(Form 700 Revised June 14, )
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Whether you are contemplating starting a new business, are a new business owner, or have owned a business for many years, commercial insurance can be one of the most important ongoing financial investments you make in the life of your company. Operating a business is extremely challenging without having to worry about suffering significant financial loss due to unforeseen circumstances. Commercial insurance can protect you from some of the most common losses experienced by business owners such as property damage, business interruption, theft, liability, and worker injury. Purchasing the appropriate commercial insurance coverage can make the difference between going out of business after a severe loss or recovering with minimal business interruption and financial impairment to your company&#;s operations.
(Contacting a Broker-Agent)
One of the first steps in purchasing small business insurance is to contact a licensed insurance broker-agent who specializes in commercial coverages. Beginning a working relationship with a reliable, competent broker-agent can be as crucial to your business plan as getting professional advice from an accountant, banker, human resources analyst, payroll specialist, lawyer, or a trusted business mentor.
Business contacts that you have made are excellent referral sources for recommending a commercial lines broker-agent, especially if the contacts are in the same industry as your business or in a closely related industry.
Professional broker-agent associations can assist you in your search for a licensed commercial insurance broker-agent. The Insurance Brokers and Agents of the West (IBA West) and the Western Insurance Agents Association (WIAA Group) are professional associations that can assist you in contacting a commercial insurance broker-agent in your local area. Please see the "Resources" section of this brochure if you would like to contact the IBA West or the WIAA Group. Also, looking through the local yellow pages under the insurance section can aid you in locating the numbers for those broker-agents specializing in commercial insurance.
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When conducting your broker-agent search, it is important to verify the broker-agent's insurance license with the California Department of Insurance (CDI). The CDI is responsible for licensing all broker-agents who sell or market insurance in California. A broker-agent is issued a fire and casualty license, which enables him/her to sell commercial property and casualty insurance. A fire and casualty broker-agent is required under Section of the California Insurance Code (CIC) to prominently display his/her license in his/her office. CIC .5 further requires a licensee of the CDI to prominently print his/her license number on all business cards, written price quotations for insurance products, and print advertisements for insurance products distributed in California. Please see the "Talk to Us" section of this brochure for the many ways to contact the CDI to verify a broker-agent's license.
After you have interviewed several broker-agents and checked their license status with the CDI, you will be better able to determine the broker-agent with whom you would like to do business. While the term broker-agent is a specific license designation with the CDI, brokers and agents act in different ways to secure insurance for consumers. Brokers may sell for many insurance companies and are usually paid by you in the form of a broker fee charged for placing and servicing your insurance business. Agents are appointed by insurance companies and are paid a commission by the insurance company with which business is placed. It is possible to approach several agents for quotes on your commercial insurance business since any particular agent may represent a limited number of insurance companies.
Initially a broker-agent will meet with you to discuss your business operations and the exposures (the possibility of loss) that are specific for your industry and business type. If you currently have business insurance, the broker-agent will ask to review your current policy. This is a standard practice used to determine the current coverage you have. The broker-agent is comparing limits, exposure bases, business classifications, exclusions, and endorsements in order to analyze any gaps, errors, or overlaps that may exist in your current commercial policy. It is not necessary to share the premiums you have paid for your current or prior business insurance, but you should be forthcoming with any other information that affects your business operations. The more credible information you provide to the broker-agent in the application process, the better the broker-agent can assess specific insurance needs and provide you with the best options to satisfy those needs and protect your business from loss.
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Depending on the individual risk characteristics of your business, the broker-agent will present you with different coverage options for purchasing commercial insurance. A broker-agent's proposal is just that, a proposal. When all is said and done it is your responsibility to make an informed decision and choose the insurance that best fits your business plan. The relationship that you build with a broker-agent is extremely valuable in this critical decision making process. An experienced broker-agent has dealt with hundreds of businesses similar to yours. Since commercial insurance can be complicated, you should feel free to discuss any terms, conditions, or concepts that are unclear to you with your broker-agent. It is part of a broker-agent's service to answer your questions and help you understand the insurance you are purchasing.
While your business may not need all commercial coverage lines, it is a good idea to have a basic knowledge of the types of insurance coverage available. As your business changes and expands you will have the necessary knowledge to purchase insurance coverage as new exposures arise. The following commercial lines of insurance cover broad areas of exposure common to most business operations:
Commercial insurance is divided into two main categories: property insurance and casualty insurance. Property insurance provides coverage for property that is stolen, damaged, or destroyed by a covered peril. The term "property insurance" includes many lines of available insurance. Commercial Property, Inland Marine, Boiler and Machinery, and Crime are the most common commercial property coverage lines. Each of these property coverage lines is described below.
Buildings you own or lease as a part of your business, your business personal property, and the personal property of others make up the basic coverage sections of commercial property insurance. Commercial property insurance can be sold separately as an Individual Line policy (referred to as a monoline policy), or it can be sold as part of a Commercial Package Policy (CPP), which combines two or more commercial coverage parts such as commercial property, general liability, and commercial auto.
Whether or not a property loss is covered depends upon the policy language, exclusions, and endorsements. You can choose the covered causes of loss in your property policy. Causes of loss are divided into two main categories: specified perils and open perils.
