Risk & Business

Positive quote of the day

2009-07-06T08:51:00.004-04:00

I subscribe to an email entitled "Positive Quote of The Day". I thought I would share today's quote, worth some thought I think. "We come into this world crying while all around us are smiling. May we so live that we go out of this world smiling while everybody around us is weeping". -- Persian proverb

Mandated health insurance on the way?

2009-07-05T09:42:00.000-04:00

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According to an article on BusinessInsurance.com, the Senate is putting together a bill that would mandate health coverage to be provided for employees for all business' except for "small" firms. The small firms would be those with 25 or fewer employees. In the latest health care reform proposal, firms would be required to pay 60% of their employees health premiums or be assessed annually $750.00 for each full time employee not covered and $375.00 for each part time employee not covered. Another bill be worked on would require employers to pay for employees health coverage or be assessed 8% of each employees pay for those not enrolled in health care coverage. This bill also exempts small firms but doesn't specifically state what a "small" firm is. Sounds like the run up to government run health care. Has the private sector messed it up that much that health care now needs to be run by the government? Another question is, can the government efficiently run health care? Lastly, what will this do to business' that will be mandated to provide the coverage or face the penalties these bills refer to? With the way the economy is lately I'm not sure that this won't prevent more workers from being added to the increasingly swelling unemployment rolls. Business are created, after all, to make a profit for those that create the business.

Insurance companies racking up big losses

2009-07-02T08:19:00.000-04:00

It's not widely known by the general public but insurance companies have been steadily losing income the past couple years, mainly due to their self inflicted premium reductions which occur every few years. These premium reductions cause what's known in the industry as a "soft market". This has been the industry's way of increasing individual companies' policy holder share through premium reductions of 20 to 40%. The problem is that in the midst of their soft market the industry has been hit with some large losses and one of their primary sources of income, investments, has been severley damaged due to the recent economic downturn. They are in a bind currently due to this economic downturn since their usual remedy was increasing premiums. This remedy can't be their quick solution since many business are struggling with their own economic difficulties and can't afford the increased premiums. An article in Property-Casualty.com states that property & casualty insurers posted a $1.3 billion dollar loss for the first quarter, their largest loss in over 20 years. Looks like the industry has some difficult waters to navigate in the next few months.

Jackson's death and the event cancellation insurance nightmare

2009-06-30T07:50:00.002-04:00

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It seems that the recent death of Michael Jackson has precipitated the start of not only one of the largest ticket refunds in history, but also raises the added issue regarding the payout of the event cancellation coverage purchased by the promoter, AEG Live. Insurer's had issued a policy, with a premium of $18 million, to cover the cancellation of the concerts in the event of an accident. The policy was also supposed to provide coverage if medical issues should arise causing cancellation. The problem is the wording of the policy and the actual cause of the singer's death. It is supposed to take up to several weeks for the reports to come back with a definitive answer on the cause of Mr. Jackson's death. Imagine the cost to the promoter if the policy should end up being denied. It's being written that they sold tickets with a face value of $85 million, gave Mr. Jackson $20 million upfront and spent close to $10 million on rehearsal costs.

AIG head steps down-too much government intervention?

2009-06-16T08:00:00.002-04:00

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Recently the head of AIG, Edward Liddy, announced his intention to step down from the company's leadership post. As has been widely reported, AIG was one of the first companies to receive "bailout" money from the government and since then have been widely criticized for it's executive pay packages, bonuses, and other forms of compensation to it's executives. I guess when a company that large hits hard times due to numerous strategic "errors" on the part of it's leadership, and then receives a large infusion of cash from the federal government, it deserves the kind of scrutiny and micromanagement it has been under from the feds. However, there's a problem developing, not only at AIG, but at many other companies that are receiving federal funds. The problem is the compensation at these firms amounts to $1.00 a week. How are you going to get someone with the savvy and experience to come in and run these major corporations, and put up with the "hyper" scrutiny from the feds, in order to steer said companies to a more sound financial footing?

Stippers, private contractors and workers compensation - what's the connection?

