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. We'll
acknowledge your contribution.
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.
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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
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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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