UNLISTED MCIS-Zurich Insurance Bhd, formerly known as MCIS Insurance Bhd,

is currently one of the top five insurance companies in the country

specialising in life insurance. It is also one of the top 10 companies in

general insurance, according to Life Insurance Association of Malaysia

statistics.

However, the company is not resting on its laurels. It could rank higher

in the future if it charts steady growth in profits and successfully

tackles the challenges that lie ahead.

After the successful merger in 2001 with its international counterpart,

German-based Zurich Asia Insurance Ltd, the company's chief executive

officer, Datuk L Meyyappan, believes the road to achieving the company's

goals will not be smooth.

He cites three areas of challenge for MCIS-Zurich and perhaps the other

insurance companies as well: increasing regulatory standards by the

government, swift changes in technology, and distribution of insurance.

`We need regulation but too much regulation slows down the imagination,'

he says. He feels that once there are too many regulations, management

would not be able to focus on making profits but instead would be engulfed

in finding ways to comply with the regulations.

However, Meyyappan stresses that he is not against the imposing of

regulations by Bank Negara Malaysia. MCIS-Zurich, he says, is adhering to

the law. The challenge for the company's management now is how to grow the

company within the regulated environment.

As for rapidly-changing technology, he says money would always have to

be spent on upgrading technology that becomes obsolete in a few months. He

says the company has been spending about RM2 million to RM3 million a year

on IT alone to keep pace with technology changes.

`We keep spending millions of ringgit on IT but we can never say the

investment is complete. We must keep investing and keep up to date with

the trends or we will be left out,' he says.

The final challenge for MCIS-Zurich, says Meyyappan, is the distribution

of insurance. He says initially, insurance was sold through agents who

dealt directly with customers. But today, banks and other financial

institutions are taking over the role. Therefore, insurance companies such

as MCIS-Zurich would have to compete with banks to survive.

He says MCIS-Zurich can tackle the challenges and is confident that the

appointment of Tan Sri Nor Mohamed Yakcob as Second Finance Minister would

be good for the industry as he understands the issues affecting it.

`This year we expect an increase in premiums of about 15% to 20% in life

products and 10% in general insurance products,' says Meyyappan. He

explains that the increase in percentage for the life insurance sector is

derived by multiplying the country's Gross Domestic Product (GDP) by

three. Thus, with a 5.5% expected GDP growth for Malaysia in 2004, the

company should have another good year ahead.

MCIS has been experiencing growth even prior to the merger. MCIS-

Zurich's chairman Datuk Mohamad Wahiduddin Abdul Wahab states in the

company's 2003 annual report that the company's outstanding performance

and ability to withstand external economic pressures through recent years

as well as deal with the changes resulting from the merger process was the

result of `clever and tactical leadership' provided by Meyyappan and his

team.

Meyyappan became the CEO of the company in 1995 and under his

leadership, the company's books have improved. In fact, the company has

been experiencing steady profit growth since 1999. Its turning point was

its merger with Zurich Asia Insurance, which now holds 40% in MCIS- Zurich

while Koperasi MCIS Bhd holds 43.69%.

The merger has boosted MCIS' business tremendously. Profits doubled from

RM13.9 million for the year ended June 30, 2002 to RM24.5 million in 2003.

Likewise, total assets grew to RM2.2 billion in 2003 from RM2.0 billion

before.

The merger also has other advantages. `The merger with Zurich would

ensure continuous growth for the company and create a platform for MCIS to

promote its products globally,' says Meyyappan.

He says Zurich Insurance has other strengths that MCIS could leverage

on, one being its international recognition. Zurich Insurance is in the

same league as the big international players such as AIG, New York Life,

Prudential and Nippon Life. The merger would enable MCIS-Zurich to keep up

with, perhaps even stay ahead of, its competitors.