2009-05-28T10:14:00.003-04:00

Read an article today regarding a strip club out in Montana that tried to claim that it's nude dancers weren't employees but simply private contractors, thereby negating the need for the club to carry workers compensation. It seems the club required it's dancers to pay a fee for the use of the stage and various other fees for types of dances performed. I guess they figured this would somehow create the impression that the dancers were indeed private contractors and not employees. Well, the Montana Supreme Court found that this arrangement was designed solely to "circumvent the Montana wage laws" and benefit the club financially. The club ended up having to pay back to the dancers money paid to them. I cite this case because many contractors out there seem to think they can do the same thing by claiming their employees are actually sub contractors when they are in reality employees that are required to be covered by workers compensation. Many times they can get away with it, but if something should happen on the job requiring medical treatment, the employer can find themselves in quite a "pickle" if found out by their respective state workers compensation authority. Many times they can be required to not only pay medical expenses but also substantial fines. In the end it can cause more trouble than it's worth.

Economic stimulas money to benefit contractors?

2009-05-12T07:28:00.003-04:00

The American Recovery and Reinvestment Act (ARRA)is sending down approximately $64.1 billion to the states. This money is targeting transportation infrastructure projects as mandated by the House Committee on Transportation and Infrastructure. This money started flowing in March initially with the release of $27 billion to states for transportation related projects. This is good news for contractors, especially with the general slowdown of housing related projects. The caveat is that this money can only go to existing plans already on the boards in the various states, not for new projects they might wish to undertake. Past experience has shown however that there are usually some types of projects waiting in the wings since the state governments have to keep their planning personnel gainfully employed. Keep an eye out, hopefully this can have a positive impact in your area and brighten prospects in a slow job market. At least until the economic engine gets some life back into it.

Contractor's have sufficient coverage?

2009-05-07T13:47:00.004-04:00

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An article I read recently in National Underwriter pointed out a potential gap in coverage for many contractors. It seems that some drywall used in the repair of homes from damage caused by Hurricane Katrina and other hurricanes/storms, has been the culprit in lawsuits being filed on the behalf of homeowners whose homes had the been repaired using the specific type of drywall that was purchased through a German firm from China. It seems that drywall gave off a strong odor and caused damage to electrical equipment and copper piping when exposed to heat and/or moisture. The potential gap in coverage is the lack of environmental coverage in the contractor's policies. The attorneys are filing against everyone from the importer to the contractors. You can't cover every potential claim but this illustrates how important it is perform a proper risk management survey when putting together coverage for your business.

Time for a workplace safety checkup?

2009-04-22T10:34:00.004-04:00

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When was the last time you took a few minutes to perform a quick safety inspection of your workplace? You might be a small business owner and don't have a risk manager on staff so it falls to you to ensure that there are proper safety procedures in place and risk is mitigated for customers and employees alike. After all, a simple slip and fall can have a disastrous effect on either your workers compensation policy, in the case of an employee mishap, or on your general liability policy, should a customer suffer an injury. Take a few minutes to inspect all signs for emergency exits, fire extinguishers and alarms to make sure they are clearly visible/lit in the event of an emergency. Also, look for trip and fall hazards, wiring looking frayed or worn, and make sure you have surge protectors installed. It might not sound like much, but just a few minutes paying attention to safety related details can save you a bunch of premium dollars down the road.

Don't get cancelled for nonpayment of premium

2009-04-13T09:40:00.002-04:00

Just a word of caution to make sure that you don't let your policies end up being cancelled due to nonpayment of premium. During these tough times many business owners are choosing to not pay their premiums, which is usually the case when finances are being juggled. The problem with this is that when times turn around and the business owner can afford to pay their premiums they may have "burned some bridges" as far as having the opportunity to go back to their previous company to obtain coverage. If there have been too many incidences of payment problems many insurance companies will opt to not offer the coverage again in the future. Also, when your agent approaches other companies that might be willing, they are asked if the proposed insured has had any pay problems or cancellations due to non payment of premium. Take the long term view when facing financial difficulties and try to work with your agent to cut back as much as feasable in your coverage, allowing you still to cover essential areas, while still saving some dollars in insurance premium. Depending upon the area of the country you live in, the insurance market might be somewhat limited and you might not have as many options available. Try and take the emotion out of this process and focus on pragmatic, practicle solutions. Your agent will be willing to help.

National Insurance Consumer Protection Act on the way?

2009-04-03T07:37:00.003-04:00

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In their dizzying rush to enact more federal legislation in the wake of the financial meltdown, congress has recently introduced a new bill, The National Insurance Consumer Protection Act (NICPA). Congresspersons Melissa Bean of Illinois and Ed Royce of California stated in their introduction of the legislation, "The meltdown of insurance giant AIG and the broad crisis in the nation's financial system serve as proof of the vital need for regulatory reform of the insurance sector. Numerous bipartisan reports on the nation's capital markets have noted that insurance remains the only major segment of the capital markets not subject to federal regulation and reform is needed." While there are pros and cons on both sides of the argument regarding this legislation it just seems that Congress needs to keep their eye on the ball right now. Did the insurance market put us in the mess we're in right now? Although AIG was a major factor, it's only fair to point out that it wasn't their insurance arm that was the root of the problem. It's also fair to ask the question, do we need more federal regulation? Although they could probably work together more cohesively, can't each state be responsible for insurance regulation in their own backyard?

