Debit Card Fee Reduction: Who's Getting Your
Savings?
Effective
October 1st, the Durbin Amendment took effect and the
cost to process most debit card transactions
became substantially lower. This affects
U.S. Restaurants that accept credit and debit
cards for payment.
To
illustrate, the cost for a credit card processing
company to process a $40 debit card transaction
before October 1st was $.58 ($40 x 1.19% + $.10
per transaction).
Now,
this transaction will cost the processor $.24 ($40
x 1.19% + $.10 per transaction).
That's a savings of
$.34.
An
establishment doing $40,000 a month in sales with
an average check of $40 means 1000 transactions
per month. Assuming half of those
transactions were paid on debit cards this would
represent a potential savings of $170 per month
and over $2000 per year, but only if those
savings are passed on to the
restaurant.
One
issue with the Durbin Amendment is that it didn't
mandate that merchants receive this
savings. As a result, many credit card
processors are reportedly pocketing the savings
and not passing it on to the merchants
(you).
How
do you know if you are getting the benefit of the
debit card fee reductions or if your processor
is?
Did
you receive a notice from your credit card
processor regarding the Durbin
Amendment? If not, it's likely that
your processor plans on keeping the savings and
not passing it on to you.
Compare
the processing fee percentage on your September
statement to the fees on your October
statement. Take your total charges
and divide by the total sales for each
month.
If
you're getting any of the savings from the Durbin
Amendment, your October processing cost
percentage should be lower than the September
percentage. If it's not, it's likely your
processor is keeping your debit card
savings.
Operating
in an industry with razor thin profit margins
necessitates being extra diligent about watching
where every nickel you're spending is going.
If you're not realizing any savings from the
passage of the Durbin Amendment it means
you may be set up to overpay for your card
processing to the tune of thousands and
possibly tens of thousands of dollars per
year.
Find
out what's going on with your Durbin Amendment
savings and talk to your processor if you
suspect you're not getting yours.
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Controlling Workers Compensation
Costs
In today's
economy, many people are struggling to keep their
heads above water. Employment rates are up,
unemployment income might be running out, and
health insurance costs are up and possibly
unaffordable for many people. Since slipping
into a recession several years ago, the insurance
industry has seen a steady rise in claims of all
types. Small property claims that may have
been paid by the policy holder are now being
turned in. Theft of money, goods and
materials has spiked. General Liability and
Workers Compensation claims involving injuries to
individuals has followed a similar
trend.
For the sake of
this article we'll focus on employees because it
dovetails with a piece we wrote a couple of issues
back about injuries that were turned in as
work-related, but actually happened off-hours,
away from your business.
Workers
Compensation claims are up and a proximate cause
would seem to be much of the same: money is tight,
some folks are going without health insurance, and
claims that might've gotten turned into an
individual's medical provider are now being turned
into their Employer's Workers Compensation carrier
fraudulently out of last resort.
There are a few
things you can do to prevent this.
Video
Tape
We've espoused
the benefit of security cameras before, usually
for monitoring patrons. Sometimes,
having cameras in employee-only areas have
benefits as well. If your building and
camera system can handle the extra camera inputs,
having a camera in your stockroom,
kitchen, garage, workshop and back door or
loading dock can deter would-be
fraud.
Posted
Warnings
Written and
posted Safety Procedures may bail you out
if an employee feigns a work injury to
cover-up an off-the-job injury by doing
something so illogical you wouldn't think anyone
would ever do them. Putting written
behavior expectations (no running, no
horseplay, safe handling procedures for chemicals,
proper procedure for moving/lifting heavy objects
or retrieving objects from high shelves, etc...) in
your employees' hands can give you a leg to stand
on if an employee is injured doing something
stupid.
