The focus at IRMI is much broader than construction risk management. Our research staff's expertise covers virtually every risk management or P&C topic you can think of for any industry (or even individuals), and our diverse product line of reference services reflects this knowledge. But construction is certainly one of our core competencies, and we are well known for it.

The management of employee welfare programs, especially group health insurance, has much in common with risk management, and the associated expense of these programs surpasses the cost of risk for most organizations. For this reason, it makes sense for IRMI to expand its horizon into this realm, and a focus on the construction industry is a logical place to start. Thus, we are piloting a new conference next month: the IRMI Construction Benefits Conference. The focus will be on applying practical risk management strategies to control employee welfare program costs, and we have invited 11 experts to share their knowledge.

If you are like most readers of IRMI Update, you do not work in this field. However, I bet that someone at your company does or you know contractors who have encountered challenges with their programs. Would you please tell them about IRMI, our reputation for sponsoring excellent seminars and conferences, and our special focus on construction? We would love to have them join us for the inaugural conference. Learn more here.

Many thanks for your trust and confidence.

All the best,

Jack

Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI

Risk Tip

Fight Fraud before It Happens—Insurance fraud is the second costliest white-collar crime behind income tax evasion. Fighting fraud is costly as well, and is often done after the fact through the use of private investigators and surveillance. But does surveillance really pay off to prosecute fraud? Statistically, no.

I had assigned 800 suspected workers compensation fraud cases over the years in many different states, which cost approximately $750,000. Due to great private investigators, I received usable surveillance tape on about 200 of them. About 10 percent of the total cases (80) were ultimately usable as evidence. However, not one of the files resulted in a successful fraud prosecution.

From this, I've learned that while surveillance may be a great tool to use on WC files, to use it as a way to prosecute fraud is not an effective use of your WC premium dollars. It is much better to prevent fraud before it occurs by proper treatment of injured employees by employers.

By: James J. Moore, AIC, MBA, ChFC, ARM
J&L Risk Mgmt. Consultants, Inc.

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 James.

What's New in Captive Insurance Company Reports

The April issue of CICR discusses the type of claim infrastructure a captive insurer should consider; updates readers on changes in the medical malpractice area, especially as it relates to captives insuring physicians in private practice; and relates several case studies from the recent World Captive Forum.

For IRMI Online and Print subscribers

For SilverPlume Sage subscribers

New Expert Commentary

There are now over 900 risk management and insurance articles on IRMI.com. Below you'll find summaries of some recent additions with links to the articles.

"Defective Construction as Occurrence" 2007—Pat Wielinski illustrates the current state of the law on insurance coverage for defective work.
D&O Litigation Trends in 2007—John Black and David Burrowes discuss securities actions against directors and officers and the trends they see that may continue into 2007.
Proof of Knowledge of a Patent Is Required—Sanford Warren explains why "active inducement of infringement" is a critical tool in preventing patent violation, and what the courts have to say on the subject.
When Must an Insurer Pay a Claim?—After a loss, insureds look to their insurers for financial help. But when? Jay Levin says the answer is not clear-cut.
Addressing the Full Spectrum of Risks—With an appropriate risk strategy in place, Mark Layton says the decision to accept risk exposure will be informed, deliberate, and justified.

Two Weeks Left To Register for Construction Seminars

Spots remain for the IRMI Construction Seminar Series in Dallas, June 5-7. You can choose from Construction Defect Risk Management and Insurance or Wrap-Ups: Avoiding the Pitfalls. Save $100 when you attend both. See the agenda, industry expert speaker bios, and register.

Your View—Industry Image

In IRMI Update 160, we asked readers for their opinions on ways insurance professionals can improve the industry's image, and heard from many. Below are some of the responses received.

