10 Ways To Reduce Your Insurance Costs

The Loss Countdown of 9/11	2
10 Ways to Reduce Your Insurance Costs (cont.)	2
10 Ways to Reduce Your Insurance Costs (cont.)	3
Did Ya Know...	3
ADA Clarification Made By Supreme Court	4
Genesis Client Is Named Top 100	4

Text Box: Businesses have been experiencing 15-60% property/casualty premium increases (and more) due to prior insurer under-pricing, under-reserving, poor investment results, all of which, was furthered by the greatest insured disaster which occurred on September 11, 2001. If a business has a 10% profit margin, a $100,000 premium increase would warrant a $1,000,000 top line revenue increase to subsidize such a change. Organizations which depend on public funding, have little room to accommodate significant premium increases. Since the “top-line” is not an effective way of absorbing premium increases, the expense line itself – the overall cost of insurance -- warrants precise focus. Here are 10 simple strategies for reducing your risk management program costs: 1. Increase Property Deductible – Property re-insurers have exerted their weight on pricing which has produced a greater rate increase on the property insurance line than some of the others. Consideration should be given to an increase in your current deductible. A $500 or $1,000 property insurance deductible was the norm 15 years ago. Considering the cost of inflation (and the fact that even your own Homeowner’s policy may only have a $500 deductible), a higher deductible would be logical. Optional quotations of $5,000 or $10,000 (depending upon your circumstance) should be examined. Contrast your claims history versus the premium savings to determine its effectiveness. 2. Increase Automobile Physical Damage Deductibles – What is your current collision deductible? If it is $500 or less, you may want to examine other options of $1,000 or $2,500 deductibles. The effi

Text Box: cacy of increasing these deductibles will depend upon the rating structure of your current program. Particularly, if you have a larger fleet of automobiles, you will have a fairly good idea as to the extent of physical damage losses that will be sustained. Again, perform a cost benefit analysis. 3. Pennsylvania Extraordinary Medical Expense Benefits Coverage – This is a statutory coverage optionally offered in the Commonwealth of Pennsylvania to pay for medical expenses of passengers in your automobiles. When it originated over 15 years ago, it was a relatively inexpensive product. Through the years, the premiums have crept up. The purpose of the coverage is to provide a $1,000,000 layer of medical expense coverage in excess of a $100,000 First Party Benefit Medical Expense Coverage (No-Fault). It would apply to passengers in your business-owned automobiles (employees are covered under Workers Compensation). Do you need the coverage? If a passenger is injured, could they avail themselves of other medical insurance? This is not a high ticket premium issue, but depending upon the size of your fleet, every little bit helps. Uninsured/Underinsured Motorists Coverage – In a past issue of The Protection Quarterly, we went into detail on the pros and cons of this coverage. Suffice it to say, that a business should not automatically accept a $1,000,000 UM/UIM limit. Not only do you have the insurance cost for the coverage, you also expose your corporate program to a loss that it would not otherwise have. This is an optional coverage which can be completely rejected by businesses in Pennsylvania. 5.. Early Claims Reporting – Claims drive insurance premiums. It is logical, therefore, to mitigate the extent of such claims. One of

Text Box: “Organizations which depend on public funding, have little room to accommodate significant premium increases.”

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The Protection Quarterly

The Loss Countdown of 9/11

Text Box: We will not attempt here to put a dollar sign on the emotional loss suffered by the victims of the 9/11 calamity. As a demonstration of the enormity of the event, however, below is a listing of the types of financial loss that have been or may be sustained over the next 10 years. 1. Damage to the building structure. 2. Damage to the tenants’ building improvements. 3. Damage to the tenants’ personal property. 4. Damage to contiguous buildings. 5. Damage to personal property in contiguous buildings. 6. Damage to various vehicles. 7. Loss of rental income to landlords. 8. Loss of rental space value to tenants. 9. Loss of income to tenants operations. 10. Loss to the aircraft. 11. Extra Expense of tenants to reestablish operations. 12. Action of civil authority which disallowed entry to neighboring businesses. 13. Loss of revenue to businesses which do business with tenants of WTC. 14. Loss of revenue associated with loss to aircraft. 15. Payment of Life Insurance Benefits to building occupants. 16. Payment of Life Insurance Benefits to individuals killed by collateral damage.

