Ben Rickard, construction risk specialist at Builtin Insurance Brokers, outlines how they saved big bucks for one new customer.
Background
JFC Pumps is a well known and highly reputable Christchurch-based concrete pumping company. Its managing director, Tim Johnstone, is on the board of the NZ Concrete Contractors Association and has tremendous experience in the industry. For many years they were, he assumed, being well looked after by their insurance broker, a large multi-national firm with offices in every major centre.
Their insurance was placed with one of New Zealand’s largest insurers and the claims they’d made were all well handled.
However, Tim is big on supporting those organisations that are affiliated with the Concrete Contractors Association, as Builtin has been for many years, so he was happy for us to make the pitch for his account.
Builtin’s approach is to get to know the client’s business in as much detail as possible, as well as what’s important to them when it comes to risk and insurance. As Tim put it at one point: “anymore info and you will know my business better than me!”
Tim’s main objective was to see if he could save money on premiums that have been steadily increasing, while still maintaining good coverage, low excesses and a straightforward claim process. One angle he wanted us to take was to consider the trucks and pumps as separate items, given that most claims are for bangs and scrapes to the truck unit rather than the equipment itself.
The Process
Once we had a good handle on the risk and requirements we approached 6 alternative insurers to request terms. Of those, three declined to quote for various reasons, mainly related to their own risk appetite and rating model. The concrete sector in general is challenging for insurers and not all of them are keen to underwrite this risk. Additionally, some understand the sector better than others and apply various conditions and rating models to reflect the risk. Specialist plant & machinery like concrete pumps (and cranes, forestry equipment, industrial machinery etc) requires specialist underwriting and not all insurers are good at doing it. Of the three that did provide terms, there was a pricing differential of close to $40,000 between the most and least expensive!
The Recommendation
Ultimately, we recommended UANZ to insure JFC’s fleet of trucks, pumps, parts and accessories and site office. UANZ specialise in mobile plant and equipment and understand the concrete pumping risk well, already having a substantial amount of this type of business on their books. This means they are very well placed to provide an accurate quote based on the risk profile of the business. Their premium compared to the others, and compared to the renewing premium from their current insurer, was substantially lower.
Says JFC’s Tim Johnstone: “given the current economic environment cost saving was a big priority for us, so we were hoping Ben would be able to save us a bit of money. But the reduction in premium he negotiated was phenomenal. Ben was also very easy to deal with throughout the process, nothing was a problem.”
There were some pros and cons to work through, as there always are when comparing options. Their current insurer had agreed to cap their maximum excess at three thousand dollars. However, the excess with UANZ was one percent of the sum insured with a minimum of one thousand dollars (500 dollars for light vehicles), so for the more expensive trucks this might mean excesses upwards of five thousand dollars. Consequently, lower value claims for scrapes to the truck body may fall beneath the excess. However, the excess for damage to third party property from a vehicle accident is still nil. UANZ also have a $250 excess for windscreen claims on the heavy vehicles (although it is still zero for light vehicles). I spoke at length to the head of UANZ about this but they were unable to amend these excesses.
Analysis
In the JFC Pumps case we did a quick analysis based on past claim history and determined that there would, on average (and all things being equal), be a financial saving on an annual basis, despite the likelihood of more claims falling below the excess.
Ultimately, Tim was prepared to accept the possibility of having to cover the cost of replacing some windscreens and some of those smaller claims in return for the significant annual premium saving that came along with it.
Cost-Benefit Decisions
As a general rule, the financial cost-benefit decision comes down to whether you’d rather be able to make more frequent but smaller claims and pay for the privilege, or if you’re prepared to save on premium and have cover designed for more serious/more expensive incidents. Understanding this balance (among other things) helps us find the right cover to suit each particular business.
Other Benefits
There were also some nice additional benefits included in the UANZ package, such as cover for the increased cost of working, such as to hire a replacement for a truck that has to be off the road for an extended period of time after an accident.
The policy also allows for the potential for appreciation in value of the trucks over the period of cover, which is a real consideration in today’s market. It also covers recovery costs.
UANZ is underwritten by QBE, which has financial strength rating of A+ from Standard & Poor’s.
Lastly, while we also reviewed JFC’s liability insurance it was agreed to retain this with their current insurer, recognising their positive claims experience.
In a Nutshell
With a comprehensive understanding of the client’s needs and a little bit of effort there’s a good chance of an improved outcome when a proper insurance review is undertaken.
Contact Ben at Builtin on 0800 284 584 or [email protected] to see if we can help you with your next renewal.