Commercial property coverage will include a provision to determine what valuation method is to be used to pay the loss. The most common policy valuation method is Actual Cash Value (ACV). Unless otherwise defined in the policy, ACV is considered to be Fair Market Value in California. There are two other methods of property valuation: agreed value and replacement cost. Agreed value waives any coinsurance penalty and pays 100% of the stated amount (agreed upon amount) for any covered loss. Replacement cost covers the amount it takes to replace your property with new property of like kind and quality up to the limits of insurance. Like ACV, replacement cost is subject to coinsurance.
There are various coverage forms and endorsements in addition to the basic property coverages already discussed that can customize coverage in a commercial property insurance policy. The following are the most common coverage forms and endorsements used in commercial property insurance:
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Without prior knowledge of inland marine insurance, it is easy to assume that this insurance line has something to do with boating transportation. In fact, inland marine insurance can cover a variety of transportation exposures; however, it does not cover boating transportation, which is covered under ocean marine insurance. Inland marine is a specialized type of property insurance that primarily covers damage to or destruction of your business property while in transport. Inland marine also covers the liability exposure for the damage or destruction that may occur to property in your care, custody, or control during transport.
Standard perils in Inland Marine may include fire, lightning, windstorm, flood, earthquake, landslide, theft, collision, derailment, overturn of the transporting vehicle, and bridge collapse.
Inland marine has great flexibility in covering many potential transportation risks. Some of the most common types of coverage offered are accounts receivable insurance, consignment insurance, equipment floaters (i.e., contractors equipment), installation floaters, motor truck cargo insurance, trip transit insurance, and valuable papers (records) insurance. If you have questions regarding particular business, then contact your broker-agent for further information
Boiler and machinery insurance can add an important layer of coverage to an insurance policy. Boiler and machinery insurance is currently marketed under such names as "systems protector," "systems breakdown," and "machinery breakdown" insurance. Boiler and machinery insurance covers business property, other property losses, and legal fees (if any) that may result from the malfunction of boilers and machinery. Boiler coverage includes covering the costs of inspection and often maintenance of boilers. Machinery coverage can include many different types of machines used in retail, office and manufacturing settings. Machinery coverage also includes major machinery systems common to most commercial buildings, such as heating, ventilating and air conditioning systems. Since most commercial property policies exclude losses from boilers and machinery, it is important to be aware of any exposure your business may have and discuss it with your broker-agent.
Crime insurance provides protection for the assets of your business including merchandise for sale, real property, money and securities. It is considered a property insurance line. Based on the crime coverage that you purchase, it is possible to be covered for the following causes of loss: robbery, burglary, larceny, forgery, and embezzlement. Specialty coverage parts can be added based on need and exposure to loss such as mercantile open-stock, burglary insurance, mercantile robbery insurance, mercantile safe burglary insurance, money and securities broad form policy, office burglary and robbery insurance, and storekeepers burglary and robbery insurance.
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Casualty insurance provides coverage primarily for the liability exposure of an individual, business or organization. Liability from the negligent acts and omissions of an individual, business or organization that causes bodily injury and/or property damage to a third party is the subject of casualty insurance coverage. Commercial Automobile, Commercial General Liability, Commercial Umbrella, and Workers Compensation are the most common business casualty insurance lines.
Commercial automobile coverage is similar to the coverage you may carry on your personal auto; however, commercial automobile exposures can be more complex requiring specialty coverages to be considered based on the individual needs of your business. Basically, commercial automobile coverage can protect your company from any liability stemming from automobiles used in your business or any damage to the covered automobile. A Business Auto Policy (BAP) has the flexibility to provide coverage for business, personal, non-owned, or hired autos based on the coverage purchased and applied to each scheduled auto. In other words, automobiles can be separately scheduled along with corresponding coverages. Coverage can differ by vehicle and a symbol or multiple symbols will designate the coverage assigned to a scheduled auto. These symbols are referred to as covered auto symbols and use a simple numerical system (1-13). The automobiles are classified by weight (light, medium, heavy, extra heavy) and by type of use (private passenger, service, commercial). Unlike personal auto policies that separate bodily injury and property damage limits (split limits), BAPs commonly utilize a Combined Single Limit (CSL) for the limit of insurance. This creates higher limits for both coverages, including per occurrence limits. Common commercial automobile CSLs are $500,000 or $1,000,000.
One of the key concepts of liability coverage is that it is comprehensive in nature. What this means is that the policy (insuring agreement) covers all hazards within the scope of the insuring agreement that are not otherwise excluded. It is likewise comprehensive in that it provides automatic coverage for new locations and activities of your business, which come about after policy inception and throughout the policy term. Commercial General Liability (CGL) is the standard commercial liability policy used to insure businesses.
There are three primary coverage sections that make up a CGL policy: premises liability, products liability and completed operations. Premises liability covers liability for accidental injury or property damage that results from either a condition on your premises or your operations in progress, whether on or away from your premises. A products liability hazard exists for any business that manufactures, sells, handles, or distributes goods or products. The hazard being the potential liability for bodily injury or property damage that arises out of your goods or products. Completed operations covers your potential liability for bodily injury or property damage that arises out of your completed work.
The major exclusions under a CGL policy include: intentional injury; insured contracts; liquor liability; workers compensation and employers liability; pollution; aircraft; automobile; watercraft; mobile equipment; war; care, custody, and control; damage to your work; impaired property; sistership liability; and failure to perform. It is always important to read and understand all coverage exclusions; however, it is particularly critical in a liability policy. If you do not understand the coverage exclusions or limitations of the CGL policy, then contact your broker-agent and discuss completely until a working understanding is achieved.
