DBA Insurance - Ask for a Rate DECREASE
I continue to be surprised to find many companies that have Defense Base Act (DBA) Insurance with the same rate they had 3, 5, or even 7 years ago. One would think that after such a long time, someone, somewhere, would have requested a lower rate, right? Oftentimes, NO.
DBA Insurance is required for all contracts with the US Government performing operations overseas. That being said, if a government contractor has multiple contracts in multiple countries, the renewal is likely automatic with little to no attention being paid to the rate being charged. In this post, I explore the 2 most common reasons why this rate goes unchecked and what you, the savvy GOVCON Insurance buyer can do to prevent unnecessary premium costs.
TWO REASONS YOUR DBA INSURANCE RATE HASN’T CHANGED OVER THE PAST FEW YEARS
1. Your insurance broker has not mentioned it.
DBA Insurance generally pays a higher commission than domestic workers compensation. DBA Insurance commission is 10%, versus workers’ compensation which is routinely 8% of the total premium, resulting in a nice amount of revenue for little if any additional work on behalf of the insurance broker. Translation…The higher the premium, the higher the commission. Ask your insurance broker for additional options and a lower rate when considering your next Defense Base Act insurance renewal. Request an alternate quote from a competing insurance carrier in search of a lower rate. Even if the rate is decreased by as little as .50 / $100 in payroll, that could mean a big savings over a large amount of payroll. Furthermore, the decrease in premium results in a bump in overall contract profitability.
If your contract work has resulting in little to no claim activity, the resulting performance may afford a lower insurance rate. In some cases, the DBA insurance has remained in place for years without any competitive consideration. The premium level is a direct correlation between payroll and the rate. If you haven’t sought out an alternative quote option for DBA insurance for the past 3 years, you should. Market flexibility continues to develop within DBA insurance programs not to mention overall competition. Ask, no demand, a rate decrease and see if you can save on your next renewal.
2. You forgot about it because it isn’t part of your annual commercial insurance program renewal.
A typical commercial insurance renewal that includes General Liability, Property, Workers’ Compensation, Automobile Liability, etc. falls on a date that differs from the Defense Base Act renewal. This is due to a contract award that was not aligned with the commercial insurance program, but required insurance to be placed on a different date. As a result, your corporate insurance program renewal may not include your DBA insurance putting it on the back burner with little or no attention being paid.
Since negotiation is routinely associated with the larger, commercial insurance renewal, the DBA insurance may be renewed “as-is”. When this happens, the rate stays the same and is overlooked until next year or the year after. To prevent this from happening, you can do two things…
First, align all dates to coincide with the same renewal date. This will put an equal spotlight on the DBA insurance as well as the renewing commercial coverages. With more awareness, the rate can be identified and reviewed.
Second, actively pursue options for lower rates at each DBA insurance renewal by speaking with your insurance professional. When the renewal is within 90 days, your insurance professional will reach out with an application to be complete. When this happens mention the need for alternative quotes to ensure premium pricing accuracy based on market conditions and strong claims experience.
Remember, it’s your money. By keeping track of premium reduction opportunities, you can add more to the contract profitability and overall performance of your risk program.