More Delaware workers compensation decreases on the way

2009-03-19T06:49:00.002-04:00

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According to the latest circular released by the Delaware Compensation Rating Bureau, (DCRB), after a period of review the rates in Delaware for workers compensation have been decreased an average of 9.74% for residual market rates and 11.3% in voluntary market rates effective this past December 1st. Obviously, with the state of the economy locally, this can't hurt. Hopefully with all the stimulas money coming out of Washington some of it will trickle down to our State and put our local contractors to work, either through infrastructure improvements needed or get the banks lending again and create a possible increase in housing construction.

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Off the wall insurance policies

2009-03-11T07:44:00.005-04:00

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We've heard of many different insurance policies covers the gamut from auto, home, life, etc. but I recently came across an article detailing some strange ones. The article listed coverage for a coffee taster who had his tongue insured for 10m Euro through Lloyds of London. Some other "different" insured "items" - America Ferrera, of Ugly Betty, has her smile insured for $10m; Rolling Stone's guitarist Keith Richards fingers; loss of chest hair that could adversely impact a person's image or career, which would have to be verified by a panel of trichologists. Also insured were - a wine maker's nose and a professional Santa's beard; a film company that took out coverage insuring against the possibility of an actress falling in love and getting married during the length of her contract and lastly Lloyds of London at one time provided coverage for movie audiences against the possibility of death due to excessive laughter. I must have missed those films, must have been REALLY funny?

General liability exposures

2009-02-26T18:03:00.002-05:00

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Not exactly exciting reading, to be sure, but I thought it might be useful to review the standard headings in an insurance contract that identify the specific types of general liability (gl) exposures. There are four standard areas of commonly referred to gl exposures - Premises and Operations - the premises liability arises out of injury and damage caused by conditions that exist in and around an insured's premises and the operations liability refers to liability for injury or damage caused directly by the insured's business operations while those operations are taking place; Products and Completed Operations - refers to injury caused by an insured's product, either made or sold by them and completed operations refers to work that has been finished or completed, given to the client and put to it's intended use; Contractual Liability - this exposure involves the insured's agreement in a contract to take onto itself specific legal liability; Independent Contractors - when a person or organization hires a contractor to perform work for it, it may expose themselves to liability for injury or damage caused by the contractor to third parties in the course of the work being performed.

No bailout money for insurance companies

2009-02-11T06:16:00.003-05:00

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According to the ground rules established by the Obama administration, insurance companies will not be receiving any of the money from the federal government's bailout program. Only financial instituitions that are federally regulated will be eligible to receive funds. The government has a "financial stress test" that will be applied to banking institutions under the plan, which doesn't translate to insurance companies. Apparently a few insurance companies did apply for relief under the plan. That being said, the federal government has another program set up that will allow insurers to sell off troubled assets to the private market using government guarantees. I guess that means that where there is a "plan" there is a way?

Workers Compensation cost containment strategies

2009-02-06T13:55:00.005-05:00

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I recently came across a post on a insurance blog, link above, that discussed the usage of peer group pressure being brought to bear to help decrease workers compensation costs. The idea was to divide your employees into groups to start a competition among them to see who can have the lowest workers compensation claim incidence rate. The article suggested monthly prizes, recognition, etc, to be used as a form of incentive. Obviously a larger motivating factor, often unspoken, would be the peer pressure among team members to keep other members incidence rates to a minimum. Those employers with not enough staff to divide into teams can use the same concept on an individual basis. Each employee would still strive to keep their incidence rate down so as to decrease the chances of having their fellow employees look down on them since results would be publicly posted monthly. There are many good ideas out there, this just being a good example. Please feel free to reply to this post if any one else has insurance premium savings ideas.

Additional Insured Endorsements-Is the Coverage There?

