Business Insurance

Valentine's Day is tomorrow February 14, 2012. I thought I would post the day before and mention the holiday so those of you who may have forgotten flowers or chocolate still have time.

It is a tradition without a clear beginning. I was always taught that St. Valentine was a martyr killed for performing Christian marriages in ancient Rome. The date, February 14, being his date of martyrdom. Over time the holiday developed as a recognition of the importance of marriage and bonds between lovers. So, I'm going with that for purposes of this post.

As a tradition, we honor the relationship. We recognize the importance of love and connection with others and set out a day to celebrate those connections.

And those connections are critically important to our well being. In fact, long-term healthy relationships can significantly improve physical and mental health. The effect is significant. Men who are divorced and single at age 48 have a statistically lower chance of living to age 65 compared to their married friends according to studies relied upon by Linda Waite and Maggie Gallagher in the book, The Case for Marriage. According to those studies men and women are more prone to alcoholism, heart disease, cancer, and psychological ailments when single as opposed to those people who are in a committed long-term relationship.

Tying all of this into business insurance, a healthy person in a long-term committed relationship is healthier, less prone to error, and more stable. All of these factors save insurance premium dollars for employers.

It all starts with remembering the flowers.

For Martin Luther King, Jr. Day I thought I would write a quick post about the Civil Rights Movement and its effect on the services afforded to poor urban communities by the financial industry including insurance and banking.

"Redlining" was a process used by financial institutions to exclude investment in particular sections of an urban area. Look at the picture - that is a redlined map of Philadelphia from the 30's as an example. Overwhelmingly, the excluded investment areas consisted of poorer white, immigrant, and African American neighborhoods. You wanted to build a business, a home, a daycare, or any business in a "redlined" neighborhood chances are that was not going to happen. Not because of your character, credit, or any other reasonable financial reason. Rather, because of a line on a map drawn, most often, because of the color of your neighbors.

That logic was not limited to the real estate market. Insurance companies, evidence overwhelmingly suggests, redlined and "reverse redlined." Meaning, certain coverages were excluded from certain neighborhoods while other (usually questionable) coverages were sold and marketed to such neighborhoods.

The Drum Major Instinct sermon, the issue of some controversy concerning the King Memorial, includes a great story by Dr. King where he tells of trying to do a little "converting" of white jail guards while he was in jail in Birmingham. He asked the guards "about where they lived, and how much they were earning." He told the guards they should be marching with him because it was only by prejudice that they did not realize that they were in the same economic boat as the civil rights marchers. Denied opportunity and fair pay by forces beyond their control.

It sounds a bit paranoid until you look at a map that was marked by someone, somewhere, and used as a tool of the trade to decide where capital would go and where insurance would be written.

Seven days after Dr. King's death, the Civil Rights Act of 1968 was signed into law. Title VIII of that law is commonly known as the Fair Housing Act and prevented redlining based on race and the Community Reinvestment Act a decade later did much to eliminate overt use of redlining and require unifom credit criteria.

Also in 1968, the Urban Property Insurance Protection and Reinsurance Act, started Fair Access to Insurance Requirements (FAIR) in response to the refusal of insurers to write policies in certain neighborhoods of several major U.S. cities. Specifically, urban riots in 1967 and 1968 led to the cancellation of policies and refusal to underwrite in certain areas considered "riot prone" after insurers and reinsurers suffered major riot related claims losses. Again, these were overwhelmingly African American neighborhoods. FAIR plans now exist in 32 states. Businesses and home owners can secure insurance through a FAIR plan where the private market will not support insurance.

Dr. King was present and prominent at President Johnson's signing of the 1964 Civil Rights Act. His continued activism and increased focus on economic gross inequlities affecting all Americans led to the 1968 Civil Rights Act. Building a business, working hard and taking a risk, garnering capital investment, and working to insure that investment is the basis of the American economy. And that possibility is just a little more fair and acheivable because of the Civil Rights Movement and Dr. King.

Fires are a major risk during the winter holiday season. I have posted an article of winter holiday fire safety tips for your home and business.

In addition to that article there are many places online to seek out fire safety tips and checklists. For example, the National Fire Protection Association has "Project Holiday" on its website. The site features full-size color posters for download addressing candle and cooking safety (most home fires in the United States are the result of unattended cooking) and videos addressing those topics and Christmas tree safety.

Our traditions are important. A little time spent on safety when practicing those traditions at the home or office can insure those traditions do not become tragedies.

I hope you all had a fabulous holiday with your family!

Being an "online" guy, I love Cyber Monday. I watched my daughters and some other relatives do the whole after-Thanksgiving shopping experience and, well, I am not interested. However, owning my own business and sitting at my connected terminal most of the day allows me the opportunity to follow the deals and promotions on Cyber Monday and I am done with my gift getting as well as some of my donating.

What allows me and the other average Americans to have faith in the online purchase? I would argue that insurers have a great deal to do with it. As insurers have developed cyber liability insurance and network insurance, they have insisted on security standards for their insureds. Obviously, not all businesses follow strict security measures and, as the breach at Sony illustrated earlier this year, targeted attacks happen to the biggest firms. But, on the whole, I am a click away from completing my shopping with millions of others.

Sometimes I get the best e-mails in this gig! Today was one of those days.

This weekend a German x-ray telescope satellite, ROSAT, is predicted to fall to the Earth. It is reported that large portions of the satellite will survive reentry and strike the Earth. Some reports state that pieces as large as 250 lbs. could strike the ground.

This morning, the helpful folk at the Insurance Information Instituteissued a media release entitled, "REPORTERS WITH QUESTIONS REGARDING INSURANCE COVERAGE FOR FALLING SATELLITES CAN CONTACT THE I.I.I." Admittedly, at the time I got the release, I was not aware of ROSAT's impending doom. So, I thought the release a bit...odd.

