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Runoff article promotes misconceptions
TO THE EDITOR: There are at least two glaring misconceptions that scream for correction in Judy Greenwald's Feb. 12 Business Insurance article, "Runoffs Change the Relationships Between Buyer and Insurer."
First is the implication that once an insurer goes into runoff it is difficult for risk managers to obtain "a fair settlement of claims." Such an observation ignores or fails to understand usual and customary historical business practices. Questionable claims that had been paid in full when the company was active often resulted in an agreed-upon increase of premium when the policy or contract was renewed. At a minimum, the loss payment became part of the experience record and factored into the premium calculations for all new or renewed accounts. Once in runoff, however, such premium-related options no longer exist for the company and the sole mechanism to resolve disputable claims, many of which are "not black or white to begin with," is to compromise. While that process might result in a less-than-expected payment, it is hardly an unfair settlement.
Secondly, Ms. Greenwald's article states runoff entities "have no incentive to pay claims promptly." Well, the good ones certainly do, because while claims will be subjected to careful coverage and documentation criteria, the well-managed runoff entity, or its service provider, recognizes that maximum credibility to raise issues and successfully seek reasonable compromises will only materialize if properly covered claims are paid promptly.
A successful runoff strategy must recognize both the financial limitations inherent in the runoff entity and the good faith obligations attendant thereto. The best way to achieve both is through quantifiable, technically proficient and responsive claim management. Risk managers would be well-served to apply similar standards.
Renny W. Hodgskin
Cambridge Integrated Services Group Inc.
Captive critique draws response
TO THE EDITOR: This is in response to John Bell's Jan. 29 letter, "Beware Misnomers in Captive References."
I am the author of the quarterly column to which the letter writer refers. Everything the learned letter writer wrote is basically true if the topic is a single-parent captive. However, my article addressed group captives.
As Mr. Bell may not know, the financial dynamics of group captives are far different from those of single-parent captives. Most importantly, because group captives share some risk, each member potentially benefits from the good loss experience of every other member.
So in this structure, it is quite possible for individual captive members to realize financial gains. In his letter, Mr. Bell, issued a challenge to me to come up with a "single significant benefit that would accrete to the majority of captive owners." Here is the answer to your challenge.
Donald J. Riggin
Practice Leader, Alternative Risk Solutions
Albert Risk Management Consultants
Rights sacrificed for 'imagined safety'
TO THE EDITOR: Sally Roberts' commentary in the Feb. 12 edition of Business Insurance once again reminded me how we as a nation are allowing our values to change. We adopt a new mantra: Don't hold me responsible, hold someone else responsible.
Holding gun manufacturers responsible for how an individual chooses to use their products, or a fast-food restaurant responsible because a person overeats, transfers the responsibility from the individual to a company, which is easier to control through laws or financial repercussions.
We migrate our value system to another point on the spectrum where the end, indeed, justifies the means. We sacrifice our freedoms for imagined safety. We teach our children to live their lives based on fear rather than reasonable caution.
Perhaps we need another leader as powerful as Dr. Martin Luther King who might say, "I am responsible for me; I am responsible for the values I hold, the decisions I make, the actions I take. I am responsible for the consequences of my action or inaction. I cannot blame the person who raised me, the person who harmed me, the door that was closed to me. It is in my power to institute change, and that change begins with me. I am the nation."
In her article, Ms. Roberts states, "I've never been a big fan of such litigation" and then proceeds to criticize laws that make that litigation impossible. I shudder not so much because we have allowed confiscation of personal property because of alleged crimes without due process, but rather because of the Americans so willing to accept an invasion of civil rights to accomplish the end.