IRMI Update—Issue #16
An E-mail Newsletter for Risk and
Insurance Professionals
ISSN: 1530-7948
May 9, 2001
In This Issue
Colleague,
My April
17 editorial struck some nerves! We were inundated with e-mails
on the issue of federal versus state regulation. You will find a
few interesting excerpts below and a more
complete version in my
"Big Picture"
column.
Thank you for telling your friends and colleagues about IRMI.com.
We especially appreciate those of you who forward IRMI Update to
others with an encouragement to subscribe. If your firm would like
to add a number of your colleagues to the list, feel free to send
us their names and e-mail addresses and we'll gladly add them for
you.
On a personal note, I enjoyed seeing so many friends at the RIMS
Conference last week. It was particularly gratifying to hear all
the kind words of encouragement. I'm glad you are enjoying the newsletter,
and I promise we will work hard to keep it fresh and interesting.
Thank you so much for your support! Have a great day.
Jack
Jack P. Gibson
President
IRMI
Keep Disposable Cameras in Company Vehicles.
I suggest to all of my clients that they place a disposable camera
in the glove boxes of all company vehicles. No need to explain why.
Also, all regular drivers of non-company owned vehicles who sometimes
drive on company business might follow suit. Actually, it isn't
a bad idea for everyone!
By: Steven B. Steinberg, CPCU
President and Principal Consultant
Entrust Risk Management Services
Houston, TX
E-mail:
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 acknowledge your contribution
as we did for Steve.
We add new Expert Commentary to IRMI.com every week. There are
now 133 articles on IRMI.com, and many more are in production. Below
you'll find summaries of some recent additions with links to the
articles.
-
Court
Finds "Direct Physical Loss or Damage" Due to "Impairment
of Function and Value"—This article examines
the recent Minnesota appellate court decision which
determined that the requirement for "direct physical
loss or damage" was met in the absence of tangible
injury when government regulations rendered cereal
unfit for sale, resulting in "an impairment of function
and value" of insured property.
-
Imaging: The Vision of Change—By using
the imaging process, organizations can better manage
change and help employees cope. This article looks
at the process and how it can be used to achieve
company goals.
-
Information Systems: Which Type Is Right for Your
Organization?—Buying a new risk management
system is difficult considering all the different
applications and alternatives. Learn what types
of systems are available and how they can respond
to your organization's needs.
-
Introduction
to ISO 14001—With the growth of the global
economy, public awareness of differences between
nations' environmental programs spurred the development
of an international standard for environmental sensitivity.
This article examines the ISO 14001 standard, certification,
and scheduled revisions.
IRMI Workers Comp.
The state law summaries in this reference go far beyond those included
in other reference services in both depth and accuracy, and this
feature easily justifies the subscription price. However, you get
much more for your money. For example, it gives you helpful advice
for dealing with each state's assigned risk plan, the competitive
state funds, and the monopolistic state funds. Visit IRMI.com for
more details and a table of contents.
Jack's April 17 editorial drew
scores of reader responses. We've provided a few excerpts below.
Since you have such a high interest in this area, we've also placed
a more complete version in his
"Big Picture"
column. If we receive additional reader comments on this topic,
we will expand the Web version. To express your views, complete
the MyView form.
- "I favor state regulation of personal lines
and no regulation of commercial lines. Rating agencies,
other independent watch groups, good faith and fair
dealing principles of common law, and free market
supply and demand factors should be adequate checks
on the commercial insurance marketplace. Will this
approach produce an environment where no one will
be hurt? No. But the current approach doesn't either.
In fact, you could argue that the inefficiencies
and ineffectiveness of insurance market regulation
guarantee that all consumers pay more and receive
less."
—Michael M. Kaddatz, Managing Director, ARM
Tech, Lake Forest, CA
- "Your hearty praise for the great work of the
NAIC is largely misplaced. For years, the NAIC championed
the right of each state to run their insurance department
as a private empire, with little regard for the
impact it had on agents, brokers, and clients. Only
after the broker community was able to push NARAB
legislation through Congress did the NAIC sit up
and take notice. NARAB would never have been passed,
or even proposed, if the NAIC had shown even the
slightest interest in seriously addressing the issues
of multi-state licensing!
"Only when NARAB passed did the NAIC come to
the table. Had NARAB died in committee, it would
have been back to business as usual, and the NAIC
would have resumed their fierce opposition to any
licensing modernization!"
