Risk & Business

Well the Supreme Court has ruled, Obama care is here to stay. Even if a political shift occurs and the law is modified one thing is for certain, the changes will not favor the insurance distribution system. Business insurance agents who sell health will have to evolve to fee for service. The health insurance companies will have to cut admin costs to make the laws 85 percent of premiums towards health costs rule. The State exchanges will have "service liaisons" To help people enroll. In my State , Delaware, the agents are not even mentioned in the exchange website. Commissions are already at risk as health insurance companies are cutting the pay to agents. The only way to survive is to start charges fees. Some agents are already making this shift. For those who have their head in the sand, look around, change is here. Until next time be careful out there and know your risks. K

Running a business insurance agency these days is messy business. What do I mean?  Well it has everything to do with transactions. In the old days the amount of transactions to handle a commercial insurance account was 1/4 of the transactions compared to personal lines. These days there is very little difference. Populating insurance company data fields or uploading them from your management system has not gotten easier despite massive amounts of money and technology invested by the industry. We have just decided that it is the way the business is. There is hope however, many more data management companies are emerging. To all those with new ideas... HELP.  Until next time be careful out there and know your risks. K

Well most industry experts are saying the hard market remains elusive in the p@c marketplace. The 4 conditions of high losses, lower capacity, tight reinsurance, and underwriting dicipline, is just not there. Yes rates are moving up slightly, but it looks like the industry will most likely slip back into hyper competitive mode very soon. This summer's hurricane season could however be a game changer. If there is a few cats due to hurricanes then the hard market may actually arrive looking like hard markets of old. If however the season is benign then the hardening that is going on now may fade away as fast as a puddle in the hot sun. Stay tuned folks. Until next time be careful out there and know your risks. K

Fitch has announced that they highly doubt that the industry work comp combined ratio will come in under 110. Thats right , they are expecting higher than a 110 combines for the work comp line of business. Well, this is to be expected after the last 5 years of under priced policies that we all experienced. In my State of Delaware the rates were reduced and even rolled back to the point that they were unsustainable. All over the country this was happening and the soft market competition just added fuel to the fire. Now insurance companies are bleeding red ink on work comp. It is expected to get worse over the next two years as reserves were inadequate to cover the "chickens" that have now come home to roost. Most companies are foolishly trying to get all thier premium back in one full swoop with double digit work comp rate increases. Well this strategy won't work because one, clients can't afford it in a recession economy, two, there are companies out there still under

Captive insurance companies have been around for many years. The use of these facilities for employee benefits has just recently been explored. What companies are finding out is these member owned insurance companies can work quite well for employee benefits, especially health insurance. The set up is usually as follows, the employer becomes the first layer insurer who cedes second layer risk to their own captive. The captive buys reinsurance to cover catastrophes. This arrangement works quite well. The employer sees most of their cost savings in the first working layer. If claims can be reduced by wellness initiatives then this layer can become very profitable. The interesting thing about health insurance captives is that the larger the risk of employees the more predictable this insurance line can be. As many mid market employers begin to understand this, I predict we will see more group employee benefit captives who can control their working layer claims and be able to cut their hea

In a continuing saga, Wells Fargo Bank is in the hunt for independent insurance agencies to increase their presence in the agent/broker distribution business. Also because of the struggle to grow in a soft market, the strategy to "buy your growth" is more attractive than ever. This is very revealing for all those in this business. The insurance product is mature and shows very little signs of really anything new that can catapult the industry. Therefore the business model of growth can only be accomplished by mergers and acquisitions. Everyone is trying to find the right size to make scale. What do I mean by scale?  It is the size that every insurance agency/brokerage wants to be to gain clout with their insurance company suppliers. The larger the agency is the more clout they can achieve. This helps agencies with retention because they can negotiate pricing more effectively with insurance companies. In addition companies will more likely give the larger agencies preferential