Blue Marble Microinsurance and Nespresso are 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.
But behavior is slow to change. The bad news is that only about a third changed the way they used social media or connected technology after learning about recent data abuses and breaches.
And it’s even more alarming that fully 85 percent of surveyed connected technology owners either don’t have cyberrisk insurance or don’t know if they do.
Education and insurance are important. Just like in real life (wear a helmet, everybody!), leading a safe online life starts with education about the risks involved. That education includes learning how insurance can help. Insurers are in a unique position to spearhead these education efforts – people will often turn to their insurance company after they’ve suffered losses from a data breach.
But consumers first need to learn about the cyber insurance options out there that can help immensely after a hack. For that to happen, insurers need to demonstrate to consumers the relatively inexpensive and valuable coverage that is available to protect them.
The alternative is for all of us to go back to sending letters by snail mail – or, if a certain lawyer is to be believed, never writing anything down at all.
It’s October – and that means it’s National Cybersecurity Awareness Month.
The National Cyber Security Alliance has dedicated the first week to making homes safe from hacking. And for good reason. Families are increasingly living connected lives: on social media, in video games, and through “smart” home technology like connected thermostats or burglar alarms.
Smart tech is convenient and efficient. Why not buy a thermostat that can automatically adjust the temperature to save you money?
Your smart tech can be hacked. But convenience can be costly. Hackers are getting more sophisticated. Your smart security system might discourage burglars – but not hackers. Hackers can use your smart thermostat to attack major websites, which is what happened in several major hacks.
Nearly a third of the smart tech owners surveyed said they have been identity theft victims.
People aren’t covered for cyberrisk. More than four out of five American consumers who own connected devices either lack insurance to protect them from cyberthreats or do not know if they are covered– and over 75 percent said they don’t plan to pay more for cyberrisks coverages.
That’s not great. Cyberrisk coverages are usually fairly inexpensive, sometimes as low as $30 per year. For that low price consumers can often get help for a range of cyber threats, including identity theft, cyberbullying, and ransomware (depending on the individual policy).
Education about cyberrisks is crucial. It’s a simple problem: People often don’t have cyberrisks coverage because they don’t know much about cyberrisks. Which also explains why many cyber-attacks are essentially “user error” – for example, a hacker sends a disguised email and a user clicks on a link, downloading malicious code onto their computer. Or someone buys a smart tech device and doesn’t change the factory password.
Getting educated about the risks of hacking is the first step to protecting your data. The next step is to use security tools. One such tool is insurance.
Insurance helps. Insurers need to make that clear. Whether as an add-on coverage to a homeowners policy or as a stand-alone policy, cyberrisks insurance can help protect you if you’re hacked. But the I.I.I/J.D. Power survey found that many people don’t know about this kind of insurance.
Insurers need to help educate their customers about the cyberrisks they face. Then they can help their customers understand why insurance can be a low-cost tool to protect their identities and assets.
In New Bern, North Carolina, a coastal town hit hard by Hurricane Florence, the storm surge deposited a stray sailboat in a homeowner’s back yard. President Trump’s offhand remark that the homeowner “got a nice boat out of the deal” was the subject of some derision. However, the homeowner may in fact be the new owner of the boat since North Carolina precedent allows an owner to walk away from a vessel rendering it abandoned private property.
A recent Financial Times article, takes a deep dive into the potential implications for the homeowner of becoming the unintentional owner of the CSY 44 sailboat. The boat is likely to be heavily damaged and in need of salvage. Since the boat’s original owner is not required to carry insurance, paying for salvage or just getting the boat removed from their property would be the homeowners’ responsibility.
Homeowners insurance could cover some of the costs, but the article notes that the homeowner is likely to hand over the title over to a professional salvor as payment for having the boat removed.
So your car got flooded and two thoughts immediately flash in your head: how am I going to get to work and how am I going to pay for this mess?
I can’t help you with the first question, but the answer to the second is easy: insurance.
Comprehensive auto coverage: If you’re one of the 78 percent of Americans that opted to purchase comprehensive auto coverage, you’re in luck. Standard comprehensive coverage will pay for damages to your car caused by water or flood, subject to a deductible. It’ll even cover you if hail smashes your windows to pieces and rain ruins your leather seats.
