Struggling with Wellness Participation? Let the Games Begin!

Tony Curtis — Tue, 15 May 2012 16:04:00 GMT

We all know by now that wellness is the new catch phrase at just about every work site. It stands to reason since a healthier workplace is a more productive workplace. But many employers have run into a major stumbling block and that is wellness participation. Employers all over are looking for ways to engage their employees. There are contribution carrots that can be used as incentives and then there is the hammer approach of non-participation means higher contributions, or having to enroll in a lesser plan.

These measures are not having the desired outcome so there is a new approach that is gaining steam and that is competitive wellness programs. Think about it....the popularity of mobile games like Angry Birds proves that adults (and kids) are motivated by competition with themselves or others. Rewards for making progress and challenges to get to the next level keeps participants coming back for more - which is essential to wellness program success.

So let the games begin. The top five winning ways to help employees get their game on are:

Web Portals - An interactive web portal is essential and could serve as the hub of a wellness program.
Create Team Challenges - Whether it be weight loss challenges, walking steps, portal based wellness trivia, wellness recipe swaps, etc... people are encouraged by a team spirit. But even in a team environment the program needs to be able to set goals for not just the team but also the individual.
Inspire Through Words of Encouragement - Social media nowadays makes this an easier proposition then say 10 years ago. Through social media you can drive employees to the portal. You can ask them to visit the portal, remind them of health goals or tell them their team is depending on them.
Offer Virtual Social Support - Teams need a place to rally and what better place than right on the portal. All that is needed is a chat room or bulletin board to track individual and team goals / successes.
Meaningful Incentives - Incentives are not helpful in achieving participation if they are not meaningful to the employees. So take a survey of your employees and ask them what incentives will mean the most to them. It could be premium differentials, better benefits, cash, or PTO days, whatever (within reason) it takes to get that participation number up.

So if you are an employer and having challenges with increasing your wellness participation why not LET THE GAMES BEGIN!

Insurance is not a Four-Letter Word -- But Risk Is!

Karen Oxman — Wed, 09 May 2012 16:17:00 GMT

At lunch recently I was asking one of my favorite clients his opinion about the state of our country and the idea that manufacturing might be one of the best ways to help our economy recover. As we chatted about the big issues, such as the role of government in business, the lack of good talent coming into the manufacturing sector, unions, etc., he suggested that I should stick with what I know best for my blog.

He was right. We all have our opinions about what the problems are and why businesses are suffering, but ultimately, I can and should stay within my area of expertise, which is risk management and insurance, especially if I am going to write about it.

Perhaps there is even greater wisdom in his comment than I had first thought. If you have a small business, you can rail against the problems you face or you can make sure you are so efficient and effective that you are profitable, continue to provide jobs for your employees and become the engine that moves the economy forward.

So what does that have to do with risk management? Actually, quite a bit. It is not all about profit, but if you lose your focus because of some unforeseen risk, you could lose your ability to grow, or you might lose your best employees or you just might lose your business. The statistics bear this out. Only 50% of all businesses that have a large loss (and have insurance) will get back up and running.

Risk may not be avoidable, but it can be mitigated. It can be reduced, controlled or transferred.

That is where risk management and insurance come into the picture. You need to think about your risk of loss in four ways. You should:

R – Review and Analyze what your exposure is to damage, loss, catastrophes, claims, liability. In California, you have to think earthquakes, fires, litigation, employees.
I – Identify a strategy and a plan to reduce your risk of loss. This might entail calling on colleagues and outside experts for some help. Sometimes just walking around your facility and observing how your staff is functioning can be very revealing. Also, a committee of key employees can surface issues you have not thought of before.
S – Start now to put your plan into action with some deadlines for accountability purposes. Beware of assigning this to someone who already has a full plate. If someone does not “champion” this process, it will not get done.
K – Keep your eye on the prize and revisit your plan regularly to be sure you are on track.

Sounds easy, but it isn't. Whether it is safety or efficiency in production, HR issues, or cyber exposures, risk analysis and planning is well worth the investment in time and resources. It is the proactive approach to Risk Reduction. The ROI could mean the difference between success or failure and can keep you from using four letter words to describe your insurance and risk management program!

Dark Times Lie Ahead for Management Liability Insurance…

Jeanne Blasher — Thu, 03 May 2012 17:00:00 GMT

Unless you have been living under a rock over the past few years, you have probably heard or read about changes affecting Employment Practices Liability (EPL) insurance especially for companies domiciled in California. Most recently, the increase in Wage & Hour claims caused some carriers to either no longer offer this extension under their EPL policy forms or reduce the sub-limit they were providing and increase premiums and deductibles substantially. Given the claims activity surrounding Wage & Hour, adjustments to EPL terms and pricing was understandable and somewhat expected.

However, we are now seeing carriers increase rates, require higher deductibles and restrict coverage terms on Directors & Officers Liability (D&O) and Professional Liability/Errors and Omissions insurance products across the board and regardless of claims activity. Coverage extensions that were typically “thrown in” for no additional premium are now either unavailable or subject to pretty hefty additional premiums and quite a bit more underwriting information.

The bottom line is that a “smooth or slam-dunk renewal” is virtually unheard of these days and the prediction is that it is going to get a lot worse before it gets any better. A complete market search is required for every account and on some classes of business, only 1 or 2 carriers will even offer terms. Little negotiation takes place as the markets state from the onset that quoted terms are final and all that is available. Incumbent carriers would rather lose a renewal then accept a cut in rate or increased deductible.

Given the aforementioned recent developments, it is imperative to start the renewal process as early as possible in order to allow ample time for marketing. Attempt to stay on top of coverage concerns and make sure you understand how the insurance carriers on your programs are responding. Communication with your broker is crucial. While no one likes to receive bad news, it is worse when the bad news comes as a complete surprise and at the eleventh hour. Don’t get blindsided!

