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Dyman Associates Insurance Group of Companies: 10 Insurance Mistakes to
Avoid in 2015

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Dyman Associates Insurance Group of Companies: 10 Insurance Mistakes to
Avoid in 2015

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At least a few of the 365 days in 2015 will include a calamity or two for your bank.

Many will be small. A few might be large. Some that start small might morph into large.

Make sure your bank’s insurance is up to the task of protecting your assets from the calamities.

Here are some insurance mistakes to avoid:

Mistake 1: Ignoring coinsurance penalties in your policies.

Coinsurance is a penalty inside many policies that can hurt you at the time of a loss. It’s a penalty assessed when your insurance company thinks you are underinsured.

Ask your agent if you have coinsurance provisions in any of your property insurance policies. If so, ask why.

I have long held that having coinsurance penalties in an insurance policy is a good indication that your agent is not looking out for your best interests. Push hard to have the coinsurance penalties removed from your insurance coverage—and take a hard look at the quality of your insurance agent.

Mistake 2: Maintaining inadequate umbrella liability limits.

Umbrella liability insurance provides protection above and beyond the coverage included in your general liability, auto liability, and employer’s liability insurance. It’s an inexpensive way to increase your level of protection against someone suing you.

Premiums can be as low as $750 per $1 million of coverage. My minimum recommended limit for any bank is $5 million. (If your bank has over $300 million in assets, consider $8 million.)

The coverage is cheap, and the exposure can be huge. The most likely cause of a multi-million dollar lawsuit for a bank is an auto accident, probably an employee of the bank driving his or her personal vehicle. Consider the potential lawsuit against your bank if a vice-president driving her personal car hits a school bus.

Mistake 3: Having inadequate data-breach/privacy mitigation coverage.

Insurance agents have been (correctly) pushing cyber-liability insurance for several years. While I want my bank clients to have cyber-liability insurance, it’s the second part of the policy—privacy mitigation—that I'm most concerned with.

If you have a data breach, you’ll have to notify your customers. Expenses in mitigating a privacy event can reach $100 to $200 per breached name. Have a breach involving three thousand names and you have just spent between $300,000 and $600,000.

I see $500,000 of coverage as a minimum. Consider $1 million.

Several insurers are now expressing coverage in terms of a number of affected people. (One insurer provides coverage to notify up to 10 million individuals.) Your agent can get you information on your coverage and the cost of higher limits.

The extra coverage is almost always worth the relatively small premiums.

Mistake 4: Inadequate extra expense coverage.

Undoubtedly your property insurance covers the repair of a building damaged by fire or windstorm.

But how about the increased cost of operations for the six to eight months it takes to get you back into the building?

• How will you pay for rental of a temporary location?

• Or the cost of bringing in a mobile banking center?

• How about the cost of fitting out your temporary office quarters with power, phone, and internet connections?

Your branches should have at least $250,000 of extra expense coverage. Your main offices may need as much as $1 million.

Mistake 5: Tracking customer property insurance yourself.

Banks can no longer afford to track customer’s insurance. Why?

The insurance is too cheap and the cost of outsourcing too low for your staff to take on this onerous task. Taking this off your plate will also make your regulators happier. (There is currently a regulatory hate-fest going on over force-placed insurance coverage.)

Talk with the insurance broker handling your force-placed insurance about alternatives to in-house insurance tracking.

Costs are as low as $6 per year, per mortgage for insurance tracking.

Mistake 6: Failure to understand the call-back exclusion in your bond.

Your bond insurer has certain expectations regarding how you will prevent funds-transfer fraud. A common policy provision is the requirement that you perform call-back verifications on transactions over a certain dollar amount. (Insurers often use your deductible as the threshold for requiring a call-back.)

Some insurers are adding additional warranty provisions. One insurer requires that call-backs be documented with a voice recording of the call-back. Understand the provisions in your policy. Talk with your agent. Negotiate the removal of onerous requirements.

Mistake 7: Not knowing about—and addressing—shared directors and officers limits.

Do lender liability or employment practices liability claims reduce your coverage for future directors and officers claims?

Many management liability policies have an aggregate limit that is equal to the limit of coverage for D&O claims. This has the effect of reducing coverage for future claims.

For example, if you have a policy with a $5 million aggregate limit, a $5 million D&O limit, a $2 million employment practices liability limit, and a $2 million lender liability limit, then a $1 million employment practices liability claim means there is only $4 million left available to pay a later D&O liability claim.

Check with your insurance advisor. Ask if your limits of coverage within the management liability insurance are separate. Show your agent this article.