2009-01-29T11:43:00.005-05:00

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Something that insureds should be aware of, contractors in particular since this practice is widespread in their industry, is the fact that Additional Insured endorsements can often reduce the actual coverage available to them, the actual Named Insured. In a recent article in The Insurance Journal, Chris Boggs, the author, sited the case of a large construction company that required one of it's subcontractor's to add them as an additional insured to the sub's general liability policy. Subsequently, the subcontractor hired another subcontractor to complete some of it's responsibilities. This is where it gets hairy. The subcontractor hired by the original subcontractor had an employee injured on the site by another contractor, also hired directly the the large construction company. The employee's company filed suit against all parties, the main contractor and also the subcontractors involved in the event, either directly or indirectly. The crux of this case is that the subcontractor that hired the injured subcontractor had to have their general liability policy respond, reimburse, the construction company that hired them, for insurance costs related to their insurance company's settlement of the claim to the injured party. For more detail on this case please go to the link provided under the title. The main point of all this is that all too often, in the course of business, we take for granted what is thought of as a standard request, in this case asking to be added as additional insured to a policy. It is important that you discuss this with your agent to ensure you have your bases covered and not take your coverage for granted.

Some things to consider to save insurance $$

2009-01-21T09:24:00.006-05:00

Image by Jake Wasdin via FlickrDue to the upheaval in the economy these past few months many business owners are taking steps to save money where they can. It might be a good idea to take a critical look at your current insurance coverage. While, obviously, your insurance is a vital and important part of your business, there may be some areas where you can cut back for now until the economy turns around. One area to consider might be your current vehicle coverage. Do you have multiple vehicles? If so, would it make sense to take some off the road for awhile? Also, keep a closer eye on your payrolls, as they can affect both your workers compensation and general liability premiums. You can always request a mid term decrease in payrolls and sales from your insurance company. Just be prepared to provide proof. Remember though, since you are looking for ways to save on your insurance premium, others that you do business with, subcontractors, other vendors, are doing the same. Take the time to make sure that they aren't cutting back in areas that are important, such as liability limits. There are smart ways to save insurance premium dollars, just make sure you don't cut yourself short in areas that are important.

Employers need to pay attention to reduce workers compensation costs

2008-12-18T18:58:00.000-05:00

Image via WikipediaWhile recently reading the current issue of an insurance industry trade magazine, American Agent & Broker, I came across an article discussing workers compensation. The article, entitled "Workers' Comp: 7 Biggest Mistakes", discussed proactive steps the employer should consider in order to increase the chances of the injured worker returning to work quickly, and also cut down on the cost to the employer. Some steps mentioned are - meeting with care providers to discuss the care of the employee; having regular on site file reviews of the injured workers case; using a medical doctor of their choosing to review medical records and reports instead of relying solely on the adjuster to make medical decisions, and simply staying involved with the process from start to finish. They did throw in one other step that's quite important, asking for and receiving assistance from your agent. While the agent cannot get involved in the actual adjusting of the claim, they can ask questions and seek clarification on many issues from company claims personnel that you, the employer, might not have access to or knowledge of. The important thing to remember is to stay involved. It can certainly help to save you money, on workers compensation claims costs and expenses, in the long and short run.

Outgoing Delaware Insurance Commissioner orders more workers comp rate cuts

2008-12-02T07:01:00.000-05:00

Image via WikipediaMatt Denn, the outgoing Delaware Insurance Commissioner, soon to be Lieutenant Governor, has ordered up additional cuts to the Delaware workers compensation rating structure. According to the insurance department's website, "The latest order by Commissioner Denn requires that the state’s workers’ compensation insurance companies discount average premiums by 6 percent each year in 2008, 2009, and 2010, and by 5 percent in 2011." Based upon their information, with these rate cuts and previous cuts already put into place since November of 2007, the total decrease in rates will add up to 45%. This is certainly good news for the Delaware business owner, especially in these lean economic times.

Premiums at the bottom yet?

2008-11-17T19:02:00.004-05:00

Image by ClevelandSGS via FlickrBased upon anecdotal evidence seen by those of us in the agency workforce, and upon articles such as the recent one in PR-inside.com, it seems that the insurance industry may finally be nearing the end of the nearly 2 years of steady pricing decreases. The article states that " In the first half of 2008 insurer profits declined 57 percent, the industry posted its worst first-half year underwriting performance since 2002, investment returns declined by 18 percent and net written premiums for the industry as a whole were stagnant. Catastrophe losses were double the average of the past decade, " reports Lockton. The article also pointed out that " The repercussions from the big hurricane losses and the meltdown in the financial markets are just beginning to be felt in the property insurance market. Insurance buyers should prepare themselves for a period of uncertainty and volatility in the property insurance market, " says Jim Rubel, Lockton Executive Vice President in New York. Also, a recent article in the FinancialPost.com quoted Charles Brindamour, chief executive of ING Canada Inc., who stated "Mounting losses in the market are taking a toll on insurers' balance sheets and may soon hit clients' pocketbooks via higher premiums." It seems that the business owner shopping for pricing efficiency might want to shop now as signs are beginning to point in the direction of pricing increases in the near future.

