Jun 7, 2012 | 21st Century Business, Business, charity, D&O Insurance, Employment Practices, Executive Liability, Risk Management
Emerging Economic Force and Litigation Target
To date, NPOs account for 9 percent of wages and salaries, 5.4 percent of U.S. gross domestic product and economic impact of nearly $280 billion according to 2010 data by the National Center for Charitable Statistics (NCCS). NPO’s are continuing to grow at an incredible rate; in fact, the number of NPOs has grown 30 percent to 1.5 million over the past decade.
The tremendous growth NPOs have experienced has not come without a cost. With the recent recession and changes in the legal setting, NPO’s have now become the prime target for Plaintiffs, lawyers and regulators.
Chartered For Good
NPOs are inherently good and are formed to serve the public interest. NPOs are organized much like a private entity with a board of trustees or directors overseeing the different operations. The directors and officers are expected to demonstrate loyalty and to act honestly and in good faith in the interest of the NPO. With all the responsibility directors and officers have, they can often times find themselves in the middle of potential litigation and very vulnerable to economic loss.
Beyond Employment Claims: Here Come the Regulators
It used to be, that NPOs had to deal with the all the claims regarding discrimination, wrongful termination, sexual harassment and others, but the floodgates have been opened and NPOs face a whole new barrage of claims. Perhaps the greatest obstacle standing in the way of the NPOs is the Foreign Corrupt Practices Act (FCPA) which basically requires thorough diligence and accurate book-keeping and internal controls among many things. Defense costs, civil and criminal fees and penalties involving an allegation of a FCPA violation can be very costly and burdensome and could threaten the long-term capability of an NPO.
With recent scandals and the financial crisis, many NPOs are being sued and are dealing with several different allegations. One of the recent allegations that several NPOs faced, is the Madoff bankruptcy trustee, who was seeking millions of dollars in “clawback” investment return recoveries.
Bad Press And Donor Actions
Recently the Central Asia Institute and its executive director and board member were under scrutiny for allegedly misusing funds that were supposed to be setting up more than 140 schools in Pakistan and Afghanistan.
Managing The Risks
The risks mentioned above, may or may not be mentioned in the specific D&O liability policy but one thing is for certain, the legal landscape for NPO’s is changing drastically and it is well worth the time and money for NPOs to consult with their insurance brokers to review their D&O liability policies.
Blog post summarized from Advisen Management Liability Journal, December 2011, “Plaintiff Bar Takes Aim: Nonprofit Organizations”
Apr 26, 2012 | 21st Century Business, Business, Cybercrime, Executive Liability, Finance, Government Policy, Risk Management, Social Media, Technology Issues
UTC is sponsoring an event hosted at Diversified Insurance Group offices. Details follow:
Cyber Risk – Management Responsibilities and Strategies!
Data and network security breaches have dramatically increased the liability exposures for all companies. Recently the Utah Department of Health announced a data breach concerning Medicaid claims involving nearly 800,000 client names, addresses, birthdates, Social Security numbers, physician’s names, tax identification numbers, etc. Come hear insurance and risk management experts discuss how breaches like this impact companies, from immediate costs like complying with state notification laws and crisis management to potential long-term financial consequences such as credit monitoring expenses, liability claims and damage to reputation. In addition, the panel of presenters will review insurance/risk transfer solutions available to help protect your company’s balance sheet.
Spencer Hoole, Managing Partner, Diversified Insurance Group
John Campos, Vice President, Diversified Insurance Group
Mickey Estey, Managing Director, OakBridge Insurance Services
For more information on becoming a member of UTC, please contact UTC Membership Directors or call (801) 568-3500.
Thursday, May 3 8:00 a.m.- 9:30 a.m.
Diversified Insurance Group
136 East South Temple
Salt Lake City
$0 – UTC Members
$30 – Non-UTC Members
Apr 16, 2012 | 21st Century Business, Benefits, Business, Executive Liability, Finance, Government Policy, Insurance Carrier
SouthCoast Medical Group had long provided health insurance to its employees the conventional way, paying premiums to an insurance company that covered medical claims. Then in January 2011 the 65-doctor practice with offices in and around Savannah, Ga., opted to take on more of the risk itself.
SouthCoast thought it could save money by self-insuring, a strategy typically used by much larger companies. Today it pays directly for the medical care of the 280 staffers and family members on its plan, setting aside the cash it would have spent on premiums to cover claims and paying an administrator to process them. To limit its risk, the group also purchased “stop-loss” insurance that would kick in after any individual’s medical bills exceeded $100,000.