Managing Insurance Program Costs through Retrospective Rating Plans

Deborah Kerr-Orlik — Tue, 01 May 2012 18:45:00 GMT

“Retros” and are gaining in popularity as workers compensation premiums increase. Since they involve an element of self-insurance, considerable savings are possible for organizations that can control their workers compensation losses. The downside is increased cost should the insured experience worse than anticipated losses. More Risk = More Potential Reward.

The word “retro” is insurance lingo for a “Retrospectively Rated Plan”. As the name implies, the final premium is determined retrospectively – after the policy expires. Final premium is developed using a relatively simple formula.

The typical RETRO formula is:

Insured’s cost = [Basic Premium + (Incurred Loss x LCF)] x Tax Multiplier subject to plan Min and Max

Basic Premium - insurance company general expenses. The basic is normally between 20% and 45% of standard premium.

Incurred Loss - the total incurred loss and expense shown on the loss runs. Retros are normally calculated three times; Generally at 18, 30 and 42 months after inception of the policy. A premium true-up is done at each calculation with premium charged or returned as the calculation indicates.

LCF – Loss Conversion Factor, typically 10%. This charge is for claims handling and is assessed against incurred losses.

TM – Tax Multiplier, this factor is used to collect premium tax. It varies by state but is usually 3% to 5% applied to total costs.

Minimum – minimum premium payable regardless of losses. The minimum is normally 30% to 50% of premium.

Maximum – maximum premium payable regardless of losses. This feature protects the insured by limiting the total payable. Even with a bad year of heavy losses, the most the insured will pay is limited to the retro maximum.

FOR AN ILLUSTRATION OF HOW A RETRO WORKS, PLEASE SEE FOLLOWING PAGE

EXAMPLE:

Indicated Premium - $650,000 (after experience modification and other rating factors)

Basic Factor - 25%

Loss Limit - $150,000(Single losses are limited for calculation purposes)

Loss Conversion Factor - 1.10

Tax Multiplier - 1.035

Minimum - 40% of Premium

Maximum - 150% of Premium

The table below shows the Insured’s Cost at various loss levels. As you can see, the break even point is $423,199 of limited loss. Less than that number will result in savings. More will result in additional cost.

Things to Consider:

Can you afford to pay if you have higher than expected losses?
Are you confident in your ability to reduce loss frequency and severity?

The Power of Action vs. Talking

Lionel McCray — Wed, 25 Apr 2012 18:01:00 GMT

Everyday in business and personal life, opportunities present themselves. Oftentimes, they present themselves as an obstacle. Just think of market changes, changes in consumer demographics, raw product scarcity, government regulation, weather, cost of fuel, etc.

For every challenge there are four basic responses:

1. The Optimist - They are so excited! They can't wait to make a plan for how to take advantage of the opportunity. They want to talk to everyone about the wonderful opportunity and get buy-in and agreement from everyone they meet. The opportunity is so large the optimist needs to slice and dice every conceivable piece of data, research every player. The amount of time they spend talking about being excited about it, oftentimes leads to being slow to the marketplace.

2. The Pessimist - They are too smart to be excited. Please note that there are no exclamation points in this paragraph. The pessimist will take every opportunity and turn it into another reason to validate their negative outlook. Much time will be spent talking about the Obstacle (NOT OPPORTUNITY). Like the Optimist, it is important for the Pessimist to have others validate their view. With any luck, the whole thing will blow over without anything being done and the Pessimist will once again be smug in their knowledge that everything stinks (business, people, government, etc.).

3. The Realist - See number 2 above. All Pessimists think they are realists.

4. The Opportunist - They are almost as excited as the optimist. They can see the challenge for what it really is; an opportunity. They are smart like the Pessimist, but see the real measure of intelligence as being able to solve the challenge to be able to reap the rewards of the opportunity. They have to think creatively to solve issues that others are only talking about. They do this quickly, in order to take advantage of the opportunity before all the optimists get to market.

Along with acting quickly comes the risk that the Opportunist will fail. That is a given. And the change that they might succeed mightily! Let's think of a few Opportunitsts:

Southwest Airlines
Berkshire Hathaway
Apple
and a thousand others

As a leader it's your job to choose and develop your firm's mindset. You can choose giddy and slow, you can be grumpy, or you can be fast, positive and action oriented.

5 Recruiting Tips! Get Creative to Get Talent

Olene Williams — Thu, 19 Apr 2012 21:34:00 GMT

Growing up, I remember watching my Dad leave for work at the crack of dawn every day. He would come home late, exhausted but never had a negative thing to say about his job. He was a loyal employee and to him that was the most important part of working. Loyalty is not something we often see with today’s generation.

Something was missed in translation during the upbringing. It’s now 2012 and the most important reason to stay at a job in this economy is the pay; and with your competitors all looking for the same top talent, you are sure to fight tooth and nail. You increase your offer, include other benefits and vacation options and while this competitive rivalry is going on, you are losing money to lost productivity and replacement costs.

Knowing that loyalty is no longer a priority with today’s candidate market, you have to change your style to attract the best talent. It’s time to get creative with recruiting and retention efforts! Here a some recruiting tips to get started:

Tip #1 – Lead the Social Media Train!

A strong social media presence is a powerful tool for recruiting this younger generation. These young college graduates come from the world of the internet. The best place to find and connect with them is through social media. Create a company page on Facebook, LinkedIn, Twitter and Yelp. New recruits will be scouring the internet for information and reviews on your company to see if it is a fit for them. Be sure to update these sites on a regular basis. Your viewers will lose interest if they come to your site today and your last update was July 2011!

Tip #2 – Tap into Your #1 Resource, Your Employees!

