Today’s presentation is “Insurance Questions & Risk Management Firing Ranges Should Have In Place During Challenging Times,” tell us about yourself and Lockton Affinity.
In my role at Lockton Affinity, I’m a program executive, which is a program manager. I manage all of our outdoor activities, which are almost all centered around shooting sports—everything from individual gun insurance to clubs to businesses. And today, we’re going to talk specifically about the business insurance aspect of what we do.
I’ve been in the insurance business for over 35 years and with Lockton for 27 years. And for the last 20 years, I’ve been managing our Lockton Affinity outdoor brand as it exists in the space. In January of 2000, we became the broker for the National Rifle Association Insurance program. And I’ve been in charge of that relationship. From there, we’ve continued to expand the products that we have available to folks who sell firearms and commercial and membership-driven ranges. We’ve built a team of specialists who focus on questions like: “How do you make your business better? How do you safeguard yourself against claims? How do you continue to make yourself attractive to an insurance provider so that you can continue to buy insurance at an affordable cost.”
Now, some of you would argue whether the cost is affordable or not, but we can get into some of those types of questions as we move on. So I want to talk a bit about who Lockton Affinity is and what’s going on in the insurance marketplace today. I’m sure some of you have seen some upheaval with current carriers and moving off of your particular insurance or price increasing, those kinds of things.
We’ll go over insurance coverages that drive your business costs and how to make yourself safer, and the things you need to ask your current agent to make sure that you’re in the best coverage. We have over 20 years of experience in the firearm retailer and range segment. We started off focusing only on gun stores that didn’t have gunsmiths; we were very conservative in our underwriting. We didn’t do a lot of commercial range operations. We were just getting our feet wet with doing retail stores. As our underwriting team got more comfortable, we expanded to those FFLs with gunsmiths on staff.
We created a gunsmith program that provides the product and general liability. Then we expanded over to those commercial ranges and folks that are doing firearm-related training. They may have their employees doing that training, or they’re allowing outside instructors to come in; we’ll talk a bit about how to protect your business from these external entities coming into your facility. If you’re paying someone on a 1099, you know how to handle those from an insurance standpoint properly.
What are examples of third parties?
Jeff Hewitt: They could be a third-party like an NRA certified instructor or a non-NRA certified instructor. They might just be certified in the state’s concealed carry class. Some of those require an NRA instructor. So it’s kind of all of those outside folks using your facility, whether it’s instructions or you have a group.
One of the clients we work with is The Well Armed Woman. They don’t have a specific range, but they might be using your firing range where they bring in their team with or without an instructor, or they might have a social shooting event. We write all their insurance, and we provide lots of certificates out there to range operators. Again, to make sure that someone else’s insurance is standing in place of yours first, for someone else’s event.
Today, we have over 4,000 ranges and retail stores that are in our program. That provides a large body of premium that the insurance carrier would look at, and it creates some aggregated buying power in the marketplace. So it helps keep our pricing at a more stable level.
Lockton is a Certified Great Place to Work in insurance eight years in a row. If anyone has a local agent, call them and ask, “Hey, I’ve got this federal firearm license and a gun store, and I need some liability and property insurance coverage.” They may say, “Yeah, we’d love to help you out.” Still, they probably don’t understand everything involved because when they try to find a reasonably priced provider, they find out that no one wants to write this; there are only about three or four carriers who want to write this type of policy. They all have different underwriting appetites and different pricing metrics, and it becomes frustrating to talk to a non-specialized agent in this space. And that’s where we come in and help with that.
We have underwriting for the long-term in mind, and this is why we’ve been able to offer this type of coverage 20 years ago, and we’re still offering it today. And we still want to be leading the industry for the next 20 years. And so, how do we do that? It’s because of our underwriting mix and expertise. In fact, 7 out of 10 folks that call and talk to us about getting an insurance quote will end up buying from us.
There are a couple of carriers we don’t quote because they don’t have good business practices, or when we look at their claims information, they continue to have the same types of claims exposures. We give a target to run toward, and some advice on how to get better with their current carrier, and then they can come back to us. But we’re usually able to match up price and coverage requirements that make a lot of sense versus the competition that’s out there. One of the things we do is survey about 25% of our insureds each year; we get about 40% of those who respond. Here are the top three reasons why people end up purchasing with us, and then they stay with us.
