IRMI Update—Issue #104
An E-mail Newsletter for Risk and
Insurance Professionals
ISSN: 1530-7948
January 11, 2005
In This Issue
Colleague,
The tragic toll of last month's tsunami in Southeast Asia is
unfathomable. With nearly 150,000 casualties, hundreds of thousands
of injured, and millions of homeless, it dwarves other recent disasters.
The largest relief effort in history is currently underway with
governments and non-government organizations participating.
The economic toll will also be heavy. However, the property and
casualty insurance industry will experience only modest losses from
the disaster because people and small businesses in the region typically
do not purchase insurance covering this risk. Even so, I expect
many of the insurers with a presence there will realize the wisdom
of going beyond the terms of their contracts in some situations
to help their customers and will find ways to support the communities
in which they do business.
Many risk management lessons can be discerned from this terrible
disaster. One is to never assume that something will not happen
simply because it has not occurred in the past. This, of course,
is why there is no tsunami monitoring/warning system in the Indian
Ocean (nor for the east coast of the United States). When analyzing
risk, it is important to consider not only the probability of loss
but also the potential severity. The worst disasters rarely happen.
Another lesson might well be for organizations to establish a
process and system for facilitating emergency communication about
impending threats within the organization. It took hours for the
tsunami to travel its entire course, inflicting damage all along
the way. If the management of one resort near the epicenter had
the ability to warn his colleagues in other parts of the region,
lives may have been spared. (Of course, a process among governments
for doing this would have been even more helpful.)
What other risk management lessons can we take away from this
tragedy? Please submit your
thoughts and comments.
In closing, I feel compelled to acknowledge our readers in India,
Indonesia, and other parts of Southeast Asia. If you live in the
region, please know that my colleagues and I—like all Americans—are
deeply concerned about the situation there, and we will do what
we can to help.
All the best,
Jack
Jack P. Gibson
President
IRMI
Identifying Ethical Organizations—Last
year's headlines gave us many examples of unethical organizations
eager to take our money, even our health, for their corporate and
their executives' personal gain. Pharmaceutical, financial, regulatory,
and even insurance organizations—or at least some of their executives—apparently
are among the biggest culprits. Here are three actions you can take
to make sure that the people and firms you deal with are ethical,
will serve your interests before their own, and will benefit your
customers, clients, and other constituents.
- Inquire about the firms from which your organization
buys or sells. If you ask for references, do check
them—but expect them to be favorable. Dig deeper
by checking with local better business bureaus,
newspapers, and courts. Look for clear indicators
of conduct that may be ethically or legally questionable.
It should not matter if the firms you are investigating
know you are looking. If they are prone to dubious
conduct and you still choose to do business with
them, your inquiries may deter them from victimizing
you.
- When dealing in an area where there have been
some real ethical difficulties—such as insurance
brokerage commissions or market sharing or severance
packages for retiring executives—ask what, specifically,
the firm has done to avoid similar difficulties
If they are going to be smeared with scandal, make
sure none stains you.
- Make some intentional minor "mistake" that favors
the firm with which you are considering doing business
and see if anyone with that firm corrects the error.
This can be something conceptually equivalent to
asking a cashier for change for a $20 while purposely
handing the cashier a $50. If the cashier corrects
you, fine. But even if the cashier takes your $50
and gives you back bills that total only $20, you
do not know whether the act is unethical or just
careless. But the incident should start you thinking
about other ways to test whether you want to do
business with this organization. Test again, in
some other context, for your own benefit and for
all those who have put their trust in you.
By: George L. Head, Ph.D., CPCU, ARM, CSP, CLU
American Institute for CPCU
Malvern, PA
www.aicpcu.org
Suggest a Risk
Tip. Send us a practical tip (less than 300 words) for
identifying and managing risks, buying insurance, managing claims,
or filling gaps in insurance coverages.
Submit your tips.
We'll acknowledge your contribution as we did for George.
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Marilyn Klinger has written about surety law and claims for IRMI.com
since 2001. A partner in the Los Angeles law firm of Sedgwick, Detert,
Moran & Arnold LLP, she is involved in all aspects of surety law,
including the preparation of bond and related transaction forms,
coverage, claims investigation and administration, surety defense,
and salvage. In her column, Ms. Klinger has discussed such topics
as surety claims handling, indemnity agreements, letters of credit,
and surety bankruptcy issues. For more information on Ms. Klinger,
see her full biography
and a
list of her articles.
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