Precision Protection

Kulda cites Jewelers Mutual Insurance Company in Wisconsin as an example. A group of jewelers created the company when they recognized the need for insurance agents and brokers who understood the nuances of the business, such as insuring a small amount of merchandise worth millions of dollars in a tiny retail space. “A big insurance company might miss the risks [associated with the industry],” Kulda says. “When you’re specialized, you understand the risk better.”

Industry-specific insurance providers offer multiple solutions for companies in like industries. Some industries, such as health care, transportation, aviation, construction, and oil and gas, are more insurance-intensive than others. Consequently, they require more specialized knowledge from providers who invest the time, people, and resources necessary to develop and maintain industry-specific expertise.

St. Paul Travelers, for example, specializes in a variety of industries, including technology. “When we focus on a particular industry, we try to provide all the coverages that business unit would need,” says Greg Vezzosi, senior vice president of commercial who oversees St. Paul Travelers’ global technology underwriting business. “In technology, we’ll provide the property coverage and the casualty coverage—whether it be automobile or general liability or worker’s compensation.”

In addition, there are a number of specialty coverages built around errors and omissions. Errors and omissions protection covers a company’s cost of defending lawsuits that allege negligent acts. Common exposures in the tech industry include inadequate software design or implementation, defective computer chips, and inadequate Web site design.

“When you think of technology, a lot of the exposure and potential-loss damage is to intangible property, which isn’t covered by a general liability policy,” Vezzosi says.

According to Kulda, one key function of specialization is that it helps remove uncertainty from the underwriting equation, meaning that a specialty insurance provider will better understand your particular risk. “Uncertainty causes a big problem with insurance,” he says. “Anytime you have uncertainty, it means that pricing is going to be difficult, because you can’t adequately assess what the risk is to charge the premium.”