Agency Web Backup Crucial

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It was encouraging to learn recently that a majority ofindependent agencies access the Web with a business-grade,high-speed, broadband connection. But it was discouraging andalarming to hear that many of these wired agencies are not equippedwith a backup connection if their primary provider goes down–as itinevitably will.

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Progressive Corp. in Mayfield Village, Ohio, announced thesefindings based on a recent online poll of some 1,300 independentagencies.

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Progressive's survey found that two-thirds of all agencies areusing a business-grade Web connection (it should be a lot higherthan that, we believe). Only about 9 percent are usingconsumer-grade connections. The remaining 25 percent said they wereunsure. (Also not a good sign.)

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More than a third of the agencies with broadband access saidthey do not have any kind of backup service, while about half relyon a dial-up modem, Progressive reported. Only 11 percent said theyhave a secondary high-speed connection to use if an interruptionoccurs with their primary provider.

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The Web is critical to communication with carriers andcustomers–as crucial as the telephone in conducting insuranceagency business. Agents, as good risk managers, must have backupsystems in place if their primary Web connection fails. Otherwise,if service disruptions occur, they might find their clients seekingmore risk management-conscious intermediaries.

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Let The Buyers Beware

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Commercial insurance buyers and their agents and brokersexperiencing sticker shock at the premium rates being charged inthis hard market might be tempted to tell primary insurers to takea hike and take their business elsewhere–to the alternativerisk-transfer market, to be exact.

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Unfortunately, this is easier said than done, as many riskmanagers and intermediaries might be learning the hard way. Theunfortunate fact for buyers and brokers is that they can never becompletely free of the traditional insurance mechanism.

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Those deciding to self-insure through a captive, for example,might still need a domestic primary insurer as a “front” to clearlocal regulatory hurdles. These days, fewer carriers are out therefronting because of the potential liabilities involved, and thosethat remain are charging more for their services and the use oftheir paper.

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In addition, even if an insured goes the captive route, theystill need reinsurance to cap their exposure. Reinsurance is notcheap these days, and reinsurers are not always easy to find. Riskmanagers, with relatively few premium dollars to leverage asindividual buyers, are likely to have a tough time getting a betterdeal than their primary insurers would.

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Then there are the administrative costs and hassles involved.Buyers who take insurers for granted will gain respect for theircarriers in a hurry when they realize how much goes into running aself-insured operation.

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Does this mean buyers should dismiss the alternative market outof hand? Of course not. But these are factors that buyers, andtheir brokers, cannot afford to overlook as they consider theircoverage options.


Reproduced from National Underwriter Edition, July 14, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved. Copyright in this article as anindependent work may be held by the author.


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