IRMI Update—Issue #10
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
February 6, 2001
In This Issue
Colleague,
Our market survey for the month of January confirms the "rational exuberance"
we have been sensing. The market is firming, but it is doing so in a controlled
and reasonable manner. The exhibit on the right shows what 340 IRMI.com visitors
experienced on their insurance renewals in the month of January. I, for one,
am glad to see sanity returning to insurance pricing without a full scale market
crash, and I hope this trend continues.
We thank all of you who shared your experience with the poll and also those
who sent me an e-mail reporting additional details. A sampling of these messages
is provided below for your further information.
Have a great day!
Jack
Jack P. Gibson
President
IRMI
| To what extent have you seen commercial
P&C rates change since 12/31? |
Decrease................16%
Increase 0-10%.....19%
Increase 11-20%....31%
Increase 21-50%....18%
Increase 51+ %......16% |
Use Care When Disposing of Obsolete Stock and Equipment! Mary Roth's Risk Tip in IRMI Update #9, to dispose of
obsolete inventory or equipment rather than store it indefinitely, makes great
sense. This holds true whether by sale, as Mary suggests, or by donation to
charity. If there is any probability that the equipment will be used again,
there are product liability risks associated with its disposal that you need
to manage.
Some things to consider when deciding to sell or donate used equipment include:
- How hazardous is the equipment?
- What was wrong with the equipment for it to become expendable?
- Was it too old to operate, did not operate properly, or were replacement
parts unavailable?
- If the original manufacturer or seller has gone out of business, the
seller of used equipment may have full liability.
Some measures to consider to help mitigate product liability exposure include:
- Obtain advice of qualified Legal Counsel to be sure all mitigation measures
are appropriate
- Make it clearly understood, in writing (such as in a sales agreement),
that the equipment is being "sold as is"
- Specify what "sold as is" might mean, i.e., with no inspections, testing,
reconditioning, or repair performed
- Recommend that the buyer or recipient have the equipment inspected and
tested before it is used and repaired or upgraded as needed to be sure it
is safe for use
- If there are any known safety hazards or deficiencies, identify them
and either repair them or recommend that buyer/recipient repair them, or
perhaps just scrap the equipment and not sell it or give it away
- Include an indemnity clause specifying that the buyer or recipient holds
the seller (or company who donates the equipment) harmless for all liability,
legal fees, expenses, etc., arising out of the use of such equipment
By: Kenneth E. Ryan
Director Loss Control and Training, Commercial Lines Division
FCCI Insurance Group
KRyan@FCCI-Group.com
Suggest a Risk Tip. Future issues of IRMI Update will include more risk tips from our readers. Send
us a practical tip (less than 300 words) for identifying and managing risks,
buying insurance, managing claims, or filling gaps in insurance coverages. We'll
acknowledge your contribution as we did for Ken.
We add new Expert Commentary to IRMI.com every week. There are now 106 articles
on IRMI.com, and many more are in production. Below you'll find summaries of
some recent additions with links to the articles.
-
Disruption: The Impetus
for Change—The cycle of change often begins with disruption.
New information, players, relationships, or objectives disrupt the status
quo. This article looks at how business management responds to disruption
and how this can affect the organization.
-
The Canadian Insurance
Market—Although close in proximity, Canada differs from the United
States in many respects, including its economy; social, political, legal,
and healthcare systems; natural disasters; and claims philosophy. This article
examines how the Canadian insurance market responds to these differences
and operates within the second largest country in the world.
-
The Reinsurance
Relationship—How Special is It?—While some have written off the
duty in these modern times, most insurance and reinsurance professionals
still adhere to the precepts of the legal duty of utmost good faith. This
article examines this duty that is so fundamental to the reinsurance relationship
and how it has changed.
-
Reducing RMIS
Costs with Application Service Providers—Need to replace an outdated
RMIS but management can't or won't justify the capital outlay? There is
a solution: Application Service Providers (ASPs). Learn how ASPs can save
hardware, network, infrastructure, database, application, and training costs
while providing a state-of-the-art RMIS.
There are a myriad of differing state regulations for agents'/brokers' continuing
education, and keeping up with them is tough. The Training and CE section of
IRMI.com can be a big help because it includes summaries and answers to frequently
asked questions about agent CE requirements in most states. To get information
about your state's CE requirements, click on "Course Catalog," select the state
and your type of license (life/health or property/casualty), and click "next."
Beneath the course listing for that state you will find links to a summary of
the state's requirements and answers to frequently asked questions about the
state's requirements. Visit the Training
and CE section.
IRMI CGL and Umbrella
Guide—This 230-page analysis of general and excess liability coverages
was updated and expanded in a second edition published last September. The Guide contains an overview of the current
(1998) version of the ISO commercial general liability coverage form, including
the 1999 modification of the policy's insuring agreement. Recent coverage developments,
such as those affecting application of the "known loss" rule, allocation of
defense expenses, and pollution cleanup costs, are given extensive treatment
in the new edition.
We received over 300 votes and many interesting responses to Jack's request
in IRMI Update #8 for information about your
experiences with commercial property-casualty insurance renewals in January.
Here are some highlights.
- "Although my current experience is limited to markets in Pennsylvania,
I closely watch market results around the globe, because primary rates are
driven in large part by changes in the global reinsurance markets. While
U.S. primary markets are somewhat slow to react, the reinsurance markets
are hardening quickly."
—Linda Williams, Assistant Vice President, Foxco Insurance
Management Services, Inc.
- "Work Comp for most my clients (middle market) leads the price increases,
and it's not surprising. This line has been seriously underpriced for years,
and it's coming home to roost. Clients and prospects are considering self-insurance
and captives in lieu of standard programs. But this presents a problem in
that their 5-year loss-to-premium history has deteriorated."
—Gordon D. Dudley, ARM, LIC, Senior Consultant, Risk
Assessment Management Services, LLC
- "In California, GL and excess so far are under control -- rate increases
of 5-10 percent. WC is another story altogether. For accounts I work with
(25k -100k), only the State Fund appears to have an appetite for quoting
this business."
—Robert G. Mahan, Esq., Managing Member, Mahan Insurance,
LLC
- "So far, the market may not be as bad as the mid-'80s. However, our
first D&O renewal under these "new" conditions has a 100 percent increase
in premium. (The account had a few small claims in their past, but none
in the just-expired year.). The underwriters are now starting to request
new applications, on renewals, that are signed by the client. In addition,
underwriters have become a little more conservative in their selection of
risks and are unwilling to take any chances on something new."
—John F. Ellis, Vice President, Entertainment and Sports
Insurance Experts (ESIX)
- "As a road and bridge contractor in the tri-state NY area, we have experienced
significant increases in the umbrella market and workers compensation. Our
experience has been excellent in both of these lines of business, and we
employed the marketing tools suggested by IRMI over the years. It appears
to be an across-the-board tightening of the market with little consideration
given to the individual experience of the contractor. This could have a
very negative impact on the contractor's mindset with regard to the strides
that have been made in the safety arena. Of course, long-term relationships
with carriers are a tremendous benefit to the insured."
—Josephine R. McCaffrey, Risk Manager, Ecco III Enterprises,
Inc.
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