Category Archives: Insurance

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U.S. Rates Continue Holding Pattern

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Insurance renewals in May showed premiums in the U.S. to be steady except when there were changes in the exposure base, according to MarketWatch. Rates are stable and most commercial accounts are securing renewal terms as they expire.

“A lot of business renewed in May 2015. Overall, rates largely continue in a holding pattern. It seems both insureds and insurers are content to move forward with little to no changes,” Richard Kerr, CEO of MarketScout said in a statement. “The only notable exception is transportation where the auto portion of these accounts is driving an average 2% increase.”

Business Owners Policies (BOP) were up from flat to plus 1% in May as compared to April 2015. EPLI coverage was down from plus 1% to flat, or 0% increase, MatketWatch said. By account size, rates matched April. Jumbo accounts (more than $1 million premium) continue to show the greatest reductions at minus 2%. Small (up to $25,000 premium) and medium ($25,001 to $250,000 premium) accounts were up 1%.

Contracting was the only industry classification to change from April to May 2015. Contracting was up 1%.

MarketScout, an insurance distribution and underwriting company headquartered in Dallas, compiles the Commercial and Personal Lines Market Barometers. The firm owns and operates the MarketScout Exchange at marketscout.com as well as more than 40 other online and traditional underwriting and distribution venues.

The National Alliance for Insurance Education and Research conducted pricing surveys used in MarketScout’s analysis of market conditions.

May 2015 rates by coverage, account size and industry class:

 

 

 

 

What to Do About Reputation Risk

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Of executives surveyed, 87% rate reputation risk as either more important or much more important than any other strategic risks their companies face, according to a new study from Forbes Insights and Deloitte Touche Tohmatsu Limited. Further, 88% say their companies are explicitly focusing on managing reputation risk.

Yet a bevy of factors contribute to reputation risk, making monitoring and mitigating the dangers seem particularly unwieldy. These include business decisions and performance in the following areas:

Financial performance: Shareholders, investors, lenders, and many other stakeholders consider financial performance when assessing a firm’s reputation.

Quality: An organization’s willingness to adhere to quality standards goes a long way to enhancing its reputation. Product defects and recalls have an adverse impact.

Innovation: Firms that differentiate themselves from their competitors through innovative processes and unique/niche products tend to have strong name recognition and high reputation value.

Ethics and integrity: Firms with strong ethical policies are more trustworthy in the eyes of stakeholders.

Crisis response: Stakeholders keep a close eye on how a company responds to difficult situations. Any action during a crisis can ultimately affect the company’s reputation.

Safety: Strong safety policies affirm that safety and risk management are top strategic priorities for the company, building trust, and value creation.

Corporate social responsibility: Actively promoting sound environmental management and social responsibility programs helps create a reputation “safety net” that reduces risk.

Security: Strong infrastructure to defend against physical and cybersecurity threats helps avoid security breaches that could damage a company’s reputation.

But brand crises make headlines with increasing frequency, and companies are laying responsibility at the feet of the C-suite, particularly chief risk officers. Deloitte reports that respondents considered the primary responsibility to rest with: the chief executive officer (36%), chief risk officer (21%), board of directors (14%), or chief financial officer (11%).

What can they do? The study offered these key points to consider when crafting a crisis management plan:

  • Don’t wait until a crisis hits to get ready. Monitoring, preparation and rehearsal are the most effective ways to get ready for a crisis event. Organizations that can plan and rehearse potential crisis scenarios should be better positioned to respond effectively when a crisis actually hits.
  • Every decision during a major crisis can affect stakeholder value. Reputation risks destroy value more quickly than operational risks.
  • Response times should be in minutes, not hours or days. Teams on the ground need to take control, lead with flexibility, make decisions with less-than-perfect information, communicate well internally and externally, and inspire confidence. This often requires outside-the-box thinking and innovation.
  • You can emerge stronger. Almost every crisis creates opportunities for companies to rebound. However, those opportunities will surface only if you’re looking for them.
  • When a crisis seems like it’s over, it’s not. The work goes on long after you breathe a sigh of relief. The way you capture and manage data, log decisions, manage finances, handle insurance claims, and meet legal requirements on the road back to normality can determine how strongly you recover.

But the real objective should be preventing these potential crises to begin with. Deloitte recommends exploring the possibilities of “risk sensing” – using real-time data to monitor the issues that might impact a company’s reputation:

Crisis management for C-suite executives

Check out the infographic below for more insights from the Deloitte Reputation@Risk survey:

Deloitte Reputation@Risk Global Survey

P&C Market Continues Downward Rate Trend

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Property/casualty insurance buyers are continuing to see flat rates, as all lines of coverage averaged a zero percent rate change, MarketScout reported today.

