The Gazette 1989

SEPTEMBER 1989

GAZETTE

Insurance Consultancy and Risk Management

Malicious Product Tamper insurance. This new form of cover has been designed to indemnify a manufacturer for the cost of recalling a product, including inventory destruction, lost profits, business inter- ruption, product rehabilitation and consequential loss. The recall of Tylenol Extra Strength in the U.S. in 1982, after contamination resulting in seven deaths, cost US$100m, with loss of sales amounting to US$400m. The significant thing about this loss was the fact that the Courts held that the cost of recall or sales losses did not fall within the scope of the Products Liability policy in force. The consultant will not advise on price - that is the broker's job. He will recommend that all insurances be placed by reputable brokers. Risk Management In a large commercial concern the cost of claims controls the cost of insurance. In recent years we have seen some Employers' and Public Liability premiums increase tenfold in one year - an enormous burden for industry, particularly, if com- peting overseas. This has led to the growth of Risk Management which is the art of working with manage- ment to protect company assets and control or eliminate losses. It is relatively new in this country and only of interest to the larger industrial concerns. The consultant would seek to introduce the f o l l ow i ng pro- cedures:- 1. A major disaster plan. 2. A planned programme of accident/fire prevention under *Managing Director of J. P. Kilcullen & Co. Ltd., Insurance Consultants and Risk Managers, Blackrock, Co. Dublin. 245

The role of the Insurance Con- sultant may best be considered under the following headings: 1. Consultation regarding cover. 2. Risk Management. 3. Consultation regarding claims. No one would hand over the keys of their home, shop, or factory to the first one who comes along and offers to look after it, for the cheapest price. First of all, he would need to know a great deal more about the offerer - his integrity, expertise and qualifications for the job. Yet, every day, people hand over responsibility for their assets, sometimes running into millions of pounds, to Brokers or Insurance Companies w i t h t he lowest quotations. The true value of insurance cover is only known when the claim arises. With most commodities you get what you pay for - that does not necessarily apply to insurance where you may not get what you thought you paid for. The vital rule when buying insurance is - If the cover is not edequete - the price does not metter. Eighty percent of commercial insurances in this country are arranged by insurance brokers. Many of these firms, particularly those who are members of the Corporation of Insurance Brokers of Ireland or the National Insurance Brokers Association, are highly reputable and provide an efficient service. Member f i rms must maintain professional indemnity insurance and produce Solvency Certificates each year. Until the legislation currently before the Oireachtas is passed, there is nothing to stop anyone describing himself as an insurance broker. No professional indemnity insurance is necessary, no level of expertise required and, very often, little to be had. If the current Bill passes through the Oireachtas in its present form, many of these firms may be forced to become agents,

from whom a relatively low level of expertise will be required. A policyholder wishing to obtain a second opinion may engage the services of a consultant who will:- 1. Examine all existing insurance contracts and visit all premises concerned. 2. Seek any additional information necessary e.g. the value of stocks at risk.

by PEARSE KILCULLEN*

3. Advise on the scope of cover he considers the policyholder should have. 4. Identify present inadequacies in cover. 5. Suggest that professional re- instatement valuations for buildings be obtained and updated annually. 6. If thought necessary, recom- mend different insurers. 7. If thought necessary, recom- mend change of brokers. 8. Examine the circumstances leading up to the contract to try to identify and rectify any possible lack of disclosure which could give rise to serious problems at the claims stage. 9. Identify material risk alterations not advised to insurers - rectify the contractual position and alert the policyholder for the future. 10. Examine the possibility of losses arising due to computers being accessed by unauthor- ised persons. 11. Suggest ways in which cover may be arranged for new kinds of losses. If the policyholder is one who makes or supplies a product that can be consumed, inhaled or applied to the skin - he may be advised to arrange