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The Dangers of Low-Cost Insurance

Posted on September 13, 2011 by lsingleton

In the insurance world, you truly get what you pay for.

Companies that specialize in providing low-cost insurance policies have grown in number and popularity in the last few years. Online services and build-your-own-policy features have convinced millions of customers they’re getting a good deal.

But it doesn’t take long for some customers to find out the deal might not have been as great as they thought.

You Do Get What You Pay For
“My husband and I switched to [a popular online insurance company] because of their apparent low rates,” an anonymous customer posted on automobileinsurancereview.com. “On our first renewal, they raised our premiums over 10%. When I called to ask why, I was told you get a discount the first time you sign up, but then every renewal is increased.”

It’s true that every insurance company gets complaints, and you have to take anonymous, online posts with a grain of salt. But you can’t expect to get superior coverage and full service at a discounted rate. In fact, that’s the biggest danger of doing business with low-cost insurance providers. Most customers aren’t aware of the gaps in their coverage until they file a claim and are denied coverage.

Is It Better To Pay More?
But doing business with a large insurance company isn’t always the answer either.
“I had [a major insurance provider's] auto insurance for 25 years with a perfect driving record,” David Martin posted on a corporate complaint site. “Yet they kept raising my rates, and when asked, refused to lower them. I also had a homeowner’s policy with the same company until recently. Found that they had been charging me 40% more than
other comparable major carriers, and my agent never caught the mistake after six years.”

David probably had great coverage, but as he pointed out, he was paying too much. And his agent was no help since his loyalties were with the insurance company rather than the customer.

So What’s The Answer?
Independent insurance brokers work with many insurance providers and can shop for the best coverage at the best prices to find a real deal for their customers. And, instead of being loyal to the insurance company, a broker looks out for his customers and lets them know when a better policy or a better price is available.

Article by Dave Ramsey

How To Choose The Best Health Insurance

Posted on September 13, 2011 by lsingleton

It is very difficult to evaluate what Health insurance plan is the best fit for you if you don’t have a basic knowledge of insurance industry lingo and terminology. An insurance provider can describe the various insurance plans ad nauseam, but unless you understand the technical terms, you are not likely to be any wiser by the end. The following are some of the most commonly used and important Health insurance terms:

Exclusions: The services that will not be covered under a Health insurance policy. Exclusions vary per provider, but cosmetic surgery, experimental treatments, or home care would be examples of common exclusions.

Co-payment: The fixed out-of-pocket amount that you will pay for each medical service or prescription before the Health insurance provider begins to pay for the service or prescription. This amount will also vary per policy, but usually range from $10 to $50.

Co-insurance: The percentage of the total cost that you will pay for a medical expense. Co-insurance may be in lieu of a co-payment or in addition to it. It also varies per policy, but a common arrangement is 20% patient payment and 80% insurance provider payment.

Deductible: The amount of out-of-pocket money you will pay before any health care expense is paid by the Health insurance provider. The annual deductible can be anywhere from $500 dollars to thousands, depending on what type of insurance plan you choose.

Coverage Limits: The pre-set monetary amount that a Health insurance plan will cover. Once you incur medical expenses past the limit, you will be responsible to pay the entire amount out-of-pocket. (Note: the Obama health care reform includes phasing out annual coverage limits by setting annual limits no lower than $750,000 this year, $2 million in 2012, and completely prohibiting them in 2014.)

Premium: The monthly payment amount that you pay to your Health insurance provider to continue coverage.

Out-of-Pocket Maximums: The point where your payment obligation ends and the health insurance company pays all future covered medical costs. These maximum out-of-pocket expenses can be applied to a particular benefit section or the all the policy benefits.

How to Determine What Health Insurance Plan Is the Right One

Health insurance coverage should be based on individual need and monetary resources. Cost is obviously a huge consideration, but luckily consumers have a lot of health care plan options. The cost of a health care plan will vary based on the benefits it provides and what insurance company is providing it. Exclusions, coverage limits, deductibles, etc. will all impact the monthly premium amount.

