Consider the Alternatives Abandoning all hope of finding affordable insurance coverage? A growing number of remodelers are turning to risk retention groups (RRGs) and professional employer organizations (PEOs).
RRGs are self-insured, member-owned insurance companies often formed by trade and professional associations and underwritten by insurance companies. One of the biggest is Pro Builders Specialty, which specializes in residential remodeling and is licensed to write liability policies in every state but New York.
Several state and regional professional associations have endorsed Pro Builders Specialty, according to Sheri Clewett of FRO Insurance Brokers in Northern California. She recently helped the company develop a general liability program for California NARI chapters, based on NARI members’ concerns with most commercial policies and the chapter’s emphasis on professional programs that lower their risk factors. “RRGs have the flexibility to make price changes based on the performance of the group,” Clewett says (800.443.6566).
There’s a “buyer beware” element to RRGs. Leininger says that RRGs typically offer less coverage than traditional insurers, and adds that their unregulated status means there’s “no guarantee fund to take over if the group fails.”
Also, it pays to know who else is in an RRG. “The rates are predicated by the people in the group,” Kinsey says. “If you let some idiot in there and he blows the loss ratios, everybody suffers.” He also advises confirming that the RRG itself has errors and omissions coverage through the insurer that underwrites it.
PEOs are basically “HR departments for hire,” Simmonds explains. They handle payroll and other administrative functions, with their main insurance advantage being their group buying mechanism.
“A PEO that can convince an insurance carrier to provide discounts can help the members realize savings in workers’ compensation and employee benefits,” he says.
Jeff Winn says that his PEO, Barrett Business Services, cuts Big Sky Construction’s workers’ comp costs and holds it accountable for safety. “They do safety checks every month, give us safety materials for tailgate meetings,” and have a safety incentive program.
A source of information on RRGs is the Risk Retention Reporter (www.rrr.com). To learn more about PEOs, visit the National Association of PEOs (www.napeo.org).
Resources Agents and brokers quoted in this article:
Workers’ compensation: Provides medical care and compensation to injured workers on a no-fault basis. Required by law in most states.
General liability: Protects against negligence resulting in bodily injury or property damage.
Umbrella liability: Provides additional liability coverage beyond the general liability policy.
Builder’s risk: Covers property while under construction. Protects against damage resulting from theft, fire, vandalism, wind, hail, and other accidental loss or damage to the property.
Inland marine: Covers goods in transit as well as jobsite equipment such as forklifts and bulldozers.
Errors and omissions/ professional liability: Covers economic loss resulting from errors or omissions during design or construction.
Employment practices liability: Covers legal action over employment relationships such as discrimination, wrongful termination, and harassment.