Buyers Face Challenges Galore
Corporate insurance buyers, who had been on cruise control for years during the long, soft market, are facing a host of challenges in what promises to be another very difficult year ahead. Among the hurdles they need to clear:
The hard market. Risk managers, CFOs and CEOs are going to have their hands full trying to contain soaring insurance costs, as well as compensate for shrinking limits and coverage, at a time when the heat is on to control expenses with the economy still in the doldrums.
Alternative markets. As tempting as it might be to tell insurers to take a hike and do it yourself, self-insuring might be easier said than done with fronts hard to find, reinsurance unavailable or unaffordable, and captive domiciles getting so many queries that they can cherry pick the best prospects.
D&O: With the spotlight shining brightly on balance sheets and corporate officer/director behavior, risk managers of public companies will be working overtime to keep exposures under control while securing adequate, affordable insurance coverage in case shareholder lawsuits hit.
Terrorism insurance. To buy or not to buy coverage–that is the question. Insurers must offer it under federal law, but buyers don't have to take it if the price is deemed too high. But can buyers afford to turn coverage down? Talk about a D&O exposure!
Tort reform. Insurance buyers, who often find themselves at the mercy of plaintiff attorneys filing costly, time-consuming and reputation-damaging class-action suits, must lobby hard in Congress for tort reforms. Even with a Republican-controlled Senate, this won't be a slam-dunk.
Employment practices liability. Risk managers must get their human resources houses in order, or else they will find themselves in the courthouse.
Employee benefits. How long can employers absorb soaring costs for health insurance and prescription drugs? They are already hitting workers with higher premiums and co-payments. Some might be tempted to dump it all in the laps of employees by establishing defined contribution plans, which they might get away with in a very poor job market.
Any one of these or a dozen other worries could keep risk managers up at night in 2003. Check National Underwriter's monthly “Corporate Insurance Buyers Report” for news, trends, tips and analyses to help firms cope. The next one up is Feb. 3, focusing on the reinsurance market.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 6, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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