Risk & Business

Recent surveys by the Big I (Independent Insurance Agents of America) shows the numbers of middle size agents is dropping rapidly. Agents with 10-20 employees used to be the majority in the country. Now, however, this group is becoming the minority.Why is this happening? there are many reasons but experts are saying it is the insurance company demands. In order to meet the production requirements agents have to grow to keep company contracts. This has resulted in the increasing number agents with 30-100 employees. The smaller agents are also thriving because they can act as boutique shops that specialize in custom service and attention. So how does this change the insurance landscape? It remains to be seen but certainly the customers demands will ultimately determine the make up of agencies. Until next time be careful out there and know you risks. K

As commerical insurance rates rise the buying insurance public is not happy. The economy has not really improved much and now public groups are acusing insurance companies of profit gouging. The reason is the amount of capital the insurance industry has accumulated. Commercial insurance buyers are more aware of the capitalization of the industry. As rates increase they are asking why? "You have all that capital on the books so take on more risks and keep my premiums in line", this will most likley be the mantra of 2012.  The insurance industry reply to this will point the fingers at regulators and rating agencies as they force the accumulation of reserves to assure future claims paying. So we have an impasse, the buyers who don't understand increase rates with record surplus and the regulators that say sock away more or else....  Stay tuned.  Until next time be careful out there and know your risks. K

The bankruptcy of MF Global is in process. Interestingly the Judge in the case could turn insurance on its ear. The executives from MF Global run by John Corzine, bought a D&O policy with about 190 million in coverage limits. The executives are the named insureds on the policy. The judge overseeing the case is indicating that the insurance money should go to the customers who lost millions due to bad executive decisions not the executives. It may seem like the right thing to do as many poor investors lost everything, but if this decision is made it could set a precedent for juridical risk that would be hard to manage. The insurance policy is a contract with consideration between the insurance company and the first named insureds. A ruling that the insurance company is to pay coverage limits direct to customers , breaks the contract. The executives bought the policy to cover them for bad director decisions that trigger legal action, which is the case for MF Global. Though it may be

The 2011 combined ratio predictions came out today and it looks like the insurance industry lost money on underwriting, again!. The industry continues to defy basic underwriting principles to compete for growth. This strategy is usually "saved" by investment income and claim paying practices where cash out is always slower than cash in. In 2012 the industry is trying to raise rates a little to test the waters of the economy. My prediction is that most business owners and premium payers are just not going to be able to afford much in increases. If losses continue to mount, the industry will force its will and knee jerk rates back up 20-25% to make up profits. I know this because I have seen it before in 25 years of being in the business. When it will happen is still uncertain but my guess is sometime in 2013. We will see, but as a business owner you better squirrel away some premium money. Until next time be careful out there and know your risks. K