Buyers Guide

• Get your submissions in early, particularly if you have an underwriting issue or if capacity was a problem last year. The earlier you know what your insurer intends to charge, the more flexibility you have in considering your options.
• Provide complete information to underwriters, anticipating likely questions that they may have. For property insurance, emphasize the steps you have taken to prevent losses.
• Evaluate your supply-chain exposures. Determine how the loss of suppliers or major customers would affect your operations. Determine the critical links in your supply chain and ask about obtaining the appropriate coverage.
• Check your renewal policy carefully to make sure that you received the coverage you asked for and that all underlying information is correct. Do you still have all locations shown in the policy? Are new locations not listed? Is your payroll lower or higher than listed? Are the correct garaging addresses shown for all autos? Are the insured values correct?
• Determine what other insurers are charging. Ask your broker what companies similar to yours are buying. Benchmarking coverages, limits, and deductibles is part of being a prudent buyer. If your insurer and broker have been doing a good job and partnering with you to control losses, you probably won’t move your account to save a few dollars. Planning for the long term rather than the short term can be the most cost effective strategy. Still, your insurer will want to be competitive.
• Beware of insurers that lowball everyone else, particularly on the liability side when they are new to the line. They may be looking for cash to stay afloat. The major writers have strong balance sheets right now, so financial stability is not a big concern in the near term. However, some insurers are more financially stable than others.




Don Way
CEO

Employee's Cell Phone Dials Up $5.2M Settlement

International Paper Co. has agreed to pay a $5.2 million settlement to Debra Ford, who was the victim of an auto accident caused by another driver, Vanessa McGrogan. McGrogan, an employee of International Paper, was driving a company-owned vehicle and talking on a company cell phone at the time of the accident. The settlement was reached even though McGrogan had violated her company's policy of requiring the use of hands-free headsets while driving.

California Tops ID Fraud

California is one of the five worst states in the nation for identity fraud, even as a poll found that identity fraud declined nationwide in 2007 for the third year running.

The 2008 Identity Fraud Survey Report was conducted by Javelin Strategy & Research. It found that criminals obtain the majority of the information they use from stolen personal belongings and through telephone calls, rather than online.

Based on interviews with more than 5000 respondents, the survey grouped California with Illinois, Idaho, West Virginia and Delaware as having the highest incidence of ID fraud. Generally, states with dense metropolitan areas such as California are more likely to have higher fraud rates, due to higher income levels and commerce activity, the report said.

Ten Years Later

After premium rates paid by California employers nearly tripled in just four years, rates are now at their lowest levels in a decade. But insurers’ combined loss ratios are starting to trend back upward.

The latest data show that overall rates peaked in 2004 at an average of $6.46 per $100 of payroll but have stair-stepped back down to just $2.44 per $100 of payroll by the end of 2007. The amount compares favorably to the rate of $2.47 that employers were paying in 1997. Total premiums written amounted to $12.6 billion, down from $16.3 billion in 2006 and down from the high-water mark of $23.5 billion in 2004.

Helping to drive down premium rates was the immediate decline of losses in both frequency and severity following the reforms of 2002-2004.

Ultimate insured losses from job injury claims in 2007 are projected to be $6.3 billion or about half of the pre-reform totals of $12.2 billion in 2001 and $12.3 billion in 2002.

But it’s not all good news because the recent trend shows a marked increase in the combined ratio over the past three years. After bottoming out at a ratio of 53% in 2005, it jumped to 65% in 2006 and 78% last year.

Claim frequency continues to decline in the wake of the reforms, but the average severity of the remaining claims is climbing.