IRMI Update—Issue #73
An E-mail Newsletter for Risk and
Insurance Professionals
ISSN: 1530-7948
September 23, 2003
In This Issue
Colleague,
If you have been following the workers compensation crisis in
California, you know why the insurance department recently declared
that the system is "near collapse." Claims costs are skyrocketing,
rates are following suit, and many insurers have become insolvent
or have pulled out of the market. This has reached such a level
of concern that it's become an important issue in the upcoming gubernatorial
recall election. Although reform legislation has just been announced,
it will likely only moderate further rate increases.
I sincerely hope that the politicians will be successful in their
efforts to solve the state's workers compensation problems. In the
meantime, it is up to risk and insurance professionals to get back
to basics and make sure they are properly managing their risks and
their insurance programs. I'm proud to announce publication of a
new reference manual designed specifically to help risk and insurance
professionals do their jobs more effectively and all buyers of California
workers compensation to save money regardless of what the politicians
do. Levine on California Workers Compensation Premium and Insurance
is a unique reference manual that focuses on premium issues, strategies,
and disputes to help control escalating workers compensation costs.
To order or get more information on this new publication, please
call us at (800) 827-4242 or check online.
Thank you for the trust and confidence you have in IRMI. I hope
our newest publication will become a valuable addition to your professional
library.
Have a great day!
Jack
Jack P. Gibson
President
IRMI
Communicate with Underwriters to Facilitate
Your D&O Renewal—The directors and officers (D&O) liability
insurance marketplace remains difficult, and one of the keys to
receiving the best possible terms is to communicate thoroughly and
honestly with your underwriters. If the regional underwriter doesn't
have the final authority for your program, it is a good idea to
meet with both him or her and the home office decision-maker. In
preparing for the meeting, work with your broker to compile a list
of questions covering the "hot topics" of the day. Then address
those issues with appropriate management, such as the CFO, General
Counsel, VP Internal Audit, Controller, etc., and compile their
responses into a Q&A format. You can then use the document for discussion
points during the meeting and leave a copy with your underwriters.
In hard market conditions, this approach distinguishes your account
from the blizzard of submissions underwriters see and avoids them
having to take notes or try to remember what was said. It has worked
well for us.
By: J. Gary Meggs
Director, Risk Management
Southern Company & Subsidiaries
http://www.southernco.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.
There are now 458 articles on IRMI.com, and many more are in
production. Below you'll find summaries of some recent additions
with links to the articles.
Find Answers
to CCIP and OCIP Questions—This year's IRMI Construction
Risk Conference provides a wealth of information on contractor controlled
and owner controlled insurance programs. "CCIPs
and Safety," presented by
TJ Lyons of Turner Construction,
uses real-life examples to show how the team approach can work to
make a safe construction site. The "Forum
on OCIPs" assembles an all-star panel of construction risk and
insurance experts to discuss both the basic issues contractors and
owners have with wrap-up insurance programs and the current market
factors affecting them. For more information on these and other
sessions, see the Conference
agenda.
New California
Workers Compensation Manual Published by IRMI—Levine
On California Workers Compensation Premium And Insurance
is a new reference manual designed specifically to help risk managers,
insurance buyers, agents, brokers, underwriters, and premium auditors
with operations or clients in the state of California. This new
manual will help you properly classify risks for premium determination,
apply experience rating rules, understand insureds' rights to claims
and rating information, understand and explain how rates are determined,
evaluate employee leasing, "sovereign nation," and other alternative
programs, deal with insurer insolvencies and the State Fund, handle
premium disputes, and negotiate important premium issues with the
WCIRB or underwriters. The author, a CPCU, ARM, and former underwriter
with over 25 years of California workers compensation experience,
is a leading attorney in the field and staff counsel to the state
Rating Bureau's Public Members. Levine
on California Workers Compensation Premium and Insurance
is now available on IRMI Online, IRMI CD, and in print. See the
details or call our customer
service department at 1-800-827-4242 to order a copy.
Jeff Slivka has been writing on environmental risk management
issues for IRMI.com since March 2000. He is a senior consultant
with AON Environmental, where he assists in the sales and broking
of environmental and professional liability insurance programs for
both environmental and non-environmental firms. His expertise is
in the areas of environmental risk management, environmental underwriting,
and environmental and professional liability insurance, primarily
for the construction industry. Mr. Slivka is a frequent speaker
and author on these topics. For more information on Mr. Slivka,
see his full biography
and a
list of his articles.
Is the Insurance Marketplace Stabilizing?—In
IRMI Update
72, Jack Gibson asked readers what they were seeing as far as
pricing in their current renewals. It appears that prices are stabilizing,
if not falling, in most lines. Following are some reader observations
on what they're seeing in their areas.
- We do see the insurance market starting to loosen
up; in fact, some pricing is even going down! Transportation
accounts remain a difficult line of business. We
are not seeing more carriers increasing their writings,
however.
—Donald P. Uvanitte, CIC, ARM, AAI, LIA,
Allied American Insurance Agency LLC, Quincy, MA
- We were very concerned about our renewal this
year. Our D&O was coming off of a 3 year dpp policy,
with favorable terms, and a higher limit liability.
We were able to renew with premiums almost the same,
and with the same coverage and limits! Our liability
insurance had gone up 400% last year, and this year,
the rate went down. The only rate increase we saw
was in auto. It was a pleasure to renew this year!