“The market continues to be trending downward over the last eight months, from October 2014 at plus 1.5% to April 2015 at a zero percent increase,” Richard Kerr, CEO of MarketScout said in a statement. “It’s not dramatic but it is a trend. Coastal property may experience some slight rate increases since we are on the cusp of the wind season. Rates on all other exposures should continue to be quite competitive.”

When measuring rates by coverage classification, automobile coverage was up to plus 2%. Rates for all other coverages remained the same. Business owners policies (BOP), professional liability and D&O coverages decreased in April 2015 by 1% compared to March 2015, according to MarketScout, an insurance distribution and underwriting company.

By account size, rates remained the same for all, except jumbo accounts of more than $1,000,000 premium. These accounts adjusted to a reduction of minus 2% in April 2015, compared with rates in March 2015.

Industry classifications were all reported at a zero rate increase in April 2015 with the exception of transportation, which held steady at a rate increase of plus 1% and habitation, which increased from 0% in March to plus 1% in April, MarketScount said.

Summary of April 2015 rates by coverage, account size and industry class:

 

10 Insurance Tips for Risk Managers

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NEW ORLEANS—Most companies will at one time or another face coverage issues and lawsuits. In order to identify and avoid insurance-related issues and disputes before they arise, risk managers should take advantage of proven strategies for resolving difficult claims, advised Darin McMullen, attorney with Anderson Kill, P.C. at the RIMS 2015 Annual Conference & Exhibition here.

1. The purpose of insurance is to insure.

Don’t underestimate potential future problems and think of loss prevention and risk transfer rather than loss financing, he noted. Companies need to assess the types of risks they will face and make sure their program is tailored to meet these needs. Also important, he said, is making sure policies are designed to cover the losses the company will face on a day to day basis. For example, certain types of risks are seen in manufacturing and other risks are particular to an IT vendor. Risk managers need to examine any pitfalls or shortages that may exist in their current policies and seek legal opinions well in advance of renewal. They need to look at how exclusions might be interpreted as well, McMullen said.

Joshua Gold, also an attorney with Anderson Kill, added that risk managers’ jobs are more difficult than ever, with fragmentation in insurance programs existing, since many polices are purchased for a program. These may include directors and officers, product liability and cyber insurance. “There are products out there that try to assimilate them and make sure gaps in coverage are treated,” Gold said, adding that while the fine print in policies can be overwhelming, it can be key for proper coverage, especially when dealing with multiple lines, excess layers and towers of insurance.

2. Don’t limit insurance expertise to the risk management department.

All too often, “there are still going to be thorny claims and there still are going to be disputed claims, which are unavoidable,” McMullen said. He said that building expertise elsewhere within the company is critical to taking advantage of any and all available coverage. “We get the need for everybody to work together, but now, more than ever, this is important,” he said. Coverage should not just be delegated to risk or legal and collaboration is needed. For example, IT departments need to be included when planning for cyber coverage.

3. Lawyers and risk managers can be natural allies.

While there may be friction between departments in a company, legal generally recognizes the beneficial role risk managers play, McMullen said. He added that risk managers need to put any insurance-related communications in writing and assist in the analysis of policies and claims.

4. Insurance is an essential component of corporate resources and asset conservation plans.

Risk managers should purchase coverage with the intent of safeguarding the company’s own property and employees. They also need to recognize which mechanisms actually transfer risk and which do not.

5. Think insurance after a loss occurs.

This means looking to insurance coverage following all lawsuits, claim letters, product-related issues and financial losses. Risk professionals also need to analyze other sources of insurance that could possibly cover a claim.

6. Give notice of a claim or loss as soon as possible.

When faced with a claim or loss, McMullen advised risk managers not to hesitate to notify their broker, insurers and everyone in their tower of insurance as soon as possible.

7. When you make a claim, don’t accept “no” for an answer.

There is no downside to challenging an insurer’s denial of coverage. “You owe it to your company, you owe it to your organization to explore this and push back,” McMullen said, adding that determination and persistence often mean the difference between coverage and no coverage.

8. Find out where your company’s policies are.

Locate, collect and catalogue past insurance policies. Also acquire and keep policies of all entities related to your company.

9. Don’t panic if your insurer becomes insolvent.

If this is the case, McMullen advised risk professionals to file a proof of claim as a creditor and file a claim against the state guaranty fund in one or more possible jurisdictions. He recommended that they request the next layer of insurance companies to “drop down,” and also to consider litigation options.

10. Make sure your insurance team is conflict-free.

This means the team should be untainted–risk managers need to know where loyalty lies and if an attorney is representing both sides, McMullen said. “You want a conflict-free insurance team to take on the insurance company and to fight for the coverage that you are paying for,” he concluded.