Risk & Business

Image via Wikipedia Based upon an article in www.insurancenewsnet.com it seems that between what individual states have done to bring down workers compensation premiums and the current recession , insurance companies are being forced to be more selective when writing coverage.  Due to the consistent decline in premiums many companies are being even choosier by geographic region and by classification.  Many states seem to have forgotten that insurance companies are in the business to make a buck and if the profit motive is constantly being whittled away then many insurance companies will have no choice but to pull back in order to protect themselves and their financial position.  Of course this will mean more business heading to the various state funds but these funds are heading for trouble themselves due to their constant rate reductions.  Sounds like a recipe for a heck of a mess.

Image via Wikipedia The U.S. Senate approved a temporary reauthorization of the of the federal flood insurance program until September 30 th of this year. The reauthorization is retroactive until June 1st, the date the program was cut off. After President Obama signs the measure all those that have been going without need to quickly move forward with their applications. This has been one of many political footballs being kicked around this year and it shouldn't be taken for granted that the program will indeed stay in force until it's stated expiration date of September 30. Remember, it's hurricane season and those living within reach of the coast need to make sure they have taken advantage of this valuable program while they still can.

Image via Wikipedia Based on an article published on the UCAR website , http://www2.ucar.edu, the oil coming from the leak at the BP site in the Gulf of Mexico may eventually reach the eastern coast of the U.S. Based upon their computer modeling the oil may get caught up in the Gulf's Loop Current and eventually make it's way up as far as North Carolina . While they are careful to say this is based upon estimation and modeling, the fact is it is unknown what sort of environmental damage may occur should this happen and how many and what types of claims may crop up. Hard to imagine the U.S. Government would allow an oil company to engage in this type of drilling without a detailed system of safety procedures in place should an accident of this type occur.

In Philadelphia , a man shot his cousin in a fake robbery in order to split workmans compensation benefits. The insurance company paid the injured cousin $250,000 in a lump sum disability settlement which the two split. A friend of the shooter tipped police and when the jig was up they both confessed. Talk about a desparate act! The word is they split the proceeds 50/50. I think the guy who took the bullet got the raw end of the deal. Until next time be careful out there.  K

Based on a study by NCCI , medical cost containment strategies for workmans comp are not working as predicted. The reason is that doctors are shifting billings from their private practices to billings through hospitals or other facilities that fall outside the fee schedules. This is diluting the effectiveness of work comp cost containment in which rates are predicted. In Delaware the recent mandated rate reductions were instituted because of the prediction that Senate Bill 1 medical cost containment strategies would start to work. However the results to date have not been stellar. I can only hope for small business owners in Delaware that the anticpated work comp cost containment measures start to show positive signs. If not the low rates business owners are enjoying now could rise dramatically the other direction. In addition insurance companies that write work comp may start to question writing policies in the State due to the cost containment climate being w...

After you have Identified and analyzed risk then you have to control risk. There are a few options to look at when deciding how to control risk in your business . You can avoid risk by making the necessary changes in your business to stop a particular exposure. You can reduce risk by changing an operation or procedure or by separating risk and duplicating processes to reduce risk. These are only a few of the steps a business owner can take to get a handle on controlling the risk in their business. In the next post I will discuss financing risk, which is how to pay for retaining risk or the benefits of transfering risk to an insurance company. Until next time be careful out there and know your risks.  K

Image via Wikipedia While I'm sure that the acronym for the Occupational Safety and Health Administration, OSHA , doesn't give small business owners a warm and fuzzy feeling, the agency does offer more than just their standard enforcement activity. Advertised on their website , www.osha.gov, they have a compliance assistance web page , http://www.osha.gov/dcsp/compliance_assistance/index.html, that provides small business' information directly relating to compliance and they also offer free onsite consultation services to help in compliance and in the prevention of onsite injuries. The site is full of information and can only help. Take a look sometime. Remember, it's FREE.

