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By Rica Howard Ford
Consider these scenarios: you are the owner of six self-storage facilities across the United States, including two that are located in a coastal area, and your mortgage requires all to have insurance protection. Unfortunately, the coastal sites have been declined or have wind storm exclusions on your standard insurance coverage. Or maybe you own storage facilities but also operate a truck leasing service at one of the locations. Perhaps you need to insure a converted property, or a one in a high crime area. If you face any of these situations, your insurance coverage now becomes more complicated. It can become much more expensive as well.
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Owners in comparable situations may wish to consider excising or separating the higher risk exposures from their standard coverage portfolios and placing them with an excess and surplus (E&S) lines insurance carrier as a stand-alone policy. This separation is prudent risk management because the owner can obtain strong property and liability coverage for the standard exposures more easily and affordably without being penalized for those higher risk exposures across the board. Later on, when claims are made, this can be beneficial in helping the owner maintain a lower loss ratio on the traditional properties.
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Isolating the standard from the unique allows the owner to maintain adequate coverage more efficiently because the excess coverage can be tailored to the higher risk.
What exactly is E&S insurance?
The excess and surplus lines market is also sometimes referred to as specialty lines. This area of insurance is highly specialized and designed to cover exposures that fall outside the box of conventional coverage. An exposure may land outside this box either because it is classified as higher risk or because it is a more esoteric item requiring additional analysis, risk assessment and flexible underwriting.
How do I obtain coverage for unusual risks?
As a self-storage owner shopping for insurance, it is crucial that you work with an insurance agent who is knowledgeable about your business and any unique needs you have. Your first step is to have a frank discussion with your agent. If it is determined that your business is better served by E&S coverage for a portion of your assets, your agent should consider teaming with a broker on your behalf.
Because of its complexity, navigating the specialty market alone can be difficult, even for the most savvy and sophisticated retail insurance professional. This includes those who specialize in selling coverage to self-storage businesses. Plus, many of these E&S markets are accessible only through a wholesaler. For these reasons, an insurance agent ideally works through an E&S broker.
The broker has the expertise to guide the agent and client through the more intricate E&S process. A good broker not only connects the insurance agent to the insurance carrier, but is a specialist who knows the E&S market inside-out and can partner with the agent to find the best solution for the insured. For instance, he or she will negotiate coverage terms and provide comparative analysis and recommendations on behalf of the client. The broker will be familiar with policy wordings and market comparisons, and will identify problem areas that someone who isn't constantly active in these lines of business might not catch.
Another important benefit of using a good brokerage firm is claims intervention on the purchased policy. In the event that a claim is later filed, the broker can intervene to ensure a timely response from the market. Again, the good broker will be an advocate for the insured, reviewing the coverage position letter to ensure that the contract is being executed appropriately and negotiating with the insurance company as necessary.
In conclusion, if your self-storage insurance requirements land somewhere outside the conventional coverage box, it probably behooves you to separate the common from unique risks and then consider the E&S market and an established wholesale brokerage for those unusual risks.
Rica Howard Ford is a marketing specialist for Crump. Crump is a multi-line wholesale insurance brokerage group with facilities that span the excess, surplus and specialty insurance marketplace. We are professionals with local presence and international access. Crump provides immediate access to more than 100 leading domestic and international markets and partners with the highest AM Best-rated companies. For more information, please visit www.crumpins.com or contact Kathy VanEeten at kathy.p.vaneeten@crumpins.
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