IRMI Update—Issue #20
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
July 10, 2001
In This Issue
Colleague,
Last issue's editorial on agents/brokers as consultants drew an avalanche
of responses. It is definitely a topic on which opinions abound. We provide
a few highlights below, and a lengthier assembly of views in IRMI.com.
Our IRMI Update subscriber family is fast approaching 10,000 risk and insurance
professionals. Won't you help us put it over the top? Please recommend it to
several colleagues. They can easily sign up for the free subscription by visiting
www.IRMI-Update.com.
And, lastly, please e-mail me a risk tip to share in a future issue. It should
be a paragraph or two suggesting a risk management or insurance technique or
tactic that readers can put to use. Of course, you'll get by-line credit as
author.
With this issue, IRMI Update becomes one year of age. Many thanks for subscribing
and participating in our community.
All the best,
Jack
Jack P. Gibson
President
IRMI
Identify Hidden USL&H Act Exposures. Do you
or your clients have a workers compensation exposure under the U.S. Longshore
and Harbor Workers Compensation (USL&H) Act? You might be surprised to know
that recent court decisions have found that a truck driver, bulldozer operator,
and security guard qualified for compensation under the Act. If employers fail
to secure compensation under the Act, the penalties that can be assessed are
onerous. The employer becomes subject to a civil action brought by the employee—where
common law defenses may not be used—and is subject to a criminal misdemeanor
charge for which executive officers must answer and could result in jail time.
Executive officers are also responsible for any benefits due the injured employee.
Double-check those work operations, and if you identify a potential exposure,
seek coverage from an insurer approved by the U.S. Department of Labor to write
the insurance.
By: Christine Fuge
Senior Research Analyst
International Risk Management Institute, Inc.
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 Christine.
There are now 182 articles on IRMI.com, and many more are in production.
Below you'll find summaries of some recent additions with links to the articles.
-
E-Commerce Insurance
Issues: A Year in Review—This article summarizes the events witnessed
in the e-commerce insurance arena in the past year: where we were, where
we are, and where we may be headed. The trend toward excluding computer
virus from commercial property policies and reliance on stand-alone e-commerce
policies are among the topics discussed.
-
Circuit City, Inc. v Adams:
Compelling Arbitration of Employee Claims under the Federal Arbitration
Act—Some employers require that their employees sign arbitration
agreements as a condition of employment. In March, the U.S. Supreme Court
upheld the use of such agreements, even for employees covered by collective
bargaining agreements. Learn the ramifications of this important case.
-
Wireless Networks:
The Next Best Thing or a Whole New Headache?—The third generation
(3G) of cellular networks is coming to America, and many companies are foaming
at the mouth for the opportunity to jump to a wireless workforce. This article
examines the two biggest hazards of using a wireless network segment and
steps that can be taken to avoid them.
-
A Historical Perspective
on Insurance: The Great Fire of London—The insurance industry
can accurately trace its formation to the Great Fire of London on September
2, 1666. Learn the history behind the event—why the setting was ripe for
disaster, the demolition of most of the city, and the foretelling of what
emerged from the ashes.
-
Sick Building Syndrome
and the Definition of "Pollution Conditions"—Are sick building
syndrome claims covered under your insurance policy? Check the language.
But what conclusion do you reach when the conditions, definitions, and exclusions
don't jibe? This article examines the quandary.
-
The Trouble with
MGAs—Managing general agents have always been used to provide
special expertise to insurance/reinsurance companies. However, they are
often viewed negatively. This article discusses some of the problems that
arise in a managing agency relationship and suggests viable solutions.
You'll Learn Plenty about Wrap-ups and OCIPS in New
Orleans!—Wrap-ups and OCIPS will be addressed from the perspective of
both owners and contractors in New Orleans. "Protecting Contractor Interests
in a Wrap-Up" on Tuesday will identify key coverage questions contractors need
to ask during the early phases of the project to leave them well informed and
prepared to negotiate the best coverage terms possible. In "Wrap-Up Success
Stories on Wednesday" you'll hear sponsors of successful wrap-up programs tell
their stories, including a description of the program design, hurdles and challenges
they faced, and steps taken to address these issues.
This is just 1 of 4 all-day seminars and 19 sessions and workshops to be
presented at the 21st IRMI Construction Risk Conference. Registrations will
be accepted in August. In the meantime, for more information, check out the
conference agenda for details about all the sessions and the presenters.
Sign Up for
Free 2-Month Subscription to IRMI Newsletters—You can sign up for
free 2-month trial subscriptions to The Risk Report,
Captive Insurance Company Reports, or
Financing Risk & Reinsurance in the Products
and Services section of IRMI.com.
Jack's last editorial on agents/brokers providing
consultative services brought many thoughtful responses. You can get a feel
for the different perspectives from the following excerpts. To see many more
responses, see "Agents
and Brokers as Consultants: Conflict of Interest or Value-Added Service?"
