Brokers Say Competitive Bidding Has Disappeared / among Underwriters

Article excerpt

Competitive bidding among commercial insurance underwriters has all but disappeared in Oklahoma as the insurance companies battle to obtain profitability, according to industry brokers.

Because of the renewed interest in the bottom line, businesses seeking coverage are being battered by high rates, particularly for liability insurance. Some firms are being forced to decide whetherto accept the rates offered by insurers or risk doing without.

""Liability insurance has become difficult, if not impossible, for some businesses to purchase,'' said Julius Kubier, president of Associated Industries of Oklahoma, a manufacturers' trade group based in Oklahoma City.

Kubier says he recently talked with two manufacturers who have ""an extremely small chance'' of suffering liability losses, yet who are having difficulty obtaining libility coverage.

""These companies have never had a claim filed, yet they've had their rates increased this year from $7,000 to $70,000,'' Kubier said. ""Because of the effect the higher rates could have on profits, both are considering not obtaining coverage.''

One Oklahoma industry that may be threatened by the insurance turmoil is coal mining.

Several of the state's coal companies are facing the possibility they may have to insure themselves in order to keep operating.

The companies' dilemma stems from the insolvency of a New York insurance company that sold bonds to ensure that mandated land reclamation work would be done at about 30 Oklahoma mines.

The situation is further aggravated by a reluctance by other insurance companies to bond coal companies.

Gayle Townley, deputy inspector for the Oklahoma Department of Mines, said under the self-insurance plan, the mining companies would post a cash bond with the state as collateral, then contribute 50 cents per ton of coal mined to an escrow account.

The reluctance of insurance companies to write liability coverage extends to the board room, where directors of public companies are almost uninsurable.

Wayne Swearingen, who owns an energy consulting business, recently revealed he has quit as a director of an Oklahoma City oil and gas company and a Michigan energy company because of their inability to obtain liability insurance.

""This world has become so litigious that the legal exposure of being a pubic director is at a level that is intolerable to me. It gets a little past my choke point,'' Swearingen said.

Kubier attributes the rate increases and reluctance of insurers to issue liability coverage to large claims being paid. Some of those who sell commercial insurance also blame the past business practices of the insurance companies.

Richard Blevins of Blevins Commerical Insurance Inc. in Tulsa said the rate increases can be attributed to insurance companies becoming financial institutions, instead of risk-takers as they were designed.

He said the companies depended on investments for profits during the period of high interest rates instead of proper underwriting practices, allowing insurance rates to fall below the actual underwriting costs. …