IRMI Update

Risk Management & Insurance Commentary, Tips, and Tactics
March 10, 2010 | Issue 223 | ISSN: 1530-7948

In This Issue

• Working Longer—Keeping Older Workers Safe/Productive
• Where Is the Captive Movement Headed?
• New Expert Commentary
• Webinar Series on Cyber Risk

Colleague,

Wow! Way back in IRMI Update 99, I opined that Eliot Spitzer was wrong in the way he was waging his war with the insurance industry, but I also believed it would begin a sea change in agent/broker compensation that would include the death of contingency fees. Yet, only 5 years later, most of the changes to producer compensation "legislated" by Eliott Spitzer—through accusations, lawsuits and the wily use of the press—have been undone. Most of the lawsuits initiated by Mr. Spitzer and his successor have been lost or dismissed. And, several states, including Spitzer's own New York, have amended the 2005 settlement agreements with AON, Marsh, and Willis such that they will no longer be legally obligated to forgo contingency commissions. Gallagher secured a similar modification from Illinois in 2009.

At the same time, the New York State Insurance Department issued its new Producer Compensation Transparency regulation, requiring some disclosure of producer compensation for insurance sales. The IIABA thought New York went too far by imposing costly administrative burdens on agents, while RIMS felt it didn't go far enough. Usually, compromises for which neither side is a clear winner are a good thing, and we will see how this plays out.

On the positive side, New York's current (and other states' future) disclosure requirements are likely to increase transparency, somewhat mitigate conflicts of interest (whether real or simply apparent), and result in greater trust of brokers by insurance buyers. Some of the brokers now eligible for contingency commissions say that, despite the reversal, they have no intention of accepting contingency fees from insurers. If their stance proves to be a competitive advantage in the marketplace, this posture might continue, but I suspect if it proves overly disadvantageous, the decision will change.

In the end, the benefits that Spitzer might claim resulted from his all-out attack seem meager: a new law requiring the type of compensation disclosure that diligent risk managers were able to secure before 2005 and some additional attention to ethics in our industry. Of course, many suspected the attack was primarily for political advancement, but the governorship it helped him gain was short-lived due to his own ethical indiscretions. The disastrous ramifications, however, are huge: financial losses by stockholders of the affected firms, particularly Marsh, the loss of jobs by thousands of people, and a tarnished reputation for innocent agents, brokers, and insurance industry personnel.

So what do you think? Did any good come from the changes Eliot Spitzer tried to force on the industry? Are we at least more ethical and more transparent than we were prior to his investigations in 2004? As a side note, are you aware that this is "ethics awareness month" for the industry? Have you read your company's ethics policy or asked your broker for its policy? Please share your thoughts and comments with readers.

On another subject, the first of six Tech-eRisk 2010 webinars, which focus on insurance and risk management for cyber, privacy, and technology risks, will be held tomorrow (and an archived recording will be available thereafter). Check out this and the other five cyber risk and insurance webinars and register now on IRMI.com.

Thanks for subscribing to IRMI Update!

All the best,

Jack

Jack P. Gibson, CPCU, CRIS, ARM
President
International Risk Management Institute, Inc.

Working Longer—Keeping Older Workers Safe and Productive

More employees plan to delay their retirement, for financial need and other reasons. Many employers believe older workers are more susceptible to injury in the workplace, and worry that an aging workforce increases the risk of disability and lost work time. Are those worries justified? Not according to the National Council on Compensation Insurance, which found that injury frequency for older workers is lower than for younger workers, although lost-time injuries tend to last longer.

Aging can affect strength, range of motion, sensory acuity, and healing time, but these limitations are offset by experience, safety consciousness, and attentiveness to the task at hand, research has found.

Slips and falls account for more than a third of all injuries to workers 65 and older. Crashes at intersections or when merging also increase with older drivers. Ergonomic injuries caused by fatigue and strain occur more commonly in older workers. These are areas where workplace design and maintenance, training, and individual accommodation can help reduce the risk of injury.

For example, to help prevent slips and falls, make sure your floor coverings are appropriate for the work environment, and kept clean and free of obstructions. Is lighting adequate, so that differences in elevation are easy to see? Are stair risers of uniform height, wide enough, and edges easily seen? Are ladders and stepstools available?

Teach employees that if they are injured, you will help them return to productive work—even if that means temporary modified duty, reassignment, occupational therapy, or some other accommodation. The employer's response to an injury, and how attached the employee is to his or her work, are more important than the severity of injury. Communication—with medical providers, workers' compensation insurers, and employees—is a vital component of successful return-to-work programs.

By William Henry, Vice President
The CIMA Companies, Inc.
Woodbridge, VA

GET PUBLISHED IN IRMI UPDATE: Send us a practical tip (less than 300 words) for identifying and managing risks, buying insurance, managing claims, or filling gaps in insurance coverages. We'll acknowledge your contribution as we did for Bill. Submit an IRMI Update risk tip.

Where Is the Captive Movement Headed?

The captive insurance company movement was largely born in the hard insurance market of 1985 and has accelerated in every hard market since. Though the movement thrives in hard markets, soft markets only seem to slow it down and rarely cause captive growth to stall. So, where is the captive scene headed in 2010? So what do others predict for captives in 2010? The editors of Captive Insurance Company Reports (CICR) contacted 17 well-respected captive practitioners for their thoughts. If you subscribe to CICR, see if you agree with the expert predictions in "2010 Prognostications on Captives" (see IRMI Online or Sage/ReferenceConnect).

For summaries of other new and updated information in your IRMI library, go to What's New on IRMI Online or What's New in SilverPlume Sage.

Recent Articles on IRMI.com

New Expert Commentary

There are over 1,001+ risk management and insurance articles on IRMI.com. Below you'll find summaries of some recent additions with links to the articles.

• Captive Underwriting Profits—Don Riggin shows how a single-parent captive can reduce expenses and convert some of it into underwriting income.

• Circuit Rejects EEOC Guidance—Paul Siegel explains a recent ruling disallowing compensatory and punitive damages for ADA retaliation claims.

• Litigation Management—Crucial but Confusing—Litigation is expensive. Glenn Brown explains how to manage costs.

• Risk Management/Insurance Internships—Brenda Wells offers suggestions on where to advertise and how to determine salary.

• Avoiding Privacy Risks—Gary Clayton shows how taking six steps can provide your organization with the information needed to avoid privacy risks.

• Only Defense Costs Paid by Named Insured Satisfy the Self-Insured Retention—A recent California case shows the danger of being an additional insured on a CGL policy with an SIR.

IRMI Featured Educational Event

Webinar Series on Cyber Risk

The Tech-eRisk™ 2010 Webinar Series from IRMI is focused on risk management and insurance for technology, cyber, media, and privacy risks. Six webinars will address these topics: contractual risk transfer issues, ways to tailor cyber coverage to exposures, what to do when a business has a data breach, wording issues for these policies, and managing cyber exposures for small businesses. You can purchase all six for less than $200 and have multiple colleagues participate. Learn more.