IRMI Update—Issue #16
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
May 9, 2001
In This Issue
Colleague,
My April 17 editorial struck some nerves!
We were inundated with e-mails on the issue of federal versus state regulation.
You will find a few interesting excerpts below and a
more complete version in my Big Picture column.
Thank you for telling your friends and colleagues about IRMI.com. We especially
appreciate those of you who forward IRMI Update to others with an encouragement
to subscribe. If your firm would like to add a number of your colleagues to
the list, feel free to send us their names and e-mail addresses and we'll gladly
add them for you.
On a personal note, I enjoyed seeing so many friends at the RIMS Conference
last week. It was particularly gratifying to hear all the kind words of encouragement.
I'm glad you are enjoying the newsletter, and I promise we will work hard to
keep it fresh and interesting.
Thank you so much for your support! Have a great day.
Jack
Jack P. Gibson
President
IRMI
Keep Disposable Cameras in Company Vehicles. I suggest to all of my clients that they place a disposable camera in the glove
boxes of all company vehicles. No need to explain why. Also, all regular drivers
of non-company owned vehicles who sometimes drive on company business might
follow suit. Actually, it isn't a bad idea for everyone!
By: Steven B. Steinberg, CPCU
President and Principal Consultant
Entrust Risk Management Services
Houston, TX
E-mail: sbs@argohouston.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 Steve.
We add new Expert Commentary to IRMI.com every week. There are now 133 articles
on IRMI.com, and many more are in production. Below you'll find summaries of
some recent additions with links to the articles.
-
Court Finds "Direct
Physical Loss or Damage" Due to "Impairment of Function and Value"—This
article examines the recent Minnesota appellate court decision which determined
that the requirement for "direct physical loss or damage" was met in the
absence of tangible injury when government regulations rendered cereal unfit
for sale, resulting in "an impairment of function and value" of insured
property.
-
Imaging: The Vision
of Change—By using the imaging process, organizations can better
manage change and help employees cope. This article looks at the process
and how it can be used to achieve company goals.
-
Information Systems:
Which Type Is Right for Your Organization?—Buying a new risk
management system is difficult considering all the different applications
and alternatives. Learn what types of systems are available and how they
can respond to your organization's needs.
-
Introduction to ISO
14001—With the growth of the global economy, public awareness
of differences between nations' environmental programs spurred the development
of an international standard for environmental sensitivity. This article
examines the ISO 14001 standard, certification, and scheduled revisions.
IRMI Workers Comp.
The state law summaries in this reference go far beyond those included in other
reference services in both depth and accuracy, and this feature easily justifies
the subscription price. However, you get much more for your money. For example,
it gives you helpful advice for dealing with each state's assigned risk plan,
the competitive state funds, and the monopolistic state funds. Visit IRMI.com
for more details and a table of contents.
Jack's April 17 editorial drew scores of reader
responses. We've provided a few excerpts below. Since you have such a high interest
in this area, we've also placed a more complete version in his Big Picture column.
If we receive additional reader comments on this topic, we will expand the Web
version. To express your views, complete the MyView form.
- "I favor state regulation of personal lines and no regulation of commercial
lines. Rating agencies, other independent watch groups, good faith and fair
dealing principles of common law, and free market supply and demand factors
should be adequate checks on the commercial insurance marketplace. Will
this approach produce an environment where no one will be hurt? No. But
the current approach doesn't either. In fact, you could argue that the inefficiencies
and ineffectiveness of insurance market regulation guarantee that all consumers
pay more and receive less."
—Michael M. Kaddatz, Managing Director, ARM Tech, Lake
Forest, CA
- "Your hearty praise for the great work of the NAIC is largely misplaced.
For years, the NAIC championed the right of each state to run their insurance
department as a private empire, with little regard for the impact it had
on agents, brokers, and clients. Only after the broker community was able
to push NARAB legislation through Congress did the NAIC sit up and take
notice. NARAB would never have been passed, or even proposed, if the NAIC
had shown even the slightest interest in seriously addressing the issues
of multi-state licensing!
"Only when NARAB passed did the NAIC come to the table. Had NARAB died
in committee, it would have been back to business as usual, and the NAIC
would have resumed their fierce opposition to any licensing modernization!"