Accident
Insurance
There are even
types of Accident Insurance that you as an
employer can establish for your employees, at no
cost to you, that would cover them for off-the-job
accidents, thereby keeping that claim off your
your business' Workers Comp policy. Imagine
if employees injured off-the-job had a disability
policy to turn to for ongoing expenses, rather
than looking to your Work Comp policy for benefits
payments. |
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Spotlight On: Aggregate
Limits
Most liability policies contain something
called an Aggregate Limit. An Aggregate is
the maximum dollar amount of coverage
available under that policy for the designated
policy term. There's usually an Occurrence
Limit as well, which is the maximum dollar amount
of coverage available for any one incident
occurring in the policy term. A potential
problem exists, when the Occurrence Limit is the
same as or nearly as high as the Aggregate
Limit. For the purposes of this example,
we'll focus on Liquor Liability, although the
scenarios provided could just as easily apply to
General Liability policies as well.
When comparing Liquor Liability policies or
quotes, there are several elements to
consider. Some of the most common include
Assault & Battery coverage and sub-limits,
entertainment exclusions, and restrictions on
premises limitations. One area that can go
overlooked is an Aggregate Limit.
A few insurers write Liquor Liability
policies without an Aggregate Limit, meaning
there is no limit on the total amount the policy
will pay out during it's term. However, many
insurers in the marketplace write policies with
matching Occurrence and Aggregate limits, such as
a $1,000,000 Common Cause limit and a $1,000,000
Aggregate limit.
Each time a claim is paid, it reduces the
aggregate amount of insurance remaining to pay
additional losses. Once that amount is
exhausted, the insurer is no longer obligated to
pay damages or
defend claims subject to the
aggregate amount. This remains the case
until the policy is renewed, beginning a new
policy period, or the insured takes out another
policy.
As an example, Leo's Bar & Grill has
written in their name a liquor liability policy
with a $1,000,000 limit per Common Cause and a
$1,000,000 Aggregate limit. Their annual
policy period begins January 1st. They have
the following claims:
Claim
1 - On February 2nd, a patron
leaves the establishment in her vehicle and
collides with another car carrying a couple on
their way home. The husband and wife sustain
multiple injuries, some of which require surgery
and a lengthy rehabilitation. The total
value of their claim is $750,000. With a
$1,000,000 occurrence limit and a $1,000,000
aggregate, the policy is sufficient to cover the
$750,000 settlement required. Upon settlement of
the loss, however, the Aggregate limit now
available is only $250,000.
Claim
2 - On Memorial Day weekend, a
group of friends meet up at Leo's Bar &
Grill. They stay for a few hours, then leave
together to go to a house party. During the
commute, the vehicle goes off the road in a single
car accident, killing the driver and seriously
injuring two of the passengers. Multiple
lawsuits are filed against Leo's, but due to the
February claim, only $250,000 of the aggregate
limit is available. Upon settlement of this
second claim, the policy limits are now
exhausted.
Claim
3 - On October 20th, a man meets
up with a friend at Leo's Bar & Grill to watch
a football game. When the game is over, he
leaves and drives across down to another
bar. On the way, he collides with a minivan
carrying a mother and her two children. The
Aggregate Limit of Leo's Bar & Grill is
exhausted, so no coverage, and more importantly,
no legal defense, is available from Leo's
insurer. The establishment is left to defend
and settle this third claim on their
own.
The timing of these claims illustrates the
problem with an aggregate limit: the exhaustion of
the limit of the policy due to prior claims may
not be realized until months or even
years after the incident occurs; because
the final dollar amount of a loss will not be
known until the claim is settled. In all
likelihood, the insured may be unaware that their
limits have been exhausted at the time that the
next event takes place.
If an insured has a liquor liability policy
with an aggregate limit, they risk running out
of coverage without even knowing it, because
incidents may have occurred that have not been
settled or even reported yet. With the
amount of time allowed in most states to file a
liquor liability claim, the potential for a
problem with Aggregate limit is more significant
that most realize.
If every liquor-related accident or incident
came to light in a prompt, timely manner,
business owners would be able to side-step most of
these issues by acquiring a second liquor
liability policy when the first one appeared in
jeopardy. However, that just isn't the way
most claims develop. As it stands, some
additional liability protection may be afforded by
acquiring an umbrella or excess liability policy,
but beyond that, good fortune and careful
consideration of an Aggregate Limit are the best
options available to
business owners. |
|
Wintertime Tips for You
& Your
Vehicles
Last issue, we looked at ways to
prepare your building for the winter cold.
