Category Archives: Business Risk

Halloween is less scary with insurance

As we put the finishing touches on our costumes, here is a short roundup of interesting and spooky Halloween-related news from around the web.

  • Inc. magazine published some good tips for business owners on how to prevent getting burned by liability claims stemming from Halloween-related events at work.
  • I.I.I.’s own Michael Barry provided CNBC with advice for consumers on how to review their insurance policies for potential gaps to help avoid any financial shock from holiday mischief and mishaps.
  • Franz Kafka’s career in insurance is illuminated in this Contingencies article. The writer, famous for his surreal and arguably scary worldview, worked as an insurance agent at the Workers’ Accident Insurances Institute of the Kingdom of Bohemia in Prague from 1908 to 1917. He is described as a successful and valued employee who cared deeply about his work.
  • And speaking of writers, Edgar Allen Poe’s poem “The Bells” was once used in an ad for fire insurance.

The I.I.I. has tips for safeguarding your home against Halloween mishaps.

Blue Marble and Nespresso launch parametric weather insurance pilot for smallholder coffee farmers in Colombia

Blue Marble Microinsurance and Nespresso have developed  a pilot program to bring weather index insurance to coffee farmers in Colombia, according to a recent Artemis blog.

Coffee crops are exposed to great risk from weather conditions, and farmers in developing countries often lack insurance options. The program provides coverage for excess rainfall and drought during the developmental stages in which coffee is most vulnerable.

Satellite technology is used to obtain the data required to create the weather indices against which the parametric policies can be triggered. If excess rainfall or drought occurs in a covered area, payments can be made automatically and quickly without the need for time-consuming claims assessment.

“This pilot initiative helps to establish a support mechanism for smallholder coffee farmers in Colombia so that they can continue to thrive in the face of climate change,” said Guillaume Le Cunff, President and CEO of Nespresso USA.

The program is a good example of the growth of microinsurance, which provides affordable insurance coverage to low income populations in developing counties.

To learn more about microinsurance, click here.

 

Malware infections drop on World Cup match days

It’s a well-known fact that worker productivity dips during the World Cup. But there is a surprising upside to workers switching off their computers and dashing off to their local pub to watch the game. According to this Yahoo Sports article, malware infections dropped by 20 percent during World Cup match days in countries whose teams are playing in the World Cup.

“A day to day drop that dramatic can only happen when people get offline in massive amounts,” explains Ryan Gerding, a spokesperson for EnigmaSoft, maker of anti-malware software. In every country that experienced a drop, infections jumped back up the next day.

Interestingly, Russia is the only country not to experience a decrease in malware when its team is playing. On match days when the national team was playing, Russia experienced a 5.98 percent increase in malware infections.

Business identity theft: An emerging threat

Individuals are not the only ones at risk of identity theft. Increasingly, businesses are contending with criminal use of their identity for tax fraud, credit card and other financial fraud, as well as having their websites and business name trademarks held for ransom.

A recently released report by the National Cybersecurity Society states that criminals are combining stolen data from data breaches with business intelligence to create large tax returns; wire transfers and ransoms which are fueling an underground economy of organized crime.

The IRS reported 4,000 instances of business identity theft cases in 2016. In 2017 that figure soared to 10,000, the largest year-over-year increase on record. Damages were estimated at $268 million in 2016, but curiously declined to $137 million in 2017.

The Insurance Information Institute has facts and statistics on identity theft here.

 

The Kilauea volcano eruption – a primer on insurance coverage

Over two dozen homes have been destroyed so far when the Kilauea volcano on the island of Hawaii began erupting last week. Lava flowed into residential neighborhoods on the eastern side, as this Wall Street Journal video shows, and the island  has been shaken by hundreds of earthquakes, the largest one with a magnitude of 6.9 occurred on Friday.

The I.I.I. has a primer on volcanic eruption insurance coverage. Below are some highlights:

What’s covered

  • Most home, renters and business insurance policies provide coverage for property loss caused by volcanic eruption when it is the result of a volcanic blast, airborne shockwaves, ash, dust or lava flow. Fire or explosion resulting from volcanic eruption also is covered.
  • Homeowners and business owners’ policies also provide coverage for property damage, vandalism or theft due to looting if the occupants are displaced.
  • There is typically a 72-hour waiting period before business interruption coverage kicks in.
  • Damage to vehicles caused by lava flow is covered under your auto insurance policy if you have comprehensive coverage, which is optional. Direct, sudden damage to engines from volcanic ash or dust is also covered under most policies.

What isn’t covered

  • Most home, renters and business insurance policies do not cover damage from earthquake, land tremors, landslide, mudflow or other earth movement regardless of whether the quake is caused by or causes a volcanic eruption. Earthquake insurance is available from private insurers as an endorsement to a homeowners policy.
  • Damage to land, trees, shrubs, lawns, property in the open or open sheds (or the contents of those sheds) is typically not covered.
  • The cost to remove ash from personal property is generally not covered unless the ash first causes direct physical loss to personal property. There is also no coverage to remove ash from the surrounding land.
  • Damage that occurs to homes, businesses or vehicles over time due to volcanic dust is not covered under most policies.
  • Volcanic Effusion (i.e. volcanic water and mud) is not covered under a typical homeowners, renters or business insurance policy. However, it is covered by flood insurance, available through the National Flood Insurance Program.

 

 

Cybersecurity insurance growth continues

Cyber insurance remained a fast-growing line in 2017, with package policy premium almost tripling, while standalone premium grew 7 percent*, NAIC data indicate.

