What Happens in a Business Insurance Review, Step by Step

A business insurance review has seven steps, from an intake call to remarketing if the findings call for it. For a small company it often takes a few weeks, and the pace depends mostly on how fast documents arrive. At each step you hand over specific information and should get something specific back. This guide is for new owners who have decided to get a review and want to know exactly what they are signing up for.

What are the steps in a business insurance review?

If you have not yet read what a review is and when you need one, start with what a business insurance review is. This article is the process from the owner's side of the table. The table below is the map; the sections after it explain each step.

What happens on the intake call?

The intake call is short, but it shapes everything after it. A good reviewer will ask:

• How was the deal structured? A stock (or membership interest) purchase usually keeps the same legal entity and its policies. Change in control provisions and reporting duties in those policies can still apply. An asset purchase usually means a new company that needs its own policies. See keep the seller's insurance or start over.
• Which entities exist now? The operating company, any holding company, trade names, and any real estate entity.
• Did any claims-made policies end or change at closing? Directors and officers, employment practices, professional and cyber policies can have short deadlines to buy a tail (an extended reporting period) or give notice of the change in ownership. These go first.
• What did your lender and investors require? If you used a Small Business Administration (SBA) loan, the loan documents usually set insurance requirements. See SBA lender insurance requirements.
• When does each policy renew? Renewal dates set the window for any remarketing.
• Are there open claims or known incidents? Anything that happened before or since closing.
• What is changing? New services, states, hires, vehicles or an add-on acquisition on the horizon.

To prepare, write a one-page deal summary: entities, closing date, deal type, lender, key customers, and the top three things you are worried about. It saves time and helps the reviewer focus on what matters to you. If you have not yet decided who should run the review (you, your current broker or a second opinion), see doing it yourself vs a broker review vs a second opinion.

What documents do you send, and what does the reviewer check?

Document collection is usually the slowest step. The complete checklist, with where to find each item, is in what documents you need for an insurance review. Once the documents arrive, the policy analysis begins. For each policy the reviewer typically checks:

1. Who is insured. Does the named insured match the entities you own now, or does it still show the seller's company?
2. When and where. Policy dates, listed locations, states and scheduled vehicles.
3. How much. Limits and deductibles compared with contract and lender requirements.
4. What the forms and endorsements change. The declarations page is a summary; endorsements can add or remove coverage. See declarations page vs full policy.
5. What the premium is based on. Payroll, revenue, class codes and property values compared with your real figures.
6. What the claims history shows. Open claims, reserves and patterns in the loss runs.

If you want to follow along, learn how to read a declarations page first. It makes the findings much easier to follow.

Why does the reviewer need to walk through the business?

Policies describe the business the underwriter was told about, often by the seller years ago. The exposure walk-through finds where reality has moved on. Expect questions like these:

• What work do your crews or staff actually do, and has anything been added since the policies were written?
• Do you use subcontractors or 1099 workers, and do you collect their certificates?
• Who drives company vehicles, and do employees ever use their own cars for work?
• Do you hold customer property, data or money?
• Which customer contracts or leases have insurance clauses?
• What would it cost to rebuild or replace your building, equipment and inventory today?
• How dependent is revenue on one location, one supplier or one customer?

This is where reviews tend to catch the important items: work the policy does not describe, payroll in the wrong class code, vehicles missing from the schedule, and contracts that require coverage nobody bought. Replacement values matter too: many property forms include a coinsurance clause that can reduce a claim payment if limits are set too low. A site visit helps for property-heavy or field-service businesses, but a structured call often works.

What should the findings and recommendations look like?

The findings should be ranked, not just listed. A useful way to sort them is into three groups: fix now (a real gap, or coverage that appears to fall short of a contract or lender requirement), fix at renewal (a pricing or structure issue), and monitor. The cost picture should show premium by policy, what each premium is rated on versus your real numbers, and any audit exposure building up.

Recommendations then turn each finding into an action with an owner and a date. Some fixes happen by endorsement on the current policy. Others need a new policy or a full remarket.

