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Specialty Lines Market The security industry Market includes burglar/fire alarm safety equipment liability, security guards and detective agencies By Larry G. France Where is the “security” in the security guard industry? Only 22 states require basic training for licensed security guards. Sixteen have no background checking requirements. Very few require FBI background checks. The federal government, in most instances, lets states regulate the industry in their respective jurisdictions. Yet, in the post-9/11 era, you will find private security guards present at sporting events, concerts, fairs, nuclear power plants, shopping malls, bus and rail terminals, hospitals and military bases. We are seeing security checkpoints where we would have least expected them. The focus on security has increased several-fold, and in some high alert situations is extremely intense. The majority of security firms have taken a hands-on approach to background checks for employees, and most have stricter requirements and standards than those imposed by government agencies. These three security industry Web sites can provide you with additional information regarding industry climate: www.securitydirectornews.com, www.homelandsecurityweekly.com and www.nasco.org (National Association of Security Companies). “Recent changes in the security industry are creating new opportunities for insurance companies, brokers, agents and their insureds,” according to Scott R. Newell, national program manager at Izzo Insurance Services Inc. “Specifically, three major changes are responsible for the shift toward more favorable market conditions. First, the security industry is benefiting from ever-improving regulations.” Joseph Ricci, executive director of the National Association of Security Companies, agrees, stating, “Contract security is regulated at the state level by governmental departments and by agencies at the federal level. We are seeing more interest and a push toward higher licensing, screening and training standards across all levels, including emphasis on industry best practices and guidelines.” Second, says Newell, “Security industry companies have been responding to the evolving regula-tions in a surprisingly positive manner. Though it would be logical, and perhaps understandable, to think they might struggle to meet the new, more stringent minimum require-ments, these insureds have been adopting standards that are even higher than those mandated. The willingness of these companies to go above and beyond required minimums demonstrates an understanding of their importance, which bodes well for all industry stakeholders. “Finally,” Newell points out, “we are seeing security companies take proactive roles in the effort to minimize claims. They are doing so by effectively eliminating the most risky clients, thereby sacrificing short-term revenues in the name of long-term consistency. These factors have created a more favorable market for everyone. Insurance companies are enjoying a major cost reduction, which has led to a willingness to write coverage in new markets and offer reductions in premiums. Obviously the security companies like to see the reductions, which, after payroll, account for their greatest expense,” Newell says. “The security guard culture is dependent on the bid process,” according to Marc Katz, principal of The Mechanic Group. “Guard firms bid against other guard firms for contracts, with price often being the determining factor, and with pennies literally meaning the difference between profit and loss. So, naturally, guard firms will utilize a similar bidding process for their insurance needs.” Katz explains that a soft market leads to greater capacity or supply, an easing of underwriting standards and more choices for your insured. How do you navigate through this soft market to not only maintain but, just as important, protect your clients? Katz says that the best way is to align yourself with a program expert: someone who can point out key coverage differences between competitors, offer you total coverage solutions and provide risk management advice on this class of business; someone who knows the marketplace and can quickly point out potential E&O landmines. Splitting coverage among various markets leaves your agency vulnerable to coverage gaps, which increases your E&O exposure. This expertise provides critical added value to both you and the client. “Contracts and their language play a major role in the security world,” continues Katz. “It is vital that a client’s contract language is limited so that indemnity, hold harmless and additional insured provisions apply only to losses arising from your insured’s direct negligent acts while performing agreed upon duties. Such language can result in lower claims costs, which converts to future premium savings.” Peter Costanza, president of Costanza Insurance Agency, says that