Each year at this time our Research Analysts interview their industry contacts and prepare a line-by-line insurance market analysis for the September issue of The Risk Report. Our goal is to provide subscribers with some insight on what to expect on their insurance program renewals during the next 6-12 months. It should be no surprise we will report that continuing price increases (substantial ones in some lines such as commercial property and umbrella liability), increases in deductibles, coverage restrictions, and reductions of limits are the norm in the current market. Underwriting discipline has definitely made a comeback and new factors, such as aggregation of risks, are being carefully considered.

The obvious question that now arises is: "How long will the hard market last?"

Previous hard markets have tended to be about 36 months. This market began to firm around the second quarter of 2000, which would put us about 28 months into the cycle. Therefore, if history repeats itself, the current hard market will end during the second quarter of 2003. Frankly, I think this would be an optimistic prediction this time around. Many different dynamics are now in play, and I don't think the industry will have recovered sufficiently by next April to launch into a cycle of increasing competition.

So what do you think? Will we begin to see competition return to the insurance industry in the first half of 2003? Or will the market level off, meaning we can look forward to a period of relative stability (i.e., little or no price movement, coverage changes, etc.)? On the other hand, are you more pessimistic and think that the insurance market is far from bottoming out, predicting we'll see a hard market continue until 2004? Please send us your opinion as to when the current hard market will end—and why. This should make for some interesting reading in the next issue. [See reader comments.]

Thank you for subscribing to IRMI Update. Have a great day.

Jack

Jack P. Gibson
President
IRMI

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Risk Tip

Five Secret Signs of an Overloaded WC Adjuster. A Workers Compensation (WC) claims adjuster's job is difficult at best. The following signs of an overloaded adjuster are not meant to pick on adjusters, but to give insureds guidelines for ensuring they have the right insurer/third-party administrator for their WC claims.

Timeliness in Investigating First Reports of Injury—All investigations should be finished within 48 hours of receipt of the First Report of Injury. This includes contacting the injured employee and obtaining a statement if necessary, contacting the employer, and contacting the treating physician.
Responsiveness in Returning Phone Calls, Mail, and E-mail—Phone calls and e-mail should be returned within 24 hours of receipt. Mail should be returned within 1 week, including mailing time.
Rehabilitation Involvement—If all of the claims have a Rehabilitation Nurse reviewing them, then the adjuster is using rehab as an adjuster at a premium cost to the insured.
Injured Employee/Insured Contact—The insured and the claimant should be contacted periodically. If the claimant and insured have not heard or rarely hear from the adjuster since the initial investigation, cost control of the claim will be heavily sacrificed.
Attorney Involvement—This pertains to claimant or defense attorney involvement. If a high percentage of the injured employees hire an attorney, it may be due to lack of communication by the adjuster or untimely responses. The use of defense attorneys by the adjuster has the same indications as #3 above. The adjuster may be using the defense attorney to adjust the file, once again at a premium cost to the insured.

The bottom line is that an adjuster's primary job is to communicate with all parties involved in a claim. If there is a communication breakdown anywhere in the process, the insured pays dearly!

By: James J. Moore, AIC, MBA, ChFc
President
J&L Insurance Consultants, Inc./The Money Planner, Inc.
Raleigh, NC
E-mail:
www.cutcompcosts.com

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.

New Expert Commentary

There are now 322 articles on IRMI.com, and many more are in production. Below you'll find summaries of some recent additions with links to the articles.

The Importance of Contingent Business Interruption—In this article, Gary Bausom explains that underwriters can choose to ignore and exclude contingent business interruption, but it will be done with an opportunity cost in terms of premium income.
Loss Ratios Increase for Surety Bonds—Will Bonds Be Available?—Lynn Schubert examines recent changes in the surety industry: increased losses, rates, and underwriting focus; return to personal indemnity requirements; and reduced capacity. But the picture is not all bleak.
Insurance Coverage—Waivers of Subrogation—In this article, Kent Holland discusses a Fourth Circuit case that demonstrates the importance of waivers of subrogation as part of the risk allocation strategy.
Exoneration Based on Fraud in the Inducement as a Surety Defense—With new business scandals unfolding daily, improper business conduct is currently in the spotlight. Here, Marilyn Klinger considers a surety’s exoneration defense based on fraud or material misrepresentation in the inducement.
OSHA Takes a Dip in the Sea: Chao v Mallard Bay Drilling, Inc.—Mike Orlando discusses a recent Supreme Court ruling expanding OSHA's jurisdiction to uninspected drilling barges, which must now comply with both Coast Guard and the more stringent OSHA safety and health regulations.

IRMI Construction Risk Conference

Last Chance for Horizon Award Nominations!—The newly renamed Gary E. Bird Horizon Award recognizes innovative risk management techniques and processes. Begun in 1998 as the Construction Risk Management Best Practices Award, this honor is bestowed annually on a risk management professional with an exceptional construction risk management or insurance program falling in one of the following categories: risk control, risk financing, risk transfer, or risk analysis programs. The winner will receive round-trip airfare, hotel accommodations, and a complimentary registration to the 23rd IRMI Construction Risk Conference as well as the award. The winner will be announced at the 22nd IRMI Construction Risk Conference in San Diego November 11-14, 2002. Don't you know someone who should be honored? Deadline is September 1. Learn more about the Gary E. Bird Horizon Award.

IRMI Products & Services

How To Get Our Annual Insurance Market Report—Our annual analysis of the insurance market will be published in the September issue of The Risk Report. Sign up today, and you'll receive the market report around mid-September. Each monthly issue of The Risk Report tackles a single risk management issue or problem in sufficient detail (8-12 pages) to give you useful insights and solutions that you can put to work. Upcoming issues will deal with D&O insurance, D&O risk control, and the affects of technology on the industry. Check out this Web page for more information.

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IRMI Update—Issue #47

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