Carriers may have been more lax in the past with their onsite inspections after taking on a new risk or reinspecting a risk they’ve been on for some time, but that is no longer the case. We are seeing carriers on top of their inspections, and recommendations these days are mostly mandatory.
The strong enforcement of loss recommendations is from a gap in carrier inspections due to Covid-19, and the hard market that the insurance industry is currently in. We know loss recommendations can, at times, be daunting. We understand and are happy to guide you, but the bottom line is that they must be complied with in a timely manner.
The hard market has created a less competitive exchange where carriers have tightened their guidelines and are more particular than ever regarding the risks they take on. As I’m sure you have seen, the hard market is also the driving factor as to why premiums have increased and continued to increase over the past three-four years. In addition, carriers are prepared to cancel your coverage if you do not provide the necessary proof of compliance for your recommendations by the date they have requested. We are happy to push back for you and ask for more time if it is valid. If it’s winter and the sidewalk cannot be repaired until spring due to the weather, or if your building has landmark status from the city, and making any changes to the facade requires more time for permission and permits… we will do everything we can to get you an extension. However, unlike in previous years, for basically anything else, the carriers have not allowed much room. If you choose not to comply with your loss recommendations or they are not completed by the carrier’s due date the following will happen:
The current carrier will send you or your broker a notice of cancellation due to non-compliance. This may not be at your policy’s expiration. This can be midterm, as the carrier will not stay on the risk without compliance of the loss recommendations. Your broker is now going to go out to market to avoid a lapse in coverage. The last thing your broker ever wants is a lapse in coverage. We have to find you another carrier. Depending on different variables of each particular building there are a number of carriers we can approach, and there may be a few that we know off the bat won’t fit based on that carrier’s guidelines. The carriers that we believe would be a good fit are going to ask why it is being non-renewed or canceled mid-term. We have to provide the reason the prior carrier is getting off the risk, and when the new carrier hears it’s due to non-compliance of loss recommendations, it brings up a lot of red flags.
One issue is that the new carrier will most likely agree with the recommendations that the prior carrier required. Then we’re right back where we started. Everyone needs to understand that an insurance policy is a written contract between the insured and the insurer. By putting coverage in place with your carrier you are agreeing to their terms and conditions, and non-compliance of any kind is breaking that contract. Non-compliance can alarm a new party getting involved and limit our market options even further. After all, the carriers feel their loss recommendations will only help eliminate the risk of exposure and make the building a more efficient and safer place.
Wait, there’s more.
Remember I mentioned the hard market and how carriers are not very competitive right now which creates an increase in premium?
What if there isn’t a competitive option right now? What if by delaying the completion of your loss recommendations you’ve lost the current premium you were paying?? It is highly likely that you will end up paying more with a different carrier.
Want another reason to handle and comply with your loss recommendations in a timely manner? The new carrier may have MORE and DIFFERENT recommendations of their own! Yikes!
As I said, carriers are on top of their inspections these days and will definitely be stopping by to take a look. It is very possible the new carrier’s inspection will generate more recommendations and or require the prior recommendations to be complied with as well. Let’s say the new carrier is still interested and provides a quote, this time the premium is higher and there will most likely be an even shorter period of time and the new and possibly old recommendations need to be complied with.
Here’s the kicker.. this is all avoidable!
Work with your broker on a timeline, and keep them up to date with the status of any work that needs to be done. Send your broker any bids, invoices, photos, any and all documentation along the way, and at completion of the recommendations. Your carrier does not want to cancel your coverage. As long as we keep providing adequate proof that the recommendations are moving forward, the carriers will usually work with you and your broker.
In the end, we all want the same thing, and in this hard market let’s give ourselves the easiest path possible.