the workers compensation, general liability and umbrella markets are continuing to soften. “With competing firms chasing each other’s business, much effort is focused on renewal retention. When marketing a security guard, alarm installer or private investigator account, make sure proper coverage is quoted. New players may be cheaper, but their coverage may not be as broad as the existing coverage. Make sure you are aware of your client’s needs.” Regarding general liability, Costanza offers this brief checklist. Does your quote include: • Coverage for errors and omissions? • Assault and battery? • Care, custody and control to the policy limit? • Personal injury? • Deductible per claim or occurrence? • Defense cost inside or outside the limit? • Auditable policy that gives money back if prospect has overestimated? • Is it a true umbrella, following form or just excess? (Many quotes will exclude E&O, assault and battery, and care, custody and control.) • Review all manuscript • Review all manuscript endorsements and be familiar with all exclusions. It appears that with the emphasis on heightened security, this line of business can hold many opportunities for agents and brokers, but remember to trust a specialist in the field. Upcoming specialty lines articles include professional liability in October, health care-related risks in November and a 2008 specialty market preview in December. The following firms have responded to our survey and indicated that they are a market for one or all of the risks that fall into the security industry class: All Risks, Ltd. and All Risks of CA Insurance Services, LLC An MGA/E&S broker that operates in all states. Target classes are security guards, burglar/fire alarm, detective agencies, and private investigation. Can offer GL, workers comp, umbrella/excess, auto, property, and crime. All carriers are rated A or better. Americana Program Underwriters An MGA/open brokerage that operates in all states except MA and HI (auto) with capacity to handle limits for both large and small risks including umbrella. Target class is the armored car industry, including ATM owners/operators and others whose principal business is transportation of coins, currency, securities, etc. Will not consider security guard operations if more than 30% of payroll. Can offer coverage for check cashing operations. AIG is the A+ rated carrier. AMIS/Alliance Marketing & Insurance Services An E&S broker that operates in all 50 states with limits of $1 million - $5 million. Target classes are private investigators, security guards, alarm companies, and insurance adjusters. All carriers are rated A- or better. Bohrer, Croxdale & McAdoo, Inc. An MGA that operates in AR, IL, KS, MO, OK and TN with limits of $1 million/$1 million. Target classes are security guards, detectives, and process servers. Will not consider bail bondsmen. All carriers are rated A or better. Brownyard Group A program administrator that operates in all states except NE and WY with limits that vary by program. Target classes are security guards, private investigators/security consultants, and alarm services. The A rated carrier is Arch. Calco Insurance Brokers & Agents A national program manager and broker that operates in all 50 states with all limits. Target classes are alarm security dealers, low voltage integrators, central stations, and guard services. Can offer GL, E&O, umbrella, fleet auto, workers comp, property, EPLI, marine, personal lines, and employee benefits. All carriers are A rated. CoverX Corporation An MGA that operates in all states except RI and WY with primary GL limits of $1 million and GL/umbrella limits of $5 million. Target classes are security guards, detectives, alarms, access control, and fire suppression. The A- rated carrier is First Mercury. Evolution Insurance Brokers An E&S broker that operates in all states except AK, CA, CT, NH, NJ, NY, RI and WV with all limits. Will consider all classes. Prime is the B+ rated carrier. Excel Insurance Service, Inc. An MGA/E&S broker that operates in NJ and PA with limits of $10 million. Scottsdale (A+), Colony (A) and Wellington (B+) are the carriers. Insurance Innovators Group An E&S broker that operates in DE, MD, NJ and PA with limits of $5 million. All security-related classes are considered. A rated carriers are used to placed coverage. Izzo Insurance Services, Inc. An MGA whose liability and workers comp program is available in all 50 states with primary and excess limits that vary by carrier. Target classes are security guards, detective agencies, alarm installation repair, and monitoring companies. Can offer auto, property, EPLI, and exclusive third-party fidelity bond form. All carriers are A rated. Jacobs & Associates An E&S broker that operates in OH only with limits of $10 million. Target classes are alarm contractors, fire suppression contractors, security guard agencies, and detective agencies. Can offer inland marine, business