Risk & Business

AIG has laid out a plan to repay the TARP money at a more accelerated pace. Some analysts say this increases the risk for stock holders and profitability. However some say that if AIG can repay 80 plus billion in just a few short years then maybe they didn't need the bailout money in the first place. This debate will go on until history proves out what was right. Anyway you skin it,  AIG is no longer the same company it was. It has however given the financial world an example of what not to do with risky financial products. Until next time be careful out there and know your risks. K

Insurance companies that insure the ships that pass by Somalia are figthting back. They are looking to put together a private Navy to protect the ships from the pirates. This is an interesting risk management technique, which is to control the pirate risk with force. I am wondering how the US Navy will feel about this since this private force will be in their jurisdiction. The way I see it is the insurance companies have a right to protect thier policy holders and their insured risk. This is just a very radical step to increase their risk management and to increase protection. It will be interesting how this works out. Until next time know your risks and be careful out there.  K

A recent study by the National Underwriter reveals that most people that file fraudulent insurance claims do so because they are trying to get back at insurance companies. Previous poor experience and service from the insurance carrier is usually the main reasoin why they do it. Goes to show that you need to treat every customer as they are the most important. you never know what they will do to get back at your company if you treat them wrong. Wake up insurance industry !   Until next time be careful out there and know your risks. K

Lexus Nexus just developed an online insurance information exchange for brokers. They are looking to solve one of the problems in placing insurance and that is information exchanges between brokers and companies. From what I read,  online risk and insurance information about companies will be available  for both brokers and companies to review. This will allow a quicker turnaround of insurance quotes and more competition. As of now this is mainly concentrated on large and mid market business. Small business will not be part of the exchange. Until next time be careful out there and know your risks.  K

There are new rules going into effect in New York on disclosing agent and or broker compensation to clients. Currently insurance companies pay brokers and agents and give them back end bonuses based on premium volume and profitability of books of business. Many in regulation feel this is a conflict of interest because agents and brokers push business to companies that they can make the most income from. Does this hurt clients and do clients care? After almost 25 years of placing insurance and getting paid by commissions I can count on one hand how many times clients asked what I made in thier policy premiums. I usually tell them anyway and most of the time they are surprised at how little we make for the service we provide. Does this system open up the possibility of agents or brokers taking advantage of clients by pushing to insurance companies based soley on profit and not  whats best for cleints,? Yes it is possible, but agents and brokers 99% of the time do whats best for their cli

I am really trying to figure out how the political results in November will effect my industry. Many say that if the Dems stay in power then there will be Federal regulation of insurance. If the Reps win then maybe the States will stay in control of insurance regulation. Either way I feel the winds of change ready to strike the insurance industry. Only time will tell.  Until next time be careful out there and know your risks. K

National Underwriter reported today that employers cost of work comp has dropped significantly across the country but medical costs have risen expotentially over the last few years. This puts the whole work comp insurance market on a slippery slope. I have tracked this in this blog over the last year. My concern for my cleints and business owners is a radical change in work comp costs because of rising medical costs. Something is going to change soon. Insurance companies are not going to continue reducing work comp rates in an environment of soaring medical costs. My prediction is overnight the market will adjust rates and business owneres will see 15-20% increases in work comp premium. I am not sure when this will occur but the current trends are going to force something soon. Until next time know your risks and be careful out there. K

Based on a University of Michigan study on medical malpractice claims, proactively disclosing medical errors actually reduces the claim payouts. Past practice has instructed medical professionals to be mum on mistakes and to let the lawyers and courts fight it out. Well it now looks as if admission and disclosure is actually better. Claim payouts to patients is considerably lessend if the truth is told early and then managed. It goes to show your mother was right, always tell the truth. Until next time be careful out there and know your risks. K

In aviation, pilots have an theory regarding risk managment. The majority of accidents occur because of a chain of events. During this chain, pilots have many opportunities to stop the chain and avoid the accident. The same is true with just about any business. Most accidents occur because of a chain of events. Risk management teaches us to recognize the chain and to stop it in its tracks. Unfortunatley, human beings miss the signs and things occur. If you want to reduce your risk profile, recognize and cut the chain. Until next time be careful out there and know your risks. K

As an independent insurance agent the sight of an approaching hurricane is a unnerving sight. If the storm comes into land it means a time we ratchet up the phone lines and get ready to help clients get claims paid. It usually a time that the insurance industry shines. However the water issue is always the problem. Most people in the way of hurricanes do not have flood insurance. Most of the damage is usually done by flooding. As an insurance agent this always upsets me. If more people would buy flood insurance in exposed areas then the coverage issues between wind and water would be lessened. People would be able to recover quicker. The lesson here, buy flood insurance if you are near the coast. Until next time be careful out there and know your risks. K