Government contracting companies with overseas operations are under a lot of pressure to secure accurate pricing when it comes to their insurance rates and overall premiums. In order to be competitive, the group answering the proposal must be keenly aware of rate increases, changes in operation, and various classifications of workers. In order to take some of the guesswork out of this equation, a clear understanding of your current rate structure is critical.
One of the most common areas where improvements may be made is in the area of Defense Base Act (DBA) insurance on the open market. This differs from the “Monopoly” in place that dictates rates for contracts associated with the US Army Corps of Engineers, USAID, and the US Department of State. For this article, I will focus on the contracts limited to the US Department of Defense.
For new contractors, establishing yourself as a buyer of DBA is not difficult. As a required insurance for all contracts provided funding under the US Government in foreign countries, DBA can be secured simply by contacting your insurance broker or agent. However, herein lies a major problem. Most agents and brokers have no idea about DBA or how it is purchased, let alone what to expect when dealing with an underwriter. Mistakes made at this point will only add to the insurance rate as the agent will likely be unable to clearly articulate exactly what you are doing as a government contractor. This starts a series of events that is very confusing, difficult to deal with, and time consuming as you normally have to educate the broker as to what you are doing as a business. The following are just a few of the proactive steps you can take as a buyer of Defense Base Act Insurance, either for the first time, or on subsequent contracts:
- Identify which insurance carriers specialize in this coverage. Here are four of the most recognized:
- Chartis
- ACE USA
- Chubb
- CNA
- Prepare a clear, concise overview of exactly what work will be conducted as part of the contract. Make this the basis of proper classification when seeking DBA Insurance.
- Ask the insurance carriers you contacted for suggestions on agents or brokers that specialize in this type of coverage.
- Understand exactly what must be used to determine remuneration or payroll to the workers. This is much more than just “payroll”.
- Ask where price breaks in the rate may occur as a result of anticipated, increased payroll.
- Seek a program that may “toss in” insurance coverages such as kidnap and ransom, or accidental death and dismemberment. Although the limits for such “toss ins” will be low, it is better than nothing.
When all else fails, look to your competitor in the marketplace and ask what they think. They may have a great suggestion on a agent or broker and will likely know exactly what to do in order to prevent future headaches and potential disasters.