Text Box: 17. Payment of Life Insurance Benefits to responding city personnel. 18. Payment of Life Insurance Benefits to those who died on the aircraft. 19. Workers Compensation Benefits to building occupants. 20. Workers Compensation Benefits to individuals injured or killed by collateral damage. 21. Workers Compensation Benefits to city personnel. 22. Workers Compensation Benefits to some of those on the aircraft 23. Potential law suits against building architects. 24. Potential law suits against building contractors. 25. Potential law suits against manufacturer of materials used in construction. 26. Potential law suits against building engineers. 27. Potential law suits against airlines 28. Potential law suits by city workers who have retained the right to sue for lack of personal protective equipment. 29. Extra cost of reconstructing building due to the enforcement of new building codes. 30. Loss suits by building owners against insurance carriers for payment of 2 limits (versus 1 limit) – currently being litigated. 31. Extra cost of all parties to enhance security features. It will take years until the actual loss is known. The list will probably grow.

Text Box: the post-accident measures is early reporting! First of all, an expedient notification is a requirement under an insurance policy. Secondly, it provides a clear opportunity for the gathering of facts related to an incident, including testimony from witnesses. The longer the wait, the more fuzzy the information. The more fuzzy the information, the lesser opportunity to defend. Limited defense means higher claim costs. More claim costs means higher insurance premiums.

Text Box: 6. Judicious reporting of claims – Psychology plays a role in how an underwriter views an account. For example, for numerous claims of small value (such as windshield damage, towing and labor, minor water damage, etc.), consideration should be given to not reporting them. Frequent and minor property damage claims generally should be retained by your business, so as to keep loss runs as clean as possible. You may also wish to consider your internal administrative cost of handling the

10 Ways To Reduce Your Insurance Costs (cont.)

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Volume 3, Issue 3

Text Box: carrier to reduce premiums, so that they do not lose your business. There are a limited number of insurers who would be willing to entertain your business, so it is a good idea to be strategic in how you approach the marketplace. Going out to the marketplace on an annual basis, for example, usually results in underwriters unwilling to seriously entertain your account since it crosses their desks regularly. In any event, if you are satisfied with the services that your current insurance carrier provides, it is better to develop and maintain a relationship with the same carrier since your business would generally be given special consideration in the event of a unique claim or renewal pricing. 10. Claims Management- In a perfect world, it would be ideal to report claims to your insurer, then sit back and enjoy the results. Wrong! You should actively participate in the disposition of the claims that involve employee injury and/or liability. Many adjusters have heavy workloads and may need to be gently reminded of the status. Further, you may have information that is quite useful to the adjuster particularly for the workers compensation claim (“The employee suffers from spousal abuse…”;” he is a new employee…”;” the accident happened on Monday morning with no witnesses…”;” we threatened to fire her the day before the accident…”. Consider the post-claim time a team effort among you, the adjuster and any defense attorney. It is not a perfect world. In today’s property/casualty insurance market, the objective should be to mitigate the extent of a premium increase (there will be one).

