Tuesday, 31 August 2010

Contaminated Products Insurance

Contaminated Products Insurance
Monday August 30, 2010

A massive egg recall is occurring throughout the United States. Millions of shell eggs are suspected of being infected with Salmonella Enteritidis. The recall is countrywide and the Food and Drug Administration has regular updates and explanations of the recall.

Is there business insurance for such an event?

Typically, product liability insurance will cover only third-party claims. This means claims from those outside of the business claiming to have been injured by the product. But, massive product recalls involve expenses beyond potential claims such as loss of revenue, business interruption, and costs associated with the recall. Those costs are generally not covered in a traditional product liability policy.

Contaminated products insurance is a type of business insurance coverage that fills the gap. The coverage is designed to cover those costs associated with contaminated product recalls. Some insurers also offer disaster containment consulting services as a part of the coverage and coverage designed to restore the product to a safe condition.

Contaminated products coverage is something to consider for your company if it will be involved in the food, medicine, or restaurant business at any level of the supply chain.

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"X" the "Text"
Monday August 23, 2010

Texting while driving. For fleet owners, a zero-tolerance policy is the best way to educate company drivers on the dangers of this activity.

How dangerous is texting while driving?

An article out of Salt Lake's Deseret News last Friday follows a test conducted by Allstate last Thursday at the company's sponsored Family Driving Challenge. An instructor from Allstate would ask questions to drivers over a cell phone. Simple math questions, for example. Within three seconds the drivers were hitting cones on an obstacle course.

Allstate is also sponsoring the "X" the "Text" social initiative in conjunction with the Jonas Brothers aimed at teen drivers. According to Allstate, a driver is 23 times more likely to crash while texting, and the National Highway Traffic Safety Administration reports driver distraction contributes to 25 percent of all police-reported traffic crashes. Information on the tour can be found at www.facebook.com/XtheTXT.

If you are a fleet owner or manager, while a zero-tolerance texting policy is the best option, you should be aware of the laws in your state and a great summary of those laws is provided by the insurance institute of highway safety on its website. Keep in mind that local jurisdictions can pass their own laws and so fleet drivers must be aware of each municipality's laws. And this is a great reason for your company to pass a no cell phone/texting zero-tolerance policy as the driver then would only need worry about one rule - yours!

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Bed Bugs...
Thursday August 19, 2010

Orkin, the leading pest controller in the U.S., has issued a warning that bed bugs are jumping to commercial properties. Excuse the pun.

Recent articles this year in the New York Times and New Yorker Magazine discussed the bed bug infestation in relation to homes and homeowners. The New York Times article discussed the fact that homeowners insurance under a standard policy does not cover the removal of a bed bug infestation.

What about commercial insurance?

Most policies will exclude a pest infestation as a maintenance issue. But, as always, discuss your particular commercial policy with your insurance professional. Training, education, and prevention, remain your businesses best bet in avoiding the cost of a bed bug infestation. If you are a commercial property manager this means identifying the signs of an infestation and taking action.

Orkin offers some incredibly helpful features on their website to help commercial owners. A bullet point list for the office and white papers with good prevention tips and even a "bug identifier" app called Orkin Pest 411 are available on the site.

(Photo © Orkin)

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More Fake Health Insurance Scams
Tuesday August 17, 2010

The Oklahoma Department of Insurance is warning against a new health insurance scam. Again, it is fake health insurance. Companies claiming to be health insurers take premiums and never pay claims.

Oklahoma Commissioner Kim Holland offers the same advice that we have discussed before: always check to make sure the insurance company is authorized to do business in your state. Always.

Here is our link to our list of contact information for every state regulatory body in the U.S.

Commissioner Holland and her staff have been fighting the fake health insurance scams in her state for some time. In January, she joined with other states in issuing fines against American Trade Association and affiliates of that company. In April, a Tennessee Judge ordered American Trade liquidated.

This time the cease and desist order names many different entities related to a company called the Association of Independent Managers.

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School is Starting!
Wednesday August 11, 2010

School is starting across the country as summer comes to a close.

The start of the school year signals critical changes to traffic patterns. Education, training, and reminders to your fleet and business drivers goes a long way to preventing accidents and claims.

So, how does traffic change? What should we be reminding our drivers?

* Traffic Law Changes - Some states have different traffic laws for "school" days and "non-school" days. School zones are now active and the speed limit changed accordingly. Right turn laws may be changed to restrict such turns on red lights. Make sure your drivers are aware of changes and how they affect routes.
* School Transport Vehicles - Buses, vans, and other school vehicles observe special driving restrictions (stopping at railroad tracks, for example) and carry many potentially distracting children on board. Train your drivers to exercise caution around these vehicles.
* Pedestrian Traffic - Children walk in groups and pedestrian traffic increases at corners and intersections. Slow, careful, and attentive driving is a must.

