The increasing use of filters in the fight against unwanted e-mail is posing problems in the delivery of e-mail newsletters, such as IRMI Update, that you should know about. Unfortunately, these filters can't distinguish between advertisements and legitimate e-zines. If you currently use a filter or plan to in the future, please determine how to "whitelist" the e-mail newsletters you receive from IRMI so that they can proceed through your filter.

This varies by filter, but generally you must simply add IRMI-Update@IRMI.com as contacts to your e-mail address book or to your approved senders list. This will allow any e-zine IRMI publishes to get through (but, of course, we will only send those for which you register). Refer to your computer expert if you have any questions about this "whitelisting" practice.

If you're thinking about attending next week's seminar on captive solutions for middle market companies in Chicago, you still have time to register. This program is for anyone who is considering joining or starting a single-parent, group, or protected cell captive. We've set it up for busy professionals—only 2 days out of the office and 1 night in a hotel near the airport. To view speaker biographies, dates, and locations, the agenda, and other information, go to this web page or, to register, phone 800-827-4242 and ask for the seminar coordinator.

Thank you for subscribing to IRMI Update and for recommending it to others.

All the best,

Jack

Jack P. Gibson
President
IRMI

Risk Tip

Safety Responsibility Lies with Each Individual—Who is ultimately responsible for the safety of your work environment? Who gets the blame when there is an accident? Is it the responsibility of management or the employee? The answer is: responsibility for safety belongs to everyone.

Management is responsible for ensuring that workplace safety policies are in place and enforced. Employees must be aware of these policies and procedures and incorporate them in their daily activities.

Encourage employees to take ownership of their workplace to ensure potential safety hazards are identified and corrected. In this manner, an employee can find a potentially hazardous situation and correct it before it becomes a problem. When employees look out for themselves and co-workers, they increase their safety awareness, which leads to a safer workplace.

So when one of your colleagues is asked who is responsible for maintaining a safe work environment, his or her answer should be: "I am." With everyone from top-level management to the newest employee keeping an eye on safety, the number and severity of workplace accidents will decrease ... and productivity will climb.

By: Marcia DeWitt
President and CEO
GuilfordPare
Baltimore, MD

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

Security Requirements in a Privacy World—Legal security requirements are increasing at a rapid pace, with Gramm-Leach-Bliley and the HIPAA as two recent examples. Kara Spooner and Gary Clayton explain.
Implementing Enterprise Risk Management—Jerry Miccolis examines ERM fundamentals—objectives, scope, organization, and tools—that companies can use to establish an ERM framework and implementation plan.
A Lien Is a Lien Is a Lien, but a Maritime Lien Is Not—In his maritime legal trends column, Michael Orlando discusses maritime liens—what they are and what they are not—and a recent disturbing decision by the Fifth Circuit Court of Appeals.
Log Notes, E-Mails, and Bad Faith Lawsuits—Gary Blake explains how poor writing skills can often be a determining factor in deciding whether an insurer has shown vexatious, unreasonable, or outrageous conduct in its claims handling.
Can You Swim?—Does drowning sound more appealing than asking clients for referrals? Frank Lee examines Referral Aversion Sales Call Reluctance and how salespeople can recognize it.

New IRMI Insights

Terrorism Insurance Update 2003—From RIMS and through conversations with many risk managers and underwriters, IRMI President Jack Gibson concluded that the terrorism risk can be managed and at least some of the risk is insurable. Here, he explains the current options.

IRMI Construction Risk Conference

Mark Your Calendar Today To Reserve November 17-20, 2003—Join us at the 23rd IRMI Construction Risk Conference in Chicago and find out how to improve your insurance, bonding, and risk management programs. Nowhere but at the annual IRMI Construction Risk Conference will you find such an offering of great ideas. We invite you to share this educational experience with us; network with many construction risk management, insurance, and bonding experts; and enjoy the Chicago nightlife. For more information, go to the Conference Web site.

Your View—Policy Delivery Delays

In IRMI Update #66, Jack asked readers whether insurers have improved the timeliness of issuing policies in the past decade and, if not what problems have occurred as a result of delayed issuance. His editorial hit nerves, and there was a considerable amount of finger pointing in the responses. Below is a sampling.