The type of business you run determines how a CGL policy is classified. Generally speaking, a specific code or codes (in some situations) are assigned based on exposures that are common to your type of business operation. The way a business risk is classified is the first step to determine premium and an important part to the rating formula. Commercial rating and premium computation will be covered later in this brochure.
The CGL policy has separate limits of insurance for general liability, fire legal liability, products and completed operations liability, advertising and personal liability, and medical payments. An aggregate limit of liability is in force for the general liability, fire legal liability, advertising and personal liability, and medical payments claims. When total claims for all these areas exceed a stated annual aggregate limit of liability, the policy limits are exhausted and no more claims will be paid from the policy for the duration of the policy period. There is also a separate aggregate limit of liability in force for products and completed operations liability claims.
When a liability claim goes above the aggregate limit of liability, the policy limits are exhausted. By purchasing a commercial umbrella, you can protect your business from being liable for this excess liability judgment. A commercial umbrella covers the amount of loss above the limits of a basic liability policy. Commercial automobile, CGL, workers compensation, or any liability policy can be covered by a commercial umbrella. A commercial umbrella may also provide coverage if a basic liability policy is not in force. Also, commercial umbrellas can provide coverage for gaps in coverage under basic liability policies. When a commercial umbrella provides coverage for basic liability loss it does not pay the loss from the first dollar. It is common to have a Self-Insured Retention (SIR) amount of at least $10,000. SIR is similar to a deductible. If there is a commercial umbrella loss and there is no corresponding underlying policy in force, you must pay the first $10,000 of the loss before the umbrella policy responds.
When an employee suffers a work related injury or illness, workers compensation insurance steps in to provide benefits based on the type of illness or injury sustained. Workers compensation is based on a no-fault system, which means that an injured employee does not need to prove that the injury or illness was someone else&#;s fault in order to receive workers compensation benefits for an on-the-job injury or illness.
As a California employer you are required under California Labor Code Section to provide workers compensation insurance from a licensed insurance company or through the State Compensation Insurance Fund (State Fund). Employers may also have the option to self-insure. Your broker-agent can assist you with purchasing workers compensation from a licensed insurance company and can assist you with information on State Fund and self-insurance.
State Fund was established by the state legislature and is California&#;s largest provider of workers&#; compensation insurance. The company is charged with being an available market for all California employers and to compete fairly with other insurers. State Fund plays a stabilizing role in the economy by providing fairly priced workers&#; compensation insurance, keeping costs down by helping to make California workplaces safe, and restoring injured workers. You may contact State Fund directly. See the &#;Resources&#; section of this brochure for information.
Workers compensation insurance is divided into two coverage sections. In workers compensation part one, the insurance company agrees to promptly pay all benefits and compensation due to an injured worker by workers compensation laws of the state listed on the declarations page of the policy. In employers liability part two, the employer is protected against situations where an employee can sue for injuries suffered under common law liability (i.e., consequential bodily injury, loss of consortium, dual capacity, or third party over actions). These types of injuries in the course of employment are not covered under workers compensation law and are therefore not compensable under the workers compensation part one coverage.
Classification of workers compensation insurance is based upon the specific duties that your employees perform in the course of their employment with your company. These classifications are developed and assigned by the Workers Compensation Insurance Rating Bureau (WCIRB) in most cases. Your workers compensation insurance company when working with the WCIRB must use the classification codes the WCIRB provides when rating your specific policy. Insurance companies can develop and submit their own classification system to the CDI for approval, but this is uncommon. Each classification is assigned a specific rate by the insurance company, which helps determine the overall premium for your policy. The WCIRB also generates the experience modification that must be applied to your policy. The experience modification is calculated from loss information your insurance company is required to submit to the WCIRB on an annual basis. The WCIRB provides a policyholder ombudsman who is available to answer questions from employers on classification, experience modification, and rating issues. Please see the &#;Resources&#; section at the end of this brochure for contact information on the WCIRB and their policyholder ombudsman.
It is important to note that workers compensation claims do not come under the jurisdiction of the CDI. The California Department of Industrial Relations, Division of Workers Compensation can assist you with questions or concerns regarding workers compensation claims. You can contact the California Department of Industrial Relations by using the information provided in the &#;Resources&#; section of this brochure. Also, you should be able to discuss any general workers compensation claims issues with your broker-agent or discuss issues on a specific claim with the claim adjuster that has been assigned to the case by your insurance company.
Designed specifically for small businesses, a Business Owners Policy (BOP) is a combination commercial policy that covers property, general liability and business interruption. It is written with strict underwriting guidelines including maximum allowable square footage for office, retail, or apartment risks. A BOP is most appropriate for small, "main street" businesses such as: hardware stores, barbershops, greeting card shops, accountant offices, or low-density apartment houses. Discuss the option of a BOP with your broker-agent, as the premium for qualifying businesses can be very competitive.
The way a policy is rated determines how the policy premium is developed. Rating factors vary based on the line of insurance you are purchasing. If you are purchasing commercial property insurance, the building rating formula is based on factors including square footage, type of construction, sprinklered or non-sprinklered, and the fire protection classification. If you are purchasing general liability insurance, the rating formula can be based on square footage, payroll, or gross sales depending on the general liability classification codes used. These are known as rating exposures.