—Bonnie Carlson
- In our state, we are seeing competition returning
to the property/inland marine market. I know of
two accounts with property values in excess of $100
million that renewed at about 50% of the expiring
rate. Please note that both accounts had good loss
experience over the past few years with no major
catastrophe losses. The auto market is still rising
somewhat. But, we have found that carriers will
discount the renewals to keep a profitable piece
of business. Workers compensation has become somewhat
more competitive on the larger, cleaner accounts.
We recently had two carriers bidding against each
other to write a new account. The result was a good
price for the insured, but still at a slightly higher
premium than expiring. General liability has been
stabilizing, but no great reductions have been seen
in the rates lately. Excess/umbrella pricing still
seems to be increasing, especially if the underlying
has a large auto exposure. Overall, the market has
stabilized somewhat for the better accounts. Safety
programs that work are key to selling the account
to underwriters.
—Steve Thibodeaux, ICT Insurance
- I have seen the primary markets stabilizing
with some increased competition from the carriers.
We have had a number of encouraging successes. There
are still challenges in some lines based on the
exposures or the states involved. Depending on the
loss experience involved with their particular risk,
their action plans for preventing losses on a go
forward basis, I expect most insurance buyers will
see some relatively small to no increases and with
increased competition for their business. They will
also have to continue to be creative on the more
challenging lines of business such as D&O, Med Mal.,
and group health insurance. Complete and detailed
submissions to the markets are still absolutely
necessary to obtaining favorable results.
—Bill Horner, SCLA, VP Risk Management Services/Broker,
Bowen, Miclette & Britt, Inc., Houston, TX
- We renewed in June. The past 2 years were the
best the company has ever experienced with respect
to losses, and we actually found competition for
our primary programs, and bettered the rates we
paid for 2002-2003. The foreign excess market, however,
worsened dramatically, despite no losses in that
arena.
—Bill Lalor, B.L. Harbert International,
LLC, Birmingham, AL
- Even here in Champaign, Ill., WC and PLI costs
are through the roof. We formed a Captive in July
to protect ourselves. I see no positive changes
in the near future.
—Daniel J. Pope, General Counsel, Christie
Clinic, P.C., Champaign, IL
- With the proliferation of tort lawyers and terrorists
in our country, the amount of aggregate risk will
grow unabated. Rather than hard market/soft market
cycles, I think we've entered a new and enduring
era of a hard market soft in spots. The herd (of
insurance companies) is confused and individual
companies will make unique decisions that will create
big opportunities for short periods of time. A diligent
agent has never been worth more to his client than
he is today.
—Tom Bobrowski, Rothschild Agency, Merrillville,
IN
- In my opinion, 2003 renewals will show more
streamlined coverages and definite exclusions for
those activities we are all doing over the Internet.
Security is more of an issue than ever, even if
we don't want to admit it! To bring efficiencies
into our operations, utilizing computer systems
and various networks is a must. The insurance industry
is putting its foot down and saying that it will
not cover these activities in standard forms, and
it is paramount that we, as brokers, educate our
clients in these issues and make coverage recommendations.
—Carrie M. Allen, ARM,
The Cyberian Group,
Inc., Huntington Beach, CA
- I would tend to agree other than the windstorm
capacity problems of coastal areas in FL and other
Gulf and South Atlantic states. This problem does
not seem to subsiding from a pricing or capacity
standpoint except on small risks (less than $750k).
—Ron Anderson, Agency Principal/Producer,
Underwood Anderson & Assoc., Pensacola, FL
- I would like to see the data behind the broad
conclusion that the market has leveled off for most
lines. As far as competition coming back, it is
just the opposite in the large account segment as
more carriers get downgraded and are exiting that
segment. Additionally most new money in is intelligent
capital not looking to soften the marketplace.
—Louis Iglesias, VP, AIG Construction Risk
Management, New York
- Rate increases are not happening across the
board in professional liability The market is still
quite aggressive for architects and engineers and
for technology E&O.
WC in CA will be tough to fix, especially with
Kemper having been one of the larger providers.
Carriers are reluctant to write even good business,
reacting to concern over potential assessments (like
MA in the 80s when all business went into the pool.)
The fix was in crediting firms for writing voluntary
business, not assessing them for it.
—Elizabeth L. Good, CIG Underwriting Manager,
Schinnerer & Company, Inc., Chevy Chase, MD
- The insurance marketplace is just like the stock
market. What we have experienced in the last 2 years
is a market correction. Prices now are where they
should have been years ago. The underwriters have
started underwriting! They can no longer survive
on investment income. Good accounts with a good
loss record will not have a problem getting insurance.
Those with a poor loss record will.
Insurance companies will keep their prices up
with reasonable increases each year. They must have
an underwriting profit. They must build their reserves
up in case we have another September 11. They can
only pay claims if they have the reserves to do
so.
—Robert Williams
- Clearly after September 11, if there is one
thing we have learned it's that the Insurance Sector
can never be termed as a Stabilized sector. Some
might say that property and auto lines are stabilizing
and things are under control, but believe me, it
will only take half a September 11 to turn everyone's
views around.
As for competition, I say it's only the Big Boys
of Insurance who are going to "rule the blocks and
run the shows," so to speak. They will take every
risk they can and every risk no one else can. That
puts into simple terms what competition we are going
to see. I don't see any new entrants coming up with
new ideas or any sort of innovations, and the "Big
Boys" are just going to go on with their normal
climb to the top.
What can customers expect? Customers can expect
to be treated like kings. Every large company will
want to get as much of the market as possible, each
and every customer will be looked after, and expect
more covers being asked for by these customers.
Also, expect the insurers to put in more conditions
and exclusions, quite simply because no one wants
to burn the same foot twice. All in all let's hope
for the best for us insurers.
—Mohammed Jaffer, Jubilee Insurance
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