Thread: OREP

Does anybod use OREP for their E&O insurance and General Liability??
There rates are substanitally lower than that of FREA for claims made policy which I and I know many of you use for E&O.
I spend about $3900 for E&O and GL - $1million coverage through FREA. OREP I beleive is around half that for $1million claims made E&O policy.
Again, do any of you use OREP?? Have you switched over from FREA or any other company??? What do you pay for $1MILLION coverage??? Opinions on this subject???

I would sure love to save some $$$ on my insurance as I know all of you would.

THanks

Similar Threads:

• Anyone jumping to OREP for E&O?

Martin - Maybe I'm missing something, but at Home Inspectors Insurance Home Inspector Insurance I see $ 3,300 for $ 1 million coverage, which is essentially the same as FREA, if not more. FREA's deductible is $ 1,000. I don't see OREP's.

Martin,

What kind of homes are you inspecting? In my area most upper end homes are in the 250,000-400,000 range.

Even on a home that is selling for over $1M, it would take a HUGE error on your part to equal a $1M repair. Remember that the more insurance you have, the more that you will be sued for when problems arise.

I have 250,000/250,000 through Capital Special Risks and it costs me $2358/year. Additional inspectors fur multi-inspector firms can be added for around 1,000/year instead of the full fee. This includes 250,000 GL, radon and WDO coverage. They have higher coverages and less coverages, but this is what suits my needs tighr now.

Note: Although I do have the E&O, I try not to tell the clients/realtors. The more that they know, the more likely you will be sued.

Jon R,

Remember your limits typically cover the cost for Defense as well. You don't have to be inspecting $500,000 houses to carry $500,000 in limits. Most claims never come close to policy limits in size, but when they do hit, and they do, you'll be glad that you carried more than the minimum.

at $400 an hour a lawyer can eat your limits pretty fast.

Kevin is correct, the majority of your E&O will be consumed by defense costs, not so much settlement damages.

OREP's premiums are not that much less than FREA's, keep in mind the taxes and other fees that will be added to your cost. Not too mention that FREA has a $1,000 deductible. Further, OREP is a Lloyd's policy, not "Admitted." And not even US based.

We JUST rolled out a new program for our tail policy. As many know, we offer a Claims Made policy and I'm sure you know what that means: the policy has to be in force at the time the claim is made. Once you terminate it, you lose coverage for all inspections unless you purchase a tail. Previously, we offered a tail policy for 75% of the last years membership fees. For one year. We are now offereing 4 years tail coverage for the same 75%. Incidentally, you can get a 1 year tail for 35% of the premium. This is HUGE!

David,

Given the recent postings on other BB's regarding disparaging remarks by your competition, I will give your company close consideration when E&O becomes mandatory (which it looks like it will).

Thanks, for posting with your information... It certainly appears the ability to cover all inspectors in the firm is a big feather in your hat. This will allow some of the new guys to stay in business by going to work for some of the more established companies that can afford E&O.

I for one would welcome the additions.

Richard

Forgive me if you think I am knocking OREP. I’m not trying to. I’m just being informative. OREP offers retro to newcomers just as FREA does free of charge. FREA also has no hidden surplus lines fees. As far as our carrier goes, AIG is actually the largest carrier in the world. Lloyds is not even a carrier. They are a collection of syndicated underwriters. When you get out of the business you will have to pay 75% of your previous years premium for only one year of coverage with OREP I believe. FREA offers you 4 years for the same price. Also, FREA doesn’t drop members after one claim. We remain very loyal to our members. Just be careful about who you go with. Read the small print.

I think that you can't go wrong with E&O if you use any of the following. I might agree with their internal workings, but it boils down to marketing and selling more coverage.

BRP.... Business Risk Partners ....... Lloyds
Allen Insuranc e........... Lloyds
Target ...... Lloyds I think
Lexington .......... AIG
State Farm Insuranc e (not all locations) State Farm
FREA ......... AIG
OREP .......... AIG ?

Also check with local insurance agents. You might be surprised at what they can do for you.