Mistake 8: Not looking carefully at your bank’s own flood insurance.

Your bank’s package policy may include flood insurance. Many have an exclusion for locations located in flood zones. Some policies exclude locations where you could have purchased NFIP/FEMA flood insurance.

Ask your agent to detail for you which locations are included in flood coverage and which are not. Better yet, have your agent build a spreadsheet of your locations showing each location as a row. Columns should be the amount of property insurance, the flood coverage at that location, extra expense coverage at that location, and other coverage limitations that apply individually to buildings you use.

Mistake 9A: Not reviewing your coverage’s employee dishonesty exclusions.

Your bond insurer expects that you will be diligent in whom you hire. Your bond includes restrictions of coverage that are automatically activated if an employee has committed a past dishonest act. These exclusions can be triggered by events many years ago that have nothing to do with employment or your bank.

I urge management to discuss known dishonest acts by any employee to assess the insurability of an employee. A shoplifting incident when a teller was in high school can mean no coverage if that teller embezzles from the bank.

Mistake 9B: Not understanding that employee dishonesty losses involve intent to defraud and personal gain.

Lately I have received a number of calls from bankers complaining that their bond did not pay for a loan officer who falsified documents so that a friend could get a loan.

You may wonder how this can happen.

The employee dishonesty coverage in your bank’s bond pays for an employee stealing from the bank for his personal gain. There must be an intent to defraud or hurt the bank—and the employee must also realize a financial gain (or expect to gain) from the fraud.

No intent to defraud, no coverage—and no actual or expected personal gain, no coverage.

Mistake 10: Failing to review your bank’s insurance annually.

You rely on your insurance agent to provide advice and insurance guidance. He is a resource you should be able to depend on. An annual review of your insurance coverage will help keep your coverage up-to-date.

Meet with your agent about 120 days before your insurance expires. Go over the coverage you have now and your agent’s plan for the upcoming renewal.

Here are a few questions that can prompt useful actions:

1. Which insurers would you suggest we consider at renewal in addition to our current insurance company? Why?

2. What coverage limits should we consider increasing? What is your basis for determining if we have the right amount of coverage?

3. What are your three most pressing concerns regarding our insurance program? What coverages are we missing that we should have?

4. What actions can we take that will make us more attractive to insurance companies?

5. What trends do you see affecting our insurance over the next three years?

Your coverage isn’t perfect—count on that.

What I’ve outlined in this article are just some of the issues I find when I review the insurance coverage purchased by a bank.

I have worked with over 400 financial institutions. Not once have I seen the perfect insurance program. On average I identify over 20 insurance issues to be considered and discussed in my coverage reviews. I think the record is 65 potential gaps and overlaps.

When we do get the policies straightened out, a renewal comes up and insurers change the policies they offer you. The insurance policies you buy this year are dramatically different from those your bank bought five years ago. Coverages change. New insurers come on the scene. The insurance marketplace evolves, devolves, improves, and regresses.

Share this article with your insurance advisor. It can start the conversation towards improving your confidence in your bank’s insurance coverage.

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Dyman Associates Insurance Group of Companies: Better Insurance Against Inequality

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Dyman Associates Insurance Group of Companies: Better Insurance Against Inequality

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Paying taxes is rarely pleasant, but as April 15 approaches it’s worth remembering that our tax system is a progressive one and serves a little-noticed but crucial purpose: It mitigates some of the worst consequences of income inequality.

If any of us, as individuals, are unfortunate enough to have income drop significantly, the tax on that income will plummet as well — and a direct payment, or negative tax, might even be received from the government, thanks to the earned-income tax credit. In this way, the tax system can be viewed as a colossal insurance system, guarding against extreme income inequality. There are similar provisions in other countries.

But it’s also clear that while income inequality would be much worse without our current tax system, what we have isn’t nearly enough. It’s time — past time, actually — to tweak the system so that it can respond effectively if income inequality becomes more extreme.

I made this argument in 2003 in my book “The New Financial Order” (Princeton University Press). And now there is substantial evidence that inequality has been rising rapidly. In his monumental new book, “Capital in the 21st Century” (Belknap Press), Thomas Piketty of the Paris School of Economics documents a sharp increase in such inequality over the last 25 years, not only in the United States, but also in Canada, Britain, Australia, New Zealand, China, India, Indonesia and South Africa, with people with the highest incomes far outstripping the rest of society.  The book is impressive in its wealth of information but it is short on solutions.