According to an article on the BBC news website, Munich RE states that natural catastrophes caused less damage and claimed fewer human lives than the previous year. As compared to 2008 when there were an estimated $200bn in paid losses, 2009 saw a significant decline to approximately $50bn in paid losses for the year. The reinsurance giant stated that this was due to a significant decline in hurricanes this year. Of course, the company being based in Europe, a board member couldn't resist commenting on the lack of significant progress on climate change policy at the Copenhagen summit this past year. Interesting, there were fewer natural catastrophes, such as hurricanes, yet many still cling to the "climate change" canard. I know I spent allot of time pondering it as I was digging out from the recent snowstorm.

Image via Wikipedia The State of California has enacted a new " pay as you drive " directive allowing insurance companies to charge insured drivers based upon the actual miles they drive instead of the industry norm of actuarial based rates. While some have expressed displeasure due to so called privacy concerns, it seems to be a sensible approach to take. There are many who drive very few miles yearly and others who drive considerably more. Both of these classes of drivers tend to pay relatively similiar rates. Insurance companies do question drivers periodically on their mileage but I'm fairly sure most drivers tend to fudge those figures a bit. This seems to be a growing trend with companies such as Progressive taking the lead. It's only a matter of time before this spreads to the commercial side of insurance. Reblog this post [with Zemanta]">

The Central Delaware Chamber of Commerce is going to work with the Delaware Insurance Department to promote the work place safety program. The safety program allows qualified business owners to save up to 20% on their work comp premiums. I know my agency has promoted this program for the last decade and have had great success in keeping premiums down for our clients . With the recent rate reductions and the opportunity to apply for the work place safety credits, Delaware employers and small business owners have some of the lowest work comp rates in the nation. Just a few years ago Delaware had the 4th highest. The insurance companies however are monitoring the rate reductions cautiously. Delaware has a hard job, it has to balance the proper rates to charge from a smaller worker population , that still allow insurance companies to make money. If not, the companies may stop writing work comp business in the State which would...

In the past I have spoken to clients regarding a particular workers compensation claim affecting them and have asked if they have brought the employee back to work yet. Too many times the answer is no, they have nothing for that employee to do since said employee is not 100% and unable to perform their specific job prior to their workers compensation injury/claim. The problem with this is that too often employers miss the point that even though an employee can't perform in the position they were in prior to their injury, it behooves the employer to create some type of alternative task/job the employee can do until such time they are able to resume their normal duties. Bringing that employee back to work means that work comp benefits /payments in that particular claim are being curtailed, thereby saving the employer potentially more being paid out, while adding to their experience mod and driving their overall work comp expenses up.

There is a lot of talk coming out of congress regarding the anti-trust exemption for the insurance industry . The McCarren Ferguson act which was passed over 40 years ago, gives the insurance industry the ability to share and pool loss data in order to set rates. Many in congress are saying that this allows price fixing by insurance companies and has contributed to the high cost of health and property/casualty insurance. The insurance industry and State insurance departments refute this accusation. Without the ability to pool loss data smaller insurance companies will not be able to set adequate rates in order to make a profit. The data information from others in the business allows more competition because small and medium companies can do business and compete with larger insurance companies. If this is to be abolished, small to medium insurance companies would not have the customer base , history, or money to get this all important loss data. A repeal of the McCarren ...

Attention business owners, if your employees are downloading information from illegal websites, you may be held liable for damages. A recent case out of New Jersey , the appellate court found the employer liable for not policing an employee who was using the work computer to download illegal pornography . The case was settled for an undisclosed amount.  In addition there have been cases where employers were found liable for retaining an employee who they caught. This is a risk problem for employers which can easily be managed. Have a internet and computer policy that is a no tolerance policy. Have all your employees sign it and educate them on your no tolerance policy. Report anything illegal immediately to the authorities. Until next time, be careful out there and know your risks.   K

