Risk & Business

The Delaware Legislature voted to reduce medical reimbursements on work comp claims. This is an attempt to reduce Delaware work com rates which pointed to medical costs as the reason for the rate increases over the last few years. The reductions will be phased in over the next 3 years and will be up to 30%.  A Delaware task force brought to the legislature findings of their study on rising work comp rates and doubled down on medical costs as the reason.  The question now is how will the medical community react to this new law ? Will this really reduce comp rates over the next few years? Only time will tell.  We will revisit this again real soon. Until next time be careful out there and know your risks. G. Kevin Nemith President CNC Ins. Associates Inc. and the Small Business Insurance Center Serving DE,MD, VA,NJ, & VA www.cncinsurance.com www.bizinsurancetv.org

Based on a recent report, 3.7% of construction workers will get injured on the job this year. Take into the fact that the average work comp claim in construction usually tops over $10,000, and you can understand why work comp is a cost driver. The direct cost of workmans comp insurance continues to rise. In most construction trades work comp premiums can be 40% or more of the total commercial premium in a 12 month policy period. The only way to reduce these costs is in safety practices. Companies that avoid injuries pay less in work comp premiums hands down. Safety practices and safety equipment may be expensive and time consuming but the payoff is big. Not only do employees have a safer work environment, but the competitiveness of the company that avoids injuries is enhanced.  There is one word in work comp cost reduction that every construction company needs to know and that word is "Safety". Those that avoid injuries pay less, period!! Until next time be car...

I always take the time each spring season to remind clients and business owners to get prepared for the upcoming storm season.  Though the hurricane prognosticators are announcing less activity this year, a few could be major. So take the time and review your properties and assets and make sure your insurance coverages are up to date. Also have a business interruption plan in case you are down a few days or weeks.  Small preparation today will could help enormously if you are damaged by a summer storm. Until next time be careful out there and know your risks G.Kevin Nemith President, CNC Insurance Assoc. & The Small Business Insurance Center Serving DE, MD, VA, NJ, & PA www.cncinsurance.com www.bizinsurancetv.org

I was reading a national news story about Farmers insurance company filing a law suit against certain towns in Illinois. The reason behind the suit is the reimbursement of insurance claims paid out due to the towns not being prepared for man made climate change. This is a really interesting case and the whole country should  follow this to see how it comes out.  The reason this is an important case is the business and politics of man made climate change could be turned on its ear by the insurance industry. If towns and cities are forced to pay back insurers because they did not implement protections from climate change then you might start hearing a different tune about man's affect,on the weather. Another way to put this is, the insurance industry is going to test the theory of man made climate change in courts.  Stay tuned to this one folks. Until next time be careful out there and know your risks. G. Kevin Nemith President CNC Insurance and the Small Business Insuran...

A few years ago Congress approved the formation of the Federal Insurance Office (FIO). This was in response to the 2008 meltdown of AIG and numerous other banks and money institutions.  For the first couple of years the office has not been in the insurance headlines very much. Lately however, it seems that the FIO is in every insurance publication I read. The office is becoming very active. Currently they are probing the need for Federal Government intervention into the 150 year old State regulation of insurance. Also I saw headline of the FIO  looking into the affordability of auto insurance. These actions are a precursor, in my opinion, of a full Federal regulatory takeover of the insurance sector. It may take awhile to achieve this, but State's will have no ability to stop it. The State regulatory system has been exemplary over the years as insurance has proven to be stable and well capitalized and did not suffer the collapse that banking and S&L's e...

Commercial insurance agents and brokers, are continually trying new ways to bring value to their clients. Many offer risk management services as a value proposition. However after years of studying the science of risk management and enterprise risk management, it occurs to me that it is extremely difficult for agents to provide full risk management services on commission only.  Most of the time it is only risk management "lite". If agents and brokers really provide the needed risk services to businesses only being compensated by commission then they could not make a profit in the long term.  Don't get me wrong even risk management "lite" is a big help to business owners trying to reduce risk in their business.  However, agents and brokers need to make their clients understand that they can only do so much on what they get paid with commission.  I predict that more and more will offer greater risk management services  for  a fee in order to do a better job ...

Most business owners will sign contracts in the course of business, but will never read them. When problems arise however then the terms in the contract are discovered and usually they are not good for the business owner. Today's contracts are very much loaded in favor of the lessor, the one that lets the contract. The business owner who signs them does not realize that all the terms go against them until it is too late.  Make sure you read every contract before you sign. Understand who is responsible for damages and watch words like "hold harmless" and  "indemnification". Get your attorney to review the wording and get your insurance broker to make sure your insurance can cover the terms of the contract.  Don't take contracts for granted,  read , read , read, before you sign. Until next time be careful out there and know your risks. G. Kevin Nemith, President of CNC Insurance Associates, Small Business Insurance Center Serving, DE, MD, PA, NJ, and VA ww...

