By: Janet Srock, AAI, CISR, Commercial Lines Account Manager
When it comes to insurance, stability and reliability are necessary to provide a sense of security to insured individuals and financial institutions. Here in North Carolina, our Insurance Commissioner and the Department of Insurance (DOI) monitor the financial condition of insurance companies that conduct business within the state. The DOI ensures that insurance carriers have sufficient assets to pay claims and to fulfill their fiduciary responsibilities and obligations to the state’s policyholders. If a carrier does not meet these requirements, it is considered insolvent, based on a regulation known as the Financial or Solvency Regulation.
How are insurance companies regulated?
- Companies become licensed to transact business only after proving to the DOI that they have enough capital and reserves to meet the North Carolina legal requirements.
- The DOI reviews and analyzes both quarterly and annual financial statements that are filed by the insurance companies. With this review, the DOI can determine which carriers are not meeting the requirements and indicate warning signs of financial positions that need to be addressed and improved.
- The DOI periodically conducts financial audits of insurance companies licensed to transact business in North Carolina.
- If the DOI sees a “troubled company” (one that has developed financial problems), the DOI will monitor it and require corrective actions. A “troubled company” sometimes becomes insolvent if it is unable to return to financial health. When this occurs, the Commissioner of Insurance takes on the role of the “liquidator,” and is responsible for paying claims out of available company assets to the extent possible.
There are two non-profit guaranty associations in North Carolina: the North Carolina Life & Health Insurance Guaranty Association (for life insurance, health insurance and annuities) and the North Carolina Insurance Guaranty Association (for property and casualty insurance). These guaranty associations protect North Carolina policyholders from severe financial loss and delayed claim payments if an insurance company becomes insolvent. There are limits on how much each guaranty association will pay per claim and in total (per policy and per policyholder).
Each licensed insurance company in North Carolina is required to be a member of one of the guaranty associations, which obtain funds from two sources: 1) assessments paid by solvent member companies and 2) remaining assets of insolvent insurers.
All 50 states and Washington, D.C., have guaranty associations, which are just another way our industry protects itself and our policyholders. Because the insurance industry is so well connected and regulated, policyholders can be confident that they are protected for the future.
Just a Reminder: The Form F in North Carolina, which outlines the risks for obtaining a policy through a non-licensed insurance company, states that “In the event of insolvency of the insurance company, losses under this policy will not be paid by any State insurance guaranty or solvency fund.”
By: Janet Srock, AAI, CISR, Commercial Lines Account Manager
With all of the news these past few weeks regarding the bombings at the Boston Marathon, it is a relevant time to discuss how insurance is affected by acts of terrorism. First, it is most important to note that many insurance policies exclude coverage for damages as a result of acts of terrorism. At the time this blog was written, it had not yet been determined whether or not the Boston Marathon bombings were declared an act of terrorism as defined below, as situations have to meet very specific criteria. Even if on the surface, an event seems to be an obvious act of terrorism, this may not be the case.
Below is a list of the five things everyone should know about the additional, and oftentimes overlooked, risks that acts of terrorism can bring upon your family or business.
- What Is Terrorism? Insurance policies have a very specific definition of terrorism, the understanding of which being critical for determining what acts are considered to be terrorism during coverage determinations. Terrorism is defined by the following ISO definition: “a violent act or an act that is dangerous to human life, property or infrastructure that is committed by an individual or individuals and that appears to be part of an effort to coerce a civilian population or to influence the policy or affect the conduct of any government by coercion.”
- How Do I Know If Terrorism Has Occurred? Certified Acts of Terrorism are acts that are certified by the Secretary of the Treasury, in concurrence with the Secretary of State and the Attorney General of the US, to be acts of terrorism pursuant to the federal Terrorism Risk Insurance Act (TRIA) of 2002. In order to be considered a “certified act of terrorism,” the act must have been committed by an individual(s) as noted above and the total loss must exceed $5,000,000. The Reauthorization Act of 2007 changed this to include acts by persons with no foreign affiliation. Additionally, the program trigger increased to $100,000,000 in 2007 and remains so today. This act is extended through Dec. 31, 2014.
