Risk & Business

Economics 101 teaches that when industries mature and the product becomes commoditized then the companies with the cash will buy up the market. I am seeing this with the independent insurance agencies in our region. Just a few years ago in Delaware we had over 60 or 70 insurance agencies. Today we have 45 or so. This trend is continuing throughout the country also. When I started in the business in the late 80's there were over 100,000 independent insurance agencies in the Nation. Now the estimates are about 25,000. This all has to do with an industry that has no place left to go with it's products for differentiation. With the advent of the internet, service demands, the only differentiating factor between agents, is falling because of online use. The agents National Associations are hoping that the complexities of insurance will keep the need for agents and bolster the industry. Though I agree that agents are needed for consumers and that insurance is a complex transaction, o

Colorodo town was the lastest to allow golf carts on  public roads. The rationale is to be more green. This is a on going trend across the country.  If you are one of the golf cart drivers you better check your insurance coverage. Now that they are allowed on roads are they considered vehicles? Will the personal auto policy respond for coverage or the homeowners policy respond ? You better check before you go crusing down the highway in your golf cart!!  Until next time know your risks and be careful out there. K

Watch out, according to the Insurance Journal, 8% of all drivers in the US drove drunk last year. This is an incredible amount of people, greater than 20 million or so. These numbers do not include the "buzzed" drivers who are slightly impaired. With this knowledge it shows that the roads in America are dangerous. Be careful out there !!   K

Image via Wikipedia Based upon an article in www.insurancenewsnet.com it seems that between what individual states have done to bring down workers compensation premiums and the current recession , insurance companies are being forced to be more selective when writing coverage.  Due to the consistent decline in premiums many companies are being even choosier by geographic region and by classification.  Many states seem to have forgotten that insurance companies are in the business to make a buck and if the profit motive is constantly being whittled away then many insurance companies will have no choice but to pull back in order to protect themselves and their financial position.  Of course this will mean more business heading to the various state funds but these funds are heading for trouble themselves due to their constant rate reductions.  Sounds like a recipe for a heck of a mess.

Workplace fatalities are down 17% Nationwide. This is good news for a change. The recsssion has given me a lot of negative things to write about, but now I finally have some good news to report !   Be careful out there.  K

I read yesterday that States got 48 million from the Feds to police Health insurers and make sure they do not raise health insurance rates prior to the 2014 health exchanges, I am disturbed by this because it implies that Health insurers are on a path to gouge policyholders from now until 2014. I disagree with this assumption. I would agree that health premiums are high but I know that health companies are setting rates based on the costs of medical care. Health rates are high because people's lifestyles and eating habits and the overall cost to provide the best medical care in the world. This type of tactic will force the health insurers to reduce coverage and reduce payments to medical providers. There is no magic formula here. The exchanges will certainly find out in 2014 that rates have to be promulgated on losses and expenses. People are not going to get healthier and medical providers still need to get paid, so I do not see how health exchanges are going to be able to keep pr

Blue Cross and Blue Shield of Delaware is looking for a partner that can shore up their financials, other health insurers in other States are laying off people and looking to merge. Whats going on? Well they are getting ready for the new health care law changes that are suppose to be going into effect in a few years. The law sets new financial guidelines and qualifications to participate in the health exchanges. The law also mandates certain profitability. It also looks like agents and brokers may be cut out of the deal unless thier National associations can lobby for participation. Anyway you slice it, it is change. Only time will tell what will happen. Until next time be careful out there and know your risks.  K

Roughly 5 years ago California reduced comp rates dramatically based on a work comp reform initiatives and a predictive drop in claims and medical costs. This was celebrated by the Small business community as they felt a instant relief from high work comp costs. Now, the California compensation rating bureau says they need to raise rates 29% to avoid a potential comp crisis where market availability could be impacted. As expected this is coming with stiff resistance because of the recession. With this going on, I have think this could be the same outcome in Delaware. A few years ago DCRB rolled back rates and continues to reduce rates because of actuarial mandates and a new legislated work comp initiative. As far as I know to date the rates are holding as claim costs have been down and insurance companies have been able to make money in comp. However in talking to company representatives over the last 6 months, the trend is changing. The comp loss ratios are climbing and the companies

A tropical depression is moving over the BP oil site this week. Why is this news to risk and insurance? Well, mainly because most scientists and risk managers really have no clue how oil in the water will affect the development of strorms and if the storm can disperse oil over a larger area. Even though this is a realtively weak storm, it still may give a good indication of what could happen with a large hurricane. The insurance and risk management community will be watching closely along with the scientists. Until next time be careful out there and know your risks. K

It seems that workplace violence is getting more prevelant. However it has been around since there are bosses and employees. According to experts one of the main reasons employees follow through with violence is because their bosses or fellow employees make them loose respect of themselves. This is very difficult for business owners to risk manage. The only way to is to create a culture of respect and empathy for all employees. This gives owners some emotional credit when they have to discipline or fire employees. Easier said than done....  Until next time be careful out there and know your risks.  K

Privacy regulations are still out there. Small business owners have to be aware if they need to comply. One of the biggest issues is with credit cards and the information gathered by employees. A simple procedural audit and checklist process  with employees can help business owners determine if they are at risk. Consult your insurance and risk professional to help. Until next time be careful out there and know your risks. K

There is a big push by insurance companies to have clients use their pay as you go work comp products. These products have insureds pay comp premium each month based on their payroll. This prevents the need for end of the year audits. These are good products because it allows business owners to pay only what is owed, no more estimated premiums. I think these products will be more the norm over the next few years. Until next time know your risks and be careful out there. K

A recent survey revealed that consumers are not satisifed with the price of insurance. Most feel that it is priced to high. My thought is this, the recent years has seen some of the lowest insurance rates in recent history. The fact that consumers are still disatisfied with the pricing tells me that consumers just don't like paying for insurance at all. Since the majority of policyholders do not have claims, most people pay insurance premiums each year and never use the insurance. I think this is the reason people don't like the price of insurance. The price they are paying is for coverage they may never use. This has plaqued insurance since it's inception. it will never change. Until next time be careful out there and know your risks.  K

My brother who lives in Destin Fla said that the oil is sinking. If you wade out into the surf, up to your chest you can reach down to your legs and feel the oil globs that are sinking into the Gulf. Risk managers who are responsible for maritime businesses in the Gulf know that they will have to deal with the oil spill for a very long time. Regardless of what the media is saying. Until next time be careful out there and know your risks. K

Met life is being investigated for thier practices in settlements to fallen soldiers families. The issue is retained asset accounts. The death benefit is put into one of these accounts and the famlies get a checking account to write drafts. The money is not given to the families in a lump sum. The death benefit sits in the life insurance company's account and earns interest until the famlies write checks. The insurance company is earning high interests rates on this money and paying the families very little. This arbitrage on differential interest rates is being looked at as ripping off the families. The investigation is continuing. I am upset about this because our industry is responsible for putting people's lives back together. If this is the case then Met Life is being derilict in it's duties. Though retained asset accounts are commonly used by life insurance companies, they should be at the decision of the families, not the insurance company. If the families want settl