IRMI Update—Issue #51
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
October 22, 2002
In This Issue
Colleague,
The hard market has caused risk and insurance professionals to spend considerably
more time and energy on their own insurance programs (or those of their clients).
However, another consideration must be the insurance programs of the other organizations
with which you do business. Many may be forced to reduce their limits or buy
restricted coverage. Some of the special coverage modifications that were once
freely obtainable (e.g., additional insured status in liability policies) are
becoming more difficult or costly to obtain. Some important commercial lines
insurers are also having their financial ratings lowered by S&P and A.M. Best.
It is probably time to review the insurance requirements you impose on others
in your business contracts. Are they still reasonable in light of recent market
changes? Are your required limits now too high? Are you asking for special coverage
enhancements that are no longer available? Do you require that all insurance
for all types of businesses be written by A+ rated insurers? It may be necessary
to make some adjustments in recognition of the new marketplace realities.
After reviewing your requirements for reasonableness, you might also audit
your follow-up system to make sure you are monitoring compliance. The best contract
insurance clause in the world is worthless if the other party doesn't comply.
And, unless you are diligent about receiving up to date certificates, you will
never find out until it is too late.
Do you agree that this is an important project to undertake? What problems
have you encountered in getting others to meet your contract requirements—like
providing additional insured status? Are insurers now charging for additional
insured endorsements or insisting on using more restricted forms to provide
additional insured status? Do you have other experiences to share or recommendations
with respect to contractual risk transfer issues in a hard market? [See reader comments.]
Of course, contractual risk transfer will be covered in detail at the 22nd
IRMI Construction Risk Conference. We're less than a month away, and I hope
to see you there.
Have a great day!
Jack
Jack P. Gibson
President
IRMI
Preparation and Management of Premium Audits Pays
Off—A proactive approach to insurance audits can pay big dividends. Gather
the audit data before the auditor arrives and prepare a test audit on a spreadsheet,
so you know what to expect. Be sure to pull out overtime and driver payroll.
In addition, if part of the liability insurance premium is based on receipts/sales,
look for non-operational receipts, such as inter-company transactions, travel
and mobilization charges, charges made to customers for being available to work,
or for maintenance contracts that required no work. Some items cannot be negotiated
out of the audit, but with reasonable explanations, some savings can be achieved.
Ask for a copy of the auditor's worksheets, and if they don't match your projections,
discuss and work it out with the auditor at the time, rather than after the
invoice for additional premium is received.
Certificates from subcontractors pose another big opportunity for insurers
to collect extra premium. In many states, all or a portion of the sub's cost
is charged as if the sub were an employee if you don't have an insurance certificate
showing adequate coverage. If you don't have a knowledgeable, insurance-trained,
person with adequate time to scrutinize every certificate, consider using a
service to do this for you. Some of the firms offering software or ASP solutions
include Certificate Management Solutions, Ins-Cert Corporation, Insurance Data
Service, and Periculum
Services. IDS and Periculum receive, check, and track certificates for you.
CMS either checks and tracks certificates for you or sells software for your
staff to use. Ins-Cert is a central database, populated by your subs' agents
for you to use for free compliance checking and reports.
By: William R. Hartigan, CIC, ARM, AAI
Ins-Cert Corporation
Littleton, Colorado
E-mail: wrh@Ins-Cert.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
give you credit for your contribution.
We add new Expert Commentary to IRMI.com every week. There are now 346 articles
in the archives, and many more are in production. Below you'll find summaries
of some recent additions with links to the articles.
-
Adding Value with ART—What
is meant by alternative risk transfer? Brent Clark provides his perspective
and explains how ART can add value by providing solutions for risk problems.
-
Managing RIFs during
Tough Economic Times—Paul Siegel presents guidelines for how
employers can implement a reduction in workforce and avoid potential employment
law challenges.
-
Project Risk
Assessment—For the bond underwriter, risk assessment is made
in relative—not absolute—standards. Rolf Neuschaefer discusses project risk
factors that may apply.
-
What Constitutes
a Full Underwriting Submission?—In the first article in a new
topic—Insurance Industry Market Practices—Peter Polstein describes the elements
that are included in a full underwriting submission, using a recent casualty
renewal as an example.
-
Environmental Risk
in Retail: Exposures and Solutions—Alan Bressler examines the
environmental risks in retail operations and presents the relevant risk
transfer products designed to mitigate these exposures.
Insurance Tips for Homeowners—With
insurance premiums for homeowners policies rapidly escalating, Robin Olson provides
tips to save premium dollars and reduce losses.
Need
Help Bidding Your Construction Insurance Program? One of the 20 sessions
at the 22nd IRMI Construction Risk Conference will offer timely tips: when to
shop your program, what information is needed, who should be approached, what
criteria to use in the selection process, how to avoid conflicts, what factors
to use when comparing proposals. For more information on this session, see Tuesday's
agenda.
Be sure to check out the agenda for details on the rest of the conference
and simply complete the online registration form to register. Hope to see you
in San Diego!
Fine-Tune Your Captive
with CICR—If you own, manage,
or are insured by a captive insurance company, Captive Insurance Company Reports will keep you tuned in to techniques
and tactics for making better use of it. Each monthly issue brings you insightful
reports on reinsurance, tax, domicile, and regulatory developments and how to
either profit from them or avoid the problems they may cause. For more information
or to request a sample issue, see this web page.
A subscription to IRMI Update is absolutely free. Use the e-mail registration form to initiate or terminate
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