- Does My Insurance Cover It? As noted above, many policies have what is called a Terrorism Exclusion, meaning that, should a cause of loss be deemed that of terrorism, your losses resulting from that act are not covered. However, you can request that your policy includes coverage for terrorism, but that typically requires payment of additional premium.
- How Does It Work? An insurance company must pay a deductible before federal assistance becomes available. This deductible is based on a percentage of direct earned premiums from the previous calendar year and has increased to 20 percent as of 2007. The insurer is also responsible for 15 percent of the loss above the deductible amount. Losses that are covered by the program are capped at $100 billion above this amount and Congress is to determine procedures and the source of funds to pay for losses in excess of $100 billion. For example: a commercial lines direct written premium for 2011 was just under $154 billion excluding auto (not part of TRIA under the 2005 extension); so the deductible was about $31 billion, and we would be responsible for the 15 percent of the loss exceeding that deductible.
- What Do I Do If Faced With A Potential Terrorism Loss? Losses resulting from acts of terrorism should be treated just like losses from other, more standard, perils such as natural disasters. Before a loss, be sure to conduct a thorough inventory of your belongings. After a loss, call your insurance company to report any losses. They will then work to determine whether or not your loss was due to a true act of terrorism, as defined above, and whether or not that loss is covered.
Acts of terrorism are tragic events. Ensuring that you are making educated decisions regarding your coverage options can help alleviate some of the tragedy after the event occurs. Insurance companies nationwide want consumers to make educated decisions to reduce the financial turmoil caused by the statement “I thought I had coverage for that.”
By: Tosha Revell, Benefits Consulting Account Manager
One of the first rules of life many of us are taught is that we should “do unto others as you would have them do unto you.” This is an especially important rule in business dealings. It is a litmus test for how we should be communicating with others in both a business environment and our personal lives.
The insurance industry, to some, has unfortunately turned into a culture where trust can sometimes be overlooked for a good price, and consumers should always be on the lookout for scams. As a member of the insurance community, I, and many of my coworkers, apply this golden rule while communicating with customers. We believe that trust is a huge part of a successful business relationship, and one cannot build trust without respect.
As we build more relationships with more clients, we hope to change how consumers view insurance and the companies who handle their policies. Every individual who works at an insurance agency most likely has a policy of their own, and those of us who abide by the golden rule understand exactly how it feels to be a customer of our own products, and how we would want to be treated.
One of the ways we work to exemplify this rule is by providing friendly courteous service without pressuring customers to buy the products we are selling simply for profit or personal gain. Instead, we work to make options available that will enhance and complement a person’s lifestyle and reflect their needs. The goal is to provide the appropriate products and services that are best suited for the customer. These types of behaviors promote stronger business relationships, trust, and can benefit both the customer and the company in substantial ways.
Money – Who needs it? Well, we all do – large corporations, small businesses, families, seniors and future generations.
Insurance carriers use money, or their insurance premiums, as their investments in the future: claims, administrative costs, revenue for stockholders’ equity and profitability. A.M. Best is an insurance-based firm that specializes in reviewing and researching insurers. Based on this research, the firm determines how financially profitable a carrier is and how vulnerable they are in comparison to other insurance carriers.
All carriers are subject to review by both their peers and A.M. Best to determine solvency, profitability and long-term financial stability. A.M. Best scores these carriers by assigning grades:
- “Secure” ratings:
- A++, A+ (Superior)
- A, A- (Excellent)
- B++, B+ (Good)
- “Vulnerable” ratings:
- B, B- (Fair)
- C++, C+ (Marginal)
- C, C- (Weak)
- D (Poor)
- E (Under Regulatory Supervision)
- F (In Liquidation)
- S (Rating Suspended)
As part of the insurance industry public knowledge commitment, A.M. Best will report carrier upgrades and downgrades to insurance commissions, on the firm’s website, in publications and on social media sites. Every consumer will want to check the financial capacity of the insurer who writes their risk(s). Franchisors and vendors will also want to verify that their interests will be protected by a strong, financially viable carrier. The bottom line is that everyone benefits from a strong, financially sound carrier vetted by their peers and A.M. Best.
Many of our carriers are at the best rating with A.M. Best including Federal Insurance Co., AutoOwners Insurance Co. and Berkshire Hathaway.
