Risk & Business

Enterprise Risk Management First Step

2009-11-08T19:46:00.001-05:00

To establish a "holistic approach to your business risk, the first step is to start with your goals. In order to achieve your business goals on a consistant basis you then need to keep the risk of the business in control in all phases. Therefore apply the risk management process to sales, marketing, human resources, financial, vendors, suppliers, stockholders, debt, R&D, etc... Enterprise risk management takes a lot of work and is the reason why most businesses do not do it. In my next post I will break down the risk management process that needs to be applied throughout your business. Until next time, be careful out there and know your risks. K

ERM, What is It? How Does It Help Business?

2009-10-26T22:37:00.001-04:00

ERM or Enterprise Risk Management is a holistic view of risk in a business. A lot of attention has been paid to ERM after the financial crisis and meltdown. Experts say that if AIG had a solid enterprise risk program they would have seen their potential downfall. I will blog about ERM this month and how it can help small business owners. I will also give some examples of steps you can take to establish an ERM approach to your business. Until next time be careful out there and know your risk. K

Pay as you drive coming

2009-10-23T08:59:00.004-04:00

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The State of California has enacted a new "pay as you drive" directive allowing insurance companies to charge insured drivers based upon the actual miles they drive instead of the industry norm of actuarial based rates. While some have expressed displeasure due to so called privacy concerns, it seems to be a sensible approach to take. There are many who drive very few miles yearly and others who drive considerably more. Both of these classes of drivers tend to pay relatively similiar rates. Insurance companies do question drivers periodically on their mileage but I'm fairly sure most drivers tend to fudge those figures a bit. This seems to be a growing trend with companies such as Progressive taking the lead. It's only a matter of time before this spreads to the commercial side of insurance.

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Central Delaware Chamber Of Commerce to Promote Safety Credit for Members

2009-10-17T20:57:00.001-04:00

The Central Delaware Chamber of Commerce is going to work with the Delaware Insurance Department to promote the work place safety program. The safety program allows qualified business owners to save up to 20% on their work comp premiums. I know my agency has promoted this program for the last decade and have had great success in keeping premiums down for our clients . With the recent rate reductions and the opportunity to apply for the work place safety credits, Delaware employers and small business owners have some of the lowest work comp rates in the nation. Just a few years ago Delaware had the 4th highest. The insurance companies however are monitoring the rate reductions cautiously. Delaware has a hard job, it has to balance the proper rates to charge from a smaller worker population, that still allow insurance companies to make money. If not, the companies may stop writing work comp business in the State which would not be good for Delaware business owners. I hope the actuaries have done the math right ! Until next time be careful out there and know your risks. K

Get employees back to work quickly to keep work comp costs down

2009-10-16T09:13:00.002-04:00

In the past I have spoken to clients regarding a particular workers compensation claim affecting them and have asked if they have brought the employee back to work yet. Too many times the answer is no, they have nothing for that employee to do since said employee is not 100% and unable to perform their specific job prior to their workers compensation injury/claim. The problem with this is that too often employers miss the point that even though an employee can't perform in the position they were in prior to their injury, it behooves the employer to create some type of alternative task/job the employee can do until such time they are able to resume their normal duties. Bringing that employee back to work means that work comp benefits /payments in that particular claim are being curtailed, thereby saving the employer potentially more being paid out, while adding to their experience mod and driving their overall work comp expenses up.

Anti-Trust Exemption Needed for the Insurance Industry

2009-10-15T18:45:00.002-04:00

There is a lot of talk coming out of congress regarding the anti-trust exemption for the insurance industry. The McCarren Ferguson act which was passed over 40 years ago, gives the insurance industry the ability to share and pool loss data in order to set rates. Many in congress are saying that this allows price fixing by insurance companies and has contributed to the high cost of health and property/casualty insurance. The insurance industry and State insurance departments refute this accusation. Without the ability to pool loss data smaller insurance companies will not be able to set adequate rates in order to make a profit. The data information from others in the business allows more competition because small and medium companies can do business and compete with larger insurance companies. If this is to be abolished, small to medium insurance companies would not have the customer base, history, or money to get this all important loss data. A repeal of the McCarren Ferguson act will only reduce competition in the marketplace because insurance companies may go out of business. Until next time be careful out there and know your risk. K

Business Owners could be held Liable for What Employees view and Download off the Internet

