Contractors Insurance Costs in New York can be high, no doubt, but understanding the factors that contribute to the cost structure may help make you a more educated consumer, and help reduce the cost of insurance over the long term.
1. The type of work you’re doing and where you’re located has a big impact on costs. A general contractor in Manhattan is going to pay a lot more for business insurance than a landscape contractor in Rockland County will. There’s not much you can do about the type of work you do, or where that work takes place, but making sure you carefully identify the work you’re doing so it’s properly classified is important. There may be opportunities to divide payrolls into less hazardous operations for general liability and workers compensation which could reduce your costs. Further, there are territorial rate differentials for workers comp that affect the cost of your coverage based on where you work. The highest rate factors are of course in the city boros with lower factors occurring further away from the city, so if your firm does work in and around the city and suburbs it’s important to record payroll not only from a classification perspective, but also from a territorial perspective.
2. Losses or claim history has a significant impact on all lines of contractors insurance costs in New York. In fact, if you have poor claims experience in your general liability insurance you may not even be able to get coverage at any price, so having the right risk control programs in place to prevent claims is critically important. For business auto that means having a good driver selection and monitoring process, for contractor’s general liability insurance that means having a solid risk transfer program in place where you monitor the certificates of insurance for all sub-contractors and suppliers and have contracts in place to transfer risk back to the parties which may originate it and prevent workers comp cross over claims which occur in New York. For workers compensation, safety, OSHA compliance, and training are all paramount in helping to reduce claims which have a direct mathematical impact on your premiums through the experience rating factor or modifier.
3. Market Conditions – The insurance business moves in cycles and is driven by a number of factors; the cost of global disasters, legislative changes, available capacity of reinsurance, the stock market or investment returns by insurers, and more. A hard market is characterized by increasing rates and restricted availability of coverage. A soft market is when rates decline and insurance is generally available without restriction. For contractors insurance costs in New York, the market has been difficult for the last ten or more years even though the general marketplace has had two or three cycles between hard and soft, with a competitive soft market for 7 of the last 10 or so years. That difficulty or hardness of the insurance marketplace for New York contractors is due predominately to the unusual labor laws that exist only in NY. Sections 240 and 241 of the labor law, which are also known as The Scaffold Law, put undue pressure on the contractors general liability and workers compensation market in New York, and until those sections of those laws are amended New York Contractors will continue to see their business insurance rates higher than their peers around the country.
4. Limits of Liability – in New York, and especially in New York City, contractors face the demand of liability limits higher than in most other areas of the county. This is driven in part by the labor law cited above, but also by the litigiousness of this area of the country. It is not uncommon to see building owners or general contractors demanding limits of liability exceeding five million dollars – sometimes even up to ten million! These higher limits of course add to the cost of insurance, unfortunately there’s not much you can do about that if you want to work in the buildings, or for those general contractors that demand that sort coverage.
5. Shopping around for quotes – believe it or not, if you’re one of those contractors that puts your insurance out to bid every year, you may be negatively impacting your costs for insurance. How? It’s called market fatigue, and what happens is that underwriters at the handful of insurers that do write contractors insurance in New York will begin to see your account across their desk every year. Maybe it’s submitted by different brokers, maybe by the same broker and if that underwriter hasn’t been successful in the past two or three “go-rounds” they’ll take a pass on your account the next time it lands on their desk because they consider your account a “shopper” and not one that’s looking to develop a longer term relationship. Therefore this fatigue wears out the marketplace and may bypass what otherwise may be a good opportunity.
Summary – Contractors insurance costs in New York are high and it isn’t easy for sure. For many classifications of contractors there are only a handful of well rated insurers writing coverage, and the prices in some classifications are quite high. To help control costs you need a plan that is strategic and long term. It needs to focus on reducing risk, cleaning up any claim problems you may have had in the past, and documenting an actionable risk management strategy. If you don’t have a plan you’ll be at the mercy of the marketplace and eventually be priced out of business. For help in creating that long term risk reduction strategy, please contact us for a consultation. The Coyle Group has the tools and resources necessary for success!