Once the rating exposures are identified and the deductibles selected (usually from information you have provided on the application), the premium is calculated by a simple formula: rate x exposure = premium. The deductible amount you choose will be calculated in the rate. The higher the deductible (the amount you choose to self-insure) the lower the rate. By utilizing higher deductibles, you can bring your premium cost down; however, you do not want to jeopardize your company&#;s financial future by choosing overly large deductibles. Speak with your broker-agent for the deductible options available to you when purchasing commercial insurance.
The basic rating equation most often utilizes other modification factors, which can include experience modifications, schedule rating, or judgment rating. Because rating formulas can range from simple to complex, depending on the line of insurance, it is important to discuss how your policy is rated and how the policy premium is calculated with your broker-agent.
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Depending on the type of loss your business experiences, the duties and responsibilities required by you in a claim can be numerous. It is important to remember that your broker-agent can assist you throughout the claims process. In many cases your broker-agent will be your first point of contact when filing an insurance claim. Whether you contact your broker-agent or the insurance company directly when filing a claim, you are required under the insurance contract to report all claims in a timely manner. This allows the insurance company to process the claim and conduct their investigation as quickly as possible.
Since commercial claims tend to be more complex, it is important for the company to assess the claim quickly in order to mitigate any situation that may have the potential for increased loss. This is especially crucial in liability claims, as there can be high dollar amounts at stake. When claims are not controlled early in the claims process, litigation from third parties can arise. Litigation can be expensive and often ends in a judgment much higher than if an experienced claim representative had handled the claim from the beginning. This is why it is necessary to turn all claims over to your broker-agent or insurance company as soon as you are made aware of the claim. Trying to handle the claim yourself violates your duties under the insurance contract and can be costly to you in the long run.
Most business owners are aware that claims loss experience is reflected in the rating formula and directly affects premium costs. By following the duties outlined in your contract regarding claims, you are a partner with your insurance company in helping to keep claims costs to a minimum, which in turn helps keep your premium costs down.
The better your claims experience, the greater modification allowed to lower your premium. When you first receive your policy, contact your broker-agent to discuss all the duties and responsibilities required by you under the contract.
The deductible on a commercial policy is the part of the loss that you pay up-front before your insurance company pays a claim. Based on the amount of the deductible as stated in your policy, the insurance company will pay up to the limits of the policy when a claim is covered after you have provided the deductible payment. The type of deductible utilized in a commercial policy is referred to as an &#;absolute dollar amount.&#; The higher the absolute dollar amount (deductible), the lower your premium.
One of the most effective ways to decrease the frequency and potential severity of claims is through loss prevention and control. Most commercial insurance companies have their own loss prevention departments; however, some insurers rely upon contracted loss prevention services. Usually loss control services are built into higher risk, higher premium accounts as a part of the entire package of insurance. If you are a small business owner, you can still benefit from proven loss control methods. Based on your type of business exposure, your broker-agent can offer suggestions on how to best control the loss exposures common to your business. The broker-agent along with your account underwriter, claims representative, and loss control representative can create an entire program of loss prevention that includes specific modifications and procedures to follow that can help create a safer workplace. These programs can even include an employee safety program that incorporates awards and suggestions. Getting your employees involved in loss control makes good business sense. Creating a safe work environment benefits everyone. When proven loss control methods are implemented, the public and workers are better protected, and your premium costs go down as your loss experience improves.
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Most businesses will have no difficulty obtaining insurance in the standard insurance market with the assistance of a qualified broker-agent. However, if your business has experienced significant losses, your business is considered to be engaged in high-risk operations (with a greater chance of claims frequency or severity), or you have recently started your business, you may not be able to locate insurance in the standard commercial insurance market. Your broker-agent can explain the options you may have in seeking and securing commercial insurance elsewhere.
When you have had three applications turned down from a licensed commercial insurance carrier (and have written documentation of the declination to insure) you can proceed to obtain insurance from the surplus line market. Sometimes referred to as the &#;non-admitted&#; market, surplus line companies offer insurance to businesses that cannot find insurance in the standard line insurance market. While these companies are not licensed by the CDI, they do have to go through an approval process that includes providing evidence of minimum capital and surplus requirements. When these requirements have been met to the CDI&#;s satisfaction, the CDI may approve the company to conduct business in California and subsequently add them to the List of Approved Surplus Line Insurers (LASLI).
A surplus line company can only be accessed through a specially licensed broker. The broker must have a surplus line license issued by the CDI in order to sell surplus line insurance. Before purchasing insurance from a surplus line insurance company, your broker must provide you with a disclosure notice under CIC Section .1 that the insurance you are buying is being issued from a surplus line company.
Although surplus line insurers must follow the Fair Claims Settlement Practices Regulations (regulations that govern how insurers handle claims), the CDI has limited jurisdiction over the operation of surplus line insurers. If the company becomes insolvent (goes bankrupt), your only course of action will be through the courts. The California Insurance Guarantee Association (CIGA), which protects claims with admitted insurers, does not apply to surplus line insurers. A surplus line broker should be able to supply information on the financial solvency of any surplus line company that it represents. You can also contact the many independent rating organizations that analyze insurance company solvency by using the information provided in the &#;Resources&#; section of this brochure. After checking the financial solvency of the surplus line company, you may also wish to verify that the surplus line company is approved by the CDI and currently on the LASLI list. You can contact the CDI through the information located in the &#;Talk to Us&#; section at the end of this brochure to check if a surplus line company is on the LASLI list.
