The investigations continue and now that bad word, anti-trust, has entered the game. <<Fla. AG Launches Widespread Anti-Trust Probe, 10 Subpoenas Issued>> Anti-trust has been the hidden crazy aunt of the insurance companies. I doubt if many people know about the anti-trust immunity that insurance companies enjoy. IF, these investigations start to spill over onto the insurance company side, will panic ensue.
For many, many, years (far more than I care to think) I have been relating to insurance company reps. that their company's tread on thin ice. <<""At this point we are investigating the brokers and insurance companies for possible violations of anti-competitive activities"">> I will say it again, true capitalist, competition does not exist in the P&C insurance industry. If the companies do not get off their Kings chair, the legislation will bring them down to earth.
If there is no collusion, no anti-trust ask yourself this, why does the entire industry goes into a hard market at the same time? Hurricanes and wildfires mean that a case can be made for the property market. The liability market does not have the same function of risk of nature. At this moment in November 2004, try to get a policy in the standard market, for a small general contractor. Has that small contractor that you've had insured, all of the sudden started to do shabby work? Has that contractors industry started to do shabby work? I think not.
It may be time the P&C industry realizes that they are not the customer. Maybe even more than that it is TIME FOR TORT REFORM in the USA.
Anti-competitive / Anti-trust
Moderators: Josh, independent guy
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FiniteReUnderwriter
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If I am not mistaken, the insurance industry is only granted a partial exemption from the antitrust laws under the McCarran Ferguson Act and the Sherman Act. In order to enjoy such exemption, it requires the act in question to occur:
(a) "within the business of insurance"?;
(b) such business of insurance must be "regulated by the state"?;
© such act must not constitute "boycott, coercion or intimidation"?.
I believe the key question will be whether the allegations that have been described in the trade and regular press lately will meet this three-pronged test. Clearly, there are some who suggest the insurance regulators either dropped the ball from an monitoring standpoint ... or failed to adequately regulate altogether.
With regard to the observation of the markets moving in unison (hard / soft market), there are numerous other markets that exhibit similar behavior. Look at fares in the airline industry "¦ when was the last time that one market made a price change that was not followed almost immediately by everyone else that served that same market segment? The similarities go even deeper "¦ many of those same airlines cut their prices to meet "competition"?, to the point that they fail to survive. Not sure wild price movements alone point to anything "sinister".
I can't say that I have ever heard anyone on the carrier side equate their position to being the "customer"?. Instead, there seems to be confusion at many carriers as to whether the insured "¦ or the broker is their "real" customer. As far as I have seen (over 20 years in the biz), the carriers acutely understand that they offer a product (service) for a price "¦ and they must attempt to price that product (service) correctly to stay in business over the long-haul.
There is no doubt that some price movements are connected to an individual risk's historical experience and/or risk profile. But, the "invisible hand" moves markets as well. I think the only thing that can be said with any degree of certainty is that the insurance industry is certainly no shining example of an "efficient market" (wink).
(a) "within the business of insurance"?;
(b) such business of insurance must be "regulated by the state"?;
© such act must not constitute "boycott, coercion or intimidation"?.
I believe the key question will be whether the allegations that have been described in the trade and regular press lately will meet this three-pronged test. Clearly, there are some who suggest the insurance regulators either dropped the ball from an monitoring standpoint ... or failed to adequately regulate altogether.
With regard to the observation of the markets moving in unison (hard / soft market), there are numerous other markets that exhibit similar behavior. Look at fares in the airline industry "¦ when was the last time that one market made a price change that was not followed almost immediately by everyone else that served that same market segment? The similarities go even deeper "¦ many of those same airlines cut their prices to meet "competition"?, to the point that they fail to survive. Not sure wild price movements alone point to anything "sinister".
I can't say that I have ever heard anyone on the carrier side equate their position to being the "customer"?. Instead, there seems to be confusion at many carriers as to whether the insured "¦ or the broker is their "real" customer. As far as I have seen (over 20 years in the biz), the carriers acutely understand that they offer a product (service) for a price "¦ and they must attempt to price that product (service) correctly to stay in business over the long-haul.
