The area 'lends itself to specialization' — and for good reason, said Victor Insurance's Jeff Benson
The devil's in the details when it comes to contractors' equipment insurance
Construction & Engineering
By Mallory Hendry

Feb 06, 2024
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This article was produced in partnership with Victor Insurance Managers LLC.

It's long been said that the devil is in the details, and for a niche area like contractors' equipment insurance, that old adage definitely holds true.

“It's an often misunderstood line of business,” said Jeff Benson, contractors' equipment program manager at Victor Insurance Managers LLC. “It lends itself to specialization. There's a lot of misclassified risks out there — I've seen schedules for millions of dollars of equipment that may not be covered properly based on the way it is classified.”

That's where deep-rooted expertise comes into play. This is a very old line of business, Benson said, adding he “feels like I've been underwriting it just as long,” and the Victor team is tenured as well.

“We have developed a program specifically designed for contractors' equipment insurance,” Benson explained. “Our coverage forms are tailored to address the unique exposures in this line of business. Our underwriting staff has years of experience, and our online portal, V2, provides a seamless experience for submitting, binding, issuing, and maintaining policies.”

Back to basics: What is contractors' equipment?
Contractors' equipment is the largest single line of inland marine business in the US and is defined as the insuring of mobile machinery such as bulldozers, cranes, excavators, and front-end loaders, as well as lighter equipment such as forklifts. There are some caveats, such as the equipment can't be licensed for road use nor can it be waterborne. The primary purchasers of this coverage are subcontractors — the street and bridge contractors, electricians, plumbers, and painters, to name a few — followed by warehousing operations, schools, and municipalities.

Contractors' equipment insurance is important not only because it satisfies contractual requirements, when applicable, but also because it covers what's critical to a business's ongoing operations. It essentially protects livelihoods: for example, if something happens to a swimming pool contractor's backhoe, they can 't just go out with a shovel and dig the hole, Benson noted. Victor has the expertise to tailor coverage that truly suits the insured's needs and keeps projects running smoothly.

Rooted in the day-to-day, with coverage to match
Asking the right questions is crucial and the team at Victor, who write these policies all day, every day - know what issues need to be addressed. Is the equipment purchased, rented, leased? Does the insured ever borrow a piece of equipment, lend or theirs out? Transportation of equipment can be a tricky area: if the insured is hauling equipment on the back of a trailer to the next job site, is it covered? That depends on the form language as some carriers exclude transit, while others may have small sublimits.

While larger carriers may include writing all lines of business for subcontractors including contractors' equipment as an endorsement, Benson warned that “agents should be aware it's not a specialized form so there might be some gaps in coverage: just because it's included doesn't mean it's covered properly, or adequately.”

“Agents and insureds need to understand their exposures to ensure the right line of business are in place, and that all exposures are covered, whether by a contractors' equipment, auto, or property policy,” he said.

As specialists in contractors' equipment, Victor uses the best-in-class AAIS form. Its scheduled equipment form includes a coverage extension for debris removal and automatically includes the following supplement coverages – employee tools, equipment leased or rented from others, newly purchased property , pollution cleanup and removal, rental reimbursement, and spare parts and fuel.

Victor might not be the only provider in the marketplace to have access to these form options, but it has the expertise to offer a tailored policy to cover the unique exposures of an individual insured Just because an insurer has access to coverage doesn't mean it's has been applied correctly — a tool is only as good as the person who wields it — and put simply, Victor is “rooted in the day-to-day of what these contractors and entities are doing.”

Trends in the space
As specialists in the space, Victor keeps up with developments. Benson is seeing notable market advancement in loss control, for example, which has helped improve industry experience.

“Contractors literally have millions of dollars of equipment sitting out in the open, and that's one of the unique exposures,” Benson said. “It's always a good idea to take a bit of time to protect that equipment.”

Loss control methods being employed with greater frequency include GPS tracking, improved fire suppression measures, and increased security, such as utilization of lights, cameras, and security guards. And with the contractors' equipment insurance line of business directly related to the total value of all insured equipment, there are billions of dollars of business out there strongly suggesting this space has very positive projections.

“Inland marine insurance, specifically contractors' equipment insurance, is directly correlated to the overall construction industry,” Benson stated. “As construction projects increase, be it residential, commercial or infrastructure, so does the demand for contractors' equipment, leading to a greater need for coverage and capacity. We are witnessing this trend in our business and expect it to continue in the future.”