As for tail coverage when you close up shop, IMO you don't need it. In the EW work that I have been doing for the past eight years I have yet to see a home inspector named in a lawsuit after they have closed their doors. Can it happen, yes it can but it is just not very likely. If you ask for stats on claims, you will never see them. For some reason they just can't provide them.

FREA -- AIG
Allen -- Liberty for their Occurrence. Lexington (AIG) for their Claims Made
Target -- LLoyds (I believe)
BRP -- Lloyds (I believe)
OREP -- Lloyds

Originally Posted by Ben Garrison

Kevin is correct, the majority of your E&O will be consumed by defense costs, not so much settlement damages.

OREP's premiums are not that much less than FREA's, keep in mind the taxes and other fees that will be added to your cost. Not too mention that FREA has a $1,000 deductible. Further, OREP is a Lloyd's policy, not "Admitted." And not even US based.

We JUST rolled out a new program for our tail policy. As many know, we offer a Claims Made policy and I'm sure you know what that means: the policy has to be in force at the time the claim is made. Once you terminate it, you lose coverage for all inspections unless you purchase a tail. Previously, we offered a tail policy for 75% of the last years membership fees. For one year. We are now offereing 4 years tail coverage for the same 75%. Incidentally, you can get a 1 year tail for 35% of the premium. This is HUGE!

Ben... Is it still true, if an inspector pays Gromicko 375.00 to become a CMI by simply claiming he met Gromickos non verified CMI requirements, the $1000 deductible is waved?

Dan, Shirley you gest...

Rich

Originally Posted by Dan Harris

Ben... Is it still true, if an inspector pays Gromicko 375.00 to become a CMI by simply claiming he met Gromickos non verified CMI requirements, the $1000 deductible is waved?

That is one of the reasons that many experienced inspectors are now shopping around for a new E&O provider.

I guess no good deed goes unpunished, huh?

Yes, there is a ZERO deductible for those who obtain the CMI designation. The major criteria for obtaining the designation is at least 1000 inspections and/or 1000 CE hours. Or a combinanation of both. So it's not as if you cut a check to Nick and all of a sudden you're a CMI. In fact, the CMI program is non-denomonational, open to anyone. Not specific to NACHI in any way, shape, or form.

I believe that Nick even turned the program over to Scott Emerson in Texas.

Originally Posted by Ben Garrison

I guess no good deed goes unpunished, huh?

Yes, there is a ZERO deductible for those who obtain the CMI designation. The major criteria for obtaining the designation is at least 1000 inspections and/or 1000 CE hours. Or a combinanation of both. So it's not as if you cut a check to Nick and all of a sudden you're a CMI. In fact, the CMI program is non-denomonational, open to anyone. Not specific to NACHI in any way, shape, or form.

I believe that Nick even turned the program over to Scott Emerson in Texas.

Interesting... So the fact still remains.. An experienced inspector that exceeds, and can provide documenation, the 1000, CE or inspection qualificiations still must pay, somebody 375.00, in addition to your E&O policy fees, for this prestigious/ marketing tool [ Per Nick], to qualify for this good deed provided by your company?

Ben - I just renewed with FREA. If this CMI/no deductible deal is open to anyone, why didn't I see anything about it in my renewal package?

Quote from Ben: "Yes, there is a ZERO deductible for those who obtain the CMI designation. The major criteria for obtaining the designation is at least 1000 inspections and/or 1000 CE hours. Or a combinanation of both."
___________________

How the hell can that be where a company would offer zero deductable to someone who MAY have only conducted 10 inspections (or zero) and still qualify by attending classes for 990 or 1000 CE hrs.--- that's just a goofy policy. There should be a hard and fast number (say 1000), plus a mandatory number of CE hrs to go along with that.

Why does FREA not offer this discount direct to folks who can prove the same qualifications without paying someone $375.00 to join their club. That just smells bad. Looks bad. Is bad.

Rich

Ins cos are businesses and this is a marketing tool that works or they wouldn't use it.