I agree that late issuance of commercial policies has gotten out of hand. You correctly point out with all the technology available there is simply no excuse for this dilemma.

In February of this year we received a request for renewal information on a policy expiring 07/01/03. This request demanded the information within 5 business days from the date of the letter (which arrived 6 days after it was dated). I found this request ludicrous in that we had not yet received the 07/01/02 renewal policy!

In connection with another renewal policy that is over 4 months past-due, we have a claim that will probably be denied by the company and will end up in court because the former policy did cover the claim while the renewal policy (which we have not yet received) purports to exclude the claim. Who do you think is going to win?

—Robert K. Fredrickson, Jr., CPCU, McKinney & Allen, Inc., Sioux Falls, SD

Commercial insurance in many instances is the most primeval activities of business. The focus is on the "kill" (getting it bound by the renewal date). Once that is done, it's off to the next potential "kill." That's where the laurel wreaths are won or lost—not in cleaning up the details. It's the thrill of victory and the agony of defeat that motivates. Quickly and professionally cleaning up the details of a placement at the expense of the next "kill" earns comments like "he or she can't keep their eye on the ball." In this kind of climate, one quickly learns to move on to the next kill or get left in the backwater or worse.

Even more important to me and other old fossils in this business is that for a good part of our time in this business, you could look a "gentleman" in the eye and make a deal both knowing what the terms and conditions were in the event of a loss before everything was committed to paper. There were houses where resources were devoted equally to production and the back office process. Along came the bean counters with short-sited "revenue per se targets." Many of their bonuses are still based on this or other irrelevant figure at the expense of service and what use to be called professionalism.

—John Becconsall

It seems to me that our industry is so entrenched in tradition, that even the process of issuing a policy annually is maintained in spite of obvious burden of overhead expenses and underwriter burnout. One simple solution that would eliminate an incredible amount of redundancy, while maintaining the integrity of the coverages originally negotiated, is to issue policies that provide continuous coverage until canceled. Renewals are seamless. Policy forms can be changed by endorsement. Customer relations are enhanced. If a major ISO edition is necessary to implement, provide reasonable notice, then issue midterm at the time of initiation, rather than wait for some self-imposed anniversary date. When this discussion has arisen to date, all kinds of reasons it won't work are thrown up, including rate filings, accounting issues regarding earned premium, etc., and policy form challenges. None of those challenges are insurmountable and, in fact, most are easily amended.

Re-underwriting every 12 months is so horribly expensive and unnecessary that it blows me away to think we can't see our way to make simple, but profound changes that would have an immediate and positive effect on the bottom lines of every carrier and broker/agent in the industry. It's like dying of thirst while standing knee-deep in water.

If there's a task force created to plant the seed of such change, sign me up.

—Jeff Brown, Garrett-Stotz Company, Louisville, KY

I, too, think policy service stinks, but I have found that you have to qualify what you say. Ask any company executive about the problem, and you will undoubtedly receive a veritable fusillade of statistics that seek to convince you that the problem is really not all that bad. And, statistically, they're probably right.

Of the millions of commercial policies issued each year, we should ask what percentage are under $5,000 in annualized premium and what percentage are above that figure. Then we should ask what the time service is on the over $5,000 versus the under $5,000. Would it surprise you to find out that the small policies are being shipped well in advance of renewal and the larger ones, on average, at a later date? And if we limited our study to policies with premium in excess of $50,000, what do you think the stats would say? I bet they would tell us that the higher the premium, the longer it takes to negotiate the deal; and the longer the deal takes to negotiate, the later the policy gets issued.

As a former company employee on the underwriting side, I was always amazed to find myself negotiating reinsurance terms well after the reinsurance contract had expired! But for primary lines, I found that BOPs, nonfleet auto, monoline inland marine, and small business workers compensation were almost always pumped out 60 days prior to renewal (or whatever the date in order to conform to statutory regs). Larger lines and policies, I found, were another story entirely.

Of course it is inexcusable for at least some service to be so poor, but understand for a moment some of the current dynamics. Most commercial lines policies are issued on a direct bill basis, meaning that as long as the policy is unissued, the possibility exists that nothing is billed. Commercial lines insureds and their agents/brokers actually like this and have learned to take advantage of the cash flow (agents/brokers can always issue an estimated bill for a binder without having to pay the company). So one of the reasons that this "inexcusable" practice continues is that at least two of the three players in the game might actually favor delays. Another contributing factor is state-based policy renewal requirements. If major premium increases and coverage reductions are to be effective on renewal, the paperwork must be current. Otherwise, the changes become pro-rated into the next policy period. Delaying negotiations and policy issuance is one way to postpone the inevitable.