Another thing to consider is to set up an office policy regarding passengers in work vehicles.

Check with your insurance professional to determine if your commercial auto policy covers non-business passengers. For example, if your sales force uses company cars and sales people regularly pick up and drop off their children, would the children be covered passengers in case of an accident? Depending on your coverage, your business may want to restrict passenger use in a clearly defined, written policy.

Finally, summer driving differs from winter driving. Weather, shorter days with less light, and other factors make winter driving more hazardous without advance planning. Proper tires, mechanically sound vehicles, emergency kits, and, most importantly, allowing additional time to get from stop to stop are just a few ways to lower the risk.

So, keep the kids in mind, and make sure your employees do as well.

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Network Security Threats
Monday August 9, 2010

Computer networks are subject to changing risks over time. A good business insurance plan is going to take into account the possibility of a network disruption and resulting business interruption. It is always important to keep in mind how much money your business would lose if it was out of business for...one day?...two?...one month?

The evolution of cloud computing, social media, streaming content, and, interestingly, security measures, has changed the nature of potential network attacks. Experts warn of some of the most dangerous threats evolving for 2010-2011:

* Malicious websites and paid spammers. Simple steps like registration and the use of a CAPTCHA can prevent spammers auto-posting on your corporate site. To get around this, the spammers pay real people to spam and drive traffic to malicious websites.
* Social networking sites may possess vulnerabilities that allow access to account and network information. Also, employee comments can be used to find out security breaches ("my bartender always forgets to lock the back door.")
* Targeted malware is malware that is developed to take advantage of "insider" network knowledge.
* Botnet intrusions occurs when the botnet latches on to the computer and begins to run malicious code.

Two threats appear to be increasing: malicious insiders and malicious fake sites. Insiders have caused damage to networks after being terminated or remain in a position to provide information to outsiders. Fake websites look like a real product or supplier site, but are malicious sites designed to attack the computer and run malicious code to keylog, use contact lists, steal data, and other malicious purposes.

Make sure your policy remains up-to-date and follow-up with your insurance professional about any policy changes that alter network risk because, as threats evolve, insurers may be inclined to exclude certain risks through policy changes.

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Do Your Fleets Drive These?
Wednesday August 4, 2010

The Highway Loss Data Institute (HLDI) posted its list of theft data for passenger vehicles 1 to 3 years old. The Highway Loss Data Institute (HLDI), is an affiliate of the Insurance Institute for Highway Safety.

Top of the list? The the 2007-09 Cadillac Escalade. To give you an idea of how much the theft of Escalades affects the public, consider that the HLDI estimates the average theft payment per year for all passenger vehicles to be $14. It is $143 for the Escalade. Losses for SUV's are six times higher than for passenger vehicles.

It is not just suburbanites and their SUV's that are targets.

Work trucks are high on the list with the Ford F-250 being number two. Kim Hazelbaker, HLDI senior vice president, states, ""Investigators tell us big work trucks like the Ford F-250/350, Chevrolet Silverado 1500, and Dodge Ram 2500 are attractive not only because of the vehicles themselves but also because of the tools and cargo they carry."

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Retained Asset Accounts
Monday August 2, 2010

Last week's post regarding Prudential's "Alliance Accounts," resulted in some comments and a number of direct emails. Thank you, first, to all of the Servicemembers' beneficiaries who wrote with personal stories regarding their experiences, and, second, to those who had on opinion one way or another.

Retained earnings accounts are accounts wherein a beneficiary's benefit is held in a corporate account (usually owned by the insurer) until the beneficiary decides on another option. Last week Bloomberg wrote about Alliance Accounts and other similar accounts set up by life insurers for beneficiaries of fallen soldiers.

Prudential has announced it is reviewing the practice, maintaining, the funds--while not in an FDIC secured account--are held in an account "protected by State Guaranty Funds that provide protection of at least $250,000 in most states." The National Association of Insurance Commissioners issued a statement regarding retained asset accounts. The statement points out the accounts have been around for decades in order to allow beneficiaries time to make financial decisions and the "NAIC is re-reviewing the disclosure requirements associated with RAA and is developing a consumer alert to help policyholders better understand the terms of these kinds of settlements. Regulators are also reviewing the transaction requirements/terms for the "checkbook" usage associated with these types of policies."

Meanwhile, New York Attorney General Andrew M. Cuomo has launched an investigation into the practices of some of the insurers.

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"Alliance Accounts" -- What do you Think?
Thursday July 29, 2010

Bloomberg.com is running a story by David Evans that will appear on the newsstands beginning August 16 in the September issue of Bloomberg Markets magazine.

