Service Information

Insurance

Obtaining a product liability policy or errors and omissions protection in the wireless industry is not insurmountable, but acquiring adequate construction and automobile coverage can be overwhelming and oftentimes impossible. Tragically, some companies are running bare.

Severe reinsurance increases coupled with investment losses and poor underwriting results have forced the insurance market to tighten their policy offerings. Increases have become the norm and  some firms are receiving non-renewal notices.

Telecom construction is considered one of the most hazardous types of construction work. The construction and maintenance of towers and communications equipment at elevations creates the potential for catastrophic loss to workers and property. This type of work also exposes the public to risk of injury and/or death. Although the focus is often placed upon deaths from elevated falls, severe injuries and property losses are common and costly occurrences on the wireless construction site, but largely go unreported in industry media.

Profitability hindered by high rates

Unfortunately, the availability of proper insurance at a reasonable price is very limited. Small and medium sized businesses struggle in obtaining insurance that enables their business to operate within  their contractual obligations and make a profit.

Due to this difficult market, some companies purchase the absolute  minimum that they can get by with and other contractors unknowingly purchase insurance that in the event of catastrophic loss may not respond properly. This leads to litigation and ultimate business failure for many companies each year.

Although rates are escalating, the good news, according to  underwriters, is that due to increased attention to safety and loss control, wireless construction losses are less than previous years. Since they provide little empirical data to support their claim, critics question whether the decline is a result of the market downturn during the corresponding period.

As the telecom industry matures, owners and general contractors are monitoring their sub-contractors and taking a closer look regarding risk management and insurance. Many owners have felt the brunt of a loss when they were using an uninsured or underinsured sub-contractor. Sub-contractors that are now the low bidder may not get a contract due to inadequate insurance or other negative risk factors.

This has led to some much-needed reforms in the telecom construction business. Companies must now meet multiple guidelines to win a contract. This has resulted in fewer serious losses; however, the industry is still off limits to many insurance carriers.

Typical minimum requirements

For a company to meet minimum requirements to work for a major telecom company, they need the following:

1. Statutory Workers Compensation
2. General Liability Coverage (Usually a $1,000,000 per occurrence limit)
3. Automobile Liability Coverage (Usually a $1,000,000 per occurrence limit)
4. Umbrella (or excess) Coverage (Usually at least $2,000,000 per occurrence limit)
5. Coverage for Property of others (Sometimes called Installation Floater)

In some cases, owners will require that minimum criteria must be met in safety areas such as Experience Modifications (for example under 1.25), or a certain maximum number of claims for each year.

Average cost for companies to purchase adequate coverage is between 10%-25% of total company payroll. This means that a company with $500,000 in payroll in telecom construction would expect to pay between $50,000 and $125,000. The variance in cost is driven by the state in which the company  works, their loss experience, and the amount of payroll the company has in each class code. Some management firms, tower owners and other clients are requiring their contractors to obtain $5,000,000 and $10,000,000 in liability coverage, increasing the company’s premiums significantly. Some contractors have had to weigh whether the resulting thin margins justify the additional cost.

Companies can purchase workers compensation in some state financed insurance pools (or assigned risk funds); however, in some cases companies can only work in that state. In most cases, unfortunately, other insurance is not available in state pools.

Insurance agents or insurance companies that specialize in this small niche are limited. Some trade associations have aligned with insurance agents and insurance companies to form insurance programs for telecom construction. These programs have fulfilled a need for small and mid size contractors to obtain insurance in this restrictive market.

Insurance programs are targeting tower owners

There are insurance programs available for tower owners for property, general liability, business auto, workers compensation, professional liability and directors and officers liability. Minimum premiums average $2,500 for each tower site; rates run from $.60 to $.70 per $100.00 of value. A business interruption policy will be based upon the company’s revenue.

We recommend that you contact our listed insurance companies and agents to obtain additional information about their services, coverages, capabilities and experience.

Classify your codes correctly

Ensure that you code your payroll hours correctly for job site activities. Many companies have had to close their doors when a year-end audit found coding descrepancies resulting in an additional premium that could not be paid. See Compensation Categories  for additional information.

Accident compensations vary

The following injury compensation averages have been compiled from companies providing construction services in the wireless  industry. Some averages are represented by only two incidents and are not reflective of any industry compensation average or trend.  In example, the high average compensation of $28,288.00 when a worker was injured after jumping from a level of less than six feet is from two accidents representing compensation of $49,228.00 and $7,347.00 .

Some averages were obtained from up to 14 reports. The three most frequent accidents, in order, were:

1. Strain or injury by lifting
2. Struck or injured by object being lifted or handled 
3. Struck or injured by falling or flying object

Strains or injuries by lifting were the most prevalent accidents. Couple them with another key compensation award, strains or injuries by pushing or pulling, and it’s clear how a high percentage of workforce accidents occur.

If the greater portion of your revenues are derived from wireless construction or maintenance, and you want to assist in providing accident data to update the industry statistics, please e-mail us at info@wirelessestimator.com . Provide us with your company’s name, the type of accident and the total Workers Compensation payment provided by the insurance company. Before identifying the total for the injury, check to see if there is a  reserve set up by the insurance company for incurred losses. All information, other than the type of claim and  payment, will remain confidential.

You can also assist the wireless construction industry by visiting Wireless Estimator’s Safety Section in the Discussion Forum and discuss a particular accident and assist your fellow workers by detailing how it might have been avoided. There is considerable industry focus upon deaths caused by falls from elevated positions. However, every day multiple serious wireless construction accidents are recorded on OSHA logs, but are seldom published.