There is no doubt that some price movements are connected to an individual risk's historical experience and/or risk profile. But, the "invisible hand" moves markets as well. I think the only thing that can be said with any degree of certainty is that the insurance industry is certainly no shining example of an "efficient market" (wink).
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FiniteReUnderwriter
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Just to make sure my point is clear ... the actions that have been described in the press (if true) are reprehensible and should be punished.
Clearly, many of the activities described would constitute antitrust behavior (bid rigging, price fixing, market allocation, group boycott, tying arrangements, etc.). Also, there is possible state antitrust action in addition to federal.
However, in the original examples cited (wildfires or hurricanes causing market turmoil, or a small contractor with availability or price issues) does not, in and of itself, necessarily suggest monopolistic or anticompetitive actions by those involved.
It will be interesting to see if the "bad actors" are truly limited to only a few (as alleged by the companies involved), or if the practices are pervasive and condoned by senior managements. I guess only time (and the process of discovery) will tell.
Clearly, many of the activities described would constitute antitrust behavior (bid rigging, price fixing, market allocation, group boycott, tying arrangements, etc.). Also, there is possible state antitrust action in addition to federal.
However, in the original examples cited (wildfires or hurricanes causing market turmoil, or a small contractor with availability or price issues) does not, in and of itself, necessarily suggest monopolistic or anticompetitive actions by those involved.
It will be interesting to see if the "bad actors" are truly limited to only a few (as alleged by the companies involved), or if the practices are pervasive and condoned by senior managements. I guess only time (and the process of discovery) will tell.
Yes, for over 50 years, the insurance companies have enjoyed exemption from the Sherman act. There was a time that baseball enjoyed a exemption but they lost some of their immunity. Congress has done away with some of the baseball exemption. The Curt Flood Act of 1998 (codified at 15 USC 27(a)) strips baseball of its antitrust immunity with respect to actions taken against major league players.
The comparison of airline rate increases is fine except that it falls short. Number one, airlines operate against functions of commodity fluctuations (oil / gas). These are known costs and easy to translate into rate increases.
Number two, airline rates fluctuate daily and sometimes hourly, you have choices of flying first class or coach, United Air or Peoples express but you can fly. In the insurance business when the hard markets hit, basically many businesses can't get it. My last example was general contractors. Please give 10 standard market companies willing to offer the general contractor a GL policy. Of course you can price it to the point that no one can afford it.
The third point is you don't need to fly to your destination, it isn't a must have situation. You have trains, planes and automobiles to take you to your destination. Commercial liability is a must in many professions and without it....you are out of business. If you want to test the theory, cancel your own E&O and see how many people will continue to do business with you. Insurance companies hold the Sword of Damocles. above the head of many, many businesses. Holding such a sword creates a very, very un-loyal clientele, one of distrust and hate. Is that the relationship you want to cultivate with a client?
I have had discussions with my State Representative and Federal Congress guy (he is a neighbor). I expressed an opinion to them that, in this day and age, there needs to be some type of liability of last resort, provider. We have such providers for homeowners, auto and workers comp insurance. Now we need the same in the liability marketplace. In my State the rates from the State WC provider is often very competitive.
The comparison of airline rate increases is fine except that it falls short. Number one, airlines operate against functions of commodity fluctuations (oil / gas). These are known costs and easy to translate into rate increases.
Number two, airline rates fluctuate daily and sometimes hourly, you have choices of flying first class or coach, United Air or Peoples express but you can fly. In the insurance business when the hard markets hit, basically many businesses can't get it. My last example was general contractors. Please give 10 standard market companies willing to offer the general contractor a GL policy. Of course you can price it to the point that no one can afford it.
The third point is you don't need to fly to your destination, it isn't a must have situation. You have trains, planes and automobiles to take you to your destination. Commercial liability is a must in many professions and without it....you are out of business. If you want to test the theory, cancel your own E&O and see how many people will continue to do business with you. Insurance companies hold the Sword of Damocles. above the head of many, many businesses. Holding such a sword creates a very, very un-loyal clientele, one of distrust and hate. Is that the relationship you want to cultivate with a client?