I wish I had the ability to transfer your anger and apparent energy from this non issue onto helping the public understand how badly we have been screwed by one self serving representative and that the whole concept of E7O is misrepresented to the consumer. Oh well, I'm charisma challenged. No-body's perfect.

Why does FREA not offer this discount direct to folks who can prove the same qualifications without paying someone $375.00 to join their club. That just smells bad. Looks bad. Is bad.

Where's Jerry P when we need him ?

The very last thing I want is to be in a pool with a group of people who feel the need to market their services with that deceptive CMI scam.

With 20+ years construction experience, 10+ years inspection experience, and thousands of inspections without a significant complaint, I need to stay far away from people who pretend to be experienced inspectors, and the companies that do business with them. I encourage all experienced inspectors to do likewise.

RT

Originally Posted by Ben Garrison

I guess no good deed goes unpunished, huh?

Yes, there is a ZERO deductible for those who obtain the CMI designation. The major criteria for obtaining the designation is at least 1000 inspections and/or 1000 CE hours. Or a combinanation of both. So it's not as if you cut a check to Nick and all of a sudden you're a CMI. In fact, the CMI program is non-denomonational, open to anyone. Not specific to NACHI in any way, shape, or form.

I believe that Nick even turned the program over to Scott Emerson in Texas.

Originally Posted by Ben Garrison

I guess no good deed goes unpunished, huh?

"Good deed"?

A "good deed" would be to recognize all experienced inspectors who have been: 1) in the business 5 years or longer, AND, 2) 200 CEU hours - that's 40 per year for that 5 years - that's twice what most associations require, AND, 3) are duly licensed where required to be licensed.

That's three very good *AND* points to use for that ZERO DEDUCTIBLE - forget and special fake or fraudulent certification which may be obtained for a few bucks.

Ben, as Thom stated, you represent a business, why not admit that this is a marketing ploy and that it has (apparently, you are still defending it) worked very well.

I would not be surprised to find out that Nick bought FREA, Nick is, after all, excellent at marketing.

He tried to buy me into having a 'Ask Jerry' section on the NAXHI forum. He compared the NAXHI forum and inspectionnews.com as being 'one's a high school play and one is a prime time show'. I thanked him for offering me the part in the high school play (with pay, whatever that meant), then said I'd rather stay a volunteer with the prime time show.

Ummmm ... maybe I should reconsider" Maybe Nick will buy me one of those $1.3 mil Prevost motor homes? Heck, I'll even let him paint 'NAXHI's ASK JERRY mobile continuing education program' on the back of it. That way, he gets to write it off as a "business expense".

Dang, I should have thought of that week before last when I replied to him. Oh well, guess that chance is gone now.

Hey Nick ... if you put one of those in my driveway, we can start talks on what is on your mind!

Jerry, your next communication from Nick will be "What color?"

Frack! ... for one of those $1.3 mil Prevost motor homes, I'd led him personally paint that on my undercarriage...

Jerry you whore.



Rich

I always heard people could be bought for the right price, now we know Richards and Jerrys price ...

Originally Posted by Dan Harris

I always heard people could be bought for the right price, now we know Richards and Jerrys price ...

Dan,

Got to learn to read better.

THIS is what I said (I've added bold here): "Hey Nick ... if you put one of those in my driveway, we can start talks on what is on your mind!"

That's just the ante to get in the game!



We all know (supposedly anyway) that Nicko could drop one in my driveway next week, but I went through a bunch of 'promises' and 'yep, I want you to help improve NAXHI' unfulfilled bravado statements from Nick that - THIS TIME - Nicko is going to have to pony up the ante to get in on the dealin'.

Yeah, right, like he follows through with what he says.

Nick ... substance ... show that there is some substance in what you say.

Sorry about that Jerry.. I caught Richards " bottom side" comment, missed yours.
Now if the price for an " un-named" E@O Ins company, [that I and many others , that choose to be a non cmi, pay $300 plus monthly for membership ] was only disclosed, I would be a happier camper.

