IRMI Update—Issue #73
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
September 23, 2003
In This Issue
Colleague,
If you have been following the workers compensation crisis in California,
you know why the insurance department recently declared that the system is "near
collapse." Claims costs are skyrocketing, rates are following suit, and many
insurers have become insolvent or have pulled out of the market. This has reached
such a level of concern that it's become an important issue in the upcoming
gubernatorial recall election. Although reform legislation has just been announced,
it will likely only moderate further rate increases.
I sincerely hope that the politicians will be successful in their efforts
to solve the state's workers compensation problems. In the meantime, it is up
to risk and insurance professionals to get back to basics and make sure they
are properly managing their risks and their insurance programs. I'm proud to
announce publication of a new reference manual designed specifically to help
risk and insurance professionals do their jobs more effectively and all buyers
of California workers compensation to save money regardless of what the politicians
do. Levine on California Workers Compensation Premium and Insurance is a unique
reference manual that focuses on premium issues, strategies, and disputes to
help control escalating workers compensation costs. To order or get more information
on this new publication, please call us at (800) 827-4242 or check online.
Thank you for the trust and confidence you have in IRMI. I hope our newest
publication will become a valuable addition to your professional library.
Have a great day!
Jack
Jack P. Gibson
President
IRMI
Communicate with Underwriters to Facilitate Your D&O
Renewal—The directors and officers (D&O) liability insurance marketplace
remains difficult, and one of the keys to receiving the best possible terms
is to communicate thoroughly and honestly with your underwriters. If the regional
underwriter doesn't have the final authority for your program, it is a good
idea to meet with both him or her and the home office decision-maker. In preparing
for the meeting, work with your broker to compile a list of questions covering
the "hot topics" of the day. Then address those issues with appropriate management,
such as the CFO, General Counsel, VP Internal Audit, Controller, etc., and compile
their responses into a Q&A format. You can then use the document for discussion
points during the meeting and leave a copy with your underwriters. In hard market
conditions, this approach distinguishes your account from the blizzard of submissions
underwriters see and avoids them having to take notes or try to remember what
was said. It has worked well for us.
By: J. Gary Meggs
Director, Risk Management
Southern Company & Subsidiaries
http://www.southernco.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.
There are now 458 articles on IRMI.com, and many more are in production.
Below you'll find summaries of some recent additions with links to the articles.
Find Answers
to CCIP and OCIP Questions—This year's IRMI Construction Risk Conference
provides a wealth of information on contractor controlled and owner controlled
insurance programs. "CCIPs
and Safety," presented by TJ Lyons of Turner Construction,
uses real-life examples to show how the team approach can work to make a safe
construction site. The "Forum
on OCIPs" assembles an all-star panel of construction risk and insurance
experts to discuss both the basic issues contractors and owners have with wrap-up
insurance programs and the current market factors affecting them. For more information
on these and other sessions, see the Conference agenda.
New California Workers
Compensation Manual Published by IRMI—Levine
On California Workers Compensation Premium And Insurance is a new reference
manual designed specifically to help risk managers, insurance buyers, agents,
brokers, underwriters, and premium auditors with operations or clients in the
state of California. This new manual will help you properly classify risks for
premium determination, apply experience rating rules, understand insureds' rights
to claims and rating information, understand and explain how rates are determined,
evaluate employee leasing, "sovereign nation," and other alternative programs,
deal with insurer insolvencies and the State Fund, handle premium disputes,
and negotiate important premium issues with the WCIRB or underwriters. The author,
a CPCU, ARM, and former underwriter with over 25 years of California workers
compensation experience, is a leading attorney in the field and staff counsel
to the state Rating Bureau's Public Members. Levine
on California Workers Compensation Premium and Insurance is now available
on IRMI Online, IRMI CD, and in print. See the details or call
our customer service department at 1-800-827-4242 to order a copy.
Jeff
Slivka has been writing on environmental risk management issues for
IRMI.com since March 2000. He is a senior consultant with AON Environmental,
where he assists in the sales and broking of environmental and professional
liability insurance programs for both environmental and non-environmental firms.
His expertise is in the areas of environmental risk management, environmental
underwriting, and environmental and professional liability insurance, primarily
for the construction industry. Mr. Slivka is a frequent speaker and author on
these topics. For more information on Mr. Slivka, see his full biography and a list of his
articles.
Is the Insurance Marketplace Stabilizing?—In IRMI Update 72, Jack Gibson asked readers what they
were seeing as far as pricing in their current renewals. It appears that prices
are stabilizing, if not falling, in most lines. Following are some reader observations
on what they're seeing in their areas.
- We do see the insurance market starting to loosen up; in fact, some
pricing is even going down! Transportation accounts remain a difficult line
of business. We are not seeing more carriers increasing their writings,
however.
—Donald P. Uvanitte, CIC, ARM, AAI, LIA, Allied American
Insurance Agency LLC, Quincy, MA
- We were very concerned about our renewal this year. Our D&O was coming
off of a 3 year dpp policy, with favorable terms, and a higher limit liability.
We were able to renew with premiums almost the same, and with the same coverage
and limits! Our liability insurance had gone up 400% last year, and this
year, the rate went down. The only rate increase we saw was in auto. It
was a pleasure to renew this year!