2009-10-13T16:21:00.000-04:00

Attention business owners, if your employees are downloading information from illegal websites, you may be held liable for damages. A recent case out of New Jersey, the appellate court found the employer liable for not policing an employee who was using the work computer to download illegal pornography. The case was settled for an undisclosed amount. In addition there have been cases where employers were found liable for retaining an employee who they caught. This is a risk problem for employers which can easily be managed. Have a internet and computer policy that is a no tolerance policy. Have all your employees sign it and educate them on your no tolerance policy. Report anything illegal immediately to the authorities. Until next time, be careful out there and know your risks. K

Identity theft on the rise

2009-10-12T11:50:00.002-04:00

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According to an article in The Telegraph, an online UK website/newspaper, identity theft has risen by more than a third in that country. Based upon information provided by the article, there have been a total of 59,000 recorded victims of identity theft in Great Britain in the first nine months of the year whereas last year the total for the whole year was 62,658. The article went into further detail explaining that account takeovers, 3rd party hacks into an existing account have more than tripled in the last 2 years. The targets of these attacks are credit cards by more than half with the blame being online purchasing and cardholder carelessness being blamed. As a business owner it's more than likely that you and your employees are making online payments and or purchases using company credit. It would be wise to consult your insurance agent to discuss procuring coverage for this type of risk if you don't already have it.

Health Reforms Gettting Closer to a Vote, Who will be Taxed to Pay for It?

2009-10-08T15:14:00.000-04:00

The Senate is scheduled to vote on health reform as early as next week. The buzz around the insurance industry is that health insurance companies are going to be taxed to pay for it. Right now there is talk in Washington about hitting insurance companies with a "windfall" tax from the profits they are expected to make with 50 million more customers in the system. This again is scaring me a little for my small business owner clients. Usually increase in big corporate taxes and or expenses always seem to trickle down to the business owner's pockets. That is what would happen if the insurance companies are taxed to pay for the health reforms. You can count in it. Until next time, be careful out there and know your risks. K

State Work Comp plans control 25% of the work comp insurance premiums

2009-10-06T20:33:00.001-04:00

A recent report showed that State work comp funds are insuring 25% of the work comp market. This high percentage is a disturbing sign that indicates the standard insurance marketplace is loosing its appetite for work comp. With the increasing costs of medical care and the rate decrease mandates from many States, insurance companies are staying out of the comp market because they can't make money. How this will play out for business owners is hard to tell. It is nice to have low premiums now but a loss of standard market options only bodes unfavorably for business owners in the long run. Stay tuned ! K

Faltering economy brings rise in suspicious claims

2009-10-05T07:42:00.003-04:00

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According to an industry source, the souring economy has brought a rise in suspicious claims. The National Insurance Crime Bureau said 41,619 suspicious claims were reported to the organization by member insurance companies, who reported claims based on property, casualty, commercial and vehicle policies. As has often happened in the past, when income goes south, questionable/suspicious claims increase. A word to the wise, insurance companies are aggresively investigating any and all claims that pop up on their radar. Worth remembering that a dip in income overall also leads to a dip in income for insurance companies. In order for them to preserve sufficient surplus to pay out on valid claims they tend to keep a sharper eye out for fraudulent activity during economic downturns.

Think like a thief? Contractor equipment safety

2009-10-02T08:36:00.004-04:00

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I recently read an insurance industry article titled "Lessons from and equipment thief" , and they discussed what would probably be tips from thieves, if they were that forthcoming, regarding the theft of contractor's equipment stored overnight at job sites. According to the article, thieves most fear being caught when stealing, storing or moving equipment. The risk of being caught while selling the equipment is low because frequently equipment owners forget to record serial numbers and buyers of used equipment tend not to check titles. The article also referenced the pointless setting up of security procedures that are too complex or not regularly checked since thieves tend to watch and wait until security starts to become lax. Another factor would be employees of the contractor. They are the ones usually responsible for the implementation of security and it is key to give them incentives to help with this responsibility. Lastly, and perhaps most important, if you don't record serial numbers it's pretty much a given that stolen equipment won't be recovered.

Know your policy limits up front

2009-09-30T14:51:00.000-04:00

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Recently a Delaware court upheld an insured's claim against an insurance company due to a lack of uninsured/underinsured coverage on the insured's policy. The court ruled that although the insured had rejected a $100,000 limit, the policy documents were sufficiently confusing as to lead to a reasonable expectation that at least the minimum limit, $15,000, was included. The insured had gotten into an accident and had racked up medical expenses. While the person at fault for the accident had coverage, their limits were used up quickly, leading to a lack of sufficient coverage for outstanding medical expenses. The upshot here is to never assume and to make sure to read all policy documents carefully. If you aren't sure then ask, don't ever assume. This is especially importing in these days of online purchasing of insurance becoming more prevalent. In this case the court ruled that the insurance company had to provide the minimum limit, $15,000.

