The Courage to Create
When I think of the courage to create, and the accompanying traits of passion and perseverance that define Risk All Stars, I can’t help but think of Renee Crow of Kimpton Hotels and Restaurants.
Like a number of our Risk All Stars winners, Crow manages risk at a company that is experiencing rapid growth. Rapid growth brings opportunity. But rapid growth, as we know, carries risk.
When Crow joined Kimpton, the company owned 24 properties. Now, it owns more than 60.
Although customer service underlies so much, there is a laser focus on it in the hospitality business. Much is expected and very little is forgiven.
The organizations these professionals manage risk for are stronger because of their courage.
According to Crow, Kimpton sets high customer service standards, but it was also facing legal snares from guest and employee interactions gone bad. She devised a training program that enabled Kimpton staff across the country to re-enact various customer service scenarios and learn from them.
Crow humbly states that she did what she did because she’d seen enough bad training approaches to know better. But I say what she did was innately brilliant.
She took a risk, or a negative, and created employee engagement across the board in seeking solutions. This is an era when employee disengagement is reported to be at high levels across many industries. The cost of risk at Kimpton has plummeted as a result.
The creative courage of Risk All Stars winner Kris Finell of Rytec Corp. also comes to mind. Finell possessed not merely the courage to create, but also the moxie to confront.
Rytec, another fast growing company, is a manufacturer of high-speed industrial doors. You can easily see the risks and the results when something goes wrong.
Rytec salesmen were in the habit of removing industrial door safety features at the behest of customers. Finell, practically brand new in her role as risk manager, put a stop to it.
Waivers that allow customers to remove safety features on Rytec doors are now a thing of the past.
Finell also had the courage to remove a broker that was friends with one of her supervisors. The relationship wasn’t working for her vision, so she vetted a number of candidates and chose one with the right fit for her.
Talking to these Risk All Stars reminded me that it’s not enough to see something; you have to say and do something. The organizations these professionals manage risk for are stronger because of their courage.
2015 Risk All Stars
Angeli Mancuso: On a Mission to Revitalize (+Responsibility Leader)
Manager, Employee Health & Safety, Cottage Health System
By getting the board of directors behind a goal to decrease patient-handling injuries, Angeli Mancuso has improved employees’ quallity of life.
Timothy Fischer: With Military Precision (+Responsibility Leader)
Tim Fischer was given nine months to address the risk implications of a sizable spin-off.
Tim Kirsch overhauled his company’s safety mission, protecting drivers on the road while slashing workers’ comp claims costs.
The urgent need for a creative solution inspired one Risk All Star to create a unique excess casualty program with benefits on several levels.
Jennifer Cable’s degree is in opera performance. She is also a risk management maestro.
Tracey Gasper: Service Centered (+Responsibility Leader)
This risk manager’s savings for her company can be measured in the millions.
Elizabeth Queen: Building a Unified Travel Program (+Responsibility Leader)
With an existing program now spread enterprise-wide, traveling employees have an improved experience, while the company enjoys lower costs and reduced risk.
One Risk All Star took on the daunting challenge of quickly relocating a sprawling headquarters, and without a single moment of down time.
David Brooks quantifies and manages risks across every industry and product offered by XL Catlin.
Brent Cooley: Shakespeare Minus the Tragedy (+Responsibility Leader)
A series of potentially high-severity events drove the push to launch a safety organization that will help keep theater students safe for years to come.
New to her position in risk management, Rytec’s Kris Finell set about correcting just about everything she could get her hands on.
Albert Fierro: The Fruits of Long, Hard Labor (+Responsibility Leader)
With decades of expertise in captive insurance, Albert Fierro was the ideal person to help AARP rein in its rising workers’ compensation costs.
Adding role playing to training efforts helped Kimpton Hotels’ risk manager teach employees how to avoid mistakes that drive up the cost of claims.
Treasury now drives risk management throughout Meritor’s business units, thanks to the efforts of Todd Chirillo.
Florida’s insurance pool members can rest easy that, thanks to Jeannie Garner’s initiative, they can bounce back in the face of severe storms.
When staff reductions and organizational change made strong leadership imperative, Amanda Lagatta rose to the challenge.
Buyers Beware: General Liability Outlook May be Shifting
The soothing drumbeat of “excess capital” and “soft market” to describe the general liability (GL) market is a familiar sound for brokers and buyers. Emerging GL trends, however, suggest the calm may not last.
Increasing severity of GL claims may hit some sectors like a light rain at first, if they have not already, but they could quickly feel like a pelting thunderstorm in others. A number of factors could contribute to the potential jump in GL prices for certain industry segments or exposures, possibly creating “micro” or niche hard markets in the short-term, and maybe even turning the broader market over the longer-term.
