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Risk Management User Group June 20, 2006 WELCOME Michael L. Hay, CRM, CGFM, CPPM.

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Presentation on theme: "Risk Management User Group June 20, 2006 WELCOME Michael L. Hay, CRM, CGFM, CPPM."— Presentation transcript:

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2 Risk Management User Group June 20, 2006

3 WELCOME Michael L. Hay, CRM, CGFM, CPPM

4 MEETING AGENDA 8:30 – 8:45IntroductionMike Hay 8:30 – 8:45IntroductionMike Hay 8:45 – 9:00Emergency RespondersJonathan Bow 8:45 – 9:00Emergency RespondersJonathan Bow Workers Compensation Consequences 9:00 – 10:00Lessons Learned-Hurricane RitaDr. Roland Smith 9:00 – 10:00Lessons Learned-Hurricane RitaDr. Roland Smith Ken Craycraft Texas State University System 10:00 – 10:15BREAK 10:00 – 10:15BREAK 10:15 – 10:30REPS EnhancementsErin Thompson 10:15 – 10:30REPS EnhancementsErin Thompson 10:30 – 11:00Exposure ClaimsMary Loza 10:30 – 11:00Exposure ClaimsMary Loza 11:00 – 11:30How Insurance WorksBenny Vanden Avond 11:00 – 11:30How Insurance WorksBenny Vanden Avond 11:30 – 12:30Avian FluDr. Susan Penfield 11:30 – 12:30Avian FluDr. Susan Penfield

5 Texas State University System Hurricane Rita Damages Lamar University/Components Education & General and Auxiliary Facilities

6 Texas State University System Hurricane Rita Damages Lamar University/Components Education & General and Auxiliary Facilities State Auditor Review

7 Texas State University System Hurricane Rita Damages Lamar University/Components and Cardinal Village

8 Texas State University System Hurricane Rita Damages Resources

9 Concepts o Emergency Proclamation o Named Windstorm o Wind-driven Rain o Spend Forward

10 Texas State University System Hurricane Rita Some Lessons Learned o Develop Repair and Replacement Cost Estimates Early o Include Revenue Losses o Retain all Versions of Cost Estimates, Include Dates o Identify Reserves, Other Revenue Options

11 Texas State University System Hurricane Rita Some Lessons Learned o Implement Early Action Plans o Contractors o Equipment o Building Materials o Fuel o Mold is Your Enemy in Any Asset Left Standing

12 Texas State University System Hurricane Rita Some Lessons Learned o Familiarize Yourself with Key Office Contacts o Governor o Lieutenant Governor o Speaker of the House o Legislative Budget Board Members o Legislative Budget Board Staff o SORM o Comptroller

13 Texas State University System Hurricane Rita Some Lessons Learned o Review FEMA Rules o Category A & B, Timing, Limits o Category E Insurance Requirements o Be Prepared to Ride Out Funding Needs

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26 Time Line The Mid-Month of September 2005: Mon.19 th – Rita in the Gulf Tues.20 th – Good News Wed.21 st – Not So Good News – Close the Campus Thurs.22 nd – Bad News – Mandatory Evacuation Fri. & Sat.23 rd & 24 th – Rita hits 8,000 square miles

27 Time Line contd The Month of October: Sun.2 nd – Power Up On Campus Tues.4 th – Campus Phones Up Thurs.6 th – Marshal Law Ends Mon.10 th – Some Employees Return to Work Mon.17 th – All Employees Return to Work Wed.19 th – Classes Resume

28 Lessons Learned

29 Communications 1. Off campus Web & 2. Phone intercept for main numbers 3. Phone bridge Academic Administrative Technical 4. Satellite phones

30 Other 1.Travel passes for key employees 2.Basic needs of key workers Food Water Cots Gas 3.Clean out all refrigerators 4.The cost of delay. Lamar University VS. McNeese University 5.The Importance of Decisive Leadership

31 BREAK See you in 15 minutes

32 REPS Enhancements Erin Thompson

33 Exposure Claims Mary Loza, AIC, ARM

34 Occupational Disease Claim DWC1s filed online with SORM DWC1s filed online with SORM Manifestation of communicable disease: Manifestation of communicable disease: Illness that occurs through the transmission of an infectious agent or its toxic products from a reservoir to a susceptible host. Illness that occurs through the transmission of an infectious agent or its toxic products from a reservoir to a susceptible host.

35 Occupational Disease Claim Adjuster investigation: Course & Scope - burden of proof on claimant to show greater exposure than the general public. Course & Scope - burden of proof on claimant to show greater exposure than the general public. Health & Safety Code & Health & Safety Code & Affidavit indicating the circumstances of the exposure incident. Affidavit indicating the circumstances of the exposure incident. Testing results taken within 10 days of exposure showing negative results. Testing results taken within 10 days of exposure showing negative results.

