Insurance Consultants of Maine Newsletter
Scott Simmonds, CPCU
November, 2003
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Feel free to forward this newsletter to your colleagues. Your comments, questions and suggestions are always welcome. Email: scott@icofmaine.com
Credit Scores To Be Used In Commercial Insurance Underwriting
Several years ago, insurers started using credit scores as a tool to assess and underwrite personal insurance buyers. Credit scoring is moving to commercial insurance too. Insurers are using any tool available to screen insureds and potential insureds. I'm in favor of such.
Insurance companies are profit-making ventures. They are entitled to charge a reasonable premium to cover their exposures. The name of the game for an insurance company is (aside from investment income) to charge exactly the right premium so you insure good (few losses) businesses. The trick is to identify the good insureds. Credit scores, driving records, and inspections are all tools to identify the risks associated with a policyholder.
I want good insureds to get the best premium possible. Credit scores will help with that.
That being said, I want to know what information an insurance company is using. I think an underwriter should disclose to clients what data sources they used in the decision-making process. Businesses should be able to dispute any information in databases that is inaccurate.
I believe full disclosure is the best policy.
Work Comp Rate Changes
Several states have had recent announcements regarding rate changes in workers' compensation - including Maine. Remember that rate is just a part of your premium calculation. You must watch two other numbers: your experience modification and risk modifiers (some policies call this "other charges").
The experience modification is controlled by you through loss control, claims management and your luck (yes, luck does play a part in workers' compensation). The experience mod is a ratio of your losses to those of similar businesses. A mod of 1.15 means you are worse than average. A mod of .85 means you are better than your peers.
Risk modifiers are subjective credits and debits underwriters use to be more competitive or to get more premium. The risk modifier can result in an increase in your premium of up to 25% or a discount of 25%. That's quite a bit of leeway!
Watch your rates but don't forget the other components of premium - experience modification and risk modifier.
Insurer Financial Performance Improves
The dramatic rate increases of the past few years are having an impact on insurance company performance. The insurance industry continues to show strengthening financial results according to several industry groups. For the first half of 2003 net written premium increased from $182.8 billion in 2002 to $202.8 billion. Pretax operating income also increased from $5.9 billion to $15.6 billion. At the same time, underwriting losses have declined dramatically from $12 billion for the first half of 2002 to $2 billion in 2003.
Competition Returning To Commercial Insurance Market
Perhaps because of the improved income picture for insurers (see above), the past two months have seen a dramatic turn in the competitiveness of the insurance marketplace. Insurers are talking to agents about new business. Underwriters are aggressively defending renewals against competitive bids from other insurers. There are actual negotiations taking place between insurance buyers and insurance underwriters!
New Address And Phone Trouble
I have moved into new quarters! My new address is 20 Sofia Rd, Saco, ME 04072. Its only about 2 miles from my old office - much bigger and brighter space though. As part of the move I had trouble with my phone. Verizon didn't seem to think my number was important! I think we are set now. Sorry for any confusion to those who tried to call me last week.
Insurance Consultant Conflict Of Interest
I recently found an advisory published by the Massachusetts Office of the Inspector General to MA municipalities. The notice outlined certain practices by some insurance consultants where there is a conflict of interest between agents and consultants. It went on to suggest that MA municipalities require full disclosure of any financial relationship between agents / brokers and the consultant.
That matter is made simple in my practice. I never accept fees or commissions from agents, brokers or insurance companies. No exceptions.
Speaker Available!!!
I'm pleased to speak to groups and associations about insurance and risk management topics. Call on me if you need a presenter! I'm told I actually make insurance interesting. Click here for details: www.icofmaine.com/ispeaker.html
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Your Privacy
I will never sell or distribute your email address to any other person or organization.
Help With Your Experience Modification
Goto http://www.modmanager.com for help understanding your work comp experience modification. Check out this free tool.
Workers Comp Tips
I also publish a weekly Workers' Compensation Tip designed to save business owners premium. Goto http://icofmaine.com/newssign.html
Life Insurance
How secure is your life insurance? Do you have the right kind? Is the policy set up correctly? I can help. Call 207.284.0085 or email me at scott@icofmaine.com. Remember, I don't sell insurance so I'm unbiased.
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Scott Simmonds, CPCU
Insurance Consultants of Maine, Inc.
Saco, ME 04072
Phone 207 284-0085
Fax 801 991-4027
scott@icofmaine.com
www.icofmaine.com
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Insurance Consultants of Maine, Inc. is an unbiased, fee-only insurance and risk management advisory firm. We don't sell insurance and never accept fees or commissions from insurance companies or agents.
Comments regarding insurance policies or products in this newsletter are for information purposes only and do not constitute an endorsement. We accept no fees or payments of any kind from any insurance organization or any company mentioned in this newsletter.
© 2003 Insurance Consultants of Maine, Inc. All Rights Reserved. We encourage sharing this newsletter in whole or in part if copyright and attribution (including my web address) are always included.