Insurance is often complex, yet at its core, insurance is actually quite a simple concept. Simply put, insurance mitigates risk by spreading that risk over a large pool of people with the understanding that only a sub group of that large pool of people will actually have a claim during a set time period. To use simple numbers, imagine a pool of 100,000 people. We know that over the course of a year’s time that pool will be used to pay out a total of $1,000,000 (to pick a round number) in claims. Add to that pool the cost of expenses generated by the insurance company such as paying their employees, the cost of running their facilities, the legal expenses involved with covering claims and a host of other expenses. In a free market system there will also be room for a profit, held in check by competition. So in order to cover both the claims generated by that 100,000 person pool and the expenses that a company incurs managing that pool, the company will arrive at a premium amount that each of those 100,000 people must be charged during that year.
Here is where it gets more complex if not interesting. Expenses, for the most part, are a fixed cost. However predicting the actual dollar amount of the claims paid out of that pool is an actuarial science. Companies that are good at predicting losses out of that pool will make a profit. Justified government regulation helps in keeping consumers from being overcharged, but the role of regulation is also to help keep companies financially viable so that they can be counted on to cover their losses. The government understands that the balancing act of expenses and claims is a sensitive thing.
Using the analogy of the “fox guarding the henhouse”, the government struggles with its own insurance programs. Government run insurance programs often don’t adhere to the very laws that they rightfully impose on companies to protect the public and the solvency of the insurance company. In addition to that, politics often comes in between the delicate balance between expenses and claims. So instead of actuarial science we have the shifting winds of politics setting rates. To make things even worse, there is generally no competition to keep government costs in check.
Today, The National Flood Insurance Program, which is already swimming deeply in red ink, nixed the planned and needed rate increases due to public pressure. If a private insurer responded that way, not only would the insurer be in violation of insurance regulation, but would be on its way out of business. The National Flood Insurance Program is currently in debt to the tune of 24 billion dollars to the US Treasury; yet getting the rates correct is determined by the level of public outcry rather than the very mathematical science required by law for private insurers.
So why should we care? The reason is simple. The National Flood Insurance Program cannot cover its debts and as a result, a year with unexpected losses will possibly require the tax payer to bail out the program. So rather than those that actually need flood insurance protection paying the accurate premium, the portion of the general public that doesn’t need flood coverage will end up paying for it anyway. Imagine for a minute that you don’t drive a car, but will be required to bail out a car insurance company for their losses. Or, imagine for a moment that you don’t own a home, but through your tax dollars you are going to pay out of pocket in order to cover that nice beach house that someone else owns because they are not paying the correct amount of money to cover their home insurance. Here is what is really important to understand as it relates to increased cost; typically when an insurer sees the pricing on the risk pool as inadequate, most often the end result will be a rate increase. When the government is in the same position, those increases are passed on in many different forms, often hiding from the consumer the true cost. It is one of the reasons why oftentimes there isn’t an outcry from the public. In the case of the ACA, not only have rates increased for many people, but there is a slew of fees, reductions in coverage, false rates being charged to other policy holders (such as young people covered under the ACA), and decreases in payments to doctors and hospitals. I have tried to raise awareness to the plight of people suffering from chronic pain. The ACA is seeking to cut payments to pain management doctors by a whopping 58%! This a cut in reimbursements to a payment level that was already lower than payments made to private insurers. Medical device taxes and fees to the consumer to cover a possible bailout of the insurance industry are also built into the program. So the actual cost to Americans is actually much higher than what most people realize.
The fact is that this problem exists in just about every insurance program run by the federal government. In addition to the National Flood Program, Medicare and Medicaid are also running deeply in the red. Whether you support the Affordable Care Act or you don’t, it is important to know that even with this law in its infancy, politics are already messing around with the delicate mathematical science needed to run a self-sustaining program. A great example is the “waiver” that some organizations have been granted; this only means that those not in those organizations will have no choice but to cover that cost for them. The health insurance carriers saw this sloppy math coming and it is one of the reasons that the ACA actually has a built in an insurance company bailout!
In the end, the costs of all of these insurance programs cost far, far more than they actually should. Today’s nixing of the Flood Insurance rate increase will ultimately, at some point, affect every American whether they need flood coverage or not.
It’s something to think about.
Have a great day!
“I was awake for the entire procedure. I can’t wait to tell you every detail…I was even able to snap some pics! See you at lunch!”
