In 2000, many of us watched the movie, "The Perfect Storm." The
blockbuster showed us how a number of meteorological factors
converged to form the perfect storm. Within the insurance industry,
there has been a confluence of key factors that led to a "perfect
storm" that began in 2001 and still continues. We've seen an
unprecedented catastrophe on Sept. 11, 2001; investment results
that have declined in stocks and bonds for a three-year period,
which hasn't happened since 1939-41; years of price decreases while
inflation significantly has risen; and reserve deficiencies that
partially are attributable to the increase in jury awards.
To understand the insurance industry, you must understand that
businesses have mutually beneficial relationships with their
commercial insurance carriers. Insurance allows customers to
transfer certain business risks for a premium charge in exchange
for achieving financial protection. For large organizations,
insurance becomes more of a financial transaction where the insurer
only responds when losses exceed an agreed-upon level, or
One difficulty with understanding insurance often involves how
carriers extend coverage and determine premiums. As a roofing
contractor, you probably find it difficult to understand why you
pay so much for insurance premiums, often for many years before
experiencing a significant claim. And you may assume a commercial
general liability (CGL) policy will provide coverage for most, if
not all, liabilities you may face. However, it is the policy
language that determines what is covered when a claim is made.
An insurance policy is a contract between you and an insurer
that specifies terms and conditions to which each party must
adhere. I will attempt to demystify the insurance purchasing
process by discussing the dynamics of the industry,...
To read the article in its entirety, please log in or register (registration is free).
Log in or register for FREE access to this article and other Professional Roofing online content.