IRMI Update—Issue #122
An E-mail Newsletter for Risk and
Insurance Professionals
ISSN: 1530-7948
October 12, 2005
In This Issue
Colleague,
The degree of disconnect between underwriting and claims within
most insurance companies seems inappropriate to me. An underwriter
works with an agent/broker and risk manager until they agree on
coverage terms and pricing. Presumably the underwriter knows what
s/he intends for the policy to cover, and often will discuss scenarios
with the agent/broker or insured. However, when the big loss occurs,
it is the insurer’s claims department and coverage counsel who determine
whether or not to deny coverage, usually without consulting with
the underwriter. Often they consider their jobs to be saving their
employer money by finding ways to deny coverage, and the complexity
of insurance policies facilitates developing arguments to do this.
It is important for insurers to deny coverage for claims that
are outside the scope and intent of their policies. However, trying
to weasel out of coverage for a loss that everyone thought would
be covered when the policy was written simply is not right. Wouldn't
this occur less frequently if underwriters were given a meaningful
voice in the internal decision-making process?
Lloyd's was this way years ago when there were many relatively
small syndicates. The underwriting and claims decision makers had
fairly close relationships and tried to work together to make the
right decision. I would think that such an approach would result
in fairer and more accurate judgment calls with fewer disputes between
insurers and their customers.
What do you think? Have you seen instances where an insurer's
claims department took a coverage position contrary to what its
underwriter had stated to be true? Doesn't it seem strange that
the party who arranges the deal has no say in how it is ultimately
carried out? Would it be better for insurers and their customers
if underwriters were given meaningful influence when making decisions
to deny coverage? Or would this cause conflicts of interest and
other problems? [See
reader
comments].
Did you happen to notice that the IRMI.com website now contains
more than 700 articles on a host of risk management and insurance
topics? We passed that milestone in July, and we are very proud
that we can make this resource available to you without cost. I
hope you find it useful. Please tell your colleagues about it.
Thank you very much for subscribing to IRMI Update.
Have a great day.
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI
Local Laws Can Help with Contract Negotiations—When
reviewing contracts, make sure you check on the latest local laws.
We work with a lot of national owners with their own contract forms,
often containing onerous terms and conditions. We are a design-build
contractor working in multiple states, and we always check for the
latest state anti-indemnity, retention, and prompt pay laws as part
of our contract review. More and more states are adopting laws in
these areas, and one can use these laws to achieve more favorable
contract terms. We recently negotiated a job in a state that had
just added new laws limiting indemnity and retention the prior month.
A quick Web search discovered this change in the law, and some tough
negotiation issues quickly became fairly simple.
By: Bob DeSmidt, CFO
Klinger Companies, Inc.
Sioux City, IA
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 Bob.
We have recently updated a number of the reference manuals in
the IRMI library and published new issues of
The Risk Report
and
Captive Insurance Company Reports. To make sure you don't
miss any of this new information take 30 seconds to scan the "What's
New" summary page.
For IRMI Online and Print
Subscribers.
For
SilverPlume Sage subscribers.
There are now 714 risk management and insurance articles on IRMI.com.
Below you'll find summaries of some recent additions with links
to the articles.
-
Anticipated
Legal Wrath of Hurricanes Katrina and Rita—After
the devastation of Hurricanes Katrina and Rita,
homeowners look to their insurers for coverage.
But will there be any? Brent Cooper and Dana Harbin
look at the issues.
-
Identity
Theft: A Personal Risk Management Approach (Part
3)—In the final installation of his series
on identity theft, Rob Olson examines the types
of coverage offered by insurance organizations and
banks, and lists other reforms that are needed to
address this risk.
-
Marketplace Blues—In the next year or
two, the insurance marketplace is going to be challenging.
The relationship between the underwriter, agent/broker,
and insured will prove crucial. Peter Polstein explains.
-
Six Ways To Sabotage a Mediation—A lawyer
on the dark side can ruin a mediation in untold
ways. In a tongue-in-cheek article, mediator Jeff
Kichaven explains some of them.
-
Deming's
Point #7 as Applied to the Insurance Industry—John
Pryor discusses Dr. W. Edwards Deming's seventh
principle: "Adopt and institute leadership" and
explains how he distinguishes leadership from management.
Get the guidance you need to effectively control costs in
IRMI Workers Comp:
A Complete Guide to Coverage, Laws, and Cost Containment.
This 1,500-page reference will help you analyze exposures, determine
which policy forms are necessary, interpret each state's act, and
place the appropriate coverage. See 18 additional ways to control
costs and benefit
here.
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