by Alex Goldman
Insurance has always been a headache for the ISP industry. Tom Millitzer, ISP broker, tells me that back when cable companies were new, they had trouble getting insurance, especially for outside plant. That was 30 or 40 years ago.
Today, WISPs find getting insurance a headache. “When people come to us for insurance, we hear that they’re exhausted from talking to insurance people because they have to teach insurance people their business,” says Dana Coates of United Agencies and founder and president of wispinsurance.com. I last spoke to Coates in 2005 and Jim Wagner spoke to him about insurance in 2002.
Coates’ business has grown. He hired one person six years ago and another recently. But insurance moves in cycles like the financial markets and he warns that as the world markets decline, insurers’ appetite for risk decreases. He says it will get tougher, not easier, for WISPs to get insurance over the next few years. “As we move into 2011 and 2012, the WISP industry needs to know that it will be tough again to find good coverage at competitive prices.”
Jonathan McLean of Risk Strategies and wispins.com — and a WISPA member — agrees. He says that there are many industries that have risky jobs — jobs as risky as tower climbing — but they have collaborated to produce best practices. Members of the oil and gas industry or the excavation industry (which is a particularly dangerous stage of construction) promise to adhere to the best practices and in return they get better insurance premiums. McLean says it’s a constant dialogue between the business and the insurance industry.
He adds that WISPs should regularly consult their insurance agent when making key decisions, just as they already talk to their lawyer and accountant.
Coates agrees. “I encourage business owners to talk to and engage in consultative relationships with lawyers, tax advisors, and insurance agents,” he says.
Both argue that you should work with an agent who knows the business. That person won’t be the cheapest option, but will provide value for $1,000 or $2,000 per year. McLean says that the average WISP, with fewer than 10 employees and revenue under $1 million, pays about $1,200 per year on average.
But to get there, WISPs have to get several significant issues done right.
Outside plant
“A lot of times we come in after a major loss,” says Coates. A company had equipment on a tower that was struck by lightning and lost $10,000 worth of equipment. Their plan did not cover the loss.
“Risk management is what we do when we work with ISPs. Generally, small business owners may not have a great deal of experience running a business, managing employees, and hiring and firing people.”
McLean recommends that WISPs divide their corporate structure into two businesses. One can handle the subscribers and the other will do the installation and own towers and tower rights.
Both insurance agents said there can be a serious problem if the business owner is climbing towers. McLean said that doing so can sigificantly raise premiums — or if the owner doesn’t ask for it, the policy may not cover them.
Coates strongly recommends using an independent contractor for installation and for climbing towers. “We encourage a WISP to subcontract risky activities to someone who is already doing it and is certified to do it. What happens if the owner of a WISP goes out and slips and falls and becomes incapacitated for a period of time? Workers’ comp may not cover them and disability may not kick in for 30 days, 60 days, 90 days, or even 6 months on some plans.”
Coates describes his business as managing TCOR, for Total Cost Of Risk.
Vehicles
He says the same issues arise with your bucket truck. “A WISP probably uses a bucket truck infrequently. It makes sense to subcontract bucket truck services. But if you need a van or a pickup truck to make house calls, that makes a lot of sense.”
Coates says that the worst case scenario with a bucket truck is extremely unpleasant. There’s a famous video (available on YouTube) that shows what happens when a bucket truck hits a power line. First and foremost — it can kill someone. And in a small community, everyone knows who died. Coates says that people should take this risk very, very seriously.
McLean agrees. He says that some WISP owners have built their own bucket truck, which is a bad idea. The truck should be built by a professional and maintained according to the manual. “A custom-built truck may not be safe.”
Coates adds that business owners should use a company vehicle, not their own personal vehicle. Many businesses form an S Corp or an LLC to limit the amount of risk they’re exposed to. “But then they put a mainline directly into their assets by using a personal car in the course of business operations, and that’s all a lawyer in an accident case needs to get to the deeper pockets of the family, the 401(k), the home, and whatever assets they want to keep separate from the business.”
McLean adds that WISPs should have Hired and Non-Owned Auto Insurance even if the business doesn’t own a vehicle. This category of insurance covers the business when subcontractors use vehicles. Larger WISPs will have a blanket business auto insurance plan. McLean says that every small business should have this coverage. It covers them whenever an employee uses a vehicle during business hours, even if the employee is on a personal errand.
McLean notes that liability laws vary by state, so the necessity of this coverage may vary depending on your location.
Employees
Businesses that subcontract tower climbing or set up a separate entity to do the risky work will pay lower premiums for worker’s comp and for health insurance, both agents agree.
Conclusion
Being insured is a key part of running a business, just like keeping accounts (and working with a CPA) and having a corporate structure (and working with a lawyer). A good insurance agent can insulate you from the risks you run in this business and can help you make important business decisions, just like an accountant and a lawyer.
