Buyers Face Challenges Galore

Corporate insurance buyers, who had been on cruise control foryears during the long, soft market, are facing a host of challengesin what promises to be another very difficult year ahead. Among thehurdles they need to clear:

The hard market. Risk managers, CFOs and CEOsare going to have their hands full trying to contain soaringinsurance costs, as well as compensate for shrinking limits andcoverage, at a time when the heat is on to control expenses withthe economy still in the doldrums.

Alternative markets. As tempting as it might beto tell insurers to take a hike and do it yourself, self-insuringmight be easier said than done with fronts hard to find,reinsurance unavailable or unaffordable, and captive domicilesgetting so many queries that they can cherry pick the bestprospects.

D&O: With the spotlight shining brightly onbalance sheets and corporate officer/director behavior, riskmanagers of public companies will be working overtime to keepexposures under control while securing adequate, affordableinsurance coverage in case shareholder lawsuits hit.

Terrorism insurance. To buy or not to buycoverage–that is the question. Insurers must offer it under federallaw, but buyers don't have to take it if the price is deemed toohigh. But can buyers afford to turn coverage down? Talk about aD&O exposure!

Tort reform. Insurance buyers, who often findthemselves at the mercy of plaintiff attorneys filing costly,time-consuming and reputation-damaging class-action suits, mustlobby hard in Congress for tort reforms. Even with aRepublican-controlled Senate, this won't be a slam-dunk.

Employment practices liability. Risk managersmust get their human resources houses in order, or else they willfind themselves in the courthouse.

Employee benefits. How long can employersabsorb soaring costs for health insurance and prescription drugs?They are already hitting workers with higher premiums andco-payments. Some might be tempted to dump it all in the laps ofemployees by establishing defined contribution plans, which theymight get away with in a very poor job market.

Any one of these or a dozen other worries could keep riskmanagers up at night in 2003. Check National Underwriter'smonthly “Corporate Insurance Buyers Report” for news, trends, tipsand analyses to help firms cope. The next one up is Feb. 3,focusing on the reinsurance market.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, January 6, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.