IRMI Update—Issue #104
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
January 11, 2005
In This Issue
Colleague,
The tragic toll of last month's tsunami in Southeast Asia is unfathomable.
With nearly 150,000 casualties, hundreds of thousands of injured, and millions
of homeless, it dwarves other recent disasters. The largest relief effort in
history is currently underway with governments and non-government organizations
participating.
The economic toll will also be heavy. However, the property and casualty
insurance industry will experience only modest losses from the disaster because
people and small businesses in the region typically do not purchase insurance
covering this risk. Even so, I expect many of the insurers with a presence there
will realize the wisdom of going beyond the terms of their contracts in some
situations to help their customers and will find ways to support the communities
in which they do business.
Many risk management lessons can be discerned from this terrible disaster.
One is to never assume that something will not happen simply because it has
not occurred in the past. This, of course, is why there is no tsunami monitoring/warning
system in the Indian Ocean (nor for the east coast of the United States). When
analyzing risk, it is important to consider not only the probability of loss
but also the potential severity. The worst disasters rarely happen.
Another lesson might well be for organizations to establish a process and
system for facilitating emergency communication about impending threats within
the organization. It took hours for the tsunami to travel its entire course,
inflicting damage all along the way. If the management of one resort near the
epicenter had the ability to warn his colleagues in other parts of the region,
lives may have been spared. (Of course, a process among governments for doing
this would have been even more helpful.)
What other risk management lessons can we take away from this tragedy? Please submit your thoughts and
comments.
In closing, I feel compelled to acknowledge our readers in India, Indonesia,
and other parts of Southeast Asia. If you live in the region, please know that
my colleagues and I—like all Americans—are deeply concerned about the situation
there, and we will do what we can to help.
All the best,
Jack
Jack P. Gibson
President
IRMI
Identifying Ethical Organizations—Last year's
headlines gave us many examples of unethical organizations eager to take our
money, even our health, for their corporate and their executives' personal gain.
Pharmaceutical, financial, regulatory, and even insurance organizations—or at
least some of their executives—apparently are among the biggest culprits. Here
are three actions you can take to make sure that the people and firms you deal
with are ethical, will serve your interests before their own, and will benefit
your customers, clients, and other constituents.
- Inquire about the firms from which your organization buys or sells.
If you ask for references, do check them—but expect them to be favorable.
Dig deeper by checking with local better business bureaus, newspapers, and
courts. Look for clear indicators of conduct that may be ethically or legally
questionable. It should not matter if the firms you are investigating know
you are looking. If they are prone to dubious conduct and you still choose
to do business with them, your inquiries may deter them from victimizing
you.
- When dealing in an area where there have been some real ethical difficulties—such
as insurance brokerage commissions or market sharing or severance packages
for retiring executives—ask what, specifically, the firm has done to avoid
similar difficulties If they are going to be smeared with scandal, make
sure none stains you.
- Make some intentional minor "mistake" that favors the firm with which
you are considering doing business and see if anyone with that firm corrects
the error. This can be something conceptually equivalent to asking a cashier
for change for a $20 while purposely handing the cashier a $50. If the cashier
corrects you, fine. But even if the cashier takes your $50 and gives you
back bills that total only $20, you do not know whether the act is unethical
or just careless. But the incident should start you thinking about other
ways to test whether you want to do business with this organization. Test
again, in some other context, for your own benefit and for all those who
have put their trust in you.
By: George L. Head, Ph.D., CPCU, ARM, CSP, CLU
American Institute for CPCU
Malvern, PA
head@cpcuiia.org
www.aicpcu.org
Suggest a Risk Tip. Send us a practical tip (less than 300 words) for identifying and managing risks,
buying insurance, managing claims, or filling gaps in insurance coverages. Submit your tips. We'll
acknowledge your contribution as we did for George.
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