I am happy to report, according to the Institute:

"Falling objects, including satellites, are covered under standard homeowners and business insurance policies. There would be coverage for the damage the satellite causes to the structure of the home or business, as well as to property or belongings damaged within the building."

"If a satellite falls on your car, coverage is provided under the optional comprehensive portion of an auto insurance policy. And if falling debris causes an auto accident, the liability portion of the policy would come into play."

So, go on about your business, satellites crashing to Earth and falling on your car is covered. But, check with your insurance professional to make sure.

As we get to the end of 2011 it is time to start looking at ways to save business insurance premium dollars in 2012. I though about this after I finished an article on premium savings for green business practices. There are a great number of ways a business can save on premium expense.

1. First, safety. Like it or not, the best way to reduce premium costs is by having safe employees and safe business practices and consistently applying those standards.
2. Your business can review its coverage and existing policies.
3. Your company can get involved in trade organizations, chambers of commerce, or other organizations and purchase business insurance through the organization for a significant savings.
4. Employee training, depending on the industry, can reduce premiums. For example, alcohol service training for bartenders and servers.
5. Security and surveillance at the location of the business, in its vehicles, and anywhere employees have access to cash and valuables can lower premiums.
6. Health and wellness, smoking cessation, diet guidance and other forms of employee health and wellness education may lead to health insurance premium discounts.

Finally, with all of the ways there are to lower premiums - it is just as easy to engage in bad practices that will raise premiums and costs. So, as we head into the end of the year, a little planning for 2012 with your insurance professional might lead to some premium savings for your business.

Not a very exciting title for a post.

There are two times when a business cheifly interacts with its insurance company:

1. At the start of the policy and during the application process when the business is purchasing the policy; and,
2. When the company, through its operations, must add another entity to its policy as an additional insured.

The status of  "additional insured," while demanded in a rote fashion in commercial contracts around the world, is not widely understood by most business owners. In the typical scenario the business has secured a lucrative contract with a larger company. The larger company sends over a contract the smaller company must agree with in order to do business with larger company. In the contract, larger company demands additional insured status. Smaller company calls its insurance professional and the agent or broker takes down some information and sends a facsimile later with an insurance certificate for smaller company to present to larger.

The issue of what rights this extends to larger company, or what coverage is diminished to smaller company, and what practical effect this agreement has, is seldom considered.

Look at your contracts, consider the "additional insured" demand, consider your chief sub-contractors - what do their business insurance policies actually state? Look at the contracts your company signs with larger companies - does your company know what it is offering when it agrees to add an "additional insured?"

What are the most dangerous jobs in the United States?

Would you believe fishing? Is it more dangerous to be a law enforcement officer or a sanitation worker?

The Bureau of Labor Statistics, part of the U.S. Department of Labor, has created a summary of workplace fatalities for 2010. I have listed the top ten with some analysis.

The terrorist attacks on the United States on September 11, 2001 resulted in one of the largest insurance losses in history. Reports differ. Some sources state that Hurricane Katrina caused greater losses, others find 9/11 to represent the most catastrophic insurance loss. All agree that losses exceeded $32 billion at a time when it was estimated worldwide insurance reserves were approximately $300 billion.

The loss involved property insurance, workers' compensation, liability insurance, airline insurance, and many other facets of the insurance market. And today's business insurance market was changed forever on that day.

Erwann Michel-Kerjan, managing director of of Wharton's Risk Management and Decision Processes Center, has analyzed the changes in risk management and insurance since 9/11. In a recent article from Wharton, the immediate changes over the course of first three to four years are outlined:

"In a 2010 paper, Michel-Kerjan studied the evolution of terrorism insurance in the U.S. since the attacks. Prior to 9/11, he says, terrorism risk was included as an unnamed peril in most commercial insurance contracts. The attacks jolted the industry, causing an estimated $23 billion in damages, making it the second costliest disaster in U.S. history after Hurricane Katrina. By early 2002, 45 states allowed insurance companies to exclude terrorism from their corporate policies, leading to the creation of the Terrorism Risk Insurance Act (TRIA), a public-private program that covers up to $100 billion of insured losses. Similar programs exist in countries including Germany, the United Kingdom, France and Australia."

It is interesting to look at financial articles from the years following 9/11. One dealt with Maurice "Hank" and Jeffrey Greenberg (AIG and Marsh) taking steps to take advantage of the "hard" market in terror insurance following 9/11. Both were out of their respective companies by 2005 with "Hank" Greenberg being investigated by New York State Attorney General Elliot Spitzer. By 2007, Mr. Spitzer became Governor of New York, but resigned in March, 2008, after prostitution allegations. And, later in 2008, the financial markets collapsed leading to "bailouts" of AIG by the federal government.

And, as always, it is interesting to think about the reaction of people if you were to tell them, on September 10, 2001, that all of these things would come to pass in the next ten years.

Who buys earthquake insurance? Well, Californians buy the most according to a list provided by the Insurance Information Institute. The Institute provided a list of direct premiums written by state in 2009. California tops the list with $1,584,897,000 in direct premiums.

Washington state is second, followed by Missouri and Tennessee, states that do not come immediately to mind when one thinks about earthquakes.

Earthquake damage is generally not covered by either the traditional homeowners or business insurance policy. But, "earthquake damage" is damage caused by cracking and shaking. Other types of damage may be covered and you will need to discuss the coverage with your insurance professional.

Perhaps the recent earthquake in Virginia has caused you to reconsider earthquake insurance as a necessary supplement to your current policy. Talk with your insurance professional. Some insurers have waiting periods after a seismic event and will not add new coverage in a particular area within that time period. This is to allow for aftershocks and other seismic events that follow earthquakes.