New Delaware Insurance Commissioner elected

2008-11-05T17:15:00.000-05:00

Karen Weldin Stewart was elected as the next insurance commissioner for the State of Delaware yesterday. Ms Weldin Stewart was elected after her third try at the post. Members of the local Delaware agents association were able to meet Ms. Weldin Stewart during the campaign and I for one came away with a favorable impression of her knowledge and attitude towards the industry. Many of us hope she addresses the workers compensation system, mainly the significant decreases in premium without any sign of the corresponding managed care system that was to be in place. Some states, Florida chiefly among them, have been addressing insurance coverage issues such as flood and other hazards, by mandating the pricing and amount of profit insurance companies are able to charge/earn. While this can work as a populist pitch during the campaign season, they can only serve to drive away insurance companies, something a small state such as ours can ill afford. Here's wishing Ms. Welding Stewart the best of luck during her term.

New rating agency being considered

2008-10-21T10:20:00.000-04:00

Image via WikipediaAccording to a story in the National Underwriter, the National Association of Insurance Commissioners, NAIC, is considering forming a new rating agency, which would perform much of the same functions as the current 3 longstanding private agencies. The association states that this was being considered prior to the current situation, in which the 3 longstanding agencies responsible for issueing ratings are being criticized for failing to not properly assess companies that have run into trouble due to their sub prime mortgage investment exposures. I would think, with the current slow response in downgrading those companies that ran into trouble, coupled with the high ratings these companies enjoyed prior to the current financial mess, that a serious self audit by the rating agencies currently providing these ratings would be in order. The whole premise behind the existence of the rating agencies is to provide guidance to investors and clients alike when choosing to do business with an insurance company. The NAIC states that they are currently in the very beginning phase of researching the viability of such an agency and will provide further information as they continue develop the concept. The NAIC states that the new proposed agency would be similar to the current Interstate Insurance Product Regulation Commission.

National Flood Insurance Program out of money?

2008-10-16T15:43:00.000-04:00

Image via WikipediaA recent article in the Philadelphia Inquirer, link above, highlighted the fact that the National Flood Insurance Program is out of money. Congress has apparently been looking for ways to fix the program the past couple of years, but in the absence of a fix, recently voted to extend the program as is through March 6th of next year. The article went on to say that the program is currently $17.3 billion in debt to the U.S. Treasury, which doesn't include the bills coming due for Hurricanes Gustav, Hanna and Ike, assuming the rest of the hurricane season passes uneventfully. Once losses from the aforementioned hurricanes are added to the total, the total taxpayer bill is in excess of $20 billion. You might recall a previous post here dated September 3rd, 2008, discussing increasing federal involvement covering flood related hazards on the coasts. As described above, the more the government is involved, the more the U.S. taxpayer has to ante up to cover the expenses. Private insurers have to set aside money to pay claims, called reserves, which the government doesn't do, instead relying on the largesse of the U.S. taxpayer. Private insurers are set up to come up with programs to cover specific perils, price them accordingly, and pay covered claims. I'm not even going into detail about how the rest of the country is subsidizing those of us who have chosen to live in a coastal area and are required to purchase flood insurance. Just some food for thought.

Important to notify insurance company of potential liability claims

2008-09-25T10:07:00.001-04:00

When trying to manage their insurance policies, many business owners make the decision not to turn in potential claims and decide to take care of them on their own. By paying for small claims, such as property damage, etc, they strive to keep claim frequency down and in turn keep renewal premiums down. One area of insurance they should not try to manage though is potential liability situations/claims. Most policy conditions require prompt notification of any potential liability claims to the insurance company and if a claim isn't turned in promptly, the policy language does note that the company can deny a claim due to late notification. It's important to do this early on since information/memories are still fresh and it gives the insurance company time to completely investigate the potential claim. The potential for a liability claim is most likely the small business owner's greatest area of risk, whether they operate a restaurant, cleaning service or any other business that offers a product. While the average business owner strives to keep claims down, they aren't doing themselves any favors by trying to manage potential liability claims since the possibility exists for claim denial and possible long term financial consequences for the insured.