Our products are well priced, we’ve got good coverage, and we have a highly specialized team that understands what our clients want. Today we’ve got Stacy, David, and Jake, who all work on a team for me, if you wish to call it our sales team or the enrollment side, but between the three of them, they’re not trying to write a shoe store this morning and maybe write a gun store this afternoon, or a range. All they do is gun stores and ranges, that’s it. And so, we’ve got three people full time, just on the enrollment side of this, so that we’re able to take the time and help each one of those folks out there understand what they need, what drives their pricing, what can make them better.
It’s more than just sending them a proposal and saying, “Hey, do you want to sign up?” It’s an education – every month, we’ll talk to a little more than 100 store owners or range owners from a new business side, and we probably write 70 or 80 new locations a month. So we’re excited about the prospects of continuing that type of growth in this program.
Over the last five to seven years, we have seen the carrier markets shrink from 10 down to three. And some of you have gone through being non-renewed by some of those carriers. And then some of you have not been non-renewed, you’ve been offered a renewal, but the pricing is so extreme that the insurance company is, in essence, telling you to shop and move your coverage. And if you’re willing to pay the price they put out for you, they’re happy to renew you. This is the type of corrective action they’re trying to do because of losses.
Some of the smaller players out there, and when I say it’s a smaller player, it might be a big insurance company, but they’ve got a small book of this business. When they have their first policy limit claim, they realize, writing coverage for commercial gun ranges is risky. Or they reevaluate why they are writing gun stores that have gunsmiths?
Can you shed just a bit of light on what you hear about the insurance industry overall for firearms?
Jeff Hewitt: I would say that the media predominantly drive me, things around the pandemic; you’ll see in the media consistently about the increase in the background checks and record firearms sales. In one instance, I know, a question got asked at a board of directors meeting at a large carrier and said, “You know, I understand all this stuff’s going on with talks about defunding the police, we’ve got this pandemic, and we’ve got these riots going on. We’ve got people in Kenosha using assault weapons to defend themselves. And we want to make sure we’re not writing any of that stuff.” Well, they said, “Well, we’re writing this stuff, and we’ve had this program and this division for X number of years.” There’s a political backlash of being associated with the firearm industry. And that tends to come from the more liberal side. We’ve had another carrier that simply had an underwriting head retire. The following person who came in to replace that person is of a different political bent; they’re very liberal. And they don’t like being in this space. They don’t want to understand it. And they’re just putting a blinder on to a way to have a profitable book of business in the firearms industry segment. And they’re just looking at the industry segment and saying, we don’t want any part of that.
Who knows what they want to do. Hopefully, we’ll have some balance where there’ll be some control with the Senate because the House and the White House will be in a different area. So I think that there’s more to come out of that political environment and what it means to the firearm industry.
So let’s shift gears here for a little bit. And as I mentioned earlier, we’re going to talk about a couple of coverage things that I think are very important for you to understand and good questions to ask your agent. General liability is our liability to a third-party. So whether that is a customer, a trespasser, somebody in our parking lot that might not be a customer, what’s our legal liability to injury or damage to someone or something else where a lawsuit could be brought against us?
We tend to see when something goes bad; there’s a fatality or some other kind of debilitating injury that’s going to be ongoing. And those tend to be more for policy limit type claims. Then somebody else that’s on your same street that’s retailing something other than firearms when they have a slip and fall or something goes wrong with one of the products they’re selling, they don’t tend to have nearly as high claim payment issues as the gun industry does. So carriers have to price for that and understand that there’s going to be these “shock losses.”
There are a couple of critical points that you can ask your current provider to make sure that you’ve got proper coverage. One of them is to ensure that you have the right coverage. General liability is written on two forms; one is called a broad form, and the other is called a limited form. One is offering what I’d call a universal coverage that protects you, employees, other owners, and members if you’re running a range or you sell memberships. Those should all be listed as insured on your policy. Because if an employee does something on the store or the ranger’s behalf, or you’ve got a member of your range that gets involved in something, you want to make sure that they’ve got protection under your policy.
So if a member is using the range and they’re involved in something that causes injury or damage to someone else or something else, they’re held liable. They’re going to be named, and you’re going to be named. You want your policy to respond to both of those. You don’t want to have an individual lawsuit from one of your members or a separate lawsuit from one of your employees because they did something and the policy doesn’t protect them. So ask your agent about those kinds of things. Broad or limited is the way that the insurance agent will understand it.
