Policyholders Expect Rates to Remain Flat or Increase

Given all the major disasters and other market realities of the past year, it’s hard to doubt that the hard market will soon be here. Policyholders have enjoyed a near-unprecedented stretch of favorable insurance premium prices, but it seems that even they now know that the jig is up.

According to a recent survey by Barclays Capital, nearly three-fourths of buyers no longer expect any rate decreases.

Commercial property/casualty insurance prices are stabilizing, with 70 percent of buyers expecting at least flat rates after years of declines, Barclays Capital said Tuesday.

The firm’s survey of 50 large buyers showed insurers are more disciplined, with multiyear deals absent from the market. Just six months ago, 15 percent of buyers were signing such deals, which insurers offer when conditions are weaker.

Barclays said 30 percent of survey respondents expect their insurance rates to rise and another 40 percent expect flat rates.

It was nice while it lasted for risk managers, but the very nature of a cyclical market means that it couldn’t stay here forever. So now the options are likely to accept paying more for the same coverage or buckle down on loss control and raise your risk retention levels.

Either way, the market is unlikely to shift radically at either the mid-year or January 1 renewals (nor will the hardening apply monolithically across all coverage lines), so risk managers — particularly those who realize that insurance is just one way to way to transfer risk — should be able to adjust just fine.

Tips for Good Corporate Governance

Maureen DeCicco of WithumSmith+Brown.

The following is a guest post for The Monitor written by Maureen DeCicco, CPA, partner in the New Brunswick office of the consulting and accounting firm WithumSmith+Brown. She has 18 years of public accounting experience and five years in private industry accounting and internal audit.

Whether your company is large or small, good corporate governance can be critical in establishing a positive organizational culture. Good corporate governance is evident by responsibility, accountability, consistency, fairness and transparency. It can financially benefit an organization, leading to higher profit margins, greater dividend yields and larger stock repurchases. Setting corporate governance procedures in place also enhances the organization’s reputation and builds integrity, making it more attractive to customers and investors.

The following are some simple tips for developing good corporate governance:

  • Document governance principles. When documenting a set of corporate governance principles, the roles and functions of the Board and its committees should be established.
  • Document committee charters. All committee charters should outline a committee’s authority as to decision making and their roles and responsibilities. This creates accountability.
  • Within charters, a well defined plan for dealing with governance issues and resolution of issues should be communicated.
  • An audit committee should monitor public accounting firm audit work, their independence, fees and level of services and scope of both audit and non audit services.
  • A compensation committee should address remuneration levels for executive officers, fringe benefit and incentive plans.
  • The corporate governance committee should make recommendations to the board for new members, and monitor the board performance.
  • The corporate governance committee should monitor committee and executive management performance.
  • Have independent members on the audit committee, including a financial expert.
  • Minutes should be taken at all meetings and committees should report formally to the board on a regular basis.
  • Employee code of conduct policy should be documented and provided to employees.
  • Board code of conduct policy for non-employee directors should be documented and provided to board members.
  • Formalize employee performance evaluations.
  • Employee complaint procedures should be made available to all employees. Employees should be made aware of non-retaliation policy and that they can be anonymous.

Following some of the basics of corporate governance demonstrates a good tone from the top, while creating transparency across all levels and in the firm’s operations. In light of the recent challenging economic times and the financial meltdown, exposing fraudulent activity is more important than ever. Good corporate governance will help to expose and correct any issues before becoming major problems.

Colonel Jack Jacobs: Leadership Learned Through War

Colonel Jack Jacobs has one of the most impressive resumes ever seen.

Col. Jack Jacobs believes that "at certain levels you have to be somewhat of a Maoist."

He is a Medal of Honor recipient, he holds the McDermott Chair of Humanities and Public Affairs at the U.S. Military Academy, he was founder and COO of AutoFinance Group and managing director of Bankers Trust, he is currently a principal of The Fitzroy Group (a London-based real-estate development firm), he serves on several charitable boards, he is the vice chairman of the Congressional Medal of Honor Foundation, he is the author of the award-winning memoir If Not Now, When? and he is an on-camera analyst for NBC.

Just reading that can make anyone feel a bit inadequate.

But Jacobs did not accept the invitation to speak at the 15th Annual Wharton Leadership Conference so he could brag about his accomplishments. Far from it. In fact, most of his bio I learned from the conference material, not from his speech.

Jacobs was there to speak about how he learned leadership from his experience in Vietnam. Simply put, he believes in four “principles of war.” Those being:

  1. The objective: “You must tell a soldier what the mission is before he’ll do what you say.”
  2. Unity of command: “Don’t have one person reporting to two people — respect the chain of command.”
  3. The truth: “Honesty is very important when running any organization.”
  4. You’ll make mistakes, but do nothing that is immoral or illegal: “Anyone who says they don’t know what’s immoral or illegal is a liar!”

Jacobs is Brooklyn-born straight-shooter whose accomplishments in life have more than proved he knows how to be a leader in any given situation, whether on the field in combat or in the office with the board. His speech made those in the audience laugh, cry and feel uplifted and motivated — all at once. Proving, once again, that Col. Jack Jacobs has an overwhelming command over people. He is a natural leader.

Check back over the next couple of days for more posts relating to the amazing speakers I was fortunate enough to hear at the Wharton Leadership Conference, including Jane Golden, executive director of the City of Philadelphia Mural Arts Program and James Quigley, author of As One.

Where Questionable Insurance Claims Come From

Wanna blame someone for your high insurance premiums? Point to the residents of California, Florida, Texas, New York and Michigan.

Combined, these five states generate half of the nation’s questionable insurance claims — most of which are either suspect auto policy submissions or fake injury claims.

These states account for 49 percent of all “questionable claims” as tabulated by the National Insurance Crime Bureau (NICB).

Questionable claims are those claims that NICB member insurance companies refer to NICB for closer review and investigation based upon one or more indicators of possible fraud. NICB just released its three-year analysis of questionable claims in the United States from January 1, 2008 through December 31, 2010.

New York, Los Angeles, Houston, Tampa and Detroit are the cities generating the most QCs. Florida has three cities in the top 10 for QCs—Tampa, Miami and Orlando.

Of course, a large reason that these states have so many fishy claims is that they are so large. Some 110 million people live in the five states mentioned.

But while they do contain about 36% of the nation’s population, that doesn’t actually explain why these locations create 49% of the questionable claims.