I have had discussions with my State Representative and Federal Congress guy (he is a neighbor). I expressed an opinion to them that, in this day and age, there needs to be some type of liability of last resort, provider. We have such providers for homeowners, auto and workers comp insurance. Now we need the same in the liability marketplace. In my State the rates from the State WC provider is often very competitive.
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FiniteReUnderwriter
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Not every town and city had easy access to air carriers. As you said, sometimes trains, cars, boats, etc. Whatever you need to get there.
What about Risk Retention Group or Group Captive as an alternative market? Risk Purchasing Group to make the total risk(s) more appealing to traditional markets?
What kind of limit does the client need to stay in business? Can they fully fund (beg, borrow) a self-insurance account, fronted by a carrier (who would credit investment income on the funds held, etc.?) The spread between the cost of those funds (interest rate on biz loan / premium finance loan) vs. the investment crediting by the fronting company could make the net "carrying" costs feasible?
I'm not saying it's easy. And I'm certainly not defending the carriers. But, the backstop for the "market of last resort" is ultimately the tax payer.
Do the taxpayers want to backstop a "commercial risk" / for-profit business concern just because they cannot find GL insurance for whatever reason (maybe not totally due to vagaries of the carriers ... e.g., some accounts poor loss history, poor financials, etc.?)
Or maybe there just isn't enough money in the deal to cover the carrier's fixed costs on top of loss costs for the price the client is willing to pay? Just don't know the particulars of the account.
There are lots of products / services I would like to buy ... but unfortunately the market does not provide them in the type / stype and price that I am willing to pay. Isn't that capitalism? This seems to be a totally different issue than insuring the public's well being via WC, homeowners, etc.
What about Risk Retention Group or Group Captive as an alternative market? Risk Purchasing Group to make the total risk(s) more appealing to traditional markets?
What kind of limit does the client need to stay in business? Can they fully fund (beg, borrow) a self-insurance account, fronted by a carrier (who would credit investment income on the funds held, etc.?) The spread between the cost of those funds (interest rate on biz loan / premium finance loan) vs. the investment crediting by the fronting company could make the net "carrying" costs feasible?
I'm not saying it's easy. And I'm certainly not defending the carriers. But, the backstop for the "market of last resort" is ultimately the tax payer.
Do the taxpayers want to backstop a "commercial risk" / for-profit business concern just because they cannot find GL insurance for whatever reason (maybe not totally due to vagaries of the carriers ... e.g., some accounts poor loss history, poor financials, etc.?)
Or maybe there just isn't enough money in the deal to cover the carrier's fixed costs on top of loss costs for the price the client is willing to pay? Just don't know the particulars of the account.
There are lots of products / services I would like to buy ... but unfortunately the market does not provide them in the type / stype and price that I am willing to pay. Isn't that capitalism? This seems to be a totally different issue than insuring the public's well being via WC, homeowners, etc.
We aren't talking about choosing to go or not to go to the theme park. We are talking about the liability problem in America. Now if you want to continue to hold the stance that there isn't a problem, well I can only assume you work for the insurance company.
Talking to every commercial CSR that I do business with they say the same thing, "this business is no longer fun." It's not fun because they have such a bi:"CH of a time just to find someone insurance. IT DID NOT USED TO BE THAT WAY.
Now captives and other risk arrangements are fine for the market that can afford to join in them. If you take a look at government statistics on small business in America you will find that small business is the backbone of the economy. When I am talking construction, I am talking about all the guys that the General Contractor needs to hire to complete his project. There are millions of small three to seven man carpenter shops around this country that provide the finishing work on a house. These guys can't get insurance, need 1 million to satisfy Gen. Conts. liab. requirements and if they do have the insurance their rates have greatly increased. Because of economy of scale these companies can't participate in such alternative risk sharing that you mention.
The liability problem is a drag on our economy and effects everyone in the society. You mention about taxpayer provided insurance, what? I don't know about your State but I'm talking a program like assigned risk plans. In my State if you want to do auto business, you will also be taking some assigned risks. The insurance company can charge a higher premium for that assigned risk but they will be participating in it. In a few years the assigned company then offers a regular plan (based on risk experience).