This issue, we'll turn our attention to you and
your vehicles. Inclement weather pays
no mind to anyone's schedule; when you head out on
errands or to work, conditions can be just
fine. But in the span of a few hours, things
can deteriorate quickly. Here are some tips
to be prepared and safe when you're out and about
this winter.
Before
Winter Storms & Extreme
Cold
- It's never too late to put together an
emergency kit. Consider including: a
shovel, windshield scraper & small broom,
flashlight, battery powered radio, extra
batteries, water, snack food, matches, extra
hats, socks and gloves, a first aid kit, a
pocket knife, a small supply of any necessary
medications, blankets, tow chain or rope, road
salt and sand, booster cables, emergency flares
and perhaps a fluorescent distress flag.
- Make a Family or
Business Communications Plan. Your
family may not be together when bad weather
moves in, so it is important to know how to
contact one another, how you'll get back
together and where you'll rendezvous.
- Stay up to date on weather forecasts and, if
conditions are threatening to worsen, minimize
travel. If travel is necessary, make sure
you have supplies in your vehicle.
- Winterize your vehicle - have a mechanic
check on:
- Antifreeze levels - ensure they are
sufficient to avoid freezing
- Battery & Ignition System - should be in
top conditions and battery terminals should be
clean
- Brakes - check for wear and fluid levels
- Exhaust System - check for leaks and crimped
pipes and repair or replace as necessary.
Carbon Monoxide is deadly and usually gives no
warning.
- Fuel and Air Filters - replace and keep
water out of the system by using additives and
maintaining a full tank of gas. A full
tank will keep the fuel line from freezing.
- Heater and Defroster - ensure they are
working properly
- Lights and Flashing Hazard Lights - check
for serviceability
- Oil - check for level and weight.
Heavier oils congeal more at low temperatures
and do not lubricate as well.
- Thermostat - ensure it's working properly
- Windshield Wiper Equipment - repair any
problems and maintain proper washer fluid level.
- Install Good Winter Tires - make sure your
tires have adequate tread. All-weather
radials are usually adequate for most winter
conditions.
During
Winter Storms & Extreme
Cold
- Stay indoors during the storm. If that
isn't feasible, at least try to minimize your
travel. Follow main roads, avoiding
untreated and/or more treacherous back roads and
short cuts. Make sure someone else knows
your travel plans.
- Dress for the weather - if you must go
outside, wear several layers of loose-fitting,
lightweight, warm clothing rather than one layer
of heavy clothing. The outer garments
should be tightly woven and water
repellent. Wear mittens or gloves, a hat
to prevent the loss of body heat and cover your
mouth with a scarf to protect your lungs.
- Avoid overexertion when shoveling snow,
which can bring on a heart attack - a major
cause of death in the winter. Depending on
your age and fitness level, stretching can also
be a good idea.
- Keep Dry - change wet clothing frequently to
prevent a loss of body heat. Wet clothing
loses all of its insulating value and transmits
heat rapidly.
- If you're outdoors for a long period of
time:
- Watch for signs of frostbite, including loss
of feeling and white or pale appearance in
extremities such as your fingers, toes, ear
lobes and the tip of your nose.
- Watch for signs of hypothermia, including
uncontrollable shivering, memory loss,
disorientation, incoherence, slurred speech,
drowsiness, and
exhaustion.
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Exercising Discretion with Minor
Homeowner Claims
The focus of the article is this database
called CLUE (Comprehensive, Loss Underwriting
Exchange). Some Insurance Companies
subscribe to this database and use the data
contained in it when underwriting a new homeowners
risk. It is said that not all insurers
subscribe to CLUE, but in our experience, it's
hard to find one that doesn't.
The database was created many years
ago to watch for fraud and consumers who had
a history of filing numerous claims.
However, in recent years, as the Homeowners market
as a whole has been losing billions of dollars,
more and more insurers are using the information
to watch not just for signs of fraud or excessive
claims, but homes that may be problematic as
well.
