Why New and Risky Contractors Need a Better Insurance Experience

Joey Giangola: Laura Allen, how you doing today?

Laura Allen: Great, how are you?

Joey Giangola: Oh, I'm doing all right. I'm doing all right. I want to know this before we really get anything too serious. And my question is, is there ever been anything that you have really tried not to like anymore? You just said, "I give up. I'm going to have to like this thing. It's too prevalent in my life and there's nothing I can do about it."

Laura Allen: Sugar.

Joey Giangola: Okay. It's a pretty easy one though.

Laura Allen: I've been a sugarholic for about 30 years and try not to like it anymore, and it's been one of the most difficult things I've ever done. But so far, so good, knock on wood. It's working. And it's amazing how much better you feel if you can get rid of sugar.

Joey Giangola: So for me, Laura, it's tomatoes. I've always not liked tomatoes. And I said, "Forget it. I'm going to give up." I've even gotten to the place where I'm paying extra for it now, and I really don't know what I'm doing with my life because I've just given up. It's one of those things where I feel like an adult shouldn't ask for no tomatoes on a sandwich, and I guess I've graduated to that place in my life now.

Joey Giangola: So I want to move over to the world of insurance, Laura, and really talking about the idea of maybe not liking to ensure a particular line of coverage or having some frustrations with it, and coming around to it and maybe the world of contractors might fit that bill. Everybody does it for some reason. They're so prevalent. But what has been your experience with people trying to go after that line of business? What are some challenges? What are some obstacles? And how do they maybe find success?

Laura Allen: Well, everybody's going after contractors these days, especially the smaller residential contractors or the smaller commercial contractors. I think there's certain areas within the country that have been more difficult than others, such as out west. We have construction defect states that have been challenging. You also have states like Florida, Illinois, New York that are pretty litigious and that's been a concern for carriers. But overall, especially when it comes to artisan contractors, the smaller ones, it's been very profitable. So every carrier that I know of is going after that class of business.

Joey Giangola: And profitability is definitely something that should be in consideration. Is there maybe a type of contractor that is maybe more profitable than another? Is there is an area that you find to be even more sort of sweet for agents to focus on?

Laura Allen: Like I said, I think the smaller one, two-man operations that are doing residential remodeling. Remodeling is... It encompasses a lot of things, painting, carpentry. But those renovation contractors that are going into people's homes, we have actually found those to be the most profitable, believe it or not.

Joey Giangola: Where does it break down? So if you got, like you said, the one to two-man shops, how big does a contractor need to get before things get a little too sticky, maybe some extra coverage is needed? What's sort of that threshold for agents?

Laura Allen: Usually once they get over half a million in sales or revenue, that's when we start seeing more complex accounts, ones that we need to focus on underwriting more, providing additional coverages, things like that.

Joey Giangola: Is there any underwriting guidelines that you could potentially give if they're looking for those smaller shops? Is there maybe some more qualifications? We're looking for just maybe a handful of employees doing the remodeling. Is there anything else that agents should be aware of as they're sort of approaching these risks?

Laura Allen: The biggest thing is just pre-qualifying the account just to make sure that these guys actually do have some experience. We've seen some truckers, for example, park their trucks because of freight rates and cost of gasoline. And they decided, "Well, I think now I'll go in to be a remodeler," and they really don't have any experience in that. So I would just say make sure you're pre-qualifying your risk first to make sure that they actually do have some type of experience, perhaps working under others. Because we will write new ventures. We love new ventures because our appetite is those accounts that the standard markets won't take. So that does open us up for new venture accounts. But just make sure that they've actually held a hammer or held a paintbrush before.

Joey Giangola: That's pretty wild. I didn't know that that was necessarily happening. I guess along the experience from... Where's a good place to be then, if they were to maybe focus their targeting even a little bit more? Six months a year in business, sort of what's that threshold to where it maybe becomes a little bit easier?

Laura Allen: Well, our sweet spot is going to be someone with two years' experience or more, but like I said, a lot of times those are going to go into the standard market, and so we won't get a shot at that, being an E&S MGA. So the new ventures, we just want to make sure they've been on a job before, they have at least six months experience doing the trade in which they claim to be in business for, whether it be carpentry or window installation, or especially roofers. We will write roofing accounts both on residential and commercial, and that would be an area we would definitely want some experience in.

Joey Giangola: Have you seen anything else in the standpoint of trying to get the wool pulled over the eyes, a little bamboozling, if you will, to where agents might not be asking enough questions? What other kind of weird things have you maybe come across?

Laura Allen: Well, the system that we have online where the retailer agent can go in and rate quote bind an issue, we don't ask a ton of questions because we want it to be very seamless for them, but we do ask some pre-qualifying questions just to make sure that they're classifying the account correctly. Let's face it, a contractor is going to take whatever job they can get, so we want to make sure if you are doing roofing, that we're rating it as roofing because obviously that's going to come with a higher premium and deductible. It's really just asking those questions of, "What are all the different types of jobs that you can do or will do?" And making sure that we quote that appropriately because these accounts are auditable. So at the end of the year, if they go and interview the insured, and the insured says, "Yeah, I did 50 roofing jobs," and we have it rated as a carpenter, there's going to be additional premium due.

