Ten Things a Commercial Property Insurance Agent Should Know

Agents, brokers, MGAs, MGUs, and program administrators have many important factors to consider regarding commercial properties. Verisk Insurance Solutions has developed this “Top Ten” list to ensure a consistent analysis of properties we survey, helping you mitigate hazards, reduce deficiencies, and improve your bottom line.*

1. High-Risk Notification

High-Risk Notification

Our High-Risk Notification Service lets you know immediately about hazards that need your quick attention. When our field analysts conduct property surveys and discover hazards or conditions with the potential for immediate loss, their first call is to you. They’ll follow up with a detailed e-mail and photographs to document the hazardous condition. You can then take prompt action, which may include making recommendations to the property owner to eliminate the hazards.

2. Exposures


Exposure data on adjacent buildings, such as walls, hazards, construction, and distance, can provide critical underwriting information. For example, a property close to a high-hazard operation or adjacent to a storage tank with flammable liquids presents potential risks. You should know about additional exposures, including local wildfire risk, the possibility for damaging winds and water, and how close the structure is to a flood or earthquake zone.

3. Fire Loss Estimates

Fire Loss Estimates

We provide two model loss estimates to let you judge the effectiveness of the sprinkler system in mitigating economic loss to a building and its occupants. Type I Loss is an estimate of the largest loss a building or occupant is likely to suffer from a fire assuming critical protection systems function as expected. Type I Loss is expressed as a percentage of the building’s value. Type II Loss is an estimate of the largest fire loss likely to occur assuming the most important protection system fails. Those two measures can help you understand the extent of risk involved so you can manage it better through hazard and loss analyses.

4. Estimated Replacement Cost

Estimated Replacement Cost

According to industry studies, 75 percent of commercial buildings are underinsured. Our 360Value® Estimated Replacement Cost gives you a quick, accurate assessment of the replacement value of any commercial property in the country. The tool enhances your ability to charge premiums appropriate to your risk, protect your customers with adequate policy limits, and maintain insurance to value (ITV) throughout the life of the policy. You get fast, accurate ITV estimates for your property—along with a detailed breakdown of costs for the building’s actual components, including framing lumber, drywall, paint, and flooring.

5. Risk Improvement Statements

Risk Improvement Statements

Risk Improvement Statements provide valuable information for a particular property. For the building and each occupant, you’ll get specific information to identify hazardous conditions, suggest remedial action, and highlight fire protection improvements and modifications. When using our ProMetrix® delivery platform, you can select one or more Risk Improvement Statements and view the effect of implementing improvements by seeing how much the estimated loss cost will change. The information can help you provide valuable cost-benefit analysis for suggested improvements.

6. Liability Exposure

Liability Exposure

You need information on liability exposures to assess risk at properties you insure. Premises exposures, such as storage areas, balconies, stairs, and handrails, can play a significant role in underwriting decisions. You also need accurate information on other premises exposures, including swimming pools, pets, lighting, fire escapes, and elevators.

7. Construction


A primary goal of underwriting for any property insurance policy is determining the risk of fire. One of the main considerations to make that determination is assigning the proper construction class. What are the materials? What percentage of the structure consists of each kind of material? How much damage will the building sustain when exposed to fire? Properly identifying the construction class can help the underwriter rate the risk more accurately. Verisk defines six construction classes for commercial buildings:

  • Construction Class 1 — frame
  • Construction Class 2 — joisted masonry
  • Construction Class 3 — noncombustible
  • Construction Class 4 — masonry noncombustible
  • Construction Class 5 — modified fire resistive
  • Construction Class 6 — fire resistive

You can find detailed information on the types of materials used and their susceptibility to damage under Verisk Insurance Solutions Construction Briefs.

8. Occupancy


Occupancy considers the following information: numerical ranking of the combustibility of contents, which measures the effect of flammable contents on the structure under fire conditions; numerical ranking of the susceptibility of contents, which measures potential damage to materials or merchandise from the effects of fire, smoke, and water; square footage for each floor level; and sprinkler and extinguisher protection credits.

9. Protection


Public fire protection
Our Public Protection Classification (PPCTM) evaluates a community’s public fire protection services, including the fire department, water supply, emergency communications systems, and community risk reduction efforts. We assign a grade from 1 to 10, with Class 1 representing exemplary protection and Class 10 indicating that the fire suppression program doesn’t meet minimum criteria. A better PPC grade—meaning better fire protection—often translates to lower fire losses.

Private fire protection
Private fire protection systems (fire safeguards at the property) include extinguishers, alarms, and automatic sprinkler systems. Automatic sprinklers are the most reliable and effective fire protection devices available today, provided they operate correctly. As an agent, you want to make sure that your risks are getting full credit for such systems. A working sprinkler system is important not only for the insurance rating but also for the prevention of extensive property damage.

10. Hazards


You should have a good understanding of both common and special hazards. Everyone benefits if you can give insureds recommendations for reducing hazards and improving protection deficiencies at their commercial properties. Knowing the hazards lets you adequately rate the risk based on current conditions. Common hazards can include deficiencies in electrical components, heating systems, and housekeeping. Special hazards can include flammable and combustible liquids, spray-painting operations, commercial cooking, welding, and cutting.


For more information...
...please call Verisk Customer Support at 1-800-444-4554, option 3. For more information on all of our commercial lines solutions, go to Verisk’s ProMetrix for Agents.

*Every insurer and/or agent has its own significant considerations for underwriting and rating. There are dozens of factors to consider. We’ve chosen to focus on ten essential pieces of information that you need to make the right business decisions.