Probe: Port Authority of N.Y.-N.J. Paid Too Much for Insurance

July 29, 2013

  • July 29, 2013 at 12:27 pm
    reality bites says:
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    From the Star-Ledger article:

    “The analysis found that treasury officials had arranged coverage for estimated contract values totaling $5.2 billion during that time, even though actual values totaled just $2.23 billion. The difference between the estimated and actual value of the contracts, the analysis concluded, cost the agency a total of $58,353,156 in excessive premiums.”

    “It is unclear whether Aon, the insurance broker, also profited from the excessive premiums.”

    Sounds like Aon is getting a write-down. Oops.

  • July 29, 2013 at 1:45 pm
    Cheetoh Mulligan says:
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    Aon or whoever the broker is profited from commissions or fees for the extra premiums.
    Can’t wait to see how good the gov’t handles health insurance and obamacare.

    • July 29, 2013 at 3:49 pm
      youngin' says:
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      Why, will the Port Authority of NJ be running the insurance exchange in that state?

    • July 31, 2013 at 11:21 am
      Libby says:
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      Cheetoh – you obviously haven’t worked on a fee basis before. The fee is the fee regardless of the premiums. That’s why the client wants a fee.

      What I don’t understand is why there wasn’t an audit. When premiums are based on estimated costs, there is usually an audit that would have returned half of their premiums. If this was a builders risk, it should have been on a reporting form with values like that.

      • July 31, 2013 at 11:41 am
        jw says:
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        You would think there would be an audit. It’s possible that the information provided to the auditor was prepared by the same person who provided the “estimates”. I don’t know if that would make a difference or not.

  • July 29, 2013 at 1:57 pm
    Agent2 says:
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    15 minutes could save you 15% on your contract construction costs!

    Incompetents in charge of people who don’t care = government

  • July 29, 2013 at 2:37 pm
    hmm says:
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    Wouldn’t there have to be an audit of the risk and adjustment of the premium anyway? What if the project was set up at a billion less than actual (oh those cost over runs. I would think this is audited and premiums adjusted accordingly. The broker may not have done anything wrong, the projections were just wrong.

    It is suspect when a fired employee is giving the information as well.

    • July 30, 2013 at 7:49 am
      jw says:
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      It’s possible the insurer didn’t audit or that the insurer only did a mail in audit.

      • July 30, 2013 at 7:54 am
        jw says:
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        Keep in mind, I don’t know anything about insurance in NJ. I’m only familiar with premium audits in the Southern states.

        • July 31, 2013 at 11:23 am
          Libby says:
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          jw – there’s no way you would do a mail-in audit on values and premiums this large. Those are usually reserved for smaller risks. Just an FYI. :-)

          • July 31, 2013 at 11:44 am
            jw says:
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            I never audited builder’s risk, so I have no clue what type of documentation they would use. I cannot even comprehend the complexity of an audit of this size operation. Yuck.

          • July 31, 2013 at 2:09 pm
            Libby says:
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            I re-read the article several times, but it doesn’t really confirm this is a builders risk, just insurance on construction projects. If it’s builders risk, there should have been some reporting form involved.

          • August 1, 2013 at 7:59 am
            jw says:
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            If I had had a client with these exposures and this large of a risk, I might’ve given up auditing a lot sooner than I did.

  • July 29, 2013 at 3:54 pm
    InsGuy says:
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    Wait, Really??

    I just did a review of my HO bills for the last 10 years and discovered I paid excessive premiums as well. I want a refund too!

  • July 30, 2013 at 12:16 pm
    InsGuy says:
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    Not an expert on B/R, but isn’t that the norm? Actual to Estimated ratios run very high when contracts are written and decline as they approach completion, eventually hitting 100% at the close of the contract, at which point a final adjustment is made. Does the article mention anything about which projects, and at what stage they are? I would imagine, being a port authority, that $5B could be only 10-20 projects, given the complexity of their construction/logistical issues.

    How many were in progress when Sandy hit? What are the pre- and post- loss values? Does that have any bearing?

    Article doesn’t give enough details to be sure of anything.

  • July 30, 2013 at 3:19 pm
    Get in line says:
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    We ALL pay too much for insurance!!!



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