Working With the Insurance Industry

Linda Stoppacher, CPP, CSP, ARM, ALCM

Acadia Insurance Company

Parties During Design Phase

• Building Owner

• Code Officials

• Fire Department

• Architects and Design Engineers

It is understood that lives and safety of occupants and responders is of ultimate importance in this presentation. We are, however, going to discuss financial issues

How Insurance Works

Business Owner

• Needs Insurance

Agent or Broker

• Helps identify needs and priorities, services account

Carriers• Carrier A

• Carrier B

• Carrier C etc.

• Absorbs the loss

Property Casualty Coverage Types

PropertyBusiness

InterruptionGeneral Liability

Product Liability

Custom or Excess Lines

Commercial Auto

Umbrella and Excess

Worker’s Compensation

Boiler and Machinery

Inland Marine

The Insurance Carrier

Underwriter

Loss Control

Claims

• Loss Control• Visits Prospective Customer

• Evaluates risks and controls, condition, protection, values, natural hazards

• Provides Opinion to Underwriter

• May Make Recommendations to Improve (or even be able to insure) Risk.

• May Have Regular Service Relationship with Customer

Rates

• Insurance Services Organization• Verisk

• HPR• Highly Protected Risk

• Generally in Cents per Thousand Dollars of Value

• Reinsurance

Main Factors in Property Rates

• Construction

• Occupancy

• Public Protection

• Private Protection

• COPe

Construction

• Consider how it will behave in a fire.

• Consider firefighting operation, whether they are likely to enter or not.

• Consider whether it can be salvaged, and if it is likely to be a complete or partial loss.

Occupancy

• What is going on inside of the building?

• What are its relative risks to fire?

• Will it impact plans of first responders?

• Combustible load?

Public Protection

• What is a Public Protection Class?

• Availability of water

• Ease and speed with which water can be accessed

• Capability, distance, and equipment of Fire Department

• Needed Fire Flow• Can have a class 9 building in a

Class 4 town

Private Protection

• Any systems inside of the building• Sprinklers

• Gaseous agents

• Foam

• Alarm transmission

• Extent of protection

• Testing and reliability

Exposure

• Generally what the building may be exposed to from the exterior• Rising water

• A neighbor with significantly more hazardous operation

• Wildfire

• Usually smallest factor of COPE

• Pepcon Disaster Example

Rate Examples

• A $2,000,000 office building made of masonry non combustible construction. Completely protected by adequately designed and supplied sprinkler system, in a Public Protection Class 2.

• Rate may be $.10 per $1,000 in value.

• Hypothetical Premium?

Rate Examples

• A $2,000,000 restaurant building which is wood frame and not sprinklered. Location is a Public Protection Class 9 area.

• Rate could be $.35-$.50 per $1,000 in value

• Hypothetical Premium could be?

Compare Rate over Time

• This will be a graph, waiting for one piece of info from an actuary

Private Protection

• Not always about rate.

• My determine insurability.

Major Loss Sources

• Water Damage

• Fire

• Wind Damage

• Catastrophe

Loss Control

• Visits a Risk to learn about operation

• Evaluate Hazards• Storage/warehousing, Flammable liquid use and storage, Machinery, Wood

Dusts, Housekeeping, Electroplating, Quenching, Commercial Cooking…

• Evaluate/confirm construction, condition and appraisal value

• Evaluate private protection• Adequacy of systems, maintenance, extent of protection

• Evaluate public protection and services

• Natural hazards

Ideal Vs. Reality

Items needed from survey

Ideally• Hydraulically designed

• Designed for that occupancy

• Alarms to a central station

• Prefire planning with Fire Department which is close by

• Fire pump is exercised

• All testing documentation is in place

• Waterflow test is available

• Code officials involved at time of design

Reality many days• Scheduled system or no placard

• Fifth occupant of 100 year old building

• Isn’t the water gong enough?

• Fire department several miles away, unfamiliar with occupancy

• Fire pump touched once per year by contractor

• No proof of testing

• Having to estimate waterflow

• Inappropriate system features

• Age

• Lack of code enforcement in area

What to do?

• Sketch and calculate system

• Find water info from town, or estimate from 2” drain

• Make recommendations• Testing• Exercise/test pump• Address age issues

• Think about holistic loss scenario

• Provide best analysis to underwriter and, if necessary, reinsurer

Situations where you may work with an insurer• Client is building a new structure

or addition• May work with FPE if no code

official

• Pay provide and discuss specs for UNDERWRITING purposes

• May want to know about materials or brands being used

• Interest in Code used in design

You may work with an insurer when…

• Client wants to make improvements to Protection for better insurance rate• Insurer may provide minimum

requirements for rate reduction

• May provide approval to underwriter that design meets internal (and external) guidelines

• May have to provide documentation to a reinsurer

May work with an insurer when…

• There has been a loss impacting the fire protection system• Conveying to our claims unit the

need for additional expenses

• Our need to understand when the system will be operational once again

• How to prevent a similar loss in the future

May encounter an insurer….

• During a fire pump test• Like to witness when possible

• Discuss results with contractor

• Graph and compare to previous years

• Discuss any need to further explore a performance issue and what the next step is

• Discuss exercise schedule

May Help an Insurer….

• What is this? • Would you interpret this the same way I am?

How you can help a customer!

• If this is not present, or plans are not on site, ISO can dock your customer in its evaluation, resulting in a higher base rate.

An Insurer may help you….

• Does your company recognize this standard?

• This is outside the scope of NFPA, therefore would you accept this?

• Is this material or technology acceptable to you?• CPVC

• CLT

• Insulated Sandwich Panels

Insurance Loss Control as a Career

• Graying Industry

• Traditionally hire people with engineering or highly technical backgrounds

• More colleges are offering Insurance and Risk Management Programs

• Use a variety of codes and standards- DOT, NFPA, FM, OSHA, CPSC, ASHRAE, etc.

• Each day is different

• Can specialize in various lines or industries

• Involved with people

What are the Main Factors in Property Insurance rateA) Construction, Age, Protection, and Neighborhood

B) Construction, Occupancy, Private Protection, Public Protection and Exposure

C) How long a company has been in business and whether the sprinkler system is wet or dry

D) Industry trends

What is HPR and how is it used?

A) Highest Premium Ratio, it is used to get the most property rate on a risk.

B) Highly Protected Rate, it allows an insurer to keep rates high

C) Highly Protected Risk, it allows an insurer who is filed to do this to substantially lower a premium rate for an exceptional risk with superior protection systems and features

D) Hourly Premium Regulation, it determines rates for a manufacturer based on hours spent in hazardous activities.

In the absence of hydraulic information, what might an insurer do?

A)Guess on the sprinkler system’s adequacy

B)Refuse to provide coverage to a company

C)Charge a higher rate

D)Sketch the system and run a hydraulic analysis