Everyone knows the importance of communication. It is especially important in the insurance business. In order to save money and maintain proper coverage, there has to be an open line of communication between the policyholder and the insurance agent. With so many factors impacting insurance premiums — including what types of coverage to buy, exclusions, inclusions, breaking news — it is imperative for business owners to keep in touch with their agents in order to keep insurance costs down and insurance policies up to date.

“I would encourage someone who is shopping for insurance to be prepared to supply the agent with lots and lots of paperwork,” said Derek Boyd, senior vice president of Horizons Insurance Group Inc., Dallas. “The more the agent can confidently tell the underwriter for an insurance company, the more comfortable the underwriter will be with quoting the account. Communication is very important.”

It helps to be proactive, too. Michael A. Weber, president of Thomas & Galbraith Heating and Cooling Inc., Cincinnati, saw his health care premiums go up 38 percent in the past year. Instead of sitting still, he took action.

“I had to do three things to manage our costs: eliminate a life insurance portion of our plan, increase deductible coverage, and begin an employee contribution for those wishing to be covered,” he said.

Another contractor, Bob Wilkins, owner of Wilkins Mechanical, Bedford, N.H., said he reviews his policies on an annual basis to get the best coverage and rates.

“Our insurance agent recommends that if you have two codes that an employee’s wages fall under, separate them according to how their hours were applied for payroll, especially if one of the codes is less and pertains to the employee’s occupation occasionally.”

In other words, said Wilkins, don’t use just one code believing it’s the only way it can be done or it may not make a difference.

“Every dollar counts and can add up,” said Wilkins.

Shop Around

“It’s only been in the last year that we became large enough to start shopping group insurance plans,” she said, noting that she found a plan not widely known for small businesses, called a medical savings account (MSA). “The plan includes your normal health insurance plans, but with a large deductible. Currently for families it’s about $3,300.

“Along with that insurance plan is a medical savings account. It is an interest-bearing account into which the employee or the employer can contribute up to 75 percent of the deductible in a year. From that account you can pay any medical expense that is not paid for by the insurance.

“It is scary to get into at first, but we love the flexibility. As employers, we also love the lower costs.”

According to Watterston, the MSA Act is due to expire at the end of this year. She understood that Congress is expected to act on extending it soon.

Like Watterston, Brad Swanson of M&S Plumbing, Heating & Air Conditioning Inc., Manhattan, Kan., is another contractor shopping around for lower health insurance rates. His company’s health insurance rates went from just over $12,100 in 1998 to a projected $68,800 in 2003.

“Scary, isn’t it?” he asked. “And the increases we had in 1999 through 2002 in our business insurance were because of a workers’ compensation claim. We had a tech fall off of a ladder and break his arm pretty bad.”

Swanson was happy to note that his business liability insurance “held its own this year.”

“We actually had a decrease in premiums,” he said. “Health insurance, on the other hand, increased about 35 percent. We are in the process of getting quotes from other providers, but the quotes are shocking from some.”

Swanson said he is attempting to get the quotes with higher deductibles, fewer benefits, lower co-pays, etc. At the same time, he is trying to keep from having his employees split the cost of the premiums.

“We do get quotes annually on our business insurance, and for the last couple of years we have been on the health insurance of an outside payroll provider. It started out rather inexpensive, but that has changed. We’re looking into going back to doing everything ourselves again.”

Steve Rothacker of Unique Indoor Comfort, Dallas, has specific ways for reducing his company’s insurance premiums.

“We use bigger deductibles, review our insurance, and get quotes every year,” he said.

John Boyce, owner of Airco Service Co., Tulsa, Okla., said it is important to shop rates for a couple of reasons.

“You need a yearly review and you need to get competitive quotes yearly — especially to keep your agent honest,” he said.

Loyalty Does Not Equal Lower Rates

“Loyalty to your insurance agent is fine; however, insurance for a corporation does not appear to be discounted because of years of coverage,” said the owner of Wilkins Mechanical. “In fact, some insurance companies, when bidding, will give a higher discount than normal on the cost of the insurance to gain your business, with hope that you will stay with them and not bid again next year.”

Art Grace, owner of Krutsch Heating Inc., Taylor, Mich., nixed the myth regarding loyalty, too.

“I had a situation where we were hit with a 50 percent increase,” he said. “So I shopped around and found lower prices than we had paid the previous year.”

Safety Is A Key

Craig Jones, owner of Slasor Heating & Cooling in Livonia, Mich., said that insurance companies offer generic employee handouts that provide information on topics such as driver safety training, site inspection for loss prevention, proper fluid storage, and installing belt guards on shop equipment.

“Insurance companies offer free safety signage, M.S.D.S. [material safety data sheet] literature, and other requirements that would lessen the [contractor’s] exposure to fines or lawsuits,” he said.

