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.

Going Gaga For Insurance

Insurers are known for helping us prepare for Mother Nature’s surprises, but did you know that insurers also have to evaluate the risks of Mother Monster, aka Lady Gaga–and other celebrities?

MarketWatch reports that Gaga, due to headline the Super Bowl halftime show on February 5, wants to perform on the top of the dome that covers the NRG Stadium in Houston.

Event organizers are working on how to keep the performer safe as well as securing insurance for the spectacle, according to the New York Post. Reports suggest such a stunt could cost over $100,000 to insure.

Specialist insurers (see our earlier post here) have a long history of protecting the stars — and the companies that promote and sponsor them — by providing appearance/event cancellation coverage, celebrity body parts insurance, and death and disgrace policies.

The Lloyd’s insurance market has insured a long line of celebrities and celebrity body parts. For example, Rolling Stones guitarist Keith Richards’ hands were insured for $1.6 million and Marlene Dietrich insured her voice for $1 million.

Insurance Insider recently reported  that the death of Star Wars actress Carrie Fisher is likely to trigger a $50 million “contract protection” policy underwritten in the Lloyd’s market that would cover Disney in the event that Fisher was unable to fulfil her obligations to act in the new Star Wars films.

Each celebrity risk profile comes with its own unique set of risks, according to the individual’s occupation, health, lifestyle and associated risks.

So, next time you go to see your favorite band, sports star or top chef perform, just think: there’s probably celebrity insurance for that.

Diverse Strategies As Insurers Embrace Digital Innovation

The routes to a digital future are many and varied, but for insurers the question is how to get there?

A new survey by Willis Towers Watson of 200 senior-level insurance executives offers some insight into the way forward.

The findings suggest that M&A and partnerships are likely to trump internal investment as insurers look to deliver digital transformation.

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Almost half (45 percent) of respondents to the survey signaled a clear preference for acquisitions as the way forward to gain digital capabilities.

By contrast, fewer than one in five insurers (17 percent) said they have a preference for internal development.

That’s not to say that internal innovation efforts have no place at these insurers, according to Willis Towers Watson, it’s more about getting the balance right between organic and inorganic growth.

Well over one-third (38 percent) of survey respondents say they have no preference between the two routes. In other words, they will use both acquisitions and internal innovation as the circumstances suit.

As insurers embrace a more outwards-looking approach to innovation, the survey suggests that traditional M&A deals are not the only option.

As Willis Towers Watson says:

“Many insurers are investing in a disparate range of technologies via venture capital funds – either through their own in-house venture capital arms, or third-party funds. This may be an attractive way to make a number of small bets on nascent innovations, rather than betting the house on an as-yet unproven technology.”

The survey found that one-third (31 percent) of respondents from the property/casualty insurance sector have set up a corporate venture arm already, while another third (32 percent) are considering doing so.

Innovation was a key topic of discussion at the Insurance Information Institute Property/Casualty Insurance Joint Industry Forum held yesterday in New York. For coverage of the forum go to the I.I.I. website.

WEF: Collaboration Imperative On Global Risks

The World Economic Forum (WEF) is calling for a redoubling of efforts to protect and strengthen systems of global collaboration in the face of increasingly disruptive risk trends.

In its just-released Global Risks Report 2017, the WEF warns that risk drivers such as income inequality, polarization of societies, and climate change need to be addressed collaboratively if solutions are to be found to the world’s most complex problems.

Nowhere is cooperation more urgent than in addressing climate and environmental risks, the WEF said. While important strides have been made in the past year, the pace of change is not fast enough and more needs to be done.

The WEF cited the Paris Agreement on climate change now ratified by 110 countries, and the landmark agreement to curb CO2 emissions from international aviation as important examples of global cooperation in 2016.

But political change in the United States and Europe is putting this progress at risk.

“This is a febrile time for the world. We face important risks, but also opportunities to take stock and to work together to find new solutions to our shared problems. More than ever, this is a time for all stakeholders to recognize the role they can play be exercising responsible and responsive leadership on global risks.”

The environment dominates the global risks landscape outlined in the WEF report, with extreme weather events emerging as the single most prominent global risk and climate change the number two underlying trend this year.

Society is also not keeping pace with technological change, the WEF noted. While new and emerging technologies can provide solutions they also exacerbate risks.

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Artificial intelligence and robotics were identified as having both the highest potential for negative consequences and also the greatest need for better governance in this year’s risk survey.

The private and public sectors need to work together and collaborate to address the challenges of the Fourth Industrial Revolution, the WEF said.

“It is critical that policy-makers and other stakeholders – across government, civil society, academia and the media – collaborate to create more agile and adaptive forms of local, national and global governance and risk management.”

Women’s Marches And Insurance

The Women’s March on Washington has inspired a grassroots movement of tens of thousands who will show their solidarity in sister marches held in cities across the country on January 21, the day after the inauguration of U.S. president-elect Donald Trump.

All 50 states and Puerto Rico are confirmed to have at least one grassroots-led march on that day, with more than 500,000 people expected to march across the U.S. and in 55 cities around the world.

For volunteer organizers of sister marches, what began with a simple Facebook posting in many cases has grown into a much bigger event for which organizers have taken on not just leadership responsibility, but potential liability consequences too.

Notwithstanding the rights of individuals to come together in peaceful protest, there’s the potential for claims for bodily injury or property damage in the event a march becomes less peaceful than expected.

What this means is that local volunteer organizers may want to explore their insurance options.

For example, many (but not all) municipalities require individuals or groups using public property to purchase liability insurance as part of the application process for a permit to hold an event.

This issue is already a hot topic in Phoenix, Arizona, where under state regulation, organizers of the sister march are required to secure some $2 million in liability insurance, per this AZCentral.com report.

A number of municipalities also offer tenant user liability programs (so-called TULIP programs) that enable organizers of certain public events on city property to more easily obtain event liability insurance.

Latest On Employment Trends

What are the latest employment trends for P/C, life/annuity, health insurers, reinsurers, agents & brokers, independent claims adjusters and third-party administrators?

The U.S. Labor Department’s Bureau of Labor Statistics (BLS) just published data as of November 2016 on detailed insurance industry employment and the Insurance Information Institute (I.I.I.) website contains updated multi-decade trend data in chart form.

Some of the key takeaways:

—In November 2016, on a year-over-year basis, employment in most segments of the insurance industry was up to varying degrees. Commentary by Dr. Steven Weisbart, chief economist for the I.I.I.:

“For the 12 months ending in November 2016, P/C carrier employment rose by 9,600 (+1.9 percent) to 523,500. However, this result does not echo longer-term trends. Over the last four years, for example, P/C carrier employment has risen and fallen in a narrow range of 510,000 to 530,000.”

—The agent/broker segment gained 900 jobs in November 2016 vs. November 2015 (up 0.1 percent) to 778,400. Employment growth in this category in the last three years has been extremely strong.

—Among smaller industry segments, reinsurance carrier employment in the U.S. fell in November 2016 vs. November 2015 (down 700, or -2.7 percent) to 24,900.

—Employment at independent claims-adjusting firms on a year-over-year basis for November 2016 rose by 2,400 (4.2 percent) to 59,200—the highest employment level seen for this segment in at least 25 years.

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.