Let's take it into the auto world. Would you want the same hard market soft market approach to auto insurance. Sorry folks but we aren't offering insurance at this time, just drive without it. Not too cool of a thought.
You say <<There are lots of products / services I would like to buy ... but unfortunately the market does not provide them in the type / stype and price that I am willing to pay. Isn't that capitalism? This seems to be a totally different issue than insuring the public's well being via WC, homeowners, etc.>> You don't think business and the economy have anything to do with the public well being? Allow me to send the next laid off worker to your phone. Maybe you consider malpractice insurance to be a luxury?
Yes capitalism does come into play but we revert back to the insurance companies pleadings to have a somewhat unique relaxed position with the Sherman Anti-trust Act. You must be an insurance company person because you like to take both sides. When it suits the insurance company they profess to capitalism, when it comes to anti-trust they profess they are insuring the well being.
OK...times up which one is it? Are they partaking of the entire capitalist model of competition or are they a quasi utility (for the public good)? What I have been saying is this: insurance companies, if you want to keep business as usual you better polish your act. If not the legislature is going to step in and make you polish it. I dare say there are many of us out here that would back a legislative effort to stop this hard / soft market cycle. I'm a devout capitalist but I also believe in competition and creating artificial shortages is what the hard / soft market cycle is all about. Insurance isn't a commodity that all of the sudden dries up. Insurance dries up because the companies say it will dry up.
BTW I love forums. I find it fun to present your position and have others discuss and present their positions. I guess it's because I started out to become an attorney. Changed my mind once it sunk in that you have to offer a defense to people you know are guilty. Not my cup of tea!
Talking to every commercial CSR that I do business with they say the same thing, "this business is no longer fun." It's not fun because they have such a bi:"CH of a time just to find someone insurance. IT DID NOT USED TO BE THAT WAY.
Now captives and other risk arrangements are fine for the market that can afford to join in them. If you take a look at government statistics on small business in America you will find that small business is the backbone of the economy. When I am talking construction, I am talking about all the guys that the General Contractor needs to hire to complete his project. There are millions of small three to seven man carpenter shops around this country that provide the finishing work on a house. These guys can't get insurance, need 1 million to satisfy Gen. Conts. liab. requirements and if they do have the insurance their rates have greatly increased. Because of economy of scale these companies can't participate in such alternative risk sharing that you mention.
The liability problem is a drag on our economy and effects everyone in the society. You mention about taxpayer provided insurance, what? I don't know about your State but I'm talking a program like assigned risk plans. In my State if you want to do auto business, you will also be taking some assigned risks. The insurance company can charge a higher premium for that assigned risk but they will be participating in it. In a few years the assigned company then offers a regular plan (based on risk experience).
Let's take it into the auto world. Would you want the same hard market soft market approach to auto insurance. Sorry folks but we aren't offering insurance at this time, just drive without it. Not too cool of a thought.
You say <<There are lots of products / services I would like to buy ... but unfortunately the market does not provide them in the type / stype and price that I am willing to pay. Isn't that capitalism? This seems to be a totally different issue than insuring the public's well being via WC, homeowners, etc.>> You don't think business and the economy have anything to do with the public well being? Allow me to send the next laid off worker to your phone. Maybe you consider malpractice insurance to be a luxury?
Yes capitalism does come into play but we revert back to the insurance companies pleadings to have a somewhat unique relaxed position with the Sherman Anti-trust Act. You must be an insurance company person because you like to take both sides. When it suits the insurance company they profess to capitalism, when it comes to anti-trust they profess they are insuring the well being.
OK...times up which one is it? Are they partaking of the entire capitalist model of competition or are they a quasi utility (for the public good)? What I have been saying is this: insurance companies, if you want to keep business as usual you better polish your act. If not the legislature is going to step in and make you polish it. I dare say there are many of us out here that would back a legislative effort to stop this hard / soft market cycle. I'm a devout capitalist but I also believe in competition and creating artificial shortages is what the hard / soft market cycle is all about. Insurance isn't a commodity that all of the sudden dries up. Insurance dries up because the companies say it will dry up.
BTW I love forums. I find it fun to present your position and have others discuss and present their positions. I guess it's because I started out to become an attorney. Changed my mind once it sunk in that you have to offer a defense to people you know are guilty. Not my cup of tea!
