Insurance: February 2009 Archives

Investors have pummeled insurance and financial stocks lately, but a University of Iowa finance professor is actually making money trading them. Insurance expert Ty Leverty is  assistant professor of finance and Tristar risk management fellow at Tippie College of Business.  He has been experimenting since last fall with a strategy of trading only the stocks of well-managed property and liability insurance companies. Although his test portfolio is extremely volatile, its value shows an increase of about 10 percent, as opposed to a broader market loss of about 30 percent during the same time.  Press-Citizen.com reports:

Leverty noticed last fall that when bad financial news is released, the stocks of property and liability insurers take their hits along with life insurance companies and other businesses in the financial services sector. However, he noticed that solid, well-managed property and liability companies usually bounced back the next day.

Leverty suspects that investors unload all insurance stocks on bad news days, assuming that all of them are widely exposed to the failed financial products that led to the credit crisis and brought down so many financial services companies.  However, he said property and liability stocks hold mostly short-term assets to match their mostly short-term, low risk policies, minimizing their exposure to the crisis.  "Those companies aren't as exposed to collateralized debt obligations or some of the other toxic assets like banks and life insurance companies are," said Leverty College's Tristar risk management fellow. The next day, he said investors realize that and buy the stocks back, and the price rebounds.

The best a business owner can do in today's ever-changing business environment is try to assess the most reasonable business risks upfront and then plan accordingly. Risk management experts offer preventive steps to help protect businesses from possible threats. 

Some risks can be mitigated by making sure the business owner has proper insurance coverage, explains Robert E. Underdown, a Scottsdale, Ariz.-based risk management consultant and insurance expert witness.  "You want to have the general bases covered," the expert says.  Risk categories can broken down into environmental (i.e. natural disaster/weather); financial (i.e. financial market risk); management (i.e. labor disputes); and supply (i.e. supply-chain issues).

Excerpted from Newsday.com.

There are many other ways to protect yourself when renting cars, says insurance expert Robin Ingle.  Call your own insurance company before leaving home to see if you have, or can add, coverage for rental cars.  If you are relying on your credit card, make sure you are clear, before leaving home, about what kind of coverage you have and exactly how much.  If a call to the credit card company still leaves you confused, ask for details in writing. Take car rental staff very seriously when they ask you to check the rental car for scratches and damage before leaving the lot. Otherwise, you risk being charged for dings you might not have made and they can end up on your credit card even after you've arrived home, warns Ingle.

The expert also says to call your credit card company's 1-800 line as soon after an accident as possible. They will take you, step-by-step, through what documents are needed as part of the claim. Ingle warns that he's seen cases where it can take a year to get some key documents, so get copies of as many as possible before getting on your plane home. Past rental agreements can be obtained through the websites of major rental companies such as Hertz and Avis, if you rented the car within the last six months.

Excerpted from TheStar.com.