Risk & Business

Fracking could be the next "gold rush" for the US. There is so much natural gas in the ground that our energy needs could be fulfilled for the next 150 years. However there is a dispute, the process of getting the natural gas out of the rock (Fracking) could pollute ground water, some scientist say. Others say that the process is safe. What a great situation for the science of risk management to be applied. Get the risk specialists around the table with scientists and start the risk management process. Identify the risk, analyze the risk, control tem, and then pay and manage the risk process. Sounds simple right? I know it is not that simple but risk management can really help in this situation. This is a time risk management can be used to strategically help the economy prosper. It could put the science of risk management on the map. Lets see how it plays out. Until next time be careful out there and know your risks. K

I am sitting in my house the day after we experienced a hit from hurricane Irene. Everything came through ok with just some branches down and a messy yard.  Flooding is going to be the ultimate damage maker with this storm. The storm is now in New York hundreds of miles away and we are still getting 50+mph gust here in Delaware. Amazing, the power of this storm and it was only a Cat 1. I think all of us that make their living selling insurance and giving risk advice will need to push clients harder to buy the protection they need from these storms. Flood policies are in the minority in my office despite the massive sales efforts we do each year to get our clients to buy the coverage. Maybe this storm will be a eye opener for many and flood policies will be bought more. Until next time be careful out there and know your risks. K

The tragedy at Indiana State fair is going to be a discussion of risk management. As lawyers for the injured line up with suits and engineers and adjusters do their investigations, the talk will eventually become one of risk control. How was risk managed and what control measures were in place will be the prime factor in the legal outcome. No matter what we do in life, risk is present. In a world as fast paced as ours, risk seems to flourish. If not mitigated, it will grow unabaded and wreak its nasty result.  It is time for the practice of risk management to hold its place along with other professionals in this world. My prediction is that a future risk practitioner will have to have education and testing similiar to the medical, accounting and other professional disciplines. It is important for the world to understand this, because risk will not let up. Until next time be careful out there and know your risks. K

Attention all risk managers, flash mobs are becoming problematic all over the US. How to control these creations of technology is problematic. Risk managers and insurance providers will have to put their heads together to find some risk control mechanisms to curb the destruction of property and personal injury these mobs can bring. Some ideas have been to tap the technology of the wireless companies to give warnings based on texts and mobile communication. Other mechanisms may be to give rewards for those who sniff out a potential flash mob as people know this stufff is going to happen. I will post on this as risk control methodologies develop. In the meantime be careful out there and know you risks.  K

I just finished a conversation with one of my marketing reps from a leading national carrier and he was complaining about their 140% combined work comp loss ratio. We both agreed that the rates are too low, and have been too low for years to absorb any uptick in claims frequency. Well, as the industry is now experiencing, work comp claim frequency is increasing. I see it as a perfect storm brewing against any potential profitability in work comp. Low rates, safety program cutbacks due to the recession, and out of shape work force, and  a recession that has businesses struggling to survive.  The industry knows that work comp can be an never ending claim, however this experience was thrown out the door during the soft market. Work comp rates fell across the country and in some States as nuch as 30-50%. Now the industry is faced with  claims it has to pay from rates that were not adequate to cover the losses. I know this means change is coming so" hold onto your hat brother".  U

Marsh, Aon, and Willis all recently reported organic growth in premium due to overseas insurance sales. Is this the future for small independent brokers in the US?  Most likely. As the US economy sputters and the premium pie gets sliced up more and more, doing business overseas becomes are real strategy. The internet and modern travel effeciencies make having an office in other countries possible even for smaller brokers. How fast this happens will depend on the US economic recovery.  Until next time be careful out there and know your risks.  K

The latest results show that captive insurance companies are showing higher profits and better dividends than standard insurance company results. Why is this?  Well for one the insureds are the owners so they have plenty of skin in the game. Safety and risk management have to be a priority in order to have stellar results. Also every policy holder is engaged in the risk transfer process and understand what losses can do to profits. In standard insurance contracts the insureds don't own the company and usually do not participate in profits. When claims occur the losses are transfered to the insurance company. The insureds allow the company to adjust and pay the claim. The insured is involved by being on the sidelines. In a Captive insurance company the insured's can't afford to be on the sidelines that is why it works.  I believe captives will continue to grow and replace standard insurance contracts in the upper middle market over the next decade. We will see how it shakes

I am fortunate to get a real sense of the state of the economy because of my clients. In meeting with small business owners everyday around my area I can sum up the US economic woes in three words, "lack of confidence". Now this is not lack of confidence in themselves as business owners, but in the Federal Government. Most if not all of my clients have no confidence the Federal Government can get it right in changing the direction of debt and spending. This is not a political issue it is a business issue. Small business owners that are still standing had to make the tough choices to cut spending. They had their equivalent policitcal issues and HR issues and entitlement issues and still had to make the decisions. Becuase they went through this pain to be able to survive and the fact that the Government or the country is not willing to do the same, confidence is at a all time low. Until we restore some confidence in the real economic engine, small business, then the country is