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FiniteReUnderwriter
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As far as my business affiliation goes, yes I work for an insurer. I have said as much in prior posts, and my user name certainly implies it. I did not realize it was a sin to be affiliated with an insurer. While I realize that Insurance Journal targets independent agents and brokers, I did not realize that members of the Forum felt this was an exclusive club "¦ and only broker's opinions count.
Personally, often I find it beneficial to examine all sides of an argument and try not to dig my heels in to an opinion or position at the exclusion of other possible ideas or solutions. I see shades of gray to your black and white - but to each his own.
With regard to whether insurers should enjoy full, partial or no protection from antitrust laws, there are smarter people than I who debate those topics and have, for the time being, enacted laws that they think provide for an orderly marketplace. Do situations change, and suggest / demand a reexamination of the status quo "" of course they do, and it happens in lots of industries, not just insurance.
I do not place clients business with carriers as you do. All I can use to formulate my opinions is what I read in the trade press, and from some small way from the finite deals that I personally see. That press, such as "Crittenden's Specialty Coverages Insider"?, has recently included numerous articles about available markets for contractors "" such as Arch, AIG, James River, CNA, Westchester, ACE, American Safety, and Lloyds.
Other alternatives have been mentioned such as Risk Cap and the California Building Industry Association / HCIC RRG, ProBuilders Specialty RRG, Builders Insurance (Mutual Captive), etc. I understand that BankNorth also has a protected cell captive domiciled in VT that looks at small programs and has some contractor risks already (roofers).
[I usually don't mention names in a Forum, and this is not meant as an endorsement, etc. of any of the above].
While these markets may not fit your client's particular needs, there is ample evidence that other accounts have sought alternative channels for finding risk transfer products. Many describe low deductibles and premiums as low as $1,500. Not all of the alternatives are for "mega" sized accounts, many seem to have capability to support smaller account programs (assuming the aggregation of accounts is big enough to cover fixed costs). And if there is sufficient need, I am sure that other producers will create their own sponsored facilities for such smaller, niche risks.
I clearly don't have all the answers "¦ but I have never met anyone else who does either.
Personally, often I find it beneficial to examine all sides of an argument and try not to dig my heels in to an opinion or position at the exclusion of other possible ideas or solutions. I see shades of gray to your black and white - but to each his own.
With regard to whether insurers should enjoy full, partial or no protection from antitrust laws, there are smarter people than I who debate those topics and have, for the time being, enacted laws that they think provide for an orderly marketplace. Do situations change, and suggest / demand a reexamination of the status quo "" of course they do, and it happens in lots of industries, not just insurance.
I do not place clients business with carriers as you do. All I can use to formulate my opinions is what I read in the trade press, and from some small way from the finite deals that I personally see. That press, such as "Crittenden's Specialty Coverages Insider"?, has recently included numerous articles about available markets for contractors "" such as Arch, AIG, James River, CNA, Westchester, ACE, American Safety, and Lloyds.
Other alternatives have been mentioned such as Risk Cap and the California Building Industry Association / HCIC RRG, ProBuilders Specialty RRG, Builders Insurance (Mutual Captive), etc. I understand that BankNorth also has a protected cell captive domiciled in VT that looks at small programs and has some contractor risks already (roofers).
[I usually don't mention names in a Forum, and this is not meant as an endorsement, etc. of any of the above].
While these markets may not fit your client's particular needs, there is ample evidence that other accounts have sought alternative channels for finding risk transfer products. Many describe low deductibles and premiums as low as $1,500. Not all of the alternatives are for "mega" sized accounts, many seem to have capability to support smaller account programs (assuming the aggregation of accounts is big enough to cover fixed costs). And if there is sufficient need, I am sure that other producers will create their own sponsored facilities for such smaller, niche risks.
I clearly don't have all the answers "¦ but I have never met anyone else who does either.
It looks like this is our personal thread because no one elese has jumped in.
