IRMI Update—Issue #122
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
October 12, 2005
In This Issue
Colleague,
The degree of disconnect between underwriting and claims within most insurance
companies seems inappropriate to me. An underwriter works with an agent/broker
and risk manager until they agree on coverage terms and pricing. Presumably
the underwriter knows what s/he intends for the policy to cover, and often will
discuss scenarios with the agent/broker or insured. However, when the big loss
occurs, it is the insurer’s claims department and coverage counsel who determine
whether or not to deny coverage, usually without consulting with the underwriter.
Often they consider their jobs to be saving their employer money by finding
ways to deny coverage, and the complexity of insurance policies facilitates
developing arguments to do this.
It is important for insurers to deny coverage for claims that are outside
the scope and intent of their policies. However, trying to weasel out of coverage
for a loss that everyone thought would be covered when the policy was written
simply is not right. Wouldn't this occur less frequently if underwriters were
given a meaningful voice in the internal decision-making process?
Lloyd's was this way years ago when there were many relatively small syndicates.
The underwriting and claims decision makers had fairly close relationships and
tried to work together to make the right decision. I would think that such an
approach would result in fairer and more accurate judgment calls with fewer
disputes between insurers and their customers.
What do you think? Have you seen instances where an insurer's claims department
took a coverage position contrary to what its underwriter had stated to be true?
Doesn't it seem strange that the party who arranges the deal has no say in how
it is ultimately carried out? Would it be better for insurers and their customers
if underwriters were given meaningful influence when making decisions to deny
coverage? Or would this cause conflicts of interest and other problems? [See reader comments].
Did you happen to notice that the IRMI.com Web site now contains more than
700 articles on a host of risk management and insurance topics? We passed that
milestone in July, and we are very proud that we can make this resource available
to you without cost. I hope you find it useful. Please tell your colleagues
about it.
Thank you very much for subscribing to IRMI Update.
Have a great day.
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI
Local Laws Can Help with Contract Negotiations—When
reviewing contracts, make sure you check on the latest local laws. We work with
a lot of national owners with their own contract forms, often containing onerous
terms and conditions. We are a design-build contractor working in multiple states,
and we always check for the latest state anti-indemnity, retention, and prompt
pay laws as part of our contract review. More and more states are adopting laws
in these areas, and one can use these laws to achieve more favorable contract
terms. We recently negotiated a job in a state that had just added new laws
limiting indemnity and retention the prior month. A quick Web search discovered
this change in the law, and some tough negotiation issues quickly became fairly
simple.
By: Bob DeSmidt, CFO
Klinger Companies, Inc.
Sioux City, IA
Bdesmidt@klinger-companies.com
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 Bob.
We have recently updated a number of the reference manuals in the IRMI library
and published new issues of
The Risk Report and
Captive Insurance Company
Reports. To make sure you don't miss any of this new information
take 30 seconds to scan the "What's New" summary page.
For IRMI
Online and Print Subscribers.
For SilverPlume
Sage subscribers.
There are now 714 risk management and insurance articles on IRMI.com. Below
you'll find summaries of some recent additions with links to the articles.
-
Anticipated Legal
Wrath of Hurricanes Katrina and Rita—After the devastation of
Hurricanes Katrina and Rita, homeowners look to their insurers for coverage.
But will there be any? Brent Cooper and Dana Harbin look at the issues.
-
Identity Theft: A Personal
Risk Management Approach (Part 3)—In the final installation of
his series on identity theft, Rob Olson examines the types of coverage offered
by insurance organizations and banks, and lists other reforms that are needed
to address this risk.
-
Marketplace Blues—In
the next year or two, the insurance marketplace is going to be challenging.
The relationship between the underwriter, agent/broker, and insured will
prove crucial. Peter Polstein explains.
-
Six Ways To Sabotage
a Mediation—A lawyer on the dark side can ruin a mediation in
untold ways. In a tongue-in-cheek article, mediator Jeff Kichaven explains
some of them.
-
Deming's Point #7 as
Applied to the Insurance Industry—John Pryor discusses Dr. W.
Edwards Deming's seventh principle: "Adopt and institute leadership" and
explains how he distinguishes leadership from management.
Get the guidance you need to effectively control costs in
IRMI Workers Comp:
A Complete Guide to Coverage, Laws, and Cost Containment. This 1,500-page
reference will help you analyze exposures, determine which policy forms are
necessary, interpret each state's act, and place the appropriate coverage. See
18 additional ways to control costs and benefit here.
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