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