IRMI Update—Issue #161
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
May 16, 2007
In This Issue
Message from the Editor
Colleague,
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.
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.
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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
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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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