Small business owners are faced with an onslaught of emerging risks. Cyber theft, supply chain disruptions, economic downturns, and employee lawsuits are just a few of the new and complex risks on small business. In a recent poll, small business owners put high trust in agents and brokers to help them. With education and insurance protection, these owners feel confident they can handle these risks and continue to grow their business. Agents and brokers are paid commissions from insurance companies for the placement of insurance. Very few of these agents and brokers charge their customers for the extra services given in education and risk management. The question now becomes how long can the agents and brokers provide these additional services at the commissions they get paid from the insurance companies. Only time will tell. Until next time be careful out there and know your risks. G. Kevin Nemith, Pres. CNC Insurance Associates & The Small Business Insurance Center...

The Biggert-Waters Flood reform act was suppose to be the legislation that would wean flood insurance policy holders off the decades old Federal subsidized insurance rates. These low rates have made the flood program affordable for many,  but in a fiscal mess. With many policy holders crying "no fair", Congress is now pushing to amend the legislation to soften the rate increases and continue the subsidies. This is a good thing for the policy holders but is really irresponsible as the flood program continues on a downward spiral.  Sooner or later the "hard decision" has to be made in order for the flood program to be self sustaining. If not the Federal Government will continue to support the unrealistic rate and premiums. The flood insurance program is promoting residential and commercial growth in flood prone areas. If the premiums were accurate my guess would be that less growth would happen in those areas because the cost would be to high for mo...

It was recently announced that the DCRB and the Insurance Department of Delaware have reached an agreement on the increase in Delaware work comp rates. It looks like 14% is the new number for 2014. Business owners may feel somewhat relieved as it was discussed that the rates should go up 40% or more. However 14% is nothing to sneeze at, as most business owners will still have a tough time paying for the increase in a lagging Delaware economy. The work comp rate making game has become an event most Delaware business owners have come to expect. Each year DCRB gives a suggested loss cost rate increase and the Insurance Department pushes back. Sometime after the start of the new year new rate structures are approved. What is problematic with this system is the affect it has on small business and the Delaware economy. Business owners have a hard time planning their budgets for the new year as work comp is a big number on their income statements and has to be factored in. Most of my clients ...

A recent insurance industry study makes is very clear that most insurance buyers are willing to buy insurance from other than agents and brokers. Names like Google and Amazon were top on the list as places consumers would buy insurance from. What does this mean for the traditional model of insurance selling? Change is on the way fellas! Over the last few decades online selling of insurance has continually grown and has dramatically realigned the agent/broker model of selling insurance. Agents and brokers have adapted by having online abilities for consumer buying. However if big marketing companies like Google and Amazon get into the business of selling insurance, agents and brokers may find it hard to compete. Most insurance buyers feel insurance is a commodity, so big marketing budgets could make it hard for traditional sales models. The one saving grace for agents and brokers is the service side. Google and Amazon may find it hard to deliver the one on one hand holding that agents a...

NAHRAB II is still sitting on the shelf in Congress. The modern insurance agency licensing bill, that could easily help agents and consumers alike , has yet to be passed. The bill would allow one license for agents and full reciprocity from States, so multistate insurance needs can easily be handled. Currently, agents must individual licenses in each of the states it needs to write coverage in.This creates major  expenses for agents and hassles for consumers. The house did pass the bill and now the Senate needs to bring it to the floor for a vote. However with all the fiscal problems the country has, insurance licensing is not top priority. Multistate licensing has been on the insurance agents wish list for decades. Lets hope 2014 is finally the year that it happens. Keep your fingers crossed ! Until next time be careful out there and know your risks. G. Kevin Nemith President CNC Insurance Associates Inc. and the Small Business Insurance Center Serving DE, MD, PA, NJ, & VA...

I know this blog post may be jumping the gun a little, but the use of drones will cause some real insurance issues. Now we may be some years away but drones are going to be used in commerce and in business. So how will the insurance industry respond.  Are they insured like autos? Are they covered like property, or airplanes ? What about the liability issues when the drones go rogue or the operators make errors. Can you imagine driving to work and being hit by a wayward drone making a delivery?  What about a competitor using a drone to spy on your best customers and collect data on them. Does this sound out of this world?   Get ready insurance industry, here come the drones ! G. Kevin Nemith, President of CNC Insurance Associates Inc. Serving DE, MD, VA, NJ, and PA www.cncinsurance.com www.bizinsurancetv.org

For many who have lived near flood prone areas and have flood insurance, get ready, your costs are going up. Due to the recently passed Biggert-Waters flood reform act, rates are going to be adjusted to more accurately reflect the risk of flood. For many years flood insurance has been under priced. The Federal program has been subsidizing the rates for years which has given people the affordability to build in coastal areas and have coverage. However, as the program struggles financially, congress was forced to pass legislation to make rates more accurate. Unfortunately for many flood policy holders they are having sticker shock as rates have gone up significantly. Will the increase in rates slow down the residential growth in coastal areas? It might. If home owners cannot afford the protection that flood insurance gives them, then they will be less likely to build homes in areas that are prone to flood. Stay tuned to see how this plays out. ...