"Not enough people and businesses have insurance cover"

As a 160-year-old company operating in every insurance market around the world, Swiss Re has a 360-degree vantage point of what's happening in any specific sector or business line at any given time. In his three decades serving with the re/insurance behemoth in a variety of roles, Russell Higginbotham (pictured) has seen first-hand the amount and the quality of knowledge and data this provides – and it was with this in mind that Swiss Re's Reinsurance Solutions division was established.

Now a year into his tenure as CEO of the division, he noted that its ultimate aim is to commercialize the organization's risk knowledge assets and deliver them to other members of the re/insurance ecosystem and beyond, with clients including brokers, MGAs, governments and property fund managers. It's an ambition that aligns closely with Swiss Re's mission and purpose, he said, which is to make society as a whole more resilient.

Utilizing data to bridge the global protection gap
At its core, insurance is an intangible proposition, based on a promise to pay and trust is at the heart of this offering. It's much the same with data, especially as data becomes more widely available and accessible because if it's not used ethically, then people will be less willing to share it and regulators will impose greater restrictions on its use.

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“There's this great opportunity to improve societal resilience, to close the global protection gap and to get more insurance into the hands of the right people in the right way,” Higginbotham said. “But as insurers and reinsurers, we have to make sure that we do that properly, otherwise that opportunity will become much more narrow. So I think it's on us to almost self-regulate around that.”

Speed ​​and efficiency – the twin demands of data
Speed ​​is the first consideration, Higginbotham said, because people want things done faster. But while underwriting and issuing a policy in real-time sounds relatively straightforward, it simply doesn't happen that way for a lot of products.

Alongside the demand for speed is the appetite for increased efficiency, he said, as firms want to make more accurate decisions, based on better data optimization. That supports them looking across their books of business and understanding in detail how they are performing, where the issues are and where the opportunities lie. Having this more granular clarity on their business is what supports growth because it unlocks more insights into new areas for growth, whether that's a market, a geography or a product.

“With better quality data, you're then able to build a strategy around that with greater understanding and confidence,” he said. “Ultimately, all of these things make insurance more accessible, more affordable, and more profitable in combination. trying to find the right balance for growth – people need to be able to see products that they want and products that they can afford, and insurance companies have to be able to provide that. So, it all comes quite together neatly.”

Understanding the connection between digital advancement and resilience

The link between digital advancement and general resilience is clear from the outcome of using the right data in the right way, Higginbotham said, however, it's not just about the data itself but also the interpretation of that data to allow companies to understand and price risk more accurately and more efficiently. Because, as an insurer or reinsurer, you have to charge for uncertainty because without knowing how a risk will perform, you need to build safety margins into your pricing and allocate more capital to that risk.

“So, ultimately, you have to be more conservative around that risk because of uncertainty,” he said. “But if you take elements of the uncertainty away, to increase accuracy and understanding, it builds a much stronger foundation for solutions development, because you can do it with confidence. Essentially, if you know how your car's going to perform, you can go faster. That's what data gives you the potential to do."

How is the insurance market responding to this offering?
Assessing how the market is responding to this opportunity, he noted that reinsurers and insurers have been on a data enrichment journey for some years now. The pandemic accelerated interest in this area, he said, because companies had to find different ways to conduct their business and support their customers. What might previously have been labeled as 'innovation' or 'competitive advantage' simply became table stakes for swathes of the market, because to be without these capabilities was suddenly a competitive disadvantage.

“Naturally, there is always going to be more to do,” he said. “But the fundamental challenge, which hasn't changed, is that not enough people and businesses have insurance cover. Either they don't have it at all or they don't have the right cover, or they don't have the right amount. And the environment we all live and work in is increasingly uncertain and we all have to make sure that insurance is there to play its role in societal resilience.

“Ultimately, the role of insurance is to provide a safety net when all the other forms of mitigation that you have don't work. That hasn't changed, rather I think the advent of data and technology just allows that to continue to happen . And I believe that the insurance industry is fully embracing that now because it has to. If you want to be competitive in the future you have to be operating on that level or you're going to find yourself becoming increasingly uncompetitive.”

Experts offer their predictions
What will happen in the insurance market in 2024?

As we arrive in 2024, the insurance landscape looks set to evolve again. From inflationary concerns, to a talent pipeline crisis, to the rising importance of cyber, insurers can expect to have a lot on their plates in the coming months.

A recent report from Deloitte shed light on a few concerns – including the rise of commercial property premiums by 20.4%, climbing expenses impacting personal lines insurers and even a hit on motor repair costs in the auto carrier space.

But is it all doom and gloom? Or are there certain changes insurers can look forward to in the new year? In that vein, Insurance Business asked a collection of the sector's biggest names and leaders to shed light on their predictions for the market in 2024 and beyond.