Text Box: smaller claims. 7. Driver Safety Program – Except for Workers Compensation, the automobile represents the highest frequency accident of most businesses. It also represents the highest possibility of a catastrophic event considering the energy that is produced by its use. Automobile accidents are controllable. Do you have a working driver safety program? Does it include documented driver selection criteria (use of motor vehicle records), control of employee – owned automobiles used in business, claim reporting procedures, and training protocols? Automobile insurance premiums are very sensitive to claims experience. 8. Health and Safety Program – Injury on the jobs are probably the greatest frequency event of your business. Similar to the automobile, these types of accidents are very controllable. A formal health and safety program is well documented as being effective in reducing employee injuries. More than any other line of coverage, Workers Compensation premiums are predicated upon the claims experience of a business. It is your money. A serious and effective health and safety program which will include safety committees, accident investigation, building inspections, etc. will reduce the number of on the job injuries. Further, it helps fulfill the OSHA General Duty Clause that your business has – i.e. to provide a safe workplace. 9. A Strategic Insurance Marketing – every 3 to 5 years, depending upon your circumstance, you may opt to obtain quotations from several insurance carriers. For one thing, it sets some barometers to establish a benchmark as to the competitiveness of your existing program. Depending upon the marketplace, it can also lend incentive to your existing

Text Box: …The US Senate has yet to pass any proposed bills to reinsure the risks of Terrorism. The insurance industry has been lobbying for “backstop” insurance, since they have indicated their inability to appropriately predict the financial consequences of the terrorism risk. Even Alan Grennspan went to bat at a recent congressional hearing. We are just now starting to see terrorism exclusions appear on insurance policies. New York and California are two of the notable states who have not approved such exclusions. …The Pension Benefit Guarantee Corporation has reported a $2,000,000,000 reduction in their surplus as response to under-funded pension plans. …Medicare administrators are being more aggressive in requiring approval of settlements made by Worker Compensation carriers. Specifically, they are looking to assure that lump sum settlements are sufficient to subsidize future medical expenses, so that Medicare funds are not unduly tapped.

Text Box: …In Chevron USA vs. Mario Echazabal, the Supreme Court will be rendering a decision of high impact. The Plaintiff is arguing that, under ADA, he is protected in working within a certain position despite the fact that he is unusually susceptible to certain chemicals due to a chronic liver condition. Chevron recommended removal to a position not having such an exposure. Mr. Exhazabal sued claiming discrimination under an assortment of premises including ADA. The 9th US Circuit Court of Appeals over-tuned a District Court Ruling by stating that Chevron could not refuse him employment. Businesses are hoping for a reversal of this appeal’s decision as it stands in sharp contrast to an employer’s legal and moral responsibility to provide a safe workplace. …The PA Bureau of Workers Compensation can now receive Employers’ Report of Injuries over the internet via www.dli.state.pa.us.

Text Box: They were seated with the giants in the industry such as IBM, Ford Motor Company and Boeing. Yet, they belonged. Special People In Northeast, a Genesis Asset Protection client, was recently honored within Training Magazines 2002 Top 100. According to the criteria of this honor, these employers demonstrated an unwavering commitment to people (their human resources) including employee development in the face of an economic downturn.

Text Box: Special People In Northeast was one of a 100 companies nationwide which have, according to Training Magazine, displayed a clear understanding of the relationship between an organization’s success and the extent to which its associates are inspired to realize their capabilities. Congratulations to Special People In Northeast! PS- Let us know of special awards achieved by your organization. We would be happy to offer kudos!

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The ADA was initially designed to protect those who have a significant limitation in an everyday life activity.

In a case of Toyota Motor Manufacturing, Kentucky, Inc. vs. Ella Williams, the plaintiff, who suffered from carpal tunnel syndrome, asserted that she was protected under the ADA. A US Circuit Court of Appeals ruled in favor of the employee stating that her inability to perform a “class” of manual activities related to her job was tantamount to an ADA disability, despite the fact that she could perform routine personal activities.

Text Box: “Mission: To equitably serve the interests of our clients and business associates with creativity, diligence and passion”.

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ADA Clarification Made By Supreme Court

(Continued from page #)

The case was appealed by the defendant and Supreme Court Justice Sandra Connor clarified that the impairment needs to be framed “…in terms of (a person’s) own experience” and be substantial.

In other words, it is not sufficient to show that certain job tasks cannot be performed. Rather, as is consistent with the original intent of the ADA law, the court has reaffirmed that everyday activities (basic life skills) need to be impacted by such a disability to qualify as impairment under ADA.