The hard market of product liability insurance is changing soon. Discover what it takes to stay afloat and take advantage of the current market of product liability insurance rates.
It had to occur.
Product liability insurance rates for the dietary supplement industry, which have been in a steep decline for about seven years, have bottomed out in the previous 90 days, and are almost certainly headed upwards in the near term.
Why? Rates have declined by 80% according to some estimates. They couldn't come down without end. Insurers have been hit by catastrophic losses and an progressively litigious social environment. Interest rates are at monumental lows with no end in sight. The ebb and flow, roller coaster course of premiums for commercial insurance has historical precedence and is poised to climb again.
Yet there are several practical steps you can implement that improve the odds that you will survive the seller's market for insurance and be around to take advantage of the upcoming buyers market when it comes.
Here are some tips.
Don't Wait Until the Last Moment
Begin talking to your broker regarding your renewal at least 90 days before the renewal date. Underwriters will be asking more questions about your business, questions were not bothering to ask last year. Since the process is going to be more difficult, it will take more time.
Focus on Coverage- With Cost
Take some time in understanding your coverage. And not simply for product liability insurance rates (although for most supplement companies this is far and away the most pricey policy they purchase). Are the risks you are most worried about insured in your current coverage? Do you know of areas where you have exposure but no coverage? Read your policies, or better yet meet with your insurance professional and carry a comprehensive review of coverage. Be ready, as one more characteristic of a "hard" or sellers market is that insurance companies invariably attempt to reduce coverage by adding up exclusions and endorsements that conflict with what you thought you were buying.
Brief Management for Higher Premiums
Nobody likes surprises. Mid-level managers at larger companies must prepare the bosses for higher premium rates. Insurance buyers should communicate with internal senior management about the company's tolerances for uninsured risk, as deductibles might rise and high limits of liability insurance may no longer be an affordable luxury.
Step in to your Underwriters Shoes
Try to imagine yourself as the product liability underwriter for your business. What questions would you ask and how can your company respond to them? You received a 483 warning letter this year (it's on the internet and your underwriter will find it)-do you have a ready and logical explanation? Can you provide copies of the certificate of insurance program you mange for your suppliers or-do you even have one? Are there any elements of your website that would scare away an otherwise interested underwriter (sports nutrition companies should take special note of this suggestion). Have you jumped from carrier to carrier each year (red flag for an underwriter) or does your documentation prove that you have demonstrated some degree of loyalty to one or two carriers?
If you've had insured claims in the previous five years, are you prepared to tell your side of the story as to what happened, and present supporting records if asked?
Select a Broker Who Specializes In Your Industry and Team Up
Have you ever said to yourself, "my broker clearly does not understand what we do"? Make it a top priority to find a broker who understands the supplement industry and will be an effective advocate for your insurance interests. Whether you supply raw material, finished product, or both, in a hard market the underwriter will still put you in the dietary supplement arena, where some unscrupulous characters still thrive. The reality is you are going to pay for that association, and a competent broker will have the skills to distinguish you from the rest of the pack.
In addition, most insurance buyers are not alert that all insurers offering product liability to the dietary supplement business need the use of a wholesale insurance broker to retrieve them. So the broker you select (hereafter called the "retail broker") must submit your account to a wholesale broker, who in turn will yield it to viable insurance companies. Most people are under the impression that their retail broker is talking directly with the insurance underwriters. This is not the case. As a result, the introduction of even another party to the purchasing chain makes the insurance procurement process more vulnerable to something "falling between the cracks." With two brokers (wholesale and retail) now in the picture, it is even more critical that a company select a competent and knowledgeable retail broker to coordinate the marketing of its insurance
So select your broker carefully-- and don't wait until the last moment!
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