Category Archives: Business Risk

Ransomware: Is Cyber Insurance On Your Radar?

Hotel guests locked out of their rooms at a four-star hotel in the Austrian Alps? Washington DC’s CCTV system disrupted days before Donald Trump’s inauguration? Libraries in St Louis brought to a standstill? Eight years of digital evidence lost by a Texas police department?

Ransomware is not just grabbing headlines, it’s now the favorite method of cyberattack used against businesses, particularly in North America and Europe, according to this Malwarebytes report.

In the fourth quarter of 2016 alone, Malawarebytes catalogued nearly 400 variants of ransomware, and 81 percent of ransomware detected in corporate environments occurred in North America.

Lloyd’s insurer Beazley saw ransomware attacks quadruple in 2016 and projects them to double again in 2017.

“Evolving ransomware variants enable hackers to methodically investigate a company’s system, selectively lock the most critical files, and demand higher ransoms to get the most valuable files unencrypted.”

In its white paper Cyberrisk: Threat and Opportunity, the Insurance Information Institute reports that insurers are issuing an increasing number of cyber insurance policies and coverage for cyber extortion, including payment of a ransom following a ransomware attack, is available.

According to the FBI, ransomware attacks are on the up, particularly targeting organizations because the payoffs are higher.

Hatching A Lawsuit? Protect Your Business With Insurance

If you didn’t think suing over Santa was bad enough shed a tear over the unfortunate case of the Hatchimal.

For those of you who aren’t familiar with the latest toy craze (or weren’t lucky enough to find one under the Christmas tree), the Hatchimal is basically an interactive stuffed animal that hatches from an egg.

Created by toy maker Spin Master Corp, each Hatchimal learns how to walk, talk and play games as it goes through the five stages of its life: egg, hatching, baby, toddler and kid.

Cute, right? Yes, but…

What if your Hatchimal fails to hatch?

For my sons, the case of the unhatching Hatchimal was remedied simply by a cuddle and some (admittedly overly exuberant) help breaking open its shell.

But as Business Insurance reports, the failure to perform has led one disappointed parent—Jodie Hejduk of Bakersfield, California, to file a lawsuit seeking class action against Spin Master Corp.

The complaint, filed in U.S. District Court in the Eastern District of California charges Spin Master with spoiling the holidays and false advertising after the toy Hedjuk purchased for her daughter failed to hatch.

The suit alleges the hottest toy of the season which retails at $50-$60 was so hard to find that some were selling on the black market for $350:

“For the few children who were lucky enough to receive a Hatchimal, many were left disappointed when their Hatchimal failed to live up to its name. Despite Spin Master’s representations that the toy would “hatch”, many Hatchimals did not hatch.”

The suit asserts violations of the California Consumer Legal Remedies Act, Unfair Competition Law and False Advertising Law. It also brings claims for unjust enrichment, breach of express warranty and injunctive relief.

A note on Spin Master’s website says:

“We have had more than a million successful hatches since we first launched Hatchimals on October 7th and we are still hard at work making sure that everyone has a magical hatching experience. We are 100% committed to bringing the magic of Hatchimals to all of our consumers.”

Spin Master also offers some troubleshooting tips on its Support/FAQs page.

And here’s the must-watch video on how to hatch your Hatchimal:

Businesses address their liability concerns through many types of risk management, of which insurance is an important component, according to the Insurance Information Institute (I.I.I.). See I.I.I. facts and statistics on litigiousness.

Most Serious Workplace Injuries Cost More Than You Think

$60 billion is a lot of money. Think about it.

For example, insured losses from global disaster events were around $49 billion in 2016, according to Swiss Re.

That’s a large number too, but not as large as the $59.9 billion cost to U.S. employers of the most serious workplace injuries and accidents in 2014, per the just-released 2017 Liberty Mutual Insurance Workplace Safety Index.

By the way, the most serious ones are injuries that cause employees to miss six or more days of work.

The nearly $60 billion in direct workers compensation costs to U.S. businesses translates into more than $1 billion a week that companies spend on these injuries, the index suggests.

As big as it sounds, the total cost actually fell from $61.9 billion in 2016, according to Liberty Mutual.

The 10 leading causes of the most disabling work-related injuries account for $49.9 billion, or 83.4 percent of the total cost of $59.9 billion.

The top three causes of the most disabling work-related injuries are:

–Overexertion ($13.8 billion, 23 percent)

–Falls on same level ($10.6 billion, 17.7 percent)

–Falls to lower level ($5.5 billion, 9.2 percent)

Collectively, these three causes represent almost half the cost of the leading accidents. Check out the chart:

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Developed annually by the Liberty Mutual Research Institute for Safety, the index is based on information from Liberty Mutual Insurance, the U.S. Bureau of Labor Statistics (BLS) and the National Academy of Social Insurance.

