Risk & Business

As a professional in the insurance business I wanted to comment about the one year anniversary of hurricane Sandy that hit the NJ and NY shores. I wanted to see how the insurance industry has handled the 60 billion dollars worth of damage. The result is not looking to good for the industry. I have read industry articles that 80 to 90 % of the claims have been paid but most of the claimants are not real happy with the industry. Also the Federal Flood program still has many claims that have yet to be resolved which adds to the public disapproval. So how is it that the insurance industry which has settled the majority of claims still is seen as the bad guys.  My take after spending over 25 years in the industry, is the process of the insurance industry is problematic. The process of adjusting insurance claims can be very difficult and usually occurs  during a highly emotional time. The process of selling and buying insurance has given the illusion that insurance is a commodity, which is d

The debate has been going on for a while. Are marketing dollars a better investment to gain new business growth, or are commissions to agents still the best way?  Well, a recent study should wake up agents and brokers. The Nomura Equity Research has published a study that GEICO has had better growth results with sales dollars going into marketing and advertising and not commissions to agents. GEICO who traditionally get new customers from direct marketing, is gaining ground on other top direct writer insurance companies, all without the help of agents. Advertising direct to customers has always been a threat to the traditional distribution system. Only recently has this  become more real than us in the agent community want to believe. Insurance is a complicated product and for a hundred years, agents have been the frontline to communication, education and sales of insurance. As insurance products are marketed more and more like commodities, the consumers perceive insurance as the same 

The development of wilderness areas in the western part of the US has increased the amount of residential homes in areas of high forrest fire potential. The 62% increase in homes built where wild fires tend to develop, has put thousands of homeowners at risk. The main reason for this growth is the availability of insurance in these areas. So the industry that is paying millions of dollars for home destruction due to fire is actually one of the main reasons homes are being built in high risk areas. This is the same reason why homes continued to be built along the coasts in hurricane prone areas. So why does the insurance industry make policies available in areas where the chance of destruction is great?.  Quite frankly, it is called risk taking (with a twist).  Insurance companies use actuaries to help them take risks. Most of the time these actuaries are pretty good and the insurance companies make money. However sometimes destruction does occur and they lose millions. With plenty of

The current government shut down is beginning to impact small business. Thousands of businesses work with the government either directly or indirectly. These businesses are starting to be affected. In addition the trickle down economies of large government contracts with the private sector is being substantially impacted. Now the questions is, " how does commercial insurance apply to claims for loss of income due to shutdown"?  Unfortunately most business owners policies and business income coverage forms do not cover this type of event. Small business owners who suffer loss revenues from the shut down will not find any relief from their insurance policies. Special endorsements and coverage forms that respond to contingent loss of income, are the answer. These special policies are becoming more and more relevant as the financial uncertainty of the US economy increases. Also as more entrepreneurs establish business relationships with overseas companies, talk of covering for lo