With the nation’s financial crisis taking new twists and turns every day, and the country’s biggest insurance organization in distress, buyers are taking a more proactive approach to renewals—assessing carriers with much greater care, while their organization’s officers and directors look over their shoulders, demanding stricter due diligence, leading risk managers say.
“In light of the financial crisis, renewal this year is definitely more tedious—more stressful than in past years,” according to Scott H. Beckman, vice president of risk management and insurance for Advocate Health Care in Oak Brook, Ill. “The approach we’ve been taking is not just monitoring but investigating insurers.”
Mr. Beckman is working on major renewals, including “our entire excess liability reinsurance program for malpractice and general liability covering all of our operations, so it probably is the singular, largest renewal and the most costly renewal for us.”
Although the company generally begins the renewal process six months in advance, he noted, “we started watching the AIG developments even before they hit.”
Even under the best of circumstances, renewal time is no picnic. The company—which he described as an integrated health care delivery system—is comprised of hospitals and other ancillary medical operations, including home health care, home medical equipment, surgical centers and freestanding diagnostic centers.
The company has more than 250 sites offering care in the Chicago area, generating revenue of about $4.5 billion and employing over 27,000 people.
“We are the largest health system in the state of Illinois, and one of the largest in the Midwest, with 14 percent market share,” Mr. Beckman noted. “We also have several large medical groups run for trauma centers, three major teaching facilities, and the list goes on, so there’s a lot at stake.”
Previous renewals mostly consisted of brokers “providing you basic fact sheets on the company—focusing on ratings.”
With the current renewals, however, “we’re going beyond that—not just reading everything that’s in publications, but looking on the Internet in regards to the companies, such as stock prices, their investment income, trying to find what weaknesses companies may have,” he added.
Mr. Beckman noted that his company does a lot of business with an AIG subsidiary, Lexington Insurance Company, which is Advocate’s major reinsurer of retention levels in its captive. “We are very much entrenched with AIG. We have them in our [directors and officers] program and our property program,” he noted. “Are they safe? They’re definitely the most scrutinized.”