Create a referral incentive program for your employees. Not only will your current employees be happy but you will most likely get a great candidate. People are not likely to refer someone who will do a mediocre job because their reputation is now on the line and no one likes to be embarrassed.

Tip #3 – Don’t Forget the Thank You

Consider offering small spot bonuses or any type of reward to employees who go above and beyond. Doing something like this frequently will help boost dedication and loyalty. Employees who feel appreciated on a regular basis will be sure to give your company great reviews and referrals.

Tip #4 – Gather Feedback

Why would someone want to work for your company? A great way to find your answer is to survey your current employees. Once a year, provide an employee satisfaction survey to learn what they find the most appealing about your organization and why someone else would want to work for your company. Quotes from your current employees can be a powerful tool to spark the interest of a curious candidate.

Tip #5 – Keep an Eye on the Competition

Let’s face it; the world today is lived through electronic devices. Your competitors are most likely somewhere in the social media world. Monitoring their on line presence will not only help you beef up your presence but it will help you know what you’re going up against. Also keep in mind, if your competitors are actively using social media and you’re not, they are reaching an audience that you are missing!

Video Game Developers E&O: It doesn’t stand for just Elves and Orcs

Sara Owens — Tue, 17 Apr 2012 16:50:00 GMT

One of the most important things to look at when starting a video game development company is insurance. There are many different types of insurance a game developer needs, but the one I get asked questions about the most is Errors and Omissions insurance.

What is Errors and Omissions insurance and why does a video game developer need it?

Let’s look at this in two parts.

1. What is Errors and Omissions?

Errors and Omissions Insurance can also be referred to as professional insurance. Errors and Omissions is meant to cover a mistake that is made on a professional level that would have a financial impact. As a Game Developer it can be difficult to find an errors and omissions insurance policy to properly cover your unique business operations. Not every insurance company likes to insure game developers and it is crucial to make sure you have an insurance policy that is designed for a game development company.

2. Why do you need Errors and Omissions?

Let’s look at a possible claim example.

If you are working on a concept for a game and someone comes along and says your game concept was their idea, you could be sued for stealing that idea. Even if you did not infringe or steal someone else’s idea you are responsible to defend the accusation that has been brought upon you. Defending that sort of claim could be very costly in many ways. You could incur tremendous legal fees for your defense, damage to your reputation, have to spend a significant amount of time away from your studio to get the situation under control, or worst of all, go out of business completely if you do not have enough resources to defend your claim. Having the proper Errors and Omissions policy would help you respond to this claims scenario and minimize your financial and operational losses.

Other possible issues and claims that the proper Errors and Omissions policy would respond to include, Breach of Contract Coverage, Intellectual Property Rights Infringement and Source Code issues, Defense Costs, Computer Virus and Hacking Attacks (intentional and unintentional, Third Party Liability, Loss Mitigation, Defense Cost and Settlement Costs, Copy Right, Trademark, and Trade Dress infringement accusations.

For more information on best practices for starting a Video Development Game Company check out the American Bar Association's Legal Guide to Video Game Development.

Good News for Employers - The "Brinker Decision"

Lionel McCray — Fri, 13 Apr 2012 22:15:00 GMT

Finally some good news for employers from the California Supreme Court!

On April 12^th, 2012 the California Supreme Court ruled that employers ARE NOT responsible for policing employees to ensure that no work is done during scheduled breaks. The “Brinker Decision” finally gives clarity and relief on an issue that has flooded the courts with mountains of lawsuits and caused scheduling nightmares for restaurants and other employers for years.

In addition to not having to police breaks, it also grants flexibility to employers in scheduling breaks and mealtimes. This was a huge issue facing industry as it created scheduling conflicts that made it difficult to operate.

Now the really great news: IT’S RETROACTIVE! This decision will apply to pending lawsuits on the issue and will provide great relief to businesses operating in California.

If you would like to read more, please click here for a much more detailed explanation.

GNW Evergreen is not engaged in the practice of Law, so we advise you strongly to confer with qualified legal counsel to discuss the ramifications of this law on your firm.

What's that Fee?

Lionel McCray — Thu, 12 Apr 2012 21:46:00 GMT

A California Non-Profit guide to understanding Insurance Broker Compensation.

When you pay for your insurance program, do you also pay a fee? WHY?

FACT: The vast majority of insurance policy premiums include broker commissions. Most policies pay 10-15% commission to the placing broker. Sometimes they are a little higher, sometimes they are a little lower. That is how most brokers get paid.

Occasionally, insurance policies are issued without commission. In the industry that is referred to as “net” or “net of commission”. In this instance, the broker will need to charge a fee in order to get paid for the work they performed on your account.

BUT, sometimes there is a fee charged IN ADDITION TO COMMISSION. When that happens, you have a right to know why. What services is your broker providing that are so above and beyond the normal scope of engagement that additional compensation is warranted? Get specifics.

IF YOU ARE CHARGED A FEE DO THE FOLLOWING:

Ask for a summary of compensation from your broker to include all commissions and fees. You have the right to transparency. It is your money.
If you find that you are being charged fees in addition to commissions, ask for clarification from your broker. Have them specifically outline what services they provide to you that are not adequately compensated via the commissions.
Confer with another trusted insurance broker to review the scope of services provided along with their insight on fair compensation for those services.

There are certainly circumstances that are unique that may justify additional compensation. Just make sure you are not paying extra for standard services.

California and the Federal Patient Protection and Affordable Care Act

Tony Curtis — Wed, 11 Apr 2012 17:38:00 GMT

We’ve all heard about the changes that have happened or are about to happen to our Nation’s health care due to health care reform. But as Californians, how are we affected by these new laws?

I’ve done some digging around and from all I’ve read and heard, California lawmakers are focusing initially on 4 major tasks:

Improving Access to Private Health Insurance for persons with pre-existing medical conditions.
Improving the Quality and Security of Private Health Insurance by enforcing new Federal Insurance Laws.
Developing a Health Benefit Exchange to make it easier to shop for and buy insurance.
Focusing on Prevention and Wellness.

