Expert Tips on Finding Quality Insurance
â€œWe donâ€™t really have a choiceâ€¦without insurance, a company is crazy,â€ says Leigh J. Johnson, CEO of Custom Alarm Inc., Rochester, Minn. â€œIs it expensive? Yes, but is gas expensive? Yes. Thatâ€™s the cost of doing business,â€ he adds.
Alarm dealers might not be able to skirt around paying high costs for quality insurance, but finding that quality insurance can be a challenge. Experts agree that the market is relatively soft right now â€“ companies have room to shop around for insurance â€“ but there still are only a handful of companies that will write general liability with errors and omissions nationwide, according to Mike Kelly, owner and founder of Michael J. Kelly Insurance, Santa Barbara, Calif., a specialty company that provides security and communications insurance nationwide.
Alice Cornet Giacalone, vice president of specialty programs for Brakke-Schafnitz Insurance Brokers Inc., Laguna Niguel, Calif., insists that alarm dealers donâ€™t actually invest in the insurance itself. â€œMost alarm dealers buy service because they never use the insurance. I call it â€˜pre-paid defense loss,â€™â€ she says. Dealers should look for more than just low premiums.
Here are some tips from insurance experts and alarm dealers on finding â€“ and keeping â€“ quality insurance.
Pay attention to a companyâ€™s ratingA worldwide insurance-rating and information agency called A.M. Best, Oldwick, N.J., rates companies in categories such as financial strength. Most experts recommend checking the rating of an insurance company and making sure itâ€™s financially stable before purchasing a policy.
â€œWith any commercial insurance, there are a lot of things you need. Very important is that a carrier needs to be financially sound so that they can handle your claims,â€ says Giacalone.
â€œClaims can come up two, three, five years later and [an alarm dealer] needs to make sure that the insurance agency will still be around,â€ she adds.
Johnson of Custom Alarm agrees. â€œA financially stable company means itâ€™s able to defend you and able to cover your claim. A.M. Best indicates ratings of carriers if you are shopping around,â€ he says.
A.M. Bestâ€™s financial strength ratings include A++ (superior) to D (poor) and E (under regulatory supervision). Not all insurance companies are rated, however. The National Burglar and Fire Alarm Association (NBFAA), Silver Spring, Md., for example, is not rated. It should be noted, however, that ratings can take several years to achieve.
Shop aroundMany alarm dealers, and insurance agents alike, recommend taking some time to look at several different insurance carriers before buying into a policy.
â€œ[Alarm dealers] just have to shop. But, do apples for apples,â€ notes George Gunning, president of USA Alarm Systems Inc., Monrovia, Calif., and vice president of NBFAA.
Gunning suggests searching for quotes from several agents â€“ making sure that you ask for the exact same limits and coverage so that you can compare easily. He also suggests asking questions. Are there charges for certificates (proof of insurance)? Is there a clause for office fires?
Kelly of Michael J. Kelly Insurance suggests alarm dealers do their research. Log onto the Internet and do a search for alarm insurance. The insurance agent also recommends looking at publications in the security industry and scanning the advertisements. Referrals from peers can help you in your search to find quality insurance companies within the industry.
For alarm dealers with existing coverage, Giacalone recommends getting quotes from other insurance brokers periodically to ensure that you are getting a competitive rate. â€œIf you need to, call and get another quote from another company to keep your agent honest,â€ she suggests.
Turn to the expertsMany dealers are resigned to the fact that they are in the alarm business â€“ not the insurance business. But ensuring that their agents understand the specific needs of the industry can bring peace of mind â€“ and better coverage.
â€œExpertise and specific knowledge of the industry is important,â€ says Dave Hood, vice president and general manager of First Alarm, Aptos, Calif.
â€œAlarm dealers are not an insurance agency. They need to go to an insurance agency that understands their business and represents financially sound carriers,â€ says insurance broker Giacalone.
Kelly also emphasizes a need for insurance providers to be familiar with the industry. â€œVery few insurance brokers truly understand liability for an alarm dealer and what they do to provide services. If you donâ€™t talk to the right agent, you wonâ€™t get the appropriate coverage,â€ Kelly says. And inappropriate coverage could mean a big loss to an alarm dealer. Attorneyâ€™s fees in one lawsuit could financially devastate a company if not covered by their insurance.
Beware of last-minute quotesIt happens. An alarm dealer might receive a letter informing him that his insurance agency will no longer cover his company. Whatâ€™s a dealer to do?