Further, OREP is a Lloyd's policy, not "Admitted." And not even US based.

Ben... What does..... not "Admitted" Mean??
I am considering going with this company, opposed to supporting or paying 375.00 to quailfiy for the bogus CMI title, that your company promotes and supports, after reading this I'm interpeting it as, OREP - Lloyd's, are not "Admitted" and not US based .. does this mean they may not be legit?
I /my customer may have a problem collecting from them if I have a claim?
they cannot legally sell me insurance?
Is any or all of this what your saying???

Jon,


Martin is in the San Diego area. 250,000 would probably buy a trailer. 400,000 might buy a decent condo. Homes probably start at 600,000 and something nice would be 1.5 mil. Remember: Location, location, location.

I'm up for renewal next month and considering OREP as an alternative to FREA. After calculating the differences @ $300,000 coverage, as far as I can see OREP beats FREA by about $300. However the deductable is $2500 as opposed to FREA @ $1000.
Nothing that makes me really consider wanting to switch over.

I agree that paying to get the CMI designation for a break on the deductable is a little dishartening, especially since I got absolutely no word about it when my renewal arrived.

I still havent made a decision yet...

It's tough being a new inspector trying to pay this amount for coverage, especially when work is slow. Still I don't think either offer a pay per inspection coverage...

Jon,

The average 1500sqft, 3bed, 2 bath detached home goes for about $400,000-$600,000, depending on what part of town it is in.

The cost of living here is quite high. But still the average "home inspector" charges about $300-$350 to "inspect" a 2000sqft home. That is about what the price is throughout most of the country, and it has stayed the same for decades...

A non-admitted carrier is not licensed by the state although they are allowed to conduct business there. They are ususally not protected by the state guarantee fund and there might be additional taxes that you're paying as agent or broker must have a surplus lines license.

Originally Posted by Ben Garrison

In fact, the CMI program is non-denomonational, open to anyone. Not specific to NACHI in any way, shape, or form.

Ben - I recently renewed with FREA. I didn't see anything about this in my renewal packet.

Each state has a guaranteed fund in case Lloyd's or a non-admitted company goes bankrupt......if this happened that is why each state has to charge a tax/fee if they aren't admitted.

To the consumer this really does not make all that much of a difference.

That tax/fee that is in the small print can make the rates less competitive as they appear. If you can save $300 by moving to another carrier while increasing your deductible, it doesn't really save you THAT much. Not to mention that your insurance is a tax write off anyway.

Now, if you're going to save about $900 a year on insurance and the strength of the policy/carrier is not terribly important to you, then make the move.

Originally Posted by Ben Garrison

Forgive me if you think I am knocking OREP. I’m not trying to. I’m just being informative. OREP offers retro to newcomers just as FREA does free of charge. FREA also has no hidden surplus lines fees. As far as our carrier goes, AIG is actually the largest carrier in the world. Lloyds is not even a carrier. They are a collection of syndicated underwriters. When you get out of the business you will have to pay 75% of your previous years premium for only one year of coverage with OREP I believe. FREA offers you 4 years for the same price. Also, FREA doesn’t drop members after one claim. We remain very loyal to our members. Just be careful about who you go with. Read the small print.

Ben... As per your suggestion, as a FREA member for the past 3 yrs, I am being very careful about who I go with, I am in the process of doing my home work, and have a couple more questions..

Can you give an example of another E@O company that dropped an insured after one claim?

In addition to reading the fine print, I am also reading the large print....
.
How do you define "We remain very loyal to our members"?
when you give added benifits only to select FREA members, that are willing to pay for a non verified title, not to mention this title could be obtained soley by attending 1000 hrs of gromicko's marketing seminars or by taking his online quizes....

I'm not going to bash my competition by giving specific examples. But I can tell you that it happens. There are carriers who have ZERO tolerance for any claims whereas FREA recognizes that many claims have no merit and are totally frivilous. And we don't cancel members on that basis.

