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MISS: LONG FLIGHTS

For many attendees, this year's excursion involved traveling from the East Coast. Some, for better or worse, came with toddlers. Though these parents may have considered themselves good risk managers, planning for this trip a month in advance, mapping out the possible risks and pitfalls, and covering every base, it still wasn't enough in some cases. In the case of Risk & Insurance® Associate Editor Michelle Kerr, three hours into the first leg of the flight was all it took before her tot's sensitive stomach took over, leaving mom shell-shocked. Sure, she'd brought a change of clothes for the little guy. But for herself? No such luck. She did her best to hose down in the lavatory. Lemon-scented wet wipes helped minimize the damage. OK, so she took a hit, but she resolved to plan better in the future.

Less than an hour into the second leg of the flight, junior bit off a bit more of his lunch than he could chew, and was ill yet again, but to a lesser degree. The next several hours passed with relative ease. The weary travelers were preparing for descent--hurrah! Then, without warning, they were blindsided yet again, proving that lightning can strike not just twice but thrice. Cursing her apparent bad karma, our editor sat in shock and horror, doused from neck to knees, reeking until she reached her hotel.

Mother Nature has a curveball with your name on it. When she's ready to hurl, there's not much you can do, at least not in coach at 30,000 feet. Even the most diligent and thorough risk managers can have the wind knocked out of them by events unforeseen.

HIT: FACE TIME

With the exception of its opening, the exhibition hall's traffic was sparse. Aon may have been the exception with its Risk game promotion attracting a constant crowd. One executive with a large third-party administrator said his team was planning to evaluate its exhibition-hall investment with an eye to what kind of return it should expect next year in New Orleans. Although many of the larger insurers saw traffic down from what they even expected, the RIMS investment was, on balance, worth it because of the meetings outside of the conference hall.

"Our people met with the folks they wanted to outside of the convention center, and we believe it may have been, in that regard, even more effective than we thought," the executive said. "The people who were here were ready to do business."

MISS: N.I.M.B.Y. NAMBY-PAMBY

A vexing issue for buyers was that of "contract certainty," or why risk managers can't receive their insurance policies when they go into effect. Broker and carrier CEOs at the Leadership Panel Luncheon agreed that it was a problem for the industry--but not a problem at their individual firms. Skeptical risk managers in the audience continued to shake their heads in disagreement.

Diane Labrador, risk manager at Intel Corp., said delays on her D&O policies were legion. Nine months after the issue date, her general counsel was doing a legal review and asked for copies of all the policies. She was missing about half of them. A call to her insurers and brokers found that they were able to produce the documents in a week. Now Labrador's put the screws to her brokers and insurers, and the process is improving.

HIT: SCREWS AND WIDGETS

Great will be the day when policyholders strengthen their facilities to withstand hurricanes and other catastrophes, when their insurers recognize this effort and give them better terms, and when models actually account for it, too, so that insurers can then get credit from their reinsurers for having a "cleaner" portfolio.

As it stands now, though, the 2006 hurricane models will upset the "apple cart" for insurers. That was the message of FM Global's Mike Burke. With some new models showing loss projections in hurricane territory jumping up 40-something percent, the balance between risk appetite and these projections is becoming skewed. Scrap the models, said Burke. Policyholders and insurers can choose to not have losses by buttressing their facilities.

It works. Burke had proof. FM Global did a study of about 476 properties post-Katrina. More than 300 were considered "clean" locations--places that had implemented the mutual's recommendations for loss prevention ahead of time. These locations had an average loss of 37 cents per $100 of coverage. For the unclean locations, that figure was $2.30.

MISS: OBSESSION WITH DISASTER

Despite the levity surrounding the usual trinkets, games and other booth enticements, the undercurrent on the show floor was decidedly grim. At the booth of Har-Bro, a general contractor, attendees spun the "Wheel of Misfortune" to see which catastrophe would determine their "prize." Fire, wind, water, mold, flood, hurricane? In the post-Katrina world of RIMS, every third booth was hawking pre- or post-disaster services.

The buzzwords this year were "crisis management," "emergency preparedness," "business continuity" and "disaster recovery." These services have been available for years, explained one exhibitor, but now they're in demand. That's because Katrina and Wilma shone a harsh spotlight on just how underprepared most companies were to handle real catastrophe. Now executives in the C-suite are breathing down risk managers' necks, demanding to know, "What are we doing about this?"

