|Legally Speaking -- Faulty construction does not justify emotional damages|
|Homeowner arena tough for insurers|
|Top ten time-wasters in corporate America|
|Managing office conflict|
|How insurers rank by size|
|Challenge proceeds on Florida rate hikes|
|A.M. Bestís outlook is mixed|
|Insurance CEOs protest Bermuda tax dodge|
|Piles of files? Escape paper clutter|
|Effective leaders must be decisive|
|Managing e-mail abuse at work|
|Florida insurers vulnerable to storms|
Speaking -- Faulty construction does not
justify emotional damages
Plaintiffs who sued a contractor for emotional distress after their construction project went bad won a victory in lower court. On appeal, however, thc court ruled that their distress did not warrant monetary compensation.
The National Association of Independent Insurers argued in a friend of the court brief that awarding monetary compensation for non-economic damages in a simple breach of contract case would set a dangerous precedent.
The case, Erlich v. Menezes, involved a dream home that turned into a nightmare when the roof developed leaks in every conceivable location. While the lower court found the contractor negligent, it did not find fraud or intentional damage.
Neverthess, the court awarded the plaintiffs $406,700 for repairs plus an additional $100,000 for emotional distress, $50,000 for pain and suffering, and $15,000 for lost wages. NAII claimed that the award for emotional distress was the first such award in California for a simple breach of contract and would set a bad precedent. NAII argued that "adding an emotional distress component to recovery for construction defects" would cause housing prices to soar.
In overturning the decision, the California Supreme Court found that because there was no fraud, the award for emotional distress was not appropriate.
arena tough for insurers
The past decade has been no picnic, and the next decade is also likely to be lean for underwriters of homeowners insurance according to a paper prepared by the American Insurance Association (AIA). While the demand for homeowners insurance has grown consistently, the impact of recent catastrophes and vigorous competition have driven the industry to a negative 16.2% underwriting return in the past decade.
The AIA predicts that the growth of the internet as a delivery system and the convergence of financial services will continue to squeeze property insurers. The industry also needs the flexibility to adjust exposures for weather-related risks.
The AIA paper cited a number of factors that will shape homeowners insurance in the near future.
Demographic changes will increase home ownership but much of that increase will occur in regions with high risks of weather-related catastrophes. Mitigation and risk management will become increasingly important.
Deregulation and market-based pricing of insurance services will help the industry but those factors will require education of the public, regulators and state legislators.
The internet and e-commerce will continue to intensify competition, focusing attention on issues such as security and the legal validity of electronic documents.
Urban markets will create special opportunities as a strong economy promotes urban revitalization, high employment and lower crime rates.
time-wasters in corporate America
1. Management by crisis
2. Telephone/e-mail interruptions
3. Inadequate planning
4. Attempting too much
5. Drop-in visitors
6. Ineffective delegation
7. Personal disorganization
8. Lack of self-disciplikne
9. Inability to say no
Source: Time Trap by Alec Mackenzie
Conflict may be unavoidable but it cannot be ignored, especially in todays workplace. To address conflict among employees, follow these steps suggested by Colleen McKenna:
Summarize the problem. Let others know that you hear their frustrations.
Seek common ground. Find a point on which all can agree and start negotiating from there.
Validate feelings. Acknowledge the reason a person feels anger or resentment.
Give advice. State suggestions on ways to resolve the conflict calmly.
rank by size
Homeowners insurance is written by more than 1,400 companies in the United States. State Farm has the lead with 23.4 percent of the market. The two largest homeowners writers (State Farm and Allstate) share one third of the market. The five largest homeowners writers share one half of the market.
The top ten homeowners writers and their market share are:
1. State Farm 23.4%
2. Allstate 11.2%
3. Zurich 7.1%
4. Nationwide Group 4.1%
5. Citigroup 3.5%
6. USAA Group 3.3%
7. Safeco 2.4%
8. Chubb 2.1%
9. American Family 1.7%
10. CGU Insurance 1.7%
The ten most costly disasters in U.S. history have occurred during the past decade, led by Hurricane Andrew in 1992 and the Northridge Earthquake in 1994.
In 1998, catastrophe losses reached an estimated $10.1 billion for the industry, substantially exceeding the average loss for the decade.
The Insurance Service Office estimates that earthquake coverage rates should double or triple for homeowners in parts of Missouri, Illinois, Tennessee, Arkansas, Kentucky and Indiana who live along the New Madrid Seismic Zone. Seismologists warns that an earthquake with a magnitude of 6.0 or higher could strike in the New Madrid fault in the next 15 years.
proceeds on Florida rate hikes
Never one to back off from a challenge, Insurance Commissioner Jim Nelson has asked a court to throw out a Florida arbitration panels approval of a 96% windstorm pool rate hike. The increase would affect nearly half million Florida homeowners and levy rate hikes as high as 268% in parts of Dade County and 380% in Santa Rosa County.
Nelson rejected the rate hike as arbitrary and unconscionable and sought a court hearing in December on the fairness of the computer models used to determine the size of the rate request.
The arbitration panels decision cannot be appealed but Nelson is asking a Circuit Court judge to keep the hike from going into effect based on what he calls a significant error. While state law requires the panel to rule on challenges within 90 days under state law, the ruling actually took nearly six months.
Nelson, who will resign his post later this year to run for the U.S. Senate, has vowed to use every legal means available to protect Florida homeowners from this unconscionable rate hike.
