Jay Johnston
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After 30-plus years of working with insurance companies that specialize in the energy industry, I have learned a bit about
salesmanship, spin and bravado. In some cases, rolling up your pants is a good idea.
Woody Allen once said (from "Love and Death"): "There are worse things than death. If you've ever spent an evening with an
insurance salesman, you know exactly what I mean."
Insurance safety can be confusing. A variety of insurance programs look good on paper, yet fail to factor the personality
of the propane industry into the equation. That is a problem because many insurance models from other industries just don't
fit the propane industry.
When it comes to insurance, there is no such thing as a free lunch. Most proposed insurance programs can survive the short-term
process of buying business by being the lowest price. But very few can survive – let alone thrive – in that cutthroat end
of the business. The same goes for profitability in the propane industry.
I hate when good insurance companies leave the business. I miss Old Republic, which was competitive and focused primarily
on safety. A few years ago that program left the business due to low premiums and poor loss ratios in a soft market. My friend,
Bill Brooks, is still the claims manager as they run off their propane-related claims.
That is the reality of being in the propane insurance business: long-term defensibility obligations for low probability claims.
The premiums of the many pay the claims of the few.
Million-dollar claims can expend a lot of premiums. Small-minded programs simply don't have enough premiums to sustain long-term
liabilities. When those high severity losses hit, the pros dig in and the cherry pickers issue cancellation notices as they
run. We have a few oil jobber insurers in the business who love the propane premiums, but are quick to cancel with claims.
If those are the problems, what are the solutions?
Insurance solutions:
1. Keep the cost in perspective: The cost of product and the employee payroll are your two biggest expenses. Insurance costs are relative. Remember the goal
is to transfer the risk of millions in exposure at a competitive cost.
Keep in mind that consumer price-per-gallon increases this year alone were ten-fold the annual 2 to 6 cents per gallon average
that propane marketer insurance costs.
2. Understand your exposures: If your customers are 80 percent residential, gas system checks completed and communication with renters may be exposures
for future focus. If your clientele is industrial, commercial or vendor re-sellers, you may want to focus on documenting training
education and communication for those exposures as well.
3. Understand your claims experience: For every dollar you pay in premiums, how much was spent or reserved on claims? You are entitled to that information. Your
current and past insurers will provide it upon request.
I recommend you secure such information directly from your insurance carrier (as agents tend to drag their feet) and immediately
focus on training and safety procedures targeted toward accident prevention in those areas.
4. Partners in profitability: I recommend you consider your insurance company as a partner in your profitability. Challenge their assumptions, but respect
their position. They hold the checkbook for millions in exposure. Treat them the way your best customers treat you.
5. Make safety a top priority and company value: Safety is a great business value. Do your best to teach, train and sell safety to employees, customers and business associates
everyday. Focus on strengthening weak links and find comfort with the knowledge that you are part of the insurance safety
solution and not the problem.
I believe that insurance premiums and earned credits must be vested in a solid safety record of accident prevention to have
a credible chance of financial success. I recommend you choose an insurance company with experience, a proven track record
of assistance with safety issues and a solid financial rating first ... then negotiate price.
In the long run, that will provide consistent savings and solutions.
Jay Johnston ( http://www.thesafetyleader.com/) is an insurance agent, business insurance coach and consultant; safety writer and inspirational speaker. He can be reached
at Jay@thesafetyleader.com
or 952-935-5350.