On the company side, service budgets are usually accurate vis-a-vis active policy counts as long as one assumes 100% staffing. The minute a vacancy occurs, all bets are off. Thus, most companies have an inherent and contradictory flaw that gives lie to their stated desires to provide superior service. In addition, no company would want to get tough on the larger accounts by insisting on adherence to rigid time standards. The account might find a home somewhere else.

To review, I do believe that automation has improved small account servicing immensely. I also believe that we have to be quick to keep reinsurance transactions out of the mix. If the primary property/casualty practices are "inexcusable," I have no idea what level of Purgatory the reinsurance business occupies.

—Richard E. Schmidt, Insurance and Risk Management Consulting, Redmond, WA

As a broker, I shared your feelings on the delay in issuing policies. Now, as a captive manager, I understand where some of those delays come from. Despite going to reinsurers with a proposed policy wording, most reinsurers will only offer quotes/cover based on their revised version of that wording.

It then takes months for us or the reinsurance broker to negotiate and cajole the reinsurers into agreeing on a single wording. Recently, there have even been a number of instances where a single policy had to be issued containing a number of different versions of the same clauses and endorsements, each relating to the portion of cover provided by a different reinsurer.

The inflexibility of reinsurers, two or three in particular, causes most of the delays for us.

—Tanguy Gaidoni, ACII, ARM, Senior Insurance Coordinator, Aon Insurance Managers (Dublin) Ltd., Dublin, Ireland

Thanks to our automated issuance systems, we are able to issue policies for our middle market construction business within minutes of having a firm order. Policies are routinely issued within a few days.

—Larry Ronhaar, Travelers Construction

I can only offer, as a relative newcomer to the risk management field, that I am aghast at the length of time it takes to receive policies. Whether it has been a renewal endorsement, new policy, or other endorsement, it can be "agreed" upon and yet take months, even a year or more, to receive the documents. As someone who deals in risk for a large residential builder and property manager, I cannot accept these lags in service and yet I am told that they are "routine." Nowhere else have I experienced such a lax attitude coupled with complete impunity.

You are, indeed, not blowing the issue out of proportion.

—Norah Lindsay, Technical Assistant - Risk Management, Minto Developments Inc., Ottawa, Ontario, Canada

I couldn't agree more that the lack of timely policy issuance is a disgrace. I used to tell my general contractors responsible for erecting multi million dollar buildings that it was conceivable the building would be done before the policy paper could be delivered and, sadly, that sometimes proved to be the case.

I think a large part of the problem is our insurers who have poor service standards to begin with then compare themselves to each other and the downward spiral continues. What about quality standards: we often insist that the manufacturers we insure be ISO certified—what about such quality standard certifications for the insurers?

—Donna Lee, Marketer, Companies Agency Inc./Wausau, Milwaukee, WI

Your commentary strikes a nerve with me. My company is a consumer-owned utility in the Upper Midwest with about $1 billion in gross revenue.

I have been around the industry since 1969, and I echo your comments. I do not for the life of me understand why policies cannot be accurately delivered by the renewal date or certainly within 30 days. Back in the days when I was a company underwriter, we routinely worked 30 days out so the policy was in the agent's hands well before the renewal date. We did that with typewriters and no copy machines well before the advent of electronic document preparation.

I am still a proponent of the old school which holds the premium is not due until the paper is delivered, but I feel like I am a dinosaur holding to that seemingly archaic concept. Trying to enforce that is next to impossible. Carriers argue they are obligated to pay beginning at inception, but that begs the question on what basis if the policy is not in hand?

A corollary issue that annoys me is carrier difficulty in getting it right the first time. Our brokers catch most of the inaccuracies and have them fixed prior to delivery, but that only adds time to the delivery delay.

