# Snowfall Insurance



## vpawale (Aug 2, 2011)

Hello All:

I got a request from a retailer who has lots of locations to mitigate his snow removal risk by designing a insurance contract that pays him based on amount of snow that falls and he has to pay for its removal. So for example average snowfall is 30 inches per season and he pays say $500 per inch above that for removal, an insurance contract will pay him $500 per inch above 30 inches for the season. So if total snowfall comes at 40 inches, the insurance claim will be 10 * 500 = $5000.

I don't know exactly how the contract is written between him and snow removal company, for a big snowstorm that is outside of his per inch removal contract. 

I have asked him to provide that. On my own curiosity to see what kind of different contracts people have, I am asking about is, how do snow removal companies charge once there is a big snowfall event, let's say it snows 15 inches or more in a span of 2 days. Also, do they charge extra for de icing after the event is done or it is included in the contract?

Thanks in advance.


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## grandview (Oct 9, 2005)

There's a company out of Chicago that sells this type of insurance. What part of NY are you in? 15 inches over 2 days is a minor snowfall to some of us.


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## vpawale (Aug 2, 2011)

In New Jersey actually.


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## grandview (Oct 9, 2005)

Snowfall insurance ,they don't cover every area so they/you need to see if they work in your area. Also they base it on official snowfall fall totals,so if the official total is 30 inches and your lot got 50 inches they won't cover it.


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## vpawale (Aug 2, 2011)

Grandview:

Actually, I have been asked to provide this type of insurance cover. I am not here for soliciting members on this site, don't get me wrong. I am purely trying to learn how best I can serve this client, by taking independent opinions form other snow plowers.

If the contract between Retailers and Snow Plowers is settled by a weather company who provides the snow totals in the area the retailer is and we write an insurance cover on those snow totals, I think it will be accepted by the retailer.

What is your take? 
Would you be willing to purchase such a cover, as an opinion of course?

Thanks for your help in advance.


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## Luther (Oct 31, 2007)

vpawale;1295693 said:


> Hello All:
> 
> I got a request from a retailer who has lots of locations to mitigate his snow removal risk by designing a insurance contract that pays him based on amount of snow that falls and he has to pay for its removal.


You seem to be forgetting something.....what about mitigating your potential losses?

First off, he's not paying anything.......his tenants are paying for this service through their cam billing. If he's just a manger, his motivation would be more of a personal interest as these type of managers are ofter bonus-ed on how much money they can "save".

You can provide him insurance by agreeing to an "all inclusive price" for your services for the entire winter. This way he can budget these costs, and will not pay anything extra if you have a hard or record setting winter.

If his position changes and he's not wanting to "over pay" because you had a light winter, then he may want to agree to a more fair exchange agreement....per push and per application agreement.

If he really wants to mitigate his potential losses, point him in the direction of Jeff Hodges of the Chicago Weather Brokerage. He can offer options if your client is willing to buy them.



vpawale;1295815 said:



> Grandview:
> 
> Actually, I have been asked to provide this type of insurance cover.
> 
> ...




Who cares what the snow totals were 4 miles, 6 miles, 10 miles (whatever) away? This means absolutely nothing as far as what the actual site totals were (and frequency) that you dealt with.

It only means something if you're willing to place a bet on the weather, and are willing to use this reporting location as the official site for the measurement(s) you are betting on (or hedging against).

If you are so inclined, you could spend your money to hedge against the downside of whatever agreement he chooses with you, and then reimburse your prospective client (if you win) by having either a light or heavy winter.


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## forestfireguy (Oct 7, 2006)

We've been approached by a company from NJ that is selling this kind of "insurance". We are talking to them, but from the few conversations we've had it seems that the premiums are outrageous, at least to insure our total book of business, we may entertain protecting enough revenue to cover bare bones costs associated with the winter whether it snows or not, and not having the risk of investing in all the prep and other fixed costs. I'll let you guys know how things progress.......


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## Spectrumweather (Sep 13, 2011)

There is lots of misinformation out there regarding snowfall insurance. In reality, there are only three admitted weather insurance carriers in the U.S., and only two of those will write seasonal snowfall insurance. None of them sell direct to contractors. As a broker, I have agreements to work with all three.