Brace for disruption: Kyle Matthews, Director of Sales and Distribution, The Hartford
“I envision the future as being disrupted by technology - and with that there being opportunity to think about how we, as people, relate to each other and do business in this new wave. Leveraging technology is going to be a real opportunity to rethink and reimagine how the support team interacts with the underwriting team.

“I'm optimistic about the opportunities we have to change the industry for the better and use what's been done to build on it – to help change the narrative around insurance, to the career destination of choice.”

Retention, retention,: Laura Zoltan, senior vice president, strategy & distribution, Arch Insurance Group Inc
“I'm now focused on attracting and retaining talent. Previously my focus was on results, but as I've grown as a manager and leader , I realize it all begins with talent. It's the people that ultimately drive Arch's culture and make it a unique and special place to work.

“The question is not only how we get people to come into this industry, but also how we get them to stay. So a big part of what I'm thinking about in the future is leading from a place of actually understanding what each individual out of his or her career. It's important to realize that not everyone has the same goals and motivations. Not everyone wants to climb the corporate ladder. So I need to take responsibility to ask these questions, and then tailor my approach and style of management accordingly.

“It's about individual development – ​​​​something which can easily (and unfortunately) be put on the back burner. But I think when managers focus on this, it makes employees feel seen, respected and valued, which ultimately drives them to stay.”

Gaining momentum responsibly: Krishna Lynch, assistant vice president, casualty risk engineering, Zurich Resilience Solutions
“The risk landscape is continually evolving, and we have to adjust and adapt. We must have the right mix of partners, stakeholders, and workforce to do that . But we also have to lean into elevating talent and ensuring that we have diverse teams. I think we're gaining momentum but there's still a lot of work to do. I think it just requires a little more intentionality.

“With advancing technologies, we have to make sure that we're integrating new tools responsibly. As we begin to integrate these technologies and use automation to help us solve problems, we have to do so responsibly.

“And I think employee wellbeing and mental health will continue to be huge issues that organizations will need to build sustainability around.”

Mind the gap: Michelle Chia, head of professional cyber liability & Zurich North America
“The challenge right now that many SMEs and mid-market size organizations face is that they have a cybersecurity gap. They have a difficult time addressing those cybersecurity gaps because they have a lack of access to resources that their larger, more complex, more sophisticated organizations have access to.

“Earlier this year we launched a new cyber insurance policy to address that white space, those gaps. This insurance policy is called the Zurich Cyber ​​​​Insurance Policy – ​​​​Concierge Suite. Resilience and risk transfer solutions that go hand in hand. so, this isn't just an insurance policy, it's not just some document that responds when something bad happens. The offering includes access to risk engineering tools and resources through Zurich's relationships to help organizations close those gaps to improve their cyber resilience.

“Zurich Resilience Solutions has digital capabilities that assist organizations to understand what is happening within their environment – ​​​​almost like an early detection. Complex and sophisticated organizations often have those detection tools centralized in-house because there are many different areas where they need to detect and protect. Data show that middle market organizations have this need too. The service happens in something like a security room where you have multiple screens to see what's happening on every floor, but from a cybersecurity perspective – which is pretty cool.”

Tough conversations: Jenna Kirkpatrick Howard, senior vice president, Lockton Companies
“My crystal ball isn't very clear most days – but I will say there's no signs that the property insurance market is improving quickly. We may not see the large spikes and increases that we've seen for the last 22 consecutive quarters but we will continue coming in a challenging market with limited capacity in. We are also starting to see liability insurance lines harden.

“I think 2024 is going to be a year of some tough conversations and good planning in advance. Alternative risk products like captives, fronting and structural solutions will become of more interest as my clients start to think about how to take on more risk so they 're not beholden to the hard cycles of the insurance market.'

Capitalizing on expansion: Berri M. Willis, associate vice president - managing director, Burns & Wilcox
“The hard market has been an opportunity as well as a challenge. I think finding the opportunity in that challenge is where you're going to be successful , not focusing on what you don't have but what you do have and then capitalizing on it. In the Carolinas, we're a very CAT exposed area and we've capitalized on our strengths with Lloyd's of London and our aggregate capabilities.

“We're looking to continue to grow expansively in 2024 – particularly when I look at talent recruitment and goals for 2024 with offices throughout both North Carolina and South Carolina. We're looking to expand Burns & Wilcox as a whole to great lengths. I want to be at the forefront of that, bringing on talent recruitment, more experts in the field, focusing on many different lines of business, different niches, and different departments. And I think it's just a recipe for success.”

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