Get An 18 Month Policy For Less Down Than A 12 Month Policy

Hello to everyone in the non-emergency medical transportation industry.  I apologize that it has been over a year since my last blog update but I have been so busy helping transportation providers solve their commercial insurance problems that time has not allowed for it.  I have so many industry updates to share I do not know where to start but I will begin with a NEMT insurance market update.

NEWS FLASH:  The market is hardening, and quickly!!!

Commercial Auto Insurers Losing Money


 In the last month alone, I have seen:

 -A conditional renewal letter from an extremely large, national insurance carrier stating premium would be increasing 30-40% "due to a general rate increase".

-A letter from an agency that focuses on the NEMT industry to a current client of theirs stating the incumbent carrier is increasing the price from $3,633 per vehicle to $10,161 per vehicle.  They go on to say the renewal quote is the best they can obtain and suggest they "try on your own to obtain a better quote".

-Numerous non-renewals letters coast to coast


The commercial property and casualty insurance market is very cyclical.  This means that there are periods that the market is very hard (increased pricing, less aggressive in regards to class of business, less risk tolerance for insurance carriers) and very soft (reduced pricing, extremely aggressive underwriting).  Over nearly the last decade, the insurance market conditions have been extremely soft and standard carriers have been writing classes of business and particular industries in which are normally written through the excess and surplus markets.  Historically, the transportation industry has led the way in the form of being the "canary in the coal mine" evidencing the market turning from soft to hard.  There are many reasons for this but a major one is the risk for high severity loss.  For example, if a three unit non-emergency medical transportation company pays a total of $10,000 on their auto liability and has an at-fault accident where a client they are transporting is severely injured, that policy could pay out hundreds of thousands of dollars.

With the increased tightening of margins for the NEMT industry shrinking due to macro factors such as medicaid funding, increased gas prices, and the like, drivers and companies are rushing to get as many trips completed as possible completed a day.  This results in less of a focus on safe practices which lead to a higher number of incidents.  Higher frequency always leads to increased severity.  Sooner or later, one of those accidents will be significant in regards to liability facing the company.  If an insurance company writes the policy described above and that company has a $500,000 loss, to get back to being profitable, the carrier would need to underwrite 99 other policies exactly like that one and not incur even one more claim.  Insurance companies need for their policies to generate no more than a 50% loss ratio in order for them to be profitable on the account.  The other 40-45% or so of premium goes towards paying underwriter salaries, claims adjusters, rent, the light bill, taxes, and other costs of doing business.  This leaves 5-10% for the company to generate a profit.  So for every aforementioned $500,000, insurance companies need to generate $1,000,000 in premium.  Otherwise, they will be unprofitable in that class of business which they will then cease to underwriter or demand large increases in premium at renewal.  This is now occurring in the NEMT sector.

Like I mentioned above, the market is changing and quickly!  Sovereign Risk Solutions saw the tide begin to turn earlier this year and began discussing the ability to write longer term, 18 month policies in order to lock in rates before the market further hardens in the coming weeks, months, and years.  I am proud to say that we were able to accomplish this AND we negotiated the down payment on these 18 month policies to be a mere 10%, which is the same down payment amount (it is actually cheaper due to the additional insured cost being the same) as the 15% down payment option that is currently available on 12 month policies.  To that end, we also have a program in place, if your company qualifies, that allows for ZERO down payment.  Due to Form E filing requirements, this puts insurance companies and finance companies in credit negative positions but due to the outstanding relationships we have built with day to day interactions, we were able to push this through on our clients behalf.

The 18 month policy with a 10% down payment is only one of the many value added services we have been working on behind the scenes.  Much, much more is just over the horizon and I look forward to sharing them with you as things are finalized in due time.  Should you have any questions or want to discuss your current insurance program and how we can help you improve your bottom line, please don't hesitate to reach out to me via email: jbrownlee@sovrisk.com or phone: 678-996-3418.

Non-Emergency Transportation Insurance Market Update

I have updates for my readers on several carriers that are involved in the non-emergency, NEMT, insurance market.  The first is Progressive.  Many NEMT companies are currently insured with Progressive.  If you call up Progressive and ask if they insure non-emergency transportation vehicles, they will tell you absolutely not.  Insurance agents have been taking advantage of Progressive's online rating and have been misrepresenting the information to get them through the system.  Progressive has become wise to this and is sending out non-renewal notices once they find out the company is involved in non-emergency transportation.  NEMT Transportation broker Southeastrans has also become aware of this and has began to reject companies that have certificates of insurance listing Progressive as their insurance company.  I have access to a standard carrier through my program that specializes in NEMT insurance and can compete with the pricing Progressive has unintentionally offered.  This company also has a great knowledge and expertise in the industry.  One of their loss prevention experts come to your business and sits down to go through your safety program development with you before they even write the policy. You will also be able to rest easy not having to fear impending cancellation notices or rejection from Southeastrans and other transportation brokers.  We also have access to many other carriers to handle any transportation risks.  Please don't hesitate to give me a call to discuss your program.

