As an insurance agent, understanding the specific details of your contractor clients’ operations is essential. And for a successful submission, it is crucial to report accurate and comprehensive information. While every question on the GCGuard application is important, the following sections play a vital role in assessing risks and binding the appropriate coverages for your contractor clients.
Year Founded/Years of Experience: Experience is extremely important from an underwriting perspective. Carriers typically look for a minimum of three years of directly related experience in the trade your contractor client works in. Although newly formed businesses are acceptable prospects, a tradesperson who only has six months of trade-specific experience is more likely to incur a loss due to their lack of expertise.
Description of Operations: Your contractor clients’ “trade” may be plumbing, electrical, carpentry, or all the above if they are residential remodelers. Even though their trade will be selected from the drop-down menu, it is still important that we understand the scope of what these contractors do. For small businesses, this may range from a single-person operation to a general contractor who subcontracts most or all the work themself. With that being stated, this section of the submission must be adequately detailed. Include the trades performed and the type of clientele your contractor client works with. “Commercial” can mean several things- specifics are extremely useful here!
Construction-Related Employee Payroll: Although some carriers use gross sales, employee payroll is often the premium basis for rating purposes when it comes to general contractor coverage. It is important to indicate if your contractor client is a single owner and operator or if they have direct employee payroll and the number of employees. Ensuring that your contractor clients report accurate payroll figures can help you avoid a slow, back-and-forth audit process and having additional premium dollars due.
Total Subcontractor Costs: Although similar to payroll, this is separate, and therefore specific figures are needed for underwriting purposes. For the same reasons listed above, it is important to accurately report subcontractor costs to avoid a painful auditing process. All materials and supplies (anything necessary to complete the job) that your contractor client purchases for a subcontractor’s project(s) should be included in these costs.
Loss History: All losses must be disclosed in the submission. To reduce back-and-forth, it is always a good idea to describe the circumstances surrounding the loss and any changes the contractor client implemented to avoid future loss.
Additional Insureds: While AIs (Additional Insureds) can be added mid-term, it is important to disclose any that are known upfront. Let’s say your contractor client works for a custom home builder that requires two things: One, that they are listed as an AI on the general contractor’s policy, and two, that the certificate has specific AI wording. If coverage is bound with Insurer X (a carrier that excludes new construction) and the contractor later comes to you saying they need to add the custom home builder as an AI, Insurer X will refuse to add them as an AI. This can result in the contractor not being able to complete the work or not getting paid since they cannot provide a certificate of insurance. It is important to discuss the AI requirements with your contractor clients to avoid unnecessary conflicts with losses incurred by their subcontractors.
Inaccurately reporting experience, operations, or loss history can result in a policy non-renewal or cancellation. In cases where that information was knowingly misrepresented, the policy could even be rescinded. All in all, the key takeaway is the importance of trust and understanding when it comes to submitting applications. We rely on the knowledge and judgment of you, our agents, and it is critical that you comprehend the risks involved. Together, we can navigate the complexities of insuring general contractors knowing that our shared goals are pursued diligently and responsibly.
