Key Considerations When Evaluating Your Prequalification Process
Prequalification is the process of assessing any potential subcontractor’s ability to borrow money and honor that debt. It’s used to determine the estimated amount that a person or company can comfortably afford to borrow and pay back. Although it sounds quite easy and straightforward, it’s common for subcontractors navigating the prequalification landscape to get easily distracted. Here’s what you should know about effective prequalification.
Often contractors review “lagging indicators,” OSHA 300 log and Experience Modification Rate (EMR) rather than focusing on the state of their current program to prequalify the subcontractor. An EMR above a 1.0 could indicate trouble. The following are useful “leading indicators” to use in prequalifying subcontractors: Written Safety Plans, Job Specific safety Plans, Morning Stretch Programs, Toolbox Talks, etc.
While many companies do a thorough job of making sure the subcontractor has adequate coverage on the certificate, they can struggle with the contractual risk transfer review. It’s imperative to work with your insurance agent at this time to make sure you’re requesting the right forms and that the subcontractors have sufficient coverage.
Claims and Litigation
Be sure you ask specific questions about the subcontractor’s history and obtain an explanation. If possible, request five years of claims history from the subcontractor. This information is relatively easy to obtain as they are required to provide it for their insurance renewal every year.
With a better understanding of these crucial areas, you are now in a better situation when prequalifying subcontractors for your next project.
At Nahai Insurance Services, we can assess your unique business and its unique risks, then craft you the right coverage so you can have the protection you need at the premiums you deserve. Contact us to get started on your tailored coverage.