For example, water damage claims are a
particularly sensitive type of claim for many
insurers. Whereas a company may allow
X number of claims over X number
of years to fit within their underwriting
guidelines, most often have more restrictive
guidelines for water damage claims. Their
reasoning is that one incident involving water
damage, may give rise to a later incident
involving mold; and mold can be an expensive claim
for insurers.
Homeowners coverage is designed to be there
for the owner to cover accidents. However,
there are those who look at and use
their Homeowners coverage as a substitute for
maintaining their homes. Rather than
carrying a higher deductible and paying for
smaller expenses out of pocket, some homeowners
carry a low deductible and turn in minor claims
that they could take care of themselves.
These things all add up, in frequency and
total dollars paid out, and chances are your
insurer is reporting your losses to CLUE.
For those who use Homeowners insurance for
anything and everything, there will likely come a
point where your insurer will say,
"enough" and non-renew your coverage. And
then, you're left shopping for new coverage with
companies that are going to be pulling your loss
history in the course of quoting you, which will
affect your eligibility as well as your
premium.
In our experience, we've never heard of the
sale of a home falling through because of a
history of claims at that location. This
article seems to confirm as much, stating,
"increased use of the CLUE database has not caused
serious problems for the real estate
industry." But we would caution that
insurers are only going to rely more and more on
tools such as CLUE, and they'll continue looking
for new ways to identify the risks that will be
profitable from those that won't, so don't rule
anything out.
Frequently Asked Questions About
CLUE
What
information is included in a CLUE
report?
The report contains consumer claim
information provided by insurance companies.
It includes policy information such as name, date
of birth and policy number, claim information such
as date of loss, type of loss and amounts paid,
and a description of the property covered.
For homeowners coverage, the report includes the
property address and for auto coverage, it
includes specific vehicle information.
Only loss history information is stored in
Choicepoint's database. No other source of
data, credit reports, criminal records, civil
lawsuits or legal judgments are incorporated into
the CLUE reports.
Loss history is kept in the CLUE database for
5-7 years.
Who
contributes to the CLUE database and how are
reports used?
Only insurance companies that subscribe to
CLUE can submit loss data and access
reports. Some companies choose not to
subscribe to CLUE and losses with
non-participating companies will not appear on
reports.
Reports are used almost exclusively to
underwrite and rate new policies. Most
insurers renewing existing policies do not access
CLUE reports at renewal, likely because they
already have loss histories for these properties
in their own databases.
Why
are insurance companies allowed to obtain a copy
of my loss history report?
Under the federal Fair Credit Reporting Act,
Choicepoint is allowed to produce a CLUE report
for the following insurance-related
purposes:
- when the consumer reporting agency has
reason to believe a person or company intends to
use the information in connection with the
underwriting of a consumer's insurance policy.
This includes situations where the consumer asks
for an insurance quote or applies for insurance.
- when the request for the CLUE report is
initiated by and at the request of the insurance
company or agent.
Can
I obtain a copy of my own report?
Consumers can request a copy of the CLUE
report on property they own by contacting:
CLUE, Inc.
Consumer Disclosure Center
PO Box 105295
Atlanta, GA 30348-5295
Toll-Free Phone: 1-866-312-8076
You cannot order a report on property you
wish to purchase. Under the Fair Credit
Reporting Act, CLUE reports can only be accessed
by the owner, insurer or lender for the
property. You can ask the current owner of
the property to order a report.
What
about erroneous information and adding notations
to a CLUE Report?
There
is a procedure for filing a report for
erroneous information, but there's no assurance it
will be corrected to your liking. If you
discover an error on your CLUE report, an invalid
claim report, or an incorrect loss payment, for
instance, then you can contact Choicepoint
directly and report the problem. They will
then contact the insurance company on your behalf
and ask for clarification on the matter. The
company has 30 days to respond to Choicepoint and
provide evidence that the information on the CLUE
report is accurate. Choicepoint will follow
up with the insurer after 20 days if the company
does not respond and again after 28 days without a
response. If the company does not respond
within 30 days, Choicepoint will remove the
information from the database.