36 Requirements for SORM to Pay for Initial Testing for Employee Exposed to Communicable Disease Employee is exposed to a communicable disease Is employee an emergency responder? All law enforcement officers All law enforcement officers fire fighters fire fighters emergency medical service employees emergency medical service employees paramedics paramedics correctional officers correctional officers

37 Requirements for SORM to Pay for Initial Testing for Employee Exposed to Communicable Disease Yes Yes Rule Applies Rule Applies All Communicable Diseases No Rule Applies HIV Exposures Only For SORM to pay for the initial baseline testing for the communicable disease: The employee must have the baseline testing performed within 10 days of exposure SORM does NOT pay for testing beyond the ten day period or for further baseline testing. SORM will NOT pay for preventative treatments associated with an exposure claim.

38 Procedure for State Agency Requesting Payment for Baseline Testing Possible exposure at the agency as defined by Health & Safety Code Chapter 81 & 85. Possible exposure at the agency as defined by Health & Safety Code Chapter 81 & 85. Refer the employee to appropriate health care facility where employee can receive a baseline test for the reportable disease. Refer the employee to appropriate health care facility where employee can receive a baseline test for the reportable disease. If testing provided is performed by a private health care provider, or medical bill is NOT paid for by agency AND testing was done within 10 days of exposure, have provider submit bill to SORM. If testing provided is performed by a private health care provider, or medical bill is NOT paid for by agency AND testing was done within 10 days of exposure, have provider submit bill to SORM.

39 Procedure for State Agencies Requesting Payment for Baseline Testing If agency receives the medical bill: If agency receives the medical bill: Submit the first report of injury to SORM online, coding the Nature of Injury as 05, Exposure claim. Submit the first report of injury to SORM online, coding the Nature of Injury as 05, Exposure claim. Submit the medical bill to SORM. Bill must be on proper format (HCFA form). Submit the medical bill to SORM. Bill must be on proper format (HCFA form). If claim is for a specific injury as well as exposure, submit the DWC1s with the first Nature of Injury code as the specific diagnosis and the second code as 05. If claim is for a specific injury as well as exposure, submit the DWC1s with the first Nature of Injury code as the specific diagnosis and the second code as 05.

40 Procedure for State Agencies in Reporting Billing for Baseline Testing, cont. Upon receipt of DWC1s from agency: Upon receipt of DWC1s from agency: Adjuster will verify information and pay for the initial testing only. Adjuster will verify information and pay for the initial testing only. Adjuster will document on adjuster notes to cost containment vendor that only baseline testing is to be paid. Adjuster will document on adjuster notes to cost containment vendor that only baseline testing is to be paid. Adjuster will flag claim so all future medical bills should be routed to adjuster for review. Adjuster will flag claim so all future medical bills should be routed to adjuster for review. Claim set up will NOT be transmitted to DWC if claim for medical billing only. Claim set up will NOT be transmitted to DWC if claim for medical billing only.

41 Procedure for State Agencies in Reporting Billing for Baseline Testing, cont. If employee later shows symptoms of the reportable disease, agency should file first a new first report (DWC1s) for a communicable disease claim, code 73. If employee later shows symptoms of the reportable disease, agency should file first a new first report (DWC1s) for a communicable disease claim, code 73.

42 How Insurance Works Presented by: Benny Vanden Avond SORM Risk Management Specialist

43 Agencies Can Buy Insurance!!

44 Industry at a Glance Total World Insurance Premiums, 2004* A.$3.2 Million B.$3.2 Billion C.$3.2 Trillion D.$3.2 Quadrillion * The I.I.I. Insurance Fact Book 2006

45 Industry at a Glance Total U.S. Insurance Premiums, 2004* A.$960.3 Million B.$960.3 Billion C.$960.3 Trillion D.$960.3 Quadrillion * The I.I.I. Insurance Fact Book 2006

46 Industry at a Glance Largest Insurance Country, 2004* (Ranked by Direct Premiums Written) A.United States B.Japan C.United Kingdom D.France * The I.I.I. Insurance Fact Book 2006

47 Industry at a Glance Largest Insurance Company, 2004* (Ranked by Revenue) A.AXA (France) B.Allianz (Germany) C.ING Group (Netherlands) D.AIG (US) * The I.I.I. Insurance Fact Book 2006

48 Industry at a Glance World Insurance Premium Breakdown, 2004* *The I.I.I. Insurance Fact Book 2006 A. B.

49 Insurance Contractual relationship whereby one party (insurer) for a consideration (premium) agrees to indemnify or guarantee another party (insured or 3 rd party on behalf of insured) against loss to a specified article (risk) caused by designated contingencies

50 Key Elements ContractPremium Conditional Benefits Pooling of Resources

51 History First evidence of insurance Phoenicians (1200 BC) Phoenicians (1200 BC) Earliest known insurance contract Genoa, Italy (1347) Genoa, Italy (1347) Marine Insurance

52 History Foundation of modern insurance Lloyds of London (1688) Lloyds of London (1688) Edward Lloyds Coffeehouse

53 History Insurance Process at Lloyds Ship owner would write the particulars of a proposed voyage on a sheet of paper Ship owner would write the particulars of a proposed voyage on a sheet of paper Name of Vessel Route Ports of Call Value of Hull and Cargo Amount willing to pay for insurance