Sometimes it’s OK not to know.
When it comes to home remodeling projects though, it is definitely NOT OK for your insurance company not to know.
Making improvements to your home or business can be an exciting — but expensive — process. In the greater Hartford area, the average major kitchen remodel costs upwards of $58,000 and adding a bathroom can run you over $40,000. (Here’s a great source for the average cost of other remodeling projects and how much they contribute to resale.)
The good news though is that not only will you have refreshed space to live, work, and play in, you’ll have a more valuable property, and that’s where your insurance company comes in.
Your carrier bases your coverage on the value of your property and includes that figure in your policy. If you suffer a loss, your carrier will use that figure to determine how much it will pay on your claim. If the value figure is outdated and doesn’t reflect expensive improvements you’ve made, your payout will not cover your entire loss.
Guess who will have to make up the difference? (Hint: You.) In addition, some carriers will actually charge you a fee at the time of loss if you didn’t tell them about the improvements!
Don’t add to the already significant cost of improvements by making this mistake. Take care of your insurance needs in advance so you are entirely covered if anything happens during the project. If construction materials such as tiles or lumber will be stored on site, make sure your policy or your contractor’s policy will cover theft or damage.
Tip: Don’t put off the call to your insurance agent. Get that done right away before you get lost in color wheels and appliance catalogs.
Tip: Some homeowner policies are comprehensive enough to cover most home additions and improvements, but others are not. Even if you think you’re covered, get peace of mind by checking with your agent.
Tip: If new furniture and fixtures are part of your addition, make sure to include those in your updated coverage.
Platinum Accounts Executive
Sometimes it’s good to take a break.
It’s time to take a break from Candy Crush when you begin mentally rearranging people’s facial features. (Line up the nose with the eyes, three across…match!)
It’s time to take a break from binge watching Restaurant Impossible when you start acting like Robert Irvine in your own kitchen. (“This tastes like dog food…how could you serve me this?!?”)
Vacations, changes of scenery, getting away from the same old boring routine…these are all good, healthy, life-affirming breaks. However, there are some things you need working for you behind the scenes 24/7/365, perhaps none more so than your Home, Auto, Life or Business insurance policies.
Letting insurance lapse is a huge risk, and unlike, say, skydiving, there’s no reward and enjoyment mixed in with that risk, only headaches and the inevitable cost increases that will come with reinstating coverage.
What causes a lapse in your insurance coverage? In this case, it’s what you don’t do that counts. Don’t pay your premiums and you could get penalized financially through fees, a loss in preferred status, or worse, dropped. Why? Letting your coverage lapse gives a carrier the impression your finances are about as stable as Patsy and Edina after a trip to wine country.
Status is good. Preferred status is even better. In the case of insurance, status will often earn you a continuous coverage discount. Let your policy lapse for 30 days, however, and suddenly you have a new kind of status: Non-preferred status. (Has quite a ring, doesn’t it? You can actually feel the carrier holding its figurative nose.)
Non-preferred status is not only unpleasant sounding, it’s expensive. Insurance carriers dislike paperwork just as much as you do, and a break in coverage means lots of it for the carrier. Trust us when we say Murphy’s Law typically kicks in at this point: No insurance? Something is going to happen. We see it all the time.
Play the “let’s let the insurance lapse” game too many times or for too long and suddenly there is no more policy to reinstate. After a period of inactivation, your carrier may treat you like a banana peel and toss you away forever. Now you’re on the hunt for a new carrier and one thing carriers don’t like is undercharging for risk. Any guesses on whether that will be cheaper? (Hint, the answer is not yes.)
You can be sure there will be corresponding fees built in upfront should they choose to write you a policy. You see, at this point what we call a Standard Carrier in the insurance world won’t take you on – the risk is too high. Remember this is insurance – it is all about risk aversion. Will we be able to find you insurance if you let it lapse? Yes, but it will be with a non-preferred, non-standard carrier or and “Excess & Surplus” lines carrier. Get out your check book.
So what’s the worst that can happen if you let your business, auto, life, or home insurance policy lapse?
Auto insurance: For one thing, it’s illegal in Connecticut to drive a car without insurance. Outlaw status aside, let’s say you’re cruising along and your phone dings with a status update from one of the cats you follow on Twitter. Distracted, you cause an accident that destroys your car and someone else’s. You are now on the hook for damages out of your own pocket. Grumpy cat you will be.
