Risk & Business

The headlines this morning are buzzing with the news that Nationwide and Harleysville are working a merger deal. This event has generated some real interesting questions. First, will this start a trend of direct writer companies buying into the independent agent marketplace? It just might. Premium growth is difficult right now so if you have the capital then you can buy your competition. Second, how are independent agents going to be treated with the new merger?  This has many agents worried as they may have to become more captive or a direct agent for Nationwide and less independent. This will most likely happen through  their agent contract. Third, What does this say about the P&C marketplace? I think it is fairly self evident, the marketplace is flat and is going to stay flat for some time in the future. Insurance companies growth strategies are only going to be achieved by acquisitions. This may be the first of many to come. Until next time be careful out there and know your ri

The Fed today announced a lowering of interest rates by buying up long term treasuries. This will directly affect Life insurers earnings. Life insurers have long term treasuries in their life product insurance portfolios and the Fed move will lower their earnings and put the products at risk. Annuities returns will be less also. It remains to be seen how the insurance companies will react but certainly they will have to down grade their earnings projections. Until next time be careful out there and know you risks. K

The Virginia Supreme Court just ruled that claims under the CGL for damages caused by global warming are not covered under the CGL. The court ruled that there is no trigger for the claims. This case most likely will be a precedent that other insurers will use as these claims arise. Global warming in its own sense is still a highly debated issue, but as insurance claims are brought to insurers, the debates will get more and more heated. Insurance carriers state that the CGL coverage is triggered by an occurrence caused by an accident and that global warming is not either. The Virginia courts agreed. How other States rule on this will remained to be seen. One thing is for certain, it will become a highly litigous issue and will most likely affect insurance coverage or insurance products in the near future. Until next time be careful out there and know your risks. K

There is an increased activity in claims centered around cyber liability. The insurance industry has been slow to react to this risk as insurance products for this coverage are still in their infancy. Sony was the first really big profile claim and their insurer is denying coverage. However small business is being targeted also and there are few coverage forms that can be purchased to cover the claims. The industry needs to really put some effort in  making this coverage more readily available and affordable. As agents we are stuck telling our clients about a high frequency, high severity risk and are not able to get the coverage forms to cover their exposures at a reasonable price. sure there are endorsements that give a little coverage, 10K here and 20K there, but the risk to small business owners that conduct sales with computers and credit card machines makes them highly vulnerable. In addition the data bases they use for marketing and customer info is at risk on their servers. Com

If Congress passes the Flood Modernization act, then flood rates will go up 15% a year for a while in order to get the program in line with actuarial rates. This will most likely cause more people to be uninsured for floods as the premiums rise and people drop the coverage. In the short term this is not a good thing but is the only way to get the NFIP (National Flood Insurance Program) on solid finanical footing. The new act before Congress will also force the program to set aside reserves which is prudent for an insurance entity. I know the timing of increased insurance rates is not good with the economy sputtering, but this is a good move to assure the programs viability into the future. Until next time be careful out there and know your risks. K

I got a email from Progressive insurance company the other day. They were offering premium payment suspensions or deferrals for anyone who was dealing with damage from Hurricane Irene. To me this is an incredible marketing strategy. It creates value for the customer and it is remembered and appreciated. This shows the power of the big insurance companies and their ability to market. All of us in the insurance business try to find ways to create value around the insurance transaction, but it looks like Progressive has thought it out. My hat is off to them for this. Smaller regional companies need to be aware and spend more on creating value through marketing strategies. If not you will contine to lose market share to the big boys. Until next time be careful out there and know your risks. K

I was reading the latest loss reports from some of the major companies in the country and weather realted losses are still topping everything. Everyday we battle underwriting to insure our clients at the most affordable rates. The companies throw at us algorithms that adjust our clients pricing based on their credit score, D&B reports, their consumer history, class of business   etc... and no matter mother nature still causes most of the losses and drive the rates. The insurance industry was created to cover the unexpected losses of nature. Here we are 250 years later and mother nature is still the main reason we are in business. Until next time be careful out there and know your risks. K