personal property, E&O, and professional. The carriers are Scottsdale (A+), Western Heritage (A+), Colony (A), Catlin (A), First Mercury (A -), and United National (A). M.J. Hall & Company, Inc. An MGA/E&S broker that operates in AK, AZ, CA and NV with primary limits of up to $3 million. Target classes are fire/burglar alarm installers, detective/patrol agencies, security guards (armed and unarmed, with or without animals), security guard liability, off-duty police officers, and firearms training and certification schools. Will not write surety. Can offer med pay; property damage extension; security, patrol, detective, investigative agency coverage extension; lost key coverage; and assault/battery—policy limits. Carriers are A rated. M.J. Kelly Co., Inc. An MGA that operates in AR, CO, FL, IL, KS, MO, MS, NE, NM, OK, TN, TX and UT with limits of $2 million/$2 million. Target classes are apartment/condo security, banks/offices, churches, construction sites, and warehouses. Will not consider airport security, schools/universities, border patrol, bounty hunters, collection/repossession risks, doormen, or bouncers. Western Heritage (A+) and First Mercury (A-) are the carriers. McSweeny Agency (E&S) An MGA/E&S broker that operates in MD, NJ, NY and PA with limits of $1 million-plus. Target class is all security-type businesses. Will not write private prisons. All carriers are A rated. The Mechanic Group, Inc. An MGA/E&S broker that operates in all 50 states with limits of up to $20 million. Target classes are security guards, private investigators, burglar/fire alarms, electronic security, background screeners, and locksmiths. Will not write fire suppression. Tudor (A+), Gemini (A), Great American (A), Navigators (A), ACE (A+), AIG (A+), and Travelers (A) are the carriers. Michael J. Kelly Insurance Agency A program administrator/E&S broker that operates nationwide with limits of $5 million. Target classes are alarm dealers, security guards, and IP operations. Can offer E&O, auto, property, umbrella, workers comp, and D&O. Admitted and nonadmitted companies are rated A or better. NIF Group, Inc./NIF Pro An MGA/E&S broker that is admitted in all states and nonadmitted in 30 states and offers primary limits of $1 million/$3 million (umbrella and excess available). Target classes are security services, detectives, private investigators, and fire/burglar claims. Can offer GL, excess, and property. All carriers are A rated. NorthCoast Excess & Surplus Agency, Inc. An E&S broker that operates in OH only with limits of $1 million/$2 million. All carriers are A+ rated. Ohio E&S Agency An E&S broker that operates in Ohio only with limits of up to $10 million. Target classes are alarm installers, detective agencies, and security guards. Will not consider security guards with too heavy a retail store exposure. Can offer GL (includes professional) and can include property coverages for a package. The A+ rated carrier is Scottsdale Surplus Lines. Prime Insurance An insurer that operates in all states except AK, CA, CT, NJ, NY, RI and WV with all limits. Will consider all classes. Can offer liability, professional liability, wrongful acts, assault/battery, sexual abuse, and specialized coverage for off-the-clock moonlighting. Prime is a B+ rated carrier. Roush Insurance Services, Inc. An MGA/E&S broker operating in IL, IN and OH with limits of $1 million/$2 million (excess/umbrella up to $25 million. Will write most classes—with some limitations on the type of work or service provided. Can offer E&O, bonds, excess/umbrella, commercial auto, property, and inland marine. The A rated carriers are Scottsdale, Evanston, Essex, and Century Surety. Russell Bond & Co., Inc. An MGA/E&S broker that operates in CT, MA, NJ, NY, PA, VA and VT with primary limits of $3 million/3 million and umbrella in excess of $10 million. Will consider all classes. Can offer property, E&O, auto, EPLI, D&O, and crime. All carriers are rated A- or better. USG Insurance Services An MGA/E&S broker/Lloyd’s syndicate that operates in all states except AK and HI with virtually unlimited capacity. Target classes are safety equipment manufacturers, fire/alarm installation, safety consultants, security guards and detectives. Can offer GL, property, inland marine, umbrella and professional. A rated admitted and nonadmitted carriers are used to place coverage. Western World Insurance Co. An insurer that operates in all states with limits of $1 million/$2 million. Target class is unarmed security guard services. Will not write burglar/fire alarm system monitoring or installation. All carriers are rated A+. Yates & Associates Insurance Services, Inc. An MGA that operates in CA only with limits of $1 million/$2 million/$1 million (excess and umbrella available). Will consider all classes. Can offer commercial auto. All admitted and nonadmitted carriers are A rated. * |
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