If your car is so water-logged that it’s inoperable, then it might be a “total loss” – meaning that paying to fix it is greater than how much your car is worth. If it’s a total loss, your insurance will pay you the actual cash value for the car (that’s the purchase price minus any depreciation since you bought the car) and then salvage it.
Not everything is covered: But comprehensive coverage is not all sunshine and roses. It won’t cover you for any of your electronic equipment in the car that’s not permanently installed (think: your GPS navigation if for some reason you don’t use your smartphone for that – but your smartphone isn’t covered either). Comprehensive is also probably not going to help you out if you left your windows open during a rainstorm, so keep your eye on that weather forecast.
What if I don’t have comprehensive coverage? Unfortunately, if you didn’t opt in for extra coverage, you’re probably out of luck. Basic auto insurance doesn’t cover flood and water damage. Your homeowners and renters policies probably also won’t help: these policies don’t cover damage from floods. If you have a newer or higher-value vehicle, this lack of coverage could be a serious problem.
As FEMA puts it, “anywhere it can rain, it can flood.” The odds are good that you live in a place where your car can get damaged from water or floods. Speak to your insurance agent or carrier about whether comprehensive coverage is the right move for you and your vehicle.
There amid perfect weather, things got “risky” as hundreds of KSU students ran a giant inflatable obstacle course and engaged with representatives from I.I.I. member companies, Lockton and Farmers, to learn about internships and job openings, collect free swag and enter for a chance to win prizes.
The obstacle course created a sensation. But what really brought people back was the desire to learn more about insurance careers and internships and the amazing possibilities they can unlock. If one anecdote could best summarize the day, it would be the following exchange:
I.I.I. staffer: “Hi! Run the obstacle course; sign up for the raffle; learn about insurance!?”
KSU student: “No time. I’m here to talk to these guys about an internship.”
Insurance claims are happening more often and they’re getting a lot more expensive – fast. The consequences are alarming. Premiums are rising for consumers and businesses. Coverage is getting scarce for some risks. Some insurers are increasingly concerned about how to keep liability insurance sustainable into the future.
But why are bigger claims happening more often? And what can the insurance industry do about it?
Advisen Ltd. held its inaugural “Big Nasty Claims Conference” on September 20 to explore these and other questions, featuring expert insight from across the insurance value chain: defense counsels, brokers, claims and insurance professionals, and risk managers.
Plaintiff’s attorney litigation strategies have evolved – and are paying off big
You’ve seen the headlines. $4.69 billion verdict for women alleging that talc baby powder caused ovarian cancer. $101 million verdict for a driver allegedly injured after his car was struck by a truck. The list could go on for what seems like forever.
And if it feels like these are unprecedented numbers happening at unprecedented rates, that’s because they are. There’s been a remarkable uptick in punitive damages from claims that went to trial, noted Jonathan Drummond, Head of Casualty – North America at Willis Towers Watson.
John Manning, keynote speaker at the conference and partner at Manning Gross & Massenburg LLP, made the case that some of this uptick is because of new plaintiff’s attorney litigation tactics. Using the so-called “reptile strategy” (based on this 2009 book), plaintiff’s attorneys have been successfully creating massive risks from what used to be fairly straightforward claims.
The reptile strategy involves appealing to what is known as the reptile brain — the part of the brain said to favor safety and survival over logic. What this often means in the courtroom is a subtle distortion of legal standards and burdens of proof. Manning argued that this allows plaintiff’s attorneys to essentially re-define “negligence” in the jurors’ minds to mean the failure of a company to be absolutely perfect and absolutely safe (a far cry from the actual legal standard).
Naturally, this standard of perfection is impossible to uphold. But the reptile strategy’s use of emotional appeal to waive away the need for actual causation can influence the jury to demand compliance with the impossible – and hence multi-million or billion-dollar verdicts against companies whose products might have posed only the slightest possible risk of danger, if at all.
This is particularly true in what Christopher Morrison, Senior Vice President at Swiss Re, called “high sympathy, high damages” claims with low liability – that is, claims where liability is pretty straightforward. He explained that these are the cases where the plaintiff’s attorneys are willing to take risks to move the needle away from traditional legal standards because, to win a big settlement, liability needs to be proven beyond the scope of the actual facts of the case.