The index helps employers, risk managers and safety practitioners make workplaces safer by identifying critical risk areas so that businesses can better allocate safety resources.

Here are some useful additional facts and statistics on workers compensation from the Insurance Information Institute.

Preparing For The Next Ground Stop To Your Business With Insurance

If you were flying United Airlines Sunday night, chances are you may have been delayed.

A computer outage grounded all of United’s domestic flights for more than two hours, according to this NBC report, though the glitch affected only aircraft on the ground and did not impact international flights.

The ground stop was issued after the Aircraft Communications Addressing and Reporting System, or ACARS, had issues with low bandwidth, NBC said.

This is not the first time that a computer glitch or system outage has affected United’s operations, or indeed those of other airlines.

Allianz warns that in today’s interconnected industrial world non-physical or non-damage causes of business interruption (BI) are becoming a much bigger issue.

Physical perils like fire and explosion and natural catastrophes are still the top causes of BI that businesses fear most, but preparing for non-damage perils is becoming increasingly critical.

This shift in BI risk means that intangible hazards, such as a cyber incident or interdependencies from global networks, can cause large revenue losses for companies without inflicting property damage.

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With this ever-expanding range of BI risks, it’s good to know insurers have you covered.

Several pertinent BI insurance coverages developed by insurers are outlined in the Allianz Risk Barometer 2017 report:

  • Non-Damage BI (NDBI) insuring loss of income and ongoing costs from interruption of business caused by situations where there is no physical damage to the insured, the supplier or customer and there is no BI claim to be made, this coverage indemnifies a business for lost revenue due to disruption
  • Data Driven (Cyber) BI insuring loss of income and ongoing costs from interruption of business due to unavailability of data and computer systems caused by hacking, technical failure or human error.

Additional resources on covering losses with business interruption insurance are available from the Insurance Information Institute here.

Looking Ahead: Commercial Insurance Pricing

Where are U.S. commercial insurance rates headed in the coming year?

Latest analysis from online insurance exchange MarketScout gives some insight.

This from Richard Kerr, CEO MarketScout:

“We expect more moderate rate reductions for the coming year for all but a few lines of business. If interest rates increase, rate reductions could accelerate.” 

December closed out the year at a composite rate reduction of 1 percent, according to MarketScout.

Employment practices liability insurance and crime were the only coverages with rate increases in December, with increases of 1 to 2 percent.

Workers’ compensation rates decreased from down 1 percent to down 2 percent in December. Commercial property rate decreases moderated from down 3 percent to down 2 percent.

The soft market is now 16 months old, but seems longer because the composite rate in 2015 was flat or plus 1 percent for the first eight months before dipping into negative territory.

Kerr noted that generally the soft or hard market cycles last at least three years.

Most industries are cyclical to some extent and the Insurance Information Institute offers further explanation of the property/casualty insurance market cycle here.

‘Tis The Season…For Lawsuits

In true holiday spirit we just got our kids to the mall to see Santa this week. Its an annual tradition, a visit that helps keep the magic alive in our all-too-knowing six and four-year olds’ minds and more importantly yields the holiday photo that keeps on giving throughout the years.

Every year Santa faces a barrage of questions. This year was no different. Our six year-old started: “Santa, I have a question. How come you know I want a two-wheeled scooter?”

Luckily, the letter from the North Pole had arrived a few days earlier telling him he had made the Nice List and that Santa knew from our elf Chippy just what he was wishing for.

This was confirmed by Santa at the mall who said: “Because you’ve been good and it’s magic.”

But what if the conversation had gone a different way?

Sometimes magic confronts reality and a lawsuit ensues, reminding us what’s at stake for Santa and the mall this Christmas.

Take this post over at Randy Spencer’s Open Mic published in the latest issue of online newsletter Coverage Opinions (edited by attorney Randy Maniloff of White and Williams LLP)

In the post, Court Holds a Mail Santa Liable: Damages Owed For Failure To Deliver A Toy Fire Truck, Randy Spencer – the only stand-up comic to specialize in insurance – tells of a Montana trial court that found a mall and its Santa liable for a child’s emotional injuries after promising a toy that was not left under the tree come Christmas Day.

How much damages did the court award in this case? $95,000.

All of which is a timely reminder that Santa (and the malls that embrace the Christmas spirit) need insurance too.

Which is why the Insurance Information Institute (I.I.I.) urges St. Nick to review his insurance policies to be sure he’s got the right insurance coverage with its Santa’s Insurance Wish List.

