How can property loss control services make a difference to your HPR insurance premium? The HPR property insurance underwriter for a confectionery manufacturer issued a warning that additional reinsurance of about $500,000 would have to be purchased annually, and passed on to the insured, our client. The insurance underwriter established that the Loss Expectancy (L.E.) related to the specific fire hazard was $50 million, and the Maximum Foreseeable Loss (MFL) was $500 million.

The client asked Harrington Group, Inc. (Harrington Group) to assist in developing a more cost effective solution that would be acceptable to the insurance underwriter. First, Harrington Group performed a fire hazard analysis, beginning with an evaluation of the material hazards. Harrington Group then analyzed the material property data collected to develop accurate fire hazard classifications for each product.

Harrington Group’s fire hazard analysis revealed that the 45 drums contained liquids that could be placed in one of three fire hazard classifications: noncombustible (ethanol mixtures), Class IIIB combustible liquids (MCT mixtures), and Class II combustible liquids (citrus oils). Harrington Group developed a protection solution for the approximately 10 drums that contained Class II combustible liquids (citrus oils) that would result in complete compliance with the local fire code requirements.

We then successfully negotiated with the insurance underwriter and ultimately gained their full acceptance of this alternative approach. Harrington Group also assisted the insurance underwriter in recalculating the L.E. and MFL values. The new L.E. value was determined to be $1.5 million and the new MFL value, $150 million. The cost of Harrington Group’s property loss control solutions was about $200,000.

Value Delivered

This one-time cost averted an annual premium surcharge of $500,000. Harrington Group’s property loss control services also gave the client considerable peace of mind by providing an accurate analysis of the real material fire hazards associated with the various products in the drums.

By Jeff Harrington, CEO and Founder of Harrington Group, Inc.