Magazine article Risk Management

Specialty Markets for Risk Management

Magazine article Risk Management

Specialty Markets for Risk Management

Article excerpt

OF THE APPROXIMATELY 3,600 PROPERTY/CASUALTY INSURANCE COMPANIES CURRENTLY OPERATING IN THE UNITED STATES, MOST ARE MULTI-LINE UNDERWRITERS, DEALING IN INSURANCE PRODUCTS FOR A WIDE VARIETY OF RISKS. A FEW, KNOWN AS SPECIALTY OR NICHE MARKETERS, CHOOSE TO CONCENTRATE EXCLUSIVELY ON ONE PARTICULAR TYPE OF INSURED. BY FOCUSING RESOURCES IN THIS WAY, NICHE COMPANIES CAN CREATE PRECISELY TAILORED PACKAGES OF COVERAGE FOR THEIR CLIENTS THAT WOULD OTHERWISE BE UNAVAILABLE OR UNAFFORDABLE IN THE GENERAL INSURANCE MARKETPLACE.

Niche companies are often organized by the very constituencies they serve in response to perceived voids in the larger insurance marketplace. The companies work hard to maintain the strong ties they have with their policyholders. To that end, specialty insurers spend a significant amount of time "inside" their constituencies, gathering and sharing intelligence about trends and major events affecting the industry. As their constituencies grow, change and become subject to expanded liabilities, niche companies respond with new coverage products and packages.

Exotic risks are often good prospects for niche marketing, because they have several unique qualities that require special attention from risk managers and underwriters. Additionally, although exotic risks are unusual, they are often common enough so that they constitute a profitable market. Typical examples of exotic risks include livestock, zoo animals, school buses, members of the clergy, pharmacists, precious stones and expensive items of jewelry. Because each of these risks presents a set of unusual coverage challenges for risk managers, niche companies have been created to provide the appropriate policies for these organizations.

Three types of exotic commercial risks are described below. Each of these enterprises produces a unique set of risk management challenges - and each has spurred the creation of a successful niche company.

NEW RISKS FOR PHARMACIES

Even for people with health insurance, the cost of getting a doctor's opinion continues to rise. However, the neighborhood pharmacist's advice comes free of charge. For an increasingly health- and fitness-obsessed American public, the choice seems dear: try the pharmacy first.

Fortunately, improvements in medical technology and delivery systems allow pharmacists to accommodate their customers' need for advice. Pharmacies now augment their traditional "drug store" repertoire of solid and liquid dosage prescriptions with new products and services, such as durable medical equipment and preparation of intravenous solutions. Unfortunately, new lines of business also bring new liability exposures. "As pharmacists' counselling duties increase and there is increased reliance upon them to be experts in medications, professional liability for the pharmacist has gotten away from the products liability coverage of years past," says Jack Williams, risk manager/loss control specialist for Pharmacists Mutual Insurance Co. Therefore, it is likely that the professional liability of pharmacists will continue to expand. "As much as the pharmacy business has changed in the past 25 years, it is expected to change even more dramatically in the next 25 years," predicts Mr. Williams.

Some of the pharmacies that deal in durable medical equipment, such as wheelchairs, crutches, braces, hospital beds, food pumps and breathing apparatuses, simply stock and sell these products. Other pharmacies go further: Some, for example, have professional therapists or nurses on staff to consult with customers about. using the equipment.

"Intravenous pharmacies" prepare intravenous solutions - on physicians' orders - for use in nursing homes or in-home care situations. They may also prepare nutritive solutions, which are administered either intravenously or through gastric tubes. These tasks once were performed exclusively in hospitals. However, today hospitals release patients earlier in the recovery process, often while the patient is still in need of supervised care. …

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