Risk & Business

Image via Wikipedia While recently reading the current issue of an insurance industry trade magazine , American Agent & Broker, I came across an article discussing workers compensation . The article, entitled "Workers' Comp: 7 Biggest Mistakes", discussed proactive steps the employer should consider in order to increase the chances of the injured worker returning to work quickly, and also cut down on the cost to the employer. Some steps mentioned are - meeting with care providers to discuss the care of the employee; having regular on site file reviews of the injured workers case; using a medical doctor of their choosing to review medical records and reports instead of relying solely on the adjuster to make medical decisions, and simply staying involved with the process from start to finish. They did throw in one other step that's quite important, asking for and receiving assistance from your agent. While the agent cannot get involved in the actual adjus...

Image via Wikipedia Matt Denn , the outgoing Delaware Insurance Commissioner , soon to be Lieutenant Governor , has ordered up additional cuts to the Delaware workers compensation rating structure. According to the insurance department's website, "The latest order by Commissioner Denn requires that the state’s workers’ compensation insurance companies discount average premiums by 6 percent each year in 2008, 2009, and 2010, and by 5 percent in 2011." Based upon their information, with these rate cuts and previous cuts already put into place since November of 2007, the total decrease in rates will add up to 45%. This is certainly good news for the Delaware business owner , especially in these lean economic times.

Image by ClevelandSGS via Flickr Based upon anecdotal evidence seen by those of us in the agency workforce, and upon articles such as the recent one in PR-inside.com, it seems that the insurance industry may finally be nearing the end of the nearly 2 years of steady pricing decreases. The article states that " In the first half of 2008 insurer profits declined 57 percent, the industry posted its worst first-half year underwriting performance since 2002, investment returns declined by 18 percent and net written premiums for the industry as a whole were stagnant. Catastrophe losses were double the average of the past decade, " reports Lockton . The article also pointed out that " The repercussions from the big hurricane losses and the meltdown in the financial markets are just beginning to be felt in the property insurance market. Insurance buyers should prepare themselves for a period of uncertainty and volatility in the property insurance market, " says Jim Rube...

Karen Weldin Stewart was elected as the next insurance commissioner for the State of Delaware yesterday. Ms Weldin Stewart was elected after her third try at the post. Members of the local Delaware agents association were able to meet Ms. Weldin Stewart during the campaign and I for one came away with a favorable impression of her knowledge and attitude towards the industry. Many of us hope she addresses the workers compensation system, mainly the significant decreases in premium without any sign of the corresponding managed care system that was to be in place. Some states, Florida chiefly among them, have been addressing insurance coverage issues such as flood and other hazards, by mandating the pricing and amount of profit insurance companies are able to charge/earn. While this can work as a populist pitch during the campaign season, they can only serve to drive away insurance companies, something a small state such as ours can ill afford. Here's wishing Ms. Weldi...

Image via Wikipedia According to a story in the National Underwriter, the National Association of Insurance Commissioners, NAIC , is considering forming a new rating agency, which would perform much of the same functions as the current 3 longstanding private agencies. The association states that this was being considered prior to the current situation, in which the 3 longstanding agencies responsible for issueing ratings are being criticized for failing to not properly assess companies that have run into trouble due to their sub prime mortgage investment exposures. I would think, with the current slow response in downgrading those companies that ran into trouble, coupled with the high ratings these companies enjoyed prior to the current financial mess, that a serious self audit by the rating agencies currently providing these ratings would be in order. The whole premise behind the existence of the rating agencies is to provide guidance to investors and clients alike when choosing ...

Image via Wikipedia A recent article in the Philadelphia Inquirer, link above, highlighted the fact that the National Flood Insurance Program is out of money. Congress has apparently been looking for ways to fix the program the past couple of years, but in the absence of a fix, recently voted to extend the program as is through March 6th of next year. The article went on to say that the program is currently $17.3 billion in debt to the U.S. Treasury, which doesn't include the bills coming due for Hurricanes Gustav, Hanna and Ike, assuming the rest of the hurricane season passes uneventfully. Once losses from the aforementioned hurricanes are added to the total, the total taxpayer bill is in excess of $20 billion. You might recall a previous post here dated September 3rd, 2008, discussing increasing federal involvement covering flood related hazards on the coasts. As described above, the more the government is involved, the more the U.S. taxpayer has to ante up to cover the ex...