At the same time, a policy is virtually worthless if it fails to cover your expected medical needs; for example, if you expect to become pregnant, but the coverage excludes maternity, it probably will not be a very beneficial plan for you. There might also be certain known medical needs, such as prescription medications, mental health needs, immunizations, home health, therapy, eyeglasses, or preventative care, that you would want to ensure are covered in whatever Health insurance policy you choose. Always understand the benefits a plan offers before signing on the dotted line.

Lastly, you should make sure that the plan is offered by a reputable Health insurance company. It is also beneficial if the company has a professional insurance agent available. The insurance agent can best apprise you of all of your health care coverage options, help you determine what plan best encompasses your financial and medical need, and answer any policy-specific questions you might have.

September is National Preparedness Month

Posted on September 13, 2011 by lsingleton

September is National Preparedness Month, providing an opportunity for agents to reflect on helping their clients be proactive. Disaster planning is also an agency’s greatest defense in the event of an emergency though. Has your firm taken the necessary precautions to survive and succeed during a natural disaster?

“We have quite an extensive recovery plan that addresses all of the possible contingencies,” said Vaughn Graham, president of Rich and Cartmill, Inc. of Tulsa, Okla. “The truth of the matter is that the plan we have in place is an evolving plan that is changed and updated and [reviewed] periodically.”

Graham recalls days before Christmas three years ago when an ice storm knocked out power to a quarter million Oklahomans for more than 10 days. Rich and Cartmill was out of power for 36 hours until brought back to life with generator services and facility trailers reserved from Agility, a company headquartered in Oklahoma that specializes in business continuity and disaster recovery solutions to small and midsized businesses.

“Since then we have installed generations at our Tulsa headquarters that [are] capable [of running] our agency management network,” Graham said. “Our preparedness plan was very successful, and we judge that by comments from our customers and the continued level of service that our customers expect from us.”

Agility recommends agents use a simplified approach to disaster recovery planning, according to Scott Teel, the company’s marketing director. Teel explains they have developed several tools to address disaster, including a 10-step checklist to preparedness:

Assess your risk, both internally and externally.
Assess your critical business functions.
Prepare your supply chain.
Create an emergency management plan.
Back‐up your data.
Create a crisis communication plan.
Assemble an emergency kit.
Review your insurance coverage.
Plan for an alternate location.
Test your plan.

“Taking one step at a time is all you have to do,” Teel says. He recommends Prepare My Business, Ready.gov, FEMA and the U.S. Small Business Administration—all government-oriented sites that address business preparedness. These sites provide downloadable PDF checklist resources that agents can email to customers or corporate clients.

“Every minute your operations are down, you’re losing money,” Teel says. “And every time a client loses money, that insurance firm increases their exposure. The more prepared the better.”

Loss of power, business blackouts and disturbed Internet and phone connections happen daily to businesses around the country. Graham said as he sees other Trusted Choice® agencies around the country deal with disasters of their own, he compares them to how they might affect his operations.

“In the event of a natural disaster, we provide availability,” Graham says. “We do our best to get our advice and council to our customers quickly.”
According to a press release, Agility is partnering with FEMA, the Ready Campaign and Citizen Corps for National Preparedness Month throughout September.

Earthquake Insurance Premiums by State

Posted on August 26, 2011 by lsingleton

An East Coast earthquake? Suffering damage from a seismic shift isn’t a risk many homeowners outside of California worry about.

Most standard homeowners, renters and business insurance policies do not cover damage from earthquakes — specifically, the potential losses from the shaking and cracking that can destroy a building and other property.

Nationwide, earthquake premiums written total $2,468,141,000 according to 2009 figures. Here’s a look at the extent to which individuals and businesses have purchased additional earthquake insurance protection. The figures include insurance written by state funds.