Admittedly the story has little to do with business insurance.

Rather, the article is about "Alliance Accounts." This is the way Prudential Financial pays out death benefits to beneficiaries of our fallen soldiers. Our readers include insurance professionals, small business people, and financial planners, so I'd like some feedback on this practice.

Prudential Financial handles life insurance for the Department of Veterans Affairs. According to the article, and discussed in Prudential's response, survivors of service men and women are told they'll get a $400,000 life insurance payout. Instead the beneficiaries receive a check book for the Alliance Account. Prudential promises to hold the money in safekeeping for as long as families would like, saying it will pay them 0.5 percent interest.

Where are the benefits held? Prudential's general corporate account according to the article.

Is the Alliance Account FDIC insured? Nope.

Does it work? Not according to Cindy Lohman whose son Ryan was killed in Afghanistan, "she tried to use one of the 'checks' to buy a bed, and the salesman rejected it. That happened again this year, she says, when she went to a Target store to purchase a camera on Armed Forces Day, May 15."

Does Prudential make money? Yep. "It was being held in Prudential's general corporate account, earning investment income for the insurer. Prudential paid survivors like Lohman 1 percent interest in 2008 on their Alliance Accounts, while it earned a 4.8 percent return on its corporate funds, according to regulatory filings."

How much money? "[L]ike $28 billion in 1 million death-benefit accounts managed by insurers."

I did some more digging and came across the 2003 testimony of Thomas Lastowka, Director, Philadelphia VA Regional Office, And Insurance Center Department Of Veterans Affairs, before The House Committee On Veterans' Affairs
Subcommittee On Benefits. His testimony praises Prudential and Mr. Lastowka stated in that testimony:

"In June 1999, SGLI and VGLI beneficiaries began receiving their proceeds through a checking account rather than by the traditional single check for the full amount of the insurance proceeds. This checking account is called an "Alliance Account." The beneficiary receives a checkbook for an interest bearing account from which the beneficiary can write a check for any amount of $250 or more, up to the full amount of the proceeds. Alliance Accounts earn interest at a competitive rate, are guaranteed by Prudential Insurance Company of America."

This begs the question whether the accounts are competitive and "guaranteed." MetLife, another insurer identified in the article, prefaces its "guarantee" as follows: "All guarantees are subject to the financial strength and claims-paying ability of MetLife." Maybe that "guarantee" had more meaning prior to the 2008 collapse and bailout of insurers. Competitive? The article finds, "Prudential paid 0.5 percent interest in July to survivors of government workers and soldiers. That's less than half of the rate available at some banks with accounts insured by the FDIC up to $250,000."

In that same testimony in 2003, Mr. Lastkowa requested that Prudential receive a management fee:

"Since the origin of the program, Prudential and the companies that provide reinsurance have not received a profit for their participation in the program (my emphasis). They have received only reinsurance premiums in return for providing such coverage to the program. In its request for the new management fee, Prudential arrived at the $400,000 amount by analyzing what it would have earned on the SGLI Program had the risk charge been calculated in a manner similar to the risk charges used on other large group life insurance cases. The SGLI Program has been charged substantially less for risk charge than these other clients."

To be fair, Prudential has issued a response stating that the company has "had years where we have made a profit, we have also had years when we had losses because we assume the investment risk for the money in the Alliance Account."

I would be interested in your comments.

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Financial Trends Among Women
Tuesday July 27, 2010

Prudential has released a study tracking the financial behavior of women over a ten-year period. What are the trends? What are strengths, changes, and challenges faced by women and expressed in their behaviors? What unique challenges do women face as a part of their financial experience? These are a few of the many questions explored in the report.

The report suggests that 95% of the women surveyed were financial decision makers and 86% of married women were the primary decision makers in their household.

Yet, fewer than two out of ten felt confident in that role and relied on non-experts for advice. Since 2000, insurance products and benefits, such as annuities or long-term care insurance are better understood by these decision makers, but not as well understood as they should be for the primary financial decision makers--according to the survey.

"While the need for a trusted financial partner has never been greater, women are relying on informal personal networks for advice," said Judy Rice, president of Prudential Investments, Prudential's proprietary mutual fund business. "Building a financial plan requires expert assistance, so it is important that financial firms work hard to build trust and do a better job of encouraging women to find the time to establish realistic plans to meet their specific needs."

From the business insurance standpoint, the ability to offer benefits that encourage retention and loyalty assumes the employee understands the value of the benefit to their family. And this knowledge is growing among female professionals: in 2004, 47% acknowledged the importance of workplace retirement plans; today, 72% acknowledge the importance of such a benefit.

Finally, when asked where the primary source of information about financial products came from? 64% said their spouses. And I will assume that 64% of the respondents are not married to financial professionals.

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