A hypothetical example. A buyer closes an asset purchase of a $4 million revenue commercial plumbing contractor. On the intake call she flags a lender deadline 30 days out. Document collection takes two weeks because the seller's loss runs need the seller's signed authorization. The analysis of the policies she bound at closing finds three problems:

• The workers' compensation policy lists only the home state, though two technicians now work across the state line most weeks.
• The equipment policy does not show the lender with the lender's loss payable clause the loan agreement requires.
• The property limit was set from the purchase price allocation, not a replacement cost estimate.

Recommendations: ask the carrier to add the second state and the lender's clause now, get a replacement cost estimate this month, and remarket the full program 90 days before renewal. She sends her board a one-page summary sorted into fix now, fix at renewal and monitor.

What happens after the recommendations?

You decide what to act on. Then the work splits two ways:

• Mid-term fixes. Your broker asks the carrier for endorsements: correcting the named insured, adding locations or vehicles, adding additional insured wording a contract requires. The change counts only once the carrier agrees and issues the endorsement, so ask for written confirmation.
• Remarketing. If the program needs a different structure or the price looks out of line, your broker prepares a submission and approaches carriers. Carriers generally work with only one broker on an account. If more than one broker is involved, agree who approaches which carriers before any submission goes out. Moving the account to a new broker uses a broker of record letter. Carriers decide whether to quote and on what terms. See how to remarket an inherited insurance program.

After anything is bound, three follow-ups are easy to forget: send updated certificates to customers and landlords who need them, send evidence of coverage to your lender, and set a calendar reminder for the next review.

How long does a review take, and what slows it down?

For a small company with documents in hand, the analysis can often be done in days to a couple of weeks. The common delays are outside the reviewer's control:

• Missing documents. Brokers sometimes hold only declarations pages, not the full policies with endorsements.
• Loss runs in an asset deal. The seller's policies stay in the seller's name, so the carrier may release loss runs only with the seller's authorization.
• Business data. Payroll by job type and state, and accurate vehicle and equipment lists, often take the longest to pull together.
• Carrier response times. Endorsements and quotes depend on underwriters' queues.

Two habits speed things up: name one person on your team who owns the document list, and answer follow-up questions in writing so nothing is lost.

A business insurance review covers commercial property and casualty policies. Group health benefits, key person life and disability coverage are best reviewed with a benefits advisor or life insurance specialist, and tax or legal questions with your accountant or attorney. Morrow can run this process for policies you inherited, flag gaps and request quotes where it makes sense; any new terms depend on carrier underwriting.

Keep reading

• What Is a Business Insurance Review and When Do You Need One?
• What Documents Do I Need for an Insurance Review?
• How to Read a Declarations Page in 10 Minutes
• Do-It-Yourself, Broker or Second Opinion: Who Should Review Your Insurance?
• How to Remarket an Inherited Insurance Program After an Acquisition
• All guides for new business owners

Frequently asked questions

How long does a business insurance review take?

For a small company it often takes a few weeks from the intake call to a written action plan. Most of that time is spent collecting documents. Remarketing, if needed, adds time because carriers need to underwrite the account.

Who from my team should take part in the review?

Usually you, one person who owns the document list (often a controller or office manager), and an operations lead for the walk-through, because they know what crews actually do, which vehicles run and who uses subcontractors. Bring in deal counsel only for purchase agreement questions the reviewer flags.

What if I cannot find all the documents?

Start with what you have. Declarations pages and loss runs are the priority. A reviewer can request missing items from the carriers or the seller's broker, though in an asset deal the seller's signed authorization may be needed.

How much of my own time does a review take?

Usually an hour or so for the intake call, time to gather or authorize documents, a walk-through call with you or an operations lead, and a meeting to go through the findings. The rest is the reviewer's work, though quick written answers to follow-up questions keep it moving.

When does a recommended change actually take effect?

Only when the carrier issues the endorsement or binds the new policy. Ask your broker for written confirmation and the effective date for each change.

References

• Insurance Services Office: Building and Personal Property Coverage Form CP 00 10 04 02 (carrier-hosted copy)

This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.