â€œDonâ€™t get last-minute quotes,â€ warns Giacalone. Receiving good quotes takes time. A less-than-honest insurance agent may prey upon a company in dire need of coverage.
â€œMany agents will wait until the last minute to give you a quote â€“ you donâ€™t have time to shop before your policy expires,â€ Giacalone adds. Insurance companies may strap on an extremely high premium for a desperate dealer. Be wary of this.
An alarm dealer should work ahead if possible to find a competitive quote and make sure that there are no glaring exclusions in coverage, such as medical emergency coverage, suggests Cecil Hogan, president of Security Consultants Inc., Memphis, Tenn.
Comfort is keyâ€œSometimes you need to pay more to deal with a broker or company you trust,â€ says Hogan of Security Consultants Inc. Hogan adds that dealing with a company you are comfortable with is very important for an alarm dealer.
Gunning of USA Alarm Systems Inc. has been in the security business for more than 20 years. Throughout those years, his company has done business with only three insurance companies â€“ most currently with NBFAAâ€™s program, Security America Risk Retention Group (SARRG).
â€œI make sure [an insurance] company will interact for me. We need to talk to contractors all the time,â€ he says. The ability to call and talk to your agent in a time of need is very important, according to Gunning. â€œWe must have faith in the agents we talk to. We sell alarms â€“ we rely on an agent.â€
Johnson of Custom Alarm has been with the same insurance broker for more than 15 years. â€œOur company takes very good care of us,â€ Johnson says. A few years ago, one of Johnsonâ€™s employees hit a deer with a company car. Thanks to good coverage and a broker he trusted, they had a check two days later, Johnson says.
Consider dealing with as few insurance companies as possibleMany alarm dealers work with more than one insurance company: one to cover general liability with errors and omissions, one for workerâ€™s comp or auto coverage, etc. Insurance experts like Kelly and Giacalone suggest getting comprehensive coverage from one company that can address all of your needs as an alarm dealer.
At some firms, such as Brakke-Schafnitz Insurance Brokers, alarm dealers can get general liability with errors and omissions, as well as other specialty coverage. Giacalone calls it â€œone-stop shopping.
â€œWe write everything,â€ she stresses. â€œThe benefit of this is that you know what coverage you have and you are less likely to have a gap in communication and a gap in coverage. Itâ€™s also easier to get a certificate for proof of insurance or additional insured certificates,â€ Giacalone adds.
Kelly says that a thorough broker should sit down with a dealer after the application process and discuss the companyâ€™s needs to ensure that all are addressed and there is no gap in coverage.
Sidebar: What is your Insurance Company Rated?Insurance experts recommend dealers find out an insurance companyâ€™s rating before deciding on an agent or broker. A.M. Best, Oldwick, N.J., is an insurance-rating and information agency with offices in the United States, United Kingdom and Hong Kong.
The company assesses the financial strength and state-of-debt of insurance organizations â€“ allowing dealers to make well-informed decisions when dealing with insurance companies.
The highest financial strength rating an insurance company can earn is an A++, meaning such a rated company has a superior ability to meet its obligations to policyholders in Bestâ€™s opinion. Learn more at www.ambest.com or call (908) 439-2200.
Sidebar: How Much Coverage Do You Need?Assessing how much coverage and what limits your company needs is a dealerâ€™s personal decision.
â€œItâ€™s the $64,000 question,â€ says Mike Kelly, owner and founder of Michael J. Kelly Insurance, Santa Barbara, Calif. No good insurance broker will tell a dealer what limit they should have, he says. Some companies go by reasonable market value of the alarm dealer or enough to protect the companyâ€™s assets.
â€œLimits should extend to all operations [in the company],â€ notes Kelly. A broker then can meet with the dealer and determine exactly what coverage and policies are appropriate.
As far as coverage in addition to general liability with errors and omissions, Alice Cornet Giacalone, vice president of specialty programs at Brakke-Schafnitz Insurance Brokers Inc., Laguna Niguel, Calif., recommends an umbrella policy, which will raise a companyâ€™s coverage limit and help them recover in the rare event of a catastrophe. She also suggests a commercial auto policy. This type of policy covers non-owned and hired auto exposure, according to Giacalone. If a secretary goes to the bank or an employee uses his own car on a break and gets in an accident, then the dealer would be covered if the other party were to sue the alarm company. Without this policy, the company has no coverage for such a loss.
â€œThis is the biggest gap in coverage for the alarm industry, in my opinion,â€ Giacalone emphasizes.
