Risk & Business

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

Even in the recession insurance companies have made money. Mostly from interest income out of investments and lack of significant claim catastrophes over the last few years. However to continue their earnings insurance companies may be faced with tough times. The Fed is looking to keep interest rates depressed even through the slow recovery. As the economy picks up and people and small business grows, claims will increase. The insurance companies will then have to walk a tight rope on when to start raising rates to keep their earnings. If they raise rates to fast the industry could hinder the already slow economic recovery. If they don't raise premiums then their earnings could be negatively impacted. So it is a fine line they will have to navigate over the next few years. Lets hope for small businesses around the country that the industry will slowly raise rates to cover the forthcoming claim increases so that the economy can grow. However if the insurance companies get ...

  I have to applaud the NFL in their accelerated quest to reduce concussions. Currently the league is looking into helmet design and rule changes on hitting and tackling. This is risk management at its best. The NFL is doing great and revenue even in this recession is up, but the league is looking ahead to make the game safer without changing the inherent toughness that makes the game great. The helmet desing issue is a great example. The NFL is looking into helmet design per position. Studies show that each position on the field have different forces on the helmet. The lineman take more hits to the front of the face and chin. Receivers take hits to the side of the head and neck. Running backs get hit more on the top of the head. As the league continues to risk manage the helmet design I can only see the game getting safer and better. Again this is risk management at its best. Until next time be careful out there and know your risks. K

For the first time businesses are reporting losing more money to electronic theft than to theft of hard physical assets. The Insurance Journal reports that the amount of loss due to electronic piracy and fraud is now outpacing the theft of business assets by millions. Studies are showing that most of this theft is coming from middle tier employees and outside thieves. The risk management practices to control the electroninc theft is not as well formed as hard asset theft and also lags in keeping up with the technology changes that occur so rapidly. How this will affect businesses going forward will remain to be seen. With the electroninc risk so high, businesses that cannot control it will most likely not expand or grow as quickly as they may be able to. In other words electronic theft may be contributing to a stalling economy. In time I think we will see sound risk managment techniques develop that can control some of the problems with electronic...

I can't help but think that 90% of this recession is lack of confidence. I hear it and see it when I visit my clients every day. No business owner that I deal with has any real confidence in the direction of the country. Time and time again we discuss how the policies of Washington DC over the last decade or so have pushed the economy to the brink and now everyone is kinda just holding on. As a country someone or something has to break the deadlock. Will it be the Nov election results ?  Will it be the banking sector? Will it be green energy initiatives?  No one really knows but America has always pulled itself out with innovation and creativitity. It is time for all of us to help ourselves by using our minds and energies to create confidence. Once we get that back then the economy will flourish again. Until next time be careful out there and know your risks. K

Risk is everywhere and never ending. Top businesses are starting to learn that risk management is a science and a needed discipline for survival and success. The complexities of it take special skills and training and cannot be accomplished successfully unless individuals are skilled in the field. As the profession of risk science evolves it is becoming clear that individuals in their daily lives could benefit from what the big corporations are finding out about risk management, it makes life easier. Unfortunately it can be overwhelming for individuals to accomplish on their own. As a matter of fact it is impossible for individuals to practice risk managment scientifically without specialized training and education. Like medicine, people need doctors to heal them when they are sick. In the future I predict that people will have a risk professional to help them live along with their docs, accountants, and lawyers. Until that time people will live risky lives because they d...

With the insurance companies making more money than ever and the increasing commodization of the business, independent agents find themselves at a crossroad. Historically, agents have been more than sellers of insurance they have been advisors and counselors of insurance and risk. Clients have always had the advantage of getting great service from agents and not having to pay for it other than the premiums since insurance companies pay the agents a commission. As companies have pushed agents for more and more growth while lowering commissions, agents are trying to continue to give the same amount of service under more and more pressure. Agents are faced with trying to serve two masters, growth for the insurance companies & quality service to their clients all the while getting paid less. Something has to give. If agents continue on this path, they will not be able to sustain their businesses. The answer may be in fee for service or the answer may be in conso...

A new law just passed in Ca. mandates a communication strategy for consumers that outlines the nuts and bolts of homeowners insurance policies. On the heels of the wildfires, many homeowners found themselves underinsured and the State felt that warnings and education will help consumers understand what they are paying premiums for. My question is where are the agents? This is the job of the agents that sell these policies to consumers. Maybe the agents have been doing a good job and the consumers are not listening, or maybe the agents hae been lax in communicating to customers what is and what is not covered. I think it is a little of both. Either way the State getting involed to such a degree that they are doing part of an agents job is not a good thing. It is the tip of the iceberg of more regulation and oversight of the business. My warning to all agents and brokers out there if you are not communicating on a regular basis the coverages and non coverages to your clients the regulato...

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