Given the wonders of electronic communication, why couldn't the carrier post a draft policy to their web site allowing the customer an opportunity to review and correct it before final issue? They are going to prepare the policy electronically anyway. It shouldn't be that difficult to post it allowing the client to at least fix most of the obvious errors. It would have to be in some version of read only access that would allow changes to be captured. The carrier would retain control of the final product so the client could not create unintended extensions without final approval by underwriters.

I don't intend to paint all carriers with the same brush, because a number of ours do very well. Others still have ways to go.

—Evan Mandigo, CPCU, ARM, Insurance and Risk Administrator, Basin Electric Power Cooperative

You always seem to bring up some of the most annoying issues in the practice of insurance ... and that's a good thing. Generally speaking, some of my smaller/regional carriers have dramatically improved the turn-around time in the issuance of policies from binding date to actual receipt of the policy. Many of the nationally based carriers still don't have their act together, so that you could get a policy in 30, 60, or even 90 days.

The problem, as I see it, is they have downsized so much they don't have the staff, and are not automated enough to handle their paper flow, AND most of all, no one in staff underwriting has ANY authority do anything. Only a few "managers" have the authority, and they don't want to make a decision, so nothing gets done. Layers and layers of management, and not enough real workers with authority are the fundamental problems. , The "good old days" were far from perfect, but for the most part underwriters were really underwriters, and not essentially raters, and their careers rose and fell with their decisions, which were still approved by management. If a company is willing to pay an underwriter $50,000, $60,000, $70,000 but not willing to give them meaningful authority, they are overpaying for the rating work that is being done.

—Thomas W. Davis, CIC, Davis American, Ltd.

I have worked in the underwriting side of commercial lines for 30 years, and I currently manage a Commercial Lines Dept. We are a small company that prides itself on having positive and personal working relationships with our independent agents. We continue to work toward automating as much of our operation as we can. We have a dedicated and hard working staff. However, finding qualified staff is often difficult and at times is actually some of the reason why delivery of policies is not as timely as we would like.

The current market has new business pouring through our doors just about faster than we can log it in, let alone underwrite, rate, and process. In my opinion though, the biggest contributor to preventing prompt issuance of policies is inadequate information provided by the Independent Agent on the application. For the type of business we write, a completed Acord Application most often provides all the information we need to properly underwrite, rate, and issue. The key in the previous sentence is the word "completed." It is the rare occasion all information is provided on the application. The failure to provide something as simple as the address for a mortgagee delays issuance.

Last week I helped the underwriters prepare their new business issues to be processed. In particular I worked on the older items dating back to March and April. Each one of these older date items was still in our office not issued because of inadequate or conflicting information.

We have in the past advised our agents incomplete applications will be declined and for a period time there is some improvement. However this has always been an ongoing challenge. If we don't specifically outline the information we need in the initial declination, we end up providing it later when the agent contacts us about it. Either way, the time spent assisting the agent depletes the time for actually issuing.

Just a thought from my experience.

—Tessa Wilson, Umialik Insurance Company

A cynic might say since nobody who buys a policy reads it until after there's a loss, the point when the policy is issued is immaterial. I can only speak for one insurance fleet, EMC Insurance, as far as actual policy-issuing performance is concerned, and the improvement here since 1985 has been monumental, mainly because of harnessing of computer power to generate premiums and documents. We don't have the kind of delays you're addressing any more. However, we pretty much work Main Street, and don't get into manuscript policies and long negotiations, such as the World Trade Center property coverage. When brokers and risk managers are niggling over details for months, it does tend to lead to questions about what the handshake meant and the belated policy issue.

—John Koehler, Branch Underwriting Manager, EMC Insurance, Minneapolis, MN

As seems to be the case with many others, we have experienced difficulty in getting our actual policies in a timely fashion. This difficulty should be an area of great concern to the insurance industry, but it appears it does not receive the attention it deserves. As an industry neophyte, I am unfamiliar with all that needs to be done to produce a final policy. However, I do find it unacceptable that you can receive a policy with barely enough time to review it before preparing the renewal data for the successor policy.

Again, I stated that I am relatively new to the industry. I am looking forward to hearing feedback from brokers, insurers, and others on this issue.

