Risk & Business

Baltimore has passed an ordinance that any new homes built will have residential fire sprinklers built into the home. This does present added costs to homeowners but in my opinion it is well worth it. Many people die each year in house fires and automatic sprinkler systems should prevent this. However there are some management issues with this. For example these systems have to be maintained and tested regularly to make sure they are functioning. Similiar to smoke detectors if not tested they may be no good. Homeowners will have to be resonsible for their own risk management similiar to business owners. Until next time be carful out there and know your risks.  K

Based on a Weiss report, 77% of coastal properties are insured by just a few insurance companies. Roughly 8 or so for each coastal State that are prone to hurricanes. This presents increased vunerability and a possible insurance nightmare. With very little spread of risk,  these insurers will have to bear a very large burden of storm claims and could affect the national insurance marketplace. It can also affect availability of insurance to others. I hope mother nature keeps the storms away!  Until next time be careful out there and know your risks. K

It seems like everyone is in the transfer of risk by contract game. No matter what contract you sign, if you read the fine print you may be indemnifying people or entities you have no responsibility for. Contracts change the game and may force you to bear all the risk. Read, please read your contracts. If you are not sure what they are saying contact your insurance professional and attorney. The insurance pro can give you the insurance & risk interpretation and your attorney the legal consequences. Until next time be careful out there and know your risks. K

With the financial reform bill just passed by congress, there will be a Federal office to "keep an eye" on State regulatation of insurance. To me this is a precursor to Federal regulation of insurance. It is only going to take one or two insurance companies to make  financial mistakes and the Feds will pounce. Insurance can only be effectively regulated by States because of the need to be close to the consumer. A Federal regulator could never be as close to the insurance consumer as a State regulator is. Stay tuned. Until next time be careful out there and know your risks. K

The insurance industry is still reducing pricing on all lines of insurance for small business owners. Commercial buyers can expect this to continue for near future. With billions of new money being pumped into the industry by investors there is plenty of capacity which drives down the cost of insurance, along with the reduction of claims.  Until next time be careful out there and know your risks. K

The Delaware legislature passed a ban on using a cell phone while driving. This includes two way radios. From a risk management perspective this is a good thing. I myself push the limits on use, as I find myself using my blackberry when driving. The main reason is that business has demanded the instant response. Since I am out seeing clients all day and most of my time is in the car, naturally there are times I use the phone when I am driving. Well, in my risk management "bones" I know this is bad practice. So I agree with the ban but am concerned how it will affect how business is done. Also I am concerned for the many businesses that still rely on two way radio communications (like trucking) and the businesses that serve these industries. Until next time know your risks and be careful out there   K

Electronic record keeping has increased risks for business owners. More liability claims have resulted because the error rate has increased due to electronic records. The need to  risk manage  electronic records has also increased which most business owners do not have time to do.  Until next time be careful outh there and know your risks. K

A terrible tragedy, The Chairman, CEO, Secretary and 3 Board members of Sundance Resources LTD all died in a plane crash in Camaroon. They were conducting business in the area when their plane went down. No one know why the plane crashed at this time. From a risk perspective having key people travel together is risky, even in cars , buses, or trains. Spread of risk is a risk management axiom and it applies also to the most valuble asset, its leaders. Until next time be careful out there and know your risks. K

With medical costs still rising faster than predicted and with more young people dropping coverage due to the economy, individuals can expect about a 20% increase in health costs. This comes at a tough time for most. From an insurance perspective, health costs will not go down until more people pay in to the system and the amount of claims are reduced. This is certainly not the direction of the country. Health insurance should not be called insurance going forward it is no longer following the laws of insurance, where many pay in for the claims of the few. Right now it is few  that are paying more and more for the majority who are making claims. Therefore when State exchanges go into place in 2014 it will resemble more of a Federal/State benefit not insurance. Stay tuned. Until next time be careful out there and know your risks. K

In the insurance industry insurance companies talk a lot about spread of risk. An example of this is diversifying the types and locations of insurance written across many States to avoid one large weather event from affecting a whole book of business. Business owners can also use diversification to reduce their risk profiles. Here are some real world examples: If you are doing business with one or two vendors and a large part of your income revolves around them, then to reduce your risk profile you need to add a few more to spread the risk. If you have all your operations under one building and have the opportunity to spread operations to other locations, do it to reduce your risk profile. If all of your key people are flying to seminars on the same airplane, then have them take different flights. Can you see how this works? The possibilities are endless. Business owners need to hire the right risk professional to help them see the ways to reduce risk profiles. Insurance agents and b

The Gulf spill brings up a real time example of contingent risk. This type of risk is one that many business owners don't see coming. If your business income is largely dependent on others that are out of your direct control, then you have contingent risk. For example, the restaurant industry that depend on the Gulf fisherman who are now docked due to the oil, have a major contingent risk. Without the fishing, restaurants have no product to sell, or may have to go through major unexpected expense to obtain seafood from other areas of the world. Trying to think of scenarios to manage this is very challenging. My attempt here is to start the thought process so business owners are aware of this type of risk. Until next time be careful out there and know your risks. K

NC State Universtiy did a study that revealed that restaurant workers across the country are not practicing safe food handling practices. This inspite of massive training efforts by the industry. The biggest two culpruits are non sterilized surfaces and using aprons and clothing to wipe hands. Both of these practices spread food borne illnesses such as Salmonella and E. Coli. Roughly 75 million people get food poisoning each year. Most don't put together the sequence of events of how they contracted the "bugs". The study did show that posters in the kitchen depicting food handling procedures do make a difference. So all you restaurant owners out there keep the training posters in the kitchen and continue training. There is no way to totally wipe out the risk but surely the risks can reduced significantly. Until next time be careful out there and know your risks.  K