Life insurance: “I don’t plan on dying in February,” you tell yourself. “I’ll wait a month and pick the coverage up again in March.” Turns out February is a pretty popular month for dying. Now your family is left with a stack of bills and no income stream from your policy to help cover them.
Home insurance: As with life and auto insurance, you run the risk of catastrophe striking during your insurance “down time.” But there’s a twist if you carry a mortgage. Get Pig-Pen sloppy with home coverage and your lender will pick up your slack, forcing coverage of its choosing on you and billing you for the privilege. Like Bruce Banner when he starts to get a little ticked off, this is coverage you don’t want to see. Hugely expensive with bare bones protections and no coverage for your home’s contents or your personal liability, this forced lender coverage only protects what they have an interest in, which is the home itself.
Business Insurance: You’ve worked hard to grow your company, one small law suit can bring it crumbling down in hours. No insurance – No coverage. Say good bye to your years of hard work
In short, there are a lot more rewarding ways to take risks then to let your insurance coverage lapse. Like extreme skiing.
Just like with your car and real estate taxes, failure to receive a bill does not remove the responsibility of paying your premiums. Add your premium due dates to your electronic calendar and PLAN for the expense!
Preventing workplace injuries and other risk control measures are key to managing your commercial insurance including Workers Compensation Coverage. Thank you to our guest blogger, Lisa Bisson, Corporate Health & Wellness Coordinator at Griffin Hospital Occupational Medicine Center for taking the time to share with us some great tips on preventing slips, trips and falls!
The most common cause of workplace injuries are slips, trips and falls. They can be the result of walking on a wet or uneven surface, a trip over an obstacle such as an extension cord or piece of equipment, or a fall from a ladder or scaffolding. OSHA, The National Safety Council and other workplace safety organizations offer training programs for injury prevention and hazard recognition to help reduce the number of injuries in the workplace.
Many of these tools are helpful outside the workplace. Many injuries at home are caused by slips, trips and falls as well. While the actual hazards may be different – icy driveways, uneven sidewalks, toys left on the floor, wiggly step stools – the lessons for prevention are still the same.
- Maintain all floor surfaces. Keep all walking areas clean, dry and free of obstacles including wires, equipment, toys, boxes and supplies. Pay special attention to items like rugs and matting that may become wrinkled or rolled.
- Repair all uneven surfaces. If that is not possible, make sure the area is clearly marked with caution tape, signage or other materials.
- Install sturdy handrails, non-skid surfaces and bright lighting in staircases and areas of egress.
- Only use appropriate, sturdy and balanced ladders or stepstools to climb to higher areas. Never use chairs, tabletops or other furniture that is not appropriate for climbing.
- Wear sensible and appropriate footwear, especially in poor weather conditions.
- Pay attention to where you are going and what you are doing. Distractions from cell phones, conversations, surroundings, etc. are just as dangerous when you walking especially in an unfamiliar area.
- When furnishing an area, moving equipment or storing boxes and supplies, make sure there are clear open pathways to walk through, especially in the event of an emergency.
- If you are unsteady walking, use an appropriate walker, cane or crutch. Do not rely on furniture, walls, or other people to help you balance. See your doctor or physical/occupational therapist for recommendations on what would be appropriate and safe for you.
By: Lisa Bisson, Corporate Health & Wellness Coordinator - (203) 944-3805 x107 or firstname.lastname@example.org
Griffin Hospital Occupational Medicine Center. 100 Commerce Dr. Shelton, CT 06484
For more information on Loss Control in the Workplace and managing your Workers Compensation – Please contact Peggy Hill, BSIE, MBA – Commercial Lines Coverage Specialist at Founders Insurance Group email@example.com or 860-482-3506 ext 11608
Thanks to our friends at NBC for the information on why it’s so darn cold everywhere! The following is an excerpt from their website on 1/6/2014:
“Connecticut was bracing for another night of freezing temperatures and sub-zero wind chills on Monday night.
Wind chill advisories are up around the state and single-digit temperatures with wind chills anywhere from -15 to -20 were expected overnight, according to NBC Connecticut Chief Meteorologist Brad Field.
Dangerous wind chills are predicted for Tuesday morning as well. Single-digit temperatures and wind chills in the -15 to -20 range will make conditions difficult for kids waiting for buses early Tuesday morning.
