IRMI Update—Issue #192
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
September 24, 2008
In This Issue
Colleague,
Wow, last week was a roller coaster ride, wasn't it? Among other things,
we watched the largest U.S. insurer—one that has touted its financial strength
in its advertising—take a big fall. While the problem had been simmering for
months with write down after write down, the final collapse seemingly occurred
in a matter of days. There is no telling what might have happened had the Federal
government not stepped in to save the day and, though AIG's financial position
has been stabilized, there is still much uncertainty as to where things will
go from here.
The speed of AIG's fall and the inability of the financial ratings firms
to provide advance warning must serve as a wake-up call. When you look at ratings,
it is important to consider not just the current rating of a company, but the
trend in its ratings over a period of time. In comparing two companies with
the same rating, one that has trended up to that rating may be a safer bet than
one that has trended down from a higher rating. Also, don't just look at one
set of ratings, such as those of A.M. Best or Standard & Poor's (S&P). Consider
the current rating and trend from as many as possible—most are now available
on the Internet at no charge.
AIG's downfall is a reminder of a lesson taught by the spectacular meltdowns
of past insurers: when the ratings are downgraded, it may be too late to make
a proactive move. They do not usually function as early warning alarms, and
you will often be in a reactive mode! Thus, once you choose an insurer to trust,
monitor insurance trade periodicals and tune into the industry grapevine to
avoid being surprised by a sudden downturn.
But how do you prepare for an insurer going down the tubes, particularly
given the cost and difficulty of changing horses midstream? Here are a few thoughts:
- First and foremost, never burn bridges. Insurance is a people business,
and you could be begging the underwriter you slighted today for coverage
tomorrow. Strive to maintain good relations, even when making a change or
when you feel slighted by someone else.
- Know the market for your business. Identify the major insurers for your
types of risks, and establish relationships with all of them. If you put
all your eggs in one basket, you will have to educate a new underwriter
from the ground up when replacing coverage with a different insurer. To
avoid this, try to place some business with two or more of the markets hungry
for your business.
- Be ready to market your program. How long does it take you to produce
sufficient data for a workers comp, liability, or D&O underwriter to evaluate
and price your account? Remember that you won't be the only account scrambling,
and your goal will be to get to the marketplace with the best submission
before everyone else. Especially if there is a limited marketplace for your
business, you want to be on top of what will be a huge pile of submissions.
What additional steps should risk professionals — whether agents, brokers
or risk managers—take to prepare for insurer insolvency? At what point do you
decide to incur the cost of short-rate cancellation and move before the insurance
expires? Please share your
ideas with fellow readers.
The IRMI Construction Risk Conference
is only 5 weeks away, and more than 1,400 people have already registered. Agents
in many states can obtain up to 21 CE credits by attending all the sessions.
If you are planning to attend and haven't registered, now is the time to do
so.
Have a great day.
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI
Obtain a Complimentary Subscription to
American Agent & Broker—The Magazine for
Insurance Agency Success—AA&B—the industry's premier sales and management
tool for agents and brokers (both retail and wholesale)—offers practical, "how-to"
information, to help top agents like you become even more skilled at prospecting,
selling, servicing clients, implementing technology, finding and cultivating
markets, and managing their businesses.
Subscribe today to American Agent & Broker
by
visiting online.
And please call (888) 772-8926, fax (216) 328-9452, or e-mail
aabcirc@SBMediaLLC.com with any
questions. Thank you!
Environmental Risk Profiles Can Help Expose Hidden
Risks—Businesses confront environmental liability every day. Specifically,
they face environmental exposures in four major areas: job site operations,
owned or leased properties, transportation, and disposal liabilities. Each area
must be explored to identify risks that may expose the firm to environmental
liability. Completing an Environmental Risk Profile (ERP) will help identify
some of the major exposures and associated claims that may arise from these
exposure areas. An ERP is a structured management tool for identifying the various
exposures associated with a business's operation. Typically, a risk profile
will encompass a review of an organization's operations with a focus on administrative
strategies and protocol for reducing or managing particular risks. Environmental
risk should not be exempt from this process. In fact, many organizations are
creating stand-alone ERPs to specifically address the area of environmental
liability. This process adds to an organization's ability to systematically
identify environmental risk and effectively manage it.
By: David Russo, Account Manager
New Day Underwriting
Bordentown, NJ
dave.russo@newdayunderwriting.com
www.newdayunderwriting.com
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 David.
The annual "Insurance Market Report" provides readers with line-by-line commentary
on the commercial general, auto/trucking, environmental, umbrella, D&O, employment
practices, and professional liability, as well as the property, workers compensation,
and surety markets.
For
IRMI Online subscribers
For
SilverPlume Sage subscribers
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.
It's not too late to register for the
IRMI Construction Risk Conference, October 27–30 In Las Vegas. You can still
reserve one of the final spots at this premier networking and learning symposium.
See all the details and register online
today.
If you haven't already done so, please send
IRMI Update to your business associates. Thanks so much!
IRMI Update is sent to subscribers by plain text e-mail twice each month.
To initiate your free subscription, use the
IRMI Update e-mail
registration form.