The California FAIR Plan has been in operation since to provide basic property insurance to property owners who are unable to obtain insurance in the standard market. Although the California FAIR Plan was established by the legislature, it is not a state agency. It is an association of all property insurers licensed in the state, who participate according to the percentage of property insurance they write in California. The California FAIR Plan was established to assure stability and accessibility of property owners to property insurance. The majority of California FAIR Plan business is in designated urban, inner city, and areas subject to destructive wildfires. While the California FAIR Plan primarily writes policies for personal property holders (homeowners), they do write a small percentage of policies for commercial property owners. Any broker-agent can help you place a commercial property policy with the California FAIR Plan. You may also request an application and informational pamphlet from the California FAIR Plan directly by utilizing the contact information available in the &#;Resources&#; section of this brochure.
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Commercial insurance companies must follow the rules set out in the insurance code regarding commercial insurance cancellation and nonrenewal. There are separate insurance code sections covering cancellation and nonrenewal for workers compensation, auto, ocean marine, surplus line, reinsurance policies, and other commercial insurance lines; therefore, it may be a good idea to contact the CDI for a complete explanation if you run into any problems with cancellation or nonrenewal notices. If you are unclear as to your rights under the insurance code, then contact the CDI by any of the methods given in the &#;Talk to Us&#; section of this brochure.
Commercial insurance by its very nature is complex. However, it is possible with the assistance of a competent licensed broker-agent to steer clear of the pitfalls and make good decisions when purchasing insurance for your business. This brochure is meant to be a starting place for the small business owner investigating commercial insurance coverages.
Throughout the brochure general information has been given on the greatest areas of concern when dealing with commercial insurance. If you desire further clarification on any commercial insurance topic, then please contact the CDI through the information given in the &#;Talk to Us&#; section. Also, this brochure has a &#;Resources&#; section as well as a &#;Glossary&#; that may be of further assistance to you in providing answers to questions you may have concerning commercial insurance.
Este folleto proporciona información valiosa sobre los siguientes temas:
¿Cómo puedo comprar seguro commercial?
¿Qué debo esperar de un corredor-agente
¿Quien se especializa en el seguro commercial?
¿Qué tipo de seguro necesito comprar para mi empresa?
¿Qué es una póliza de propietario de empresa?
¿Cómo se califican las pólizas comerciales, cómo se seleccionan los deducibles y cómo se determinan las primas?
¿Qué necesito saber sobre los reclamos comerciales?
¿Qué pasa si tengo problemas para conseguir seguro para mi empresa?
¿Hay reglas específicas para la cancelación y no renovación de seguros comerciales?
Este folleto está disponible en español en nuestro sitio web en insurance.ca.gov. Seleccione traduce español a la derecha de la pantalla. Seleccione la ficha al consumidor elegir los tipos de seguros, Seleccione guías de información, luego seleccione serie commercial.
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The Insurance Diversity Initiative (IDI) was established by Insurance Commissioner Dave Jones in in an effort to focus on diversity issues within California's $259 billion insurance industry. Specifically, these efforts - both by Department staff and the Commissioner-appointed Insurance Diversity Task Force - are meant to encourage increased procurement from California's diverse suppliers and diversity amongst insurer governing boards. This Initiative represents an open door to increased business opportunities for California's minority, women, disabled veteran, and LGBT owned businesses. The Department accomplishes these goals by conducting surveys to collect and make public information about the diversity efforts of insurers, as well as through outreach, partnerships, and Department-hosted events. The first action of the Commissioner was a Voluntary Survey sent to the state's top insurers to understand the state of supplier diversity and governing board diversity in the industry. Since then, the Initiative has administered annual surveys to ensure transparency around these important issues of diversity.
In May , Commissioner Jones announced a new multistate initiative, the Multistate Insurance Diversity Survey. The MIDS Initiative was established by insurance commissioners across six states &#; California, District of Columbia, Minnesota, New York, Oregon, and Washington &#; in an effort to focus on diversity issues within the nation's $1.78 trillion insurance industry. Between and , insurers increased their procurement with California diverse businesses by $586.6 million. MIDS will now build on California's success by taking a look at diversity issues across the nation's insurance industry.
Supplier diversity, as seen in other industries, is a win-win for both diverse businesses and insurers. For California&#;s diverse businesses, this Initiative represents an open door to a once seemingly impenetrable market and thus increased business opportunities. For insurers, increased partnerships with diverse suppliers can result in decreased costs and more competition for bids, in addition to enhanced quality, creativity, and innovation from those suppliers &#; giving insurers the edge they need in a competitive market with rapidly changing demographics.
The Insurer Supplier Diversity (ISD) Survey is a biennial survey which requires all insurance companies with written premiums of $100 million or more in California to report their procurement efforts with diverse businesses in California. For the first time ever, information about insurer procurement practices is being collected and made available to the public.
Recent reports demonstrate a strong correlation between the diversity of an organization&#;s leadership and the level of its success in supplier diversity.