And we suggest the I.I.I.’s business insurance checklist would make a great stocking stuffer in this case.

All the best for a happy and safe holiday season!

Workplace Safety Imperative for Truck Drivers

Transportation-related incidents were the leading cause of workplace fatalities in 2015—and by a long way—according to data just-released by the Bureau of Labor Statistics (BLS).

Of the total 4,836 workplace fatalities recorded in 2015, transportation-related incidents accounted for 2,054, or 42 percent.

The next closest major cause of workplace fatalities was falls, slips, and trips at 800, or 17 percent.

A key takeaway from the BLS figures: some 745 drivers of heavy and tractor-trailer trucks died because of injuries at work last year, more than any other major civilian occupation. The majority of these fatalities (84 percent) were caused by transportation incidents.

What are some of the factors in large truck crashes?

Truck braking capability for one. The Insurance Institute for Highway Safety (IIHS) reports that loaded tractor-trailers take 20-40 percent farther than cars to stop, and the discrepancy is greater on wet and slippery roads or with poorly maintained brakes.

Truck driver fatigue is another known crash risk. Federal regulations allow drivers of large trucks to drive up to 11 hours at a stretch, and up to 77 hours over a seven-day period.

Still surveys suggest many drivers violate the regulations and work longer hours than permitted.

Distracted driving is another key factor impacting the number of accidents.

As for insurers, a recent report by ratings agency A.M. Best noted that commercial auto insurance results continue to underperform the results of the overall property/casualty commercial lines market, due to escalating claim frequency and severity.

With more vehicles on the road, cumulative miles driven increasing, and gas prices at reduced levels, making a profit writing commercial auto insurance is a challenge few insurers have been able to meet, A.M. Best said.

It pointed to the considerable perils associated with larger vehicles, including trucks and buses, noting:

“The increased number of miles traveled over the last three or four years also factors into the rise in the fatalities associated with accidents involving larger vehicles that often produce losses exceeding $100,000 in total claim cost.”

Despite the myriad challenges, leading writers of commercial auto insurance have a track record of profitable operations, according to A.M. Best.

Still, more effective risk management and underwriting techniques focused on both covered drivers and vehicles are needed, the ratings agency said.

The Compliance, Safety, and Accountability (CSA) program implemented in 2010 by the Federal Motor Carrier Safety Administration, together with state partners and the trucking industry expanded safety reporting and enforcement measures for large trucks and buses.

Check out the Insurance Information Institute facts and statistics on workplace safety.

How To Keep Commercial Insurance Customers Satisfied

A survey of more than 1,400 risk professionals at large organizations in the U.S. or Canada that have purchased a commercial insurance policy from one of the profiled insurers or brokers throws up some interesting results.

It finds that as rates across the U.S. commercial property/casualty insurance market continue to decline, the key variables in driving overall commercial insurance customer satisfaction are insurer profitability and broker expertise.

The J.D. Power study, conducted in conjunction with RIMS (the risk management society), found a distinct correlation between customer satisfaction and insurer profitability, as measured by total commercial combined financial ratios.

Among large commercial insurers, the highest performing companies in overall satisfaction—XL Catlin (773 on a 1,000-point scale); CNA (767); and Chubb (765)—are also found to have some of the strongest combined ratios in the industry.

This suggests that the most profitable insurers are able to support more flexible underwriting standards to meet customer needs more effectively, according to J.D. Power.

The study found an overall correlation between customer satisfaction and insurer profitability of 0.67, suggesting the more profitable the book of business an insurer has, the greater the likelihood the insurer will also have high levels of satisfaction.

Among commercial insurance brokers, the most significant single attribute driving that performance is quality of advice/guidance provided, with the highest-performing firms, Lockton (863) and Arthur J. Gallagher & Co. (823), outperforming larger rivals by a large margin.

This demonstrates that brokers with in-depth expertise and who have a hands-on, consultative relationship with their clients are consistently driving the highest levels of customer satisfaction, J.D. Power says.

The inverse also appears to be true, as the study shows customer satisfaction declines by an average of 136 points among the 20 percent of customers who indicate their broker does not completely understand their business needs.

Industry-wide, brokers received an average rating of 8.34 on a 10-point scale for the quality of advice/guidance provided metric.

In addition to quality of advice/guidance, satisfaction with brokers was based on the following attributes: reasonableness of fees; ease of the renewal process; effectiveness of risk control services; variety of program offerings; effectiveness of program review; price, given services received; billing and payment process; and claims process.

Satisfaction with commercial insurers is based on five factors: service interaction; program offerings; price; billing process; and claims.

