IRMI Update—Issue #121
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
September 28, 2005
In This Issue
Colleague,
More than 100 people have obtained the CRIS designation since we launched
the Construction Risk and Insurance Specialist program last March, and many
more are working on it. Needless to say, we are excited about the early success
of our new online insurance designation and state insurance CE program. All
six CRIS courses are approved for up to 12 hours of mandatory CE credit in 44
states, and four other states have approved two or more.
If construction isn't your cup of tea, we also offer many other online insurance
CE courses on commercial, professional liability, and personal lines property
casualty insurance as well as life, health, and disability insurance. In most
states you can secure all of your required CE credits through quality IRMI courses
for less than $50.
To learn more about both of these online insurance continuing education options: www.irmi.com/Ce.
Registrations for the 25th IRMI Construction Risk Conference are coming in
fast and furious. If you plan to attend, now is a great time to register. Our
hotel room block is going fast and the registration fee increases on Saturday.
See the agenda or register.
Thank you for subscribing to IRMI Update.
Have a great day.
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI
Consider New Approaches in Cost per Work-Hour—Cost
per work-hour is a time-tested, reliable risk performance metric. It has been
used to measure a company's relative performance of safety and claims management.
The measure is also useful for considering claim-related costs to be charged
back in project/job cost allocations.
Traditionally, cost per work-hour has been calculated for workers compensation
claims costs. To calculate cost per hour, the total incurred losses are divided
by the total work hours performed. This can be done at the corporate level,
by operating entity, division, by level of supervision or even the crew level.
Three new approaches for cost per work are offered to expand the usefulness
of this metric:
1. Update historical cost per work-hour calculations at least on an annual
basis using currently valued loss runs. This will provide a truer picture of
historical loss development. When executives, managers, and supervisors see
how losses develop over time, it reinforces the value of prevention as the ultimate
cost containment strategy.
2. Consider conducting cost per work-hour for all casualty lines of insurance
coverage and not exclusively for workers compensation. When incurred losses
for automobile liability and commercial general liability are added to workers
compensation incurred losses, a more accurate total cost of risk per work-hour
is attained.
3. Graphing the total cost of risk per work-hour to show the relative portions
of loss costs attributable to each line of coverage helps to reinforce focus
on your loss leaders.
These three new approaches are useful to change cost per work-hour to total
cost of risk per work-hour. This risk performance metric can help drive continuous
risk improvement and positively impact productivity, quality, risk, and safety
management outcomes.
By: Cal Beyer, Vice President
Construction Risk Control Solutions
Arch Insurance Company
St. Paul, MN
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 Cal.
There are now 709 risk management and insurance articles on IRMI.com. Below
you'll find summaries of some recent additions with links to the articles.
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Claims in a Disaster—In
light of the many natural disasters this year, insureds who have never had
to deal with insurance claims adjusters are confused or intimidated by the
prospect. Barry Zalma provides advice.
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Maximizing Your Coverage
after Hurricane Katrina—ay Levin explains how prompt submission
of Hurricane Katrina claims can minimize disputes and result in prompt payment
by insurers which is desperately needed to get people and businesses back
on their feet as quickly as possible.
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Georgia Supreme Court
Stalls Motor Club Plans—Dr. Tim Ryles discusses a recent case
which should serve as a warning to insurance agents that just because a
promoter says a particular product is not insurance doesn't mean that the
courts will agree.
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Avoiding the Reinsurance
Credit Risk—The best-case scenario for a reinsured is to have
its reinsurance recoverables secured to avoid any unnecessary credit risk
associated with obtaining reinsurance. Larry Schiffer explains.
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One Occurrence—No
Stacking—In his monthly insurance law column, Kevin Merriman
discusses a new insurance/risk management court case. The August case, applying
Pennsylvania law, deals with the limits of liability provision.
More than 40 states have now approved the 25th IRMI Construction Risk Conference
for insurance agent and broker continuing education credit. Find more CE details here.
Early-bird registration ends September 30, so register online now to save
$125 and reserve your preferred workshops. Don't miss this premier forum—November
7-10 in Las Vegas—for improving the ways we manage and insure construction risks.
In IRMI Update 120, Jack Gibson asked about
lessons learned from recent natural disasters, both from a public policy and
corporate perspective. Following are some of the responses received.
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Jack, Since you asked: Rather than focusing one set of resources on terrorism,
another on flooding, and so forth, I'm beginning to think we need a national
disaster plan and a Disaster Risk Insurance Act (DRIA) that are equipped
to deal with the results of manmade and natural disasters of any kind, whether
they originate from foreign, domestic, peacetime, wartime, or natural sources.
The disasters that trigger the plan could be defined roughly along the lines
of the narrower definitions now used in TRIA.
Katrina might also lead us as an industry to reexamine the current practice
of trying to categorize property insurance coverage by peril for windstorms,
floods, and ensuing fires. Looting and other forms of theft might also belong
in that list. I suspect Katrina's victims are more concerned with indemnification
than with categorization. When disasters or catastrophes occur, perhaps
behind-the-scenes government-backed disaster reinsurance would enable our
industry to respond to the need for indemnification without the problems
of categorization.
—Eric Wiening, Author-Educator-Consultant, Eric Wiening,
Consultant, West Chester, PA
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Human nature is fundamentally adolescent (e.g., "bad things won't happen
to me") and short-sighted (e.g., tends toward immediate gratification instead
of long-term gratification). Disaster preparation and most other components
of risk management require leadership that is mature (e.g., "bad things
happen all the time and can happen to me as easily as to anyone else) and
far-sighted (e.g., able to delay gratification and make long-term investments
for a greater good). To achieve maturity and far-sightedness, many things
are required over many years. Key among those things are academic education
and life experience that include the formation of positive values, ethics,
and knowledge of the political, economic, and business conditions most likely
to produce positive results from human nature. Has our country learned that?
Have each of us?
—Greg Dodd, Risk Manager, Perot Systems Corporation,
Plano, TX
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If you are an agent in a coastal area you need to offer every client
flood insurance and get a written rejection if they don't buy it and this
includes excess flood and business interruption or extra expense when appropriate.
If you don't, and you get involved with an Ivan like we did last year or
the likes of Katrina, you will get to know your E&O adjuster and attorney
very well as the plaintiff attorneys will come out of the ground looking
for dollars from you. Planning is the key.
—Ron Anderson, Broker/President, Underwood Anderson
& Associates, Pensacola, FL
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A lesson learned from Katrina is the obvious need for a national catastrophe
pool. I know that this has been discussed before then shelved along with
a dozen other proposals. The debate needs to begin again.
We are always going to have catastrophic events and the one way to ensure
that coverage is extended is through a national program. Although such a
program may not cover all of the cost for this event, it could have mitigated
the cost and eventually sped up the recovery efforts.
I do hope that someone will finally be willing to bring this topic forward
when the waters recede and the clean up is underway.
—Susan Leclercq, Account Manager, USI Ins. Services
of San Diego, San Diego
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Lessons learned: Contingent business interruption (CBI) when a company
has no direct loss from a disaster however its customers in that region
are now out of business and cannot purchase the company’s goods and services
is an important risk to manage. Coverage for CBI on a geographic basis for
a multitude of small customers (blanketed basis) due to such an event is
a consideration for hurricane prone areas. However the availability of this
coverage (especially for flood) is virtually nonexistent. Then there's the
issues of civil authority and egress/ingress. A very complicated situation
that needs to fully researched with clients to make them aware of the risks.
—Rob McCauley, Producer, Knowles Associates LLC,
Scranton, PA
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