Category Archives: Business Risk

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.

Cyber Claims Costly To Businesses Large and Small

Data breaches can be costly, no matter how large or small an organization may be.

That’s a key takeaway of the latest NetDiligence study on cyber claims costs that analyzed 176 data breach claims submitted by insurers.

While the average claim for a large organization—at $6 million—was 10 times the average claim for a small organization, some of the largest claims in this year’s study came from smaller organizations with revenues of $2 billion or less.

This year’s dataset included 21 claims in excess of $1 million (12 percent) of which 81 percent (17 out of 21) involved nano-, micro- and small-revenue organizations that were victims either of hackers or malware.

The largest legal costs (defense and settlements) in this year’s study were from two micro-organizations (revenues of $50 million to $300 million). One lost valuable trade secrets to a hacker, while the other exposed protected health information due to a lost laptop.

The combined legal costs for these two organizations ranged from $1.5 million to more than $4.5 million, NetDiligence said.

Interestingly, the average claim payout across the dataset was $495,000, while the median claim payout was $49,000

The highest average claim payout—$1.3 million—was in the financial services sector.

The majority of claims (87 percent) submitted for analysis in this year’s study came from smaller organizations with revenues of $2 billion or less.

NetDiligence said this is in line with previous findings that smaller organizations experience most of the incidents. This is likely due to the fact that there are simply more small organizations, than large ones.

Other contributing factors may be that smaller organizations are less aware of their exposure or they have fewer resources to provide appropriate data protection and/or security awareness training for employees, NetDiligence said.

A point that underscores the growing need for smaller companies to purchase cyber insurance.

While many leading cyber liability insurers are participating in the study, NetDiligence noted that there are many insurers that have not yet processed enough cyber claims to be able to participate.

“It is our sincerest hope that each year more and more insurers and brokers will participate in this study—that they share more claims and more information about each claim—until it truly represents the cyber liability insurance industry overall.”

Charlotte Unrest and Business Insurance

Ongoing civil unrest and protests in Charlotte, North Carolina following the police shooting of Keith Scott are reported to have caused significant property damage to businesses in the central area of the city.

The Charlotte Observer reports that entertainment complex EpiCentre faced looting and sustained significant damage Wednesday night. Numerous businesses were damaged, including Sundries EpiCentre, CVS, Enso and Fleming’s Prime Steakhouse, it said.

The NASCAR Hall of Fame was among other sites hit by vandals, with adjacent restaurants and hotels also damaged after officials declared a state of emergency for the city.

As clean-up gets underway it’s important to note that most commercial insurance policies generally include coverage for losses caused by riots. civil commotions and fires.

The definition of rioting covers looting by people who steal merchandise or other property from a premises. Vandalism is also covered.

According to The Charlotte Observer, a possible curfew for Thursday night is being discussed by city officials.

The Insurance Information Institute (I.I.I.) notes that if a business has to suspend operations or limit hours due to rioting, business interruption coverage is only covered if there is direct physical damage to the premises, forcing a business to suspend operations.

A “civil authority provision” in a business policy provides coverage for lost income and extra expenses in the event the police or fire department bars access to a specific area as a result of the danger caused by a riot or civil commotion.

In April 2015, looting and arson in Baltimore, Maryland, following the funeral for Freddie Gray, a 25-year-old who died after suffering a severe spinal cord injury while in police custody, resulted in estimated property damage of about $24 million, according to the I.I.I..

Five of the costliest civil disorders in the U.S. occurred in the 1960s. Here’s they are:

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Brushing up on Terrorism Insurance

Multiple explosions over the weekend in New York and New Jersey as well as a knife attack by an individual at a mall in Minnesota come amid heightened concerns of terrorist attacks 15 years after 9/11.

Some 29 people were injured in the blast Saturday night in New York City’s Chelsea neighborhood, which is also reported to have caused significant property damage. Meanwhile, nine were injured in the Minnesota mall attack, where the suspect was killed by police.

Monday morning another explosion was reported near Elizabeth train station in New Jersey, where up to 5 devices were found, and as the FBI investigation intensified and security tightened around major transportation hubs, law enforcement officials arrested a suspect in the NY/NJ blasts.

While the unfolding events are unsettling, it’s good to know that if the home you own were damaged by an explosion and fire, personal insurance policies have you covered.

Standard homeowners insurance policies cover the homeowner for damage to property and personal possessions due to explosion, fire and smoke—the likely causes of damage in a terrorist attack, according to the Insurance Information Institute (I.I.I.), even if terrorism is not specifically referenced in the insurance policy.

Condominium or co-op owner policies also provide coverage for damage to personal possessions resulting from acts of terrorism, while damage to common areas of a building like the roof, basement, elevator, boiler and walkways would be covered providing the condo/co-op board has purchased terrorism coverage.

Standard renters insurance policies also include coverage for damage to personal possessions due to a terrorist attack. Again, coverage for the apartment complex itself must be purchased by the property owner or landlord.

If your car is damaged or destroyed in an explosion your auto insurance policy will cover the damage if you have purchased “comprehensive” coverage.

Commercial insurers are required to offer coverage against terrorist attacks and many owners of commercial property, such as office buildings, factories, shopping malls and apartment buildings,  have purchased the coverage.

Marsh estimates some 60 percent of U.S. businesses have purchased terrorism insurance, up from 27 percent in 2003.

However, losses are only covered by a commercial terrorism insurance policy if the government officially certifies an attack as an act of terrorism. Several criteria must be met for the certification to be made. If property/casualty losses do not exceed $5 million in the aggregate, the act will not be certified as an act of terrorism.

Acts of terrorism are excluded from most standard business insurance policies.

Workers compensation—a compulsory line of insurance for all businesses—covers employees injured or killed on the job and therefore automatically includes coverage for acts of terrorism.

Check out I.I.I. facts and statistics on terrorism.