Try locating your carrier on A.M. Best’s website to see its rating and financial strength. You can also view the checks and balances in place to keep the future of the insurance industry on a profitable horizon. Our carriers are being monitored by stringent guidelines, and SIA Group is proud to provide our clients with the best carriers. Feel free to contact your account manager with any questions regarding the quality of your carrier.
To find out more about A.M. Best and the services they provide, visit www.ambest.com.
If your company handles critical assets such as customers’ personal data, intellectual property or proprietary corporate data, you are at risk of a data breach.
One of the most overlooked business risks in today’s society is cyber liability. Cyber Liability comes into play when secured information gets released into a non trusted environment. Too often, business owners ignore this risk it until it is too late because cyber liability is not on a business owner’s radar as an immediate threat. As a business owner, having this attitude toward cyber liability can lead your business to experience severe financial losses. If you are not properly protected, the technology that your company relies on to conduct business can be the very same reason for your losses. Failing to put security measures and an infrastructure in place can damage a company’s reputation, productivity and bottom line.
A data breach can result from something as simple as an innocent mistake: a misplaced laptop, smartphone or computer files in an unsecured location. According to the Computer Security Institute, about 2 in 5 companies experienced a significant cyber security issue in a recent 12-month period. The cost of a data breach increased to $7.2 million in 2012, up from $6.8 million in 2009. Data breach incidents cost U.S. companies an average of $214 per compromised customer record (The Ponemon Institute 2011). As a business owner, this risk is not to be taken lightly.
Some precautions you can take to prevent risk exposure are:
- Identify security risks and put an appropriate security program in place.
- Ensure that your cyber risk management plan is a formal, documented plan that includes a description of all systems used based on their function, the data stored and processed, and the importance of the data to the organization.
- Review the cyber risk plan on an annual basis and update it whenever there are significant changes.
- Never give sensitive information, like social security numbers or credit card numbers, out over the phone unless you can verify the identity of the person on the other line.
- Shred all credit reports and other personal data before disposal.
- Educate employees about phishing and pharming scams on the Internet. Remind them not to click on anything that looks suspicious or seems too good to be true.
- If your company does not have an IT department, hire an outside company to set up the proper security measures for your computer network.
- Always monitor credit reports and other financial data.
Many employers waited on the election results to begin implementing the health care reform’s requirements—and now many employers are confused about what they need to do to get their business in compliance. If you are one of those employers, there are ways to get yourself “caught up” on the changing healthcare world.
As an employer, the first step is to evaluate your organization’s movement in complying with the health care reform law. If you are one of the many employers who chose to hold off on making plan decisions or preparing to comply with the Health Care Reform laws, you may find yourself needing to catch up on the efforts involved to meet the upcoming requirements.
There is quite a bit that goes into understanding the Patient Protection and Affordable Care Act, and in order to feel comfortable with the upcoming changes, it is important to consider whether you will or will not continue to provide health insurance coverage as a benefit to your employees. As an employer, you may feel that not offering coverage may be the cheaper and easier way to deal with Health Care Reform, but you may be surprised by the outcome of taking this route.
Here are a couple of items to consider when deciding whether you will be offering coverage or not:
- Are you a large group employer? (Do you employ 50 or more full time employees, including full time equivalents?)
- Do you employ more than 30 full time employees? (Employees that work 30 or more hours per week)
- Is your employer-sponsored health insurance coverage deemed unaffordable? (Is the employee’s share of premium more than 9.5% of your employees’ W-2 income or is the plan’s share of the total allowed cost of benefits less than 60 %?)
These questions are essential in determining the strategy you will need to pursue because beginning in 2014, employers with 50 or more full-time equivalent employees may be subject to a penalty tax if they do not offer health care coverage to all full-time employees (and dependents). These employers can also be subject to a penalty if they do offer coverage, but the coverage is unaffordable or does not provide minimum value.
SIA Group has the resources available to guide you through these difficult questions. Contact us today for further clarification on the “Patient Protection and Affordable Care Act.”
General contractors all know how important it is to obtain certificates of insurance for subcontractors they use. However, as relationships between general contractors and subcontractors develop and strengthen, it is not uncommon for general contractors to become more lax with obtaining proper certificates for each and every job and making sure that those certificates meet the requirements of their workers’ compensation carrier. Improper certificate administration can add significant liability onto the general contractor.