Well it is a new year and the data theft at Target stores will most likely test the coverage of the commercial general liability policy. To date Target has not announced their insurance coverage but odds are the claims will be sent to the liability policy. Since data theft claims are relatively new in the insurance industry, the history of legal precedents is very thin. The commercial general liability policy has not been tested as might happen in the Target case. Cyber liability policies have been in force to handle data crimes but they too do not have a lot of claims history. So stay tuned to this story as it may completely set the future precedent on how insurance policies respond to data crimes. Until next time be careful out there and know your risks. G. Kevin Nemith  President of CNC Insurance Associates Inc. Serving Delaware, MD, PA, NJ & VA www.cncinsurance.com www.bizinsurancetv.org

The changes in the health care insurance market due to Obama Care are ground breaking. However these changes are quickly turning away from traditional insurance models. The insurance business is a "for profit" business where actuarial sound rates are charged to many in the hopes to cover the claims of others, with some money left over for profit. This is why the drafters of the new health care legislation put in a mandate. However with the White House exemption of employer plans and now recently, those who have had their current plans cancelled, the Obama Care health insurance model is at risk of collapsing as traditional insurance. Lack of the mandate reduces the spread and increases the risk in the pool. Also, the premium subsidies, delayed premium payments, and forced re-issuance of cancelled policies, put enormous pressure in insurers ability to make profit. Without profit, the health insurance companies that are the back bone of Obama Care will go...

Many business insurance policies have coverage for loss of business income. If the property is damaged or destroyed and the business owner cannot open the doors, then the business income insurance coverage kicks in. However, one of the missed extensions of coverage that has to be added is off premises power outage. When the power goes out across a region, the business could lose income. This is important coverage that has to be endorsed on the business income insurance, it is not automatic. Loss of income when the power goes out can be very costly. In the winter, heavy snowfalls could knock power out for days. In the summer, thunder storms can do the same. Check your commercial insurance coverage and make sure your business income coverage also covers off premises power outage.  Until next time be careful out there and know your risks. G. Kevin Nemith, President CNC Insurance. Associates Serving, DE, MD, PA, NJ, and Va www.cncinsurance.com www.bizinsurancetv.org

I couldn't believe what I was reading. A New York insurance regulator sees the ACA act (Obamacare) as a model for standardizing homeowners insurance. The regulator believes there is room for improving how customers understand the complexities in homeowners policies and the Federal Government is the ticket to get this done. This is absolutely a bad idea. Homeowners insurance is a complex product. Standardizing this insurance product is not going to fix the problem of surprised consumers after claims. Insurance companies market the homeowners policy like it is a commodity. People think they are covered for everything. Agents try to educate by sending out checklists and coverage reminders all the time but consumers are reluctant to spend hard earned money in coverage they think they do not need. In addition the flood versus wind debate after major storms always causes problems because homeowners policies rarely cover flood, but people still think they do. So when t...

Predictive modeling is common in insurance underwriting. Insurance companies use computers to analyze data about each customer, with other variables, to predict the chance of loss. These technical "magic beans" are suppose to help insurance companies become more profitable. However I just looked at insurers combined ratios through 3 quarters of 2013 and there are a lot of insurers not making any a whole lot of money on underwriting. As a matter of fact the majority of insurers are barely breaking even. I have been in the business a long time and today's combined ratios are no better than when underwriters used their experience and expertise to predict losses back in the day.  The predictive models are not really making much of an impact in my opinion. Millions of dollars are being spent by insurance companies to perfect these computer models in hopes to squeeze out more profit. I think the only profit advantage that these predictive models will gi...

As a professional in the insurance business I wanted to comment about the one year anniversary of hurricane Sandy that hit the NJ and NY shores. I wanted to see how the insurance industry has handled the 60 billion dollars worth of damage. The result is not looking to good for the industry. I have read industry articles that 80 to 90 % of the claims have been paid but most of the claimants are not real happy with the industry. Also the Federal Flood program still has many claims that have yet to be resolved which adds to the public disapproval. So how is it that the insurance industry which has settled the majority of claims still is seen as the bad guys.  My take after spending over 25 years in the industry, is the process of the insurance industry is problematic. The process of adjusting insurance claims can be very difficult and usually occurs  during a highly emotional time. The process of selling and buying insurance has given the illusion that insurance is a commodity, w...