54 History Fellow coffee drinkers would decide how much, if any, of the risk they were willing to accept in exchange for the premium Fellow coffee drinkers would decide how much, if any, of the risk they were willing to accept in exchange for the premium The insurer would write his name on the ship owners slip under the shipping information The insurer would write his name on the ship owners slip under the shipping information Hence the term underwriter

55 History American Property Insurance Companies Charleston, SC (1735) Charleston, SC (1735) Fire Insurance

56 History American Life Insurance Companies Presbyterian Synod of Philadelphia (1759) Presbyterian Synod of Philadelphia (1759) 19 th Century Life Insurance Boom Fraternal Orders Fraternal Orders Low-cost, members-only insurance Many still provide coverage today

57 Industry at a Glance Total World Insurance Premiums, 2004* A.$3.2 Million B.$3.2 Billion C.$3.2 Trillion D.$3.2 Quadrillion * The I.I.I. Insurance Fact Book 2006

58 Industry at a Glance Total U.S. Insurance Premiums, 2004* A.$960.3 Million B.$960.3 Billion C.$960.3 Trillion D.$960.3 Quadrillion * The I.I.I. Insurance Fact Book 2006

59 Industry at a Glance Largest Insurance Country, 2004* (Ranked by Direct Premiums Written) A.United States B.Japan C.United Kingdom D.France * The I.I.I. Insurance Fact Book 2006

60 Industry at a Glance Largest Insurance Company, 2004* (Ranked by Total Revenue) AXA (France) Allianz (Germany) ING (Netherlands) AIG (US) * The I.I.I. Insurance Fact Book 2006

61 Industry at a Glance World Insurance Premium Breakdown, 2004* *The I.I.I. Insurance Fact Book 2006 A. B.

62 How Insurance Works?

63 How Insurance Works Requirements of an Insurable Risk Large number of Homogenous Exposure Units Large number of Homogenous Exposure Units Accidental Accidental Determinable and Measurable Determinable and Measurable No Simultaneous Destruction No Simultaneous Destruction Probability Calculable and Not too High Probability Calculable and Not too High

64 How Insurance Works Underwriting Process of reviewing applications for coverage and the information contained therein Process of reviewing applications for coverage and the information contained therein Accepted applications must then be classified according to the type and degree of risk Accepted applications must then be classified according to the type and degree of risk Appropriate rates assigned for the exposure Appropriate rates assigned for the exposure

65 Underwriting-Whats Fair and Why? Health Insurance Underwriting Factors: Cigarette Smoking Cigarette Smoking Obesity Obesity Age Age Prior history of heart disease Prior history of heart disease Genetic predisposition to cancer Genetic predisposition to cancer Gender Gender Race Race

66 Underwriting-Whats Fair and Why? Auto Insurance Underwriting Factors: Location Location Gender Gender Age Age Income Income Race Race Driving Record Driving Record Credit Score Credit Score

67 Underwriting Considerations Adverse Selection MisclassificationControl Civil Rights Costs of Classifications Social Policy

68 Guaranteed Cost Insurance Underwriting Premium Depends on Classification Group Premium = (A) x (Pure Premium) + B A = Administrative Costs proportionate to loss A = Administrative Costs proportionate to loss B = Administrative Loading Fee B = Administrative Loading Fee Pure Premium = Amount insurer needs to cover loss Pure Premium = Amount insurer needs to cover loss = Frequency x Severity = Frequency x Severity

69 Guaranteed Cost Insurance Examples VS. Lets Get Ready to Rumble!!

70 Guaranteed Cost Insurance Examples A = 1.4 B = $150 Premium = 1.4 x (Pure Premium) + $150

71 Adult Female Driver Adult Female Driver # of cars = 10,000 # of losses = 250 $ losses = $3.5 Million Pure Premium = Frequency x Severity Frequency = 250 / 10,000 =.025 Frequency = 250 / 10,000 =.025 Severity = $3.5 Million / 250 = $14,000 Severity = $3.5 Million / 250 = $14,000 Pure Premium =.025 (14,000) = $350 Pure Premium =.025 (14,000) = $350 Premium = 1.4 ($350) + $150 = $640

72 Male Teen Driver # of cars = 10,000 # of losses = 500 $ losses = $5 Million Pure Premium = Frequency x Severity Frequency = 500 / 10,000 =.05 Frequency = 500 / 10,000 =.05 Severity = $5 Million / 500 = $10,000 Severity = $5 Million / 500 = $10,000 Pure Premium =.05 (10,000) = $500 Pure Premium =.05 (10,000) = $500 Premium = 1.4 ($500) + $150 = $850

73 Premium Rate Setting Goals of Insurers (Goals of Regulators) Adequate Adequate Fair Fair Reasonable Reasonable

74 Social and Economic Value of Insurance Stability Reduction in Reserve Funds Insurers Investments Satisfies Financial Requirements Specialization in Loss Prevention

75 Social Costs of Insurance Operating Costs Moral Hazard Exaggeration of Losses

76 Final Thoughts Insurance is not too complicated for you to understand Insurance is just one of many risk management techniques available

77 Thank you! For more insurance information: Insurance Programs for Texas State Agencies Insurance Programs for Texas State Agencies (Risk Management) Insurance 101 Course Insurance 101 Course (Outreach and Training) ©


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