Directors and officers (D&O) liability insurance is one of the most complicated lines of insurance. There is no accepted standard D&O policy, and there are an uncountable number of variations between the forms offered by the many insurers who write the coverage. This presents an important challenge to risk managers and insurance agents/brokers who can ill afford to make an error in arranging the coverage since D&O insurance protects the personal assets of the organization's directors and officers.

If you or your organization subscribes to IRMI publications on IRMI Online or SilverPlume Sage, you probably have at your disposal an invaluable asset to help you arrange bulletproof D&O programs: D&O MAPS. Check out the D&O Coverage Guide we just added to D&O MAPS. It is a comprehensive, user-friendly analysis of the major and minor provisions found within D&O policy forms. In addition, the nine sections of the D&O Coverage Guide correspond exactly with the major headings used in the 300-plus individual policy analyses contained in D&O MAPS, allowing subscribers to easily obtain additional in-depth discussion of specific policy provisions addressed within the analyses. No assessment of commercial lines insurance coverage would be complete without accompanying legal analysis. Accordingly, the D&O Coverage Guide cites and discusses hundreds of recent and relevant court decisions interpreting various D&O policy provisions.

Since most major brokers, large independent agents, and many risk managers subscribe, you probably have access to this valuable resource. Make sure you put it to good use.

For D&O MAPS IRMI Online Subscribers

For D&O MAPS SilverPlume Sage Subscribers

If you aren't already a subscriber, learn more about D&O MAPS at www.IRMI.com.

Lastly, please note that the early bird-registration rate for the Construction Risk Conference ends in just 2 days. If you plan to attend and haven't already done so, now is a good time to register.

I hope to see you at the Conference next month. Thank you for subscribing to IRMI Update.

Have a great day.

Jack

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

Risk Tip: Where Is It?

Unfortunately, we don't have a risk tip for this month because no one sent one in for us to use. Why don't you send one for the next issue? It's a great way to put yourself and your company in front of 30,000 risk professionals without paying for an ad. Risk tips are short (200 words) tips giving specific risk and insurance management advice. Of course, product promotions are not eligible—that's what the sponsor ads are for. Submit your tips.

What's New in Your IRMI Library

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

New Expert Commentary

There are over 1,100 risk management and insurance articles on IRMI.com. Below you'll find summaries of some recent additions with links to the articles.

Where Has Traditional Reinsurance Gone?—Alternatives to traditional reinsurance have gained significant momentum. Larry Schiffer looks at these options.
Insurance Industry Valuation Insights: Recent Trends—Jeff Balcombe looks at how the weak economy, soft market conditions, and deterioration in the credit markets are limiting the growth of insurers.
Property Catastrophe Risk and Capital Markets Risk Transfer—Don Riggin discusses the barriers to frequency losses being traded in the capital markets.
Litigation Best Practices—Lessons from Risk Manager of the Year—The Business Insurance Risk Manager of the Year provides some yardsticks and takeaways to improve litigation management processes and outcomes.
Enterprise Safety Management: Implementing a Framework—Peter Furst recommends weaving the safety process into the very fabric of the organization to achieve an injury-free workplace.
The Developing Legal Standards for Data Security—Gary Clayton overviews laws and regulations implemented to manage risks related to the processing of personal data.
Key Considerations When Buying Builders Risk Coverage—Jay Levin explains that why precise coverage terms and conditions should be reflected in the construction documents and reviewed in detail by all.

Two Days Left for Early-Bird Rate

The early-bird rate for the IRMI Construction Risk Conference ends 5:00 p.m. Central on September 12. Now is the time to reserve your spot, have your pick of workshops, and take advantage of our lowest rate. Register online today for this premier networking event. See the full agenda, speaker roster, and learn why your peers attend every year.

Your View—Insurance Cost versus Claims Service

IRMI Update 190 asked readers whether they consider the quality of the claims service they receive when choosing insurers, or just focus on the premium cost. Below are some responses.

In our experience, companies with large retentions and large claim volumes typically pay close attention to the quality of claims service that they receive. They are not apt to simply search for the absolute lowest price at each renewal. At the same time, they also have the clout to demand special claims service from whoever they use as a claims administrator so they are not stuck with the "off-the-shelf" service. We see a greater number of middle market companies that will chase price and operate on the assumption that all claims departments are the same. We see a real need for the broker and consultant community to do a better job of providing education and information to these companies so they can evaluate and compare the coverage and claims service (in addition to the price) offered by the various insurers and then select the carrier that fits best.

—Glenn Brown, Albert Risk Management Consultants,
Needham, MA
In my view, broker weight given to claim service in buying decisions is meager, and those insisting otherwise are paying lip service. Exceptions exist, but too often at the end of the day, the broker bears down on price, price, price. Then, when claim service goes bad 6 months later, everyone acts surprised. Go figure! One problem is you can't always measure the savings from a lower quote. Measuring or quantifying the qualitative difference between adequate and superb claim service is tough and drifts into the realm of subjectivity. Add in a dollop of wishful thinking—"We won't have any claims"—and the desire to show upper management how much money the broker and risk manager saved and you have a recipe for giving claim service short shrift. Buyers who insist that claim service weighs heavily in the buying decision have as much credibility as late-night Lotharios who assure their dates, "Yes, I’ll respect you in the morning!

—Kevin Quinley, Fairfax, VA
Let's be honest, for the small to mid-market customer, price is the sole consideration in the purchase of insurance products. On the other hand, clients with professional risk managers handling risk financing by definition have more flexibility in evaluating which commercial insurance proposal is better. Claims can be a real wild card that may make an attractive price a bad choice, and a good risk management professional should be asking about both claims handling abilities and reputation. In my experience, some markets can and do make claims into a contact sport.

When I entered the business with a major broker in the late 1960s, fast-track account service types first spent a year in brokerage claims. This taught a basic respect for the written word, and that ultimately insurance is a contractual relationship. Today, I doubt that running newly minted Stanford or Harvard MBAs through claims is seen as a meaningful experience. In the 21st Century, it's all about brands and relationships. Let's get the party started!

Something else to keep in mind is that as profitability for commercial insurers has been distinctly challenged, post-Enron and WorldCom, post-9/11/2001, post-hurricanes Katrina & Rita, and most recently with the wildfires in and around Los Angeles County in California, we meet a different claims person today -- someone who is less trained, less skilled, less empathetic, less compassionate, and someone generally less able to deal with the ups and downs of dealing with both demanding clients, pressure, and those who may injured and/or damaged.

The job is not complicated, but the real problem is that insurance is not glamorous, like advertising or consumer products, or a career on Wall Street. It is part of Finance, but for any number of factors, it is not on any graduate's list of best first choices. We are, and have been, what has been called a profession by accident.

In some respects claims handling has improved, but most markets have now regionalized claims offices, in some cases, handling the entire country out of two regional claims offices. But ultimately claims is a one-on-one, face-to-face business, and the talent on the bench is more challenged, yet the problems in individual claims situations have not really changed.

Fortune 200 companies measure success based on customer satisfaction. If Procter & Gamble or IBM ran an insurance company, I think they would do a much different job of delivering services, which is what this is really all about. No one wins when the first contact with an insurance company's claims department is an eight page, single-spaced letter, starting with the words: "We reserve all of our rights." That's just a recipe for pissing people off.

In short, claims handling should be a key consideration in risk financing through the purchase of commercial insurance products.

—E. Bernard McGlynn,
Lewis-Chester Associates, Inc., Summit, NJ.

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IRMI Update—Issue #191

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