Risk & Business

It has been proven out. Obesity increases work comp loss ratios 5 times. Now with studies estimating that 60% of the american work force is considered over weight, this should be of vital concern to the insurance industry. Work comp loss rates have gone down during the recession. Actuaries are reporting lowering loss trends due to the amount of people out of work. As the economy improves and more unemployed get jobs the expectation is that comp loss trends will start to get worse and rates will have to go up. Now throw in the fact that most of the newly hired will be overweight, and have been very inactive in day to day work because of unemployment, I do not think the actuaries have models to make these predictions. I feel it spells a unpredicted bad comp lose ratios than anyone expected. As I have said in previous blog posts, the worse case scenario for business owners will be a violent reversal of increasing comp rates that will be practically unaffo...

Currently truckers can drive 11 hours a day. If the Feds get their way this will change to 10 hours. Now this doesn't sound like a big change but studies show it could reduce truck fatalities by 2 or 3% . Even this doesn't sound like a big change but certainly any improvement on the fatality rate is worth it. Truck companies say that it will increase costs. Well this might be true but safety is as important as profit. Again risk managment is the key here. Most truck companies using good risk managment are always looking at driver fatigue and monitor their hours on the road. I think all this will work out for the truck companies and the improvement of the fatality rate. Until next time be careful out there and know you risks. K

If the Federal Government passes a new regulation proposed today, it will scrutinize Health insurers pricing over the next few years. Not being able to regulate rates they can certainly put undo pressure on companies that have an actuarial need to raise costs. This is troublesome to me as it opens the door for more and more regulation of pricing. It also opens the door for Federal intimidation on profits. If insurance companies are profitable then they may be criticized on their pricing and could be 'forced" to lower rates to reduce profit. Insurance is becoming more and more a commodity and therefore is starting to fall into a perceived public right. This could no doubt pit the Federal Government and the private business sector of insurance against each other. Stay tuned.  Until next time know your risks and be careful out there. K

Doctors that practice defensive medicine regularly are practicing good risk management, right? Well that depends. Good risk management has to fall into the lines of the organization's goals and budget. So when doctors go over board with testing and procedures then they may fall outside of both goals and budget. However at the same time the doctor may be preventing a large law suit by a patient against themsleves or their organizations. When thinking about this it really shows how the practice of risk management is very difficult to get right all the time. This is where risk professionals that are trained in analysis, identification, control and managment step in. The future for practitioners of risk management in medicine is bright. I see where they are sitting right next to the doctor making decisions on where to take risk and where to not take risk.  Until next time be careful out there and know your risks. K

You have heard it on the Progressvie commercials, name your own price and coverage is catching on with the big insurance companies. The insurance buying public are gobbling this up like candy. Many are cutting their insurance costs in half. I have a big problem with this. Insurance contracts are complicated and coverages are not clear cut. After 27 years in this business I am battling with insurance companies over coverage language weekly and only my experience level gets me through it so I can win more than I lose for the benefit of my clients. Now who is going to fight for the lowly guy who bought a name your own price policy when his coverage and limits are inadequate. I can tell you it will not be the insurance company. Buyers beware, these low priced options may be time bombs waiting to blow up when you have a claim. Buy your insurance from an independent agent. You get free counsel from them and you can be assured they will be in your corner when you have a claim. Until next time...

Watching the metrodome's ceiling fall from the weight of the snow, made me think of a few things. First, how amazing it was that the collapse didn't occur during the game. Second, how the engineering of the dome couldn't handle 17 inches of snow. Third, some unfortunate insurance broker will have a busy Monday morning getting the claim going and talking with insurance adjusters. Luck sometimes beats risk and this situation is a perfect example. Lucky that a game wasn't going on when the collapse occurred. Lucky that the ceiling failure will make the engineers and builders repair it stronger so it doesn't happen again. Finally lucky that the insurance industry is around to fix the damage and move on with life. Yes luck is a formidible foe of risk however it doesn't come around that much. Risk tends to be around all the time, luck shows up every so often. The lesson learned here, use risk management in your business all the time because you cannot count on luck. U...