I think that each of the many people in the insurance industry has a responsibility to put their best foot forward on a daily basis. The delivery of superb customer service will do more to enhance the reputation of the insurance industry and at the same time neutralize the negative issues we have had to endure, because it is so broad based. By all means, participate with the many associations and relationships that the industry has. Bring your influence to the table to do what can be done to promote the many pluses and services that we have to brag about. Even though we in the industry are painfully aware of what has been going on, we can't be too sensitive to this phenomenon, as it does not have nearly the impact with the general public that it does within the industry. We need to be proactive and offset the negatives with strong counter-messages that help bring back and maintain the respect the vast majority of the industry players so richly deserve.

—Phillip Blue, Director Risk Management, State of Minnesota, St. Paul

While surety is not insurance by definition, the main providers of corporate surety in the United States are insurance companies, lumping this niche industry into your same "leaking boat." The National Association of Surety Bond Producers membership is comprised of agents and brokers across the U.S., Puerto Rico, the U.K., and Guam. NASBP affiliates represent every major surety provider (insurance company) in the U.S. Each year, every member firm is asked to have each individual involved in the surety process read and sign a Code of Professional Standards. Hopefully, there are other groups or trade associations involved in our industry that embrace the importance of professional conduct for the benefit of all.

—Matt Cashion, 2003-2004 NASBP National President, Secretary/Treasurer, The Cashion Co., Inc., Little Rock, AR

Insurance and risk management professionals can and should work to uphold and raise the image of the profession, but I fear we set ourselves back in our reaction to the Spitzer investigations and the piling on of other attorneys general and insurance regulators. The agenda was set, and very few risk managers and insurance executives attempted to counter the misinformation being distributed in the trade publications and the mainstream media.

For instance, it was very disingenuous of risk managers to swoon and pound their chests over contingent commissions when RIMS had a very public policy statement on the issue. For some to act surprised at the reports of "secret" income being paid to insurers was either ignorance or posturing. It is my belief that a few members of the risk management community that felt the RIMS position was too soft were actually complicit in the investigations of attorneys general and the others who saw an opportunity to jump on board the train. The RIMS leadership was embarrassingly silent in the debate. Some in the brokerage community even tried to make risk managers complicit in "allowing" them to do the things that were accused.

Is there a risk manager that was diligently doing their job any more educated on broker commissions now than before? Are they any more effective in managing risks now that this whole fiasco is done? If people break the law, they should be punished. Ninety percent of what came out of the investigations just made the job of managing risks more difficult with no corresponding increase in effectiveness.

The trade publications caught on to the tailwind of this and would not even consider other viewpoints. "Letters To The Editor" should more properly be entitled "Letters That The Editor Agrees With And Will Print". The sanctimony shared with readers was disgusting.

Defensive responses to the issues lowered our profession's image and did not help counter the tremendous pull from those that made gain from the experience. It seems that only one insurance executive even publicly tried to stand up and tell the other side of the story. Good for him.

The best way for insurance and risk management professionals to uphold and raise the image of the profession and industry is be vigilant in understanding their company's/clients' risks and to use the best tools available to manage those risks, to provide fairly priced and understandable coverages to use as tools for risk management, to continue to educate themselves on the various methods of risk management, and to encourage others to do likewise. In addition, be involved in your community as a citizen and as a professional. Let others see what you stand for and then you will have a foundation to address the image of our profession.

—Randy McKnight, Director of Corporate Risk Management, Belz Investco GP, Memphis

Belonging to the right professional association can make a big career difference. As an NAIW member, I am exposed to others in the industry from different employers, and we spend a lot of time discussing industry issues. The perspective you get when you go outside your employer is very helpful in creating your own ethical standards. It's also a benefit to be able to contact other members around the U.S. and get instant assistance with a problem. I would recommend NAIW and its standards of ethics and professionalism to everyone. I know I have learned, and continue to learn each and every day. Our industry reputation was created one customer at a time and the negative can likewise be changed one customer at a time.

