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DBA Insurance – 6 Essential Points In Obtaining Coverage for Government & Defense Contractors

DBA Insurance – 6 Essential Points In Obtaining Coverage for Government & Defense Contractors

DBA Insurance is an essential part of any overseas operation. It is required by legislative mandate (Defense Base Act) and considered central to government/defense contractor business risk management.  Mistakenly seen by some as operational overhead cutting into profits, Defense Base Act insurance provides business leaders with the confidence to enter foreign contracting opportunities enhancing the scope of profitable business opportunities. Provided below are 6 essential points in obtaining DBA Insurance.

The intent of Defense Base Act Insurance

The intent of DBA insurance is to protect the workers participating in US Government contracts overseas.  It covers employees from the financial loss of physical harm and associated consequences (Loss Wages, Medical Treatment).  Furthermore, DBA insurance allows third-country nationals and local employees (in-country) to participate in the workforce with additional expertise and variable income levels that can be far less than a US National.  Many contracts require local employees to participate in public work projects, for instance, Afghanistan.  DBA Insurance has 6 essential points required by insurance carriers.

Greater confidence is a positive result of Defense Base Act Insurance

Defense Base Act Insurance enhances the confidence of corporate leadership by maintaining the financial well being of both your company and your workforce.  The focus on operation and mission quality takes center stage while minimizing financial loss.  The cost of insurance must be accurately determined in the proposal development stage.

3 aspects of financial predictability related to acquiring DBA insurance

  1. Minimum premium(s)
  2. Payroll-based premium(s)
  3. Slot-rate premium(s)

Minimum premiums, ranging from $5,000 to $10,000 are determined by the insurance company.  Additional payroll reported during the insurance policy period is added without additional premium until it is maximized.

Premiums for operations with higher payroll figures are more expensive.  Other factors that contribute to the premium determination is the type of work, country of operation, and loss history.

Payroll-based premium is the standard method to determine premium levels.  Payroll per $100, is multiplied by the insurance rate(s).  The payroll percentage is determined.  Payroll is 1 of the 6 essential points required to obtain DBA Insurance.  Accurate payroll amounts translate into better underwriting results, minimizing audit adjustments and premium changes.

Slot-rate premiums are determined by underwriting guidelines when a significant amount of payroll is associated with a contract value.  Payrolls in the millions of dollars are applied against a pre-determined rate to simplify the underwriting process and DBA administration on behalf of your company.  Using the rule of large numbers, the underwriting criteria and rates set by the insurance company reflect a rate commensurate with operational exposures and claims history.

Obtaining Defense Base Act insurance is simple. Visit for more information.

6 essential points required for Defense Base Act insurance

  1. Contract Number – critical as the policy tracks directly with the insurance policy
  2. Worker count by occupation, country, classification (US National, Third Country National, or Local)
  3. Payroll or contract value
  4. Country of work
  5. A thorough operational description
  6. Details on transportation, housing, and security

Each essential point is outlined in the Defense Base Act insurance application.  It is important to work with a skilled, experienced insurance professional that understands the various aspects related to coverage limitations and claims management of Defense Base Act Insurance.  Using the wrong insurance agent/broker will cost you in time, money, and resources if unfamiliar with the coverage.

The Sacrifice Of Low Insurance Premiums May Be Uncovered Claims

The Sacrifice Of Low Insurance Premiums May Be Uncovered Claims

As a business insurance buyer, you should demand risk-reducing services as well as lower insurance premiums.  Lower insurance premiums don’t mean you have to sacrifice service for the lowest cost, but you need to know the necessary strategies and tips that could lead to a successful insurance purchase.

Soft Market

The insurance industry continues to be in a “soft market”.  You have an opportunity to consider service as well as price.  Unfortunately, agencies may not provide ancillary services that can really set them apart from other agencies.  Selecting the right insurance partner is vitally important, with reviewing the offerings that accompany the insurance placement.

Insurance services are not utilized to their fullest extent for two reasons.  First, you didn’t request assistance with loss programs, risk control, or claims management.  Second, agents and brokers don’t offer them, cutting services to keep expenses to a minimum.

The difference between $1,000, $10,000, or $100,000 in losses may come from services offered

When the insurance market turns or “hardens”, prices will jump significantly.  Service needs will increase as you look for ways to keep claims down to offset increasing premiums.  Putting little thought into risk or loss control measures before the market turns, can result in uncontrollable premium increases.  I recommend talking with your insurance professional about services related to risk control, claims management, appraisals, actuarial analysis, and risk audit.  In other words, get started with reducing the cost of risk before its too late.  Other services some brokers provide include, but may not be limited to:

  • Loss analysis
  • Risk Control surveys
  • Open claims reviews
  • Property assessments
  • Industrial Hygiene surveys
  • Fleet program audit and review
  • Safety program audit and reviews
  • DOT survey
  • Environmental assessments
  • OSHA audits and assistance
  • Ergonomic reviews

Low Price Insurance Policies-You Get What You Pay For

Limited service is one potential issue with cheap premiums.  Others include limited coverage or sub-limits, reducing the amount of insurance in place.  With lower limits, you risk contractual non-compliance with vendors, customers, or leases.  In short, don’t let the low price blind you from making the right choice of insurance carriers and jeopardizing active contracts.

Tips for making the right choice on price and service for insurance programs

  1. Request a marketing matrix that details the insurance carriers approached and the result, i.e., declined, accepted, etc.
  2. Review the exclusions attached to the insurance policy for key coverages that may be minimized or eliminated.
  3. Ask if sub-limits have been added to the policy if the premiums are well below other quotes.
  4. Consider the insurance company rating.  Check to see that it is A+ or better.
  5. Verify the information provided, ensuring lower numbers of payroll, property values, or revenues were not used.
  6. Check the deductible accompanying the quote to make sure you know what is expected in the event of a claim.

If the agency or broker does not offer these points and has the listed services, it may be time to look for an insurance brokerage that does.

Brian S. Smith, CIC, ARM