Another advantage of the merger is the ability of both companies to

cross-sell their products. Zurich Insurance has a bigger mix of products

and it specialises in the oil and gas sector. Prior to Zurich Insurance's

entry, MCIS' focus was limited to the conventional `retail and light

policyholders', especially life insurance policies.

There is uncertainty about how hold harmless agreements apply. This is why an increasing number of firms are requesting to be added as additional insureds.

he issues involving additional insureds can be complex. Some additional insured situations are automatically covered. Some additional insured situations can be dealt with by the use of an endorsement(s). Still other additional insured circumstances are not insurable.

Although we will refer to several court cases to illustrate additional insured coverage examples, this article is not intended to be the last say on legal interpretation. A given court case may have an impact on subsequent court cases in that state. But sometimes subsequent court cases in a given jurisdiction do not follow an earlier decision. And a court case precedent set in one state does not necessarily apply in other states.

For instance, I was working with an Illinois attorney on an insurance agent's errors and omissions claim. Three Wisconsin court decisions stated that an insurance agent cannot be held responsible for the particular act that the Illinois agent had committed. Illinois had no court decisions like those found in Wisconsin. The Illinois attorney told me that Illinois courts would not be swayed by the Wisconsin decision. Thus, any or all of the examples given in this article may not apply in your state. You will need to determine if my ideas and examples are valid for your state.

What is an additional insured?

In simple terms, an additional insured is any entity, not shown in the part of the declarations page showing the named insured, that is provided liability protection on an insured's insurance policy. Sometimes the additional insured is automatically covered by a policy; in other cases, an endorsement will be needed to add an additional insured to a contract.

Additional insureds are automatically protected by several insurance policies including business auto, garage, and commercial general liability. An employee driving the employer's truck or car is an example of an additional insured that is automatically covered.

Adding the leasing company to an insured's business auto policy is an example of an additional insured's being covered by using an endorsement to add an entity to an insurance contract.

Occasionally a request is made to add an additional insured to the policy as a named insured. This cannot be done. There are several ways to distinguish the difference between a named insured and an additional insured. Named insureds can cancel an insurance policy, pay premiums and void or nullify the insurance contract. Additional insureds cannot cancel the policy, pay premiums or nullify the policy.

Additional insureds via contracts

During the early 1980s, an Illinois business we will call Small Service Station, Inc. (SSS), signed a lease for the service station that SSS would operate. The service station was owned by International Oil, Ltd. (IO). Someone was injured at the service station. The injured person sued both Small Service Station and International Oil. SSS was excused from the lawsuit. Per the court's judgment rendering statements, the court found that SSS was not negligent.

The lawsuit proceeded against IO. One item that then came into play was a hold harmless agreement in the premises lease between International Oil and Small Service Station. Per the hold harmless agreement, SSS had to protect, i.e., provide insurance, for IO. Many times this type of hold harmless agreement is thrown out by a court, but such was not the case here. SSS, per the hold harmless agreement, had to provide coverage for IO. While this is an actual case, the names used are fictitious.

In another Illinois case, the court ruled just the opposite on a hold harmless agreement. A contractor, Shaheed, had signed a hold harmless agreement in favor of a public agency, Chicago Transit Authority (CTA). The Chicago Transit Authority wanted Shaheed to respond to a claim against CTA. In Shaheed v. Chicago Transit Authority, 484 NE 2d 542 (Ill App 1985), the court ruled that the hold harmless agreement was unenforceable.

These two entirely different court decisions, rendered in the same state, show that there is nothing certain about the way hold harmless agreements apply. This uncertainty seems to be the reason why an increasing number of firms are requesting to be added as additional insureds. You may even find situations where a firm already has a hold harmless agreement and also wants to be added as an additional insured.

Additional insured introduction

Insurance Services Office's Commercial General Liability (CGL) Coverage Form CG 0001 is a commonly used liability contract. Coverage for some classes of additional insureds are automatically covered by the Commercial General Liability Coverage Form. Employees as additional insureds is an example of such a class. We will not be looking at the additional insureds who are automatically covered by the CGL. Instead we will review several aspects of one commonly-used additional insured endorsement.

