Simmonds Business Insurance Index - Market Changing

For the first time in a long time, I am predicting a hardening in the insurance market.  That is reflected in the changes I am making in the Simmonds Business Insurance Index:

The Simmonds Business Insurance Index™ August, 2011

Renewal Premiums Flat To Slight Increase

Renewal Coverages Negotiate

Buyer's Outlook Long-Term: Prices Increasing

I think the insurance marketplace is starting to change.  Over the next 12 months we are going to see higher premiums and restrictions on coverage.

Over the past month I have seen underwriters decline accounts they would have drooled over six months ago.  My August and July renewals were/are more intense in the negotiations than in recent memory.

I'm getting more aggressive questions from insurers, and I'm starting to see a general attitude of, "We are not really interested in being competitive if it means we can't have the price we want."

At the same time, there are flashes of the soft market.  One recent renewal had one insurer 40% below last year.

As the marketplace toughens, it will be more important than ever to have a renewal plan and to negotiate coverage and premiums with insurers.

Agents and insurers have been looking for a hard market for some time - years now.  Their incomes will be going up.  Workloads too.  To the insurance buyers out there I say, "Make them earn it."

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NonProfits-Where and Why Buy D&O

Letter from someone who found me on the internet...

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July 25, 2011

Dear Scott,

I just read your article here:

http://www2.guidestar.org/rxa/news/articles/2004/nonprofit-directors-and-officers-insurance-the-good-the-bad-and-the-ugly.aspx?articleId=839 and wonder if you might answer a few questions for me.

I am a director of a newly formed citizens' group, a non-profit corporation in the state of xx. We are not a 501c(3), although we may become one in the future. We expect to approve our Bylaws at the board meeting tomorrow, and we do have an indemnification clause...

We have been told that, although it is unlikely, there is a small risk that we will be sued, and that to be able to afford to defend ourselves in this unlikely event, we should get directors' and officers' insurance. You wrote in your article:

"Volunteer service is no defense for improper acts. Many states, however, provide immunity from prosecution if the actions arise out of voluntary service in a nonprofit. Remember that these laws are at the state level, and that they vary from state to state. State law cannot provide immunity from federal statues such as ERISA, the Americans with Disabilities Act, or Civil Rights laws."

We are in xx.  How do I find out if we really need this coverage or not? Can you point me to a description of the coverage that would be most applicable in our situation? Further, do you know of insurers who perhaps specialize in our type of needs?

Thanks for your prompt response,

SB

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My reply...

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SB,

Your indemnification clause is only as good as the assets that stand behind it.  Without insurance, you are asking your directors to risk their personal assets.

Any good local commercial insurance agent can help you.  Talk with your board members and supporters - find one who runs a successful business, and ask them to refer you to their insurance agent.

A local attorney can help you with the laws in your state.  Personally, I cannot imagine serving on a board of directors without D&O insurance.  The premiums are usually $1,000 or so for a small group.  Why should so many board members risk so much for so little?

Best of luck.

Regards,

Scott

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United States Longshoremen and Harbor Workers' Act - USL&H

The United States Longshoremen and Harbor Workers' Act (AKA USL&H) is a federal law that provides benefits to workers who were injured in certain occupations having to do with dock workers and other maritime jobs.

Twenty years ago we worried about incidental workers on docks - florists and pizza delivery people for example - who would go onto docks or ships occasionally but whose job was not really maritime.  The law then (as I recall) was changed so that the current rules exclude from coverage:

(A) individuals employed exclusively to perform office clerical, secretarial, security, or data processing work;

(B) individuals employed by a club, camp, recreational operation, restaurant, museum, or retail outlet;

(C) individuals employed by a marina and who are not engaged in construction, replacement, or expansion of such marina (except for routine maintenance);

(D) individuals who (i) are employed by suppliers, transporters, or vendors, (ii) are temporarily doing business on the premises of an employer described in paragraph (4), and (iii) are not engaged in work normally performed by employees of that employer under this Act;

(E) aquaculture workers;

(F) individuals employed to build, repair, or dismantle any recreational vessel under sixty-five feet in length;

(G) a master or member of a crew of any vessel; or

(H) any person engaged by a master to load or unload or repair any small vessel under eighteen tons net;

if individuals described in clauses (A) through (F) are subject to coverage under a State workers' compensation law.

So, based on the above, a florist delivering flowers to a dock-worker is not eligible for USL&H benefits (though they are eligible for state workers' compensation benefits).

I was recently talking with a agent who insisted that his bank clients needed USL&H coverage in case a loan officer wandered onto a dock and got hurt.  As I argued, he brought up the fact that the premium was about $300 on a bank that spends over $100,000 a year on insurance.

The wind went right out of my sails.

However, should the bank even spend $300 on this?  If there is never a claim, the bank spent $3,000 over ten years.  If there is a claim, I hope a judge would hand an attorney his head for even trying to subvert what I think is pretty clear language (above).  However, lawyers are creative and judges continue to astound.

What's the right answer?

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