I encourage people to shop their insurance around, it's part of running a business. I do it all the time with my auto insurance and sometimes I check out what term life insurance carriers are doing as well. If you can recognize substantial savings while still getting a quality product, then by all means make the necessary changes.

Originally Posted by John Arnold

Ben - I recently renewed with FREA. I didn't see anything about this in my renewal packet.

John Arnold,
Did you ever get a response to your statement???

Rich

I just got a quote from BRP (Business Risk Partners). I went with a $5,000 deductible on 500,000/1,000,000 coverage. It also includes General Liability in the same amount, Corporate Coverage and Radon testing coverage. The total for the whole shebang is $2480, this includes a $110 fee/tax.

This quote is for me and it might be different for you depend on your history and that state that you live in.

I'm fairly happy with this quote and it is the best that I have seen as it covers everything including my GL & Radon. Still shopping so we shall see.

This is the ASHI E&O preferred vendor, so if you are an ASHI member you get a discounted rate.

Originally Posted by Richard Rushing

John Arnold,
Did you ever get a response to your statement???

Rich

Rich:

This program is a pilot program and we are still trying to work out the details. The initial press this program got was based on a CMI course being developed by a committee headed up by Michael Rowan. We are still awaiting the latest details of what the CMI designation will entail.

Ben

Originally Posted by Ben Garrison

Rich:

This program is a pilot program and we are still trying to work out the details. The initial press this program got was based on a CMI course being developed by a committee headed up by Michael Rowan. We are still awaiting the latest details of what the CMI designation will entail.

Ben

In the mean time, though ...

Anyone with $350 and the CMI behind their name gets a 'Get Out of Jail Free' card.

Ben, it's been, what, about a year? And all based on (using your words here) "this program got was based on a CMI course being developed by a committee headed up by Michael Rowan".

One would think that the E&O program would be developed and promoted such that it was EFFECTIVE UPON COMPLETION OF THE COURSE the E&O program was based on, for those HIs who COMPLETED and PASSED that CMI course.

Instead of 'Hey, you guys say you are going to do this? Great! Here's a big freebie for you in the meantime, no catch, no questions asked, free for the taking.'

Originally Posted by Ben Garrison

I'm not going to bash my competition by giving specific examples. But I can tell you that it happens. There are carriers who have ZERO tolerance for any claims whereas FREA recognizes that many claims have no merit and are totally frivilous. And we don't cancel members on that basis.

I encourage people to shop their insurance around, it's part of running a business. I do it all the time with my auto insurance and sometimes I check out what term life insurance carriers are doing as well. If you can recognize substantial savings while still getting a quality product, then by all means make the necessary changes.

Ben.. Thanks for your replys.. Some of them reminded me of Gromickos 1/2 or unanswered questions, when the ? was difficult to defend your position, or comment "We remain very loyal to our members" was not answered.
[ Oh well since ole Nickey came on the HI radar we all have seen a lot of that lately ]

As far as shopping, if a company provides me good service, [honestly, cost is secondary to me] I do not think about looking / shopping else where.
When a company I'm doing business with favors some one over me [ with equal or more experience] simply due to the fact that the other person is willing to pay an individual for a bogus title to qualify for a discount, I'm going ah shopping..

Hello everyone - this is David Brauner at OREP. Beware of insurance agents who bash other programs/carriers without facts- enough said I hope.

Check us out and compare is all I can say. Compare coverage, compare price and compare service. Lloyds is solid and the US underwriter who backs this particular program is one of the largest.

Thanks.

By the way - Scott Patterson has this exactly right and he's not even an insurance agent:

"Each state has a guaranteed fund in case Lloyd's or a non-admitted company goes bankrupt......if this happened that is why each state has to charge a tax/fee if they aren't admitted."

To the consumer this really does not make all that much of a difference."

Thanks again,
David

Scott Patterson is completely and totally WRONG.
Now, I don't know Scott and I have enjoyed reading his posts, he is very well respected in the HI community, but he has made an error and it is very important to correct this error. He can be excused because he is not an insurance professional.

