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Vortex Snow Insurance

Discussion in 'Business Fundamentals' started by ColumbiaLand, Sep 12, 2010.

  1. ColumbiaLand

    ColumbiaLand Senior Member
    Messages: 790

    www.vortexinsuranceagency.com I find this type of coverage interesting and wondering about the cost. Has anyone every used this specific company or anything like it. serious
     
  2. deicepro

    deicepro PlowSite.com Addict
    Messages: 1,124

    x2.......I'm thinking too good to be true......lots of fine print??
     
  3. hoskm01

    hoskm01 Senior Member
    from AZ
    Messages: 475

  4. elite1msmith

    elite1msmith 2000 Club Member
    from chicago
    Messages: 2,762

    i would think that it costs a pretty high dollar value. but i cant say for sure

    If you find the correct balance of per push and seasonal accounts, and sell those that way , it really doesnt matter what winter does, you make money both ways
     
  5. NorthOfEden

    NorthOfEden Junior Member
    Messages: 6

    From what I've read, it looks like it costs 1k for 10k of coverage. You can hedge either way, under a seasons snow accumulation or over seasons accumulation.
    Haven't thought about purchasing, but last year one of the client reps mentioned that a competitor was claiming that the client wouldn't have to pay for services after 50" accumulation because of "snow insurance".
    So someone has hedged snow.
    I'd be interested in knowing if anyone else has encountered hedging as a sales tool?
     
  6. elite1msmith

    elite1msmith 2000 Club Member
    from chicago
    Messages: 2,762

    yeah but how is that 10% figured? if we both want 10k in coverage but i want mine to occur at 35 inches and yours at 45 inches and up, then i would think my rates would be higher, plus they said they pay X per inch....i would have 10 more inches on top of you.

    I would really like it if the moderators, got in touch with this company and posted more info...HINT
     
  7. deicepro

    deicepro PlowSite.com Addict
    Messages: 1,124

    I wonder if this is a government insurance, you know like the farmers, they always get checks, if so where do I sign up:laughing:
     
  8. hoskm01

    hoskm01 Senior Member
    from AZ
    Messages: 475

    The Farming industry only gets checks with disasters and such. "Crop insurance" is not a government entity.
     
  9. ForestEdgeSnow

    ForestEdgeSnow Senior Member
    Messages: 136

    So if I have contracts that are seasonal and contracts that are pay per push when would I get a check? Do I get reward for setting up my business for success. When my kids are old enough will there be any risk in life? How do I use this insurance to set up my business for success and how would I market this to my costumers so that it is cost effective for my business and my costumer. I will give them a call tomarrow thanks for the post.

    Justin
     
  10. EvenCutLawnCare

    EvenCutLawnCare Senior Member
    Messages: 207

    Of if the government is paying them NOT to farm their land..........
     
  11. Neige

    Neige Sponsor
    Messages: 2,197

    Here are 3 examples I have recieved recently.
    #1 CWB is about eliminating risk for you and your clients.

    One type of risk comes in the form of all-inclusive contracts.

    These types of contracts are nice for snow contractors because they create a guaranteed cash flow. They also protect your clients by allowing them to properly budget for their snow expense for the year.

    We have talked about how to protect these accounts on the high side for all-inclusive contracts by buying protection for those extreme snowfall years.

    Another way for you to build better client relationships on all-inclusive contracts is by offering them a rebate for those years for less than average snowfall.

    This is fairly simple in the way it works:

    In addition to your regular contract…offer them an additional option.

    For a certain cost, they can purchase protection if it is a below average snow year. (CWB will provide you costs for this)

    You collect the premium from the client and use that to purchase the protection through CWB.

    If it is a below average snowfall year, you collect from CWB and use that money for the rebate.

    A financial example would be:

    You have a $30,000 all-inclusive contract

    Average snow fall is 40 inches.

    The client feels that anything over 25 inches is acceptable for the contract.

    The client opts to purchase protection for anything under 25 inches for $2,500. (total payout would be $10,000…so this would be a total of $7,500 in protection)

    If it snows less than 25 inches that year, you would rebate the customer the $10,000 (in essence, they regain their $2,500 and profit $7,500.

    This is a 25% rebate. ($7500/$30,000 = 25%).

    This helps to align your interests with your client by rebating them in a light winter while still maintaining a high margin

    As a contractor, you have won in a number ways:

    You have positioned yourself as a partner to your client

    You still billed $30,000 for the account

    You get to keep a higher percentage of the $30,000 collected from the account

    The client wins a number of ways as well:

    They paid 25% less for the contract

    They have a contractor as a partner….rather than just a vendor.

    They received the services you provided and feel great about them.