Today I’ll dig deeper into focus area #1.

Improving Access to Private Health Insurance for persons with pre-existing medical conditions:

Under a health plan, pre-existing medical conditions such as high blood pressure, heart disease, cancer, type 2 diabetes and many other conditions; could cause you to be denied coverage, forced to go through a waiting period or be charged higher premiums and out-of-pocket expenses. Health care reform has now provided some relief for those with pre-existing conditions battling for coverage.

Authorized by the Patient Protection and Affordable Care Act, the federally-funded Pre-Existing Condition Insurance Plan (PCIP) is designed to provide access to more affordable coverage for people with pre-existing conditions. Depending on your age and where you live, costs will range from $127 to $1,003 per month. Applications are available now. But in order for you to qualify for this program you must be without insurance for six months prior to enrollment. For more information visit the Pre-Existing Condition Insurance Plan (PCIP) website.

Check in later for next blog focusing on Improving the Quality and Security of Private Health Insurance!

We Write "This" but We Really Mean "That" (Entertainment Insurance)

Peter Tempkins — Thu, 05 Apr 2012 16:22:00 GMT

In this day and age where lawsuits are getting easier and easier to file and plaintiffs are looking for someone to be responsible for everything, how easy it is to take words in a contract or rider and hang a defendant with them?

How many times has a band put in a contract or rider that they are doing pyro only to find out that the band is bringing in a pyro company. So the liability if something goes wrong with the pyro belongs on the pyro company first. If the bands “team” was playing it smart they also have a contract with indemnification and a certificate of insurance from the pyro company in favor of the band.

I was reading a rider recently and there was a section in there that stated once the production manager was on site, the PM was in charge of the site. What the client really meant was once the PM was there, he would layout where the mobile stages went, where the selling vendors would be and where food vendors go.

With all that has happened in the past year there have been many conversations on who gets to call a show in the case of severe weather. Is it the promoter, the band, the tour manager, the production manager or the local authorities? Some production managers say they should, some promoters say they get the call. My learned opinion is if the band “team” feels it is unsafe for the band then they make the call for the band. If the promoter or local authorities feel it is unsafe for the public then they make the call. Ah but what is written in the contract? Some riders and contracts use words, as an example: “if the band feels it is unsafe then they can delay or cancel the show”. Does this mean the band can cancel the “event” or does it mean if the band feels it is unsafe they are not going out on stage? I am sure if you ask the band they will say the later but if something happens and it goes to a lawsuit guess what. We wrote "This" but We Really meant "That".

I recently heard of a deposition where the General Manager of a venue testified that once the tour was on site the tour’s security was in charge of the venue. Trust me when I say the President of the U.S. was not the tour so the Secret Service was not in charge of the building. The tours rider was actually very clear on security. It said tour security wants to meet with building security and here are some suggestions. The good news is the contract and rider will help but the bad news is now the tour security people have to do depositions. On a side note I wish I was there because I would have asked the clients attorney to ask the follow up question “I am sorry but did you just say that when a tour comes into your venue you let their security people take charge? I would bet the GM would change their story.

I know people like to look for the good in people but if there is a way to win money with half truths and innuendo’s then why does the truth matter.

I am not saying that injured people should not file lawsuits or be compensated but let the suits be truthful and the compensation be fair and let us write what we mean and if we aren’t sure, maybe ask.

Don't Get Bitten by the COBRA!

Justin Turner — Tue, 03 Apr 2012 17:06:00 GMT

Consolidated Omnibus Budget Reconciliation Act of 1985, more commonly known as COBRA, is one of the many areas of compliance your HR department must appropriately manage. But what if they don't? What if your internal efforts of COBRA administration fall short among the myriad of benefit compliance issues? HIPPA Regulations, ERISA Compliance, Sec. 125 Documents and the new ACA Preparation; COBRA is one more law that exposes your company to heavy penalties and fines. So, how much could it cost you?

Well, for COBRA noncompliance, which is enforced by the U.S. Department of Labor, the Department of Health and Human Services and let's not forget the Internal Revenue Service (yes the IRS) fines are as follows:

$100 per day per employee
or $200 per day if the employee and spouse or dependent is affected
$110 per day under ERISA for statutory penalties
Civil Lawsuits
Attorneys' fees and interest

In addition, your company could be subject to a separate COBRA Audit from the IRS and face potential fines ranging from $2,500 to the upward amount of $500,000. Ouch!

So what are your responsibilities and how do you prevent this? Proper notification and communication within the required time frames to your employees is the foundation for COBRA compliance. You must provide written notification to all covered employees and their dependents about their COBRA rights.

What notices must be provided?

General (or Initial) Notice,
Election Notice,
Notice of Unavailability of COBRA Continuation Coverage, and
Notice of Early Termination of COBRA Continuation Coverage and Conversion Rights.

COBRA Administration is not something to fall short on. Knowing your responsibilities as the employer and following the notification guidelines will help you stay in compliance and avoid the costly COBRA Bite!

5 Ways to Keep an Aging Workforce Safe

Karen Oxman — Thu, 29 Mar 2012 18:13:00 GMT

I don’t know about you, but I seem to feel older every day, and I'm starting to notice some changes in my own abilities. In today's economy, many employees are continuing to work well past their expected retirement age. There is a growing concern for the safety of this population while on the job.

A good start to tackle this emerging problem is by raising awareness. Considering and addressing the challenges associated with aging workers can help to ensure safety in the workplace. It can also encourage mentoring and cooperation among the three or four generations you now have at your workplace.