"By the way - Scott Patterson has this exactly right and he's not even an insurance agent:
Now, the fact that David (from OREP) confirmed that he was right is scary.

Here is a quote from the insurance guidelines from the Surplus Lines Association.
"Surplus lines insurance companies are specifically prohibited by law from participating in the guaranty association."

Now putting the record straight about some other posts about insurance.

The taxes and fees are used to pay for the administration cost of "regulating" non-admitted business. Admitted business is funded through your particular states taxes (income and sales). The laws and regulations of your state prohibit them from paying for regulation of non-admitted business, therefore they have to tax your policy to pay for the admin. It's really a crazy way of doing it, but that's the way it works.

Quote from Ben Garrison (in regards to the surplus lines taxes)
"That tax/fee that is in the small print can make the rates less competitive as they appear."
By law the surplus lines tax and fee disclosure must be in the same font and size as all other premium and broker fee disclosures on an invoice. It may not happen all the time, but it should.

Admitted company premiums and coverage are "Guaranteed." The Guaranteed fund is paid into by the all admitted carriers. They are required to do this by law. When a carrier goes insolvent the IGA will step in to respond to claims. They may not pay for an entire claim either, but they will pay something.

Originally Posted by Kevin Healy

Scott Patterson is completely and totally WRONG.
Now, I don't know Scott and I have enjoyed reading his posts, he is very well respected in the HI community, but he has made an error and it is very important to correct this error. He can be excused because he is not an insurance professional.

"By the way - Scott Patterson has this exactly right and he's not even an insurance agent:
Now, the fact that David (from OREP) confirmed that he was right is scary.

Here is a quote from the insurance guidelines from the Surplus Lines Association.
"Surplus lines insurance companies are specifically prohibited by law from participating in the guaranty association."

Actually that information came from my states insurance commissioner. I simply called her office and asked about it. I would think that the office that is in charge of insurance for the state of TN might kind know about this. But, hey I could be totally wrong.

Kevin, I'm curious? What type of work do you do?? You have nothing listed under your profile.

I apologize to anyone that I may have offended, especially Scott who I know is well respected and a good Home Inpsector. He contributes often to this BB and should be commended for helping this community.

It's tough enough these days getting straight answers on the internet, I just want to make sure that when you're coming to this community BB you get the straight scoop.

Kevin Healy

Originally Posted by Kevin Healy

I apologize to anyone that I may have offended, especially Scott who I know is well respected and a good Home Inpsector. He contributes often to this BB and should be commended for helping this community.

It's tough enough these days getting straight answers on the internet, I just want to make sure that when you're coming to this community BB you get the straight scoop.

Kevin Healy

Kevin, No apology is needed or even required. Heck, I'm wrong when I say good morning half the time to my 11 year old son! Come to think about I was wrong all of the time when I said anything to his 27 year old sister! Yes, you do the math!

Kevin, please fill in the profile so we know a little more about you.

Scott,

I work in insurance I am licensed in CA, I operate in 10 western states.
I called our Surplus Lines Assocation in CA to confirm my suspisions about your post and was told that it was "flat out wrong". I also called a few other states reps they confirmed it. I did not call TN. I will double check your state.

I actually reread my post and thought it came off a little harsh, again I apologize. Like you guys in HI, somebody makes a mistake and it gives you all a bad name. or the media misrepresents your industry it and it makes your life more difficult. I feel the same way about insurance (it's what I do) .

Kevin

This is David Brauner with OREP. I agree the verbiage is ominous – certain states require that type of form to be signed. The bottom line is that these companies ARE allowed legally to do business in your state. Most every carrier that writes inspector insurance is surplus lines (all but one). Many of them – the names you know best - have been servicing this profession for a decade or more. Do you think they (or we) could do that if it was illegal?

Here is a link to an explanation on the website of the Surplus Lines Association of Illinois. I’m also pasting it below in its entirety in case the link doesn’t work. Surplus Line Association of Illinois .

Please read it all the way through if you have any doubts about SL insurance.

