IRMI Update—107
An E-mail Newsletter for Risk and
Insurance Professionals
ISSN: 1530-7948
February 22, 2005
In This Issue
Colleague,
Mary is right. I met Mary, a very bright insurance lawyer, at
the recent ABA Construction Law Forum in New York. She has an interesting
way of identifying legal trends. When legal publisher Mealey Publications
introduces a new reporter devoted to a particular topic, she interprets
it as confirmation that there is much more litigation to come in
that area. Mealey publishes more than 50 reporters, covering such
focused topics as lead, asbestos, silica, insurance bad faith, construction
defect, and other types of litigation. So what is the latest legal
issue on Mary's unique radar screen? Broker liability from contingency
commissions.
Yes, Mealey will launch its "Insurance Broker Liability" report
next month. For only $695 per year, lawyers can keep up with the
latest developments in lawsuits against agents and brokers.
While Marsh has settled with Spitzer, we've probably only seen
the tip of the iceberg as respects the effects of his action. There
is an impending sea change in agent/broker compensation, and, right
or wrong, contingency commissions are going away. The IIAB and others
will fight for them, but it's a lost cause. If regulators and litigation
do not force elimination of contingency commissions, the marketplace
will. In the future, commercial insurance buyers are likely to choose
only those agents and brokers who forgo contingency commissions,
and all will have to do so to compete.
These will be difficult times for managers of agencies and brokerages.
If you are one, you might consider a subscription to Mealey's other
new report: "Antidepressant Drugs." Seriously, you would be well
advised to think about your business model and how you can adjust
it for this new reality.
How will agents and brokers find additional revenue to replace
lost contingency commissions? In what ways will agent/broker compensation
be made more transparent to buyers in the future? Will these changes
make it more or less difficult for small firms to compete in the
marketplace? [See
reader
comments].
On another note, we still have some seats left at all three Tech-eRisk
2005 seminars to be held next month. If you are an agent or broker,
the new media and cyber policies may provide lucrative new sales
opportunities. If you are a risk manager, you would be wise to analyze
your firm's exposures and need for this type of insurance. Mike
Rossi and Amit Yoran will give you the knowledge to do this. For
more information, see our seminars page.
Thank you for subscribing to IRMI Update. Have a great day.
Jack
Jack P. Gibson, CPCU, ARM
President
IRMI
Take Advantage of No Cost Insurer Services—They
say there's no such thing as a free lunch, right? That might be
true, but there is free loss control, fire protection engineering,
and sprinkler consulting.
Many insurance companies offer high caliber, professional consulting
to their insureds at no additional cost. The services are funded
by the premiums and, perhaps more significantly, by the resultant
lower loss ratios as a result of the efforts of these dedicated
risk control and fire protection professionals and the subsequent
implementation of various loss control measures by the insureds.
What happens when an insured does not partake of mutually beneficial
offers of loss control advice? One recent example highlights the
risks and costs to insureds.
An insured, very successful in custom audiovisual component manufacturing,
was building a new 40,000 sq. ft. facility. The builders risk premiums
quoted were deemed too expensive so the insured completely self-insured
this aspect of the venture. The insured hired reputable sprinkler
contractors and engineers to design the sprinkler system. Based
on occupancy description and a review of NFPA 13, the sprinkler
system was designed. This remote site also required fire pumps and
a reservoir.
On paper, the entire sprinkler system, hydraulic calculations,
and pump installation complied with NFPA 13. During a subsequent
site visit by a professional fire protection engineer that was required
by the underwriter for the permanent property insurance that would
be put in place after completion, it was, however, discovered that:
- The height of rack storage exceeded the maximum
allowable for the sprinkler design density, and
therefore, was not in compliance with NFPA 13.
- The used fire pump was never performance tested.
- Only one fire pump was installed without a backup
pump—although a backup pump was planned.
- There was no independent electrical service
to the remote pump house; it was fed through the
main plant.
- None of the water supply valves in the pump
house or at the sprinkler alarm valve in the plant
were monitored.
The insured now faced additional and unexpected loss control
expenses and much higher property premiums until all deficiencies
were rectified, and they could have been avoided had an insurer's
risk control specialist been consulted prior to construction. There's
usually no charge for these insurer-based loss control services,
so be sure to take advantage of them.
By: Owen Kurin, P.Eng., MBA, FCIP, CRM
Loss Prevention Manager
The Citadel Assurance
Toronto
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 Owen.
There are now 631 risk management and insurance articles on IRMI.com.
Below you'll find summaries of some recent additions with links
to the articles.
-
A
Broker's Value—Gary Bausom addresses
the need and method of assessing enterprise goals
and the broker or brokerage firm's role in achieving
those goals.
-
London Calling (for U.S. Healthcare Risks)—Despite
weathering several crises, the London insurance
market remains a solid alternative to the U.S. domestic
market for healthcare risk management. Charles Kolodkin
explains.
Amit Yoran will be sharing the podium with Mike Rossi at our
upcoming Tech-eRisk 2005 seminars. Who better to explain the latest
trends in cyber threats than the man who coordinated the U.S. cyber
security efforts for the Department of Homeland Security last year?
Prior to joining the Bush administration, Mr. Yoran was the vice
president of Managed Security Services at the Symantec Corporation.
He is now Security Advisor with Yoran Enterprises. Mr. Yoran and
Mr. Rossi will open your eyes to cyber risks and how to identify,
contractually transfer, and insure them.
Are you an agent looking for lucrative new sales opportunities?
An underwriter trying to put your arms around cyber exposures and
coverages? A risk manager wondering if your company is properly
protected? This seminar is for you. Visit the seminars section of
our website to learn more.
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