    This is just one another application for utilizing CWB services. On all inclusive accounts, you could combine a rebate program and protect your business from losing money in extremely high winters. Next week's newsletter will cover how that works.

    Call CWB today to find out more about eliminating risk for you and your customers.

    Best,

    Jeff Hodgson
    Chicago Weather Brokerage, LLC
    30 South Wacker Drive, Suite 2200
    Chicago, IL 60606
    P: 312.466.5666
    C: 574.457.6792
    jeff.hodgson@cwbrokerage.com
    www.cwbrokerage.com


    #2 Chicago Weather Brokerage is about eliminating risk for you and your clients.

    You have read about how we are able to eliminate that risk on seasonal basis. But what about monthly?

    If you OR your client was only worried about a certain month(s), you can execute trades on a monthly basis for November, December, January, February or March. You can trade any of those individual months.

    Some reasons contractors or their clients would trade monthly:

    They are mostly pay per push and while they live in cities where they know snow is coming (January through March is always good), they don't know when it will start. So, they are looking at protecting revenues in November and/or December.

    Their area could have higher than normal snow fall in the first part of the winter and they will lose money on all-inclusive business with any snow fall in March.

    In an above average winter a contractor with pay-per-push clients could add protection for the later months

    Clients that bought protection and the snowfall exceeded the protection they bought…so they may buy more protection in the final months of the season.

    Again, protecting your business, or your clients business, can be approached differently. CWB provides flexibility so you can make the decision that makes the most sense to you, your business and your clients.

    From a strategic perspective, protecting the entire season, or per month is based in individual needs and preferences.

    A financial example of how this works is as follows:

    Remember….everything CWB does is based on inches and probability. Therefore, while the investments and payouts are similar, the inches will vary drastically in this scenario. As they should…they are based on each month and therefore, the payout per inch may appear greater.

    Average Snowfall is 9.3 inches in a certain month in your area (in this case Detroit)

    The concern in this case is that it will snow less than 5 inches

    Last season you could purchase $10,000 of protection for less than 5 inches of snow in the Month of February for $3,680

    If it snows less than 5 inches, the contractor receives $10,000 (or a $6,320 net gain)

    You can purchase as much protection as you need based on your concern of risk each month.

    This strategy can be used for any winter month to protect you and your clients for excessively high or low snowfall. Everything is based on the average snowfall in your area (see inset to the right for explanation of measurement stations.)

    This is just another example of the flexibility of the products that CWB can provide to protect businesses, both yours and your clients.

    Call CWB to discuss how our products can work for you and your clients.

    Best,

    Jeff Hodgson
    Chicago Weather Brokerage, LLC
    30 South Wacker Drive, Suite 2200
    Chicago, IL 60606
    P: 312.466.5666
    C: 574.457.6792
    jeff.hodgson@cwbrokerage.com
    www.cwbrokerage.com

    #3 Chicago Weather Brokerage is about eliminating risk for you and your customers.

    As we presented last week, that could mean creating a program that offers rebates back to your all-inclusive accounts in low snowfall years.

    Another approach with all-inclusive contracts is to eliminate your risk from extremely high snowfall and to offer you customer the option of a rebate in light snowfall seasons.

    THIS COULD WORK AS FOLLOWS:

    Eliminating high side risk (extremely high snowfall seasons):

    Calculate your all-inclusive pricing as you normally would (generally this is done by figuring your labor, equipment, materials, profit, etc per event and then pricing based on the average number of events)

    Determine what you would bill for higher snowfall levels above average, including profit (ex. In a 50 inch market, you may want to protect at 70 inches and 80 inches or above)

    Contact CWB to get costs for above average snowfall levels in increments (70 inches and 80 inches suggested above)

    Include these costs (including your normal profit) in the proposal to client.

    It is up to each contractor on how they position this to the client, but this is a sales opportunity. As a cutting edge contractor, your are assured of being in business in extreme years, because you have financial protection.

    Eliminating down side risk (providing a rebate to your clients.)

    As presented last week, know your numbers

    CWB can provide you pricing for low snowfall protection to cover the cost of a client rebate

    Provide your clients with an option to purchase this rebate protection

    FINANCIAL EXAMPLE:

    Average snowfall is 50 inches and your pricing for a certain all-inclusive account is $100,000 for the season. /p>

    You are concerned about snow fall exceeding 70 inches for this account

    Purchase $20,000 of protection from CWB for 70 inches and above for a total cost of $7,000

    Purchases $10,000 of protection from CWB for 80 inches and above for a total cost of $2,500

    The proposal to customer now becomes $109,000

    Let's assume it snows 80 inches in total during the course of the winter. You still collect $109,000 from the client and receive a $30,000 payment from CWB.