Packaged cybersecurity policies as measured in quantified and estimated direct premiums written grew from $416.8 million in 2016 to $1.1 billion in 2017. The number of packaged claims made and occurrence policies in-force increased by 71 percent.

Standalone cybersecurity policies did not fare as well, with a 7 percent increase in direct premiums written from $920.7 million in 2016 to $985.6 million in 2017. The number of standalone occurrence policies in force fell by 12 percent, and the number of standalone cybersecurity claims-made policies fell by 33.3 percent. The loss ratio for 2017 standalone cybersecurity insurance was just 30 percent.

Over the past year, headline grabbing cyber incident such as the Equifax breach ensured that companies remained aware of the enormous potential losses cybersecurity threats pose to their businesses. Cyber incidents ranked second on Allianz’s 2018 list of top business risks (five years ago, it ranked 15th.).

A recent PwC report cautioned that given the increasingly frequent and severe nature of cyberattacks, it’s still unclear whether cyberrisks are adequately priced.

“The inevitable market-turning event will separate carriers that have sufficient risk management, underwriting processes and capital in place from ones that do not,” said the report.

Click to enlarge

*NAIC data sourced from S&P Market Intelligence on April 27, 2018.

 

Will the Facebook/Cambridge Analytica Scandal Prompt Computer Science to Enter Its Own Age of Enlightenment?

By James Ballot, Senior Advisor, Strategic Messaging, Insurance Information Institute

 

Many of us are still trying to make sense of how our data were affected by a massive data-scraping operation by the research firm of Cambridge Analytica that allegedly misused personal information of 50 million Facebook users. One expert with  a “big picture” view of this scandal is  Yonatan Zunger, a former engineer/privacy expert at Google, who sees the Facebook/Cambridge Analytica affair as further evidence that computer science needs to have its “A-Bomb” moment.

What Zunger means by this is that the fields comprising computer science have to “come to terms with the responsibility that comes with building things which so profoundly affect people’s lives.” And, relatedly, when (or if) there is an “enlightenment” movement, will it empower programmers, data engineers, and others in the field to fight the “weaponization of their work,” or will hackers and other cybercrooks simply redouble efforts and build better mice to defeat better mousetraps?

At the heart of this moment of reckoning are topics of keen interest to insurers. Concerns about  big data analytics in insurance are being raised on several fronts. The Geneva Association recently published a report highlighting the concerns regarding privacy, discrimination and competition that big data analytics present to the insurance industry. And this recent article by R.J. Lehmann warns that “The more complex predictive modeling grows and the more attenuated from the sorts of relatively straightforward risk factors that both consumers and regulators can easily understand, the greater the odds of a backlash.”

 

The overlooked employee lawsuit risk of family-owned businesses

One might think that family-owned and operated businesses would be relatively immune from employee lawsuits, but that’s not the case according to a recent Gen Re article.

The reasons family-owned businesses get sued include: most family owned businesses employ at least one non-relative; the non-relative is likely to be first to be fired when the business is struggling; and family members are reluctant to discipline each other for bad workplace behavior, especially if the family patriarch is the one misbehaving.

The article gives several examples of lawsuits against family businesses and the awards paid out, concluding that a family-owned business would benefit from including employment practices liability insurance (EPLI) as a part of its insurance package.

 

The Week in a Minute, 12/15/17

The III’s Michael Barry briefs our membership every week on key insurance related stories. Here are some highlights. 

More than 90,000 people have been evacuated in recent weeks as California’s Thomas Fire—the fourth largest in the state’s history in terms of acreage burned—migrated last weekend (December 9-10) into Santa Barbara County from Ventura County.

The total insured damage caused by 2017’s hurricanes Harvey, Irma, and Maria, coupled with two Mexican earthquakes, could rival 2011’s record catastrophe-related payouts from that year’s major earthquakes in Japan and New Zealand, according an analysis published in The Wall Street Journal’s Wednesday, December 13, print edition.

The I.I.I.’s Market Report webinar, “Protecting Small Business Against #cyberfail,’ was held on Monday, December 11.  It is archived online.

 

I.I.I. Market Report Webinar: Protecting Small Business Against #cyberfail”

“Small businesses are an easy target,” said Steve Clarke, Vice President, Government Relations, ISO. Clarke was one of several experts describing the cyber threat small business owners face in an Insurance Information Institute webinar Dec. 11, “Protect Your Business from #cyberfail.”

Many of these enterprises are data-rich businesses, Clarke continued, pointing to how a recent study estimated 28 percent of cyber thefts occur at health care companies while another 17 percent came at financial services firms.

Other issues which arose—

Cutting down the time between when a cyber breach takes place, and when the victim notices it has happened, also known as the ‘dwell time.’

The importance of educating employees about cyber risks, and how many cyber breaches occur because a company’s employees unknowingly open emails which are part of phishing operations aimed at gaining access to a company’s computer network.

The U.S. Small Business Administration has materials on cybersecurity on its website.

Watch this webinar now.

Presentation Date
Monday, December 11, 2017

Speakers

Introduction: James Lynch, Chief Actuary, Insurance Information Institute

Moderator: Marty Frappolli, Senior Director of Knowledge Resources, The Institutes

Panelists:
• Steve Clarke, Vice President, Government Relations, ISO
• Nick Graf, Ethical Hacker, CNA Insurance
• Donald Smith, Director of the Office of Entrepreneurship Education, Small Business Administration
• Michael Rohrs, Associate Director of Global Cyber Practice, Control Risks