Risk & Business

AIG has laid out a plan to repay the TARP money at a more accelerated pace. Some analysts say this increases the risk for stock holders and profitability. However some say that if AIG can repay 80 plus billion in just a few short years then maybe they didn't need the bailout money in the first place. This debate will go on until history proves out what was right. Anyway you skin it,  AIG is no longer the same company it was. It has however given the financial world an example of what not to do with risky financial products. Until next time be careful out there and know your risks. K

Insurance companies that insure the ships that pass by Somalia are figthting back. They are looking to put together a private Navy to protect the ships from the pirates. This is an interesting risk management technique, which is to control the pirate risk with force. I am wondering how the US Navy will feel about this since this private force will be in their jurisdiction. The way I see it is the insurance companies have a right to protect thier policy holders and their insured risk. This is just a very radical step to increase their risk management and to increase protection. It will be interesting how this works out. Until next time know your risks and be careful out there.  K

A recent study by the National Underwriter reveals that most people that file fraudulent insurance claims do so because they are trying to get back at insurance companies. Previous poor experience and service from the insurance carrier is usually the main reasoin why they do it. Goes to show that you need to treat every customer as they are the most important. you never know what they will do to get back at your company if you treat them wrong. Wake up insurance industry !   Until next time be careful out there and know your risks. K

Lexus Nexus just developed an online insurance information exchange for brokers. They are looking to solve one of the problems in placing insurance and that is information exchanges between brokers and companies. From what I read,  online risk and insurance information about companies will be available  for both brokers and companies to review. This will allow a quicker turnaround of insurance quotes and more competition. As of now this is mainly concentrated on large and mid market business. Small business will not be part of the exchange. Until next time be careful out there and know your risks.  K

There are new rules going into effect in New York on disclosing agent and or broker compensation to clients. Currently insurance companies pay brokers and agents and give them back end bonuses based on premium volume and profitability of books of business. Many in regulation feel this is a conflict of interest because agents and brokers push business to companies that they can make the most income from. Does this hurt clients and do clients care? After almost 25 years of placing insurance and getting paid by commissions I can count on one hand how many times clients asked what I made in thier policy premiums. I usually tell them anyway and most of the time they are surprised at how little we make for the service we provide. Does this system open up the possibility of agents or brokers taking advantage of clients by pushing to insurance companies based soley on profit and not  whats best for cleints,? Yes it is possible, but agents and brokers 99% of the time do whats best for their...

I am really trying to figure out how the political results in November will effect my industry. Many say that if the Dems stay in power then there will be Federal regulation of insurance. If the Reps win then maybe the States will stay in control of insurance regulation. Either way I feel the winds of change ready to strike the insurance industry. Only time will tell.  Until next time be careful out there and know your risks. K

National Underwriter reported today that employers cost of work comp has dropped significantly across the country but medical costs have risen expotentially over the last few years. This puts the whole work comp insurance market on a slippery slope. I have tracked this in this blog over the last year. My concern for my cleints and business owners is a radical change in work comp costs because of rising medical costs. Something is going to change soon. Insurance companies are not going to continue reducing work comp rates in an environment of soaring medical costs. My prediction is overnight the market will adjust rates and business owneres will see 15-20% increases in work comp premium. I am not sure when this will occur but the current trends are going to force something soon. Until next time know your risks and be careful out there. K

Based on a University of Michigan study on medical malpractice claims, proactively disclosing medical errors actually reduces the claim payouts. Past practice has instructed medical professionals to be mum on mistakes and to let the lawyers and courts fight it out. Well it now looks as if admission and disclosure is actually better. Claim payouts to patients is considerably lessend if the truth is told early and then managed. It goes to show your mother was right, always tell the truth. Until next time be careful out there and know your risks. K

In aviation, pilots have an theory regarding risk managment. The majority of accidents occur because of a chain of events. During this chain, pilots have many opportunities to stop the chain and avoid the accident. The same is true with just about any business. Most accidents occur because of a chain of events. Risk management teaches us to recognize the chain and to stop it in its tracks. Unfortunatley, human beings miss the signs and things occur. If you want to reduce your risk profile, recognize and cut the chain. Until next time be careful out there and know your risks. K

As an independent insurance agent the sight of an approaching hurricane is a unnerving sight. If the storm comes into land it means a time we ratchet up the phone lines and get ready to help clients get claims paid. It usually a time that the insurance industry shines. However the water issue is always the problem. Most people in the way of hurricanes do not have flood insurance. Most of the damage is usually done by flooding. As an insurance agent this always upsets me. If more people would buy flood insurance in exposed areas then the coverage issues between wind and water would be lessened. People would be able to recover quicker. The lesson here, buy flood insurance if you are near the coast. Until next time be careful out there and know your risks. K