Rank State Direct premiums written in 2009 (thousands)

1. California $1,584,897
2. Washington state 134,970
3. Missouri 88,542
4. Tennessee 59,612
5. Oregon 53,777
6. Illinois 49,999
7. Kentucky 35,141
8. Florida 31,645
9. Indiana 31,161
10. South Carolina 30,515
11. Texas 30,264
12. New York 29,825
13. Utah 29,121
14. Ohio 26,665
15. Alaska 20,840
16. Arkansas 19,113
17. Mississippi 17,851
18. Nevada 17,708
19. Massachusetts 15,207
20. Georgia 13,713
21. Pennsylvania 13,303
22. New Jersey 12,417
23. Virginia 10,013
24. North Carolina 9,053
25. Louisiana 8,430
26. Colorado 8,351
27. Hawaii 7,878
28. Alabama 7,238
29. Arizona 6,774
30. Maryland 6,559
31. Michigan 6,265
32. Kansas 5,564
33. Connecticut 5,140
34. Oklahoma 4,845
35. Minnesota 4,242
36. Wisconsin 3,796
37. Iowa 3,629
38. Montana 3,460
39. Wyoming 2,902
40. Nebraska 2,385
41. Idaho 2,372
42. Rhode Island 2,218
43. New Hampshire 2,217
44. New Mexico 1,857
45. Washington, D.C. 1,782
46. Maine 1,428
47. West Virginia 1,352
48. Vermont 860
49. Delaware 747
50. South Dakota 440
51. North Dakota 329

Source: SNL Financial LC, Insurance Information Institute

Trusted Choice Agents Sponsor Regional Food Bank

Posted on August 19, 2011 by lsingleton

Trusted Choice independent insurance agents of Oklahoma are proud to be sponsoring the Food for Kids Backpack Program of the Regional Food Bank. Now through September 30 Trusted Choice insurance agents will be one of four sponsors to match contributions made to the Regional Food Bank. So for every dollar contributed the amount will be doubled up to $100,000.

The Backpack Program provides food for chronically hungry elementary school children over weekends and holidays when school programs are not available. With your help, these children will not have to go to school on Monday morning on an empty stomach.

Oklahoma Business Insurors is a proud Trusted Choice member.

Our Sister Company Enters Nation’s Top Tier

Posted on August 19, 2011 by lsingleton

Insurance Journal announces 10-year-old firm is now one of nation’s largest

Oklahoma City – Just 10 years after its founding, Oklahoma Agents Alliance is now one of the United States’ largest independent property/casualty insurance agencies, according to the August issue of Insurance Journal.

OAA entered the list at No. 87 and is one of only three Oklahoma-based companies named in the annual ranking. Insurance Journal bases the list on premiums written in the previous year, a standard benchmark for the insurance industry.

“It’s happened so quickly that I think many people will be surprised to see us on the list,” said Chris Torres, president. “We started in 2001 with just one member agency, but the success of our model has attracted more than 80 agencies from across the state to join us in creating a vibrant organization that allows our members to compete with even the largest national agencies.”

OAA’s mission is to establish a network of independent insurance agencies in Oklahoma owned in partnership with entrepreneurial-spirited individuals. Member agencies remain truly independent, making their own decisions and pursuing their own strategies. At the same time, OAA’s leadership forms relationships with national carriers, creating opportunities that were previously unachievable for most agencies in Oklahoma. OAA also provides member agencies advice and support, and negotiates bonuses and profit-sharing with partner companies like Travelers, The Hartford, Safeco, MetLife and others.

“Our growth rate has outstripped even our own optimistic early projections,” said Tony Caldwell, partner. “We have enjoyed an average annual compound growth rate of 31 percent over ten years, and that’s been through some of the hardest economic times the country has seen in recent memory.”

OAA expects to exceed $142 million in premiums this year, and Torres said they expect to break the $250 million mark by 2015.

“This achievement proves that the partnership model OAA uses is not only feasible but very successful for our member agencies, no matter their size or history,” Torres said. “We are proud to represent Oklahoma on the national insurance scene.”

Oklahoma Agents Alliance is a growing network of independent insurance agencies in Oklahoma. OAA offers growth opportunities to agencies that want to remain independent while also being able to compete with larger regional agencies and clusters. OAA is a member of SIAA, a national organization that writes in excess of $6 billion in combined premium value. OAA is among the largest writers of insurance in Oklahoma. Find us on the web at oaaonline.net.

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Not Owned, Not Covered, Not Good!