The Governing Board Diversity (GBD) Survey examines the state of diversity among insurer governing boards and requires all companies with written premiums of $100 million or more in California to report on: 1) the demographic composition of the board; 2) the leadership of the board&#;s diverse members; and 3) the company&#;s outreach efforts and strategies to diversifying its board membership.
The GBD Survey is also the first survey of its kind in the nation and is meant to encourage insurance companies to seek diverse leadership and governing boards that are reflective of California and the nation&#;s changing demographics.
For more information about the Insurance Diversity Initiative, visit: www.insurance.ca.gov/ | (916) 492-
Ambest Road Oldwick, NJ
: 908-439-
Website: www.ambest.com
Division of Workers Compensation (DWC)
PO Box San Francisco, CA
: 800-736-
Website: www.dir.ca.gov
Office of Self Insurance Plans (OSIP)
Olson Drive, Suite 230, Rancho Cardova, CA
: 916-464-
Website: www.dir.ca.gov
PO Box Los Angeles, CA -
: 213-487- or 800-339-
Website: www.cfpnet.com
33 Whitehall Street, New York, NY
: 212-908- or 800-753-
Website: www.fitchratings.com
Koll Center Parkway, Suite 290
Pleasanton, CA -
: 800-772-
Website: http://member.iiabcal.org/
7 World Trade Center,
250 Greenwich Street, New York, NY
: 212-553-
Website: www.moodys.com
1 California Street, 31st floor
San Francisco, CA
: 415-371-
Website: www.standardandpoors.com
P.O. Box Pleasanton, CA
: 888-782-
Website: www.statefundca.com
Northcorp Pkwy
Palm Beach Gardens, FL -
: 877-934-
Website: www.weissratings.com
Sun Center Drive, #100, Rancho Cordova, CA
: 800-553-
Website: www.wiaagroup.org
Broadway, Suite 900, Oakland, CA
: 888-229- Ombudsman 415-778-
Website: www.wcirb.com
Actual Cash Value
Unless otherwise defined in the policy, Actual Cash Value in California means Fair Market Value. The Fair Market Value of an item is the dollar amount that a knowledgeable buyer (under no unusual pressure) is willing to pay and a knowledgeable seller (under no unusual pressure) is willing to accept.
Agent
A licensed individual or organization authorized to sell and service insurance policies for an insurance company.
Aggregate Limit
The maximum dollar amount of coverage in force for a property damage policy or liability policy. This maximum amount can be figured on a per occurrence basis or as a general aggregate for the complete policy term.
Agreed Value
A method of loss valuation where the insured and the insurer list an agreed upon amount to be paid in case of loss. This valuation method is most common in property insurance when insuring valuable artwork, antiques, or classic autos. A professional appraisal is usually required.
Arbitration Clause
A clause in an insurance policy that allows the insured and the insurer to each appoint an arbitrator if they cannot agree upon an appropriate claim settlement. Once the arbitrators have been selected, they in turn appoint an independent umpire. If the arbitrators disagree, then the umpire decides which claims settlement to support. The final decision is binding.
Betterment
A situation that occurs in a loss when an old piece of property is replaced by a brand new item. The insured is put in a better financial position than they were before the loss occurred, and consequentially may have to pay the difference in price for the betterment.
Binder
A short-term agreement that provides temporary insurance coverage until the policy can be issued or delivered.
Broker
A licensed individual or organization who sells and services insurance polices on your behalf.
Broker-agent
A licensed individual who can act as an agent representing one or more insurers, and also as a broker dealing with one or more insurers representing your interests.
Cancellation
The termination of an in-force insurance contract by either the insured or the insurer before its normal expiration date.
Claim
Notice to an insurance company that a loss has occurred that may be covered under the terms and conditions of the policy.
Claim Adjuster
The person who evaluates the damage caused by a covered loss and determines the amount to be paid under the policy terms.
Claims Made
A liability insurance policy where coverage applies to claims filed during the policy period no matter when the loss occurred subject to a retroactive inception date.
Coinsurance
An insurance clause that defines the amount of each loss that the company pays according to the amount of insurance carried, divided by the amount of insurance required. This basic formula relates to a contracted percentage of coverage that must be required to prevent a coinsurance penalty.
Combined Single Limit
When bodily injury liability and property damage liability is expressed as a single sum (limit) of coverage.
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Commercial Lines
Insurance coverages for businesses, commercial institutions, and professional organizations, as contrasted with personal insurance.
Commission
A portion of the policy premium that is paid to an agent by the insurance company as compensation for the agent&#;s work.
Concurrent Causation
Occurs when two or more perils cause a loss. When only one of these perils is covered by the insurance policy, the court generally rules that the entire loss is covered. Many insurance companies have reworded their policies to clarify that only a loss attributed to a covered peril is indeed covered.
Conditions
The portion of an insurance contract that sets forth the rights and duties of the insured and the insurer.
Consequential Bodily Injury
In Workers Compensation, special circumstances can arise when a work-related injury causes some sort of non-work related injury. (Please see Loss of Consortium, Dual Capacity, and Third Party Over glossary definitions.)
Coverage
Protection that is provided under an insurance policy.
Declarations (DEC) Page
Usually the first page of an insurance policy that contains the full legal name of the insurance company, the policy number, effective and expiration dates, premium payable, the amount and types of coverage, and the deductibles.