The approach is common for corporations with thousands of employees, where the cost of care and the attendant risk is spread out over large numbers of people. For small employers, though, one car accident or organ transplant can push expenses far above the expected level. Still, with premiums for traditional policies continuing to rise, small businesses are increasingly ready to roll the dice. Some 20 percent of companies with 50 to 199 workers self-insured in 2010, up from 14 percent four years earlier, according to a Rand Corp. analysis commissioned by the U.S. Department of Labor.
. . .
Self-insured plans are governed by federal law and not states, which typically oversee health insurance. Some regulators fear that insurers attempting to avoid state taxes on insurance premiums and skirt state laws requiring minimum benefit levels will offer plans that are self-insurance in name only. One way they can do that is with stop-loss policies that start paying out at very low levels, after as little as $10,000 in claims, which sharply reduces the risk companies face. If “the employer is not in fact bearing the risk and the insurance company is, then the states take a look,” says Sabrina Corlette, a researcher at the Georgetown University Health Policy Institute. New York and Oregon already forbid insurance companies from selling stop-loss insurance to groups with fewer than 50 employees, and California’s insurance commissioner wants to outlaw the sale of certain stop-loss policies to small businesses.
Self-insuring appeals to employers because dollars not spent on medical care stay in the company instead of flowing to the insurance carrier’s bottom line. The approach also gives businesses more detailed information about how their workers use health care. Claims data, which insurers are often reluctant to share, can help companies tailor plans and wellness programs to improve workers’ health by helping them quit smoking or lose weight.
For small employers, self-insurance programs can bring unexpected problems. In its first year of self-insuring, SouthCoast faced a spike in major claims that ate up 60 percent of its reserves. When the company’s stop-loss policy came up for renewal, the premiums more than doubled, to $250,000, because of the costly claims, even after SouthCoast agreed to take on an additional $25,000 of risk per employee. The total cost to SouthCoast—including claims, stop-loss coverage, and administrative fees—jumped 25 percent, says Chief Financial Officer Gary Davis. Traditional insurance, though, would cost double what the company spent last year, he estimates. “You have to keep your eyes open that it’s a risk,” says Davis. “One out of every five or six years, you’re going to have a bad year.”
Insurers offering stop-loss policies sometimes protect themselves with what the industry calls “lasering.” That’s when they raise the dollar amount the employer must pay before stop-loss kicks in for certain workers deemed to be high-risk—which can shift even more cost to employers. The practice can be “devastating” to small businesses, says Carl Mowery, a managing director in consultancy Grant Thornton’s compensation and benefits practice. Employers pay more up front for guarantees that they won’t have sick workers carved out later on, but Mowery says small businesses should insist on that protection to avoid being overwhelmed by catastrophic claims. “A premature baby who has a lot of health issues could be a million-dollar claim in a single year,” he says. “That could be twice as much as [small companies] pay in health premiums altogether.”
Any benefits from self-insurance don’t materialize overnight, cautions Sam Fleet, president of AmWINS Group Benefits, a wholesale insurance brokerage in Charlotte. “You need an engaged employer, and it’s not a one-year savings,” he says. Fleet says small companies drawn by the promise of lower costs may not fully grasp the risk involved. “What scares me is there are a lot of people out there that recommend self-funding to employers,” he says. “It’s really, really important that you understand what you’re getting into.”
Full Businessweek Article can be found HERE
Apr 13, 2012 | Business, Cybercrime, D&O Insurance, Employment Practices, Executive Liability, Finance, Insurance Carrier
Some Segments Experiencing Modest Firming but No Uniform Market Hardening
For the Property insurance market, 2011 was a challenging year, with insured global catastrophe losses totaling $108 billion. Revisions to catastrophe modeling tool RMS 11.0 is also putting upward pressure on rates. Catastrophe-exposed accounts saw rates climb an average of 5%-10% in Q4 2011, with many accounts experiencing increases in the 10%-15% range – a trend that has continued through Q1 2012. While Willis expects rates for catastrophe risk to continue to climb throughout 2012, abundant capacity and the lingering weak economy have tempered upward pressure on a broader level.
In primary/umbrella Casualty lines, more than 75% of insureds are seeing modest rate increases on renewal, driven by gradual increases in revenues and rating exposures.
Key Price Predictions for 2012
- Non-CAT risks: Flat
- CAT-exposed risks: +7.5% to +12.5%
- General Liability: Flat to +7.5%
- Umbrella: +2.5% to +7.5%
- Excess: Flat to +7.5%
- Workers’ Compensation: +2.5% to +7.5%
- Auto: Flat to +10%
- Directors & Officers: -5% to +5%
- Errors & Omissions: Flat to +5% with good loss experience; +10 to +20% with poor loss experience
- Employment Practices Liability: Flat to -5%
- Fiduciary: Flat to -5%
Flat to -5%; more competitive for first-time buyers
Information excerpted from Yahoo!Finance