The group out of Chicago that was mentioned does not sell insurance, but rather exchange-traded snowfall derivatives. If considering those, please seek professional accounting and legal advice. there are eligibility rules and at the end, you could end up owning Uncle Sam a good chunk of your settlement check. Just perform your due diligence before purchasing.

Spectrum


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## Luther (Oct 31, 2007)

Spectrum....please pm me your phone number.

I want to talk to you and learn more of what you have to offer.


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## grandview (Oct 9, 2005)

http://www.cwbrokerage.com/snow.html


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## Luther (Oct 31, 2007)

Thanks gv. We already work with Jeff, but I would like to know what else is out there.


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## EdNewman (Jan 27, 2004)

Just sell a mix of pre-paid and pay as it snows and you just self insured. You can even blend for a single customer if they want a hege.


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## White Gardens (Oct 29, 2008)

If you want to hedge against a low snowfall year, then save some money in the summer months.

I'm sure the premium you would pay for something like that could easily be saved during the summer months.

.....


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## vpawale (Aug 2, 2011)

I started this thread by asking a question about Snowfall Insurance, I am glad to share some of the successes I had in providing insurance cover to mid level snow management companies as well as some of the contractors here in Northeast area.

The insurance policy highlights as follows:

1. We settle based on local snowfall data that is provided by company called Weatherworks, which actually estimates snowfall at the location/zip code you are plowing snow at.

2. We match the reimbursement by size of the storm, so if you have a 18 inch storm (which is big for NJ) we reimburse one amount if you have say 10 inch storm we reimburse another amount. We provide client with storm brackets and client can fill out how much they want to get reimbursed based on how big the snow storm is. This provides them flixibility to match the amount they will receive from their clients for removing the snow.

For example, the brackets are as follows:

Inches Snow	Reimbursemed Amount
0.00 $2,148
0.01 $7,048
2.00 $9,122
4.00 $11,122
6.00 $15,296
8.00 $18,296
10.00 $23,370
12.00 $25,370
15.00 $29,370
18.00 $34,444
21.00 $38,444
24.00 $41,594
27.00 $44,744

3. We provide two covers, based on the risk snow contractor possesses. 
In case, they have a fixed priced contract out to their customer we provide them an insurance cover that covers them after a deductible that locks in their profits and/or snow removal expense, in case there is significantly higher snow fall in the coming season. 

If contractor is working per storm basis we cover them with low snow fall cover, so they can at least cover their fix cost for the season i.e. equipment and material purchases for example, in case there is a very low snowfall in the coming season.

4. Premium on these contracts: Weather insurance cover is different than the one we typically buy as individuals. There is a significant portion of premium on this insurance which will be collected in claims which we call as average reimbursement. So to be fair, when you are comparing premiums you need to make sure what average claims you will be getting back. So for example, we have priced above contract, with a deductible of 180k with a limit of 250k i.e. we cover expenses above 180k upto 250k a total of 70k in total reimbursement. The premium of this contract comes to 19.5k which sounds very high but average claims on this contract is 13.5k which means out of pocket cost to cover 70k is only 6k. So the question that you should ask as a contractor could you pay 6k to cover a cost overruns of 70k. And in this case the contractor who bought this said yes and paid the premium.

Finally, if this is something as a contractor or a snow removal management company, you would be interested in let me know. Again, not trying to solicit your business but just trying to help you out to manage your weather risk with an insurance policy that will match perfectly with your cash flows for the snow season.

Regards.


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## grandview (Oct 9, 2005)

Let me know if I'm wrong. But they way they measure snow and I measures snow are 2 different things. I live by the "official" recording site which is the airport. So if they said officially 5 inches fell but in my lots its more like 8 inches you take the official site totals not mine.correct?


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## vpawale (Aug 2, 2011)

Grandview,

I did take your advise into account first time you mentioned this, so we contacted a local snow reporting agency which estimates snow on ground at the location and not airport reading. So, the data we settle on will be localized provided by actual snowfall at the location.
Hope this helps.


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## grandview (Oct 9, 2005)

I'm in lake effect area. So one side of town can have 40 inches and the other end they were cutting the grass.Like last year.


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## vpawale (Aug 2, 2011)

Understand. I am just mentioning what we have done using localize weather. Granted that a zipcode may not receive same amount of snow but still lot better than an airport which is 35 miles away.


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