Installation floater rating basis

[Rob]

So I have a solar contractor that has a trailer filled mostly with materials such as copper wiring, pipe, and connectors. The total value is about $15,000. He also has about $4,000 in tools/equipment. So I had a policy quoted for Tools/Equipment along with an Installation floater and the premium for the installation floater portion was about $2,400. On a $5,000 job, it is mostly labor and the materials amount to about $300 (the solar panels are not his legal responsibility according to contract, based on what he is telling me). His estimated installation receipts are about $800,000. So he is having a hard time reconciling the premium vs. risk. Assuming a rate of .30 per $100 of receipts, the premium of $2,400 to cover $15,000 worth of materials seems excessive to him and in his mind it is not commensurate and he is asking me to speak to underwriters to see if anything different can be done, which is not likely. Other than "that's just the way it is in your situation", do any of you have a way to explain why installation receipts is an appropriate rating basis for this risk?

[wariline]

I dont think sales receipt is the rating basis for floater. The $2400 premium looks more like to me is for general liability.

[Rob]

I dont think sales receipt is the rating basis for floater. The $2400 premium looks more like to me is for general liability.

No, I already have his general liability which is separate. I am also very well versed in reading and analyzing quotes and the underwriter has confirmed that that is the rating basis.

[UnderwriterSam]

Hi Rob,

Good question and this is one that trips almost every insurance professional up.

The accurate rating basis for an installation exposure is:

Estimated Average values at risk per job

X

Estimated number of jobs under construction at any one time**.

(This is calculated by: average duration of a job/ 365 days) x the estimated number of annual jobs


That gives you the correct exposure base to apply a rate to.

In your example, the only missing piece of information is the average duration of a job.

Say, for instance, your contractor spends 5 days per job and completes 10 jobs per year. The calculaton would be:

(5/365) x 10

or .137

Take the .137 pro-rata factor and multiply it by the estimate average value at risk of $300 and you get an exposure base of:

$42.

The .30 assumed below would be applied to that $42 figure, not to annual receipts.

To your broader question, that seems like an absolutely crazy premium for such a small exposure. You may want to make sure that your underwriter knows (and understands) that your client isn't responsible for the installation of the actual solar panels. That might make all the difference in the world.

Good Luck!

US

[egalloway01]

Installation Floaters are not filed and are subject to rating and interpretation from each company. They can be flat rated, based on the sales of the business, on completed value of the project or building starts and stops.

Installation floaters can be taken out for a single project, specific machinery or equipment or it may be on a blanket basis for the entire operation.

There are various possibilities - but it does sound like that your insurer doesn't want to cover your insured.