Contractors get their insurance rates to go down 20% and more, by comparing notes with their peers. You need to connect with your competitors, and agree to pull out your policies for comparison. One of you is paying too much. If you get a group together, you will find most of you are paying too much.



For example, consider commercial liability insurance for general contractors. When buying insurance, contractors are typically isolated, and the insurance industry likes it that way. It is nice and complicated, and there are plenty of ways to spread fear, to keep contractors from doing much about it.

You are expected to pay premiums and not ask too many difficult questions. Isolated contractors try to ask intelligent questions, but they have no benchmark idea of what the best deals look like. They have very limited power.

I happen to know that rates are all over the map for contractors liability insurance. General contractors focused on residential remodeling are a good example. I've seen premium rates range from 0.7% of sales to over 3%. The more policies you compare, the better market intelligence you collect, and the better your negotiating power. Turn on the lights, and it is easy to see what to demand.

Contractors are reluctant to show their insurance policies to their peers, because they are also competitors. Their don't want to show their numbers for sales and payroll for one thing. Also, they are not all that confident they have the best deals, and don't want to feel dumb. Every time I've seen contractors pull out their policies and compare them, there are always a good percentage wondering how the best deal on the table came to be that way. Only a few are getting the best deals, and the rest are overpaying large sums of money.

To get maximum value from comparing notes, you want to do it with others who have very similar operations to yours. Compare with others in your state, with similar license categories, similar sales volume, doing very similar types of work. By doing this you remove confusing variation, which you must do to understanding what your rates should be. Significant claim history can influence rates. If one of your group is paying a lot more, ask about claim history, to see if that explains it.

You've got to keep an eye on coverage variation also.Really cheap policies might be claims-made forms instead of occurrence forms. You can't compare the two. They are completely different animals. Check to see if the limits of coverage are similar. Check deductibles. Check exclusions. With all that said, I've seen insurance companies quote identical accounts with one quote being double the other.

The more contractors work together, the more power they have when it comes to purchasing insurance. If a hundred contractors doing an average of one million in sales organized themselves into a buying group, they could probably buy an insurance company. Working together, they could expect to see insurance costs 20% to 30% lower than those dealing with the industry one on one.