“There are trends we’re seeing that will play out slowly. Industries that carry more general liability exposure will and have been hit first and hardest, but it won’t apply across the board initially,” said David Perez, Senior Vice President and Chief Underwriting Officer, for Liberty Mutual Insurance’s National Insurance Specialty operation. “There is ample capital in the market today, which allows a poor performing account to move its policy frequently from carrier to carrier. Poorer performing classes, however, will likely face increased pricing for GL policies and a reduction in capacity.”
The good news for buyers is that they can take action today to lessen the impact these trends and the evolving market may have on their GL programs.
David Perez on the state of the GL market.
Medical and Litigation Trends Drive Severity
One factor increasing claim severity is the rising cost of health care, driven both by greater demand and by medical inflation that is growing faster than the Consumer Price index.
The impact of rising medical costs on commercial auto is well-known. Businesses with heavy transportation exposures are finding it more difficult to obtain coverage, or are paying more for it.
That same trend will impact general liability, just on a slower and more fragmented basis.
“In light of these trends, brokers and buyers should seek to understand how effectively their current or potential insurers defend GL claims, particular in using evidence-based medicine to assess and value the medical portion of a claim, and how they can provide necessary care to claimants while still helping clients control their total cost of risk.”
— David Perez, Senior Vice President & Chief Underwriting Officer, National Insurance Specialty, Liberty Mutual Insurance
“It takes longer for medical inflation to register through the tort system in general liability than it does in auto liability (AL) because auto claims are generally resolved more quickly,” Perez said. “But the same factors affecting severity in AL also exist in GL and as a result, it’s foreseeable that we will not only see similar severity trends in GL, but they may in fact be worse than we’ve seen in commercial auto.”
Industries with greater exposure to severity in general liability claims should be the first wave of companies to notice the impact of medical inflation.
“Medical inflation will drive up costs across the board, but sectors like construction and product manufacturing have a higher relative exposure for personal injury lawsuits.”
The impact of medical inflation on the GL market.
Beyond medical inflation, two litigation trends are increasing GL damages. First, plaintiffs’ lawyers are seeking to migrate the use of life care plans—traditionally employed only for truly catastrophic injuries—to more routine claims. Perez recalled one claimant with a broken thumb and torn ligaments who sought as much as $1 million in care for the injury for the rest of his life.
Second, the number of allegations of traumatic brain injuries (TBI) in GL claims is growing. It can be difficult to predict TBI outcomes initially and poor outcomes can be expensive and long tailed.
“In light of these trends, brokers and buyers should seek to understand how effectively their current or potential insurers defend GL claims, particular in using evidence-based medicine to assess and value the medical portion of a claim, and how they can provide necessary care to claimants while still helping clients control their total cost of risk,” notes Perez.
Changing Legal Landscape
Medical inflation and litigation trends are not the only issues impacting general liability.
Unanticipated changes in court interpretations of policy language can throw unexpected pressure on GL pricing and capacity.
Courts sometimes issue rulings interpreting policy language in a manner that expands coverage well beyond the underwriter’s original intent. Such opinions may sometimes have a retroactive effect, resulting in an immediate impact on not only open, but also closed cases in some circumstances.
Shifts in the Marketplace
In addition to facing price increases, GL brokers and buyers will be challenged by slightly shrinking capacity due to consolidation and repositioning among carriers in the marketplace. “Some major carriers have scaled back their GL writing, resulting in a migration of experienced senior management. As these executives leave, they take their GL expertise and relationships with them, resulting in fewer market leaders and less innovation,” Perez said.
“Additionally, there are new carriers coming into the business that may not have the historical GL loss data to proactively identify trends or the financial strength and experience to effectively service their GL customers and brokers. Both trends make it important for brokers and buyers to work with an insurer that is committed to the GL market and has the understanding and resources to help better manage risks impacting customers.”
Last year saw a high level of mergers and acquisitions in the insurance industry. Buyers should take advantage of that disruption to re-evaluate their needs and whether their insurers are meeting them. Or better yet, anticipating them.
What’s a Buyer to Do?
Buyers—and their brokers— should look to partner with insurers that can spot emerging trends and offer creative solutions to address them proactively.
What should buyers and brokers do, given the trends facing the GL market?
“Brokers and buyers should value insurers that have not only durability and a long history in the general liability business, but also a strong risk management infrastructure,” Perez said. “Your insurer should be able to help you mitigate your specific risks, and complement that with coverage that works for you.”
Beyond robust GL claims and legal management, Liberty Mutual also provides access to one of the insurance industry’s largest risk control departments to help improve safety and mitigate both claim frequency and severity.
In addition, notes Perez, “Even if a company has a less than optimal loss history in general liability, there can be options to provide adequate coverage for that company. The key is to partner with an insurer that has the best-in-class expertise, creativity, and flexibility to make it happen.”
By working closely with their insurers to understand trends and their potential impacts, brokers and buyers can better prepare for the possible GL storm on the horizon.
To learn more about Liberty Mutual’s general liability offering, visit https://business.libertymutualgroup.com/business-insurance/coverages/general-liability-insurance-policy.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.