Professor Piketty talks about instituting a “global tax on capital” but acknowledges that it is a utopian idea and says that “it is hard to imagine the nations of the world agreeing on any such thing anytime soon.” He talks about raising the rate of the top tax brackets and raising inheritance taxes but sees “little reason for optimism” that this will happen. There have been big increases in taxes on the rich in the past, but he points out that these tax increases were put in place only in response to wars — specifically, World War I and World War II.

Let’s try not to have another major war. Instead, there are some positive things we can do now. As I said in my 2003 book, it would be wise to start amending the tax system immediately. I suggested this fundamental reform: Taxes should be indexed to income inequality so that they automatically become more progressive — meaning that the marginal tax rate for the highest-income people will rise — if income inequality becomes much worse. Ian Ayres of Yale and Aaron Edlin of the University of California, Berkeley, made a similar argument in 2011 in The New York Times.

There is a practical reason for starting now. If we wait until income inequality is much more severe, we will have a whole class of new superrich who will probably feel entitled to their wealth and will have the means to defend their interest. That’s already gone far enough. We shouldn’t let it become more extreme.

There is also a theoretical reason. It is what the psychologists Yaacov Trope of New York University and Nira Liberman of Tel Aviv University called temporal construal theory. They showed that people are more idealistic and generous when dealing hypothetically with the distant future than they are about actions they need to take today. That’s why it pays to ask people to decide on measures to uphold egalitarian ideals when they don’t have to cough up the money immediately.

In a draft research paper in 2006, Leonard Burman, director of the Urban-Brookings Tax Policy Center; Jeffrey Rohaly, also of the policy center, and I analyzed a kind of inequality-indexed tax system. (We called it the “Rising-Tide Tax System.”) With the benefit of hindsight, we came up with a system that could have been put in place in 1979 — when inequality was much milder in the United States — and that could have prevented any increase in after-tax inequality through 2006.

Though our proposal worked in theory, we found that putting it into effect would encounter difficulties. For the system to be effective, the top tax bracket would have had to rise to well over 75 percent — a political nonstarter, in our view. We also believed that there would have been negative economic effects, including more tax avoidance. So we concluded that the proposal wasn’t ready for advocacy. We held off from finishing and publishing that paper.

Today, though, there are some possibilities that might alleviate, at least partially, any increasing inequality in future years.

In testimony before the Senate Finance Committee last month, Mr. Burman proposed a version of inequality indexing that might be politically acceptable today. His idea was to integrate inequality indexing with inflation indexing: Instead of just linking tax brackets to inflation as measured by the Consumer Price Index, as we have done for years, he proposed that the adjustments also take account of rising inequality, if it occurred. He proposed a system to offset the loss in tax revenue that inflation indexing would produce, in a way that would get us closer to a target distribution of after-tax income; if inequality worsened, higher tax brackets would bear a bit more of the burden, and people at the bottom would bear less.

A relatively minor change like this should be politically acceptable. It is a reframing of inflation indexing, which is already a sacrosanct principle, and would be revenue-neutral. By 2025, Mr. Burman argued, it could pay for a doubling of the earned-income tax credit, “with more than $100 billion left over to adjust middle-income tax liabilities.”

Such a plan would be a nice first step toward making our tax system manage the risk of future increases in inequality.

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Bill Would Free Insurance Firms from
Bank Capital Rules of Insurance Products at Dyman and Associates

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Bill Would Free Insurance Firms from
Bank Capital Rules of Insurance Products at Dyman and Associates

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The U.S. lawmaker who wrote a Dodd-Frank Act provision that imposes bank-like capital standards on the insurance industry introduced legislation to ease the requirements.

Insurance Products at Dyman and Associates

Senator Susan Collins, a Maine Republican, said at a Senate Banking subcommittee hearing today that her 2010 provision was not intended to subject insurance companies to the same capital and liquidity standards as banks.

“While it is essential that insurers subject to Federal Reserve Board oversight be adequately capitalized,” Collins said at the hearing, “it would be improper, and not in keeping with Congress’ intent, for federal regulators to supplant state-based insurance regulation with a bank-centric capital regime for insurance activities.”

The provision of the Dodd-Frank overhaul of U.S. financial regulation requires the Fed to set minimum capital and leverage standards on non-bank firms, including insurance companies like Prudential Financial Inc. (PRU: US)

Collins said insurers engaged in activities regulated as insurance at the state level would be exempted from the Dodd-Frank capital requirements under her bill.

Insurance companies say bank capital standards don’t fit their business and submitted testimony to the subcommittee to press their case for an amendment.

“It’s a difference in the fundamental business model,” Julie Spiezio, senior vice president of insurance regulation and deputy general counsel for the American Council of Life Insurers, said. “It’s like trying to put the safety standards of airplanes on cars.”