Last Grasp for Health Insurers?

2009-09-24T21:11:00.001-04:00

To follow up from my post yesterday, it seems that health insurers are trying to get all their premium now before the congress passes a health reform bill. Most of my clients are seeing 20%, 30% and even 40% rate increases for their upcoming health plan renewals. This will create a major financial burden on business owners. I will suspect that many will drop their employee health plans. Stay tuned Kevin

Georgia Flooding Makes a Case for Every Business to Have Flood Insurance

2009-09-24T07:43:00.000-04:00

Areas of northern Ga. that have never flooded are now under water from a deluge of rain. The State climatologist says that Atlanta had not seen rain of the magnitude received in over a century. The Chattahoochee river broke through its banks and wreaked havoc on the surrounding areas. The total estimated damages will be in excess of 300 million dollars. What makes this worse is that only 20% of the claims will be covered by flood insurance. The rest of the damage will not. Many business owners neglect to consider flood insurance for their businesses. Like homeowner policies flood is not covered under business owner policies. A small entrepreneur can be put out of business by a large rain event and not be able to use his property insurance to cover the damage. Assess your area and place of business. If you are in a low lying part of town and vunerable to large runoff after a rain storm, then buy flood insurance. If you are near a river, stream or tributary then buy flood insurance. Consult your business insurance professional to discuss your risk factors. Until next time be careful out there and know your risks. Kevin

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Health care companies will pay the health care bill if congress has its way

2009-09-22T22:51:00.001-04:00

I have posted a few paragraphs regarding the health care debate going on in congress. Today I read an article that congress wants to impose taxes on health insurers to pay for a health care reform bill. I think health care insurers should get a risk management plan. With a stroke of a pen, the whole health insurance industry could be changed and the way health insurers make money could be minimized. It goes to show that no matter how big your company is a risk management plan to deal with the unexpected is always needed. Until next time be careful out there Kevin

Inflation and Your Business Insurance Premiums

2009-09-21T15:03:00.006-04:00

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Many of the economic articles you will come across today are starting to talk about inflation. With the billions and billions of new printed money placed into our economy this year, sooner or later inflation will follow. The Federal Reserve Chariman, Bernanke assures us that the Fed can contract the money supply rapidly enough to thwart a heafty rise in inflation. Though this may or may not be the case, a rise in inflation is almost certain over the next 24 months or so. This means rising insurance premiums for business owners. Insurance companies have bottomed rates significantly during the last three years, and there is no where to go but up. As inflation rises over the next few years, costs of claims, medical, and property replacement will all go up. Insurance carriers still realing over the financial market collaspe will see rising claim costs with suppresses premiums and weak investment returns. Attention business owners, plan for premium increase sometime over the next 24-36 months if not sooner. I am concerned the cost of business insurance will go up as inflation starts to rise. Until next time, be careful out there and know your risks ! Kevin

Workers Compensation and Facebook

2009-09-17T08:13:00.000-04:00

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Recently an official with the Virginia workers compensation commission rescinded a $200.00 a day fine against Facebook. It seems an employer in the state requested photos from Facebook of an employee who was collecting workers compensation. Apparently the photos revealed the employee on vacation while they were supposed to be injured/rehabilitating and collecting workers compensation. Officials at Facebook refused to turn over the photos citing the federal Electronics Communications Privacy Act prohibited it from responding to the subpoena. To me this illustrates the lengths employers and those administering workers compensation will go in order to combat fraud. This should probably serve as a cautionary tale as well to those who frequent these social networking sites. Be careful what you put up there in cyberspace, the "EYES" are everywhere.

Are you on a Board ? Does it Have D&O Insurance Coverage?

2009-09-14T23:01:00.001-04:00

With the financial meltdown that occurred roughly a year ago, directors and officers have been in the cross hairs. Lawsuits against directors for bad decisions and mismanagement of their respective companies has increased. Which brings me to remind you the readers about being on volunteer boards and your liability exposure. If you are on a little league board, bank board, senior center board, etc... You are exposed to lawsuits from the decisions you make. Just because you are a volunteer you still may be sued. Make sure your board has a D&O insurance policy. This will give you the protection you need. Until next time, be careful out there. K