    You now have collected $139,000 ($109,000 client + $30,000 CWB) in total revenue which ensures your profitability for all-inclusive accounts, even in high snowfall seasons.

    Including the rebate:

    As presented last week, you could offer a rebate back to the client for a less than average snowfall year.

    Perhaps the client wants to protect against snowfall that is less than 25 inches.

    You purchase $30,000 in protection from CWB for the client for less than 25 inches at a cost of $6,000.

    If snowfall is less than 25 inches, CWB pays $30,000 ($30,000 payout - $6,000 investment = $24,000 net rebate or 24%)

    Total proposal to client is $115,000, but now you are protected and so are they. Finally, a product that can align your interest with your clients in below-average, average and above-average snowfall seasons.

    There is a reason many contractors, both big and small are working with CWB this season. CWB can help you grow your business while reducing your risk.

    Certainly, this may make you look at your overall pricing model on your all-inclusive contracts. Many contractors have built in a high side cushion for their all-inclusive contracts. This cushion could cover some of the cost for protection, therefore changing the example above.

    In the end, it comes down to knowing your numbers. CWB can help you work through each scenario, and allow you to protect both you and your clients. .

    Best,

    Jeff Hodgson
    Chicago Weather Brokerage, LLC
    30 South Wacker Drive, Suite 2200
    Chicago, IL 60606
    P: 312.466.5666
    C: 574.457.6792
    jeff.hodgson@cwbrokerage.com
    www.cwbrokerage.com

    There you have it, gives you an idea. I have never used it.
     
  12. Vortex

    Vortex Junior Member
    Messages: 6

    Hello group.

    The costs vary by location and the insurance threshold, but are generally 10-18% of the aggregate limit of the policy. Example for Allentown, PA. If snow exceeds 40", policy pays $1,000 for every inch above 40", up to $29,000. Premium is $3,494.

    Have questions? Feel free to give me a call.

    Rob Holmes
    Vortex Insurance Agency
    SIMA member
    913-253-1250
    2008 Silverado HD Duramax (no plow!)
     
  13. IMAGE

    IMAGE Sponsor
    Messages: 1,741

    Does USM (or any other national) use your (or another) insurance policy? I know USM has a clause where they add or subtract to your contract value, based on % snowfall average for your location. Is this how they cover thier ass?

    Can you provide a dollar value for amount of $ you have insured? (I want to know how large of a company you are)

    How long have you been in the snow insurance business? (I want to know your history)

    What do you use for determining the "average" or "trigger" number of inches for a certian location? (NOAA? Weather.com? Etc... ?)

    And finally, as a contractor with many small seasonal (residential) contracts, how can you help me hedge my accounts that are only valued at $600/each per season (seasonal price).
     
  14. Vortex

    Vortex Junior Member
    Messages: 6

    Does USM (or any other national) use your (or another) insurance policy? I know USM has a clause where they add or subtract to your contract value, based on % snowfall average for your location. Is this how they cover thier ass?

    I cannot comment on any use of our products by any current or potential client. Sorry.

    Can you provide a dollar value for amount of $ you have insured? (I want to know how large of a company you are)

    Our insurance business is fairly new (rolled out in Jan '09). Vortex is a subsidiary of another company that manages weather risk, through weather derivatives, around the globe and routinely manages well over $400 million of weather exposure each year. The insurance business offer policies in the U.S. only. More information on the history of the company is available on our website.

    How long have you been in the snow insurance business? (I want to know your history)

    We are relatively new to the snow insurance business. We attended the SIMA Symposium in Louisville in 2009 to learn about the snow removal business. This year, I was a speaker and a panel discussion participant. Interest this year has been quite high

    What do you use for determining the "average" or "trigger" number of inches for a certian location? (NOAA? Weather.com? Etc... ?)

    We use National Weather Service locations for the most part. We do not use any private meteorological firms to establish claims. The National Weather Service acts as a disinterested third party.

    And finally, as a contractor with many small seasonal (residential) contracts, how can you help me hedge my accounts that are only valued at $600/each per season (seasonal price).

    Rather than write a policy for each contract, we could write a single policy for the total exposure of all contracts. The insurance policy is independent of any other contracts.

    Thanks for the questions. Please feel free to visit our website or call me if you have any other questions. I hope to pop in to these forums from time to time but the quickest response is via the phone.

    Thanks,
    Rob
    Vice President / Meteorologist
    Vortex Insurance Agency
    www.vortexinsuranceagency.com
     
  15. Superior L & L

    Superior L & L PlowSite Veteran
    from MI
    Messages: 3,039

    Very interesting stuff !
     
  16. hoskm01

    hoskm01 Senior Member
    from AZ
    Messages: 475

    Rob,

    Thanks for representing your company here in a straightforward way. You bring an interesting product to the table.