I didn't mean to taint your choice of employment. I was only exhibiting frustration because it sounded like the same line that insurance companies always give. It sounded like there is no problem with the availability of liability coverage. It was like I was hearing political talking points. Due to your moniker, I took a guess that you work for an insurance company. Sorry if I sounded too harsh....I have friends that work as UW's for CNA.
I guess I'm still a bit miffed at spending an abnormal amount of time recently on my own E&O. I'm still a bit in shock at how high the premiums are this year. It now takes 20 clients to pay for E&O.
Since you are on the inside you also never get to tell that small business client that even though he's never filed a claim, his policy premium will be double this year. Most of my clients have been with me for a minimum of 10 years. I have empathy for them when I give them the news that their premium has doubled in price.
Yes, if I wasn't on the east coast.CA Builders Asso may work. The other ideas of captives could if they could get in for $1,500, perhaps the captive in VT.
<<I clearly don't have all the answers ..but I have never met anyone else who does either.>>
Well that is my point. I'm just not sure how P&C companies have been allowed to artificially disrupt business cycles with an artificial shortage. I was sitting here thinking car manufactures could do the same thing, if they all decided to cut back on the amount of cars they produce an artificial shortage would occur. Prices would then rise.
I wonder how long the health insurance industry could get away with a hard market. Oops hard market folks..... we just aren't offering that insurance at the moment, we are offering it to those between the ages of 25 and 30, if you can wait, maybe next year the market will soften.
I didn't mean to taint your choice of employment. I was only exhibiting frustration because it sounded like the same line that insurance companies always give. It sounded like there is no problem with the availability of liability coverage. It was like I was hearing political talking points. Due to your moniker, I took a guess that you work for an insurance company. Sorry if I sounded too harsh....I have friends that work as UW's for CNA. I guess I'm still a bit miffed at spending an abnormal amount of time recently on my own E&O. I'm still a bit in shock at how high the premiums are this year. It now takes 20 clients to pay for E&O.
Since you are on the inside you also never get to tell that small business client that even though he's never filed a claim, his policy premium will be double this year. Most of my clients have been with me for a minimum of 10 years. I have empathy for them when I give them the news that their premium has doubled in price.
Yes, if I wasn't on the east coast.CA Builders Asso may work. The other ideas of captives could if they could get in for $1,500, perhaps the captive in VT.
<<I clearly don't have all the answers ..but I have never met anyone else who does either.>>
Well that is my point. I'm just not sure how P&C companies have been allowed to artificially disrupt business cycles with an artificial shortage. I was sitting here thinking car manufactures could do the same thing, if they all decided to cut back on the amount of cars they produce an artificial shortage would occur. Prices would then rise.
I wonder how long the health insurance industry could get away with a hard market. Oops hard market folks..... we just aren't offering that insurance at the moment, we are offering it to those between the ages of 25 and 30, if you can wait, maybe next year the market will soften.
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FiniteReUnderwriter
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Hey, at least you did not call me a "wisenheimer" or "weenie" like in the Noodle thread (wink).
I can empathize too "" as many of the deals that I see cross my desk relate to serious dislocations in the insurance markets (availability, capacity, price), but the only difference is I usually deal with large commercial accounts who can afford to fund much of the limit they want to purchase.
But, there also have been some finite deals where a large enough group of individual risks have gotten together as a group and formed a RRG, reciprocal or other means of "aggregating" their risks (and premiums), so that losses can be predicted with some degree of actuarial credibility for that group. I have offered reinsurance programs to help support such efforts (leverage relief, excess of loss, aggregate stop loss, etc.).
But that does not offer an immediate solution or help for your small, individual risk client.
If I am correct in understanding your issue, another option that might be worth considering is to approach one of the larger general contractors that regularly employs your clients and discuss whether they want to sponsor such a facility via a "channeling" type program (much in the same way a hospital system might underwrite the risks of its non-employed docs who are granted practice privileges at the hospital) and insuring those risks in a captive, RRG or trust facility.
As long at that GC has sufficient funds to provide the "seed capital" / surplus to start such facility, such a channeling program could represent an additional revenue source for that GC. I would think it doesn't have to be as big as some of the Association-sponsored RRGs to be viable "" just big enough to produce some actuarial credibility in the loss pick for funding purposes?
