Insurance... the word alone evokes strong feelings from anyone who hears it and usually not positive ones! ?EUR??,,????'??How can they keep building skyscrapers when they are supposed to be losing so much money??EUR??,,????'?? ?EUR??,,????'??This 300% rate increase is justified because it is actuarially sound!?EUR??,,????'?? ?EUR??,,????'??It?EUR??,,????'???s not the insurance company?EUR??,,????'???s fault, it?EUR??,,????'???s those darned attorneys!?EUR??,,????'??

Does all of this sound familiar? Do you feel like you are missing something when you try to read a basic insurance policy such as your homeowner?EUR??,,????'???s? Is it ever possible to understand insurance without feeling as though you?EUR??,,????'???ve got a severe headache waiting to blossom? Let me suggest it is indeed possible to not only understand, but even have a working knowledge as to what your insurance portfolio should andshould not be expected to do. (I?EUR??,,????'???m not going to tell you that you will ever fully enjoy this new found knowledge, but you just might!)

Unfortunately, the insurance too often would rather keep you, the insurance consumer, in the dark. There is no federal regulation of the insurance industry. (I am not convinced there should be. If you want to see what our federal government can do for insurance, take a long look at Social Security and Medicare.) Only states have authority over then own Departments of Insurance and the companies that practice within. Some consumer organizations that have tried to start public educational movements are often, if not always, grossly reactionary and often times do not deal in facts themselves. The truth of the matter is, it is very difficult to get factual information concerning the insurance industry and then be able to understand it.

The insurance industry would like you to believe that somehow court awards and losses suddenly quadrupled in the last few years. Such is just not the case. (Weather related catastrophes have been unduly harsh recently, but that?EUR??,,????'???s not really the culprit.) The truth of the matter is, the insurance industry?EUR??,,????'???s own decisions to under-price their own product in hopes of making a profit through various investments simply did not work out. Their poor decisions were compounded by the continued drop in interest rates we have seen over the past several years. These are the facts that relate most directly to why your business insurance premiums have increased rather dramatically. This statement does not mean that awards have not increased; indeed they have. The insurance companies were able to temporarily make sufficient money to pay those increased awards, and also make a profit at the same time. This kept each company from making the difficult individual decision to raise only their rates which encourages customers to ?EUR??,,????'??shop?EUR??,,????'?? and potentially insure with a different company. Instead the companies waited for their competitors to arrive at the same ?EUR??,,????'??crisis?EUR??,,????'?? and raise their rates simultaneously. A simple case of no one wanting to go first.

I am of the opinion that the insurance industry crisis is the direct result of four major areas. As previously mentioned, the insurance industry is much to blame for its own problems. Unfortunately for you, the insurance industry can, with the stroke of an arm, raise rates across the country because they can show they are ?EUR??,,????'??losing their shirts?EUR??,,????'?? but nowhere is the insurance industry accountable and obligated to admit that much of that problem is of their own doing.

The other three areas compounding this problem are too large to be included in this, the first column of its type in The Landscape Architect and Specifier News. My purpose is not to use this as a forum to merely ?EUR??,,????'??bash?EUR??,,????'?? the insurance industry. I am going to attempt, through this column, to give you factual, ?EUR??,,????'??real world?EUR??,,????'?? information to help you deal with the problems of a changing insurance marketplace. Future topics will include suggestions on how to avoid costly and frivolous litigation, how to determine the adequacy of your insurance portfolio, how to find an insurance agent or broker that understands your needs, and how to best prepare for the next insurance crisis which will undoubtedly occur within the next several years. In all likelihood the next crisis will be worse than the one we?EUR??,,????'???ve just been through.

You are invited to participate in this column by sending in your questions. From time to time we will publish your questions for the benefit of all.

Jim Leatzow
Leatzow & Associates
Insurance Consultants