Posted on August 19, 2011 by lsingleton

As the fall approaches across the United States, millions of young people will embark on that great journey we call life on a college campus. Others entering their golden years and their families will consider the benefit of moving into an assisted living facility. Still others, uninterested in or unable to secure a home loan, will choose to move into an apartment or rental home.

What does each of the above circumstances have in common?

None of them own the home in which they are living—thus preventing them from purchasing a standard home insurance policy.

Yes, those individuals described above could find coverage for personal property or personal liability claims under the home insurance policy of someone else. For example, some policies will extend coverage to a student while living away attending school. However, reliance on someone else’s insurance is risky—coverage may be inadequate or nonexistent, depending on the terms of that policy.

If you’re one of the individuals described above—or feel responsible for someone that fits the description—wouldn’t you feel better knowing insurance coverage is in force?

Renters Insurance
Renters insurance is a generally used term to describe a policy designed for someone that does not own a home. Insurance carriers that sell renters insurance typically have their own rules to determine who is eligible. Many policies will offer both personal property (often called “contents”) and personal liability insurance.

Personal Property
Renters insurance is often marketed and sold for its ability to cover personal property. Many carriers focus on this function of the policy for psychological reasons. Why? It’s much easier for buyers to visualize the theft of or damage to personal property than it is to visualize a personal liability claim.

You can buy renters insurance at a limit sufficient to pay the cost to repair or replace damaged or stolen property. Some insurers allow buyers to choose to purchase coverage that will reimburse the cost to replace damaged property with a newer model—without deducting for depreciation. Others only allow buyers to buy insurance that will pay the actual cash value of the property, allowing the claims adjuster to deduct for depreciation. If available, the former option is preferable—many types of personal property, such as electronics and furniture, depreciate significantly.

Renters insurance may be sold on a “named” or “open” perils basis:
• If the former option applies, coverage is limited to causes of loss or so-called “perils” specifically named in the policy. Let’s say your TV burns in a fire. It likely will be covered because fire is a named peril. If the event causing damage to the property is not a named peril, than no coverage will apply. For example, if your furniture is damaged in a flood it probably won’t be covered because flood is not a named peril.
• If the open perils option applies, coverage is extended to any cause of loss or “peril” unless the event causing damage is specifically excluded. If available, this option is preferable, as you can never predict the event that will cause damage to your property.

Personal Liability
Many renters insurance policies also cover an insured’s personal liability. Let’s say you’re entertaining guests at a gathering at your apartment. A drink is spilled on the tile floor and someone slips and falls, causing serious bodily injury. As host, you could be found negligent for that person’s injury and made responsible for his or her medical bills. Without personal liability insurance, you would have to pay those potentially devastating costs out of your own pocket. Even worse, if a lawsuit were to arise, your personal assets also may be tapped to compensate that person for his or her injury. The types of bodily injury claims covered by your policy vary and should be reviewed carefully.

You also may be found personally liable for property damage caused to the space you are renting or to someone else’s property, such as a neighbor’s building. As with bodily injury, the types of property damage claims covered by your policy vary; again, review the coverage carefully.

Conclusion
Regardless of your living arrangement, choosing to live uninsured could prove financially devastating if your personal property is stolen or damaged. The same is true if you are responsible for someone’s injury or damage to his or her property. Call today and talk with a Trusted Choice® independent insurance agent for help in securing renters insurance for you or a loved one.

P/C Sector Steady, Life Industry More Vulnerable: A.M. Best Briefing

Posted on August 17, 2011 by lsingleton

Over the past few months, A.M. Best Co. has grown increasingly concerned with the heightened level of global economic uncertainty.

Continuing economic weakness in certain European countries and the debt crisis in the United States have elevated the risk profile of U.S. insurers. The hard-won agreement between Congress and the Obama administration to increase the U.S. debt ceiling averted a default by the U.S. government, but the deal falls short of erasing all uncertainty as to the credit quality of U.S. sovereign debt. Though A.M. Best does not employ a sovereign ceiling, sovereign debt downgrades are a factor taken into consideration when assessing the financial strength of an insurer.