—Jason G. Booker, CPA, Financial Analyst, RBX Industries, Inc., Roanoke, VA

I agree completely that the delay SOME insurers force us to endure before they issue policies is inexcusable. To take that a step further, why do our customers have to wait until the day before their renewal to get pricing? Our agency primarily serves the middle market ($50,000-$500,000 premiums). When we deliver complete submissions to carriers 90-120 days prior to expiration, what possible excuse is there for not responding with a quote at least 30 days before renewal? I think it's mainly fear—that another carrier will get to see their price; and an inability to get on top of their paper flow. Our new goal is to deliver proposals to our clients 45 days before expiration—complete with binders, invoices, and any other required paperwork.

—Brad Poggi, Producer, Pinnacle Insurance Partners, LLC, Grand Rapids, MI

I've been in this industry slightly longer than you've admitted to and worked for an insurance company, brokerage, and for the last 15 years consulted. I totally agree with your observations about delivery time of policies and endorsements—and the detriment to coverage accuracy. Perhaps the 80/20 rule is guiding insurance company expense and overhead decision-making concerning policy issuance and endorsement processing. No matter that the policy issued doesn't match the binder and specifications—let the buyer beware. If there's no loss, then what's the big deal? If there's a loss, well, then we'll just have to duke it out.

Rarely have I ever received an inaccurate policy that is in the insured's favor—generally it's the extensions of coverage and refinements negotiated at renewal that seem to get left off. The policies are received so late in the term that the corrections never materialize and repeated follow-up requests vanish into the ether. At a certain point you're still trying to correct an expired insurance policy—and that certainly doesn't capture anyone's attention (especially if you've changed carriers), and there is definitely an errors and omissions exposure established and a lot of time invested in "CYA."

Maybe the thinking goes like this: Why spend a lot of time processing endorsements? If it's a property coverage, and there's no loss, why fuss over details that don't count after 12:01 am? So what if the demolition and increased cost of construction or replacement cost was left off, even though it was paid for. Catch you next time.

General liability coverages are another matter altogether—as all of us IRMI devotees know—and it never fails that it's the additional insured, named insured, and enduring coverage elements that get totally screwed up and never amended. So who comes up short in the long run when the adjuster consults the policy a couple of years from now and says, "Sorry there's no endorsement here for that"? It's so infuriating to see the diligent efforts of conscientious insurance brokers, insureds, and even dedicated underwriters to put together solution-oriented insurance programs only to have them undermined by insurance company home office operations whose work product demonstrates a total disregard for and lack of interest/pride in the very product they're selling. Package policies are the biggest offenders. I've had better results with workers comp, D&O, E&O, and specialty coverages.

Until insurance companies' feet are put to the fire over the issue of timely policy issuance and responsiveness to correction requests, I don't see any incentive for them to change. I think there are some hidden advantages to foot-dragging. Other financial services industries have mandated turnaround times. Maybe insurers are playing into the hands of legislators.

—Robin Foorman, CPCU, ARM, Consultant, Piedmont, CA

I firmly agree with you! Commercial insurance customer service is terrible. Most personal lines insurers deliver policies within days not months. My recent experience lies with both the carrier and the broker. The carrier issues policies incorrectly, the broker audits the policy and requests corrections. The corrections take forever and have to be confirmed by the underwriter. They are made and result in more errors which now require more corrections. I had one policy delivered on the day of expiration. They average about 4 months to deliver.

—Jim Shiflett

There is absolutely no reason for a delay in the issuance of policies. The insurance carrier CEOs should hold managers to the fire for policy issuance delays. One only has to look at the delay and the ensuing problems with the September 11 disaster.

—Alan Doloboff, Director, Frank Crystal & Co., Inc., New York, NY

I completely agree about the long delays being a problem. Not having been a commercial underwriter, I know I should tread lightly. As a personal lines underwriter, however, I worked with a company to reduce personal lines policy turnaround from 72 to 14 days, and this was well before automation and the Internet. It's amazing to me that technology hasn't solved this, but technology will only speed up the mess you already have if you don't have good workflows at the beginning.

I love the insurance industry and have a life-long career here. Your point, though, brings me to my pet peeve: the reluctance to hire professional managers in our industry is hurting us. We tend to promote salespersons and underwriters, and as a whole don't do enough to hire or train in the area of management. Good managers could streamline processes and keep employees well trained. Agency owners tend to want to manage the shop, when they should be out selling. Underwriters, claims adjusters, and others understandably want promotions, and yet they are allowed to become "managers" with no formal training in the management field.