The Business Council of Westchester this spring will use a private foundation grant to launch a program aimed at extending health insurance coverage to sole proprietors and non-profit agencies in Westchester County.

The New York State Health Foundation in New York City awarded a $150,000 grant to the Business Council, in tandem with the Cooperstown Chamber of Commerce, to raise awareness among insurance brokers of Healthy New York, a state-subsidized insurance program, and raise enrollment in the lower-premium program among small-business owners in Westchester and Otsego counties.

Norman Michaels Jr., a Business Council director and president of Michaels & Associates Inc., an employee benefits and financial services company in Armonk, said the council will work with the Cooperstown Chamber of Commerce to develop a similar program in Otsego County. The grant program here is led by Michaels and Paul J. Vitale, Business Council vice president for government and community relations.

Healthy NY is a program of the state Insurance Department that last year provided comprehensive health benefits to nearly 150,000 New York residents through 17 private health plans. Since the start of the program in 2000, nearly 400,000 people have participated in Healthy NY. Uninsured individuals and sole proprietors who meet income requirements and small business employers with 50 or fewer workers and with at least 30 percent of their employees earning $36,500 or less per year are eligible for the program.

In the Westchester area, the state program had 10,291 enrollees in June 2007, an 11 percent increase from the previous year. Yet the Healthy NY option has been underused and underexposed, Michaels said. "If you were a sole proprietor or small business guy just starting out and needed medical insurance, and you heard about Healthy NY, you'd never find it," he said. "It's buried in the morass of Web sites in New York State."

"It's aimed at the working poorer," Michaels said. "But in hard economic times like this, it's a program that I think all employers, especially the not-for-profits, should look at."

Michaels said the Business Council in May will host a workshop on the Healthy NY program for insurance brokers. New marketing materials for the state insurance program have been prepared and will be posted on the Business Council and Michaels and Associates Web sites, he said.

"Our goal is to have 250 sole proprietors who didn't have medical insurance before on the plan," by Oct. 1, Michaels said. "Our second goal is to introduce Healthy NY into every not-for-profit in Westchester that can qualify. The smaller not-for-profits, those poor people are stretching dollars in every single direction."

Sole proprietors make up about 10 percent of Business Council membership, which numbers more than 1,200, said Business Council President and CEO Marsha Gordon. Nonprofit agencies make up about 9 percent of membership, she said.

Healthy NY premiums are lower than other individual and small group policies because the state makes "stop loss" reimbursement payments to health plans that cover 90 percent of all claims between $5,000 and $75,000 per enrollee. State officials said the program, as one of the few state insurance programs to rely on that mechanism to subsidize premiums, is considered a model for private health insurance expansion initiatives.

Still some 900,000 New Yorkers are uninsured yet eligible for public health insurance coverage, according to grant-making officials at the New York State Health Foundation. An additional 1.3 million state residents are uninsured but do not qualify for public health insurance, according to the foundation, which was established in 2006 with charitable funds resulting from the conversion of Empire Blue Cross-Blue Shield from a nonprofit organization to a for-profit corporation.

"In order to solve the issue of working poor who don't have insurance, it's going to take the combined effort of different organizations to do that," Michaels said.

Kiss that cold sore goodbye with the NEW Abreva Pump. Then you'll be ready for your Valentine's Day kiss! While other products just soothe, Abreva heals cold sores from the inside out ... FAST. Think Fast. Think Abreva

She is a woman of vision. In fact, she is living her vision. Against all odds, she started up an insurance company, based on her master's thesis, during one of the most difficult markets the industry has ever seen. Today, Nonprofits Insurance Alliance Group is a major and well-respected player in the nonprofit, social services sector.

