NBFAA seeks to establish a member-run insurance program

Saturday, February 1, 2003

SILVER SPRING, Md. - With an eye towards curbing members’ skyrocketing insurance costs, the National Burglar & Fire Alarm Association (NBFAA) is gathering data to launch its own insurance program in what could become one of its biggest member benefits.

The NBFAA has contracted with insurance broker Marsh Advantage America to pursue developing a risk retention group (RRG). The RRG would work like an insurance company, with the ability to issue policies and to do its own underwriting.

Marsh’s Tom Perry, who is working with the NBFAA, said besides stabilizing costs, the RRG offers many advantages.

“We’re looking for (the RRG to offer)…a stable program that will not be affected by the economy,” he said. “The second thing along with that is cost. We hope that this program will be price sensitive.”

According to Perry, the RRG will also grant the NBFAA to design coverages for members that are not currently offered on the market.

Currently, the NBFAA and Marsh are gathering loss history data from NBFAA members. Once the data is collected, an actuary will use it to help form the RRG and determine its underwriting rates.

According to NBFAA President Cecil Hogan, the aim of the RRG is to ensure affordable general liability coverage for NBFAA members.

“The biggest thing it’s going to do is give (members) a reliable, reasonably-priced ongoing source for the insurance that we all are desperate for, and yet over the years we’ve seen a very volatile product,” said Hogan.

Merlin Guilbeau, NBFAA executive director, said the program was conceived after the NBFAA saw its members’ having difficulty getting insurance because of rising costs and in some cases, non-renewal by their carriers.

“We’re seeing right now that insurance rates are at the very minimum going up by 20 to 30 percent if not 200 percent at renewal times,” Guilbeau said. “We’ve already seen a couple of large insurance companies decide they no longer want to insure the alarm industry next year. So, not only are people having a hard time getting decent rates, they’re just getting non-renewed.”

David Mandel, NBFAA marketing and membership director, stressed that it is vital for members to provide the necessary information to maximize the effectiveness of the RRG.

According to Mandel, the association has received approximately 125 completed surveys from its 2,500 member companies.

“We still need data,” Mandel said, stressing that all data submitted will be kept strictly confidential. “Although we are well along in the process, we really need people’s help… the association can really help solve this problem (by forming the RRG).”

The news of potential insurance relief cannot come soon enough for some dealers. NBFAA member Tony Smith, owner of Security Finance Associates in Pasadena, Calif., said that he has seen his insurance costs go up, as insurance companies raise rates to cover losses incurred across the board.

“There’s significant increases that are being passed out to the industry right now that have no relation to loss history,” he said.

While coverage is still available, Smith said it is beginning to get prohibitively expensive.

“You can get the coverage, but do you want to pay the price?” Smith said. “Generally speaking, in this industry we have no choice but to pay the price, but it’s getting pretty expensive.”

Smith is not alone in dealing with skyrocketing insurance costs. Looking at dealers in the same situation, Hogan said the RRG is a necessity.

“All of our members have got to have this product,” he said. “All of us as businessmen recognize that there are two things here; number one, we want to get the best price, but also we want to get a product that’s going to be there from now on.”

Mandel said he does not yet have a firm date when the RRG will be finalized. “It is dependant on the survey information coming back,” he said, adding that he hopes to update NBFAA members on the development of the program at the NBFAA spring conference in Las Vegas in March.

Both Hogan and Guilbeau are adamant in their support for the RRG.

“If I had my way, it would be available tomorrow,” said Hogan. “NBFAA has been working toward this literally for the last 20 years, toward having some sort of insurance group we could have control over.”

“This is a huge step for the industry,” said Guilbeau.