The consequences of this strategy are impacting traditional legal standards themselves. Manning said that, in his view, the reptile strategy is “the number one factor in moving the line of demarcation of burden of proof for negligence and causation analysis.” “There’s a lot more ‘next asbestos’ if they [the plaintiffs’ bar] don’t have to prove medical causation at the trial,” he added, referencing the recent ruling regarding Monsanto’s Roundup weed killer.
Same old claims, new massive losses
These massive verdicts coming out of claims litigation are having a trickle-down effect. Claims settlement costs are also increasing, absent any trial – because huge verdicts mean a new “floor” for what a plaintiff’s attorney will demand in settlements. As Mia Finsness, Managing Director of Casualty Claims at Markel Corporation, noted, “one runaway verdict can drive the whole discussion on what settlements look like – you get massive settlements before you get to trial because plaintiff’s attorneys will just say they want huge money and that sets a floor.”
“Loss costs in casualty have always been increasing,” said Andy Barberis, Executive Vice President of Commercial Claims at AIG, “but over the last five to 10 years the increase has been exponential.” There doesn’t seem to exist a cap on where loss costs could end, he added, and these recent trends are of significant concern for the future sustainability of the insurance industry.
And not all verdicts need to be massive to have an effect. It was a running theme throughout the panels that claims that once cost $1 or $2 million to settle are now going for much more. “Things that used to be routine, we’re seeing a doubling or quadrupling of the verdicts,” said Kevin A. Maloney, Senior Vice President at Allied World. Over time, these individual increases can add up to big losses.
One panel was asked if “litigation financing” might have something to do with increasingly aggressive claims settlement on the part of the plaintiffs’ bar. (Litigation financing is when third-parties fund a plaintiff’s lawsuit in exchange for a portion of a settlement.) The short answer: a lack of transparency about when litigation is being financed by outside parties makes it hard to know if this is a widespread phenomenon. “Transparency is a real issue regarding funding. It’s hard to know they [financiers] even exist because right now there are few requirements for disclosure,” Finsness said.
Several lawyers said they had only incidentally found out third-parties were funding litigation, such as when a plaintiff’s attorney was very aggressively pursuing a high settlement and admitted to being funded.
Tort reform is unlikely, so strong legal defenses are crucial
Could tort reform help rein in aggressive litigation and massive verdicts? The mood at the conference was that the prospect for enactment of any meaningful tort reform is becoming an ever more unrealizable reality.
Instead, strong legal defenses that recognize and counter reptile strategies and other plaintiff’s attorney tactics are crucial.
For one, the conference experts stressed unity among parties to a defense; that is, making sure everyone is on the same page to preclude a plaintiff’s attorney from “driving a wedge” between the defense. Communicate “early and often” was also stressed– insureds, brokers, risk managers, and counsel need to share information and coordinate defense strategy as early as possible.
In other words, be more strategic. Plaintiff’s counsel on the other side of the fence, observed William Passannante, an attorney with Anderson Kill P.C., “will pool resources and share information and contact each other to form a united front,” especially when there’s potential for a big settlement. “I don’t know if I see the same willingness among defense counsels,” he added.
Finsness agreed, arguing that effective defense counsel and coordinated strategy are crucial components of satisfactory claim settlement.
Emerging risks might completely change the litigation landscape
Panel members were asked what they think could be the “next asbestos” to hit the insurance industry:
Talc-related litigation – the potential population of plaintiffs dwarfs that of the asbestos population.
The opioid crisis continues to increase litigation and claims exposure for many books of business.
Concussion litigation, especially with the increased attention on long-term brain injuries suffered by football players.
Climate change litigation, particularly the recent cases seeking to hold individual companies liable for alleged climate change-related damages.
Exposure “leakage,” in which old issues crop up in new contexts. Finsness noted that PFOA (chemicals used in a number of products) contamination could potentially become a product liability issue.
Premises security. Will venues become liable for shootings or other acts of violence on their premises?
The upshot being: claims are happening more often, are getting more expensive – and may be cropping up for new exposures that could haunt the insurance industry for decades to come.