Sidebar: What Makes a Retention Group Insurance Policy Different?Eighteen months ago, the National Burglar and Fire Alarm Association (NBFAA), Silver Spring, Md., began offering an insurance alternative to its members called the Security America Risk Retention Group (SARRG).
With SARRG, many members are able to achieve large cost savings relative to other insurance brokers. â€œI would tell any NBFAA member to make sure they get a quote. If I hadnâ€™t Iâ€™d be paying $6,000 more each year,â€ says George Gunning, president of USA Alarm Systems Inc., Monrovia, Calif., and vice president of NBFAA.
In fact, according to Merlin Guilbeau, executive director of NBFAA, the insurance program already has 230 happy members.
â€œHalf of new NBFAA members have joined the organization recently, strictly for the insurance,â€ notes Cecil Hogan, president of Security Consultants Inc., Memphis, Tenn. â€œIn 18 months, we have yet to see our first claim, which allows us to offer a reasonable rate,â€ he adds.
The organization reports very positive feedback and Guilbeau says that admittance in the program is not guaranteed for members. â€œJust because youâ€™re a member doesnâ€™t mean you will be accepted,â€ he says.
This selectivity is what allows the program to offer savings to members. Some insurance agents, however, have concerns about insurance programs such as SARRG. For one thing, SARRG is not a rated program.
â€œIf it were my alarm company and I could be with an A-rated carrier, there is no reason to go to a non-rated company,â€ notes Alice Cornet Giacalone of Brakke-Schafnitz Insurance Brokers.
Mike Kelly of Michael J. Kelly Insurance agrees. â€œMy viewpoint is that there is no benefit. I have grave doubt that after a few claims filed, there may be no [SARRG] insurance at all,â€ he says. Kelly maintains that NBFAA should make their financial review known to the public so that individuals making insurance decisions have that information.
Another concern, according to Kelly, is that SARRG only offers general liability with errors and omissions policies â€“ without other specialty policies. Nevertheless, many dealers have saved money with SARRG, and Guilbeau points out that the programâ€™s independence from stock market fluctuations helps keep premiums stable. â€œInsurance companiesâ€™ premiums fluctuate. Our group has no ties to the stock market, which equals no big swings in premiums,â€ Guilbeau says.
Some dealers worried about joining programs like SARRG because of the coverage limit. Up until recently, SARRG was only able to cover a dealer with a $1 million policy. Recently, however, they have been able to raise that coverage to $5 million.
â€œMy original concern was the coverage we could get,â€ Gunning says. Now that the coverage has increased significantly, Gunning believes many more NBFAA members who might not have joined before will switch to SARRG.
Sidebar: Admitted versus Non-admitted Insurance CompaniesAdmitted companies must file forms with each state on an annual basis to substantiate their financial conditions. They then have admitted status in individual states. The insurance rates filed are monitored by the State Insurance Department. What this means is that a policyholder is guaranteed that all claims will be paid, even if the insurance company fails. This is backed by a State Insurance fund.
A non-admitted company is not required to file state to state, but rather the company operates under a federal law. Non-admitted companies do not need to have rates, policy forms
or coverage approved by the State Insurance Department â€“ meaning that they can change their rates or policies at any time, without waiting to file paperwork or receive approval.
According to Mike Kelly of Michael J. Kelly Insurance, Santa Barbara, Calif., the financial condition of a non-admitted company could exceed the financial condition of an admitted carrier, which in turn might mean they are willing to offer higher risk coverage.
While admitted companies may seem a more stable choice, not all carriers wish to go through the process it takes to become an admitted company. Regardless, Kelly suggests checking the financial review of all companies before choosing a carrier.
Insurance Contacts:l Alarm Insurance Agency, Charleston, S.C.
Call (800) 474-0933 or visit www.alarmins.com.
l Brakke-Schafnitz Insurance Brokers Inc., Laguna Niguel, Calif. Contact Alice Cornet Giacalone, vice president of specialty programs, at (949) 365-5100
or visit www.brakkeschafnitz.com.
l Kirschenbaum and Kirschenbaum, P.C. Attorneys at Law, Garden City, N.Y. This law firm has many years of experience dealing with alarm dealers in the
security industry. Call (516) 747-6700 or visit www.kirschenbaumesp.com.
l Michael J. Kelly Insurance Agency, Santa Barbara, Calif., celebrated its 25th year providing insurance for the alarm industry. Call (805) 682-0113 or visit www.alarmchannel.com.
l Security America Risk Retention Group,
Denver. Call (866) 315-3838 or visit