Watch out all you social media internet users, more and more employers are using what you post as part of the employment record. "How dare they" you say, well get use to it. More and more employers are getting the inside sccop on their employees and how they feel about their jobs by what they post on social media. It is not uncommon for employers to use internet material in job evaluations. Now the question becomes is this legal and or is it right? I guess the courts will sort this out over time. One thing is for sure, if you put it out there on the internet it is fair game. Many of the younger generations do not quite understand this but they will learn real quick as they approach the job market. This also brings up a risk and insurance issue for small business owners. If you have employees and you are monitoring social media of your employees, you better protect yourself from possible backlash with insurance and risk management. You will need to get in place an EPLI policy ...

Master Card's servers were hit by Wikileak supporters after the founder Assange was arrested. This shows that even the big boys like Master Card have not covered all the risk basis against cyber hackers. It may be to much to ask any business owner to do but anyway you look at it, cyber risk management is a must in today's business world. Until next time be careful out there and know your risks. K

The life insurance association MDRT (million dollar round table), lost 1.0 million dollars after they found an IT manager embezzeled the money over a period of time. The scheme was to use a fraudulent IT systems vendor were big payouts were made under the guise of computer services. The fraudulent vendor split the money with the IT manager and no services were rendered. How does this happen to insurance people who are in the business of protection of others, well it goes back to risk managment. We are all guilty of not really being proactive on risk. we run our businesses as reactive to risk situations or events that are caused by risk. However the answer to reducing the drama in our business lives is to be proactive and use risk managment as a day to day discipline. It may take a while but I see the day that business owners will have risk managment meetings more than they have sales meetings. There is so much money that can be saved by risk prevention or reduction that it could be...

If you live in a flood zone or near a flood zone you are required to get flood insurance by most financial institutions. Unfortunately many business owners elect to get the coverage because they do not want to pay the premiums or they think flooding is remote. Well, just look at Nasville a year or so ago when the whole town was flooded. Many of the business owner did not have flood insurance, neither did many homeowners. Now the Federal Government is bailing out the uncovered by buying up homes and business properties that were flooded. So if the government is going to buy up flooded properties then why even require flood insurance at all. It seems to me that the Feds might as well just wipe away the need for policies and premiums and just buy out areas that were flooded. I know this sounds a little ridiculous, but it seems to hold true in all areas where unexpected flooding occurs. Just a thought. Until next time be careful out there and know your risks. K

The commercial general liability policy will cover what the insured is legally obligated to pay due to an occurence. The key trigger here is what is an occurence. There are volumes of case law developed over the years that make that determination. A recent case with the Archdiocese of Milwaukee demonstrates some of the complexity of determining what the policy will cover. The Archdiocese filed a claim against their general liability policy in a case of priest abuse. They made the claim stating that they did not represent that children would be safe under the oversight of priests and thus constitutes an "accident and an "occurence" under the policy. The courts ruled that the abuse does not trigger an accident or an occurence and therefore the Archdiocese cannot use their liability policy for coverage. As you can see unless it is clear cut claim the courts usually determine coverage. Until next time be careful out there and know your risks. K

As more and more information comes out about the upcoming health care law implementation, one thing is clear, agents are not included in the equation. Effective 2012 health insurers must use 85% of the premiums collected for health costs. The rest is for administration and profit. Whoa there nellie... where is the agents commission? Well its not in there or at least not expected to be in there. Actually the health insurers and the Fed are mute on the subject. The agents associations are hearing that no one meant to cut out the agents and health insurers will have to squeeze the cost of paying agents out of the 15% leeway they have, which means it is not going to happen. By the looks of this, agents are going to have to get paid directly by the consumer. If this does not get changed before 2012, I see a major shift in the compensation of agents from commission to fees. I also see this carrying over to other lines of insurance. Are the agents in the country ready ...

With the insurance industry shedding full time jobs and the recession taking its toll on savings accounts, insurance retirees are coming back to work in the business as part time fill ins. Agencies and insurance companies are realizing that there is a whole lot of talent and knowledge that retired over the last few years and are calling them back. Also the retirees are realizing their nest eggs are shrinking fast and can pick up some quick money working back in the business. This is a stop gap strategy to keep up the work load the business demands without having to bring back the full timers that were let go over the last few years. The problem with this strategy is that we are still not bringing or holding onto young talent in the business. As the business matures and the work force matures the industry will be scrambling to play catch up when the retirees go back to the golf course and bingo games. Until next time be careful out there and know your risks. K

