by michael123 » Tue Mar 17, 2009 06:21 pm
I have a small plastic manufacturing business. I had been using the same broker for 20 years. No claims, although one potential which turned out to be nothing related to my manufacturing. My original broker retired and new guy came with 50% higher premium. I decided to see if I could do better. I called two brokers. I answered all their questions. They said I had been vastly under insured: I had valued my manufacturing equipment at the current used value ie what I pay to replace a 10 year old piece of equipment with another 10 year old piece of equipment. Both new brokers said I must value it at NEW REPLACEMENT cost. ie buy new today $100,000 vs present value of $20,000. Some of the equipment I purchased new but I have a hard time valuing a piece of equipment that I paid $1500 for and value it at $6,000!
I had insured for $500,000 and new replacement pricing would be $1,300,000!
Second problem: I got a call from one of the brokers saying that since I was shopping my insurance around, he couldn't get a quote because the other broker contacted them first! Is this in fact the way insurance companies operate? You have to take what they give you? And only single source it?
I had insured for $500,000 and new replacement pricing would be $1,300,000!
Second problem: I got a call from one of the brokers saying that since I was shopping my insurance around, he couldn't get a quote because the other broker contacted them first! Is this in fact the way insurance companies operate? You have to take what they give you? And only single source it?
Posted: Tue Mar 17, 2009 09:28 pm Post Subject:
If it's a replacement value policy, then yes you should have high enough limits to address that amount. I don't see the problem with this. Also, most replacement cost policies require that you maintain a certain percentage of insurance to replacement cost value (co-insurance and it's usually 80%-90% of the cost to replace).
I think the second part of your post is that you contacted a broker that uses a carrier that another broker also uses. The carrier has an agreement with their brokers not to quote the same policy to two different brokers as this would allow one broker to steal business away from another. Brokers and insurance companies usually have agreements not to do this as why would a broker use that insurance company when that insurance company is going to allow another broker to steal that business? Also, how is it going to look when the insurance company gives a lower premium amount to one broker and a higher one to the other? Someone would be a little upset.
Posted: Wed Mar 18, 2009 03:36 am Post Subject:
So is there two types of policies? The replacement type where the insurance company would replace my old machinery with brand new equipment? No depreciation? Then the second where I would insure for the current value of my equipment? With this policy, would the insurance company pay me the insured value of my equipment, ie $500,000 or would they then depreciate it below what I insured it for?
I thought if I got quotes from 2 brokers, each would have a favorite insurance company or two and get prices from their favorites, evaluate which company gave them the best overall deal, then both come to me with their best deals. Evidently, they both went to the same insurance company. I always thought that there are a number of insurance companies so that wouldn't happen. Both brokers did mention that commercial business insurance for manufacturing businesses was a narrow field and only a few insurance companies specialized.
Posted: Wed Mar 18, 2009 05:29 am Post Subject:
Normally, a broker would operate for multiple insurance companies. He/she would obtain quotes from the carriers he/she is associated with matching your need and budget. It might have happened that both the brokers you have contacted have businesses with the same carriers.
Both brokers did mention that commercial business insurance for manufacturing businesses was a narrow field and only a few insurance companies specialized.
Yup, they are right to some extent. May be there are only few players available in this niche market. Not all carriers write businesses in every line.
Posted: Fri Mar 20, 2009 03:11 am Post Subject:
There is a limited number of carriers that will write plastics manufacturing, depending on the type of plastics used, processes used (extruding, molding, heating devices) and any finishing and what type of liquids are used.
Posted: Fri Mar 20, 2009 04:37 am Post Subject:
Thanks to this forum, I'm finding out more about business insurance than I ever thought I'd need to know! Today the second broker called me to say she couldn't get a quote from some companies because they had been contacted. (I had thought she was the first one to have made contact) I phoned my original broker to see if he had been making inquiries. It turns out he had, so I talked to him for a bit. Some companies didn't want to write plastic manufacturing business insurance and others didn't want to have anything to do with me if I was exporting to the USA! (Sorry guys, probably US based insurance companies too!) He also told me my existing company would never insure me if I had come as a new customer. They were only doing it because I had been with them since I started the business 20+ years ago. They were also using the "re-insurance" market, whatever that means. I'm sure you'll know. He did have one company working on it. As well, the second broker did have one company that no one else had contacted so she will have that for me in the next couple of days.
Again, thank for for all your help. I'm sure I will add to this when I'm trying to read the fine print on a new policy.
Add your comment