Fed Agreement

Federal Reserve Chair Janet Yellen and her predecessor, Ben S. Bernanke, have said they agree that insurance companies should meet different capital standards than banks.

“We recognize that there are very significant differences between the business models of insurance companies and the banks that we supervise, and we are taking the time that’s necessary to understand those differences and to attempt to craft a set of capital and liquidity requirements that will be appropriate to the business model of insurance companies,” Yellen said at a Feb. 27 hearing.

However, Fed officials say the language of Collins’ original provision limits their ability to develop a different capital regime for insurance companies.

‘Some Constraints’

“The Collins Amendment does restrict what is possible for the Federal Reserve in designing an appropriate set of rules,” Yellen said.

Collins said she believes the 2010 provision gives the Fed adequate authority to tailor the requirements to the insurance industry.

“I do not believe legislation is necessary,” Collins said in an interview following her testimony to the panel. “I believe the Fed could have solved this if it wanted to.”

She predicted that her bill and a similar measure by Ohio Democrat Sherrod Brown, who led today’s hearing, and Nebraska Republican Mike Johanns, would be consolidated into one measure.

“I believe in the end that we are going to come together on a single bill and that’s my goal,” she said. “We’ve resolved a lot of issues over the past few months but we still have a couple of issues to come to consensus on.”

The Brown-Johanns bill, which has 23 co-sponsors, has yet to gain approval by the committee.

‘Bipartisan Agreement’

“There is broad, bipartisan agreement that providing traditional insurance is different from banking,” Brown said in an e-mailed statement yesterday. “Capital rules must accurately measure and address the risks of the businesses to which they are being applied.”

Former Federal Deposit Insurance Corp. Chairman Sheila Bair has cautioned against congressional action and said lawmakers should instead wait on the Federal Reserve to act. In a letter to Brown yesterday, Bair said the bill would give insurance companies “a significant competitive advantage over banking organizations engaged in the same activities, and leave the door open to the kinds of highly leveraged risk-taking which contributed to the 2008 crisis.”

President Barack Obama’s administration has previously opposed any legislation to amend Dodd-Frank.

Right Time

“I do recognize the concern about opening up Dodd-Frank when there has not been sufficient time to evaluate its impact,” Rodgin H. Cohen, senior chairman of Sullivan & Cromwell LLP, which represents Metlife Inc. (MET: US) and other insurance companies, said in testimony prepared for the subcommittee. “But, if there were ever to be any change, this is the time and place to do so.”

The Financial Stability Oversight Council last year designated Prudential and American International Group Inc. (AIG: US) as systemically important financial institutions, or SIFIs, which would subject them to the Fed’s capital rules. MetLife Inc., the largest U.S. life insurer, has said it’s in the final stage of consideration for the risk tag.

Designation as a SIFI subjects companies to added scrutiny of capital levels, liquidity and leverage from the Fed even as U.S. insurers are primarily overseen by state regulators. MetLife said in its annual filing that being deemed systemically important could limit the company’s ability to pay dividends or repurchase shares.

The need for a taxpayer rescue of AIG in 2008 helped convince regulators that more supervision is needed for nonbank firms. AIG almost failed amid losses in its Financial Products unit, which wasn’t overseen by state regulators.

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Why Aren't We Buying Insurance Against Global Warming?

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Why Aren't We Buying Insurance Against Global Warming?

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Dyman & Associates Insurance Group of Companies

Every responsible person carries insurance against all sorts of life's potential catastrophes. We don't think twice about buying health insurance, home insurance, car insurance, life insurance, liability insurance, and it goes on and on.

From a gambler's perspective, these are all sucker bets. Insurance companies make their big bucks by tipping the actuarial odds in their favor so that they can pay off far less in reimbursements than they receive in premiums.

We are willing to richly reward insurance companies in this way because they spread the risks across a large group. The individual pays the extra price to gain security and peace of mind. Which brings us to the two life or death questions now facing our species: Why we are failing to take out an insurance policy against global warming? Can we wise up before it is too late? The risks that we are causing and will suffer from a future environmental catastrophe couldn't be clearer. Atmospheric and oceanic carbon dioxide is rising at an alarming rate. Computer models predict drastic temperature and sea level changes with increasing certainty. The population explosion and the rapid growth in per capita consumption are together befouling our atmosphere and draining irreplaceable supplies of fossil water.

And the effects of global warming are likely already upon us. Year after year of record-setting world mean temperatures. Unprecedented droughts in California. Unprecedented rains in England. Atlanta colder in January than Anchorage. Supposedly once-in-a- hundred-year weather disasters happening every few years.

