Risk & Business

As halloween approaches tomorrow night I can only think about how much risk is involved in this event. Lets take the risk management process and apply it to "trick or treat". First, let's identify the risks:  Kids running through the streets at night, more cars on the roads shuttling kids, people walking on properties in the dark, candy, candy, candy, and more candy... , ghostly and creepy characters roaming about, etc...  Now lets analyze these risks qualitatively:  All those kids running about certainly increases the chance of injuries, all the cars on the street increases the chance of accidents, all those people walking through properties increases the chance of damage, all that candy increase the chance of kids not sleeping because of a sugar high, and finally the ghosts and ghouls (enough said). So the next steps are risk control, and management of trick or treat. Lets see..... you know I think I am going to take off my risk managers hat tonight. Trick or ...

The incidence of concussions has increased in football. Diagnosis of this brain condition has improved with new testing and protcols, and it is now evident that helmet hits are the main cause. Risk managers are trying to find a ways to mitigate the risk with new designs and materials, however risk mitigation needs to start with coaches and youth football. Watching games I constantly see players using their helmets as weapons and launching themselves into other players. Tackling has become a procedure of dropping the head and spearing into the pile. When I played football many years ago, it was taught to "see what you hit". This requires a player to keep his head up and the helmet naturally rests against the back of the shoulder pads. The pads help stabilize the helmet hit and also absorb much of the blow. In my opinioin this has to be reinforced from the little leagues to the pros, then and only then will the rate of concussions be reduced or at least trend the other way....

Risk modeling has done a very good job at prediciting direct damage estimates from natural disasters and other claims. The models however have fallen short when trying to predict contingent damages. The last few years has been a real eye opening experience for insurers and reinsurers. The Japanese earthquake and the midwest weather catastrophes have wrought billions of  dollars in contingent damages that  risk models did not predict. Industry experts say the models can't be improved until the industry gets a real handle on contingent liabilities. The world is more connected today and supply chains and dependency is now world wide. This global web will require new studies and products to deal with this increasing risk. Not until the industry gets a new understanding of contingent damages will the modelng software get better. Until then insurers will have to charge rates for business interuption coverage without the use of computer software. Until next time be careful out t...

As predicted by many in the industry the long soft market in work comp has deteriorated the profitability in this line of insurance. This has forced many States in the country to ask for rate hikes over the next 12 months. Though needed by the insurance companies to preserve the market, business owners are not ready for the increase. Profits and sales are at all time lows for most businesses and having to pay more for work comp premiums comes at a bad time. For agents this creates a lot of pressure on them because they will be delivering the increased premium bills and having to collect it. What should have happened over the last few years was a gradual increase in rates to make the market viable. Now, the industry finds itself asking for double digit increases which is the proverbial "knee jerk" rate change. We agents who have been around long enough to have seen this before, know that the renewal process with your clients becomes difficult. Premium increases are never p...

The long term health care provision in the Obama health care law was dropped by congress the other day. No doubt the reason was the numbers. The private LTC market is reeling already because actuarially it has been hard to get a handle on the right premiums to charge. This product is a coverage that needs to be paid into for sometime to work. Under the Federal health care LTC would become an onerous burden on tax payers because actuarially it doesn't hold up and most likely would bust the health care overhaul. If Congress gets into the insurance "game"  with health care in 2014 and the States set up their exchanges to make it happen, they better have good numbers going in. Insurance bites back hard if the actuarial assumptions are way off. Until next time be careful out there and know you risks.  K

Health insurance premiums are rising and will continue to rise with the implementation of  Obama Care according to Towers Perrin analysis. This is going to put a lot of pressure on the health exchanges as more people will be put in the pools to cover. I do not think the architechs of the plan figured a mass exodus from the private market to the State health exchanges. Maybe it was expected and actuarially makes the State exchanges more feasible. Time will tell. Until next time be careful out there and know your risks. K

The city of New York risk management department must be working overtime right now. With the protesters milling around the worlds financial district, the risk of a major event causing property damage and injury is very high. Mayor Bloomberg's statement to allow the protestors to stay as long as they abide by the laws is a very good risk management decision. A statement antagonizing the crowd could have been trouble. So far the protests have been in control and the risk mitigation techniques that the city has implented have worked. I hope this will continue until the weather changes which most likely will reduce the crowd sizes and reduce the risks. Until next time be careful out there and know your risks.  K

Well, what now insurance companies? Rates have been so low for so long and underwriting has not really been underwriting, that sooner or later the piper had to be paid.. Well the piper has started to collect as insurers earnings have decreased significantly and combined ratios are climbing. The industry has used Wall Street and timing of claim payouts to make up for under priced insurance. However this cannot save the companies this time and underwriting discipline has to come back in vogue. The market has to adjust to get back to the core discipline of making money on underwriting. If it does not and the competitive marketplace stays as agressive as it has been,  then the industry will be changed forever. More consolidations will occur in the company world and also in the broker/agent world because organic growth will be almost impossible. Heck, it is only 1-3% now, that certainly is not a percentage range to build a business on. The industry is at a cross road...

It is going to be very hard for Nationwide to give the Harleysville Independent agents access to Nationwide products and not give Nationwide agents access to Harleysville products. This is the beginning, I believe of major changes in the independent agency system. This merger will most likely blur the lines of agent differences. As direct / captive agents get more access to independent markets, it becomes irrelevent to a consumer the differences of independent agents versus a captive agent. This acquisition could be a game changer. It most likely will spur more of the big boys buying up independent regional insurance companies. The other issue here is stock value and stock companies. Nationwide is a large mutual and now they own a super regional stock company. How they use this dynamic and how they market it remains to be seen, but I have to believe this was a very brilliant and calculated move by Nationwide. Hold on to your hats folks. Until next time be careful out there and know...