procedures, you should be at or below the industry average of OOS violations. Those companies who have a program but there is no perceived penalty are likely the ones who will have elevated violation scores. Simply put, carriers are looking for accountability for the drivers, mechanics and, ultimately, the company they are considering for coverage; lack of enforcement for the stated policies is no longer something they are willing to overlook.

Loss Runs
Anyone who has ever handled an insurance renewal knows that loss runs are required in order to have terms released from potential suitors. Most agents will start working on the renewal three to four months ahead of the expiration date, and, as such, pull the loss runs around this same time. Historically, carriers would accept the data as long as it was valued within 60 to 90 days of the actual expiration of the current policy. Recently, however, we have seen several carriers come back and request updated loss info within 30 days of the renewal to ensure there has not been any further loss development. This can be extremely frustrating as it is often a pain to get the initial set of reports and then be asked to go back and obtain the data again a month or two after initially providing them. This can get even more complicated if you are shopping your coverage via multiple agents as the incumbent agent can delay the delivery of the requested documents jeopardizing options they may not be bringing to the table. You should be able to have updated loss info within 10 business days from the date of the request. Anything taking longer than this time frame is likely the result of your agent trying to insulate themselves from the competition.

Catastrophe Plan
Anyone operating in a state subject to catastrophic events such as wildfires, hurricanes, tornadoes, flooding etc. is likely to have an established catastrophe plan. We have had several carriers asking to see these and not just for companies who are in weather prone areas. Many are asking to see what protocols are in place should an employee or invited guest come to the facility and later identified as having COVID. They want to see what processes are in place for tracking and notifying potentially exposed parties as well as how they will clean and sanitize areas where the infected person or persons might have been. For those who are also in inclement weather prone areas, they still want to see how you will secure your buildings and equipment in the event foul weather is heading your way.

Coverage Terms
When COVID first started there were a litany of claims and subsequent lawsuits between policy holders and their carriers related to Business Interruption coverage. For the most part, all of these lawsuits were filed in vain as there was no direct physical loss or impairment to their property. The carriers relied on this verbiage (as well as some others) to deny claims.
Insurance policies were never intended to respond to a pandemic- type events as there is literally no way for them to collect enough premium to pay claims. Now carriers are including amended exclusions for Communicable Diseases and Viruses, which have broadened the definitions and further reduced or eliminated coverage for the policy holder.

Further, we are seeing a number of carriers update their coverage forms and provide new versions. Rarely, if ever, are amendments to coverage forms to the benefit of the policy holder. Generally, these are implemented after a carrier has identified an issue with the current version and wants to amend it to help stop the continued losses for which the version provides coverage. If you are curious to know when the forms in your policy were last amended, you can do so in the declarations section of the policy. As an example, the CG 2037 10/01 would have last been amended in October of 2001 (10/01 suffix). Please understand, this is not to say every change to terms of coverage are to the detriment of the policyholder, but generally speaking most changes benefit the insurance carrier when implemented. Not everything related to the “New Normal” is bad, so we certainly do not want to make it appear that way. There is a positive we are starting to see.

Regional Carriers
One trend we have noticed that could be viewed as a plus is the interest of Regional Carriers starting to offer terms to the industry. Ten years ago, there were a number of insurance carriers interested in the Waste and Recycling sector. Due to the severity of losses this number has dwindled in recent years; however, we have recently seen a number of smaller insurance carriers who are specific to a certain region begin offering coverage.

While it is great to see new entrants, it is important to keep in mind the coverage they offer may not be as inclusive as some larger carriers and, as a result, could require the addition of some additional policies to truly protect your company. It will be imperative for companies who consider a smaller regional carrier, to work with their agent to ensure all coverage gaps are addressed, which, in short, means more of your time spent working on insurance and away from your daily operations. Whether these companies will continue to pursue the industry will be determined over time, but it is certainly refreshing to see some new players available in the market, even if it is in a limited capacity.

Be Prepared for the Unexpected
If COVID has taught us anything, it is to be prepared for the unexpected. Change is inevitable and our ability to adapt is paramount. While none of the examples are really Earth shattering individually, they can be a headache when compounded upon one another. Several of these might be items you have already  experienced and, as such, are moot, but for those who have not yet experienced some of these changes, you need to be prepared. The likelihood of you being asked to submit information you have never been asked for in the past is extremely likely and failing to do so could jeopardize a potential option for your company to consider.

Within the industry there is often a sentiment for, “this isn’t how we have done it in the past” when faced with something new, especially when it is on an item like insurance. Being asked about your financials or to submit multiple sets of loss runs is intrusive at best, but this is the new normal we are facing. By pushing back on these requests, you are likely limiting the already small number of options you might have for your renewal. | WA

Nathan Brainard, AAI, is Vice President of the Environmental Division at Insurance Office of America (IOA) (Longwood, FL) and is the endorsed insurance partner of the NWRA. Nathan has been with IOA for 16 years and specializes in Environmental Insurance with an emphasis on insurance for the Waste, Recycling, Remediation and Demolition industries. He can be reached at (407) 998-5287 or via e-mail at nathan.brainard@ioausa.com.


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