Economics 101 teaches that when industries mature and the product becomes commoditized then the companies with the cash will buy up the market. I am seeing this with the independent insurance agencies in our region. Just a few years ago in Delaware we had over 60 or 70 insurance agencies. Today we have 45 or so. This trend is continuing throughout the country also. When I started in the business in the late 80's there were over 100,000 independent insurance agencies in the Nation. Now the estimates are about 25,000. This all has to do with an industry that has no place left to go with it's products for differentiation. With the advent of the internet, service demands, the only differentiating factor between agents, is falling because of online use. The agents National Associations are hoping that the complexities of insurance will keep the need for agents and bolster the industry. Though I agree that agents are needed for consumers and that insurance is a complex transaction, ...

Colorodo town was the lastest to allow golf carts on  public roads. The rationale is to be more green. This is a on going trend across the country.  If you are one of the golf cart drivers you better check your insurance coverage. Now that they are allowed on roads are they considered vehicles? Will the personal auto policy respond for coverage or the homeowners policy respond ? You better check before you go crusing down the highway in your golf cart!!  Until next time know your risks and be careful out there. K

Watch out, according to the Insurance Journal, 8% of all drivers in the US drove drunk last year. This is an incredible amount of people, greater than 20 million or so. These numbers do not include the "buzzed" drivers who are slightly impaired. With this knowledge it shows that the roads in America are dangerous. Be careful out there !!   K

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.

Workplace fatalities are down 17% Nationwide. This is good news for a change. The recsssion has given me a lot of negative things to write about, but now I finally have some good news to report !   Be careful out there.  K

I read yesterday that States got 48 million from the Feds to police Health insurers and make sure they do not raise health insurance rates prior to the 2014 health exchanges, I am disturbed by this because it implies that Health insurers are on a path to gouge policyholders from now until 2014. I disagree with this assumption. I would agree that health premiums are high but I know that health companies are setting rates based on the costs of medical care. Health rates are high because people's lifestyles and eating habits and the overall cost to provide the best medical care in the world. This type of tactic will force the health insurers to reduce coverage and reduce payments to medical providers. There is no magic formula here. The exchanges will certainly find out in 2014 that rates have to be promulgated on losses and expenses. People are not going to get healthier and medical providers still need to get paid, so I do not see how health exchanges are going to be able ...

Blue Cross and Blue Shield of Delaware is looking for a partner that can shore up their financials, other health insurers in other States are laying off people and looking to merge. Whats going on? Well they are getting ready for the new health care law changes that are suppose to be going into effect in a few years. The law sets new financial guidelines and qualifications to participate in the health exchanges. The law also mandates certain profitability. It also looks like agents and brokers may be cut out of the deal unless thier National associations can lobby for participation. Anyway you slice it, it is change. Only time will tell what will happen. Until next time be careful out there and know your risks.  K

Roughly 5 years ago California reduced comp rates dramatically based on a work comp reform initiatives and a predictive drop in claims and medical costs. This was celebrated by the Small business community as they felt a instant relief from high work comp costs. Now, the California compensation rating bureau says they need to raise rates 29% to avoid a potential comp crisis where market availability could be impacted. As expected this is coming with stiff resistance because of the recession. With this going on, I have think this could be the same outcome in Delaware. A few years ago DCRB rolled back rates and continues to reduce rates because of actuarial mandates and a new legislated work comp initiative. As far as I know to date the rates are holding as claim costs have been down and insurance companies have been able to make money in comp. However in talking to company representatives over the last 6 months, the trend is changing. The comp loss ratios ar...

A tropical depression is moving over the BP oil site this week. Why is this news to risk and insurance? Well, mainly because most scientists and risk managers really have no clue how oil in the water will affect the development of strorms and if the storm can disperse oil over a larger area. Even though this is a realtively weak storm, it still may give a good indication of what could happen with a large hurricane. The insurance and risk management community will be watching closely along with the scientists. Until next time be careful out there and know your risks. K

It seems that workplace violence is getting more prevelant. However it has been around since there are bosses and employees. According to experts one of the main reasons employees follow through with violence is because their bosses or fellow employees make them loose respect of themselves. This is very difficult for business owners to risk manage. The only way to is to create a culture of respect and empathy for all employees. This gives owners some emotional credit when they have to discipline or fire employees. Easier said than done....  Until next time be careful out there and know your risks.  K