IRMI Update—Issue #51
An E-mail Newsletter for Risk and
Insurance Professionals
ISSN: 1530-7948
October 22, 2002
In This Issue
Colleague,
The hard market has caused risk and insurance professionals to
spend considerably more time and energy on their own insurance programs
(or those of their clients). However, another consideration must
be the insurance programs of the other organizations with which
you do business. Many may be forced to reduce their limits or buy
restricted coverage. Some of the special coverage modifications
that were once freely obtainable (e.g., additional insured status
in liability policies) are becoming more difficult or costly to
obtain. Some important commercial lines insurers are also having
their financial ratings lowered by S&P and A.M. Best.
It is probably time to review the insurance requirements you
impose on others in your business contracts. Are they still reasonable
in light of recent market changes? Are your required limits now
too high? Are you asking for special coverage enhancements that
are no longer available? Do you require that all insurance for all
types of businesses be written by A+ rated insurers? It may be necessary
to make some adjustments in recognition of the new marketplace realities.
After reviewing your requirements for reasonableness, you might
also audit your follow-up system to make sure you are monitoring
compliance. The best contract insurance clause in the world is worthless
if the other party doesn't comply. And, unless you are diligent
about receiving up to date certificates, you will never find out
until it is too late.
Do you agree that this is an important project to undertake?
What problems have you encountered in getting others to meet your
contract requirements—like providing additional insured status?
Are insurers now charging for additional insured endorsements or
insisting on using more restricted forms to provide additional insured
status? Do you have other experiences to share or recommendations
with respect to contractual risk transfer issues in a hard market?
[See
reader comments.]
Of course, contractual risk transfer will be covered in detail
at the 22nd IRMI Construction Risk Conference. We're less than a
month away, and I hope to see you there.
Have a great day!
Jack
Jack P. Gibson
President
IRMI
Preparation and Management of Premium
Audits Pays Off—A proactive approach to insurance audits
can pay big dividends. Gather the audit data before the auditor
arrives and prepare a test audit on a spreadsheet, so you know what
to expect. Be sure to pull out overtime and driver payroll. In addition,
if part of the liability insurance premium is based on receipts/sales,
look for non-operational receipts, such as inter-company transactions,
travel and mobilization charges, charges made to customers for being
available to work, or for maintenance contracts that required no
work. Some items cannot be negotiated out of the audit, but with
reasonable explanations, some savings can be achieved. Ask for a
copy of the auditor's worksheets, and if they don't match your projections,
discuss and work it out with the auditor at the time, rather than
after the invoice for additional premium is received.
Certificates from subcontractors pose another big opportunity
for insurers to collect extra premium. In many states, all or a
portion of the sub's cost is charged as if the sub were an employee
if you don't have an insurance certificate showing adequate coverage.
If you don't have a knowledgeable, insurance-trained, person with
adequate time to scrutinize every certificate, consider using a
service to do this for you. Some of the firms offering software
or ASP solutions include Certificate Management Solutions,
Ins-Cert Corporation,
Insurance Data Service, and
Periculum Services.
IDS and Periculum receive, check, and track certificates for you.
CMS either checks and tracks certificates for you or sells software
for your staff to use. Ins-Cert is a central database, populated
by your subs' agents for you to use for free compliance checking
and reports.
By: William R. Hartigan, CIC, ARM, AAI
Ins-Cert Corporation
Littleton, Colorado
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 give you credit for
your contribution.
We add new Expert Commentary to IRMI.com every week. There are
now 346 articles in the archives, and many more are in production.
Below you'll find summaries of some recent additions with links
to the articles.
-
Adding
Value with ART—What is meant by alternative
risk transfer? Brent Clark provides his perspective
and explains how ART can add value by providing
solutions for risk problems.
-
Managing
RIFs during Tough Economic Times—Paul
Siegel presents guidelines for how employers can
implement a reduction in workforce and avoid potential
employment law challenges.
-
Project Risk Assessment—For the bond
underwriter, risk assessment is made in relative—not
absolute—standards. Rolf Neuschaefer discusses project
risk factors that may apply.
-
What Constitutes a Full Underwriting Submission?—In
the first article in a new topic—Insurance Industry
Market Practices—Peter Polstein describes the elements
that are included in a full underwriting submission,
using a recent casualty renewal as an example.
-
Environmental Risk in Retail: Exposures and Solutions—Alan
Bressler examines the environmental risks in retail
operations and presents the relevant risk transfer
products designed to mitigate these exposures.
Insurance Tips for
Homeowners—With insurance premiums for homeowners policies
rapidly escalating, Robin Olson provides tips to save premium dollars
and reduce losses.
Need Help Bidding Your Construction Insurance Program?
One of the 20 sessions at the 22nd IRMI Construction Risk Conference
will offer timely tips: when to shop your program, what information
is needed, who should be approached, what criteria to use in the
selection process, how to avoid conflicts, what factors to use when
comparing proposals. For more information on this session, see Tuesday's
agenda.
Be sure to check out the agenda for details on the rest of the
conference and simply complete the online registration form to register.
Hope to see you in San Diego!
Fine-Tune Your Captive with CICR—If
you own, manage, or are insured by a captive insurance company,
Captive Insurance Company Reports
will keep you tuned in to techniques and tactics for making better
use of it. Each monthly issue brings you insightful reports on reinsurance,
tax, domicile, and regulatory developments and how to either profit
from them or avoid the problems they may cause. For more information
or to request a sample issue, see this
web page.
A subscription to IRMI Update is absolutely free. Use the
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