 |
 |
 |
|
HKMB International HEAD OFFICE: T: 416-597-0008 |
|
 |
|
 |
![[spacer]](http://www.hkmb.com/shared/spacer.gif){kind=small} |
SPRING 2006 | |
|
In this Issue: |
|
|
2006 Spring Market Forecast
Why the continuing soft market? Since the beginning of 2005, most insurers have been pursuing plans for business growth predicated on fairly aggressive expansion of market share. In almost all cases, their targeted growth exceeds the rate at which the Canadian economy is growing. To achieve their targets, insurers have to stay competitive on their existing book of business in order to retain it, while at the same time, writing new business at a pace that outruns the economy. Is it any wonder then, that for sought after, profitable business we are seeing renewal rate thresholds ranging from “as is” to minus 5 to 10 percent? Not surprisingly though, for some specialty classes of business and accounts that have not been profitable, rate increases may be occurring. Since a major acceleration of the economy is not expected, the soft market in P&C insurance is likely to continue until insurers change their strategy with possible further softening in the last quarter as insurers scramble to meet year end targets.
Avian Flu Pandemic
As of March 2006, the World Health Organization (WHO) maintains an avian flu pandemic alert level of 3 (out of a possible 6): a virus new to humans (H5N1) is causing infections, but does not spread easily from one person to another1. If an avian flu pandemic does strike, and there is no certainty of this occurring, the WHO predicts “high rates of illness and worker absenteeism”2 that may strike in waves of varying intensity. However, “not all parts of the world or of a single country are expected to be severely affected at the same time.”3 The medical community projects that up to 40% of the workforce could be unavailable for up to eight weeks.4 Are you ready for it? Burying our collective heads in the sand is never an acceptable risk management solution. The time to plan is now, when we have the opportunity to be proactive. Even if the current threat never materializes, the possibility of a global pandemic always exists so all that planning will not go to waste. Having identified a risk, the next step in the risk management process is measuring the risk. Ask yourself these basic questions: If a pandemic strikes, how will my business operations be affected? How will my clients and suppliers be affected? How will the financial performance of my company be affected if half of my staff is away for 6 to 8 weeks? What if there are fatalities amongst my staff? Once we have quantified the risk to the best of our abilities, the next step is managing it using techniques of risk reduction and, perhaps, risk separation. What we are aiming for is reducing the risk for our people to the extent possible, and ensuring we can get back up and running normally as quickly as possible when a wave passes. Since not all parts of the country are expected to be hit severely at the same time, seeking alternate suppliers that are geographically separated from your primary suppliers may be worthwhile. Creating scenarios where staff work off site may keep more work flowing and minimize contact. Establishing policies and training staff to observe necessary levels of personal hygiene both at the workplace and elsewhere may help to reduce infection. A number of “canned” preparedness plans are available (a little internet research may be in order) but there really is no “in a box” solution since all business situations are unique in some way. Every company should develop its own plan customized for its particular set of circumstances. Below are some references that provide useful and reliable information on this topic.
Bill 198 and the Impact on Directors and Officers Liability Insurance
It is rare for lawyers to celebrate the enactment of new legislation, and when they do people get nervous. So what’s all the fuss around Bill 198? Who should be concerned? With 90% of all share transactions occurring in the secondary marketplace (i.e., TSX), Bill 198 should be on the minds of all Directors and Officers sitting on public company boards. What is this legislation? Bill 198 is Ontario legislation that imposes liability on all public corporate disclosure that is misleading, incorrect or late made in the secondary marketplace (i.e., TSX). Parties that can be held liable under the legislation are Directors and Officers, the Public Issuer (the organization), experts (lawyers and accountants), to name a few. How much could parties be liable for?
Why are U.S. lawyers interested?
What now?
For more a more detailed and comprehensive discussion, please visit our website and download our Bill 198 slide presentation. Should you have any questions, contact our Directors’ Liability Practice: Kelly Lang, VP and Partner at kelly.lang@hkmb.com or Kathy Fong, LLB, Account Manager at kathy.fong@hkmb.com.
Healthcare Provider Fraud: Alive and Well in CanadaIf you are like many other benefit plan sponsors that we have spoken to or heard about, the members of your plan have probably experienced delays in claims payments for many of the auxiliary services provided under your extended health care programs. The overriding reason for these delays is that there has been a huge increase in claims for these services as a result of government downloading of healthcare costs and the propensity of an aging but active population to make greater use of these services. Unfortunately, an increase in fraudulent claims, particularly for acupuncture, massage therapy, orthotics, support hosiery, semi-private hospital stays and vision care, also contributes to the overall increase in claims and to the delays in claims payments as carriers request additional documentation that the services claimed were actually provided and medically necessary. The source of the fraudulent activity rests primarily with providers, some of whom are simply padding their own pockets while others are funding organized crime. A series of articles by Tom Blackwell in the National Post in December 2005 highlighted the extent of these illegal activities extrapolating in one article that “the total fraud could range from $2-billion to almost $8-billion”1. While those numbers are large in absolute terms, they represent less than 10% of total claims and no one is suggesting that providers generally are anything but upstanding citizens. However, the cost is real and, of course, is paid by plan sponsors in increased plan costs, and plan members and their families in benefit reductions. Its impact is also felt in additional administration, delays in claims payments, and plan members disgruntled by demands for additional documentation and wait times for payments. In response to this costly, industry-wide problem, the Canadian Health Care Anti-Fraud Association was formed in 2000. Membership includes life and health insurance carriers, governments, law enforcement agencies and provider associations and regulatory bodies. In addition to studying the extent of the problem, the association is determined to eliminate heath care fraud in Canada. While increased scrutiny at the time of claim may be an inconvenience for your plan members, it may be the first step to uncovering and removing fraudulent providers from the system.
CALL US WITH YOUR QUESTIONS, COMMENTS OR CONCERNSIf you have any questions, comments or concerns about the matters addressed in the HKMB Market Report, please contact us. We would be happy to discuss them with you.
|
|
In our last Market Report we noted that the softening of the market that had been experienced over the first half of 2005 would temporarily slow or even stop as a result of the devastation caused by hurricanes Katrina, Rita and Wilma. To some degree this did take place but the effect was short lived, as we suggested it would be. Now well into 2006, Property & Casualty rates on average for most classes of business continue their decline. (Individual client experience has, of course, varied depending on specific circumstances.)
A number of sources have compared the potential avian flu pandemic with Y2K – much ado about nothing! Perhaps that’s so, but the question that may always remain unanswered about Y2K is simply this – was it a non-issue in the end because it never really was a threat or because we prepared diligently for it for a year or two in advance?
When Bill 198 came into force in Ontario on December 31, 2005, Ontario lawyers popped champagne corks, and U.S. Shareholder Plaintiff lawyers printed off flight schedules to Toronto. 