The bitter weather is part of a polar vortex that dropped brutal cold into the Northern Plains and the Midwest over the weekend and into Monday. Parts of the country saw wind chills that reached 50 to 60 degrees below zero on Monday. Schools closed due to the extreme cold in Minnesota, Wisconsin, Indiana, Illinois and Iowa.”
Tips from Team Founders:
Protect your pipes from bursting!
- Open up the cabinet doors underneath your kitchen and bathroom sinks – this will allow warm air to surround the pipes
- Steady drip of warm water will also help prevent pipes from bursting
- Try to limit cold drafts – put blankets or towels at the edges of doors or windows
- Be prepared for power outages – have a generator or woodstove to heat your home
- If you are going to be away for extended periods of time – make sure you have the temp in your house set at 55 or above. You can also install a low temp monitor (often times you can get an insurance discount for this!)
- If a pipe does burst – shut the water off at the source immediately and call your insurance agent. It will be a mess – and not fun, but we will help you through the process!
We are hearty New Englanders – we can survive the dreaded Polar Vortex! Stay warm & bring your pets inside!
Call us if you need us! 860-482-3506 http://www.foundersgrp.com
Did you ever spend hours searching for the perfect fir- the one that will sit in the corner next to the fireplace? Of course! You carefully place family favorite ornaments upon it’s fresh branches – the smell fills the room. Candy canes, lights and garland – perhaps even some paper chains the kids made in pre-school that have survived for over 20 years. Last but not least – you fill up the green tree holder with water. You’re done! The lights get turned on – the fireplace gets lit. Time to enjoy that tin of cookies brought over by the neighbor.
Sound familiar? I’m sure it does to many.
Here’s what often happens a week later:
Johnny jr. forgets to water the tree every day when he gets home from school. Tabbie the cat decides to chew on the lights and tinsel when no one is looking. The fireplace continues to get lit every night – oh and the tree is right next to the heating vent. Those freshly cut branches on the tree are starting to droop a little. Life gets in the way – and hey the tree only has to last until New Year’s Day.
Don’t be this family – Christmas Tree fires are dangerous! Here are some facts from the National Fire Protection Association
Dry Tree vs. Watered Tree
Facts about home holiday fires
- One of every three home Christmas tree fires are caused by electrical problems.
- Although Christmas tree fires are not common, when they do occur, they are more likely to be serious. On average, one of every 40 reported home structure Christmas tree fires results in a death compared to an average of one death per 142 total reported home structure fires.
- A heat source too close to the tree causes roughly one in every six of Christmas tree fires.
- More than half (56%) of home candle fires occur when something that can catch on fire is too close to the candle.
- December is the peak time of year for home candle fires. In December, 11% of home candle fires began with decorations compared to 4% the rest of the year.
Have a safe and happy holiday!!!
Director of Marketing & Sales
Founders Insurance Group
Protection of patient health information is of high priority for every healthcare provider. HIPAA/HITECH has evolved since its introduction in 1996. The health care industry has the highest privacy breach rate compared to any other industry. In the past decade, we’ve seen a surge in risk control techniques to protect against privacy breaches at entities that transmit data electronically: clinics, hospitals, nursing homes, pharmacies, and medical practices – to name a few.
Best Practice organizations have shared that as part of the Crisis Management process reviews, they review their existing Disaster Recovery plans to ensure they have the ability to quickly and effectively respond to a Security Breach. Prior to an Emergency, it is critical to ensure the appropriate HIPAA Security Standards safeguards are in place and guidelines are strictly followed.
Unfortunately, even with the appropriate training, firewalls, and other expensive safeguards, security breaches are widespread and the cost to recover is increasing. Typically the most expensive part of a data breach isn’t the liability cost to the affected, but the cost of notification and credit monitoring! (Tweet this!)
Cyber-attacks are more sophisticated than ever, with the leading sources of Security/Privacy breaches from:
- lost or stolen computers (e.g., desktops, laptops, servers, smart phones),
- USB drives,
- paper records,
Acquiring the appropriate level of Cyber Liability insurance coverage helps cover the Disaster Recovery costs associated with notifying its patients by law, health record and credit monitoring services, legal and forensic costs, and applicable HITECH fine/penalties. Depending on the organization’s patient database, these costs can run into the millions.
Questions? Concerns? We can walk you through the process!
Peggy Hill, CLCS, MBA
860-482-3506 ext 11608