As the recovery process continues following the Minneapolis Interstate 35W bridge collapse Wednesday night, many of us have given it more than a passing thought during our commutes via roads, rails, bridges and tunnels. Naturally the collapse is prompting questions concerning the quality of the nationÃ¢â‚¬â„¢s transportation infrastructure. The insurance industry plays a vital role in helping individuals and businesses recover from an event like this. It underpins the economic security of individuals and businesses and helps sustain a number of related industries across the country. But maintaining and strengthening the existing outdated transportation infrastructure is a mammoth task that will require public and private input. For insurers, the potential liability exposure is enormous and certainly something to think about. Check out I.I.I.Ã¢â‚¬â„¢s publication Ã¢â‚¬Å“A Firm FoundationÃ¢â‚¬ for further information on how insurers support the economy.
Employee back problems are frequent and costly. ThatÃ¢â‚¬â„¢s the upshot of a new study from the Workers Compensation Research Institute (WCRI). The report analyzes data from 14 large states (AR, CA, FL, IL, IN, LA, MA, MD, MI, NC, PA, TN, TX, and WI) from claims with an average of three years’ experience. WCRI found that nearly 14 percent of medical costs were paid to treat workers with back conditions involving disc conditions or radicular symptoms (e.g. radiating pain into the limbs). Nonspecific low back pain accounted for about one in seven claims and 11 percent of medical payments. Conditions involving the neck accounted for nearly 4 percent of claims and nearly 8 percent of medical payments. WCRI also found that shoulder or arm conditions Ã¢â‚¬“ both inflammation due to overuse as well as sprains and strains Ã¢â‚¬“ accounted for a significant share of medical costs and claims. For example, sprains and strains represented close to 7 percent of medical payments and nearly 6 percent of costs. Another interesting stat, carpal tunnel conditions were diagnosed in about 1 percent of cases, but accounted for more than 3 percent of medical costs. WeÃ¢â‚¬â„¢re wincing just thinking about it. Check our further I.I.I. information on workers compensation and workplace safety.Ã‚
Two reports published yesterday by ratings agency A.M. Best on U.S. captives and risk retention groups (RRGs) point to continuing growth in these alternative market mechanisms, even amid soft market conditions. A number of trends are highlighted, but one interestingÃ‚ nugget is that medical malpractice accounts for a significant portion of business for both captives and risk retention groups. According to the reports, medical malpractice continues to be the dominant line of business for domestic captives (close to 40 percent), while medical malpractice (claims made) accounted for 43 percent of RRG business in 2006. Which leads us to conclude that despite greater stability in the price of medical malpractice insurance and some improvement in the tort environment, doctors are not looking to return to the traditional market in a hurry. Check out I.I.I. updates on captives and alternative risk transfer mechanisms and on medical malpractice online.
The filing of a lawsuit against Con Edison less than a week after the New York City steam pipe explosion underscores the importance of liability insurance for businesses everywhere. According to reports, the womanÃ¢â‚¬â„¢s lawsuit accuses Con Edison of negligence, saying the utility failed to properly maintain the pipe that ruptured outside her offices in mid-town Manhattan and is seeking unspecified damages. At least 30 people were injured and one died as a result of the July 19 explosion. Litigation risk is one of the major exposures facing U.S. businesses. A recent study by the Pacific Research Institute put the total annual cost of tort litigation to the economy at $865.37 billion, or $9,800 per family. ItÃ¢â‚¬â„¢s worth noting that this figure includes direct as well as indirect costs. The study also estimates that America wastes $589 billion each year on excessive tort litigation. Check out further I.I.I. info on the liability system.Ã‚
Word on the street is that immeasurable risks are the biggest threat to the industry, according to a poll of executives at this week’sÃ‚ International Insurance Society (IIS) annualÃ‚ seminar in Berlin. Some 41 percent of attendees identified immeasurable risks as the biggest concern. Next up was inadequate human capital with 27 percent citing it as the biggest threat. New market opportunities were the top issue for 24 percent, while 21 percent cited competitive pricing and adequate profitability. Regulation challenges were identified as the biggest threat by 20 percent of those polled. The results are interesting given a recent survey of international risk managers by the Economist Intelligence Unit (EIU) (see May 3 posting). After climate change, respondents cited least confidence in how their organizations were handling terrorism risk and human capital risks. It strikes us that terrorism risk is a good example of an immeasurable risk, and human capital risks are clearly an ongoing concern for both insurers and their clients. How do we address these concerns going forward? What are your thoughts?Ã‚ For more on international insurance,Ã‚ check outÃ‚ theÃ‚ I.I.I.Ã¢â‚¬â„¢s updated International Insurance Fact Book online.