Exercise, who knew? Oh, that’s right, we have heard for years how important exercise is for all of us. Encouraging all employees to participate in an exercise program can potentially reduce the risk of an injury on the job. How about a walking program at lunch. Nothing too strenuous, but enough to get moving. At our office we even lay out walking routes that cover 1-1/2 miles. When employees complete a route, they get a ticket for a drawing each month with a monetary prize.
Rotate work assignments so older employees have less exposure to repetitive motion risks. There is another benefit to this. Rotating routines periodically can also improve employee morale by avoiding boredom and cross train workers. Probably not a bad idea for all employees.
If possible, eliminate heavy lifts, long reaches and elevated work from ladders. This is sound advice for any age. Whenever there is lifting or reaching, see if there are alternatives or tools that can reduce the load. This can save muscles and joints for the long haul as well as prevent injuries.
A job safety analysis and an ergonomic assessment can be used to identify possible improvements to a work environment. One ergonomic specialist, Dr. Jeffrey Tucker www.drjeffreytucker.com focuses on assessing the physical fitness of an employee based on 7 easy moves. From the results he can tell the likelihood that the employee will suffer an injury. There is a point system and it can be used as a platform to encourage everyone to improve their physical fitness.
Improve lighting and color contrast around the workplace as vision is typically compromised with age.

There is a connection between increased healing time and age, so in the event that one of your aging workers does get injured, remember that it may take the employee longer to heal than a younger worker.

Ultimately, make safety a priority. Senior management must be visible in the safety effort and must support improvement. And that is not only good for the aging workforce, it is good for all employees!

What's in a name? (Named Insured)

Jeff Newman — Wed, 28 Mar 2012 15:47:00 GMT

Named Insured? Additional Insured? Additional Named Insured? Aren’t they the same thing? Absolutely not! In fact, relying on them being the same thing can be the difference between having coverage for a loss and not being covered at all. And quite often, contracts misuse these terms which can cause problems. So, let’s walk through the differences:

Named Insured

A Named Insured quite simply is an entity with whom an insurance contract is made, and whose interests are protected under the policy. The First Named Insured is the entity that the insurance company’s obligations will be directed to (ie. notices of cancellation or non-renewal). Also, this entity has to comply with all the duties and obligations outlined in the policy.

Additional Named Insured

Additional Named Insureds will normally include those entities whose operations are closely tied to the first named insured. Entities that are additional named insured in many circumstances will also have common ownership amongst the different entities. These entities are given the same coverage for their operations as the first named insured. These entities do not have the same privileges and obligations as the first named insured such as the right to cancel coverage or receive notice of cancellation. We will often see language in a contract that asks our insured to name a vendor as an additional named insured. This is not something that can be done nor should the named insured want to do it. That brings us to our last term…

Additional Insured

Additional insureds are typically required when one entity has agreed to indemnify another party in a contract. Examples would be a property lease, or a vendor agreement. The company that is hiring a vendor to do work for them will want to be protected for the liability associated with that vendor’s work. So, being named as an additional insured will provide that protection with direct rights under the named insured vendor’s policy. But the important thing to remember is that the company that is hiring another party (company A) is typically only protected for something that arises out of the negligence of that vendor’s (company B) operations. If there is a claim that results from the negligence of Company A, being an additional insured is not going to protect them. Their own insurance would however afford that protection. Too often I hear about an entity thinking that they don’t need coverage because they are named as an additional insured on their vendor’s insurance. This is a very risky way to do business because the loss that occurs may not be the negligence of the vendor and therefore the vendor’s insurance will have no obligation to offer any coverage.

So, when looking at your contracts, make sure you are using the correct terminology. There actually is quite a difference in a name!

What Type of Long Term Care (LTC) Policy is right for you?

William Eicher — Thu, 22 Mar 2012 17:03:00 GMT

The most popular type of LTC policy is a stand-alone, comprehensive policy. These plans look to cover all long-term care services and are usually purchased with monthly, quarterly, semiannual or annual premiums. There are abbreviated payment options (policies fully paid up after 20 years, 10 years or 1 year of payments). Comprehensive stand-alone policies are very much like the typical modern health insurance policy. They try to cover as many different care alternatives as possible.

There are many ways LTC coverage is packaged. One way is to offer LTC as a rider to a cash value life insurance policy. The policy represents 2 separate coverages and the premium is split up to pay for both. One disadvantage of these policies is that many do not need the additional life insurance.

Another way to package LTC insurance is as an "either/or" feature in life insurance. If the insured needs long-term care before death, benefits are paid instead of life insurance. If all benefits are paid before death, the policy expires. Any benefits not used result in a reduced pay-out at death. One disadvantage of these policies is that underwriting for life insurance can be stricter than LTC insurance. Many who qualify for LTC insurance would be denied coverage for life insurance.

A third way to package LTC insurance is to integrate it into a single premium deferred annuity. This usually requires a lump sum of $50,000 or more. Part of the earnings from the annuity will pay for the LTC insurance. Unfortunately most of us do not have $50,000 or more accessible for such a policy.

A fourth way to package LTC insurance is combined with a disability income policy. Prior to age 65, the policy can only be used for disability income. Premiums paid after age 65 provide long-term care coverage. Premiums for such a policy will be higher than a stand-alone disability policy since long-term care coverage requires a portion of every premium be set aside.

Everyone’s personal situation is different. It is important to sit with a qualified LTC expert to review your needs and to develop a personalized solution.

Are you getting brown M & M's in your Risk Management Services?

Lionel McCray — Tue, 20 Mar 2012 18:13:00 GMT

The rock group Van Halen once cancelled a show because of brown M & M's. It's true! The band had a clause in their contract that required a bowl of M & M's in their dressing room, but there must be NO brown M & M's. If the dreaded brown candy was found, the band could cancel the show, AND still receive full payment. Not only could they cancel a show, THEY DID!!!