Recent stress testing undertaken by A.M. Best Co., as detailed in the Best’s Briefing Sovereign Debt Pressure Spreads to Insurers’ Balance Sheets, considered the possibility of a sovereign rating downgrade, albeit more severe than what has occurred to date. But regardless of the severity, the luster of U.S. Treasury securities as a virtually risk-free investment has been tarnished. Nevertheless, they remain a necessary mainstay of insurers’ portfolios, especially for life companies. Meanwhile, broader macroeconomic concerns that were part of A.M. Best’s stress scenario loom as large as ever.

For property/casualty (P/C) rating units, the estimated impact of the economic stress scenario on balance sheet strength as measured by Best’s Capital Adequacy Ratio (BCAR) was an average decline of approximately 47 points. A.M. Best estimates that less than 2% of all P/C rating units potentially could have seen their ratings impacted by the stress scenario.

Stress testing had a more significant impact on life/annuity (life) BCAR ratios. On July 19, 2011, A.M. Best indicated that it was considering a revision in the rating outlook for the U.S. life/annuity sector to negative from stable. Given reports of continuing economic weakness, the likelihood of such a change in outlook in the near term remains elevated. A.M. Best will continue to review each company on a case-by-case basis and take rating actions accordingly.

Source: Program Business Insurance News

Drop in Workers’ Compensation Costs Reflects Recession

Posted on August 17, 2011 by lsingleton

The number of workers covered by workers’ compensation dropped by 4.4 percent in 2009, the biggest decrease in two decades.

Also, according to a report by the nonprofit National Academy of Social Insurance, employer costs for benefits fell by 7.6 percent to $73.9 billion in 2009, reflecting the overall decline in employment.

“As one might expect, when the Great Recession hit, employers paid less in workers’ compensation costs because there were fewer workers to cover,” said John F. Burton, Jr., chair of the panel that oversees the report.

Burton said that although the drop in employer costs represents the biggest decrease in the last two decades, benefits increased slightly by 0.4 percent to $58.3 billion, reflecting in part benefits provided in 2009 to workers injured in prior years.

The total benefits paid to injured workers in 2009 increased in 23 states and the District of Columbia while declining in the remaining 27 states, compared to the previous year.

Payments for medical care declined for the first time in a decade by 1.1 percent to $28.9 billion, although they continue to make up roughly half of total workers’ compensation benefits.

Employers paid a total of $73.9 billion nationwide for workers’ compensation with a cost of $1.30 per $100 of payroll, the lowest in the last 30 years.

A total of 4,551 fatal work injuries occurred in 2009, which is a 12.7 percent decrease from the number reported in 2008, and the lowest since 1992.

The report, Workers’ Compensation: Benefits, Coverage and Costs, 2009, provides data on workers’ compensation benefits for the nation, the states, the District of Columbia, and federal programs. The report has been produced annually by the National Academy of Social Insurance since 1998. NASI is based in Washington, D.C.

Key Trends

Key trends identified by the report include:

National Trends

Workers’ compensation programs in the 50 states, the District of Columbia, and federal programs paid $58.3 billion in benefits in 2009, an increase of 0.4 percent from $58.1 billion in 2008.
Medical payments decreased by 1.1 percent, to $28.9 billion, in 2009 but cash benefits to injured workers increased by 1.9 percent to $29.4 billion.
Costs to employers fell by 7.6 percent in 2009 to $73.9 billion. This is the largest percentage decline in employer costs since 1987.
Workers’ compensation covered an estimated 124.9 million workers in 2009, a decrease of 4.4 percent from the previous year due to the recession, which began in 2007. Aggregate wages of covered workers fell by 4.7 percent in 2009.
Measured as a percentage of the wages of covered workers, benefits paid to workers increased whereas employer costs fell in 2009. As a share of covered wages, employers’ costs in 2009 were lower than in any year since 1980.

State Trends

Between 2008 and 2009, the total amount of benefits paid to injured workers declined in 27 jurisdictions while the remaining 24 jurisdictions experienced an increase in benefit payments.
Among the 51 jurisdictions (including the District of Columbia), on average from 2008 to 2009, medical benefits declined in 27 states and cash benefits increased in 28 states.