That testimonial comes from Robert L. Miller, senior vice president of Brown & Brown Insurance Services in Allentown, Pennsylvania. He is talking about Pamela Davis, founder and chief executive officer of Nonprofits Insurance Alliance Group, which consists of four companies: Nonprofits Insurance Alliance of California (NIAC); Alliance of Nonprofits for Insurance, Risk Retention Group (ANI-RRG); National Alliance for Nonprofits for Insurance (NANI), a captive reinsurer; and Alliance Member Services (AMS), the management company that supports the other three.

NIAC provides liability insurance to nearly 6,000 nonprofits in California and writes in excess of $40 million in premium. ANI-RRG provides the same coverages to nonprofits in 23 states plus Washington, D.C., and writes more than $15 million in premium.

The difficult market to which Miller refers was, of course, the mid-1980s when insurers, after years of cash flow underwriting, began to retrench in the face of impending losses. Almost the entire insurance industry was digging in its heels, and coverages for many lines became either unaffordable or unavailable.

During this time, Davis, having returned to school at the age of 30, was working toward her master's degree at the University of California at Berkeley, majoring in public policy. "There was tremendous insurance instability in the nonprofit, social services sector, and it seemed to me that insurers were dictating what social services organizations could operate in California," Davis says. "The state had just passed a law allowing nonprofits to create a risk pool and I recognized that, if there was going to be any stability in the market, nonprofits would have to do just that. I wrote my thesis on that subject, and then the California Community Foundation gave me a platform when they published 5,000 copies. That's when I began looking for the backing to actually start up a company."

After she had received several small grants from various foundations, Davis's first major capital commitment came from the Ford Foundation in the form of a $500,000 loan. Other foundations came on board, and after a two-year effort Davis had $1.3 million in low-interest subordinated loans to work with. She realizes now that this was a thinly capitalized start and was more cautious when it came time to start the second company in the Group. However, she is proud to say that all loans were repaid with interest.

In 1989, NIAC was up and running. "It took two years of development," Davis says. "We had a rocky start at the beginning. There was an earthquake in Santa Cruz, and for a while we were without electricity and telephone service. But we hobbled along. Small local brokers across California cared deeply about the nonprofits market and took a chance with us. Many of those original brokers remain with us today."

Of the 5,500 charitable nonprofit organizations that are members of NIAC, 29% are in community service, 26% in arts and education, 12% are in mental health and health-related developmental disabilities, 11% represent shelters, 8% are in neighborhood improvement and social action, another 8% are in animal care and the environment, and 4% in philanthropy and volunteering. The company writes broad form general liability, social service professional liability, commercial auto liability and physical damage, non-owned and hired auto liability, improper sexual conduct, directors and officers liability, and umbrella. Property is provided through their MGA operation.

Expansion plan

Ten years after the establishment of NIAC, Davis wanted to expand the company's operations, but by law it could operate only in California. In 1999, she started up Alliance of Nonprofits for Insurance, Risk Retention Group (ANI-RRG) with $10 million in grants from the David and Lucile Packard Foundation and the Bill & Melinda Gates Foundation. Like NIAC, ANI-RRG is a 501(c)(3) nonprofit, serving more than 2,000 other nonprofits in 23 states and the District of Columbia. The states are Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Maryland, Michigan, Minnesota, Missouri, Nebraska, Nevada, North Carolina, Ohio, Oregon, Pennsylvania, Utah, Vermont, Virginia, and Washington.

"A key strength of our organizations is our singular commitment to the nonprofit sector and our membership in it," Davis says. "We broadly serve the nonprofit sector, including nonprofits and brokers of all sizes, by providing appropriate insurance at prices that are adequate and fair, and that can be maintained over the long term. Our prices reflect our best assessment of the lowest sustainable price for the individual risk involved, but not necessarily the lowest price during a soft market. We believe that providing the nonprofit sector with a reliable, long-term solution takes precedence over shortterm market pressures."