IRMI Update—Issue #172

An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
November 7, 2007

In This Issue

• Message from the Editor
• Risk Tip: Watch Out When Employees Use Their Autos on Business
• New Expert Commentary
• See the Top 7 Reasons You Need Contractual Risk Transfer
• How To Get IRMI Update E-mails

Message from the Editor

Colleague,

Bidding insurance programs has long been used to introduce competition into insurance purchasing for the purpose of reducing premiums and improving coverage terms. Softening insurance markets, such as the current one, can be an excellent time to obtain competitive proposals. With that in mind, here are a few guidelines you might consider:

• Generally, it is better to choose your agent or broker ahead of time and have one firm go to the marketplace on your behalf rather than use a competitive insurance proposal process to choose your agent or broker.

• If you do decide to use multiple agents or brokers to obtain competitive proposals, use an equitable process to allocate specific insurers to each agent or broker, avoiding overlaps.

• Do not bid your program too frequently. Generally speaking, bidding your program more frequently than every 3 or 4 years will make underwriters wary of writing your business.

• Provide detailed underwriting data and specific coverage requests to enable underwriters to get a good feel for your account and your needs.

• Never bid your program unless you are willing to make a change of insurers.

• Evaluate all three aspects of the proposals you receive—service, price, and coverage terms—and consider them all in making your choice.

So what do you think? Is now a good time to bid an insurance program if competitive proposals haven't been sought in a while? Is it best to let one agent or broker approach the marketplace for a particular coverage line or have two or more bid against each other? How often should an insured wait between seeking competitive proposals? What additional guidelines do you recommend to assure a fair and successful process? [See reader responses].

Thank you for subscribing to IRMI Update. Please forward it to your friends and colleagues with your recommendation to subscribe.

All the best,

Jack

Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI

Risk Tip

Watch Out When Employees Use Their Autos on Business—Employees frequently use their own vehicles on company business. This usage can vary from running errands, for example going to buy office supplies, to almost constant use, for example sales personnel traveling a territory. Such usage can subject the employer to liability. So employers should take several steps to assure that both they and their employees are properly protected.

Employers should clearly communicate to their employees that they are not covered as an insured under the employer's policy when they or anyone else in the organization uses their automobile on company business. They should understand that their own insurance covering the vehicle stands first in line to cover any loss.

It is important to stress to employees that they should be familiar with their automobile policy coverage if they use their own vehicle in the employer's business or borrow a vehicle for such use. Coverage provided by a personal automobile policy can vary from one insurer to another so they should be encouraged to contact their personal lines agent for advice before using the vehicle on company business.

To protect their own insurance or self-insurance program from loss, employers should require minimum levels of liability insurance and proof of insurance from the employee. They also should develop and disseminate policies for automobile usage to all affected parties to provide guidance and help eliminate potential areas of confusion.

Drawn from Practical Risk Management, Topic G-8, Automobiles.

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New Expert Commentary

There are now over 900 risk management and insurance articles on IRMI.com. Below you'll find summaries of some recent additions with links to the articles.

• Captive Insurance Companies: Beware of New Treasury Proposal—Mike Mead warns captives to pay attention to the recent proposed regulation change affecting the tax deductibility of premiums.
• Insurance for the California Wildfires—Jack Hungelmann answers personal lines coverage and claims questions that arise when your home is destroyed by fire.
• Enterprise Risk Management in Uncertain Times—Mark Layton and Damian Walch warn that while bad things happen, prudent companies prepare for them.
• Insurance Fraud: The Orphan Child of the U.S. Justice System—Barry Zalma rails against the lack of public outcry over the devastating problem of insurance fraud and offers a solution.
• The Startling Economics of Controls Documentation Review—Taking a cue from systems engineering, Matthew Leitch describes how coaching is key to preparing appropriate internal controls documents.
• Pushing Your Aviation Risk Management Comfort Zone—Adam Webster examines why taking risks is necessary to avoid business stagnation and discusses the dangers in doing so.

See the Top 7 Reasons You Need Contractual Risk Transfer

This one-of-a-kind reference manual is the industry's most thorough explanation of how to allocate risks in all types of contracts. You'll save hours of drafting time with "boilerplate" insurance clauses. Use the state-by-state analyses of how the courts interpret hold harmless and indemnity clauses to bulletproof your clauses. Explains when and how to require additional insured status. Plus, many more strategies to protect your company! Subscribe today or learn more about Contractual Risk Transfer.

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