Risk & Business

With the July reinsurance renewals fast approaching, many are wondering if the commerical insurance market will harden up. Most commercial insurance buyers are expecting rates to flatten but not go up. If the insurance industry thinks it can increase rates rapidly to make up for the years of underpriced exposures, they need a reality check. As I meet with small business owners each day, they are struggling to keep the doors open. Their cash flow is tight, and work is limited. Their, customers are thin and orders are spotty. The economy is just not rebounding as now indicated from recent economic reports. The best thing the insurance industry can do is to hold things steady. Allow the economy to pick up, then gradually adjust rates to proper levels.  Well, I know this is not how it will play out. Competition will continue to cause rate reductions until losses build to such a point that the industry has no choice but to "knee jerk" rates back up which means another burden on sm

With the passage of the Dodd Frank bill to prevent another economic meltdown , directors and officers find themselves under the microscope. With the passage of the bill there is a whistle blower clause that gives a hefty reward for insiders giving up info on how the directors and officers are running their companies. The problem with this is that the reward is large enough that it could cause fraudulent claims just to collect. Now company leaders are going to have to risk manage the possibility of defending themselves from these whistle blower claims. Buying insurance is one way to transfer the risk but there is limited coverage out there. Full operations and financial transparency is another way along with good record keeping. Anyway you cut it, the Dodd Frank bill is going to change the way D& O risk managment is looked at and practiced. Until next time be careful out there and know your risks. K

I just finished a podcast on the value of using the risk management process with fleet safety. Implementing the five step approach prior to driving can have great results but there is a problem. Drivers in the hurried time before they get in the trucks just do not want to go through a risk management process. So trucks are operated on the road with unmanaged risks that could turn into claims. I had these conversations and to the drivers credit it is very difficult to pull this off. The culture of the organization has to believe in risk management. The owners of the fleets need to give all the support and time for drivers or risk managers to use the process prior to fleet operations. Nationwide results have proven the process will work. Now its up to fleet owners and operators to make it happen. Until next time be careful out there and know your risks.  K

Agents and brokers do not be dismayed at the state of the insurance market. As Asia and Russia economies grow, the demand for insurance will increase. This opens up a great opportunity for brokers and agents that can expand their businesses to reach these markets. Millions of people who have attained "middle class" status in these countries will need to protect their assets using insurance. Brazil is also an area of growing economic opportunity for agents and brokers. The US insurance market may be mature and flat but the international market is growing with demand and opportunity. Agents and brokers need to be ready to sieze the day. Until next tiime be careful out there and know your risks. K

I read an article online from the Insurance Journal that evaluated the 2009 reserve changes industry wide. The data showed that the industry basically made money by offsetting climbing losses with reserve releases from previous years. This is a perfectly acceptable strategy since the reserves were set up to pay future losses that never developed. However those days are probably gone. This year is heating up to be a significant loss year for the industry and reserve releases may compromise ratings, so the industry must use underwriting to make money. I don't expect rates to rise because of the economic conditions but I do expect a little day of reckoning for the insurance companies.  Until next time be careful out there and know your risks. K

As we get closer to the date of implementation of the Federal health care mandate, the role of agents and producers is still up in the air. Currently many health insurers are cutting insurance agents commissions to make the medical loss ratios. The IIABA (the national association for independent agents) is lobbying hard to exclude agents commissions in the MLR formula (medical loss ratio). States that implement the Federal plan under insurance exchanges have the power to change this if the Feds don't do it. So far New York is the only State to address the role and pay of agents, as they are included in the proposal but at what commission is still undecided. Other States may or may not follow suit. This is a extremely hard position for health agents. The unknown makes it hard to plan and or invest in their firms because they could be losing their commission income by 2014. My guess is that some States will allow agents commissions and some States will not. Agents are going to have t

Yes it is that time of the year, Hurricane season. It is also the time to reevaluate your need for flood insurance and also to make sure your insured property values are up to date. Your standard insurance policies will cover the wind damage and cover inside rain damage that occurs because of damage to a roof or buildings structure. However flood  damage is not covered by standard insurance. In order to get this coverage you have to buy a policy from the NFIP. You can use insurance companies to get access to the NFIP policies but the final claims are paid by the Federal Government.  So business owners take the time to risk manage the need for flood insurance. Buy it now because you will not be able to get it when the storm is coming. Until next time be careful out there and know your risks. K

As employees use their mobile devices during work, employers need to make sure they have defined parameters of usage. But when employees are not working on the job, then mobile device usage becomes problematic. This is especially true with work comp injuries. More and more claims are coming back on employers with employees usuage of these devices after work. In other words if an employee gets injured after work while using a company owned cell phone is this a case for work comp? Courts are starting to hear these cases and time will tell how it plays out. Interestingly that the use of mobile devices could trigger that employees are "on the clock" even after regular work hours. Many of us talk to clients or customers on the weekends or communicate with them using text or email on these devices. does this trigger compensibility? Stay tuned and lets see how the courts sort this out. Until next time be careful ou there and know your risks. K

The debate when there is flooding and water damage is which came first. If wind causes the damage then standard insurance covers the claim. If flooding causes the damage then the NFIP covers the claim. When both happen at the same time that is when the problems occur. First the standard insurance companies will say it was water that did the damage and the Feds will say it was wind that did the damage. This was very evident after hurricane Katrina. This week in congress a new act was introduced in an attempt to mitigate this problem. The Coastal Act has a formula to determine which caused what when there is nothing left of the structure. This will be a an interesting development if it is passed. Maybe it is the answer to finally settle the wind vs water issue. Only time will tell. Until next time be careful out there and know your risks. K