Deductible
The amount of the loss that the insured is responsible to pay before benefits from the insurance policy are payable.
Depreciation
The actual or accounting recognition of the decrease in value of property over a period of time according to a predetermined schedule.
Dual Capacity
In Workers Compensation, an employer may be liable two ways to an employee who incurs bodily injury on the job as a result of using a product or service produced by that employer. The employee is eligible for Workers Compensation benefits and may also sue the employer because of the defectiveness of the injuring product or service.
Earned Premium
The portion of the policy premium paid by an insured that has been allocated to the insurance company&#;s loss experience, expenses, and profit year to date.
Endorsement
A written agreement that changes the terms of an insurance policy by adding or subtracting coverage.
Effective Date
The starting date of an insurance policy: the date the policy goes in to force.
Exclusion
A contractual provision in an insurance policy that denies or restricts coverage for certain perils, persons, property, or locations.
Experience Modification
The adjustment of premium resulting from the use of experience rating. Experience rating plans reflect an insured&#;s past loss experience (usually from the past three years) and uses this experience to modify and determine the prem
The termination date of coverage as indicated on an insurance policy.
First Party
The policyholder (insured) in an insurance contract.
Flat Cancellation
Cancellation that takes place on the policy effective date. No premium charge is made; however, other charges (i.e., service) may apply.
Fraud
An intentionally deceptive act committed to obtain an unfair or unlawful advantage. Fraud usually involves monetary gain.
Frequency
The number of times a loss occurs.
Hazard
A circumstance that increases the likelihood or potential severity of a loss.
Indemnity
In a property and casualty contract, the objective is to restore an insured to the same financial position after the loss that the insured had prior to the loss. In the most basic sense, indemnity is compensation for a loss.
Independent Adjuster
A person or organization that provides claim adjusting services to different insurers on a contract basis.
Insurable Interest
Any interest (most commonly ownership) that a person, company, or corporation has in a subject of insurance such as a business, building, or auto, which can be damaged and may cause the person, company, or corporation financial loss or other tangible deprivation. Generally, an insurable interest must be demonstrated when a policy is issued and must exist at the time of loss.
Insurance
A method of shifting risk from a person, business, or organization to an insurance company in exchange for the payment of premium. The insurance company commits to be responsible for covered losses.
Insured
The policyholder(s) entitled to coverage under an insurance policy.
Insurer
The insurance company who issues insurance and agrees to pay for losses and provide covered benefits.
Insuring Agreement
The portion of an insurance contract that describes what is covered. The insuring agreement usually states the perils insured against, the person(s) and/or property covered, the property locations, and the period of the contract..
Judgment Rating
A rating modification (either decrease or increase) that is based on the underwriters experience, best judgment, and analysis in classifying and underwriting a particular type of risk
Lapse
In property and casualty insurance a lapse in the termination of a policy because of a failure to pay premium when due.
Liability Insurance
Coverage for a policyholder&#;s legal liability resulting from injuries to other persons or damage to their property.
License
A certificate of authority issued by the CDI to an insurer, agent, broker, or broker-agent to transact insurance business. The maximum amount of benefits the insurance company agrees to pay in the event of a loss.
Loss of Consortium
A potential situation in any bodily injury claim (including Workers Compensation claims) where a spouse contends that the bodily injury of their partner deprives them of the natural affection (spousal duties), help, and companionship of said spouse.
Loss Payable Clause
A provision that authorizes the insurer to make a loss payment to a person, company, or organization (loss payee) other than the insured. The loss payee must have an insurable interest (such as a lienholder for business personal property or a mortgagee on real property).
Managing General Agent (MGA)
An agent contractually authorized by an insurance company to manage all or part of the insurer&#;s business activities. An MGA can manage the marketing, underwriting, policy issuance, premium collection, appointing and supervision of other agents, claims payments, and reinsurance negotiations of an insurance company.
Material Misrepresentation
A factual falsification made in such a manner that the insurance company would have refused to insure the risk if the truth had been known at policy issuance. A material misrepresentation gives an insurance company grounds to rescind a contract.
Misquote
An incorrect estimate of an insurance premium.
Nonpayment of Premium
Failure by the policyholder to pay the premium on a policy or pay the installment premium payments due on a policy.
Nonrenewal
The termination of an insurance policy on its normal expiration date.
Occurrence
A liability insurance policy that covers claims arising out of occurrences that take place during the policy period, regardless of when the claim is filed.
Peril
Cause of loss.
Personal Lines
Insurance written on the personal and real property of an individual (or individuals) to include such policies as homeowners insurance and personal auto insurance, as contrasted with commercial lines.
Policy
A contract that states the rights and duties of the insurance company and the insured.
Premium
The monetary payment that an insured makes to an insurance company in exchange for the contract indemnifying the insured against potential loss. Simply put this is the payment made by the insured to keep an insurance policy in effect.
Producer
A term used by the insurance industry to refer to agent, brokers, broker-agents, and solicitors.
Pro Rata Cancellation
A cancellation of a policy by an insurance company that returns the unearned premium to the policyholder (the portion of the premium for the remaining time period that the policy will not be in force).
Provisions
The statement of policy conditions in an insurance policy.
Public Adjuster
A licensed person or organization that represents the policyholder by contract in property damage claims negotiations with an insurance company.