Joey Giangola: Yeah. And I would imagine that there's definitely some scenarios where they can make that decision to become a roofer based on, like you mentioned, opportunity. And that opportunity might not have involved the time in which they were discussing their insurance. So again, we're always in the risk aversion game, but is there any suggestions you could have for agents for that carpenter that might feel a little ambitious and develop that roofing skill midway through a policy?

Laura Allen: Yeah, I think from the retail agent standpoint, just advise the client that this is how we have you rated right now. If things are to change, give us a call. The thing about contractors is there's a lot of communication back and forth throughout the year because they may need a certificate of insurance to get on a job, so they're calling their retail agent for that. And we allow the retail agent to provide them a certificate of insurance based on what we've quoted. So when they're calling in, the retail agent can just ask them, "What type of job is this for?" And then if it turns out that they're doing additional classifications that we don't have on the policy, then we can endorse that on.

Joey Giangola: Yeah, that's another interesting point too. There is an often sort of last minute of need for that insurance at times. Being able to respond relatively quickly would be of a decent benefit, I would imagine.

Laura Allen: Absolutely. And that's why we made this initial rate quote bind system so easy to use because a lot of times the contractor's right there in the office, and they need something done within five or 10 minutes, and this online platform allows them to do that.

Joey Giangola: Yeah. I guess, how does that compare to maybe what agents might be dealing with currently as they're having to deal with maybe a more traditional process? What kind of time are we talking about that they're able to potentially save?

Laura Allen: Well, I think a lot of retail agents have... A lot of independent agents have several markets that they have in-house that they can go to, standard type markets, and a lot of them have online platforms, so the retail agents are used to that. What we did is we tried to develop ours to be the fastest, the easiest, the most user-friendly, if you will. And I think we've achieved that. I've gotten a lot of very positive feedback from our retail agents that it's one of the most... the easiest systems that they've ever had to use. And once again, our system is going to be tailored for those accounts that they cannot place with their standard market for one reason or another. So it is truly an E&S product, excess and surplus lines, meaning non-standard, non-admitted, so they just need to keep that in mind.

Joey Giangola: So let's talk about that. Where is an agent likely to run into something? What's going to point them in that direction of being a little bit riskier, where again, the people that they're used to turning to outside of those standard markets, what's something that they could help them identify those risks a little more quickly to know where to go to?

Laura Allen: Well, the biggest one that we're seeing are new ventures. A lot of standard markets will not take a new venture unless they can show proof of coverage. And so a lot of these guys don't have that. So we will take new ventures. Sometimes the classifications, maybe it's tree trimming, maybe it's roofing, know some of those classifications, the standard markets won't allow. I would say new ventures and classifications would be the two big points. We will look at accounts that have had prior loss activity. That sometimes does pull it out of the standard markets. However, that's not going to qualify for this online system that we've offering. We're going to have to underwrite that ourselves. But we have underwriters throughout the entire country that are available that can turn these quotes around very quickly. So even if it's not on the online system, reach out to your RPS underwriter and they can help you.

Joey Giangola: What I'm always interested in is ways that agents can gain a little bit of a competitive advantage in terms of when they're dealing with the maybe riskier classes. Those contractors have probably heard that same song and dance where it's going to take a little bit or whatever, and if an agent's able to maybe go in and say, "Listen, I can do this. I can do it quick." Is there any other areas, we mentioned roofers, tree trimmers, is there any other sort of areas where you think that might... where the standard markets generally don't like to sort of get too close to that agents could maybe look to target?

Laura Allen: The renovation class is one of the most popular because it's all-encompassing. So I would definitely say that that makes us stand out from other carriers, including admitted standard carriers. There's a long list of available classes, so I would just welcome any retailer to go on, try it out, see all the different classes available. And they may see one in their particular state that they don't have immediate access to with their standard markets. We also offer-

Joey Giangola: From a-

Laura Allen: Oh, I'm sorry.

Joey Giangola: [inaudible 00:10:30].

Laura Allen: I was going to say we also offer some contractors' equipment and installation floater coverage for a nominal fee. So that's another selling point.

Joey Giangola: Well, actually, you're leading me right to my next question. I was going to talk about additional coverage. What are we not talking about? What are some things that are maybe some loopholes, some areas where maybe could use a little extra attention that might get overlooked?

Laura Allen: Not on this online system, but we do have a couple divisions within RPS that do workers' comp, and so that ties in nicely with artisan contractors. We also write trucking. We have a big division that writes truckers. So when we get into the larger accounts especially, we can look at writing their trucking account as well. At RPS, we really want to be the retailers' one-stop shop for these accounts and be able to offer all the coverages that they need, even including excess and umbrella, because sometimes they have to have higher limits for a particular job. We're seeing that more and more often where a million occurrence is not enough, they want two or three million, and we can offer that.