Fraudulent Insurance Claims Increasing? What is Your Risk Management Plan

2009-09-10T22:05:00.002-04:00

The National Insurance Crime Bureau (NICB) has reported the amount of suspicious insurance claims has risen this year 13%. Suspicous car fires, auto glass claims,and product liability claims are up 20%,76% & 90% respectively. Also double billings on work comp claims have also increased. What is going on? Well I think it has to be recession and economy related. As a business owner, part of your risk managment thought process has to take into consideration your vunerability to insurance fraud. As money gets tighter people look to insurance claims as a way to get income. It is hard to catch and prosecute insurance fraud, so be aware. Your risk planning should include being more engaged in your claims with the insurance adjusters. Try questioning everything and everybody that you may know that is invovled with the claim. Keep your ear to the ground and report any suspicious issues. It will take a team to catch fraud committed against you and your business. Until next time, know your risk so you can manage them. Kevin

Recession Cut Backs on Safety May Prove Costly

2009-09-08T17:07:00.000-04:00

It is a proven fact that businesses that focus on loss control, safety and risk management pay a lot less in business insurance premiums. When compared to thier respective peer groups, these businesses can pay 20-30% less in business insurance costs. However with the lingering recession, many business owners over the last few years have cut spending money on safety and risk management programs, only to see their loss histories deteriorate. Though most business owners have yet to see their rates go up because of the soft, highly competitive insurance market, the true costs will come home to roost when the insurance market starts to "harden" rates next year. If you have cut your safety programs, put them back in place. It might be real hard to find the money, but you will be glad you did when the commercial insurance market changes and "punishes" businesses with poor loss histories. Until next time remember if you know your risk and can measure it then you can control it. Kevin

Health Care Compromise ?

2009-09-07T13:02:00.001-04:00

It looks like President Obama and the democratic controlled congress is looking to softn it's position on health care. A national health program to compete against the current health marketplace is most likely going to be "set aside" for future use if the reform does not work. 2013 will be the decision date to implement a government plan if needed. Stay tuned ! Have a great labor day ! Kevin

Poll favors ban on cell phone texting/driving

2009-09-03T13:20:00.006-04:00

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According to a recent AAA poll, most Delawareans favor a ban on texting while driving, a response favored by 96% of respondents to the poll. Also, 64% of respondents favor an outright ban alltogether of cell phone use while driving. While Delaware has yet to move forward with any cell phone legislation the City of Wilmington has enacted a ban on hand held cell phones and texting while driving in the city itself. It's safe to assume that most parents are in favor of this measure as well as employers who have employees out on the roads. Apparently some studies have shown that texting while driving is comparable to drunk driving in terms of the danger it presents to motorists. While I'm not in favor of more legislation this seems to be a prudent action to head off an increasingly problematic issue.

H1N1 and your Business Insurance Policies, How will they respond?

2009-09-02T10:10:00.003-04:00

The H1N1 flu has been the center of the news lately. The CDC is anticipating a large outbreak of the flu this winter season. What kind of risk will you have with the flu and your business? Though lawsuits against business owners for contaigon diseases being attributed to the business are rare, they do exist. Your business liability policy will respond if third party lawsuits are brought against you. Here is an example, If someone claims that your business caused them to contract the H1N1 and they lost income due to the illness, your business liability policy would defend you. The chances of you being found liable and triggereing coverage is rare. Your business liability policy would be your best source of protection from such lawsuits. Regarding work comp issues, an employee could claim that the H1N1 was an occupational disease which could trigger coverage for the employee is some States. Cases do exist that have created precedents. For example a case in California resulted in the Ca. Supreme Court awarding work comp benefits to workers that contracted conjunctivitis in the eye. The court ruled the breakout was an occupational disease thus triggered coverage under the work comp policy (Bethlehem Steel Co. v Industrial Accident Commission, 21 Cal.2d 742). Though future lawsuits from a potential H1N1 breakout against business owners is still a slim probability, your business liability policy and work comp policy will be there to defend you and to pay if you are found liable. Make sure you discuss your coverages with your business insurance agent or broker prior to the "flu season". Until next time Be careful out there, and remember you beat risk by understanding your risk!

Work Comp now paying for weight loss surgery

2009-08-31T14:27:00.003-04:00

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It seems that in Oregon the State Supreme Court ordered the agency responsible for handling work comp in that state, SAIF Corp., the state chartered agency that oversees compensation insurance, to pay for gastric bypass surgery for an injured worker that needed to undergo knee replacement surgery. The worker in question injured his knee on the job some years before. At that time he filed for compensation and had knee surgery. Some years later he was working in a bakery and reinjured the same knee. During the time between his first knee surgery and reinjury to the same knee he gained some weight. This time the doctor advised him that before he could have the knee repaired he should undergo gastric bypass in order to ensure a successful procedure to the knee. The state court decided that this was all related to his injury and should be covered under workers compensation. The decision actually seems to make sense.