The commissioner is also proposing legislation that would authorize the Department of Insurance and state university system to develop computer models that would be more comprehensive than those that are currently the industry standards.
outlook is mixed
In its annual review on insurance trends, A.M. Best Company noted that global competition, changes in the financial industries and the Internet will have a major impact on the industry in the coming year. The annual review offers a mixed picture for insurance company ratings in the near future.
Following are some of the factors A.M. Best predicts will be significant:
Life insurers will most likely be affected by the financial-service modernization legislation approved last year. Increased competition will force companies to work harder to differentiate their services.
Property-casualty insurers will continue to feel the impact of globalization. Excess capacity in the global market will keep premiums low and tighten margins for these businesses.
Personal-lines companies will be hard pressed by e-commerce and Internet-based competition. Independent agents will remain essential for most in this segment but price competition by virtual companies will be fierce.
On the bright side, A.M. Best believes the circumstances will offer opportunities for small companies or those that find new ways to deliver services.
Insurance CEOs protest Bermuda tax dodge
A group of insurance executives including The Hartford Insurance Group and Chubb Corp. are lobbying Capitol Hill to fight what they believe is unfair competition within the industry. At issue are the insurance and reinsurance companies that have moved to Bermuda or have been merged into holding companies based on the off-shore island.
Bermuda-based companies have full access to the U.S. capital markets and business opportunities but avoid U.S. income tax except for the one percent excise tax. They also avoid taxes on investment income and other revenues that U.S. companies must pay.
A spokesman for Hartford argued that the non-tax sheltered insurers are at a competitive disadvantage. While U.S. insurers are taxed at more than 30% on several levels, the Bermuda-based insurers manage to dodge everything but the one percent excise tax. Furthermore, they do not have to pay income tax in Bermuda.
Some of the insurers that have come under the Bermuda umbrella include Cignas personal lines, NAC Re, Everest Reinsurance Company and White Mountains Insurance Group.
U.S. insurers maintain that the government could dispel the tax inequity by addressing the offshore tax advantages or lowering the tax rate for U.S. property and casualty insurers to even the playing field.
of files? Escape paper clutter
If the top of your desk looks like Florida after a hurricane, youre courting disaster. Being disorganized wastes time and destroys focus. Organizational consultant Debbie Williams (www.organizedtimes.com) offers these tips for getting control of your files before they control you.
Sort through stacks on your desk. You cannot file anything until you know what is there. Toss anything you havent used in the past year including business papers, personal notes and publications. Keep only those items that will be useful for tax purposes or future business reference.
Use files. Before you file, though, remember that 80 percent of what you file will never be looked at again. Be discriminating and organize your files into two different types: archives (legal and tax papers) and current (client information, receipts and reference materials).
Use organizers. An accordion folder with letters or numbers lets you place each document in a place where it will get systematic attention. At the beginning of each month, review all the papers in your file for attention.
Use digital aides. The folders on your computer take up virtual space and you look at them only when you need them. Digital calendars have reminders. Other software can remind you of important deadlines.
leaders must be decisive
To take your business where you want to go, you must be able to delegate quickly, make choices and be willing to accept the responsibility is something goes wrong. Making even a wrong decision in a timely fashion is better than indecision because one who waivers or is reluctant to make choices inadvertently communicates a lack of concern about a problem.
If you are to be a strong decision-maker, remember these tips:
Dont put off decisions. Procrastination does not improve the situation, wastes time and destroys your image as a leader. If someone above you has to have a part in the decision, keep your employees informed. Silence will only encourage them to imagine worst-case scenarios.
Do your research, then decide. Make the best decisions you can based on what you know. If you have to make a decision that is unpopular in the short run but the best choice given the circumstances, accept that role. Effective leaders are not competing in a popularity contest.
Stay with your decision. If you later see that you made a poor decision, analyze what went wrong so you can do better the next time. Accept the consequences and dont lay blame elsewhere.
e-mail abuse at work
There are legal as well as business reasons to address the misuse of e-mail in the workplace. Last year, Chevron Corporation paid $2.2 million to employees who were offended by a vulgar interoffice e-mail. Consider these pointers for establishing an e-mail policy.
Investigate software. Many programs will scan the content of e-mails to filter out profanity, pornography or language that could put your company in court.
Write a policy. Update employee handbooks an send out memos to remind workers that e-mail is owned by the company and subject to scrutiny. Be clear about the definitions of inappropriate e-mail.
Deal with personal use. Your employees may have a legitimate need for personal use of e-mail. Make it clear that such use should be limited to lunch time or breaks.
insurers vulnerable to storms
Many Florida insurers are unprepared for the next major hurricane according to a report issued by A.M. Best. The result could lead to a crisis similar to that which followed Hurricane Andrew in 1992.
At greatest risks are several Florida-only insurers that rely heavily on reinsurance and handle some of the riskiest business in the state. Best cautions that those companies might not survive a catastrophic storm.
Hurricane Andrew rendered ten insurers insolvent and prompted some national insurers to pull their Florida business. As a remedy, the state established a common insurance underwriting association that relied largely on debt financing to pay claims.
The state has managed to decrease the number in its insurance association by providing incentives to private insurers to take the customers. However, Best notes that some of the private insurers are "meagerly capitalized."
On a more positive note, building and safety codes in the state have improved dramatically and leading companies have lessened their catastrophe exposure while still writing insurance in the state