5 Tips for Start-up Businesses Having Trouble Getting Product Liability Insurance

Karen K. Klein makes some good points in her article “When You Can’t Secure Product Liability Insurance” in BusinessWeek. These two show why it’s sometimes difficult for start-up businesses to get Product Liability insurance:

• Premiums for even low-risk products are often too high relative to sales.  Minimum premiums can be between $2,500 to $5,000 annually and can go up to $5,000 to $10,000 a year.
• Commissions for brokers are typically in the 7.5% to 10% range. As a result there is not enough revenue to get a broker’s interest.

Here’s what you can do

We specialize in providing Product Liability insurance to startup businesses. The following five tips may help start-up businesses like yours  secure Product Liability quotes and insurance:

1. Have a business and marketing plan and be willing to provide it with your application.  Going to the expense and trouble of putting together a business and marketing plan shows you’re serious about purchasing Product Liability insurance.  Agents and brokers receive numerous applications that omit basic information, such as estimated sales or limit of liability.  The higher quality your submission, the more likely people are to help.
2. Don’t approach insurance agents or brokers for formal quotes until you’re within 30 to 45 days of needing Product Liability insurance.  An agent or broker specializing in Product Liability insurance can usually provide you with a premium indication without having to get the underwriter to prepare a formal quote. He or she can simply pick up the phone and speak with the various underwriters they work with on a regular basis.
3. Chose an agent or broker who specializes in Product Liability, which is a highly specialized field. Not all agents know how to approach the appropriate underwriters or underwriting groups to maximize your chances of getting a competitive quote.  For example, your local agent and I could approach the same insurance carrier, but through two different underwriting groups.  If your local agent uses an underwriting group that has no expertise in the type of product you sell, you’ll get a quote. But because the underwriter lacks knowledge about your product, you’re less likely to get the most competitive quote.
4. Be honest.  An application that includes inconsistencies is a red flag that you’re not a serious prospect. Or you’ll be suspected of  hiding something.   Experienced agents and brokers know these types of prospects are the least likely to buy insurance. Their time is usually best spent working on other accounts.
5. Offer to pay the insurance agent or broker a consulting fee. Base your offer on being refunded if you purchase insurance.  Agents constantly make decisions on which applications to submit to the market based on past experience.  They have a responsibility to provide high-quality prospects and applications to the underwriters to earn a fair income for their time and effort. Underwriters receiving too many low-quality prospects that don’t buy insurance may decline to work with those agents in the future.  As a result, agents decline to work with many applicants. By paying a consulting fee, your broker will know you’re a serious prospect. He or she will then more willing to go the extra mile to help you secure Product Liability insurance.

Have questions or want a quote? Give us a call at 800-622-7370.