Our industry needs to catch up on this point with the rest of the world. Why don't we have more management majors and MBAs in our agencies and companies? The best coaches were not necessarily the best players; and the best players are usually lousy coaches! Give technical folks a good technical track to run on, promote them on the technical track, pay them well, and let managers be managers. Good management would solve the problem you see with processing, along with many other issues we have in the wonderful business in insurance.

—Lisa H. Harrington, CPCU, AAM, AAI, AIP, Vice President of Education, Florida Association of Insurance Agents, Tallahassee, FL

The insurance industry has been operating in a crisis mode for quite a while, and the events surrounding September 11 certainly have not helped. When something innovative is on occasion adopted in the business, it is pretty much the equivalent of moving from the Iron Age into the Bronze Age. We are not a trend-setting industry, nor are we innovative.

In defense of business-as-usual, it is extremely hard to hit "best efforts" goals when training programs have for the most part disappeared, staff has been thinned-out, profitability has disappeared, older staff has been offered retirement packages, and a choice of insurance as a career is off the radar scope. Some have observed that we are just recycling the same group of people in the industry, when we honestly need to show some to the door. Yes, late issuance of policies is common. It's an open secret, and even when the policies are finally issued, they need corrections.

Taking corrective steps requires acknowledging a problem. Regretfully, we are an industry in deep denial.

—E. Bernard McGlynn, Jr., Director, Claims & Surety Services, Lewis-Chester Associates, Inc., Summit, NJ

Surprisingly, this has improved a great deal. Back in the 1980s we would take 3 months or more to get policies out of the Aetna. Now, at Travelers, our national business has 90 percent of all policies out with 90 days. Even AIG, which used to take 12 months, is much better. And the newer policies are largely electronically published, with capability to send these to larger brokers in the electronic form. Renewals are less an issue than is new business, since forms and coverages more frequently are negotiated. Definitely an improvement for large commercial accounts compared to the past.

—Tom Ackman

As amazing as it may seem, the delay in issuing new policies or their renewals is a very common problem. I believe it has spread worldwide like SARS, and very much like it, can be deadly unless treated properly!!!

I have lived this problem with local, regional, European, and U.S. insurers. If I were paranoid, I would think this is a strategy created by insurers to show a false sense of burden in the policy management process to complicate as much as possible their claims management process. I say this because technology on one side, and standardization of policy wordings and risk profiling on the other, should make it relatively simple to issue a valid policy in a couple of days in the United States, London, Venezuelan or Japanese insurance market.

The delayed issuance of a policy is a very real threat for insureds. Not having the finally agreed policy wording means that the contractual arrangement, required to enforce its terms and conditions under friendly negotiations or fierce legal fights, does not exist. It is customary to have cover notes, but these abide to very general wordings, thus the exact term and conditions agreed are not there. This "black hole" is so harmful that a claim for anything ranging from the anticipated cancellation of the policy to a catastrophic claim, could be sucked into it without any idea of when and what the outcome will be. I believe a lot of time and expenses would be saved by insurers and insureds following the reduction in arbitrations and suits caused by differences in the interpretation of coverages based solely on cover notes. This could cause premium savings for the insureds (nice joke on me!!!).

I have seen some insurers take charge for the consequences that the issuance delays create during the claims management process, but I have never seen one insurer pay a big amount of money without, at least, a deep technical discussion.

—Gustavo A. Torres G., Petrolera Ameriven, Barcelona, Venezuela

Not only are policies and endorsements taking forever to get issued, they are rarely CORRECT. How is it that brokers catch all the mistakes, yet carriers continue to issue policies with mistakes and errors routinely? The WASTED time and money spent on corrections must be enormous. With all the consolidation within our industry the past few years, and the focus on profit, automation, and cutting costs, the lag time for policy issuance and endorsement issuance has increased across the board.

The carriers call timely issuance of contracts "service." I call it efficiency which leads to profitability. If a carrier could promise prompt delivery of accurate policies, wouldn't that be a niche?