Organizations included in the J.D. Power 2016 Large Commercial Insurance Study have at least $100 million in annual revenue or operating budget.

The Insurance Information Institute provides some useful facts and statistics on the commercial insurance market here.

Prepared for #CyberMonday and #GivingTuesday?

With Cyber Monday and Giving Tuesday rounding out the Thanksgiving holiday digital spending and giving are expected to reach record levels, which means businesses and individuals need to be prepared for cyber threats.

In 2015, Cyber Monday was the largest e-commerce sales day ever with online orders totaling $3.07 billion and experts expect this year’s total will be higher still, according to a post on the The U.S. Chamber of Commerce’s Above the Fold blog.

It cautions businesses to be vigilant, especially when it comes to payment card protection, and offers the following tips:

—Change your passwords and make them strong: just as you would lock the doors before leaving, lock this door too. Make sure employees know this too.

—Install software updates known as patches that your payment service provider sends you for your payment systems: install updates, just as you would on your phone, so your payment system is protected.

—Keep business information private: keep passwords, user IDs, or other details for payment systems private. Confirm an unexpected call or email separately with the supposed caller or sender before proceeding.

Even digital philanthropy can bring out cybercriminals. According to the Identity Theft Resource Center (ITRC), in recent years there has been substantial growth in web-based giving or mobile donations.

In fact one of the first global-scale events that brought attention to mobile donations was the 2010 hurricane that struck Haiti. The Red Cross received millions of dollars in donations from cellphone users who simply texted the word “HAITI” to a five-digit number.

While it feels good to give, the ITRC says it’s important to remember to do your homework and check out a charity before clicking on a link or responding to potentially fraudulent email requests claiming to be a part of Giving Tuesday.

One cause you might consider supporting is The Insurance Industry Charitable Foundation’s Early Learning Initiative (ELI) which provides an opportunity for every young child – regardless of means – to learn to read and write.

Join your insurance industry colleagues in the worldwide #GivingTuesday movement by contributing $5 for ELI here.

Check out the Insurance Information Institute’s facts and statistics on corporate social responsibility here. The I.I.I. white paper Cyberrisk: Threat and Opportunity has the latest information on the current exposure and how insurers are responding.

Rolling Stone Defamation Case Highlights Insurance Need

As the Rolling Stone defamation case moves into the damages phase today, media businesses everywhere—and their insurers—will be watching closely.

A federal jury on Friday found that Rolling Stone magazine, its parent company Wenner Media and Sabrina Rubin Erdely, the author of a discredited 2014 article about an alleged gang rape at the University of Virginia, were liable for defaming Nicole Eramo, a former associate dean of students at the school.

According to this Wall Street Journal report, Ms. Eramo is seeking $7.5 million but the award could potentially go higher.

Rolling Stone also faces a defamation suit brought by the UVA chapter of the fraternity Phi Kappa Psi, the focus of the 2014 article. That case is seeking $25 million.

The verdict against Rolling Stone is the second large media liability claim this year.

In June, a jury awarded $140 million in damages to the former professional wrestler known as Hulk Hogan in an invasion-of-privacy case against Gawker Media Group over the publication of a sex tape.

Gawker settled the lawsuit just last week agreeing to pay the wrestling star, whose actual name is Terry Bollea, $31 million. Gawker was forced into bankruptcy and sold to Univision in August.

The cases have prompted legal experts to express concerns over the increasing frequency with which complaints about journalism are being settled in the “unpredictable and expensive sphere of the courts”, according to this New York Times article.

From the insurance perspective, the cases underscore how important it is for online and traditional publishers, broadcasters and other media-related firms to purchase media liability insurance.

This specialist type of errors and omissions (E&O) insurance protects creators of content against liability claims resulting from a range of exposures, including, but not limited to, defamation, invasion of privacy, infringement of copyright, and plagiarism.

While there is a fair amount of media liability insurance sold (an estimated $300 million to $500 million in the United States, and $50 million elsewhere (mostly in the United Kingdom)), according to this 2016 survey by Betterley Risk Consultants, further growth is predicted:

“We suspect that much of the media market is untapped risk, self-assumed by large organizations that can afford to self-insure, or ignored by small organizations that don’t think they are exposed.”

In the case of Rolling Stone, its parent company Wenner Media, is reported to have an undisclosed amount of media liability insurance to cover any damages related to the trial.

Still, at least one analyst cited in this report by the Wall Street Journal, says that if costs related to this lawsuit and other pending lawsuits exceed $50 million, Wenner Media may not be able to fund it with existing resources.

Check out I.I.I. resources on E&O insurance for small businesses here.