- Agents or brokers can provide unbiased service, if they are reputable
and have a separate consulting arm. The typical agent/broker is not a loss
control specialist, not a bonding expert, and not a claims expert. They
need to stick where they have their expertise, whether it be personal lines,
GL, etc., to give advice. I ran a risk management consulting arm (fee for
service basis) of a large regional broker for a number of years, and when
the "agents" (salespersons) got involved in "consulting," E&O claims resulted.
—James S. Kahn, CPCU, ARM, Lackawanna Casualty Company,
Wilkes-Barre, PA
- I agree with your statement "professional agents try very hard to provide
their clients with the best possible advice...." But what about those exposures
that may be retained or transferred by means other than insurance? I've
found most insurance agents typically focus their attention on risks that
are handled through traditional insurance products. This is where the agent's
training and expertise reside.
—Charles Perry, CPCU, ARM, AIAF, Vice President-Corporate
Accounting, Preferred Reinsurance Intermediaries, Inc., Columbia, SC
- I have been providing risk management and insurance advisor services
to my clients for years. We provide a complete value-added service package
that includes such things as an annual review of workers compensation experience
rating modification, loss control and risk transfer strategies, claims management
procedures, and we review all contracts that our clients enter into, and
offer advice on insurance provisions. All of our clients appreciate these
services and reward us for these value-added services by referring us to
new prospects. As a result of performing these services, all of our new
business comes from referrals.
—Paul Coffey, E.J Wells Insurance Agency
- There is an old Biblical saying that applies here, "You cannot serve
two masters." An agent by definition represents the insurance company. While
there are many agents that have their insureds' interests at heart, they
must, in good conscience, represent the company. The consultant ONLY represents
the client. What is more important, most clients realize this fact and are
more trusting of the consultant than the agent.
—W. Hank Bahr, CPCU, ARM, CIC, President, Bahr Consultants,
Inc., Knoxville, TN
- The difficulty in the insurance industry is that some folks have more
than one employer. Agents and brokers find themselves in a juxtaposition
situation where their employer is both the insurance company and the insured.
That can cause problems for them.
—John Hislop, Producer, SIA Group, Jacksonville, NC
- A good agent is a risk manager. Their ultimate goal should be to protect
the "assets" of the company, not sell a policy. If any salesperson is looking
for short-term financial self-interest, then they will not obtain long-term
clients.
—Julie Schatz, Senior Vice President, Roberts & Crow,
Inc., Dallas, TX
- We advertise ourselves as a "consulting broker" or as "your insurance
advisor" in that we offer our clients risk management advice as well as
insurance products and services. However, an independent consultant should
be utilized if the client is distributing an RFP to various brokers with
a truly objective purpose or if an alternative (i.e., self-insurance) appears
to be a viable alternative that should be properly evaluated.
—Larry Johnson CPCU, President, FirstLine Insurance Services,
Omaha, NE
- I was intrigued by your question, "Can agents and brokers provide credible
and unbiased consultative advice?" I have a rhetorical question—"If you
DON'T trust your agent or broker, why are you doing business with them?"
—Blair Basham, Director of Risk & Insurance, USFWW, Itasca,
IL
- Any professional agent or broker always places the client's interest
first, or they can expect to lose that client. We value the long-term relationship.
We have suggested clients take other agents' products at times, but we keep
the relationship active and when situations change, we get the clients'
business back. When a buyer picks a good professional agent, they should
not need to pay extra for a consultant. Professional Independent Insurance
Agents are the best deal going.
—Richard Heckle, AAI, Chairman, Dean, Heckle & Hill,
Inc., Matthews, NC
- I served as a risk manager for a few years, and I always trusted our
agent to answer my questions honestly and to provide us with the best solutions.
He helped us reduce our workers comp and P/C premiums which lowered his
commissions but his payback was our loyalty for 25 years until the company
sold.
—David J. Schmerer, Training Coordinator, JEA, Jacksonville,
FL
- In spite of how close the client relationship is to the agent, there
remains an element of "doubt" or "mistrust," as the agent is seen as the
seller of product that generates commission. The consultant avoids being
painted with that brush, and can be successful with helping the client to
understand the need to buy coverages absent from their program. The savvy
agent understands this, and rises above feeling threatened.
—Whit Payne, President, WP Risk, Atlanta
- I could not agree more! If our industry is to change the perception
that many business owners have about us, we must bring risk management expertise
to them. Too often we are seen as simply selling a product with some good
service instead of providing business solutions that extend far beyond insurance
and may even eliminate some insurance ... Approaching the relationship with
the mindset of serving as a consultant will go a long way toward building
trust and credibility.
—Kevin Schoonhoven, Commercial Producer, InterWest Insurance
Services Inc., Merced, CA
- Unfortunately, we live in the real world of hidden agendas, tactics
aimed at achieving business goals, and organizational goals being met through
achievement of objectives. The unbiased consultant is a rare commodity.
The consultant sells services (notice the plural). They thrive on building
continuing relationships. Some of their advice is self-serving. The unbiased
agent or broker is a rare commodity. They thrive on building continuing
relationships and selling products. Some of their advice is self-serving.
—Dan Sielicki, Risk Manager, generalRoofing, Fort Lauderdale,
FL
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