It is the first explanation I found by Googling. I'm sure there are many others. Please do your own research and get the facts.

What is surplus line insurance?
In order to understand what surplus line insurance is, it is helpful first to understand a few things about the insurance marketplace and to understand what surplus line insurance is not.

The first player in the marketplace we'll discuss is the insurance company, sometimes referred to as an insurance carrier or insurer. The insurer is the company that actually writes the policy and accepts the risk that something will happen. They collect your premiums and those of other insureds and invest them. If a claim is made, they pay the claim from this pool of collected premiums.

Insurers are licensed on a state by state basis in the United States. Generally, an insurer must get a license in any state where it wants to write policies. Each state has a Division of Insurance (or similar regulatory body) that regulates these insurers. The regulation takes many forms and varies from state to state, but it can basically be divided into two general areas.

First, the regulators monitor the finances and market conduct of the insurers to see that they are financially sound and using fair and honest business practices. Second, they regulate or approve the insurer's policy forms (the actual content of the policies) or the insurer's rates, or both. These insurers contribute to a state fund, called a guaranty fund, that is used to pay claims if any of these licensed insurers were to fail (go bankrupt).

The next player is the agent or broker (we'll collectively refer to them as producers). If you are an individual or company that needs insurance, the producer acts as the middleman between you and the insurer. The producer is also licensed and regulated by the state. When you tell the producer you need insurance, the producer must try to find you a policy from one of the insurers that is licensed to operate in your state. There are some cases, however, (generally less than 10% of policies nationwide) where the licensed insurers will not accept a risk because it does not meet their internally established guidelines. The risk may be too big, too unusual or substandard. In these cases, a specially licensed producer called a surplus line producer gets involved. Their special surplus line license allows them to procure a policy for you from an insurer that is not licensed in your state.

Since this insurer is not licensed in your state, they are not regulated by your state's Division of Insurance in the same way licensed insurers are regulated (they are, however, regulated in the state or country where they are domiciled or located). Since they are not strictly regulated by your state, they are generally free from the form or rate regulations imposed on licensed insurers. This gives them the freedom to maintain broader internal guidelines for accepting risks. They have more flexibility to design and price their policies and can, therefore, accept risks that licensed insurers will not.

In many states, including Illinois, the licensed surplus line producer is required to ascertain that the insurer meets certain financial standards before buying a policy from them. In many other states the Division of Insurance, or some other authority, monitors the financial condition of surplus line insurers and maintains a list of insurers that surplus line producers are allowed to use. Whether done by the surplus line producer, the state Division of Insurance, or some other entity, this financial monitoring is an important function because if the insurer were to fail (go bankrupt), there is no guaranty fund protection for you.

It is important to note that these insurers are generally not unable to obtain a license in your state, rather they choose to operate on an unlicensed, surplus line basis.

Scott,

Just got off the phone with Bob Ribe Chief Analyst (615) 741-1633 at the Surplus Lines Division in TN.

Insurance placed through a surplus lines carrier in TN do not have any Guaranteed Association that would meet your commitments from a claim if your carrier would become insolvent. Sorry.

Kevin

Of course- surplus lines is by defintion not part of a state's guarantee fund. These companies choose not to be a part of it.

The following is from NAPSLO (dot org) - the National Ass. of Professional Surplus Lines Offices.

It also is a good place to do your homework.

Please note the paragraph below that begins: Since 1994...
And also the final paragraph, which I will paste here as well:

Surplus lines companies are able to offer specialty insurance in large part because they are free of rate and form restrictions imposed on other insurance carriers. In this way, companies are able to react to changes in the market and design a policy that meets the needs of the insurer and the insured. While surplus lines companies may not be regulated as traditional carriers, that does not mean they are not regulated. Each company must be licensed (admitted) in one of the 50 states and must meet the solvency requirements of that state. As a result, the state of domicile becomes the regulator over that insurer
>>>

The National Association of Professional Surplus Lines Offices, Ltd. (NAPSLO) is a national trade association representing the surplus lines industry and the wholesale insurance marketing system.

