Web site cancels shop insurance

My company’s commercial insurance policies renewed each August in uneventful fashion—that is, until 2012. About 6 weeks before this year’s renewal, our insurance agent informed me our carrier had decided not to renew any of our policies, in spite of having no claims for more than 4 years. Even when reviewing our claims history, the several previously filed didn’t total much, so there wasn’t any reason to consider us particularly risky. Or was there? 

According to our carrier, we were suddenly a high-risk client. Without much warning, procuring new insurance policies suddenly went to the top of my priority list and became yet another time-consuming, non-revenue-generating activity.

After discussing the matter, the agent informed me that some carriers are fleeing industrial accounts. Apparently, they envision plane crashes, oil well explosions and hurricanes devastating industrial facilities and aren’t willing to accept the risk anymore. 

After asking why our company was suddenly considered high risk, I discovered the primary culprit—our Web site. “Well, they see on your Web site that you serve the aviation, energy, transportation and medical sectors,” the agent said. My immediate response was, “What does that have to do with anything?” He informed me that by simply listing and promoting services to these industries, the carrier automatically assumed this meant the manufacturing of critical components that could expose the carrier to tremendous risk involving a product failure.

I wanted to know my next course of action and the agent assured me that other carriers specialize in such policies. This began the process of responding to many requests for paperwork involving company details, information about manufacturing processes and the markets we serve. While it’s understandable an insurance carrier looking to insure a manufacturer for the first time would want so much information, it was still very time-consuming and even frustrating.

During this process, incorrect risk assumptions about our capabilities and customer base began to reveal themselves. It was exhausting trying to explain that shops serving those particular industries don’t necessarily make high-risk parts and it’s the customers themselves that typically make the mission-critical components. In our case, we don’t have to make such parts because the market for noncritical items is so vast we don’t have to pursue the high-liability stuff.

Further attempts at clarification included explanations of the stringent quality and certification requirements for producing such parts. Having said that, I emphasized that this doesn’t necessarily mean our company wouldn’t be willing to make critical components if the risk was worth the reward, but we wouldn’t automatically do it without verifying our insurance policy would cover the exposure.

After learning a lesson, we removed some specific terminology from our Web site that contributed to their stress. The experience made clear the increasing difficulties of operating a manufacturing business, and I now have an even greater appreciation for those with enough gumption to pursue it, in spite of the obstacles. I’m glad you’re doing it with me. 

Don’t forget, the words on your Web site will be read and believed, and perhaps believed too well. Craft them carefully.