Quotation
An estimate of the cost of insurance based on the information supplied to the agent, broker, broker-agent, or the insurance company.
Recision
The cancellation of an insurance policy back to its effective date resulting in a return of all premium charged.
Regulations
Requirements developed by the CDI that implement laws passed by the legislature. Regulations go through a public comment process and must be approved by the state Office of Administrative Law.
Reinstatement
The restoration of a lapsed or canceled policy.
Renewal
The continuation of an insurance policy (offer of renewal) into a new term from the same insurance company that issued the existing policy.
Replacement Cost
The amount that it costs to replace lost or damaged property with new property of like kind or quality in the local market.
Schedule Rating
A method of pricing property and liability insurance. Schedule Rating uses debits and credits to modify a base rate figured by the special characteristics of the risk exposure. Insurers develop Schedule Rating because actuarial experience shows a direct relationship between certain physical characteristics and the possibility of loss. Most schedule rating plans must be filed and approved by the CDI.
Second Party
The insurance company in an insurance contract.
Self-Insured Retention (SIR)
The portion of a property or liability loss retained by a policyholder.
Severity
The size of a loss. Loss severity is used as a factor in establishing premium rates.
Short Rate Cancellation
A cancellation initiated by policyholder request in which the premium returned is subject to an administrative penalty.
Sistership Liability
Exists when a manufacturer refuses to withdraw a product as ordered by a government agency or company management. Once a defective product has been identified and recalled, an insurance company excludes all other claims arising from the defective product due to the negligent failure of the company to take the product off the market.
Split Limits
The technique for expressing limits of liability coverage under a particular insurance policy by stating separate limits for different types of claims growing out of a single event or combination of events. Coverage can be split (limited) per person, per occurrence, between bodily and property damage, or in other ways.
Subrogation
The process of recovering the amount of claim damages paid out to a policyholder from the legally liable party. When a company pursues the legally liable third party, they are required to include the policyholder&#;s deductible in the recovery process.
Third Party
An individual other than the policyholder or the insurance company who has suffered a loss and may be able to collect compensation under the policy due to the negligent acts or omissions of the policyholder.
Third Party Over
The legal doctrine that involves an injured employee bringing suit against a third party who (for one reason or another) is able to bring an action against the employer.
Underwrite
The process to evaluate the insurance application and independent sources in order to verify the information provided and to determine the acceptability of the risk.
Underwriter
The person who performs the underwriting process to accept, reject, or modify risks on behalf of the insurer.
Unearned Premium
The portion of the written premium applicable to the unexpired or unused part of the policy period for which the premium has been paid. For example, in an annual premium policy 11/12 of the premium is unearned at the end of the first month of the policy.
Waiver
The relinquishment of a known right, which may be expressed or implied.
Written Premium
The total premium on all policies written by an insurer during a specified period of time, regardless of what portion has been earned.
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This was first published on my mailing list The Looking Glass. Every week, I answer a reader&#;s question.
Photo by Wesley ChanQ: In all my past roles, I&#;ve worked on products that were already mature, where my job was to support further growth by making iterative changes. I recently changed roles into a team that&#;s essentially starting from scratch, creating new products. While I enjoy how there are fewer constraints, it&#;s daunting to imagine to long road ahead. What are your tips for designing 0 to 1 products?
Successful 0->1 products &#; ones that create valuable new intents for people at scale &#; don&#;t arrive into the world fully-formed. Like humans, products go through different life stages. You don&#;t use the same tactics and process to nurture a product that is just getting started as you do one that is mature and scaling.
By giving names to the different stages of product development, knowing what stage each project is in, and understanding what matters the most in that stage, you can improve your chances of building products that have meaningful impact in the world.
A people outcome is a point of view about what should be different about a target audience&#;s behavior, understanding or sentiment if your proposed product is wildly successful. Before pixels get specced or code written, start by defining a clear vision for your product that is grounded in what people need and want.
To define the right people outcomes&#;
Getting to product-market fit means building and iterating on your product until it achieves your intended people outcomes. The key in this phase is to define good hypotheses and get to conclusive results on those hypotheses as quickly as possible.
To work efficiently towards product-market fit&#;
Not shipping does not mean you&#;ve failed: in 0&#;1 development, it&#;s unrealistic to expect that every hypothesis we come up with will be correct. Teams that execute well and come quickly to a deep understanding of why a particular hypothesis didn&#;t work out should be rewarded, even if the recommendation they give is to pivot or shut the project down. If you assume everything we try must ship, then we will only try conservative, incremental ideas.
Preventing premature optimization: don&#;t worry about getting your product neutral on revenue or time spent before you&#;ve demonstrated it&#;s valuable. It&#;s also not important at this stage to figure out how your product should work with another speculative product idea (because who knows if either are what we want yet?). That&#;s what the next phase is about. Also don&#;t assume anything existing in the product is off-limits to change, lest overconstrain your product too early.
Congrats, your product now has Product-Market fit for a segment of people! Now is the phase where all the constraints we threw out in the earlier phases get reconciled before your product launches to a broader audience.
Reconciling your product means&#;
Growing your product means understanding what changes will make the product valuable to more people, and more valuable to the people who are already using it. This is where teams tend to want to start but you should only be here once you&#;ve gotten the past three stages. So how can you bring more people into your funnel?
A successful growth model&#;
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