Complying With an Insurance Carrier’s Loss Control Requirements

This spring I had the privilege of attending the National Propane Gas Association’s 2024 Southeastern Convention & International Propane Expo in Charlotte, North Carolina. Charlotte is the home of NASCAR racing, and they have a museum right across the street from the hotel where I stayed. A quick tour was all the time I could afford, but while I was there, I sensed the amount of money, expertise, professionalism and attention to detail that goes into racing. Just this past Memorial Day, over 300,000 people attended the Indianapolis 500. After the race, the winner, Joe Newgarden, let it be known in an interview that it was a team win. Very stringent rules and requirements must be met in order to participate in these prestigious events, not to mention the attention to detail that must be paid to both the car and driver. 

This got me thinking that this is what propane marketers are faced with every day: stringent requirements both from regulatory bodies and now the insurance companies. The undeniable truth is the propane industry cannot do business without insurance. 

The underwriters writing property and casualty insurance for the propane industry are being forced to focus on every part of the propane business to determine if they are even able to offer a quote for insurance. The losses stemming from a failure to follow the rules in the “old days” would have been minor compared to the nuclear claims that we saw in 2023 and are seeing so far this year. Of course, propane claims are only one reason the insurance companies are tightening their underwriting rules. Losses from fires, tornadoes, flooding and the wind have contributed significantly to their loss ratios. 

The insurance carrier’s first step in understanding your account starts with the initial applications that agents are submitting on your behalf. These applications may seem cumbersome, but they are imperative for the carrier to be able to understand your operations and properly rate your account. 

Filling out the Accord 125 or the insurance company’s supplemental applications, or signing the fraud declaration when the coverage is bound, all create potential legal documents in the event of a loss. When you sign these documents, you are attesting that all the information contained within is accurate and factual. In some cases, agents may prefill these documents as a courtesy to save you some valuable time. However, ultimately, you, the marketer, are responsible for the accuracy of the information the agent included. 

The second step for the carrier is to ensure the information you provided on the application is correct. To enforce this, more and more carriers have turned to a focus on loss control. Several insurance carriers have loss control or risk engineering departments that are visiting insureds’ locations or conducting telephone calls with the owner — sometimes before even providing a quote. The goal of these visits is to 1) make sure the marketer is doing what they said they were doing on their application, and 2) offer solutions to the marketer to get everything in order so that in the event of a claim, there is documentation that all proper procedures were followed, thus protecting their interests and yours as completely as possible. 

For example, are you using a standard Propane Education & Research Council gas check form? Has a gas check been done on every new customer and documented in their file? What percent of customer files will have a completed form? What about duty to warn? Have you sent out or given a duty to warn in a new customer packet or an annual mailing? These are all questions that are included on most carrier applications. If you answered yes to these on the applications and in actuality you’re not doing them (or cannot prove that you are), you technically could be in trouble for committing insurance fraud. Penalties for non-compliance can range from a loss not being covered, to losing your insurance coverage altogether, to even being prosecuted or fined for fraud. 

The theme that I hear over and over from insurance carriers is that propane marketers are overwhelmingly unsophisticated in their recordkeeping. There are a variety of software systems out there geared to the propane industry that can greatly assist you with proper and thorough documentation. 

I always recommend working with an insurance agent who is knowledgeable in the workings of the propane industry. It’s an ever-changing industry, and it’s important that your agent is well-versed in your business so they can advocate to the carriers on your behalf. 

There is no future for insurance companies to provide coverage for propane companies if the marketers themselves do not understand that they must comply with the terms and conditions of their policies.