Opinion: ObamaCare and the Great Recession Deliver One-Two Punch to Workers’ Comp

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Posted on August 6, 2011 by lsingleton

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By James Ryan, Executive Director of Sedgwick CMS

In the last several years, our nation has been in the throes of the worst recession since the Great Depression. While the Great Recession brought plenty of challenges for the workers’ compensation industry—including increased potential for fraud—during this time our country also underwent significant comprehensive health reform. These events have created unique challenges and significant uncertainty for the workers’ compensation industry.

In March 2010, President Barack Obama signed into law the Patient Protection and Affordable Care Act and the companion Health Care Education Reconciliation Act of 2010 (hereinafter referred to together as “ObamaCare”). Although the full effects of ObamaCare on the workers’ compensation industry remain to be seen, initially experts have seen it as a double-edged sword for medical costs.

Under ObamaCare, hospitals may have less of a need to cost shift to workers’ compensation since more people will be covered by insurance (by some estimates an additional 10 percent of the U.S. population or more than 30 million people). However, other providers may cost shift more to workers’ compensation due to cuts in Medicare reimbursement. Finally, as ObamaCare leads to new regulations in the health insurance industry, ultimately this may have a trickle down effect to the workers’ compensation industry as jurisdictions adopt similar regulations.

ObamaCare aside, the recession has presented its own set of challenges for the workers’ compensation industry. Employers, under financial pressure to reduce overall claim costs, are seeing a reduction in claim frequency but an increase in severity and duration. The potential to mitigate claim severity may be impacted by the unavailability of regular or light-duty jobs and the lack of available capital to settle claims. At the same time, medical treatment costs continue to increase and regulatory oversight is becoming more aggressive in some cases as jurisdictions look for their own increased revenue. Finally, risk management departments may be dealing with these challenges despite budget and staffing cuts to their own departments.

More Challenges, Less Revenue

Workers’ compensation insurers face similar challenges of increased claim severity, lack of some mitigation tools such as availability of regular or light-duty employment, continually escalating medical costs, and increased jurisdictional oversight. In addition, insurers may be dealing with reduced premium revenue as businesses negatively impacted by the recession cancel their policies or default on premium payments. Also, as employers struggle with their own finances during the recession, premium fraud is a potential concern. Finally, insurers may have seen the recession negatively impact their available reserves and their stock prices.

During the recession, workers’ compensation third-party administrators (TPAs) have seen a reduction in revenue due to reduced claim frequency while working to meet the needs of an increasingly demanding client base. The TPA industry is under pressure to maintain claim handling quality and reduce claim duration and costs for their clients despite reduced revenues and reduced availability of the aforementioned mitigation tools.

Suspicious Claims on the Rise

The recession presents the entire workers’ compensation industry with an increased risk of fraud as well. The increased number of layoffs caused by the recent downturn in the economy has insurance investigators watching for possible increases in spurious injured worker claims. According to a May 18 National Insurance Crime Bureau (NICB) Suspicious Claims Report, the number of suspicious workers’ compensation claims for first quarter 2011 was up 24 percent overall compared to the first quarter of 2010.

The NICB report indicated the largest trend of a reason to refer a workers’ compensation claim as potentially questionable was for Inflated Medical Billing, which had a 103 percent increase from first quarter 2010 to first quarter 2011. If ObamaCare does result in non-hospital medical providers attempting to cost-shift to workers’ compensation due to decreased Medicare reimbursements, instances of inflated medical billing could continue to increase.

According to the report, claimant fraud was the most prevalent reason to refer a claim, as potentially questionable with 477 instances. That was a 23 percent increase from first quarter 2010 to first quarter 2011; this category was relatively flat from 2009 to 2011.

Perhaps somewhat surprisingly, disability as a referral reason for potential questionable workers’ compensation claims remained relatively flat (6 percent increase) from first quarter 2010 to first quarter 2011. Possible explanations for this are: 1) fewer jobs exist during a recession, which leads to fewer instances of this type of fraud; and 2) workers may value their current jobs more during a recession and are less likely to jeopardize them.

Many of the challenges of the recession remain and the potential impact of ObamaCare on the workers’ compensation industry is just beginning.