Most people know the story of Chicken Little ("the sky is falling"). In today's world chicken little may be right. Now, let me clairfy. The environment for business owners is more risky than ever. Risk management has evolved into a main discipline because catastrophic events are happening at more frequency than before. So it would be good medicine for all of us to take some advice from Chicken Little. Plan for the worse but expect the best. This is a good risk management thought process and will give you an edge in preparedness. Until next time be careful out there and know your risks!   K

I read an article in the Insurance Journal today by Chris Burand regarding insurance companies posting big profits. Chris, you nailed it!  Though the carriers may assume it is good underwriting, I agree with Chris that it is just low losses due to the poor economy, and luck. When I meet with my clients and talk about risk and insurance, right now their exposures are really low. With risk exposures low, claims are down significantly. Also companies have pushed services to the agent that at one time were done by the insurance carrier. This helps the carrier significantly in their expenses but hurts agents. As the insurance industry continues shift costs down to the agents and has the good fortune of low claims in a shrinking economy, profits will continue for the insurance companies. Until next time be careful out there and know your risks. K

It looks like the insurance coverage that is protecting the businesses involved in th BP oil spill is forcasted to be inadequate to cover the claims. The forecasters are estimating losses in excess of 10 billion, while the insurance contracts total 1.5 billion. I am not sure how this will pan out but you know it is going to be ugly. Also if the Fed increases the liability cap for future oil spill events, then more oil firms will have to buy more insurance and will take a lot of the coverage capacity out of the market. This could trickle down to higher rates in the coming years for all business owners. Only time will tell. Until next time be careful out there and know your risks!   K

In an article published in the N.Y. Times entitled, Spillonomics : Underestimating Risk, http://www.nytimes.com/2010/06/06/magazine/06fob-wwln-t.html, the author discusses the fact that many business , like BP , underestimate the actual risks involved in an enterprise since the type of incident, such as the current oil spill/explosion in the Gulf of Mexico , hasn't occurred previously to them. And since this type of event is so catastrophic it seems hard for us as humans to wrap our minds around the possibility of it ever happening. Also, it seems the government may have unwittingly aided in this thinking since a little know provision in the 1990 law passed after the Exxon Valdez spill capped a spiller's liability at $75 million for a rig spill. For a large company like BP , the prospect of paying out this amount in the future should a spill occur is probably negligible considering the probable profits made from the enterprise. It is worth noting though that BP has

As a practicing risk manager, I have found myself thinking about the pro's who are responsible for the risk mitigation for the games. The task is huge to make sure the games go off without any major incidents. All phases of risk will have to be addressed, property, liability, financial, human recources, security, etc.., too much to mention in this blog. When the games end and the world talks about the competition, the real winners will be the risk managers who worked their tail off to make sure nobody even knows what they accomplished. Thus is the life of a risk manager. Until next time be careful out there and know your risks! K

A recent Supreme Court ruling on "disparate impact" could increase the amount of lawsuits against employers for employment practices claims. This legal case relaxes the time period to bring suit and hinders summary judgement dismissals, both a detriment to employers. Now is the time to make sure you have EPLI insurance. Like insuring your buildings and insuring for liability, this is a must coverage in today's business climate.   Until next time be careful out there and know your risks.  K

Image via Wikipedia Based on an article published on the UCAR website , http://www2.ucar.edu, the oil coming from the leak at the BP site in the Gulf of Mexico may eventually reach the eastern coast of the U.S. Based upon their computer modeling the oil may get caught up in the Gulf's Loop Current and eventually make it's way up as far as North Carolina . While they are careful to say this is based upon estimation and modeling, the fact is it is unknown what sort of environmental damage may occur should this happen and how many and what types of claims may crop up. Hard to imagine the U.S. Government would allow an oil company to engage in this type of drilling without a detailed system of safety procedures in place should an accident of this type occur.

 Vermont and New York are looking to reduce their work comp rates. This follows what we have seen in Delaware and in most States in the country. The reason?  The recession. With 10 % unemployment across the country, work comp claims are down significantly. The caution here, and most insurance company underwriters know it, when the economy picks up and people get back to work, then the claims will come home to roost. When that happens, insurance companies are going to find it hard to raise their rates quickly enough to cover the increasing claims. I think business owners are going to see low work comp rates for a long time. Until next time be careful out there and know your risks.  K

This is my friendly blog reminder to all my clients, update your building and property values and check coverages. Also buy flood insurance.!!   Call us today. we are here to assist in protecting your assets.  K

Here is the question:  is it better to enforce or prevent?  This is circulating around D.C. as the 2011 budget has a major funding reduction in the OSHA Employer Voluntary program. The Voluntary program allows employers to cooperate with OSHA and work out issues on safety and prevention without worrying about getting hit with fines or citations. If this program is eliminated by the 2011 budget , it will be a major disadvantage to many who use it to make their workplaces safe for employees. The word is that the funding will be "swtiched" to enforcement. This approach is surely in the interest of revenue generating and will put employers on the defensive. In my experience most employers try to do the right thing for their employees safety. Many times they have safe workplaces but are behind in the OSHA regs and this could cost them big  if the focus of OSHA changes. Stay tuned!   Until next time be safe out there and know your risks.  K