HIT: GROUP HEALTH BYPASS

Employers have made great strides in injury reduction over the years. Injury frequency is down, way down. Since 1997, there's been a 32.4 percent reduction in occupational illness and injury. Yet workers' comp costs just keep rising. Medical costs are to blame. They make up more than 50 percent of the total cost of comp claims, eclipsing indemnity costs. Enter managed care guru Heidi Mader of Aon Consulting and her radical suggestion: Bypass the standard workers' comp managed care network model altogether.

According to Mader, group-health models offer attractive alternatives. Some group health PPO networks now have comp capability and are operational for workers' comp in some states. Organizations utilizing these networks could see additional PPO savings of up to 30 percent, thanks to discounts negotiated by these networks. Of course, the workers' comp industry is justifiably nervous.

MISS: ROLL (LAST YEAR'S) TAPE!

A good portion of the Leadership Panel Luncheon could've been lifted wholesale from the transcript of last year's gathering of broker honchos, despite some new names and faces.

Quality . . .blah, blah, blah (We're working on it). Transparency . . . blah, blah, blah (It's a good idea). Integrity . . . blah, blah, blah (We're all model citizens of the insurance community). Contingent commissions . . . bad, bad, bad (No, of course we don't take them/pay them--anymore). The favorite quote of the luncheon came from Pat "The Terminator" Gallagher, on how Arthur J. Gallagher deals with corporate evildoers: "If you do something that breaches the integrity of our organization," said a steely Gallagher, "I will kill you."

HIT: RUMORS WON'T DIE

The health-care industry session had to compete with the hoot, hollers and Magnum P.I. theme music from the session next door. What session was it next door? Who cares? The topic in the health-care session, medical malpractice, was relevant enough to beat out the rowdiness. It started with the moderator, Willis Senior Vice President, Tim Metke, warning the audience and other speakers: "The press may be with us, so watch what we say."

Just what was there to say about med mal that would stop the presses? Rates were looking good, terms and conditions were loosening? Major carriers were looking settled? Or as Metke and Transatlantic Re Senior Vice President Paul McKeon warned, that softening was on the way?

All good news for buyers. But the real news had to deal with hurricanes affecting casualty rates on one hand, and the pesky rumor that Zurich and Travelers might merge.

MISS: MISSING MONEY?

At the Leadership Panel Luncheon, the common observation was how adept panelists were avoiding answers.

Ellen Vinck, the outgoing RIMS president who is vice president of risk management at BAE Systems Ship Repair Inc. in San Diego, asked what happened to the millions of dollars that companies had been paying in contingent commissions. "I didn't receive a corresponding reduction in my premium," she said.

Panelists claimed they neither pay nor receive contingent commissions anymore. But no one had an explanation about where the money went. In frustration after these answers, Vinck asked crowd members to raise their hands if they thought the issue of contingent-commission payments was over. Only three out of nearly 1,000 raised their hands.

HIT: THREE R'S

Safety committees are one example of how employers use teams to manage risk. But the concept has evolved, and now some organizations are using the idea to take risk management to a new level. No longer are teams or committees utilized primarily for postaccident analysis and other functions. This new breed of teams is proactive, working to wipe out risk and pinch off incidents before they happen.

At California's Mission Linen, for example, the company has developed teams at each of its plants. The teams all utilize an assessment process developed by Liberty Mutual. It's called Residual Risk Retention, or R3, and it can be applied to nearly any type of operation with workplace injury or illness risks. It uses mathematical formulae to quantify the level of risk inherent in each task. The genius of it is that it's simple. You don't have to be an engineer or an actuary to use or understand it.

MISS: LUNCHEON BUNT

Baseball, the Great American Pastime, is filled with storied legend. So it would not have been unreasonable to ask of keynote luncheon speaker, Anthony Avitabile, director of risk management for Major League Baseball, to regale the audience with stories of the Old Ball Game. Risk management itself may not be terribly exciting, but working with 30 teams, each home to goodness knows how many really, really well-paid sluggers and pitchers, should at least produce some anecdotes about trying to insure one of these guys who's in the habit of getting hurt. Instead, Avitabile chose to use a PowerPoint presentation, discussing how he helped create a risk management plan and insurance program that all the teams accepted, which ultimately saved them millions. Sure, that's helpful, but not particularly captivating.

July 1, 2006

Copyright 2006© LRP Publications