When trying to manage their insurance policies, many business owners make the decision not to turn in potential claims and decide to take care of them on their own. By paying for small claims, such as property damage, etc, they strive to keep claim frequency down and in turn keep renewal premiums down. One area of insurance they should not try to manage though is potential liability situations/claims. Most policy conditions require prompt notification of any potential liability claims to the insurance company and if a claim isn't turned in promptly, the policy language does note that the company can deny a claim due to late notification. It's important to do this early on since information/memories are still fresh and it gives the insurance company time to completely investigate the potential claim. The potential for a liability claim is most likely the small business owner's greatest area of risk, whether they operate a restaurant, cleaning service or any other busi...

Image via Wikipedia With Hurricane Gustav thankfully having passed through and done it's worst, it's looking like the last few months of the hurricane season are going to be quite active. As of this writing there are 4 more storms forming in the Atlantic, Hanna, Ike, Josephine and Karina. The current estimate of insurable losses from the damage caused by Gustav are currently between $2 and $4.5 billion. I mention the insured loss estimate because currently there is a move afoot by the federal government to expand government control of disaster relief and also increased federal disaster insurance coverage. With more federal involvement and more federal dollars spent for disaster coverage, take a look again at the numbers I previously mentioned regarding estimated insurable losses from Hurricane Gustav, came ashore as a Cat 2 and quickly became a Cat 1, and extrapolate the numbers of a busy hurricane season. The private insurance market has done the job it is supposed to do...

Image via Wikipedia Delaware Insurance Commissioner Matt Denn today announced another cut for workers compensation rates to be effective October 1st. This rate cut is an average 11.57 % decrease in premiums, covering the wide range of occupations covered under the code. When combined with the rate cuts previously undertaken last fall, the State of Delaware insurance website, www.delawareinsurance.gov, is touting the almost 30% decrease in workers compensation rates since last year. While work still remains to be done on the cost containment/managed care portion of recent workers compensation legislation, this is a good sign for employers that the days of runaway workers compensation costs/premiums might indeed be a thing of the past.

When a new contracting business is established they shop around for insurance and usually end up acquiring the policy that provides the best price and/or coverage. The problem starts when it comes time for the policies to renew. Many are unaware that these policies, namely the general liability and workers compensation policies, are auditable policies. When first written, general liaibility policies are based upon either sales or payroll for the policy year and workers compensation is based exclusively upon payroll. Things go wrong though when the contractor uses subcontractors for various jobs and fails to collect a certificate of insurance from the contractor showing proof of their own, the subcontractor's, general liability and/or workers compensation coverage. At audit time, usually a few weeks before the policies are due to expire, the auditor asks for these certificates of insurance. If they aren't provided then the insurance company will use the payroll paid to th...

Many times small business owners try to parse what is or isn't an employee when faced with the prospect of having to obtain workers compensation coverage. A commonly used tactic by those trying to wiggle out of having to purchase workers compensation is coming up with inventive labels for their employees in order to dodge the workers compensation "bullet". Oftentimes employees are labeled subcontractors, or are made officers of the employers corporation. The problem is the definition of who is an employee often bumps up against the employers fondest wishes. For instance, does the person work at a time and place directed by the employer? Are they provided with the tools in which to perform their job function by the employer? Does the "employee" work solely for the employer? Can the "employee" be considered an independent contractor? It is important to know and understand the distinction ahead of time before considering ways of avoiding workers ...

The insurance commissioner, Matt Denn, and the State of Delaware, have been working the past couple years on overhauling the costly, definitely for small business owners, workers compensation system. It's no secret that many employers have been frustrated by the ever increasing costs associated with the program in recent years. While it will take time for the complete overhaul to be completed, a welcome change being felt more immediately is the decrease in premiums that have lightened the insurance premium burden on business owners both large and small. One facet that is being addressed is a managed care type of system, aimed at decreasing both the cost and time involved in the claim process. Recently, while reviewing the Delaware Code referencing this, Title 19, Labor, Workers Compensation, we found an item of interest for employers. Specifically, under Chapter 23, section 2322E, paragraph (d), it states, "Within 14 days of receiving a notice of injury, an employer ...

Many businesses, both large and small, provide their employees with laptops. Many times employees will either take them home or take them with them on company trips. Is there a plan in place at your company regarding the security of laptops? Many of these hold sensitive company information that could cause a major headache for the company should this information be stolen. Do these devices contain financial information? What about sensitive information specific to your clients? Many times employees transport these devices in their vehicles and might be prone to leaving their vehicles unlocked. While there is coverage available to replace the stolen laptop, there isn't much that can be done once this information has fallen into the wrong hands. Set up procedures before something happens regarding security for these devices. Make sure that when employees do travel with these devices that they are stored/locked securely in the trunk while traveling, and that they don't ...