Was this just a case of high maintenance rock stars? Lead singer David Lee Roth was asked about it, and his response was thought provoking for me. He said the contract was written to establish many important safety and security requirements to protect the band and its equipment. The band felt that if a venue failed to pick up on the M & M's requirement, they probably hadn't read the rest of the contract, which could result in an injury to a crew member or damage to their equipment.

Think of your broker as a Rock n Roll Venue. Their job is to make sure that they understand and address all aspects of your Total Cost of Risk or TCOR. When your broker does their job right, your "show" goes off without a hitch. If they don't, you may hit a sour note.

Attention to the details is what Risk Management Consulting is all about. If you are getting brown M & M's in your bowl, perhaps you need to book a new venue.

Workers Compensation Dividend Plans

Deborah Kerr-Orlik — Thu, 15 Mar 2012 15:51:00 GMT

What loss sensitive plan is best for your organization? No one answer is right for every business. One way to dip your toe in the loss sensitive arena is to obtain a policy with a dividend plan. The most common type of dividend plan uses the following formula:

Dividend = Earned Premium – [Retention + (Incurred Loss X LCF)]

Definitions:

Dividend: Amount of money returned to the client for achieving losses below a certain threshold

Earned Premium: Final audited premium

Retention: Insurance company expenses. This is typically 25% to 50% of premium.

Incurred loss: Total paid and reserve loss plus allocated legal expense.

Loss Conversion Factor (LCF): Factor applied to losses to cover the claims adjusting expense. The normal LCF is 1.10.

There are many variations, but a typical dividend plan will have one calculation to determine if a dividend is to be paid. The timing of the calculation varies as well but is usually between 6 and 18 months after expiration of the policy.

Sample dividend calculation:

Assumptions:

Audited Premium = $100,000
Retention = 35% of Audited Premium
Incurred Losses at 12 months following policy expiration = $50,000
LCF = 1.10

Dividend = $100,000 – [$100,000 X .35 + ($50,000 X 1.1)]

Dividend = $100,000 – [$35,000 + $55,000]

Dividend = $100,000 - $90,000 = $10,000

Dividend plans can only return premium! There is no possibility of paying more than the audited premium regardless of how high incurred losses are. There is no downside to having a dividend plan. However, dividends cannot be guaranteed! The insurance carrier can decide to withhold dividends if they choose.

Transferring Your Risk. Is Contractual Indemnity Enough?

Robert Di Paolo — Tue, 13 Mar 2012 17:14:00 GMT

When able to do so, transferring risk to others can be a successful strategy to protect one’s business and bottom line. However, is the transfer via contractual indemnity provisions enough? Well, it’s not. It’s merely the first step.

When attempting to push risk to third parties and to gain protection from them, with the help of an experienced attorney, gaining broad indemnification is the first part of three key elements that offer protection of greater substance.

The indemnification provision must be accompanied by a well constructed insurance requirement section. This section must outline the structure of insurance that the other party must maintain including Additional Insured endorsement requirements and waivers of subrogation. The insurance requirement section should be constructed to dovetail with the indemnification and hold harmless provisions of the contract so as to serve as a funding mechanism should a claim occur from which you hope to be protected.

Even if the insurance requirement is appropriately satisfied, it’s still not enough. Indemnification provisions within contracts are typically much broader in scope than the coverage which the insurance policies provide. So if a claim occurs outside the scope of insurance coverage and the indemnifier remains responsible to protect you contractually, hopefully they have the wherewithal to fulfill their obligation.

So, this brings us to the third key element which involves an analysis of the indemnifier’s financial stability and their ability to protect you in the absence of insurance. The question is, do they have the money, capital, reserve or assets to afford you the protection they have obligated themselves to?

So, at minimum, without these three key elements; indemnification, insurance and a financially stable and capable indemnifier, are you really transferring your risk and protecting your company’s bottom line?

Cal OSHA Recordkeeping - Are you ready for a visit?

Olene Williams — Wed, 07 Mar 2012 00:03:00 GMT

It’s OSHA season! You just finished posting your logs on 2/1 and you won’t take them down until 4/30. Sometimes the OSHA season feels like an unwanted holiday. And much like Santa Claus…OSHA will be checking the list twice!

Just how accurate are your OSHA logs? Are you one of those companies who just checked every incident as other recordable cases or did you make sure all the information matches the incident report? Did you calculate out your days away from work and total hours worked or did you just write down your best guesstimate? As the business owner you need to protect your company from any unknown expenses, and that includes OSHA fines! And yes OSHA will fine you for not keeping accurate records. Even if you fill out your OSHA log, failing to post it can result in a fine up to $10,000!

Here is a great example to learn from: US Labor Department’s OSHA fines Lowe’s $182,000 for willful and repeat recordkeeping violations. $160,000 of this fine was simply for not correctly classifying injuries and not correctly recording the number of days a worker was a way from work.

These amounts are scary, for any business owner in our economy. Are you prepared to face a fine of this magnitude?

Now that you are aware of the risk, plan to be proactive and avoid it with these helpful tips:

Read through the OSHA Posting Requirements and make sure you understand them.
Identify an OSHA Team for your organization.
Determine how your logs will be kept. (online system, excel spreadsheet, etc…)
Make sure you have a backup of your OSHA files. If you have everything on paper…scan it in to a computer!
With your team, decide how you will write your OSHA incident descriptions. Remember they need to be clear and easy for an outsider to read and understand what happened. Try not to use your own company jargon.
Stay organized. If you have more than one location make sure you set up different logs.
Regularly maintain your OSHA logs. Do not wait until January 31^st to put your log together. Remember OSHA can come in at anytime and request to see your logs.
Always keep 5 years of OSHA logs on hand and ready to provide to an OSHA inspector.
Have someone check your work. Better safe than sorry, ask your broker to review your Cal OSHA log and make sure you didn’t miss any steps.
If you rely solely on your HR Manager or Safety Manager to complete your log, GET INVOLVED! People make mistakes and mistakes could mean a hefty fine.