—Robert E. Joyce, Executive Vice President,
The Harry A. Koch Co., Omaha, NE
- "The present system of state regulation of insurance
is as antiquated as the horse and buggy, and creates
massive inefficiencies on the part of brokers, risk
managers, and insurance companies. The only people
who seem to gain are the various bureaucracies in
each of the state capitals. Insurance, as part of
interstate commerce crosses state lines more so
than staying within state boundaries; just look
at products, automobiles, WC, etc., where the exposure
has become much more mobile and should not be limited
to any specific state. While I'm leery of federal
bureaucracy, can it be worse than what we are presently
dealing with, not to mention the fact that some
state Insurance Departments spend their time generating
political funds for the ruling party and others
are just plain dishonest?"
—Luke Halley, Insurance Services Manager,
Halliburton Company, Houston, TX
- "Uniformity of Statutes is great—witness the
Uniform Commercial Code (UCC). Federal regulation
would be bad—too much power in one place."
—Robert G. Mahan, Esq., PE, Managing Member,
Mahan Insurance Brokers LLC, Carlsbad, CA & Mystic, CT
- "My view is and always has been that a uniform
set of regulations would make the insurance industry
far more efficient. States' rights are important,
and where there are demonstrable reasons to deviate
from a national standard, they should be given due
consideration. Having said that, I believe there
are very few areas where differentiation is warranted.
"I certainly cast my vote for pressing for national
standards pertaining to consumer protection and
regulation of the insurance industry. I believe
this will only come about through federal regulation
as I concur that each state will deviate from any
guidelines established to the point where the effect
is nil."
—Duane K Ludwig, CPCU, ARM, Senior Vice President,
Marsh Risk & Insurance Svcs., San Francisco, CA
- "The thought of state regulators abolishing
their own empires requires more imagination than
I possess. And, from an insurer perspective, my
concern is that we will have 51 hoops to jump through
in lieu of the current 50. And, for product filings
applicable to just one state, we may have 2 hoops
to jump through in lieu of 1. Certainly, if that
is the outcome, it wouldn't be an improvement. For
the short term, let's see if the devils we know
can get their act into some semblance of alignment.
If they can't, we can always opt to start over with
"big brother" from DC."
—Robert W. Whitman, Division V.P., Great
American Insurance Company, Cincinnati, OH
- "I have seen several times that most states
have agreed to accept changes in insurance forms
that our state or some other states have refused
as being against the interests of our clients. I
think a great example is the 72-hour waiting period
for business income coverage. When it came through,
only one state, Louisiana, would not allow the change
unless an endorsement was provided to allow the
waiting period to be deleted. Once that endorsement
was provided for Louisiana, the rest of us in the
other states also wanted the same endorsement. Would
the efficiency of a centralized system have allowed
that to happen? It may seem to be an obstacle to
efficiency, but I believe that we need checks and
balances in the insurance industry to preserve the
interests of all the parties. I have not seen any
indication that a centralized efficient system will
do that."
—Chuck Schramm, CIC, CPCU, ARM, AAI, Lamb,
Little & Co., Rolling Meadows, IL
- "I am very opposed to federal regulation. If
individual state regulation is less efficient, that
is a small price to pay to have the benefits. Benefits
include the fact that having 50 departments innovating,
deciding, analyzing results is a sort of best practices
in the long run. Having only one results in a stagnant—way
too powerful/bureaucratic—regulator. Not a good
thing at all in the long run."
—Larry Andreano, The Campbell Agency, Inc.,
Byron Center, MI
- "The ink on GLB is barely dry, and the states
are already making major strides in standardization,
where it makes sense. They will never agree on every
issue, and I am thankful for that. The state's governance
is supposed to reflect the uniqueness of the citizenry.
What flies in California or Maine may not suit Virginians
or Texans. Ultimately, independent agents, captives,
and consumers would be the losers in a federally
regulated environment, and the only winners would
the national insurers and larger brokers."
—William D. Cundiff Jr., CIC, AAI, President,
Wm. Cundiff & Associates, Inc., Fredericksburg, VA
- "Granted, the current system of having 50 different
insurance commissioners is not very efficient, but
I have less faith that the federal government can
do it any more cost efficiently. One only need to
look as far as the rates (and benefits) involved
with the USL&H Act as opposed to state workers compensation
and you see how inefficient and expensive a federally
run program can become."
—Bill Hughs, Vice President, Willis of Louisiana,
New Orleans, LA
A subscription to IRMI Update is absolutely free. Use the
e-mail registration form
to initiate or terminate your subscription.