Joey Giangola: And talking about maybe being able to grow with the client because you start out with that one or two-man renovation shop as they become more successful, then obviously the insurance sort of scales up with them. Maybe map out sort of what that maybe progression looks like. I don't know if you've seen something, a good example, to where you've seen a client grow and then just all the additional coverages that have come with it and maybe what an agent has done to, I guess, foster that account and sort of nurture it.

Laura Allen: We had a gentleman that was working, a one-man operation. He was helping a larger contractor, so he was the sub, but he had to have his own insurance. So we insured him, and he was doing sewer main construction. And because of his experience, he actually built his business and grew it to a 15-man operation and was starting to get some state jobs, some governmental jobs, and grew into a very large operation that we still ensure to this day. For some reason, that class of business did not appeal to the standard markets, so he was unable to move over to the standard side, which is great for us because we continue to have him as a client and continue to build out his business. So that's definitely one success story I can think of.

Joey Giangola: Yeah, absolutely. And in terms of additional coverage, like you said, like sewer, is there any terms of liability or anything like that that might be also considered that maybe is also getting overlooked?

Laura Allen: Not that I can think of. I mean, general liability, it's bodily injury, property damage, and most retailers are aware of what we cover. It is important to read through the policy language, especially when you're writing with an E&S carrier because there may be some terms or some exclusions that they're not used to on the standard side, but we do try to point those out. I can't point out every one of them, so it is important to read the policy. But generally that's what we're there to do is to protect that contractor while he is on the job.

Joey Giangola: I guess of your years of watching this business come through the door, is there anything that has stood out to you in terms of what makes agents successful in targeting it? Is there anything that, any sort of common denominator that you've picked up on over the years?

Laura Allen: A lot of it is done by word of mouth. So you write one contractor, he goes and tells his buddies, and next thing you know, got another contractor coming in. It may not be the same type, but you can really build your business just through word of mouth, which is how most retailers build their business anyhow, providing great service. If you can turn those quotes around, turn the policy around, turn the certificates around quickly, that's what everybody's looking for, and to offer them a fair premium for the limits and the exposure that they have. It's just a matter of, once again, providing excellent service, and the turnaround time has to be there between the retailer and the insured and us as the wholesaler.

Joey Giangola: Yeah, now that's a whole nother interesting area of intersection as you mentioned. What would you set the expectation in terms of turnaround service? Where do you think the benchmark is? Where can we make that facilitation as effort and easy as possible?

Laura Allen: Well, the key is in working with a wholesaler like RPS that has dedicated underwriters that do this day in and day out, so they're extremely efficient. They know the marketplace, they know the carriers, they know their appetites. So if I get a call on, say, a roofer in Florida, I'm going to know my top four carriers to go to. And we have over 25 carriers that I can go to to obtain an artisan contractor quote. But just being efficient in the process of knowing, okay, I'm not going to waste my time and quote 10 different markets. I know that these are the top three that are going to give the best terms and best pricing. So I think that that's it right there, just being able to access a wholesaler that has all the markets available in the marketplace and knows how to use them.

Joey Giangola: All right, Laura, I've got three more questions for you. And the first one is, what's one thing you hope you never forget?

Laura Allen: What's one thing I hope I never forget? Oh, that's a great question. This sounds kind of cheesy, but my mind, my memories. Because I have elderly parents that are in their nineties, and I thank God every day that they're not going through dementia or Alzheimer's because I do have friends that have parents going through that. And they have their minds. They're very sharp. My dad was a engineering professor, and he still helps doctoral students write papers at age 92, if you can imagine. So I just hope I have that same memory and function when I get to be hopefully that age. It can be kind of scary when you start forgetting things and forgetting memories. I mean, we all forget things. I forget where I put my keys or whatever, but to forget memories, it's kind of scary. So I hope that never happens.

Joey Giangola: Now, on the other side of that, Laura, what's one thing you still have yet to learn?

Laura Allen: Oh, I have a lot to learn, and I try to do... Your podcasts, I think, are excellent. I try to do various podcasts when I'm driving. I try to do webinars whenever possible just to learn. There's so much that we can learn. I've been in this industry for 32 years, and there's still so much to learn. It's ever-changing. I want to learn more about crypto, I want to learn more about AI. I think those types of things are going to change our world. So I'm probably putting more effort right now into AI just to understand it more. It's scary, but it's fascinating as well.

Joey Giangola: Well, maybe that'll lead us into our last question, Laura. Last question to you, if I were to hand you a magic wand of sorts to reshape, change, alter, speed up, really any part of insurance, what's that thing? Where is it going and what's it doing?

Laura Allen: Wind aggregate in the southeast territory. So I'm in charge of our southeast region for all lines, and I have never in my career seen it as tough as it is right now in property capacity, wind capacity. So if I had a magic wand, I would give Louisiana, Florida, North and South Carolina, all the wind capacity they could write profitably.