There are many reasons why OSHA might come knocking at the door. It could be a random selection, it could be due to an accident that occurred, or maybe an employee gave them a call. But the reason for the visit won’t matter when the inspector is standing in front of you. For this OSHA season, stay off the naughty list and make sure your logs are accurate and up to date!

It's Time for Sexual Harassment Training!

Olene Williams — Thu, 01 Mar 2012 16:46:00 GMT

As I was walking through downtown Los Angeles over the weekend, I noticed a lot of fashion trends from previous decades making a comeback. Mullets, bell bottoms, legwarmers, neon jeans. And it got me thinking….do certain “trends” from previous times come back in the business world? Back in the 90’s there was a huge wave of sexual harassment claims and so far in the 2000’s we have certainly been hit with a comeback averaging 15,549 sexual harassment claims per year. So how do we stop this trendy comeback going forward?

Let’s take a look at a couple of cases.

Do you remember the 1998 Sexual Harassment Case, Burlington Industries v. Kimberly Ellerth? This was the case of someone who was an “emotional and mental victim of sexual harassment by her supervisor.” In this case the Supreme Court ruled “that workers can still bring sexual harassment cases against employers even if the harassment is not supported and the employee’s career is never hurt.” What did this case mean for employers? The Supreme Court made it clear that as the employer you are held liable for a supervisor’s harassment.

In 2011, a record-breaking $95million was awarded to a former employee of Aaron’s Inc. The plaintiff said an Aaron’s store manager had been sexually harassing her for a year. Although she reported it to a supervisor, the employer never took any action!

So what can you do to protect your company from the acts of your supervisors?

Regularly provide sexual harassment training for your employees! And always document, document, document!

The California Law AB 1825 requires you to train your managers every two years, but is that really enough? Will the sexual harassment ab 1825 training stay top of mind for your supervisor team for 2 years? What about your employees? Do you have a program in place to train your supervisors and employees so that there is a mutual understanding of what sexual harassment is?

In addition to your AB 1825 requirements, here are some helpful tips to keep your company protected:

Implement a sexual harassment training program for both your supervisor team and your employees.
Maintain a schedule to make sure that you are training your staff at least once a year.
Have your staff sign in for the trainings and keep a documented file of the attendees and the training program.
Try to make your training sessions as interactive as possible. Add in some incentive, so that your staff will remember the content of the trainings.

Educating your staff and supervisor team is the most important step you can take to protect your company from this sexual harassment comeback. We don’t need to repeat trends, we can set new ones! Train your company and leave the risk of sexual harassment claims hanging in the back of the closet with the MC Hammer pants.

Group Long Term Care – Where do we go now?

William Eicher — Tue, 28 Feb 2012 16:55:00 GMT

Long Term Care polices (LTC) have been around in some form or fashion since the early1980’s. At its peak in 1989, there were over 140 insurance companies offering long term care policies. UNUM, on February 7, announced that they are withdrawing sales of any new LTC policies. There are now only a handful of companies representing over 80% of the market share of LTC policies and it looks like the market will be shrinking even more.

So why are so many companies getting out of a market that seemed to be the hottest item since sliced bread?

Interest rates have a huge impact on the pricing and profitability of LTC plans. The insurance company is dependent on interest income generated from the premiums paid now to pay out claims in the future. Interest rates are at an all time low.
Most companies are reporting an underwriting loss and high overhead
Although, LTC sales have increased year over year the projected “explosion” of LTC sales never materialized
Individual underwriting is very intensive and many are denied coverage

LTC remains a viable protection for the insured and probably more important the children or loved ones that would need to pay for or provide the care if one needs long term care. While there are few choices of carriers there are several that are financial stable and at least at this point, committed to the product.

When choosing a LTC carrier be sure to look closely at:

Their financial strength
Commitment to the market
Rate stability

Come back to check out my next blog! We will look at the different types of plans and features.

Optimizing Your Opportunity Cost

Justin Turner — Fri, 24 Feb 2012 00:40:00 GMT

With the cost of Employee Benefits expected to increase 5.4% in 2012, many employers are scouring the landscape for answers to reduce health insurance cost. Year after year, cuts in employer contributions, benefit options and employees facing rising out-of-pocket health expenses have brought many U.S. employers to a complex dilemma: do you continue to invest in your employee benefits plan or do you reduce or eliminate these benefit offerings?...

Optimizing your Opportunity Cost.

Opportunity cost? Economics defines this as the cost and value of an activity versus that of its alternative. Basically, how is one choice more valuable than the other choice? For CFOs and Human Resource departments today, this choice is, do you invest in a comprehensive employee benefit program (and to what extent) or continue this annual cycle of transferring more and more expense to an already demoralized workforce?

Think of it like this, if your company were to reduce the overall benefit offerings to save money in the short term, this might result in losing several key employees. How would this affect your company’s production? On the other hand, your organization chooses to invest in a richer benefit plan, yes costing more in annual premiums, but now you’ve kept those key employees and possibly attracted another talented employee. Now i'll ask again, how would this affect your production? In a 2011 study by MetLife, 71% of employees surveyed, attested to the benefits offerings being the reason for joining their current employment. And for those already employed, 82% say that their benefits package is the reason they stay. So, aside from monetary compensation, it’s no surprise why employers continue to make the choice to spend big bucks on employee benefits.

How do you Optimize your Opportunity Cost of an already costly employee benefits program that is so critical in “attracting and retaining” quality talent?

A thorough Market Analysis is a good place to start. Understanding trends in health care cost and the value of each dollar spent is the key to laying the groundwork for a favorable ROI. New plan options and designs, including funding options like HSA’s and HRA’s are always wise considerations to make when attempting to stretch every company dollar. Reviewing current industry benchmarking data is also important when marketing a competitive benefits program. In other words, know what your options are and what your competition has to offer.