The second update is on a company that currently writes workers compensation insurance for NEMT companies is AIG/Chartis.  In general, they tend to have higher workers compensation rates than the monoline workers compensation carriers in the market and often times, the last stop before companies go into the assigned risk pool.  I have received confirmation that effective 5/1/2011, they will no longer be writing any new workers compensation policies in the state of Georgia.  Effective 7/1/2011, AIG/Chartis will be non-renewing all transportation risk, which includes non-emergency transportation companies.  The agency has several different workers compensation markets that are all more competitive than AIG.  When you receive your cancellation notice, please give me a call.

Developing Your NEMT Risk Management Program

There are many different reasons to have a comprehensive risk management program as a NEMT business owner.  The main reason is that a single misstep can wipe out everything you have worked so hard to establish in the form of an uncovered multi-million dollar lawsuit against your company.  Defense costs alone often reach six figures in no time at all.  A vast majority of NEMT companies drug test their employees prior to employement, post-accident and also when there is reasonable suspicion.  If you do these three things, you are eligible to become a certified drug free workplace.  This easily obtainable certification is an automatic 7.5% credit on workers compensation premiums.  On top of that, it makes your company more attractive to insurance companies and helps in our negotiations with underwriters to further drive down your workers compensation premium.  This credit occurs repeatedly year after year and also differentiates your company from your competition when you can prove that your drivers are certified drug free.  We can walk you through the entire process.

Going back to how one claim can eliminate your business, many NEMT business owners are unaware that many things are excluded from your insurance policies unless you buy specialized coverage.  Employment practices liability, or EPL, is a major exposure in today's litigious society.  These include things such as discrimination, wrongful termination, sexual harassment, and retaliation. Other additional actions which are alleged in these cases, such as libel, slander, or other defamation, invasion of privacy, mental anguish, infliction of emotional distress, loss of consortium, assault, battery, breach of contract, negligent hiring, supervision, promotion or retention in connection with any other employment-related claim are also excluded from your common general liability policies. 

An EPL policy can be obtained for an extremely reasonable premium that barely reachs four figures or probably about one quarter of what you are currently paying for one NEMT vehicle.  EPL premiums are determined by the number of employees as well as the quality of your company policies.  Our agency has developed templates for every applicable company policy needed for your business that we offer to our clients at no additional cost.  It brings our agency joy to protect your business and add value to your company.  We go above and beyond to make sure EPL policies are endorsed with a third party endorsement; they are otherwise left off. This endorsement means that there is also coverage if one of your clients, falsely or not, files suit against you or one of your employees alledging any type of the aforementioned acts such as sexual harassment.  EPL is just one of many risks that can hurt your business, lower your bottom line, or even close your doors.  We make sure this does not happen.

The Difference Between Standard Carriers and the E&S Market

There are two different kinds of insurance carriers in the world today.  The admitted or standard markets, which most of you will recognize as the Travelers, Hartfords, and Liberty Mutuals of the world.  These carriers follow guidelines set forth by each states Department of Insurance (DOI). These carriers are required to file their rates with the DOI, which then approves their use. The carriers must use these filed rates on all clients and cannot deviate. Admitted carriers are also a part of each states guarantee fund which provides for protection for policyholders if a company becomes insolvent.

 Admitted carriers often do not meet all the needs of many insurance buyers. Non-admitted insurance carriers (sometimes referred to as excess and surplus lines carriers) offer an opportunity for coverage for specialty risks that might otherwise be un-insurable. Non-admitted carriers do not have to file their rates with the DOI and thus they retain the flexibility to price risks according to their specific exposures. While these companies are not licensed by the DOI, they do have to go through an approval process that includes providing evidence of minimum capital and surplus requirements. When these requirements have been met to the state DOI’s satisfaction, the DOI may approve a company to conduct business in that state.  Non-admitted carriers also require all premium to be paid up front resulting in the client to be forced into a premium finance agreement which adds another 10-15% of costs to an already inflated premium.

The reason I went into this explanation is that up until recently, all carriers who agreed to provide insurance for non-emergency transportation companies were Non-admitted carriers.  That is, until now...