—Petra Lee, Insurance School Manager, Tower Hill Insurance Group, Gainesville, FL

I firmly believe that professional societies can help to instill trust (again) in our industry. When an individual completes all of the requirements for a designation, which includes that individual's signature on a statement of ethics, then that individual views their industry and how they operate in that industry on a different level. Organizations like the CPCU Society not only promote ethics but education, which I think is key to mitigating and someday eliminating the insurance industry's bad reputation. If more individuals in the industry would take the time to actually learn about the industry—from economics to coverages to the legal aspects of what we do—then there would be less errors in judgment, and we would be able to explain why we do what we do in a practical way to consumers.

Today I was able to participate in Connecticut's first Insurance Day at our state Capital. I appreciated a comment made by one of the participants that the industry is too shy to discuss the good things that the industry does for people, from paying claims to charity work in our communities. People only hear the negative, and that just has to change. Insurance was created to impact society in a positive way, but it is hard to deliver that message when top insurance executives receive multi-million dollar salaries and bonuses, and all others do not get a slice of that pie (perceived) whether you are a claimant or an employee.

Jack, I believe, like you do, that we can change our recent negative reputation into a good one (again). It will take time but an emphasis on ethics and education will help, along with some better advertising of the good our industry does for society.

—Noreen Kuziak, MBA, CPCU, ARe, AIS, Property Reinsurance Underwriter, The Hartford Steam Boiler Inspection and Insurance Company, Hartford, CT

By and large, I do not believe the reputations of individual professionals are worse off than the industry as a whole. Consumers either trust the insurance professional they work with or find another professional. Some business risk consumers and even fewer personal insurance consumers are able to find another mechanism to handle risk other than insurance.

The problem seems to be that, as an industry, we must use actuarially sound pricing factors, some of the underwriting factors we use become politically charged, and get drug through the media and political arena even when we mostly do our jobs correctly. And then we wonder why the public doesn't take our word for how we did it accurately. Are there some bad apples in the industry—of course—and unfortunately the entire industry gets smeared when the light shines on them. But how is that any different from any unfair generalization?

Insurance is not so difficult that the basics cannot be learned. The key is education for all consumers. The basics of insurance should be taught as a mandatory course in high school. If this were done, it would accomplish many things:

1. Soon-to-be insurance consumers will be exposed to a topic that is generally perceived as an arcane and pseudo-evil and something the government requires.

2. Those who pay attention will be informed consumers. They will understand the importance of auto insurance, of property insurance, of life insurance, etc. (Considering this is the age when people get their first auto, the easiest topic to start with would be auto insurance.)

3. It may even interest some to look at the insurance industry as a place to earn a living.

Professional societies and trade associations, as presently functioning, are of great assistance to those in the industry but not the general public. Perhaps they could best help by lobbying for a basic insurance course across all high schools and by sponsoring education for elected officials.

The road for individuals is more difficult. An articulate insurance professional, if talking to an open-minded audience, would be able to accomplish much with that audience. However, the way the insurance industry is routinely vilified by the press and government officials, I do not see how attempts by individuals would make a dent to any worthwhile extent as compared to a general educational approach.

—Joseph Wiest, Market Conduct Director, Travelers, Hartford, CT

As a CPCU, Class of '75, I would never think of not being an active, dues-paying member of the CPCU Society. Thanks for the message to those 10,000 CPCUs who have chosen not to be active and supportive in paying dues. And also to those employers who wear blinders with respect to not supporting employees with the CPCU designation. Being in the P/C insurance business for over 40 years, it is clear to me that active, dues paying CPCUs stand head and shoulders above others in the industry in being responsive, diligent, and putting the client's interest before their own. Yes, I believe every individual CPCU can make a difference in transforming the public's opinion of the insurance industry and I recognize that this is a responsibility of mine, every day. Thanks,

—David Skolsky, CPCU, P/C Consultant, Insurance Analysts & Consultants, Atlanta

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IRMI Update—Issue #161

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