Risk & Business

Unfortunately for small business owners insurance rates will go up in 2012. Why? Quite frankly insurance companies are losing money. Now they have been losing money on underwriting for sometime now, but have always managed to keep in the black because of investments and reserve releases to pad the bottom line. However these two "tools" to make income have not been good the last two quarters. Also bad underwriting is getting worse. Insurance company execs have to face the facts that they can no longer turn away from their core business , underwriting, and force rates up to adequately cover losses. Small business owners are stuck in a bad postion also. They have enjoyed the low rates but depended on the industry not to "knee jerk" them into major rate increases. Well , just how fast rates will climb remains to be seen, but either way change is here. Until next time be careful out there and know your risks.  K

With the abuse scandal brewing at Penn State, other risks will surface that could negatively affect the college. First reputational risk will develop. The institution has had a blemish free run and now the reputation could be tarnished. This will dove tail into financial risk as donations to the school and or enrollment may drop. This could affect the bond rating of the college as the money dries up, which then moves the risk right into the board room. The D&O lawsuits could be overwhelming. I am not saying this is what is going to happen but it gives one a perspective on how risk is related. Until next time be careful out there and know your risks. K

The state of New York signed a bill into law that deregulates P&C premiums for insureds with greater than 15 million in sales and greater than 25K in premium. This move is an effort to spur more competitive rate environment for commercial insurance. Most States have a entry point in premium and or sales for deregulation of commerical pricing. This move, though good for consumers, may work against stabilization of markets. There is a fine line in competitive rate promulgation and market stability mainly due to the fact that claims have to be paid. Underwriting to a profit is no longer the norm in insurance carriers. Most carriers depend on the financial markets to make money. History shows that carriers will follow each other into a lowest rate game in order to get business. However each new account is way underpriced and eventually the claims come home to roost. This means that a few insurers will go out of business and that is bad for consumers. I can remember back in the late 90&

The National Safety Counsel is predicting the need for qualified Occupational and Safety professionals is increasing. This trend is expected to continue for the next decade. However there is a problem. The amount of qualified candidates is decreasing. The reason: more Universities and Colleges have cut programs in this area due to funding restrictions. Also the current demand is low because of the recession. This is giving a false sense of lack of interest in the field. However, as the economy rebounds, more employers will be looking to fill jobs for safety and occupational health. This will put the current crop of young graduates in the drivers seat in a few years. However the decreasing trend could create a void in the marketplace and put a strain on employers and their insurance carriers. I am a firm believer that these professionals help keep the insurance industry in business because of risk mitigation. Studies show that employers with in house safety personel have less claims and

The flood insurance program (NFIP) is at another funding deadline and Congress has to vote to extend it. This short windows of time for a valid flood program is not making it any easier to sell the coverage to consumers. Most customers know that the program is really poorly run and funded and only buy the coverage when they are forced to by the bank. To make matters worse the claim payments and settlements have not been stellar. I went to a regional meeting of a large Northeast insurer and they said after hurricane Irene only 60% of the flood claims have been settled. This is appalling. So this is a call out to Congress to get it right this time. The nation needs the flood program to be on solid footing to grow the economy. The private sector is not prepared to take it over.  Let's hope this Congress does what it needs to do to fix the broken NFIP. Until next time be careful out there and know your risks. K

I have been in the business selling commercial insurance for almost 27 years. I can count on one hand how many earthquake policies I have sold over that time period. Quite frankly, business owners just did not think it was worth spending the money on such a small chance of risk. However the earth has been shaking quite regularly in places just not use to seeing earthquakes. In my office in Delaware we had walls shake when the Richmond Virginia epicenter quake hit the northeast. I hope that more business owners will want to purchase the insurance as I think the earth will continue to shake for whatever mother nature's reason. Untill next time be careful out there and know your risks. K

The loss of business income due to the Occupy WallStreet protesters is testing insurance policies. The coverage form most likely will not cover the loss of income of stores and businesses impacted by the occupiers. The coverage needs to be triggered by damage or loss of use to tangible property. The fact that the large numbers of protesters are  keeping patrons away doesn't trigger the policy coverage. Some businesses have had to shut down because of it. Even if the business owners had contingent business interuption coverage the form would probably not pay the loss due to lack of damage. The riots in England tested this covergae also, however most businesses were able to collect on their insurance because the property had been vandalized or destroyed. It is said that the occupiers are trying to rally against big corporate business and banks. Unfortunately they are hurting the one institution that this country has counted on for decades to produce a US economy, and that is small bu

Oklahoma had an earthquake yesterday and the ground is still shaking with after shocks. This is a risk management challenge. How do you prepare for an earthquake. You really can't. Buildings can be built to withstand them but has only been emphasized in prone areas. Supply chain disruptions can be devastating to small businesses. It seems that quakes are happening everywhere. In the summer Richmond had one that was felt all the way to New England. A geologist friend of mine told me that earthquakes are the earth's way of protecting itself. Each time a tectonic plate moves,  the magnetic protective field increases. This may mean that we will be experiencing more earthquakes over the next few years. Is the earth telling us something?  Until next time be careful out there and know your risks. K

United States debt is still increasing. Currently we are approaching 15 trillion dollars.  If you look at this unimaginable number one has to start talking about risk. If risk is increasing and no risk mitigation techniques are being applied, it is a train ready to go off the track. The debt is a political footbal right now as the republicans want to start cuts and the democrats want to raise taxes. I think the conversation should change to a risk management conversation. First identify the risks. This is easy, debt is rising and this is causing the escalation of risk toward economic collapse. Second let's look at risk analysis. This is pretty easy too, qualitative or quantitative analysis comes up with the same result, we are spending more than we are taking in. Now its time for risk control. To move the debt number rapidly into the other direction we have to do both, cut costs and increase taxes, we have no choice. Now how we finance these actions is where the rubber meets the ro