Banking on Insurance _ Winter 2004 - Texas Bankers Association

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					                        Banking                                             Insurance News for
                                                                            the Banking Industry

                        WINTER 2004
                                             on Insurance                                    VOLUME 5 NUMBER 1

                        Risk Management 101
203 West 10th Street
Austin, TX 78701-2388
   (800)318-4142                                                                       By Brien O’Connor

 (512)479-7436 Fax                                                                                President, BIA
                                his term may be familiar to some
                               of you, or it may be completely
 Please Route to:
                               foreign. As insurance pro-
                        fessionals, we at Bankers Insurance
                                                                        Risk Management:
                        Agency strive to be the best risk               The practice of han-
                        managers we can for our customers –
                        Texas banks.                                    dling risks by way of
                        Since 1989, the Texas Bankers                     reduction, elimina-
                        Association has had an insurance                   tion or transfer of
                        affiliation to help its members with Risk
                        Management. Today that affiliation is            risk, with the latter
                        Bankers Insurance Agency.                        commonly achieved
                        With over 50 years of combined
                        experience, the team at Bankers                   through insurance.
        Inside:         Insurance Agency stands ready to help          The National Underwriter
                        you, the banker, with any insurance need
                        your bank may face.
   Tips from the        In 1989, the TBA board took a bold step     policies available to protect your
     Treehouse!         and bought ownership in a new insurance     exposures.
                        company called BancInsure. BancInsure       Daily, we analyze the exposures of Texas
                        was created to provide oftentimes           banks, helping CEOs make informed
         Insurance      difficult to place insurance coverages–
             Rates                                                  decisions regarding their risks. We do this
                        mainly Financial Institution Bonds and      through several methods: checklists or
        Why Use         Directors and Officers Liability
                        insurance. Today, with over 300 banks
                                                                    applications; financial information (i.e.,
                                                                    Call Reports and audits); on-site
         Bankers        throughout Texas as customers, the          inspection of each location; previous loss
       Insurance        BancInsure story has been a true success    history; and occasional reviews of leases
                        for the association, but more importantly
        Agency?         for the banks in Texas.
                                                                    and contracts.
                                                                    Once we have the information we need,
      Watch for our     Ever since its entry into Texas,            we then assist the banker in the best way
                        BancInsure and the professionals at         to approach risks. It may be to Avoid
   “Question Man”       Bankers Insurance Agency have done          Risk by eliminating an activity or
 monthly postcards      great things for the banks in the state.    exposure. For example, each year a bank
answering common        First and foremost, BancInsure has          would sponsor the local fishing
  claims questions:     created a competitive environment           tournament. Alcohol was provided to the
                        forcing the competing insurance carriers    fishermen, and the event would last all
                        to lower their prices–to the betterment     weekend long. This obviously was a huge
                        of the banks in the state. Second, our      exposure to the bank. Although
                        team at Bankers Insurance Agency has        ‘incidental’ liquor liability is provided
                        continuously worked to improve the          under most General Liability policies,
                        coverages provided to your bank,            the bank’s policy wasn’t meant to cover a
                        ensuring that you have the broadest         bunch of drunken fishermen!
                                                                                     Cont. on back page…
Why Use Bankers Insurance Agency?