Since it was founded in 1975, NAPSLO has become the authoritative voice of surplus lines. Acting as a source of information, NAPSLO spends a great deal of time identifying and explaining to regulatory, other segments of the insurance industry, the media and the public the vital role surplus lines plays in the insurance industry. (For more information, see History of NAPSLO)

The Role of the Surplus Lines Market
The surplus lines industry is important because it provides a market for insurance covering hard to place risks that are not written by the standard markets. There are three basic categories of surplus lines risks: Non-standard risks which have unusual underwriting characteristics; Unique risks which admitted carriers do not offer a filed policy form or rate; and Capacity risks where a client seeks a higher level of coverage. Examples of such risks include aviation, product liability, inland marine, earthquake, and professional liability.

Since 1994 the A.M Best Company has performed an annual survey of the excess and surplus lines market and has found that its solvency record is as good, if not better, than the overall industry.

NAPSLO's Involvement
The NAPSLO logo is inscribed with the Latin phrase "Uberrima Fides," which means "in the utmost good faith." This serves as a symbol of the professionalism, and purpose of the members and the association. Applicants must meet financial and conduct standards in order to join the association and NAPSLO members must follow a code of ethics in dealing with customers and companies. Dealing with a NAPSLO member ensures that you are dealing with a knowledgeable surplus lines broker or company.

Members are kept up to date by NAPSLO concerning changes in the industry. The association works with regulators regarding relevant legislation, provides educational opportunities and seminars, and offers other important services to its members and the industry. In doing so, NAPSLO and its members can provide additional value by knowing when new insurance products are needed and offering them to answer the needs of the ever changing social and insurance environment.

Meeting the Needs of Consumers
The surplus lines market plays an important role in providing insurance for hard to place risks. With the ability to accommodate a wide variety of risks, the surplus lines market acts as a compliment to the admitted market. Often called the "safety valve" of the insurance industry, surplus lines fills the need for coverage in the marketplace by insuring those risks that would otherwise not be protected.

Surplus lines companies are able to offer specialty insurance in large part because they are free of rate and form restrictions imposed on other insurance carriers. In this way, companies are able to react to changes in the market and design a policy that meets the needs of the insurer and the insured. While surplus lines companies may not be regulated as traditional carriers, that does not mean they are not regulated. Each company must be licensed (admitted) in one of the 50 states and must meet the solvency requirements of that state. As a result, the state of domicile becomes the regulator over that insurer

I have no basic knowledge of what would be your average acceptable risk E&O policy limits for various areas around our country, but I do know that through my years of experience providing home inspector litigation support in the San Francisco bay area that a million dollar E&O policy would be the absolute minimum a HI should consider carrying. The suits I've been involved with have risen in the last couple of years to an average of more than half a mill and are climbing. Bottom line; a million buck ain't what is used to be, that's for sure.

That CMI deal really does have an odor to it and I'd be very leery of anything related to that fellow who may park a 1.5 mill RV in East coast Jerry's driveway?

Wow this has been fun! Kind of like having a tooth filled with no anesthetic! In all reality, most if not the majority of all home inspectors could really care less about the insurance company that they are getting their coverage through. Most just want the best coverage with the lowest rate. Admitted or Not Admitted does not make the home inspectors phone ring. The infighting makes me not want to do business with anyone who talks bad about the compatition!

Kevin, I spoke with a Ms. Leslie Newman 615-741-2241. She is the Commissioner.


Honestly the various E&O providers are starting to sound like the Mold Testing Laboratories. They are all trying to install fear.

The CMI thing is very offensive to me and thousands of other multi-year experienced inspectors around the country, it is a slap in our face. Again this was done as a marketing ploy, but it was done with the wrong group of folks. If you look into the pool of CMI's, I think that you will find about 75% of them have been in business less than two years. I know 9 of them who started their company in 2007! Anyway this is the reason that so many inspectors are now shopping for a new E&O provider.