Magazine article Risk Management

Struggles of the Silent Majority. (End Analysis)

Magazine article Risk Management

Struggles of the Silent Majority. (End Analysis)

Article excerpt

Delayed renewals, reduced binding authority, class underwriting, limits offered below regulatory requirements and other risk transfer tricks are not new phenomena. Everyone with more than a few years of experience in the risk industry has seen the games we play to get the best possible solution for our exposures. Insurance buyers work brokers against each other, brokers work risk transfer vendors against each other, risk transfer vendors work the government and brokers and buyers. But the situation seems to have intensified in the last year. I have heard from members of the risk community who want to tell their stories but who do not want their names published for fear of reprisal from some level in the risk management chain of demand.

The following incident got me started on a quest to find out what is really happening in the risk management field:

A hazardous material transporter was given a renewal quote with a substantial price increase for a $1 mil lion limit where regulations require a $5 million limit. The price increase and limit decrease were delivered only a few days before the effective date, so without other options, the transporter renewed and set out to search for the extra $4 million.

Soon after the effective date, the policy was canceled. In the transportation business, if you do not have your limits in place and your regulatory filings complete on renewal day, you are out of business.

Eventually, the risk manager got the incumbent risk transfer vendor to rescind the cancellation by agreeing to an approximately 300 percent premium increase for the $1 million limit--a 300 percent increase for 20 percent of the original limit.

In another example, late in the renewal process, an incumbent risk transfer vendor told a broker not to market a large block of property to any other vendor, or otherwise risk losing its renewal quote. Given the tough times to find insurance for buildings, the broker previously had asked the risk transfer vendor to provide the renewal proposal, including coverage and pricing, thirty days before the renewal date. In response, the risk transfer vendor requested renewal information from the broker ninety days in advance of the effective date. …

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