—Bonnie Carlson
- In our state, we are seeing competition returning to the property/inland
marine market. I know of two accounts with property values in excess of
$100 million that renewed at about 50% of the expiring rate. Please note
that both accounts had good loss experience over the past few years with
no major catastrophe losses. The auto market is still rising somewhat. But,
we have found that carriers will discount the renewals to keep a profitable
piece of business. Workers compensation has become somewhat more competitive
on the larger, cleaner accounts. We recently had two carriers bidding against
each other to write a new account. The result was a good price for the insured,
but still at a slightly higher premium than expiring. General liability
has been stabilizing, but no great reductions have been seen in the rates
lately. Excess/umbrella pricing still seems to be increasing, especially
if the underlying has a large auto exposure. Overall, the market has stabilized
somewhat for the better accounts. Safety programs that work are key to selling
the account to underwriters.
—Steve Thibodeaux, ICT Insurance
- I have seen the primary markets stabilizing with some increased competition
from the carriers. We have had a number of encouraging successes. There
are still challenges in some lines based on the exposures or the states
involved. Depending on the loss experience involved with their particular
risk, their action plans for preventing losses on a go forward basis, I
expect most insurance buyers will see some relatively small to no increases
and with increased competition for their business. They will also have to
continue to be creative on the more challenging lines of business such as
D&O, Med Mal., and group health insurance. Complete and detailed submissions
to the markets are still absolutely necessary to obtaining favorable results.
—Bill Horner, SCLA, VP Risk Management Services/Broker,
Bowen, Miclette & Britt, Inc., Houston, TX
- We renewed in June. The past 2 years were the best the company has ever
experienced with respect to losses, and we actually found competition for
our primary programs, and bettered the rates we paid for 2002-2003. The
foreign excess market, however, worsened dramatically, despite no losses
in that arena.
—Bill Lalor, B.L. Harbert International, LLC, Birmingham,
AL
- Even here in Champaign, Ill., WC and PLI costs are through the roof.
We formed a Captive in July to protect ourselves. I see no positive changes
in the near future.
—Daniel J. Pope, General Counsel, Christie Clinic, P.C.,
Champaign, IL
- With the proliferation of tort lawyers and terrorists in our country,
the amount of aggregate risk will grow unabated. Rather than hard market/soft
market cycles, I think we've entered a new and enduring era of a hard market
soft in spots. The herd (of insurance companies) is confused and individual
companies will make unique decisions that will create big opportunities
for short periods of time. A diligent agent has never been worth more to
his client than he is today.
—Tom Bobrowski, Rothschild Agency, Merrillville, IN
- In my opinion, 2003 renewals will show more streamlined coverages and
definite exclusions for those activities we are all doing over the Internet.
Security is more of an issue than ever, even if we don't want to admit it!
To bring efficiencies into our operations, utilizing computer systems and
various networks is a must. The insurance industry is putting its foot down
and saying that it will not cover these activities in standard forms, and
it is paramount that we, as brokers, educate our clients in these issues
and make coverage recommendations.
—Carrie M. Allen, ARM, The Cyberian Group, Inc., Huntington
Beach, CA
- I would tend to agree other than the windstorm capacity problems of
coastal areas in FL and other Gulf and South Atlantic states. This problem
does not seem to subsiding from a pricing or capacity standpoint except
on small risks (less than $750k).
—Ron Anderson, Agency Principal/Producer, Underwood Anderson
& Assoc., Pensacola, FL
- I would like to see the data behind the broad conclusion that the market
has leveled off for most lines. As far as competition coming back, it is
just the opposite in the large account segment as more carriers get downgraded
and are exiting that segment. Additionally most new money in is intelligent
capital not looking to soften the marketplace.
—Louis Iglesias, VP, AIG Construction Risk Management,
New York
- Rate increases are not happening across the board in professional liability
The market is still quite aggressive for architects and engineers and for
technology E&O.
WC in CA will be tough to fix, especially with Kemper having been one
of the larger providers. Carriers are reluctant to write even good business,
reacting to concern over potential assessments (like MA in the 80s when
all business went into the pool.) The fix was in crediting firms for writing
voluntary business, not assessing them for it.
—Elizabeth L. Good, CIG Underwriting Manager, Schinnerer
& Company, Inc., Chevy Chase, MD
- The insurance marketplace is just like the stock market. What we have
experienced in the last 2 years is a market correction. Prices now are where
they should have been years ago. The underwriters have started underwriting!
They can no longer survive on investment income. Good accounts with a good
loss record will not have a problem getting insurance. Those with a poor
loss record will.
Insurance companies will keep their prices up with reasonable increases
each year. They must have an underwriting profit. They must build their
reserves up in case we have another September 11. They can only pay claims
if they have the reserves to do so.
—Robert Williams
- Clearly after September 11, if there is one thing we have learned it's
that the Insurance Sector can never be termed as a Stabilized sector. Some
might say that property and auto lines are stabilizing and things are under
control, but believe me, it will only take half a September 11 to turn everyone's
views around.
As for competition, I say it's only the Big Boys of Insurance who are
going to "rule the blocks and run the shows," so to speak. They will take
every risk they can and every risk no one else can. That puts into simple
terms what competition we are going to see. I don't see any new entrants
coming up with new ideas or any sort of innovations, and the "Big Boys"
are just going to go on with their normal climb to the top.
What can customers expect? Customers can expect to be treated like kings.
Every large company will want to get as much of the market as possible,
each and every customer will be looked after, and expect more covers being
asked for by these customers. Also, expect the insurers to put in more conditions
and exclusions, quite simply because no one wants to burn the same foot
twice. All in all let's hope for the best for us insurers.
—Mohammed Jaffer, Jubilee Insurance
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