As
far as adding notes, only consumers can add any
additional notations to their individual CLUE
reports. For instance, if a dog bite claim
occurs and the homeowner gets rid of the dog, the
consumer can write to Choicepoint to have the note
added to their CLUE report.
Can CLUE
reports distinguish between an inquiry and a
claim?
Reports
indicate losses by type. Consumers should be
aware that contacting their company or their agent
to discuss an actual loss might be considered
reporting a claim, even if the company does not
end up making a claim payment. This is
because when a loss occurs, the policy requires
the company to take specific actions within
specified time frames. Consumers should be
specific as to whether they are filing a claim or
merely making an inquiry into their coverage.
For
instance, a consumer may contact his/her agent to
report an event, such as a broken water pipe and
determine the extent of coverage in order to
decide whether or not to go forward with the
claims process with the company. The insurer
might not indemnify the consumer for this loss for
a variety of reasons: the amount of the damage may
be below the deductible, the consumer may pay for
the loss themselves, or there may be no coverage
for such a loss under the terms of the policy.
If
a consumer filed an actual claim and the insurer
made no loss payment on this claim, this
information would be recorded by the company and
may appear on a CLUE report.
Can an
insurance company use loss history from a prior
owner to determine my eligibility to obtain
insurance on the home?
If
a company can show a relationship between the
prior owner's loss and the probability of a future
loss to the home, they may use the
information. There are currently no laws
that specifically govern the use of the prior
owner's loss history in determining your
eligibility for
coverage. | |
|
Standard Market vs. E&S
Markets
As
conditions continue to be difficult on small
business owners, more and more seek drastic
measure to cut insurance costs. Sometimes
this means they leave a "standard" market carrier
for an "excess" or "surplus" market carrier
because of a dramatic price difference.
However, most of those business owners who wind up
in the E&S market are primarily concerned with
the bottom line, and never consider why it's
called an "excess" or "surplus" market.
Let's look at some differences.
Standard
Market carriers are also called "Admitted
Carriers". They are called admitted because
they are reviewed and licensed by a state's
Department of Insurance. Conversely, Excess
and Surplus Market insurers are commonly called
"Non-Admitted". If you've ever been with a
Non-Admitted carrier you would be able to
recognize this because the dec page(s) of your
policy would be stamped with a "Non-Admitted"
warning stamp. Some carriers may be
"admitted" in some states and "non-admitted" in
others.
Being
an admitted carrier also means that the insurer
must adhere to state-specific rate and form
regulations. Admitted companies must file
their rates and policy forms with the state's
Insurance Department and future changes must be
filed for and approved. They also pay into
the state's "Guarantee Fund" which is used to pay
losses to policy holders should another admitted
carrier become insolvent. There once was a
time when an admitted carrier had as much a chance
to become insolvent and unable to fulfill their
obligations to their policy holders as pigs had of
flying. But as we've seen with the collapse
of AIG, this is a whole new economic world we now
live in.
Non-Admitted
carriers are still rated for financial stability
and regulated in other ways, but they're not
policed by the the Departments of Insurance in the
states in which they write policies. So they
operate in this sort of void where they make up
rates on the fly, and the policy you buy one year
could have coverage that is dramatically different
from the one you buy the following year, because
they got burned on a certain type of claim and
decided to change their policy form on a
whim.
They
don't pay into any state "Guarantee Funds", so if
you're insured with a non-admitted carrier who
becomes insolvent while you still have months left
on your policy, cross your fingers. If you
have a claim in that time, good luck filing a
claim on a policy written with a company that's
out of business.
Excess
and Surplus carriers exist for risks that are
declined by standard markets due to reasons such
as new ventures, insureds with unfavorable or no
loss history, undesirable class of business, or
property that is of an age or condition such that
a standard market insurer won't write it.