When you’re going through the quote process, whether it’s with us or someone else, we often offer a second opinion. We don’t care if you white-out your insurance premiums so that you don’t feel like you’re giving us a target to shoot for to be $5 cheaper. Send us the policy form so we can tell you what you have and compare it to what we’re proposing.
We have people say, “Oh, wow. Those guys are so much cheaper than you are.” Well, they may not be so much cheaper. It just may be your exposure limits are different.
You could go to someone unfamiliar with writing this class of business, and they can’t find anyone to write it. So they’ll go to an insurance wholesaler, who will find them a market. They usually have high minimum premiums; you could spend $5,000 to $10,000 for this policy. And they may give you a limited coverage form for the designated premises and business only. So, if you also have a range or if you have a gunsmith on staff and those aren’t listed in the designated premises and operations, any claim you have may not be covered. So you have to look at comprehensive or universal coverage under the broad form where it picks up all those things first and foremost because that’s part of your operation.
It’s an intended or implied part of your operation first. Secondly, it helps you also protect yourself and your employees when you’re away from your premises. Whether you do some transactions at a gun show or you’re going to a convention, you have a booth, or you’re out helping with a community outreach program for other people in the firearm industry.
There may be liability you might have associated with that. So again, that’s the big point I would look for when you’re looking at your policy with your current broker.
The other thing, as I mentioned earlier is, you want to make sure that you’re presenting yourself in the best way you can as a business to make the insurance carriers want to continue to provide you coverage at an affordable cost. Many of us will have outside groups coming to use our facility, whether that be an instructor, a training business, or another shooting group that doesn’t have its own range. Ensure that you’re getting a certificate of insurance from that organization and listing your business as an additional insured.
You want to make sure the club or instructing entity that came in to use your range has insurance standing in front of yours if there’s a claim that happens. Let’s say that someone has an accidental discharge and gets shot in the leg, and there’s $100,000 of medical expenses. As a range owner or the business owner, you don’t want to have anything to do with paying that. You want to make sure that you’re documenting that because they’re going to name you in the suit. You’re going to give the claims adjuster that other entity’s insurance provider and tell them that the claim is theirs.
So you want to make sure you continue to present yourself in the best case that you’re doing safety practices like always getting certificates of insurance from outside groups or that you have successfully been able to use those. Again, it’s like anything else; whether it’s your automobile or your homeowner’s insurance, it’s all about claims. How is your insurance provider going to look at you after claims are made?
Let’s talk a bit about property coverage. This is intuitive in the sense that it works like your homeowner’s insurance. I need to provide protection so that I’ve got replacement cost coverage on that. If you’ve got outside lending sources, those are things that are going to help drive your decision of whether or not you buy the property coverage. And you have to consider property coverage in really three ways that I want to point out.
One is you’ve got the real property, the building, and anything that’s permanently attached to the building was considered a building. So cabinets, display cases that are permanently mounted – those are all part of the building. And then you’ve got your inventory or your contents, that’s the stuff that’s not attached that you can sell, or someone can steal by walking out with it from your store. Several variables are driving the cost of coverage. If you’re not near fire protection, several things intuitively drive that cost if you don’t have sprinklers. What’s the building made of? Is it a concrete structure? Is it frame building, masonry combustible? When you talk to us, we’re going to walk you through and do a cost evaluator on what you would require in today’s dollars to replace that building based on square footage, construction type, those kinds of things. So we don’t want you to go in and have a co-insurance problem where you’ve under-insured when you have a total loss. That gets messy between you and an insurance carrier.
Usually, they come back to the agent saying they were sold faulty insurance because of this penalty from the insurance carrier because we didn’t insure it for enough. We make sure we get rid of all those types of variables.
So talk to your agent about a couple of different things if you fit into this category. Look at what your deductible on the property is on your policy and ask for some additional limit options. So if you have $1,000, look at a $5,000 or a $10,000 deductible and see what kind of cost savings you get on those types of property losses. If you’re in a building and you’re not using all of the building, or it’s an older building, and we walk you through your cost estimate or what it’s going to cost to replace that building. You’re saying, well, wait a second. I’m not using all of the building currently. And if I have to replace this due to a total loss, I don’t want to replace it for $2.2 million. I think I could build a nice $1 million building to serve the purpose I need. Or, if you don’t need much of a showroom anymore because you’re making a lot of sales over the internet. So whatever the reason may be, you can talk to your agent about putting together what’s called an “agreed value policy.” You can pay the premium on a much lower valued building. And that’s a way to help minimize those costs.
Is it prudent for a store owner to do their assessment before calling you to have a better idea of protection they can put in place before you start writing and reviewing their property for a policy?
Jeff Hewitt: I think simultaneously is probably good. And let’s just face it. I know you may think that your insurance doesn’t come up until July 1st, so today, I don’t care about it unless I’ve got a claim, right? It’s just like me on my automobile insurance. I ignore it until I get the renewal in the mail. I would say that the two are kind of independent to me. If it coincides with their insurance coming up for renewal at the end of the year, I think they do those simultaneously. One of the important things I want to make sure that I talk about in this particular area is business interruption insurance. Business interruption insurance will help provide income at a level you select in your policy for a covered loss. So if you have a smash and grab where you have to be closed while they’re fixing the building and making the changes or you’re getting more inventory in, those kinds of things.
Then the insurance company will pay you a determined amount, and you and your agent will determine that amount. It can be everything, which is the most expensive, called actual loss sustained. So it says for 12 months, we’re going to give you whatever it needs to keep your business going even if you have to be shut down because you had a total fire loss.
A more affordable option is to look at your monthly revenues. Then buy a 90 day or 180-day policy that will give you a monthly income replacement. This way, you can continue to keep your employees on the payroll, pay your mortgage or your rent, and any outstanding liabilities that you have.
Continue to pay your insurance and those kinds of things that business interruption. And that’s a consultative thing that you need to spend a little bit of time with your agent on and make sure that when I talk about things you can do is not to buy too little or too much. The top end of the spectrum is this actual loss sustained; that’s the most expensive. And if you think 180 days’ worth of coverage or six months’ worth of coverage at $20,000 a month is good, that’s going to cost you a lot less. Again, run through your books with your agent when getting a quote for these types of options.
It’s not automatically included with most carriers out there, so you’ve got to ask for it. And if someone’s trying to win your business at a skinny price, that’s one of the first things to go.
Worker’s compensation is one of those compulsory things required by your state, and you can talk to us about your state requirements. Some states have minimum payroll requirements. Some have a minimum number of employees requirement before you have to start buying it. It’s non-health insurance, but it takes care of your liability to employees if they’re injured on the job. It takes care of their employee injuries, and it can take care of any lost time from work if they have to do that. And there are some deductibles or waiting periods there for them to get wage replacement. If you go to the doctor or the emergency room, they’re going to ask if it’s a work-related injury because they will file it on health insurance or your employer’s workers’ compensation.
And there’ll be a difference here for this group; if you have a store and no range operations, then you’re paying a retail rate. So your counter workers, managers, you are paying the same rate as the shoe store down the street, in terms of what workers comp rate. When you have a range and have employees that will go out onto the range, you have range officers, then you get into a different classification that’s a little more hazardous, and you’re going to pay more because the risk of injury is there.
And that’s just the way those work. The beauty of how all the states are set up around the country is each one has its state insurance department. And they all have a little bit different rules, which’s very similar to what happens here with worker’s compensation. So if you’re in California, inherently, you’re paying a higher rate because it’s got very rich benefits versus a store in Texas. Texas has low rates because they have low benefits for workers comp-related injuries. So you can shop around and find different carriers that are going to find different things, different pricing. So it’s worth your while to shop around
Something essential to call out, relative to workers compensation, is that you as a range need to ensure that if you have those third-party contractors working on your range, doing lead mitigation, things like that, that they have the proper coverages in place for their employees. Because we’ve seen it in the past where a business is using that third-party and that third-party didn’t have insurance, then suddenly the business is the one getting the attention and the focus as far as claims.
Our partner MT2 Firing Range Services can assist because they are the Firing Range Lead Management Authority specializing in providing environmental firing range services and lead remediation.
Watch the full video interview on the MT2 Firing Range Services Virtual Summit; click here
About Lockton Affinity
Jeff Hewitt is a Senior Vice President and Program Executive with Lockton Affinity. He has over 35 years of experience in the insurance world and more than 27 years with Lockton Affinity. He has spent the last 20 years specifically focused on providing firearm-related businesses with customized insurance solutions for FFL retailers, gunsmiths, and firearms ranges.
Learn More: http://www.LocktonAffinity.com
About MT2 Firing Range Services
MT2 is the Firing Range Lead Management Authority. We operate from regional offices across the country and always pay the highest value for range lead Guaranteed!!
You Operate the Firing Range. We Get the Lead Out!™
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