Washington State has enforced Stop Work Orders for construction sites where contractors have no work comp insurance to cover their employees. The contractor if found will face up to $1000 a day in fines and has to post a bond to get reconsideration to start the job again. This is hard core insurance policing. Many construction workers are not covered because their "employers" make them sub contractors when they really are employees. The contractors then do not buy work comp and basically have workers on the job with no coverage. Washington State may be setting a standard for other States to follow to protect workers on jobs. The only way for the work comp system to have adequate rates is to have everyone in the system that needs to be in the system. When contractors try to beat it by making their employees subs when legally they are not, then rates go up because fewer are paying for the claims. Good luck Washington, tell the rest if the States how to get it...

Up to recent months the insurance industry has been able to keep their employment numbers in tact. However at the end of October the industry shed 6000 jobs and the number of people employed by the industry is at it's lowest in 20 years. This is a direct result of the current prolonged soft market and recession. Even the steady business model of the inurance industry is having a hard time in the current economic times. Until next time be careful out there and know your risks. K

The new health reform law put in place this year will place profit restrictions on health insurance companies. In order to participate in the State exchanges and to have access to 30 million new potential customers, they have to place 85% of premiums into medical coverage. This leaves 15% for expenses and profits. Also this also includes agents commission. As most insurance company executives will tell you, 15% is not a lot of room to cover for profit, commission and business expense. So the prediction is that agent commissions will be cut from the health insurance premium process. All indications show this to be true, just look at the Federal Government's new website for the upcoming health exchanges and you see no link or reference for agents or brokers. This is quite disturbing because the general public all alone tackling a Federal health system without the advocacy of agents is going to be disaster for the public good. I know the younger , web savy generation will think they c...

Recently a Medical Transcription Company was sued by an employee that was fired for posting negative things about her supervisor. This opens up the discussions of managing the risks of Facebook. Social media is not going away. Employees are using it to talk about work and employers are using it to find out what is on the mind of their employees. This is new ground for the courts. How much jurisdiction does an employer have when it comes to Facebook and social media? Can an employer fire an employee for talking disparingly about the boss? Where does it end? I am not sure at this point, it is still early in the social media world. Risk managment professional need to make sure that conversations and risk profiling does not forget social media. Just like any other risk, these technological advancements have to managed both on the employers side and also employees side. Stay tuned for legal precedents and risk management techniques to be established. Until next time be careful out there...

I read an news article today about a man who was caught on tape faking a fall in a grocery store. He purposely spilled some soda on the floor then laid down and screamed that he fell. Well after showing him the surveillance tape, he quickly left the store. I wonder how many claims are really faked. How much money does the insurance industry lose because of fraudulent claims. I am sure the industry really can't figure this out, because people are too creative. Let me give you some more examples. Plumbing employee says he hurts his back on the job. After getting 6 months of work comp and physical therapy and a full restriction from work, a neighbor post a video on you tube of our work comp claimant climbing his roof to put up christmas decorations. In another example a bus hits the rear of a car who stopped suddenly in front of it. Ten passengers on the bus claim to have wip lash. After much investigation the police find out that the driver of the car and the passengers were rel...

I just read a article that my professional association Independent Insurance Agents of America (Big I) gave 1.7 million to campaigns for pro-insurance candidates. They also stated that 93% of the candidates they supported won in the election yesterday. Holy cow, talk about effectiveness. In my previous post I said this election will affect the insurance industry, well with this type of success it sure will. The biggest fear the industry has right now is Federal regulation. If the elected candidates are real supporters of the industry then the States will continue to regulate insurance. I hope they don't get "DC'd" and change their minds. All of us in the industry depend on them to keep us in a regulatory environment to allow growth and healthy competition in insurance. Until next time be careful out there and know your risks. K

Tuesday's mid term election will give the insurance industry something to think about on Wednesday Nov 3rd. No matter the outcome the industry will have to deal with an increasing Federal push into regulation of insurance. The thought is that the Republicans will still push for some Federal regulation but will still keep most of the State regulation infrastructure in tact. If the Dems keep control then the State system could be in jeopordy as some people think. My thought is that either way the insurance industry is changing to more Fed regulation and less State oversight. I see this trend continuing under the Republican or Democratic controlled Congress. Until next time be careful out there and know your risks. K