Defense Base Act Insurance. Wow, just the name of this insurance program musters thoughts of war coverage and a potential labyrinth of regulations and bureaucracy. Well, believe it or not, it is basically workers’ compensation on steroids intended to protect those serving in the commercial sector in support of government contracts abroad. What has made Defense Base Act insurance (DBA) so interesting however, is not the coverage, but the cost, perceived faulty claims management, and overall lack of understanding on behalf of the insurance community that has resulting in unstable premiums for the past several years?
DBA insurance is a requirement for many government contractors working abroad under contract by or through the US Federal Government. Depending on the type of contract a company may be under for the work, DBA can be obtained either on the open market or through a program mandated by contract via Rutherfoord and the CNA Insurance Company. For the sake of this article, we will focus on the open market.
The Department of Defense allows its contractors to seek coverage for DBA through the independent agent network, i.e, any insurance broker or agent. Insurance markets are available throughout the industry, however AIG (Chartis) and ACE USA have been the preeminent carriers in this space. Rates for each occupation listed under the contract are determined by the underwriter, but not taking into consideration the war risk as the US Government picks up this piece of the coverage — here is where it gets a bit dicey! When negotiating rates for insurance coverage, underwriters need to be aware of the actual risk versus the perceived risk. This is when a broker or agent familiar with DBA is most needed; to speak on behalf of the client in order to secure the most competitive, fair rate available. However, insurance related to DBA risks does not end there.
As a result of increased exposures, government contractors may consider rounding out their programs with ancillary insurance products that may offer additional protection to their workers such as world-wide medical, accidental death and dismemberment, and life insurance with war risk included.
Understanding DBA is not difficult, just a bit complicated. Protecting the lives and earnings of your workers is critical to the success of each contracted mission. Taking lightly the potential impact of loss or lack of coverage could have devastating results. Consult with a broker or agent that is well versed in this space and ensure they have the necessary relationships and understanding of its associated complexities. Look for an insurance partner that is concentrated in this area, not one that does it only once in their career.
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sure. let me know.
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