In the eyes of Jeff Miller, vice president and general manager of Al-Don Services, Creve Coeur, Mo., insurance companies often do more good than they are given credit for.

“I think the rising cost of insurance will force more contractors into doing more safety training,” he said. “Everyone knows that labor costs and insurance costs are the fastest growing expenses, so if the insurance industry partners up with contractors to show contractors how they can save money versus constantly digging into pockets, they will gain tremendously. Most people view insurance as a necessary evil instead of a possible benefit for customers doing business with them.”

By all means, if an agent does not discuss the benefits of a good safety record, it may be time to shop around. One can do the shopping over the Internet, too. (See sidebar below.)

Small Business Health Fairness Act

In a statement from the Office of Management and Budget, it was pointed out that an “estimated 85 percent of the 41 million uninsured Americans are members of working families. Employees of small businesses are half as likely as employees of larger firms to receive insurance through their employers, and the cost of that insurance is often 20 to 30 percent higher. Additionally, insurance costs are rising much more rapidly for small businesses than large firms.”

The bill still faces an upward battle for passage in the Senate, but HVACR and construction industry leaders remain optimistic.

“National Association of Wholesaler-Distributors [NAW] member companies, like other smaller employers across the country, are truly struggling in today’s highly concentrated health insurance marketplace and their workers are highly affected by that struggle,” said NAW President Dirk Van Dongen. “This [bill] employs an effective marketplace approach to this problem, and one that involves little, if any, cost to the taxpayers. For these reasons, enactment of the bill is among NAW’s top legislative priorities and in fact leads our health policy agenda.”

“This legislation is a concrete step to giving small businesses, their employees, and their families a positive solution to health care coverage and offers a blueprint on how to solve America’s health care coverage needs,” said Kirk Pickerel, Associated Builders and Contractors’ president and CEO.

Higher premiums can have several effects, two of which are somewhat painful. Employees may be asked to contribute more. Also, customers may have to pay higher costs.

Swanson doesn’t care for either scenario. “We are still shopping around to see what we can do,” he said. “Our advisor says we have to draw the line and do it now. As of yet, we have not mentioned anything like that to our people. It is, in essence, a pay cut for them, but how do you overcome that kind of an increase?

“We know we’ll have to raise rates, and we are highest in Manhattan already. Guess we’ll see what happens.”

Jones believes higher rates are a trickle-down effect from the 9/11 terrorist attacks. “The great loss in equity in the stock market supposedly forced insurance companies to look to premiums as the only way to pay for losses from claims,” he said.

Meanwhile, Larry Taylor, owner of AirRite Air Conditioning Co Inc. in Fort Worth, Texas, believes contractors should get involved in the legislative process to enact changes in insurance laws.

“We are going to have to have a much stronger voice in the state House of Representatives to make change happen,” he said. “For example, we need changes in the auto insurance to make it a true no-fault plan. Each driver goes to his or her insurance company for a claim, regardless of who caused the accident. If that happens, then the false claims will go away because of someone not having coverage on themselves.”

Miller agreed. In his estimation, HVACR contractor groups can be influential, too.

“I think associations like ACCA, Excellence Alliance, Airtime 500, etc., could have a positive effect helping contractors of all sizes if Congress passes the association insurance issue,” he said.

Sidebar: Finding Insurance Advice Online

One of the more informative Web sites is www.insure.com. The Web site provides tips for shopping around for the best policies and also provides price quotes. Some of the free advice centers on the importance of a good safety record. Not only does having a good “mod” factor result in winning competitive bids, it also helps lower premium costs.

According to insure.com, “Liberty Mutual [Insurance Co.] maintains a three-tiered system for its workers’ comp policyholders. Standard policyholders don’t receive much preferential treatment in terms of rates, and there’s a bottom class considered poor risks that are doomed to pay higher premiums.

“But companies with proven safety track records and few claims can move into a ‘preferred’ policyholder class, where Liberty Mutual gives special considerations. Usually, employers are rewarded for high safety standards by a premium calculated using a lower base rate than their state’s average.”

Two other Web sites, www.ehealthinsurance.com and www.quotesmith.com, are also useful in helping small businesses find affordable, top-rate health insurance coverage for employees.

Another Web site, www.allbusiness.com, offers tips on what to look for in an insurance provider. Here are some pointers from that Web site:

“Insurance agents are essentially commissioned salespeople who work for specific insurers. As a result, they may not always offer the most competitive policies. Critics of agents believe that they cannot be objective about insurance products. Others insist that the only way to find your way through the myriad of insurance options is with the help of a good agent. Just keep in mind that some are more helpful than others.”

AllBusiness recommends that you ask an agent the following questions about individual insurance companies: