By Jennifer Ha, Head of Editorial and Publications, Insurance Information Institute
Hail damage is a growing problem in large regions of the United States and causes about $1 billion in damage to crops and property each year, according to the National Oceanic Atmospheric Administration (NOAA). As such, after years of field and lab research, the Insurance Institute for Business Home and Safety (IBHS) has recently released the results of its first hail impact performance program—the IBHS Impact Resistance Test Protocol for Asphalt Shingles—designed to track impact-resistant roofing products and to demonstrate the IBHS performance standard for impact-resistant shingles.
To test its standard, IBHS bought the most widely purchased impact-resistant shingles available to consumers and tested them in its lab under simulated real-world conditions, which it has now published on its website. The site includes disclosures, test standards and Member-only data.
Owning a small business has many rewards, like freedom, independence and the chance to financially benefit from your own hard work. But there are also major challenges, like long hours, hungry competitors, and cash-flow problems.
One of the challenges that lands squarely on the shoulders of the small business owner is risk management. Whereas larger firms have the funds to hire specialists whose sole concern is identifying and preparing for threats to the business, Arthur the accountant and Mia the mover must take on that role themselves.
Natural disasters are a type of risk that can strike a business at any time. Luckily for Arthur and Mia, business insurance often comes with loss prevention expertise offered by many insurance carriers to their clients. An agent or broker can create a disaster and recovery plan customized for any business.
Here is a list of disaster planning tips State Farm® offers for small businesses, they include:
Take time to plan evacuation routes and exits from your facility and mark them.
Install proper emergency lighting and exit signs to help show the way in case of power failure.
Designate staff “safety wardens” to guide and assist any emergency efforts, including regular drills.
Businesses should conduct emergency training exercises with all employees as frequently as needed to reinforce proper reaction times and responses.
Identify appropriate shelter spaces, such as a basement or storm cellar, in your facility for emergencies that may require them. If there is no basement in your building, go to the center of a small interior room on the lowest level away from windows or outside walls, such as a closet or interior hallway. Make sure spaces are kept clear of items that would limit their capacity or safety.
Contact a qualified contractor to discuss risk mitigation construction techniques for your building or office.
As an added precaution, you may also want to research places where you could temporarily relocate your operations if disaster strikes.
Maintain a comprehensive, up-to-date inventory of the items and equipment used in your business. Consider capturing these assets in photographs or video and securing the images and inventory files offsite.
Institute regular backup procedures for critical software and data to help ensure your business maintains access to the digital infrastructure it needs.
A business natural disaster plan will help get you up and running.
Following a disaster, you’ll want to resume business as quickly as possible:
Keep a name and telephone number list of contractors or repair firms who could make emergency temporary repairs or board up windows should some of your buildings be damaged.
Maintain a list of key suppliers, creditors, customers, and employees you need to contact about the state of your operation.
Construct a financial plan to cover continuing payroll expenses and debt obligations.
Graduation isn’t an end, but a beginning. As you embark on your career path, please allow me to offer a few observations and some valuable guidance that others have shared with me:
Have an upward vision. Know where you want to go in life but understand that worthwhile journeys seldom follow a straight path; sometimes moving sideways creates a clearer route to the top.
Remember that what got you “here” won’t necessarily get you to “there.” Take stock of what’s around you and look for new skills and points of view that can contribute to success.
Be open to new challenges. You may find new perspectives on—and outlets for—your passions.
The last bit of advice is kind of familiar to those of us in the insurance industry. “I never considered a career in insurance when I was a student” is a pretty familiar refrain. Our team at the Insurance Information Institute includes an actuary who studied journalism, an economist who studied literature, and other dedicated professionals who’ve come to insurance from a wide variety of educational and professional backgrounds. Why did we all end up choosing insurance as a career? Because we have discovered what more than 2.5 million folks currently working in our industry already knew: That insurance careers offer virtually limitless opportunities to earn, learn, grow and make lasting contributions to your community every day.
So, if you haven’t yet considered a career in insurance, then you’re in good company. Because for 350 years, our industry has been driving innovation, embracing change and building a safer, more prosperous world. That’s why the I.I.I. and our member companies are proudly leading the charge to build a workforce that’s responsive to the needs of the people we serve.
We wish you all the best and hope you will choose insurance as a career.
On June 11 the Federal Emergency Management Agency (FEMA) published data covering more than 2 million flood insurance claim records going back to 1978 on its OpenFEMA website. This is a giant leap towards helping scientists, policy-makers, and the public understand how the National Flood Insurance Program (NFIP) works, where flood damage occurs, and what the costs are to the nation.
“This data demonstrates FEMA’s commitment to build a culture of preparedness by providing insights to our stakeholders that can help close the nation’s insurance gap,” said Dr. Daniel Kaniewski, FEMA’s Deputy Administrator for Resilience, in a news release. That gap is quite sizable: FEMA estimates that only 3 percent of homeowners have flood insurance.
Private insurers, who have been carefully getting back into covering flooding in recent years should be able to use the data to grow in the flood insurance space. “The private market will now be able to identify areas with prior flood claims and historical flood insurance policies,” said David Maurstad, FEMA’s Deputy Associate Administrator for Insurance and Mitigation.
As useful as these data could be, the dataset does not include the exact addresses of affected buildings, to protect policyholders’ privacy. It does include ZIP code-level data on where policyholders received payments. A home buyer might not be able to learn the full history of flood risk for a property, as thisSouth Carolina Post and Courier article points out.
However, the published data do enable analysis of how coverage has changed in a geographic area, and where NFIP claims have been filed for more than 40 years. Information such as: state, census tract, ZIP code, year of loss, and amount paid on claims are included. The dataset will be updated every 45 to 60 days and delivers the most specific amount of geographic data possible.
The Natural Resources Defense Council (NRDC) has already used the data to create this animation showing the location of every NFIP claim in the contiguous United States, from 1970 through 2018.
The I.I.I. has more insights about flood insurance here.
By Brent Carris, Research Assistant, Insurance Information Institute
On Sunday, June 3rd, the Governor’s Ball Music Festival (Gov Ball), a three-day event on Randall’s Island in New York, fell victim to the perils of inclement weather. After delaying set times by nearly seven hours, it was subsequently announced to the attendees that all were to evacuate due to the inclement weather forecast. What followed was a mass exodus of frantic festival-goers trying to get off the island.
Gov Ball organizers announced that they would be offering full refunds to everyone who bought a Sunday ticket (prorated if they had purchased a three-day pass). As 150,000 visitors flocked to Randall’s Island for Gov Ball in 2017, according to a Founder’s Entertainment white paper, this could result in roughly $19 million in refunds.
But the event organizers won’t be on the hook for the full cost of those refunds as they likely have event cancelation insurance. Event cancelation insurance typically costs 1 to 1.5 percent of the overall cost of an event, and provides cover for cancellation, abandonment, interruption or postponement of an insured event for reasons beyond the control of the event organizer.
In 2017, we witnessed the worst of a music festival gone awry with the infamous Fyre Festival (Fyre). While the Fyre debacle was largely due to the organizers’ lack of planning, the outcome taught mega-festival organizers what not to do and how to best prepare for uncontrolled disturbances.
Ideally, risk and claim specialists tour facilities far in advance to mitigate any potential dangers and to keep all attendees safe. Determining the size and type of insurance coverage means understanding the risks of the specific event.
As noted in thisInsurance Journal article, mega-events like Coachella and Lollapalooza will take on at least five kinds of insurance policies: cancelation, including terrorism coverage, general liability, umbrella policies, workers’ compensation, and business auto coverage. Additional coverage can be bought for crime, errors and omissions policies, directors and officers’ policies, and if applicable, film insurance.
When all goes well, a music festival means great music with great friends. However, when weather doesn’t agree or emergency strikes, the result can be a calamity for the festival organizers and the attendees.
By Dr. Steven Weisbart, Chief Economist, Insurance Information Institute
There is good news on the bodily-injury liability insurance front, but no one seems to have noticed. The cost of health care for severely-injured people has barely increased in the last year.
Primarily, bodily injury (BI) liability insurance pays for the medical bills of people who have been severely injured due to the negligence of the insured. As a result, the severity of BI claims would tend to track price changes for inpatient and outpatient hospital services, where severely-injured people would go to get treatment and recover. And lately, these price changes have been shrinking—big time.
The Bureau of Labor Statistics calculates a price component for each of these each month as part of the various versions of the Consumer Price Index (CPI). On June 12 the BLS published its latest data for May 2019.
For inpatient hospital services, the change in prices was +1.2 percent, when compared to prices a year earlier, in May 2018. For outpatient hospital services, the change in prices was even smaller (+0.9 percent), when compared to prices a year earlier.
To put these numbers in some context, the Consumer Price Index for All Urban Consumers (CPI-U)—the most widely-used measure of inflation—rose by 1.8 percent in May 2019 vs. May 2018. Many economists prefer to measure inflation without the effect of price changes for food and energy, which are notoriously volatile. This measure is known as the core CPI. Its May 2019 vs. May 2018 change was 2.0 percent.
When was the last time that any healthcare costs—let alone for hospital services—rose at a slower rate than general inflation? Of course, many other factors affect claims for bodily injury liability, but this is a welcome trend for a significant element.
The most familiar index is the Consumer Price Index for All Urban Consumers (CPI-U)—prices as experienced by all urban consumers, but BLS also publishes CPI-W (prices as experienced by urban wage earners and clerical workers).
An innovative insurance product is being deployed to protect several miles of coral reef around Cancun and Puerto Morelos, reportsBusiness Insurance. The government of Quintana Roo, Mexico, purchased a parametric insurance product that would pay up to $3.8 million to repair hurricane damage to the reef.
Parametric insurance works using a clearly defined parameter (a metric or an index) that triggers the payout. Up until recently, parametric insurance was used by reinsurers for catastrophe risks, but it has started to be used in the travel, retail and agricultural sectors Insurance Businessreported a year ago.
The reef insurance will be triggered if wind speeds above 100 knots are registered within the covered area, with a payout split of 50 percent for reefs and 50 percent for beaches.
One of the advantages of parametric coverage is that it pays out very fast, which is crucial since reef repair will need to be done very quickly to avoid further damage, according to Mark Way, director of Global Coastal Risk and Resilience at The Nature Conservancy in Washington.
“We hope this insurance approach will serve as a scalable model to build new financial mechanisms for the protection of nature,” said Mr. Way.
The insurance policy is financed by the Coastal Zone Management Trust, an organization formed in March 2018 to promote the conservation of coastal areas in the Mexican Caribbean. Partners in the development of the reef insurance concept include the Nature Conservancy, the state government of Quintana Roo, the Cancún and Puerto Morelos Hotel Owners’ Association, CONANP, Mexican Universities and insurance industry representatives. Swiss Re Ltd. was an early partner in the development of the concept.