California is the second leading state for earthquakes, with an average of over 160 earthquakes per year. The majority of the most costly earthquakes in U.S. history occurred in California. So a new study indicating that recent reforms to the stateÃ¢â‚¬â„¢sÃ‚ workers compÃ‚ system would result in a substantial drop in the potential WC losses arising from earthquakes is welcome news. Based on the assumption of 15.6 million employees working statewide, the WorkersÃ¢â‚¬â„¢ Comp Insurance Rating Bureau of California study found that the expected annual loss for the stateÃ¢â‚¬â„¢s WC insurers would be slightly over $180 million, or $11.56 per employee, compared with $418.7 million, or $26.93 per employee, in a similar 2002 study. The updated study also projects the total statewide WC loss in a one-in-100 year quake would be $4.2 billion, and $6.3 billion for a one-in-200 year event. Looking at the 20 counties with the greatest exposure, the study puts Los Angeles County at the top of the list, with 4.25 million employees. While the drop in costs is a positive development, we note that WC is a compulsoryÃ‚ coverage for most businessesÃ‚ in CA and that earthquake exposure continues to be significant. Check out I.I.I. earthquake facts & stats, workers comp infoÃ‚ and how insurers support the CA economy online. Further info is also available from the Insurance Information Network of CaliforniaÃ‚ (IINC).Ã‚
Legislative solutions to extend the Terrorism Risk Insurance Act (TRIA) will be the focus of a hearing scheduled this Thursday before the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises. As with many issues in our industry, there are different viewpoints on what any extension legislation should look like. While there is general agreement a continuing federal role is key to ensuring that terrorism risk insurance remains available to those businesses that want and need the coverage, the devilÃ¢â‚¬â„¢s in the detail. Key points under discussion right now include: the length of any proposed TRIA extension; trigger/deductible levels and potential extension of coverage under TRIA to include domestic acts, group life losses and chemical, nuclear, biological and radiological (CNBR). Check out I.I.I.Ã¢â‚¬â„¢s additional information on terrorism risk online.Ã‚
Since we blogged a few days ago about terrorism insurance take-up rising in the U.S. two further reports have been published confirming the trend of improving availability and affordability of coverage under the Terrorism Risk Insurance Act (TRIA). First, a RAND Corp study finds that TRIA effects are most positive for a conventional attack, with expected costs to taxpayers in this scenario lower with TRIA than without. Then a study from Guy Carpenter points to an emerging global aviation market issue Ã¢â‚¬“ whether losses to aircraft hulls, passengers and third parties arising from weapons of mass destruction (WMD) should be government risks or commercial market risks. As airlines are required to have passenger and third-party liability insurance cover to receive landing rights, the cancellation of coverage could threaten to bring about a complete shutdown of the aviation industry. While the U.S. government currently provides U.S. air carriers with passenger and crew liability, hull war risk and third-party liability cover, the report notes that since 2002 most other government schemes have been withdrawn and replaced by commercial cover. I.I.I. has further aviation information available online.Ã‚ Ã‚
As debate continues on the renewal of the Terrorism Risk Insurance Act (TRIA) beyond 2007, latest industry stats again support the programÃ¢â‚¬â„¢s success. A new report from Marsh shows that U.S. businesses are buying more terrorism insurance than ever, in spite of the increasing cost of coverage. Take-up rates for the coverage have climbed steadily, from 27 percent of U.S. businesses in 2003, to 59 percent at the end of 2006. Almost two-thirds of large U.S. firms and 60 percent of mid-sized firms bought the coverage in 2006, up slightly from 2005. The median terrorism insurance rate was $47 per million of total insured value in 2006, a 9 percent increase on 2005. Financial institutions were the biggest buyers of terrorism insurance (81 percent), followed by real estate and utility firms (77 percent) and educational institutions and health care (76 percent). In terms of region, the Northeast still had the highest take up rate for coverage (66 percent), followed closely by the Midwest (63 percent). Check out further I.I.I. terrorism risk information online.
A hearing down on Capitol Hill today titled Ã¢â‚¬Å“Liability Reform and Small BusinessÃ¢â‚¬ highlights the growing litigation risk faced by small businesses and the need for good liability risk management and adequate insurance. The hearing before the House Small Business Committee includes testimony from the president of the U.S. Chamber Institute for Legal Reform (ILR). The ILR has just released two studies showing the impact lawsuits can have on small businesses. According to the studies, the tort system in the U.S. cost small businesses $98 billion in 2005. The threat of lawsuits also alters the way small business owners make decisions, with 62 percent saying they make business decisions to avoid lawsuits. These decisions can have significant effects on the business, such as making products and services more expensive, or making a product or service unavailable to customers. For more information on insurance and risk management for businesses, check out I.I.I.Ã¢â‚¬â„¢s new insuring your business website.Ã‚