Tom Maupin and Stephanie Hutcherson

Builders Insurance Group

December 22, 2004
HousingZone

HousingZone.com Web editor Erik Gabrielson talks with Tom Maupin and Stephanie Hutcherson of Builders Insurance Group about the company's new general liability insurance product that's available to builders in Georgia. The Atlanta-based company began writing general liability policies in November 2002.

Gabrielson: Give me a little background on Builders Insurance Group.

Hutcherson: We are 10 years old, founded in 1992 by a group of home builders. We started out as a self-insured fund, just basically knowing there's a niche out there to be filled with writing workers' compensation insurance for home builders, solely in the state of Georgia. We have grown, and now we're Builders Insurance Group, and we have member companies.

When we first came out with our GL product we had so much response. We're starting with a pilot group of agents because it is a new product for us and we want to make sure we work out all the kinks and don't overwhelm ourselves. The second phase will probably be in a couple of months and we'll broaden that accessibility to more agents.

Maupin: As far as size, the minimum premium on this program is $2,000, but there is no upper end on that. Being so new, we didn't want to pigeonhole ourselves into a certain size of the market. So we're hoping to [insure] virtually any sized builder. One of the limitations [for larger builders] is that this program is open only to Georgia operations. So if you've got guys spilling over to Tennessee or South Carolina, or wherever, we're not going to be able to help them.

Gabrielson: Is there any restriction for those building attached housing?

Maupin: Condos are definitely a no, and I think [with] townhomes we're going to ultimately end up placing some limitations on those as well. Apartments would probably be OK, but there would be a height limitation. Nothing over three stories.

Gabrielson: Why is Builders Insurance Group writing these types of policies in Georgia while most others are leaving the GL market?

Maupin: Number one, we have a lot of expertise in the construction trades. As you might know, we're the largest writer of workers' compensation in the state of Georgia, and our book of business is very much concentrated in residential home builders. We're endorsed by the Georgia Home Builders Association and have been for 10 years now. So we do have an existing customer base that we can tap into.

We have agents who sell our product who are knowledgeable in the construction trades, and we're issuing a policy that excludes some of the trendier-type claims out there. If you follow this at all you've probably seen some articles about mold-type claims, mold-related claims, in places like California and Florida and Texas. We are excluding anything to do with mold- or moisture-related losses. ( Listen. )

Gabrielson: Are there any other types of exclusions you attach to your policies?

Maupin: Yes, all policies are going to have certain exclusions, but the ones of note for the reader of this type of material would be EIFS. Five or six years ago that was the hot claim topic, if you will, and that is also excluded in our policy.

Gabrielson: What's involved with your underwriting process for builders? How would you go about evaluating whether you would insure a builder?

Maupin: The basic criteria is that they generate a minimum premium of $2,000 a year, not have any single losses of $100,000 or more in their history and have a three-year loss history of less than 50%. Those are the basic criteria. The other is, all of our insureds, in order to have coverage or participate in our programs, must be members of the Georgia Home Builders Association. The other one, as it relates to general liability, is that they must have workers' compensation coverage. It doesn't necessarily have to be with us, but they have to have that coverage in place. ( Listen. )

Gabrielson: How important is a builder's internal quality assurance program or the use of a third-party QA consultant? Do you take that into account when writing policies?

Maupin: We're going to rely on our agents to a large degree. We think we can assure ourselves of getting a quality builder by the loss-ratio requirements that we're attaching to it and also the years-in-business requirement [three years in business].

Gabrielson: Do you know how many GL policies you've written?

Maupin: I am showing that we've written 34 policies at this point.

Gabrielson: Is that mostly small builders or big builders?

Maupin: It's across the board, but we're averaging somewhere in the neighborhood of $12,000 or so per policy. It's hard to equate that to how big a builder is. It depends on how much of the work they do themselves versus subbing it out, because the premiums are determined by payrolls, or payrolls for uninsured subs. You could have a builder that does 30 homes, and he might pay $5,000, and you could have a guy who does 100 homes, and he might pay $5,000. It just depends on the mix of insured subs versus uninsured subs and the number of his own employees.

Gabrielson: Anything else to add?

Maupin: If you stay close to what's happening in the marketplace, there's very little availability of general liability for home builders. If we go back 10 years, that's kind of what gave rise to this organization to begin with, was a similar occurrence with workers' compensation. Ten years ago some major players in the market pulled out and created a void in the marketplace that was filled by this organization. What's happening today with GL is very similar to that.

Gabrielson: If a builder in Georgia wants more information about Builders Insurance Group and its products, how would he go about contacting you?

Hutcherson: Initially, they can come directly to us, and then we can advise of an agent that they can use. They can actually call our underwriting department, but our main number is 678/309-4000, and we'll direct calls to the underwriting department.

Builders Insurance Group is online at www.buildersinsurancegroup.com.