Even as inflation has cooled, water well contractors across the nation are seeing spikes in their 2024 insurance renewals.
The insurance industry experienced an increase in overall claims in 2023, with wildfires up and distracted driving causing more traffic accidents. Nationwide, the average premium increase for auto insurance was nearly 18%, according to the Federal Bureau of Labor Statistics.
Making matters worse is repair costs are 25% higher. All this has led many water well contractors to see cost jumps in their general liability and vehicle coverage, forcing them to adjust their pricing for 2024 to maintain their profit margins.
While workers’ compensation insurance rates increased in some states in 2024 and others decreased, Steven Smith of Assured Partners/Front Range Insurance Group says workers’ compensation rates in the water well industry over the last 15 years have generally trended downward because of more awareness on job safety.
“One of the primary things we talk about with larger accounts [10 to 20-plus employees] is their loss history for all policies and workers’ comp claims that might affect their MOD [experience rating modification],” says Smith, relationship manager in Fort Collins, Colorado.
“In cases where they report a claim, we will do a follow-up call to discuss the accident and what might be done to avoid such in the future. We consult them as to underage drivers and to be sure they provide driver information to us before hiring. All our clients are now very aware of this so that they don’t hire a driver with an unacceptable motor vehicle record.”
Smith, a veteran insurance agent who insures a group of about 75 contractors over a five-state area, enjoys educating his clients. Some key issues that contractors may not be aware of include the following.
- The first 90 days of an employee’s employment is the highest risk for workers’ compensation claims.
- Most contractors are unaware of utilizing the post-hire pre-placement physical with new hires. It’s a test conducted for an employee after a company makes an offer of employment.
This exam can tell if a prospective team member has the physical capacity to perform their job safely and effectively. Business owners should contract with a licensed medical professional such as a physician or a nurse practitioner, typically their workers’ compensation provider, to conduct the exam. They will provide you with the results and help you interpret their findings.
“That’s not done by the vast majority of contractors,” Smith says, “and if they don’t, I can point you to some of our worst claims that have come from contractors who have ignored the health of the person coming in off the street for a job.
“Even some of my best contractors don’t look at that as closely as they should. If I was going to say the best tool any contractor has in his hand, it’s a post-hire pre-placement physical.”
- If an owner doesn’t properly hire or fire an employee, they will get sued. That’s why employment practices liability coverage is important.
- Lastly, many business owners don’t carry workers’ compensation coverage on themselves because their insurance agent hasn’t helped them do it cost effectively.
Smith says if it’s done cost effectively, “it’s the best life insurance you can buy.”
“Very inexpensive insurance for the owner if you do it right—it’s tremendous protection for the family,” he says.
Risk management basics begin with a careful review of the contractor’s insurance needs and policy.
“Not all agents do so but we do this every year whether in-person, online, or via a phone call,” Smith shares.
“There is a financial reason to have a safe culture, and we’ve gone through that with people many times.”