In a recent case heard by the North Carolina Court of Appeals, Jose Clemente Hernandez-Gonzales v. Jimmy Worrell d/b/a Worrell Construction, the Court issued guidance regarding the liability a contractor assumes when a subcontractor is used on a project. This case illustrates the “liberal” interpretations of existing statutes the N.C. Industrial Commission often use.
The crux of this case, when it comes to the general contractor’s liability, results from the fact that the general contractor relied upon a subcontractor’s certificate obtained from a previous job. This exemplifies the importance of proper certificate administration and obtaining a new certificate for every job, regardless of the relationship you have with the subcontractor. Because of this mistake, the general contractor was found to be liable to the same extent as the subcontractor and, should the subcontractor default on medical and/or expense payments to the employee, would be responsible for those same payments.
This court case can impact general contractors’ insurance costs as well, even if there is no accident or workers’ compensation claim to be paid. For example, a contractor’s workers’ compensation policy premium is determined by the estimated payroll for their employees. Should a general contractor utilize an uninsured subcontractor, they will then be responsible for that subcontractor’s estimated payroll as well. At the end of the workers’ compensation policy period during the final audit, if the general contractor cannot provide job-specific certificates on all subcontractors utilized during the policy year, they will owe additional premiums to their carrier. More than likely, these will be costs that the contractor did not originally budget for.
We hope this illuminates the importance of proper certificate administration. There are many different tools and resources available to assist in the management of this risk. For more information, please feel free to contact one of our construction experts James Kirkpatrick at email@example.com or 800-682-7741.
How many times have you heard that phrase in your life? I have heard it so many times that I now turn a deaf ear to it. Why wouldn’t I be safe? It is easy for adults who are completely capable of taking care of themselves to ignore this phrase. But when the tables are turned and you are advising your children, it is easy for this to become the parent mantra. “I love you, honey and BE SAFE!” Throughout the years I have said this to my children countless times. Fully expecting my children listen.
Even including children, who would intentionally not be safe? What exactly does “be safe” mean? The obvious answer is that it means putting oneself in safe surroundings (including work environments) and situations, but what does this really mean? What does being safe really entail? There are many factors that feed into a person’s safety and the more focus placed on these factors, the better equipped we’ll be to put this famous phrase to use. Here are a few important tips on how to be safe:
- Being safe is an attitude – being safe always starts with the individual and is always based on attitude.
- Complacency can be public enemy #1 – Complacency brings about the feeling that nothing bad will ever happen to you – accidents only happen to other people. If you have the attitude that nothing bad will ever happen, you will close your eyes to the hazards that may surround you, which in turn may close your mind to warning signs. When you close your eyes to safety hazards or stop listening to the warning signs, you won’t know how to protect yourself because you won’t know about any surrounding dangers. Staying informed and alert is the first step in staying safe. With the right information and the right level of awareness, you will know where hazards are so you can avoid them and stay safe.
- Safety – Don’t leave home without it – Before you leave for work, ask yourself a few questions. Are you well rested? Is your mind on work or are you preoccupied with other issues? Are you leaving for work with enough time to get you where you need to go without having to break some laws? The answers to these questions can help you determine if you are already putting yourself in harm’s way. Getting to your work area – When youarrive at your work area, be it a machine or cubicle, take a moment to prepare yourself to work safely. Do not only look at your personal work area, but take a look at the surrounding work area, too. Is the area free of hazards? Ask yourself what you have to do to be safe right now and throughout the day. Think about the jobs you will do and what you must do to complete those jobs safely.
Think safe, work safe. Yeah, those are catchy slogans, but more importantly, it is a way to remember that you need to keep your head in the game. If you are thinking about safety, then you will be working safely.
With Isaac quickly approaching the coast, the topic of disaster preparedness is more important than ever. Here at SIA Group, we are huge advocates for being prepared for the unexpected so that when disaster strikes, you can more effectively and efficiently handle the situation. Need a refresher course on disaster preparedness? Check out the links below to our previous posts on the topic. As always, feel free to give us a call if you have any questions. Our thoughts are with our neighbors down south as they prepare for the storm.