      his week, I was visiting a bank in
      the Fort Worth area when we got
      to the topic of their Commercial
Package Policy. The banker explained to
me that, while they trusted us to do their
Bond and D&O insurance, they owned
their own insurance agency and wanted
to use it for their Commercial Package
insurance. I told the banker that they
might want to reconsider this idea for the
following reasons:
1. Expertise. At BIA, all we do is insure
   financial institutions. We insure over
   300 banks throughout the state.
2. We understand your exposures.
   With over 50 years of combined
   experience and 15 years of insuring
   only banks, we know your exposures
   better than your own agency. They
   may be great at insuring contractors
   or bowling alleys, but at BIA, banks
   are all we do.
3. Errors and Omission exposure.
   You may not be aware of this, and
   your agent may not be as well, but in     4. Current carrier charging too
   EVERY Agent’s Errors and Omissions           much. Unfortunately, in the
   insurance policy there is an exclusion       insurance world, if the insurance
   for “Controlled Business.” This means        company knows that the business is
   that if there is a loss involving a          controlled by the insurance agency,
   business that is owned by the agency         sometimes they will charge more than
   or controlled by the parent of the           they should. This is just a fact of life.
   insurance agency, the E&O policy will        When competition enters into the
   not respond. For example: The bank           equation, it’s amazing how sharp the
   suffers from a fire to its property (or      underwriter’s pencil may be.
   any loss), which was not covered
   because of an oversight by the agency.    5. Broader coverage. Bankers
   Should the bank attempt to sue its           Insurance Agency uses BancInsure
   agency for the negligence, the E&O           exclusively for its insurance carrier.
   policy would deny the coverage.              Why? Because TBA owns an interest
                                                in BancInsure. In addition,
                                                BancInsure has the broadest policies
                                                for banks in the insurance market
                                                place. The BancInsure Advantage and
                                                Advantage Plus policies were designed
                                                specifically for banks. There are
                                                added endorsements geared for the
                                                banking world exposures.
                                              At your next insurance renewal, why not
                                             give BIA a call to see how we can help you
                                             save money and, more importantly, im-
                                             prove your bank’s Risk Management
                                             program! ●
Volume 5 Number 1   Winter 2004                                                    Page 2
Why are my insurance rates going up?
                                                               Latresa Powell, CIC
                                                 Tips from the
        ccording to the ISO (Insurance
        Service Office), fourth quarter
        losses are the highest in 10 years.
U.S. Property & Casualty Insurers paid
$12.8 billion to homeowners and busi-         F. Talk losses!!
nesses for property losses from 21 cata-      It is important for all
strophic events last year. There were         business owners to
more than 1.6 million property and auto       make their employees
claims filed for the year.                    aware of what losses
The catastrophic events affected 39           do to the bottom line.
states, with California suffering the         Review all workers compensation losses
highest insured losses at $2.1 billion,       to see if there is a frequency problem or a
followed by Texas at $1.5 billion. The 21     workplace hazard you have not recog-
events ranged from wildfires to wind and      nized. Keep your premises safe for your
thunderstorm. Here is a breakdown:            customers. Always review any on-site
2003: $12.8 Billion in losses                 accident to see what caused it and what
                                              might be done to prevent it from happen-
2002: $5.9 Billion in losses                  ing again.
2001: $28.1 Billion in losses                 G. Develop a good relationship with
      (largely due to Sept. 11 losses)        your insurance agent.
2000: $4.6 Billion                            Select an agent who is an expert in the
                                              type of business you own and who in-
1999: $8.3 Billion                            sures multiple clients like yourself.
1998: $10 Billion                             Work with your agent and make sure
                                              they are aware of all business activities
How do you as a consumer prepare              and functions. Once a year, ask for a full
for possible increases in premiums?           review of your coverage. Require on-site
A. Raise your policy deductibles.             visits to all of your locations. If you
                                              develop a loss history that is not too
B. Know your policy coverage.
                                              pretty, ask your agent for loss control
This helps you decide what options you
                                              assistance and risk management advice.
really need to keep and the ones you
                                              Clients choose our agency because we
might drop.
                                              insure only banks. That is our expertise.
C. Don’t turn in the small claims.            We devote our time and attention to
A $60 windshield repair should never be       insurance matters that are important to
paid by your insurance company. If in         your industry.
doubt, call you agent.
                                              H. Be proactive rather than reactive.
D. At least once a year, ask for              Plan now for what may come tomorrow.
loss history on your policies.                Bankers Insurance Agency is here to help.
This will give you first hand information     Please give us a call if you have insurance
about claims that are being paid under        questions or need risk management
your policy. Remember, your claims            assistance or loss control advice. ●
history is very similar to a credit score.
The lower your losses, the better your
                                                Come visit us at booth # 506
E. Remember your insurance policy
is not a maintenance policy.
It is your responsibility to keep and
maintain your property in good condition.
The insurance industry began with the
intent to protect us when a catastrophic
event strikes, not pay for damages be-
                                                At TBA’s 120th Annual Convention
cause the property is not maintained.
                                                 April 28-30, 2004 in Houston, TX
Page 3                                                      Volume 5 Number 1   Winter 2004
                        Risk Management 101 (cont.)
                        Another way to help reduce exposures       Finally there is the Transfer of Losses.
                        is Loss Prevention. A bank up in the       This may be accomplished by things such
                        Panhandle had beautiful glass doors.       as employee leasing, subcontracting
                        And yes, customers would walk right        operations, etc. However, the most
                        into them! Placing decals with the         common form of risk transfer is the use
                        bank’s logo on the doors helped solved     of insurance contracts.
                        that problem. In addition, during the      In our next article, we’ll begin to take a
                        winter months, employees were              look at the main components of a bank’s
                        slipping and falling in the parking lot    insurance portfolio. They are the
                        around the same area. It turns out the     Financial Institution Bond, Directors and
                        area in question was grass with a slight   Officers Liability Policy and Commercial
                        rise to it. The bank cut through the       Package Policy. ●
                        grass and laid a small sidewalk that
                        could be kept clear and salted when it
                        iced over.
                        We can also help bankers Reduce
                        Losses. A bank in a rural community
                        was robbed. The bandits jumped up
                        and over the counter and wiped out the
                        teller drawers. It was suggested by our
                        company claims department that the
                        bank should add windows to the teller
                        area and to place any excess cash in
                        unused safe deposit boxes in the vault.

203 West 10th Street
Austin, TX 78701-2388
 (512)479-7436 Fax

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