Along with the major budgetary decisions that directly affect the overall compensation package of your employees, continued follow-through and a pro-active employee benefits administration will have a great impact on your organization.

Food Vs Indemnification: Entertainment Insurance

Peter Tempkins — Tue, 21 Feb 2012 18:02:00 GMT

I always find it interesting that when I read band riders often the band has paragraph upon paragraph for food they want or do not want and sometimes nothing about indemnification or insurance.

I can surely understand them asking for their favorite beer (I do not drink beer) or vodka (my favorite is Tito’s) or asking not to have brown M&M’s (is that her clothes or is she really naked??) or having the cheese in slices or cubes (depends if you are snacking or putting it on a sandwich). But no insurance or indemnification?

If something goes wrong, the beer, vodka or cheese is not going to protect the band if they get sued for something that is not their responsibility. While the food is “used” every night (or is it), the indemnification by the promoter may not be used but it is surely needed.

Some bands think that if the promoter has insurance then they are protected. Not true. Some bands think it will never happen to us. It does. Some bands think what can they get from us? Seriously? How about your brand, your equipment or your income. Some bands think, “Why would our fans that love us, sue us”. Think of the attorney who says “they have money, they are rock stars, they are rich, and it will not hurt them” …and now that fan thinks they may have hit the lottery.

Not too long ago a band got sued by fan that got a scratch when her arm got pinched in the barricade. The band sent her off to the hospital, took care of her medical bills and she got to hang with band for the rest of that night and the next two days (yes multiple shows same venue). Boom! A few months later the lawsuit came in. Yes she won money. I am sure she still loves the band and I am sure the money helps. By the way, they were my client, and I had them covered with their own insurance but you guessed it no indemnification from the promoter. So the cost of the claim went on their policy. By the way they like sliced Gouda and all M&M colors are welcome.

So the next time you are thinking about food or drink and how much fun they can have with the rider, spend a little time on insurance and indemnification. It may mean the difference between picking your cheese or having to rely on government cheese or worse giving up the dream.

Workers Compensation Trends

Lionel McCray — Fri, 17 Feb 2012 00:46:00 GMT

Guess what happens when insurance companies lose money? You know the answer, they increase premiums. Workers Compensation carriers are going into their 4^th consecutive unprofitable year. The average insurer is spending $1.25 for every dollar of premium received. Expect substantial premium increases in California Workers Compensation ahead.

Potential negative underwriting and pricing actions are concerning enough by themselves. But they are only half of the picture. Just as important is the Experience Modification Factor, which can dramatically increase the actual premium paid. When carrier loss ratios are in the unprofitable range, it is obvious that many employers will also have poor loss histories as compared to their premiums paid. This will push their modifier higher. That modifier sticks with you for several years, penalizing you for your prior losses.

This is an example of what a change of Experience Modifier and Underwriter pricing can have on your policy, even if the base rate is not changed.

What factors are driving the poor results?

-Average costs of an indemnity claim have risen 35% from 2003 ($61,664 vs. $45,642)

-Average Medical costs have increased 63% since 2003 ($42,613 vs. $26,108)

What can you do?

1. Actively work to prevent injury and illness in your workforce with a joint safety/wellness program. Obesity, smoking and diabetes dramatically increase the costs of work comp claims.

2. Demand consistent, aggressive claims management practices. If there is an open claim you should know why, and what steps are being taken to close it.

IIPP: Old Fashioned or State of the Art?

Karen Oxman — Thu, 16 Feb 2012 18:26:00 GMT

What is an Injury & Illness Prevention Program (IIPP)?

An Injury & Illness Prevention Program is a mandated Safety program that requires all companies with employees to have and use an IIPP. In 1991 California mandated these programs and the data shows that five years after this requirement became law, California had a net decrease in injuries and illnesses of 19 percent.

According to a recent OSHA White Paper, “Injury & Illness Prevention Programs” published in January 2012, “an injury & illness prevention program is a proactive process to help employers find and fix workplace hazards before workers are hurt. In fact, not only do these programs work to reduce workplace injuries, if they are created and maintained properly, they can “transform[sic] workplace culture that can lead to higher productivity and quality, reduced turnover, reduced costs, and greater employee satisfaction.”

There are really four basic elements to a successful IIPP.

Finding the hazards that can cause injury or illness
Creating a plan for reducing or eliminating the risk/hazard
Engaging and Training management and the workforce
Continuing evaluation of the program and correction where needed

Do We Need One?

Definitely. It is the law and you can be fined if you don’t have one.

Does it Work?

One study done by Stanford University several years ago found that for every $1 of direct costs from injuries or illness the indirect costs can range from $1.1 for severe injuries to $4.5 for the least severe injuries. According to OSHA, the introduction of the IIPP throughout the country has made the working conditions in the U.S. much safer and can lead to significant improvement in the health and safety of the individual company’s workforce as well as a reduction in workers comp claims. When deployed properly and refined regularly, your plan will reduce both direct and indirect costs from injuries or illness in the workplace.

Is It Expensive to Create One?

No. There are vendors who will create an IIPP for you or you can call CalOSHA and they will give you the template or go online at www.esafetymanual.com. In addition to the Template you will find a number of safety manuals that are industry specific.

Results of an IIPP?

Results vary based on implementation and usage. Most small businesses create the plan, because they have to, and then put it on a shelf. That really is a shame. An IIPP can be the road map to creating a safety culture and awareness that improves productivity, morale, certainty around claims handling and bringing injured workers back effectively.

This is a program that every business, whether small or large, can benefit from. It takes a little time and commitment, but well worth the savings in hard dollars as well as the indirect costs.