—Robert E. Joyce, Executive Vice President, The Harry
A. Koch Co., Omaha, NE
- "The present system of state regulation of insurance is as antiquated
as the horse and buggy, and creates massive inefficiencies on the part of
brokers, risk managers, and insurance companies. The only people who seem
to gain are the various bureaucracies in each of the state capitals. Insurance,
as part of interstate commerce crosses state lines more so than staying
within state boundaries; just look at products, automobiles, WC, etc., where
the exposure has become much more mobile and should not be limited to any
specific state. While I'm leery of federal bureaucracy, can it be worse
than what we are presently dealing with, not to mention the fact that some
state Insurance Departments spend their time generating political funds
for the ruling party and others are just plain dishonest?"
—Luke Halley, Insurance Services Manager, Halliburton
Company, Houston, TX
- "Uniformity of Statutes is great—witness the Uniform Commercial Code
(UCC). Federal regulation would be bad—too much power in one place."
—Robert G. Mahan, Esq., PE, Managing Member, Mahan Insurance
Brokers LLC, Carlsbad, CA & Mystic, CT
- "My view is and always has been that a uniform set of regulations would
make the insurance industry far more efficient. States' rights are important,
and where there are demonstrable reasons to deviate from a national standard,
they should be given due consideration. Having said that, I believe there
are very few areas where differentiation is warranted.
"I certainly cast my vote for pressing for national standards pertaining
to consumer protection and regulation of the insurance industry. I believe
this will only come about through federal regulation as I concur that each
state will deviate from any guidelines established to the point where the
effect is nil."
—Duane K Ludwig, CPCU, ARM, Senior Vice President, Marsh
Risk & Insurance Svcs., San Francisco, CA
- "The thought of state regulators abolishing their own empires requires
more imagination than I possess. And, from an insurer perspective, my concern
is that we will have 51 hoops to jump through in lieu of the current 50.
And, for product filings applicable to just one state, we may have 2 hoops
to jump through in lieu of 1. Certainly, if that is the outcome, it wouldn't
be an improvement. For the short term, let's see if the devils we know can
get their act into some semblance of alignment. If they can't, we can always
opt to start over with "big brother" from DC."
—Robert W. Whitman, Division V.P., Great American Insurance
Company, Cincinnati, OH
- "I have seen several times that most states have agreed to accept changes
in insurance forms that our state or some other states have refused as being
against the interests of our clients. I think a great example is the 72-hour
waiting period for business income coverage. When it came through, only
one state, Louisiana, would not allow the change unless an endorsement was
provided to allow the waiting period to be deleted. Once that endorsement
was provided for Louisiana, the rest of us in the other states also wanted
the same endorsement. Would the efficiency of a centralized system have
allowed that to happen? It may seem to be an obstacle to efficiency, but
I believe that we need checks and balances in the insurance industry to
preserve the interests of all the parties. I have not seen any indication
that a centralized efficient system will do that."
—Chuck Schramm, CIC, CPCU, ARM, AAI, Lamb, Little & Co.,
Rolling Meadows, IL
- "I am very opposed to federal regulation. If individual state regulation
is less efficient, that is a small price to pay to have the benefits. Benefits
include the fact that having 50 departments innovating, deciding, analyzing
results is a sort of best practices in the long run. Having only one results
in a stagnant—way too powerful/bureaucratic—regulator. Not a good thing
at all in the long run."
—Larry Andreano, The Campbell Agency, Inc., Byron Center,
MI
- "The ink on GLB is barely dry, and the states are already making major
strides in standardization, where it makes sense. They will never agree
on every issue, and I am thankful for that. The state's governance is supposed
to reflect the uniqueness of the citizenry. What flies in California or
Maine may not suit Virginians or Texans. Ultimately, independent agents,
captives, and consumers would be the losers in a federally regulated environment,
and the only winners would the national insurers and larger brokers."
—William D. Cundiff Jr., CIC, AAI, President, Wm. Cundiff
& Associates, Inc., Fredericksburg, VA
- "Granted, the current system of having 50 different insurance commissioners
is not very efficient, but I have less faith that the federal government
can do it any more cost efficiently. One only need to look as far as the
rates (and benefits) involved with the USL&H Act as opposed to state workers
compensation and you see how inefficient and expensive a federally run program
can become."
—Bill Hughs, Vice President, Willis of Louisiana, New
Orleans, LA
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