Perhaps these are all flukes, but should we complacently bet the species on the blind hope that someday we can work out a technological fix. Prevention is much better than cure, especially since there may not be a cure or the cure may be too late to save the day.

We should be taking out an insurance policy. Why aren't we? Why are we the selfish generation that failed to save the earth for our grandchildren and their children. The times they are fast a changing and clearly we are not changing fast enough to keep up with them.

Part of the problem is human nature. Living in a harsh world, our ancestors faced an uphill battle for day-to-day survival and couldn't anticipate or plan for the prospect of a long-term future. Evolution has therefore favored short-term, short-sighted decision-making. It is not within human psychology to be very good at really long-term planning -- especially for things that are difficult to visualize.

Part of the problem is corporate psychology. Executives and shareholders think in terms of quarters, not decades or centuries. The smart short-term profit play is to spend hundreds of millions casting doubt on environmental science, electing science denying politicians who can't see past election day, and propagandizing the public into numb inaction.

The basic pitch is 'do nothing' until we can prove beyond a shadow of a doubt that we are irrevocably ruining our environment. Of course, this is brutal and ruthless cynicism -- by then it will be too late to save ourselves and prevent the environmental catastrophes, famine, war, and pestilence that will inevitably follow. 'Apres moi, le deluge'. Let the grandchildren suffer. We don't wait to develop an illness before taking out health insurance, or an accident for car insurance, or apply for fire insurance after the fire starts. The whole meaning of insurance is that you buy it early and without certainty you will ever need to use it.

The same foresight should inform our approach to global warming insurance. This would take the form of paying the price now for systematically reducing the risk of future catastrophes for our children and their children. This needs to be done immediately -- before we can be absolutely certain how grave are the risks and how far in the future is the tipping point. That's what insurance is all about.

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Dyman & Associates Insurance Group of Companies: Flood
Re home insurance

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Dyman & Associates Insurance Group of Companies: Flood
Re home insurance

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Your questions answered

In the summer of 2013 the government and insurance industry came to an agreement about flood-prone homes, to allow owners of such homes to be able to buy affordable insurance. Under a scheme called Flood Re, annual premiums will be capped and payouts for flood damage will come from a central pool of money.

How do I know if my home is affected?

The scheme covers 350,000 households which the Environment Agency says are at high risk of flooding. You can use its interactive map to find out if your home is one of them.

What does this mean for homeowners on flood plains?

Unless your property is in council tax band H then the flood aspect of your buildings insurance will be capped from 2015. The Association of British Insurance says the cap will be £210 a year for properties in bands A and B, rising to £540 a year in band G. The premiums will go in a central fund and be used to pay out claims to any insurer. In theory, some people could see their costs go down once the cap comes.

It is important to remember that the cap is only on the flood element of your insurance – if other risk factors change, your premiums could be pushed up by them.

Insurers will also pay a levy into the fund equivalent to £10.50 a year on every home insurance policy.

Does this mean my premiums will go up?

If you are on a flood plain it could, although you have probably already seen premiums rise to reflect the risk. If you are not on a flood plain insurers say the cost of the levy won't be added to policies as homeowners are already paying some of their premium to subsidise other customers at greater risk of flooding. However, the cost of this year's flooding could mean higher premiums for everyone as insurers attempt to cover their bills.

What happens to band H council tax payers?

They are not covered by the Flood Re scheme so could see premiums rise by a sum above the cap or find that their homes become uninsurable. This could have a knock-on affect on the value of their homes, as mortgage lenders will only offer loans on properties which have buildings insurance.

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Dyman
and Associates Insurance Group: Buying and Selling

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Dyman
and Associates Insurance Group: Buying and Selling

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Dyman and Associates Insurance Group

If you decide to buy or sell a manufactured home, or if you're just seeking for more information, you'll profit from this section. Let our easy-to-follow tips help guide the way before you getting overwhelmed by all you need to know to buy or sell a manufactured home.

- Buying a New Manufactured Home

- Buying a Pre-Owned Manufactured Home

- Buying and Selling Resources

- Choosing the Right Location

- Colleen’s Chronicles: An e-Journal of a First Time Manufactured Home Buyer

- Manufactured Home Featured Resources

- Mortgage Calculator

- Moving and Packing Guide

- Parts & Supplies Resources

- Selling a Manufactured Home

- The Park Manager Tool Kit – A Free Guide to Make a Park Manager’s Job Easier

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Dyman & Associates Insurance Group of Companies

We are more than what you expect!

The right insurance policy should be last thing you ought to worry about or better yet the one that is worry free.

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