—Susan Ruvolo, CIC, Area Vice President, Arthur J. Gallagher & Co., Glendale, CA

If anything, the time from renewal or initiation of a commercial policy has gotten even worse and the companies (some of them) are hiring outside service providers to review and inspect the submissions prior to completion of issue. The problem I find is that for the most part, many of these independent inspectors do not have expertise in the related business practice and yet they are there to inspect a risk for the company, supposedly to assure the company underwriters that the writing agent is submitting a qualified risk. My question is this: If the company underwriters do not trust the expertise of the agent, why do business with the agent at all? Ours would be a better business if the companies would simply stop doing business with any agent or agency that submitted risks that were not as they actually were. After all, those of us who truly make a living in the business have an obligation to write quality business and to submit risks to the proper markets. Those who don't wish to operate in a professional manor should go sell used cars or go to law school.

Companies have an obligation to operate in a timely fashion and to support the agents/brokers, not just leave us hanging out waiting to deliver contracts. Or worse yet always looking for ways to cut commissions and close markets.

—Rex Caffall, Caro USA

Further to the point made, unissued policies likely will invite coverage disputes. Being that the courts generally look to the insurer as the "sophisticated party," more often than not such disputes resolve to the detriment of the carrier. In my company, we call this phenomenon Underwriting Leakage.

We discovered that there was no performance related carrot or stick to reward or reinforce a policy issuance standard. To address the so called leakage, staff underwriters and underwriting assistants have a measurement included in their respective performance plans. Policy issuance results have since improved considerably, whereby 90% of policies have been issued within 30 days of inception and 97% within 60 days (or 3% Underwriting Leakage). If it does not get measured, it does not get done!

This performance clearly gives us a competitive advantage and reduces "Claim Leakage."

—Michael Biscan, Underwriting Manager, Zurich North America

The late issuance of insurance policies is a horrible problem today as it was 10, 20, and even 30 years ago! With all the improved technology, I think the problem has gotten worse in the past 10 years. Unfortunately, I think this problem is contrived and perpetuated by the insurance companies. You've got to believe agents and brokers don't find this a problem, since the late issuance of the policy practically eliminates competition—a competing agent/broker can't take the insured's policy, on a timely basis, and improve upon it—coverage terms and conditions and/or pricing.

In fact, the practice of agents and brokers "binder billing" a renewal when they haven't been billed by the insurance company is another outrageous practice. What is even more frustrating is that renewals are 3 and 4 months late in being issued! The solution to the problem of late policy issuance is a simple one: the insured doesn't pay the premium until a policy is delivered.

—David J. Skolsky, CPCU, Insurance Analysts & Consultants, Avondale Estates, GA

When I entered the business in 1966, commercial lines policies were always delivered late—same situation as today. I recall that when Allstate first entered the commercial lines business in the early 1980s, they touted a less than 10-day turnaround on commercial lines policy issuance. I don't know what they do now. I was once risk manager for a $2.5 billion company. They had enough clout to tell the broker that they would not pay a dime until the policies were delivered. In that case, the policies were promptly delivered.

In my opinion (verified by observation), the brokers are almost always the culprits, not the carriers. The brokers are late "sealing the deal" with the underwriters; late delivering requested information to the underwriters; late reviewing the coverage when it arrives from the carriers, and late actually delivering to the client. On the other hand, brokers are very good about canceling binders if the premium is not paid. It just depends on where your focus is. If you experience late delivery, pull some of your Dec pages and look for the date near the bottom that identifies when the policy was typed, policies do not stay in the underwriters office following their being typed. I bet you'll notice that policies routinely take 2-3 month from when they are typed to be delivered to your door.

—Butch Taylor, Chief Counsel, Litigation and Insurance, MWH Global, Inc., Denver, CO

I couldn't agree with you more. It is truly an embarrassment that it still takes carriers and brokers 10-12 months to deliver a policy. The WTC loss is the perfect example of the difficulties a risk manager can and will face when a loss occurs and a policy has not been issued.

The problem is further exacerbated when you have a layered program. Each excess layer will in most cases insist on a copy of all the underlying policies before they will issue their excess policy. If there are 10 layers to the program, and you give each carrier 30 days to issue a policy, the best you can hope for is having all your policies in hand before the whole program expires. Corrections are a whole other story.

That being said all the carriers were paid within 30 days of binding.

—Ira E. Cohen, Corporate Risk Financing, Manager, TIAA-CREF, New York, NY

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IRMI Update—Issue #67