If I Had a Fire, I Would Have Gone Out of Business

Industry: Hardware Manufacturer Exposure: $11 million

Coverage Benefit: $3.5 million in Additional Coverage

Savings: 18%

Insurance Problem

Thirty years ago, two brothers formed a hardware manufacturer to fill a growing gap in the industry.  They had made a lot of changes over the years including moving all of their manufacturing to Asia.  One thing they did not change over the years was their insurance agent.  A new CFO joined the company and realized that there was room for improvement in some of the vendor relationships.  The CFO brought in Swingle Collins & Associates to do a review of the company’s insurance plan.  His main complaint was that he received an audit for 300% of the policies’ general liability premium and he did not know why.

When Swingle Collins started reviewing the policies, there were many problems that stood out.  The first was the current agent represented to the carrier that the manufacturer was only producing $3,000,000 revenue.   At the audit, it was discovered they were producing $11,000,000 so the CFO had received a bill for $11,000 that had to be paid in 30 days.  It would have been better for cash flow to properly report the  company’s size, which would spread the additional premium cost throughout the year.

The other problem was the company only purchased $675,000 of property insurance.  At the time of the meeting the insured had $4,000,000 in property in their warehouse.  When the owner learned of the discrepancy, he said, “If I had a fire, I would have gone out of business.”

Risk Management Solution

Swingle Collins secured the company new insurance policies based on $11,000,000 in revenue with $4,000,000 in property insurance.  Once the management team learned they were underinsured, they also wanted to add dependent property coverage on their manufacturing plant in Asia, directors and officers coverage, crime coverage, employment practices liability, fiduciary, international liability and workers compensation coverage.

Results

The company had been paying $33,000 for their incorrect insurance coverage.  Swingle Collins was able to increase the property limit by $3.5 million and find a policy for $16,000 or a 50% savings.  Once we added the other coverages requested their total cost was $27,000.  The owner was very grateful that they were able to save $6,000 and add seven coverages while increasing their limits.  He no longer has to worry about losing thirty years of work if there was a fire.