You ought to accent auto

Workers Compensations figures for vehicle accident injuries are not included in the above listing. They are typically a significant percentage of compensation payments. Vehicle liability and physical damage auto losses are covered by the contractor’s automobile insurer.

Insurance underwriters say that a relatively young workforce in the wireless industry contributes to elevated accident levels and higher  premiums. They point to accident statistics that show that the unusually high accident frequency rates of younger drivers tend to begin dropping after the age of 21 and stabilize in the mid to late 20s. Accident statistics for truck drivers follow a similar pattern, but the drop begins three to four years later and levels off in the early 30s.

Driver education and OSHA mandated programs have had a marked influence on accident reductions. Some insurance companies will provide free defensive driving courses.           

EMR: A widely used indicator of a contractor’s past safety performance

Insurance companies are requesting extensive company profiles prior to providing premium quotations. A firm’s experience modification rate (EMR) for Workers Compensation insurance is the leading information reviewed for lower or higher rates.

The insurance industry has developed the experience ratings systems as an equitable means of determining premiums for  Workers Compensation Insurance. These rating systems consider the average workers’ compensation losses for a given firm’s type of work and amount of payroll and predict the dollar amount of expected losses to be paid by that employer in a designated rating period, usually three years. The rating is based on a comparison of firms doing similar types of work, and the employer is rated against the average expected performance in each work classification. Losses incurred by the employer for the rating period are then compared to the expected losses to develop an experience rating.

Many wireless clients in their contractor pre-qualification screenings, require a 1.25 EMR or less. If higher, they may consider acceptance, if extenuating circumstances are provided. The maximum number of claims each year is also a consideration for many major telecom companies.

Rate reductions available to lower climbing premiums

Established wireless construction companies with a low EMR  history, low loss runs and financial stability will be accorded lower premiums, but insurers are also viewing other benefit and risk factors.

Some considerations are:

• The percentage of total operations of the firm involving  climbing or working on towers.
• The heights of towers that are constructed or worked upon.
• The percentage of work involving the erection of  monopoles.
• The percentage of work involving new construction.
• Compliance with a comprehensive safety and health program.
• OSHA incidence rates.
• Procedures in place for recovery for an injured employee on a tower.
• The number of company owned cranes.
• The number of employees and the percentage of employees who have  completed a third party tower safety training  and RF radiation course.
• Pre-employment screening procedures.
• Types of medical coverage and safety incentive programs.

Splitting companies can oftentimes lower premiums

For years, many companies have split their tower division off into a separate company. A great amount of money is saved this way on general liability and workmen’s compensation insurance. Contracts are written between the two companies. This allows lower rates because tower erectors pay the highest insurance amounts. In example, if a company had frequent contracts to commission transceiver equipment, it would be beneficial to set up a separate company to perform those services. However, it’s important that there be a clear delineation of responsibilities to avoid liability should an accident occur. Having separate companies also allows the owner to sell one at any time without interfering with the general operations of the other business.

Access to quality health care may become available to uninsured wireless workers and their families

Both large and small wireless industry companies are struggling to maintain a quality health care plan for their employees and their families, and still remain profitable, but it’s more acute within the industry’s smaller companies with less than 25 employees who have been forced to drop coverage due to annually rising health care costs of 25% or more. And small businesses that do provide health insurance pay between 15% and 30% more than larger firms.

In 2003, the average annual family health care policy cost $8,916.00 per small business employee, per year. Small businesses are clearly at a disadvantage. Approximately 41 million Americans are uninsured, and over 60% reside with a family employed by a small business. Only 55% of firms with 3 to 9 workers offered health benefits in 2002, down from 58% in 2001.

The health care of America’s workers will be greatly improved if legislation, S. 545, The Small Business Health Fairness Act,  introduced by Senator Olympia Snow (R-Maine) is approved, paving the way for millions of employees and their families to gain access to affordable, quality healthy care coverage.

This companion legislation to the bipartisan supported House of Representatives H.R. 660 legislation which passed June 20, 2003,

will allow trade and professional associations to offer their members an affordable Association Health Plan (AHP).

AHPs have existed for decades, both multi-state and intra-state.

However, while the Employee Retirement Income Security Act of 1974 (ERISA) preempts state regulations for most corporate and union health plans, it does not preempt AHPs - a critical difference that has led to the relative extinction of AHPs.

As state regulations and mandates have proliferated in the last decade, AHPs have become increasingly difficult to operate. In 1990, there were more than 1,000 AHPs. Today, there are less than 200.

The primary obstacle to creating and running an AHP today is state regulation which can add 30% to the cost of insurance. The simplest way to allow AHPs to prosper again is to extend ERISA to AHPs, allowing association health plans to operate like a corporate or labor union health plan through the Senate’s approval of S. 545.

Only bonafide trade or professional associations, which must exist for at least 3 years for purposes other than offering health benefits, can sponsor an AHP. Their plans must abide by HIPAA rules and therefore cannot exclude high risk groups or individuals.

What can you do to help?

Bill S. 545 is stalled in the U.S. Senate and without action this legislative effort aimed at reducing health care costs for independent businesses will fail.

Urge your senators to pass AHP legislation this year. Let them know that small companies in the wireless and all other industries need AHPs to be able to provide health insurance to their employees in the face of spiraling health care costs. Your support is critical to help bring Fortune 500 benefits to small business owners and their employees. If you belong to a trade or professional association, have them lend their support.

Countless influential advocates are united in support of AHP legislation. In addition to the US Chamber of Commerce and the Associated Builders and Contractors, more than 150 organizations representing over 12 million employers and 80 million American workers are pressing for approval of S. 545.