IRMI Update—Issue #133
An E-mail Newsletter for Risk and
Insurance Professionals
ISSN: 1530-7948
March 22, 2006
In This Issue
Colleague,
We are continuing our support of ethics awareness month with
a new ethics article from George Head. In
this piece, George
discusses the sources of personal ethics.
Be sure to check out
Ethics Considerations for Property
Casualty Insurance Professionals. This booklet can help
you prepare a code of ethics for your firm.
If you have ever attended one of her seminars, you know that
Kate Westover knows captives. IRMI is now the proud publisher of
her second book,
Captive Practices and Procedures. A companion to her
first book,
Captives and the Management of Risk, this new book goes
beyond explaining what a captive is and when one might be feasible
to explain how captive insurance is used.
Captive Practices and Procedures provides information
about the many facets of running an insurance company, including
accounting, finance, underwriting, and governance. Learn more about
this
new book.
For a limited time, you can buy either of Kate's books for only
$51.99 each, a 16 percent savings off the cover prices. When you
place your order, use this code to get your discount: CAP603.
We still have room at the Washington, D.C., Tech-eRisk 2006 seminar
on April 4-5. Click here for more information or to register.
Thank you for subscribing to IRMI Update.
Have a great day.
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI
While there have been no terrorist events in the U.S. since 9/11,
most experts agree that more will take place. The question is when
and where, not if. The following are some tactics to consider for
managing the risk.
- Consider terrorism insurance within the context
of your total "extreme event" risk management strategy.
- Make pricing a secondary consideration to breadth
of coverage and your prospective insurers' claims
paying and financial ratings.
- If you are paying more than 5 percent of your
property insurance premium for TRIA coverage, you
are in the higher-priced segment of the market.
Check the stand-alone property terrorism insurance
market as an alternative.
- If you are considered a high-risk account, conduct
personal pre-quote meetings with your preferred
insurers, and ask them to sign confidentiality and
nondisclosure agreements on any sensitive information
you share.
- Make sure your underwriters understand the loss
mitigation and avoidance tactics you have implemented.
- Make sure that the address information on all
properties is error-free.
- Explore nuclear, biological, chemical, or radiological
(NBCR) coverage.
- If you are purchasing the statutory TRIA coverage
but not purchasing the extension for "other acts
of terrorism," reconsider. The additional premium
for this extension is usually modest.
Excerpted from
The Risk Report,
James W. Macdonald, February 2006.
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.
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There are now 774 risk management and insurance articles on IRMI.com.
Below you'll find summaries of some recent additions with links
to the articles.
Are you concerned about the proper use of indemnity agreements
and insurance requirements in technology-related contracts? If so,
it's not too late to attend the last seminar, April 4-5 in Washington
D.C. This highly acclaimed and updated seminar addresses both insurance
for these risks and contract provisions to manage them. It has received
rave reviews from attendees. Register or learn more about the agenda
and the dynamic program presenter.
In IRMI
Update 132, Jack Gibson discussed the importance of establishing
ethical behavior as an ingrained part of an organization's corporate
culture. He asked for reader thoughts and suggestions for approaches
to reinforcing ethical behavior. Some of these responses are reprinted
below. Also, be sure to check out the new IRMI course
Ethics Considerations for Property and Casualty
Insurance Professionals—a nuts-and-bolts guide to developing
an ethical code and making ethical decisions.
-
Jack, your question should be one that needs
no comment—the ethical should have a market advantage
over the unethical.
However, I keep reading about fake insurance
companies and brokers who sell nonexistent insurance
who cause millions of damage to the unsuspecting
and make fortunes for the unethical. Insurance buyers
more often than not choose price over ethics in
the short run, but the ethical succeed in the long
run.
—Barry Zalma, Lawyer,
Barry Zalma, Inc., Culver City, CA
-
In the post Sarbanes-Oxley world, I completely
agree that those in the insurance industry must
exercise a heightened degree of oversight on ethical
behavior, but a code of ethics may not be the most
effective way to address what we all agree was embarrassing
behavior by both individuals in the insurance industry,
and the organizations for which they work. For example,
I agree that if someone involved in bid rigging
is also sporting CPCU or CLU designations, that
would certainly appear to be valid grounds for removing
the designations. However, that does not address
the role of the employer, nor the series of unfortunate
steps that perhaps led to a culture where this type
of behavior was permitted. It never happens overnight.
I would venture to guess that professional integrity
is the core value in most successful firms, but
a code of conduct is only words on a piece of paper.
What is needed is a combination of best practice
expertise combined with training, compliance management,
and reporting systems. In short, education and training.
The good news is that graduate business schools
are starting to reemphasize ethical conduct, and
the larger industry players are either under orders
to set up in-house compliance departments or are
voluntarily thinking it's a good move, but a code
alone is worthless without the training and top-down
support that encourages ethical behavior. Citigroup,
as was widely reported in the business press, made
mistakes in Japan that earned them government sanctions.
The newly elected chairman of the board in an interview
with Business Week
noted that he always wants his people to make their
numbers, but it is somewhat embarrassing to now
have to add, "and don't break the law." The best
advice comes from the medical profession: First,
do no harm. But after the lawyers get involved,
it will probably come out as: Minimize harm.
Our products are becoming commoditized, our behavior
to say the least needs improvement, the industry
is generally not a career choice anymore, our profit
margins are worse than ever, we lack the glamour
of, say, a career in advertising, and now we are
in the headlights of state and even federal regulators.
In my opinion, there is no one big thing to correct,
and lots of little things that need attention. We
need to start training people so that they will
act independently, minimize harm, and to also be
accountable. Once we all adopt best practices, at
that point we may want to start thinking about a
code of conduct. We have a long road back, and in
light of all the recent problems, I for some reason
remain optimistic.
—E. Bernard McGlynn, Jr.,
Director, Claims & Surety Services, Lewis-Chester
Associates, Inc., Summit, NJ
-
I deal with unethical behavior in our industry
on a daily basis. My firm represents insureds in
challenging inappropriate premium charges based
on the state rules, regulations, and statutes governing
insurance policies and plan agreements. Since the
state departments of insurance do not enforce compliance
with their rules and leave it to the civil court
system, virtually no player in our industry is subject
to the mandatory exercise of ethical behavior. If
players are unethical, their purpose is to increase
fee or premium revenue. If they are ethical, there
is no platform or stage to enjoy the anticipated
beneficent public relations. Ethics (that CPCUs
have brandished with fervor) may evolve if and when
there is a risk and a reward associated with unethical
behavior versus ethical behavior.
—Monte Gale, President,
National
Risk Services, Inc., Glen Rock, NJ
-
I agree with you, in theory, that insurance organizations
with a demonstrable commitment to ethics and integrity
should have competitive advantage in the marketplace.
Unfortunately, I just haven't seen one that would
fit this bill. I believe that insurance companies
have damaged themselves dramatically over the last
few years in particular. If you asked most people,
they would stack them up there with attorneys, politicians,
and used car dealers.
—Buck Irwin, COO, Nextep,
Norman, OK
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