These non-admitted carriers make
uninsurable risks insurable, but do so by
organizing and operating in a way that allows them
the flexibility to rate and amend coverage with
limitations and exclusions that make your risk
attractive again. The coverage is not
apples-to-apples with a standard market, so don't
make the mistake of comparing the quote you
receive from a standard market carrier to an
excess or surplus carrier's quote solely on
price.
Common
Differences
Minimum Earned
Premium
E&S
Market quotes often have a minimum earned premium,
usually 25%. If you bind coverage with them,
you're agreeing to pay a minimum of 3 months worth
of coverage, even if you're still shopping other
quotes or are considering a sale of your business
sooner than 3 months.
Surplus Lines
Taxes & Stamping Fees
Buying
a policy through an E&S market adds certain
taxes and fees for using a non-admitted carrier as
well. Additionally, most E&S Markets act
as wholesalers, requiring you to get insurance
through a broker, who often add policy fees of
their own.
Lower Limits
Available
Whereas
a standard market insurer may offer liability
limits such as $500,000 or $1,000,000, E&S
markets may only offer $300,000 or
$500,000.
Inferior
Property Coverage
Standard
Market insurers may quote Replacement Cost
coverage by default on your building and contents,
but E&S Market
insurers often quote on an
Actual Cash Value basis - which factors in
depreciation. They may offer RC, but you'll
certainly have to pay for the better
coverage.
Exclusions,
Exclusions, Exclusions
The
old saying, "You get what you pay for" is one that
generally rings true. There's almost always
a reason one quote is dramatically cheaper than
another - prior losses weren't disclosed, sales
receipts and/or payroll were undercut, or entire
lines of business weren't quoted. If you're
looking at a quote from an E&S company, you're
looking at a quote with plenty of
exclusions. Assault & Battery
Coverage? Business Income? Utility
Services? Crime coverage? Probably all
excluded, unless you specifically requested it to
be quoted. Even then, it's no
guarantee. Take Crime coverage, for
example. You can request it be quoted, but
with almost any excess carrier the coverage will
be excluded unless you have a premises alarm
in working order with a current contract for
service before the crime loss occurs. We've
had dealings with companies where they've required
a certificate on the alarm at policy binding or
coverage would be excluded throughout the entire
policy term. |
|
Be sure to add our email address to your
contact book to ensure that you continue receiving
industry updates, informative articles and tasty
tidbits.
Sincerely,
Bret Dixon Insurance
| | |
|
What
happens 473 times every
hour? |
|
|
According to the
Department of Transportation, traffic accidents
happened at that rate in 2008 (the most recent
stats we could find). Are your personal
auto limits up to par, or are you carrying
low-limit, cut-rate coverage?
We offer a
full-line of
personal lines coverages for your home, auto, boats,
motorcycles, RVs, and more. Give us a shot
at your next renewal to see how we
compete.
Click here for more
information.
|
|
Upcoming
Events &
Holidays |
|
We will be closed Monday, February 20th
for President's Day.
---
For those of you in Southern
Illinois, BDI is helping
organize this year's golf tournament for
the Madison County chapter of the Illinois
Licensed Beverage Association. The MCLBA
will be donating proceeds from this year's
tournament to the Shriner's Childrens
Hospital in St. Louis.
If you're interested in a team or
sign sponsor, email us
here for the forms.
It's a fun event for a great cause,
please consider it. The tournament is on
Monday, May 21st at Rolling Hills Golf Course in
Godfrey,
IL. |
| Carrier
Corner |
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We
represent over 15 insurance carriers and have
access to many more via brokers, but you may only
know one or two that we deal with. Each
issue, we'll highlight one of our valued
partners in
this space.
Progressive
Progressive is
an A+ ("Superior") rated company based in Ohio,
and writes coverage nationwide. You've
probably seen a hundred of their commercials with
"Flo". We use them to write a variety of
personal lines coverages such as auto, boats &
personal watercrafts, motorcycles & ATVs,
motor homes, manufactured homes and Travel
trailers.
They also write
a bit of Commercial Lines coverage, such as
Business Auto and Employment Practices Liability,
and are quite competitive on both, even on a
monoline
basis. | | |
