Snow and ice management is a hard market. So, what does that mean? We’ll, it’s a sellers’ market and there are fewer carriers. The industry leader in this segment – Mesa Underwriters Specialty Insurance Company (MUSIC) – withdrew last year from this segment and are no longer writing snow contractors. The remaining carriers have tightened their underwriting guidelines, and carriers are appointing fewer agents.
The East Coast, in particular, has been hit hard. So, if you are a snow contractor in New York or New Jersey, Pennsylvania, Connecticut, Massachusetts, then you’re probably having a tough time of it. The admitted insurers and carriers in those states are really staying away from snow contractors at this point.
The price increases, interestingly, have been flat. And in some instances, we’ve even seen reductions, but those are for the smaller contractors with under 20 percent of snow revenues. There still seems to be markets among the admitted carriers for those contractors – especially in the Midwest and outside of the Greater New York area. It really varies by region.
We’ve also seen rate increases in excess of 200 percent, and those tend to be for larger risks or contractors with claims activity, and the amount of snow business (more than 20 percent) they’re doing – so it really varies.
Some of the carrier that continue to play in this market have been imposing higher minimum premiums from $50,000 to $100,000, and deductibles from $5,000 to $25,000 and up. Some of them also have underwriting constraints on the types of properties that snow and ice managers work for, as well as limitations on the amount of work that is subbed out to service providers.
So, it’s a challenging market, especially on the East Coast.
How Did We Get Here?
As you know, insurance is the law of large numbers. Theoretically speaking, they file their rate and periodically revisit it, and if the loss ratios are higher than expected then they file for rate increases. Unfortunately, the loss experience for the snow contractor segment has been 200 percent to 300 percent, depending on the carrier. Those are the kinds of loss ratios that force some senior managers to say, “No mas! Let’s exit.” You can not correct these kinds of loss ratios.
There are a number of factors – inadequate insurance rates, heavy snowfall over the past several years, and inordinately high claims activity. The frequency of claims can be addressed by most carriers with imposing deductibles. But when you add severity of claims. poor risk selection and increasing medical costs, irresponsible competition among some of the insurers – all of these factors drive many carriers out of the snow and ice management segment.
Unfortunately, this is where we are at this point.
We’ve also had carriers, as well as snow contractors, not paying attention to risk management and loss-control procedures. So, there’s some naivete with insurance writers not really guiding their insured to pay close attention to the contracts that snow contractors are entering into with their customers. Likewise, contractors are not being clear or understand what property owners are expecting from them.
So, it’s been a tough couple of years because a great number of these carriers have just decided to exit the market. There is a great number of smaller regional mutual companies, or even some of the super-stock national companies, that would still consider some of the smaller risk contractors – landscape, construction, pavement — that have some incidental snow management exposures and will take them on. In fact, there are some admitted carriers that don’t’ even have a code for snow contractors, so they’ll consider you if you’re some form of landscape or paving contractor, then they’ll secondarily underwrite the snow exposures.
There are admitted carriers who are local, regional, mutual companies licensed in a small number of states and tend to write small risks. They’re still doing this in the Midwest outside of the Greater New York area. There’s still a market and there’s still an interest to the extent that you’re talking about landscape or paving contractors who do incidental work that is under 20 percent snow. You should still be able to find a coverage for that and the pricing remains very competitive.
If you have some claims activity, then it gets a little hairier. You’ll be forced into the non-admitted market – the excess and surplus lines market. There are a number of excess and surplus lines markets that will entertain snow contractors. Unfortunately, many of them begin to impose some higher minimum premiums and higher deductibles.
The area we’re finding it exceedingly difficult to find markets for are the larger contractors, particularly 100 percent or substantially snow-related receipts. Right or wrong, many carriers have concerns about this segment of the snow and ice industry so fewer markets are gravitating toward this segment. However, I have been in contact with a few carriers who are prepared to consider these on some kind of risk management captive-type program.
Where Is The Market Headed?
Under 20 percent snow revenue. The smaller contractors still have a pretty good 12 to 18 months ahead where the rates will still be reasonable. The smaller regional types of carriers may not be paying as close attention to this segment, so they’re still writing it. You just need to prepare and cultivate a positive relationship with your carrier.
My concern is as more risk ends up with these carriers, and they not paying attention with the underwriting, the losses will catch up with them.
20-50 percent snow revenues. This is a hardening market. There’s pressure for higher deductibles and higher minimum premiums.
Over 50 percent snow revenues. The market is hard now and moving toward some types of shared risk mechanism, such as a captive or risk retention type of solution. I would also include in this group contractors who use a substantial amount of service providers to service their winter contracts.
Becoming More Attractive
First and foremost, tighter contracts are essential. I would encourage you to take advantage of the Accredited Snow Contractors Association (ASCA) and have them review your contracts before you sign them. Define the work that will be performed and define when the work is completed and when the property owner assumes liability for the premises.
Maintain strong recordkeeping and documentation practices because many times carriers believe they have to settle because they feel they can’t mount a solid defense. Having good records and documentation, pictures, timestamps – all of these will help your defense.
Also, it’s very important to maintain strong management of service providers. It’s not just getting copies of their certificates of insurance. You need to have the ISO endorsements included that, in fact, you are being named as an additional insured, you’ve got the Waiver of Subrogation, and that all of these are on file
I’ve seen instances where claims are sitting on your loss runs, yet you’re not getting credit for the fact that the loss arose from a service provider who has insurance and named you as an additional insured. You should be fighting with your agent or carrier to understand why they should be giving you credit for underlying coverage that is to your benefit. Any market looking at your loss runs is going to consider that you have this big claim sitting in your experience.
Lastly, maintain staff who are ASCA-C certified, and have your company become ISO 9001/SN 9001 certified. We are educating carriers that this is a professional, risk-management oriented committed to keeping claims low.A frequent Snow Magazine contributor, Michael Moncada is an insurance expert with The McGowan Companies and has more than 35 years of experience in the industry.