IRMI Update—Issue #85
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
March 23, 2004
In This Issue
Colleague,
I have a theory about the employment practices liability exposure: most claims
arise because the wrong person was hired in the first place. Sure, the most
common sources of claims are probably allegations that an employee was discriminated
against in some manner or that an employee was wrongly terminated. In other
words, most claims arise after an existing relationship goes sour or is terminated.
However, I believe that the relationship is less likely to sour or be abruptly
terminated by the employer if the employer does a thorough job on the front-end
with a superb hiring process. This should be a standardized process used uniformly
throughout the company and should generally include some combination of the
following elements:
- Proper identification, documentation, and communication of job requirements
- Preemployment personality testing to help determine whether the candidate
has the attributes to succeed on the job (and in the workplace)
- Preemployment background checks of credentials and criminal records
- Preemployment drug screening
- Manager training on how to conduct a thorough and legal interview
- Reference checks
Some of these steps may be controversial, but I think they are all worthwhile.
One that always surprises me is reluctance to use preemployment personality
testing for fear that its use will lead to a lawsuit. We've used testing very
successfully at IRMI for 25 years. If the instrument is carefully chosen and
used as only one additional tool in the selection process (and not as a "hire/don't
hire" decision-making switch), incurring a lawsuit from using it is highly unlikely.
There is much less risk involved in using these tools than arises when you hire
the wrong person because you don't use testing. We know of no successful suits
against users of legitimate preemployment profiling instruments.
What do you think of my theory? If we could eliminate bad hiring decisions,
would we eliminate or substantially reduce the incidence and severity of claims?
What do you think are the key elements of a good hiring process? Where do companies
most often go awry in their hiring? Have you had success using personality testing
in the hiring process? [See reader comments].
Our first "Proactively Managing Risks and Claims in Design and Construction"
is being held in Las Vegas today, but you still have time to register for the
Chicago or Washington seminar. I hope we see you at one of them. Go to our seminar web page for details
about them.
Have a great day.
Jack
Jack P. Gibson
President
IRMI
Use a Written Scope of Engagement—The agent/broker
is paid a fairly substantial amount of money in the form of commissions or fees
to service a business entity's insurance account. This often involves much behind-the-scenes
work of which the insured may not even be aware. However, one of the most frequent
causes of dissatisfaction is the feeling that the agent/broker is not providing
the services that a firm needs. One way for both the agent and the client to
reduce the chance of this occurring is to use an account service agreement.
Having a written agreement gives both sides a standard by which to measure the
service performance of the agent/broker and helps to justify the compensation
provided for that service.
The written scope of engagement and the agent's/broker's commissions or fees
should be discussed, renegotiated, and revised annually. Compensation plans
vary, but they generally involve fees, commissions, or a combination of the
two. These arrangements include commissions that are sometimes negotiated, flat
fees, and time and expense billings. Using a written scope of engagement will
help insureds get their money's worth and agents/brokers to demonstrate their
worth.
Derived from recommendation #58 from
101 Ways To Cut Business
Insurance Costs.
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 519 articles on IRMI.com, and many more are in production.
Below you'll find summaries of some recent additions with links to the articles.
Proactively
Manage Risks and Claims in Design and Construction—Two nationally
recognized experts describe and explain today's design and construction risks,
how they are allocated in standard contracts, and what actions owners, contractors,
and design professionals can take to manage them. The professional liability
insurance options, ways to eliminate coverage deficiencies, and what to do when
construction claims do arise will also be discussed. This 1.5 day seminar has
been filed for 12 hours of insurance CE credit in 47 states. Architects, engineers,
attorneys, CPAs, and CPCUs may also receive credit. To be held in Chicago March
31–April 1; and in Washington D.C. April 13–14, you won't want to miss it. To
learn more, see the Seminars section.
New IRMI Personal Lines CE Courses Available—Now approved in 37 states, with
more approvals coming in every day, are four new IRMI continuing education (CE)
courses:
- IRMI Personal Inland Marine
- IRMI Homeowners Insurance
- IRMI Personal Umbrella Insurance
- IRMI Personal Auto Insurance
Gain 4-12 CE credits (depending on the state) by taking these new self-study
courses. In most states, you can read or print the study materials directly
from our Web site and even take the test online. You can also order printed
materials and a test. And you can't beat the price—all the credit you need in
most states for under $50. Check it out today! For more information or to order
one of these or other CE self-study courses, see the Training and Education section of IRMI.com.
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