It would seem that the GC is in a perfect position to understand the risks and select only those subcontractors who they know do good work and are likely to be a "better than average" risk (they control who they hire, and only those subcontractors are allowed to participate).
Since the CG is able to charge each subcontractor a "premium" that is based on what is perceived to be a competitive market "average" (does that even exist at the present time?), it would seem they are in a good position to be a risk taker. Who better to "underwrite" construction risk, and perform account selection than a contractor on their own projects? And the GC does not even have any premium collection risk "" just offset against the subcontractor's invoice.
Are there any other brokers out there on construction risks that have had success (or I suppose it would be instructive to also know about failures) with alternative products / solutions?
I can empathize too "" as many of the deals that I see cross my desk relate to serious dislocations in the insurance markets (availability, capacity, price), but the only difference is I usually deal with large commercial accounts who can afford to fund much of the limit they want to purchase.
But, there also have been some finite deals where a large enough group of individual risks have gotten together as a group and formed a RRG, reciprocal or other means of "aggregating" their risks (and premiums), so that losses can be predicted with some degree of actuarial credibility for that group. I have offered reinsurance programs to help support such efforts (leverage relief, excess of loss, aggregate stop loss, etc.).
But that does not offer an immediate solution or help for your small, individual risk client.
If I am correct in understanding your issue, another option that might be worth considering is to approach one of the larger general contractors that regularly employs your clients and discuss whether they want to sponsor such a facility via a "channeling" type program (much in the same way a hospital system might underwrite the risks of its non-employed docs who are granted practice privileges at the hospital) and insuring those risks in a captive, RRG or trust facility.
As long at that GC has sufficient funds to provide the "seed capital" / surplus to start such facility, such a channeling program could represent an additional revenue source for that GC. I would think it doesn't have to be as big as some of the Association-sponsored RRGs to be viable "" just big enough to produce some actuarial credibility in the loss pick for funding purposes?
It would seem that the GC is in a perfect position to understand the risks and select only those subcontractors who they know do good work and are likely to be a "better than average" risk (they control who they hire, and only those subcontractors are allowed to participate).
Since the CG is able to charge each subcontractor a "premium" that is based on what is perceived to be a competitive market "average" (does that even exist at the present time?), it would seem they are in a good position to be a risk taker. Who better to "underwrite" construction risk, and perform account selection than a contractor on their own projects? And the GC does not even have any premium collection risk "" just offset against the subcontractor's invoice.
Are there any other brokers out there on construction risks that have had success (or I suppose it would be instructive to also know about failures) with alternative products / solutions?
We have two GC's in our area with the pockets to take on such a risk and I am not sure why they would want to do it?
From my input it would be a labor of love and not one of business. Sometimes the hierarchy of a job can be two, three or more deep. AN example: you have the GC, he subs the cabinet guys, they sub to guys that install. The only big shop in most of these situations is the GC and the others are just entrepreneur type guys. Often good at their trade but not too hot at cash flow, etc. I'd say that most of the new houses popping up everywhere you will find the little guys supplying all the finish work. They are the ones that are being hurt.
Sorry to hear they are calling names on that other forum. I just signed on to the wholesaler you mentioned. Before plopping down my money I checked their appetite, it looked ok and then I gave them my credit card number. My first three attempts at getting quotes was a bust. Even though the companies may have an appetite they didn't have an appetite in my State.
After 19 years I think it is time to open a coffee shop, play nice music and get out of this business. I can start an entire other rant on finding markets. I can't find market outlets and I can find carriers to supply quotes..........you see how it can get frustrating.
There is one place that I can pay $10,500 to all for the ability to share my commission with them. It sounds good but it is still $10,500.
I have never, ever never ever had a problem in the life, health market. None of the large brokerages ask for an entry fee and insurance companies are open and looking for sales.
From my input it would be a labor of love and not one of business. Sometimes the hierarchy of a job can be two, three or more deep. AN example: you have the GC, he subs the cabinet guys, they sub to guys that install. The only big shop in most of these situations is the GC and the others are just entrepreneur type guys. Often good at their trade but not too hot at cash flow, etc. I'd say that most of the new houses popping up everywhere you will find the little guys supplying all the finish work. They are the ones that are being hurt.
