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.
-
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.
-
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.
-
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.
-
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.
- 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.
-
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
-
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
-
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
-
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, CA
-
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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