Where Are Your New Insurance Ideas Coming From?

If you have been buying your insurance from the same agent for 10 years, where are your new insurance ideas coming from?

Insurance is not a one-size-fits-all proposition. It is also not a once-and-done deal.

Your operation changes. The insurance marketplace changes. Exposures that we never thought of five years ago are now costing businesses millions of dollars.

Is your insurance changing? Where are the new ideas coming from? Where are you getting new perspectives?

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Repeat After Me, Coinsurance Is Bad!

For the 432,234th time now, I have had an agent send me a proposal of insurance that includes coinsurance.

Insurance buyers, ask your agent if you have coinsurance on your property insurance policy. If the answer is yes, ask your agent why they have allowed your insurance company to include a penalty that might hit you when you have a loss.

For the insurance buyer, a coinsurance penalty is ALWAYS bad. It means that there is a chance that a partial loss might not be covered like you think it will be.

If you are interested in knowing how coinsurance works and how the penalty hits you, send me an email (or use the search bar to the right).

Frankly, all you need to know is that coinsurance is a penalty - penalties are never a good thing. Your agent is supposed to be helping you avoid bad things, and if you have coinsurance, YOUR AGENT IS NOT DOING HIS OR HER JOB!!!!

(Note to Insurance Geeks: Please do not send me emails lecturing me on the benefits of coinsurance. Do not tell me that it is a rating necessity that really benefits insurance buyers. Insurance buyers should buy the right amount of insurance - if they do that there should never be a coinsurance penalty. No individual insurance buyer has ever been better off at the time of a loss by having a coinsurance clause in his policy.)

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Insurance Matters: Used Up and Left Out

My latest column for CU Management:

Your credit union undoubtedly buys directors’ and officers’ insurance to cover your board members. There is a fly in the ointment, though. What you have for insurance may not be enough. If it is enough, it may not be the right kind. If it is the right kind, it might get all used up.

First, we have to talk about indemnification, which is the act or process of securing against loss. The idea that D&O protects directors and officers is actually a bit off. Your credit union bylaws state that if a director is sued, the credit union will indemnify the board member. Your directors’ and officers’ insurance reimburses the credit union for that indemnification.

In most cases, it is really the assets of the credit union that protect a board member. The D&O policy (up to the limit of coverage) keeps the credit union from being out the cost of the lawsuit. In most cases, the D&O policy really protects the credit union.

Except when it doesn’t.

Full article...

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Japan and the US Insurance Marketplace

I was asked today if I thought the disaster in Japan would have an impact on the US business insurance marketplace.

Not even a noticeable ripple.

A US disaster costing several billion dollars would have an impact.

A more likely cause of a change from buyer's market to seller's market would be a dramatic increase in the demand for insurance coverage or a drop in the capacity of insurers.

Supply and demand - simple economics. Right now there is lower demand (due to the economic decline) while capacity (supply) is at unprecedented levels.

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Quake and Tsunami in Japan

The pictures are horrific. You cannot watch without shaking your head at the humanity.

Standard Publishing put out an email blurb today on disasters. It included the following:

"...While economic losses from the disaster will be huge, the particular nature of these events will make most of that loss uninsured. So far, estimates of insured loss range from $12 billion to $35 billion. The Japan Earthquake Reinsurance Pool (JERP) is expected to cover from $2 billion to $4 billion USD of the direct shake losses..."

I have fielded calls from several media outlets on earthquake insurance in the US.

Most of us in the US do not have earthquake insurance. Your home insurance probably excludes it. Your business insurance does too.

Earthquake is the only catastrophic cause of property loss for which most Americans are not insured. Get quotes and buy the coverage.

Also, send a check to the Red Cross while you are at your desk.

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What Your Credit Union Board Wants To Know About Directors' and Officers' Insurance

My newest white paper for credit unions...

Actually, this is the same white paper I announced the other day - I just customized it a bit for credit unions.

A clear explanation of directors' and officers' insurance designed specifically for credit union board members. What's covered? What's side A? Can I depend on my umbrella policy for protection? Can we buy coverage for civil money penalties? Explain claims-made.

I have included answers to the questions I get when I do seminars and presentations to board members. Thirty years of board member questions in nine pages. Free for credit union leaders and board members. Just send me an email - Scott@ScottSimmonds.com.

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Oregon Workers' Compensation Report Out

Every two years the OR Department of Consumer and Business Services puts out a report of the workers' compensation rates of the 50 states. It does a pretty good job of outlining where everyone is. It appears on its face to be fair.

Check out your state.

Montana has the highest rates at 163% of the median.
North Dakota has the lowest rates at 50% of the median.

My state of Maine is at number eight, down from five in 2008.

Look at Appendix 4 to see a direct comparison of the state rates for different employment classes. Class 8810, Clerical shows rates in MT at $0.75 and $0.13 in MA and DC!

The sales codes range from $1.04 to $.15.

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What Your Bank Board Wants To Know About Directors' and Officers' Insurance

My newest white paper for bankers...

A clear explanation of directors' and officers' insurance designed specifically for community bank board members. What's covered? What's side A? Can I depend on my umbrella policy for protection? Can we buy coverage for civil money penalties? Explain claims-made.

I have included answers to the questions I get when I do seminars and presentations to board members. Thirty years of board member questions in nine pages. Free for bankers. Just send me an email - Scott@ScottSimmonds.com.

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The Simmonds' Business Insurance Index™ For March, 2011

Here's my read of the current marketplace for upcoming business insurance renewals:

Renewal Premiums: -5%
Renewal Coverages: Liberal Terms
Buyer's Outlook: Long-Term: Prices Flat - Soft Market Continues


I continue to see every indication that the commercial insurance marketplace, as a whole, will continue for at least the next six months as a buyer's market.

Agents keep telling me that they are seeing firmer prices. However, when the actual renewal quotes come in, the prices continue to drop when there is competition for the account.

A recent gathering of insurance executives in Maine included a panel discussion on the future of the market. The room was filled with insurance agents and insurance company people. Many made comments about the current inadequacy of premiums and low-price foolishness. Frankly, what I heard was a complete lack of understanding about how free markets work. Supply and demand always finds a way... The current supply of insurance exceeds demand, so prices decline. Until insurers walk away from clients (decreasing supply), prices will stay at what are historically low levels.

The other part of supply and demand is that suppliers always want high prices, and buyers always want low prices. Push and pull makes it all work.

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