We have touched on this subject briefly before but I ran across an article in "The Specialty Insurance Blog" referencing statistics that indicate that distractions while driving, such as using a cell phone, have a direct impact on accidents. The blog references a post in the Insurance Journal that discusses a finding by the National Highway Traffic and Safety Administration (NHTSA), that emphasizes that 25% of all traffic accidents are caused by distractions, and that a survey done by Nationwide Mutual Insurance found that 73% of all drivers talk on their cell phones while driving. I mentioned in the past about small business employers having clearly stated company policies for employee use of cell phones while driving on company business and I think this further illustrates the actual gravity of the issue. The Specialty Insurance Blog referenced a study by the University of South Carolina that found subjects were "4 times more distracted while preparing to speak or s...

Republican house attorney John Brady has resigned his position in the General Assembly to throw his hat in the ring for the insurance commissioners office being vacated by current commissioner Matt Denn, who is running for the office of lieutenant governor in this fall's election. Mr. Brady, the first Republican to join this particular race, is joining the three Democrats who have already announced, Gene Reed, Karen Weldin Stewart and Tom Savage. Might be a good thing to pay attention to this race due to the number of candidates. Are there substantive issues being raised? How will they be helping the consumer and what's their attitude towards insurance companies? Something to think about. Anyway, happy 4th of July to all!!

Here's another example of "proactive" government in action. According to a post entitled "What Florida really wants - other peoples money" in one of my favorite blogs, RiskProf, John McCain, the nominee for the republican nomination for President, does not support a national catastrophe plan, while the democratic nominee for President, Barrack Obama, and some governors do. Of course what this really means is that those of you not living near a coastal area could still end up subsidizing those of you that choose to. The main thrust of the disaster plan would be to create an emergency cash reserve set up for states to access in the case of future natural disasters, such as Hurrican Katrina or rampant wildfires. This fund would be federally managed, always a cause for concern, with funds contributed by private insurance companies. Obviously the governors that are vocally backing this plan happen to preside in coastal areas. As Mr. McCain stated, this woul...

According to a recent article in National Underwriter, www.propertyandcasualtyinsurancenews.com, anti-fraud organizations representing sectors of property and casualty insurance and health insurance are combining efforts to combat fraud. This is good news for small business owners who are annoyed when their insurance companies pay for what they consider illigitamate claims. Not only are insurance rates affected by the number of claims paid out for possible fraudulent activities but individual insured's loss histories are negatively impacted as well. As many of you might know, every claim paid out by your insurer is recorded by them and provided to any future insurance company you wish to do business with. Hopefully this is a sign of future proactive and aggressive attention to this area by insurance companies.

With the spotlight currently focused on the subprime mortgage crisis and with many prior examples of securities debacles, think Enron, it's interesting to note that insurance entities are starting to explore opportunities into this historically untouched area of investment for them. According to their website, Lloyds, www.lloyds.com, one of the largest world players in the insurance and reinsurance market, "Convergence between the capital and insurance markets is gaining pace and Lloyd's insurers are at the forefront of developments". They have formed an investment management company that will specialize in traded insurance risk. With the global industry as a whole having an extremely profitable run the past couple years due to the low incidence of insurance related catastrophes, combined with a successful run of investment profit in the stock markets, they are now exploring new ways to broaden their earnings capacity. While at face value this looks much like many...

It's that time of year again, hurricane season is upon us. According to the National Oceanic and Atmosperic Agency (NOAA) website, they are predicting a 90% chance of normal or above normal activity in the Atlantic this year. Their definition for normal or near normal is a range for major hurricanes at 1 to 3 for the season. Their definition for above normal is a range between 2 and 8 major hurricanes. The reason I bring this up is the fact that many business owners located at or near the shore, or in designated flood zones, aren't currently carrying flood insurance. While not intended to scare you, it's important to realize that your current property/casualty insurance does not cover you in the event of flooding. Take a look around your building/facility, is most of your stock and or equipment, located in an area accessible to water in the event of flooding conditions? Can you afford to self insure this material in the event of a major weather event? You may be sur...

Interesting article I ran across. Seems that with the increased gasoline costs, motorists are driving less, thereby decreasing accident rates. An analyst at Lehman Brothers upgraded major personal auto insurer Progressive Corp. as an investment due to this trend. With the recent trend of insurers decreasing their rates to win business, this would be a welcome sign for them to increase profit margins. The story stated that in the 70's, when gasoline prices increased substantially, the same trend occurred.