Sorry to hear they are calling names on that other forum. I just signed on to the wholesaler you mentioned. Before plopping down my money I checked their appetite, it looked ok and then I gave them my credit card number. My first three attempts at getting quotes was a bust. Even though the companies may have an appetite they didn't have an appetite in my State.
After 19 years I think it is time to open a coffee shop, play nice music and get out of this business. I can start an entire other rant on finding markets. I can't find market outlets and I can find carriers to supply quotes..........you see how it can get frustrating.
There is one place that I can pay $10,500 to all for the ability to share my commission with them. It sounds good but it is still $10,500.
I have never, ever never ever had a problem in the life, health market. None of the large brokerages ask for an entry fee and insurance companies are open and looking for sales.
The fact that insurance premiums exhibit cyclical behavior certainly is no evidence of collusion or conspiracy. And, though I understand why insurers might favor "tort reform" (a phrase loaded with ideological baggage), if I'm a broker, why would I care (unless its just that old Republican pro-business, trickle-down stuff again)?
Seems to me the problem is simple. Brokers are generally paid a commission by insurers for selling their products. Do brokers "work for" the people who pay them? No. I mean yes. Well, not exactly... Their primary duties are to the insurance buyer. Is there a conflict of interest here? Of course. How should this conflict be resolved? How about by buyers of insurance paying brokers on a flat fee for service basis? Just like other "professionals".
But lots of buyers - even those who you'd think would be sophisticated - don't like this arrangement. They don't want to pay brokers for deals that don't go through. They believe that if insurers pay brokers, then they won't have to. Is there a "free lunch"? How can anyone in business be so uninformed?
Insurers should STOP paying commissions to brokers. Brokers should start billing as if they were professionals. This tilts the playing field for brokers though. It changes the value proposition from selling lots of stuff to delivering insightful advice at a justifiable price. This would certainly be a huge problem for most brokerage firms which are staffed up with salespeople.
Seems to me the problem is simple. Brokers are generally paid a commission by insurers for selling their products. Do brokers "work for" the people who pay them? No. I mean yes. Well, not exactly... Their primary duties are to the insurance buyer. Is there a conflict of interest here? Of course. How should this conflict be resolved? How about by buyers of insurance paying brokers on a flat fee for service basis? Just like other "professionals".
But lots of buyers - even those who you'd think would be sophisticated - don't like this arrangement. They don't want to pay brokers for deals that don't go through. They believe that if insurers pay brokers, then they won't have to. Is there a "free lunch"? How can anyone in business be so uninformed?
Insurers should STOP paying commissions to brokers. Brokers should start billing as if they were professionals. This tilts the playing field for brokers though. It changes the value proposition from selling lots of stuff to delivering insightful advice at a justifiable price. This would certainly be a huge problem for most brokerage firms which are staffed up with salespeople.
People like to think they are not paying for th service and that is why they would rather pay a commission. They don't see what the payment for services. For 15 years I also had my series 7 license and people usually never questioned or cared about the commission sturcture. Al long as they made money they were happy and I had a lot of happy clients. Then I decided to drop the series 7 and go with a State registered investment advisor. No commissions were taken but an hourly fee was applied. That side of my business plummeted. People didn't mind if I made $500 commission but if I billed them for my time doing a financial plan and implementing that plan..... they did not like it. To be truthful, I didn't like billing them and I didn't care for the fee only business.
Sometimes I do business with people that it becomes a labor of love. Even though my time outweighs the paltry commission, I'm determined to get them a policy. Other times that big policy is a breeze to settle and that commission helps level out the loss on the small, harder to place policy. It would be nice to invoice for our time but I don't think it would work.
There's also the salesperson inside of me that likes to go gorilla hunting at times and like the thrill when I get one.
Sometimes I do business with people that it becomes a labor of love. Even though my time outweighs the paltry commission, I'm determined to get them a policy. Other times that big policy is a breeze to settle and that commission helps level out the loss on the small, harder to place policy. It would be nice to invoice for our time but I don't think it would work.
There's also the salesperson inside of me that likes to go gorilla hunting at times and like the thrill when I get one.