The Senate is scheduled to vote on health reform as early as next week. The buzz around the insurance industry is that health insurance companies are going to be taxed to pay for it. Right now there is talk in Washington about hitting insurance companies with a "windfall" tax from the profits they are expected to make with 50 million more customers in the system. This again is scaring me a little for my small business owner clients. Usually increase in big corporate taxes and or expenses always seem to trickle down to the business owner's pockets. That is what would happen if the insurance companies are taxed to pay for the health reforms. You can count in it. Until next time, be careful out there and know your risks.  K

To follow up from my post yesterday, it seems that health insurers are trying to get all their premium now before the congress passes a health reform bill. Most of my clients are seeing 20%, 30% and even 40% rate increases for their upcoming health plan renewals. This will create a major financial burden on business owners. I will suspect that many will drop their employee health plans.  Stay tuned      Kevin

Image via Wikipedia Recently an official with the Virginia workers compensation commission rescinded a $200.00 a day fine against Facebook . It seems an employer in the state requested photos from Facebook of an employee who was collecting workers compensation. Apparently the photos revealed the employee on vacation while they were supposed to be injured/rehabilitating and collecting workers compensation. Officials at Facebook refused to turn over the photos citing the federal Electronics Communications Privacy Act prohibited it from responding to the subpoena . To me this illustrates the lengths employers and those administering workers compensation will go in order to combat fraud. This should probably serve as a cautionary tale as well to those who frequent these social networking sites. Be careful what you put up there in cyberspace, the "EYES" are everywhere.

Image via Wikipedia It seems that in Oregon the State Supreme Court ordered the agency responsible for handling work comp in that state, SAIF Corp., the state chartered agency that oversees compensation insurance , to pay for gastric bypass surgery for an injured worker that needed to undergo knee replacement surgery . The worker in question injured his knee on the job some years before. At that time he filed for compensation and had knee surgery . Some years later he was working in a bakery and reinjured the same knee. During the time between his first knee surgery and reinjury to the same knee he gained some weight. This time the doctor advised him that before he could have the knee repaired he should undergo gastric bypass in order to ensure a successful procedure to the knee. The state court decided that this was all related to his injury and should be covered under workers compensation. The decision actually seems to make sense.

Image via Wikipedia In case you were't aware, the Delaware Compensation Rating Bureau (DCRB) recently filed to stop the further pending rate decreases to workers compensation mandated by the Delaware Insurance Commissioner 's office. The DCRB had disputed the cost savings that were to be realized by the medical savings containment measures in Sentate Bill 1 of the 144th Delaware General Assembly . Ruling against the DCRB on July 24th, the Delaware Chancery Court and the Supreme Court upheld the pending rate decreases as previously set forth by the commissioner 's office. Hopefully the cost containment measures put into place by Senate Bill 1 will realize the savings projected in the bill. If not, the prior and pending rate decreases may be for naught, since the obvious fix may be the reversal of these rate decreases, putting us in the same place as before.

It's not widely known by the general public but insurance companies have been steadily losing income the past couple years, mainly due to their self inflicted premium reductions which occur every few years. These premium reductions cause what's known in the industry as a "soft market". This has been the industry's way of increasing individual companies' policy holder share through premium reductions of 20 to 40%. The problem is that in the midst of their soft market the industry has been hit with some large losses and one of their primary sources of income, investments, has been severley damaged due to the recent economic downturn . They are in a bind currently due to this economic downturn since their usual remedy was increasing premiums. This remedy can't be their quick solution since many business are struggling with their own economic difficulties and can't afford the increased premiums. An article in Property-Casualty.com states that prop...

Image via Wikipedia According to the latest circular released by the Delaware Compensation Rating Bureau, (DCRB), after a period of review the rates in Delaware for workers compensation have been decreased an average of 9.74% for residual market rates and 11.3% in voluntary market rates effective this past December 1st. Obviously, with the state of the economy locally, this can't hurt. Hopefully with all the stimulas money coming out of Washington some of it will trickle down to our State and put our local contractors to work, either through infrastructure improvements needed or get the banks lending again and create a possible increase in housing construction. Reblog this post [with Zemanta]">