Risk Insider: Ernie Feirer

Rocks, Hard Places Meet Automated Loss Runs

By: | August 22, 2016 • 3 min read
Ernie Feirer, CPCU, is Vice President and General Manager, Commercial Insurance, at LexisNexis Risk Solutions, where he is responsible for developing a suite of solutions for the commercial insurance market. He can be reached at [email protected]

In the world of commercial insurance, I often use the phrase ‘Rock, meet hard place.’ This happens most often when describing how time-and labor-intensive manual processes, such as gathering loss runs, place commercial property and casualty carriers in the position of delaying time to quote or moving ahead with incomplete information.

Think about it this way. As a short-order cook, two orders for scrambled eggs come in. The first requires you to go to a farm, chase after chickens and collect three eggs. The second order directs you to the refrigerator. Which order will you fill first?

On average, manual loss runs add 5 to 10 days to a carrier’s time to quote. It’s not uncommon for underwriters to proceed without loss runs for small business policies, when the premiums don’t justify the time and cost involved.

Despite this, loss runs offer a fuller understanding of the risks, so you can either rate these policies differently, require coverage changes, or reject them all together. The results can equate to millions in potential or actual losses from just a small portion of business.

Would you rather evaluate John Contractor who installs residential flooring, or would you rather be the carrier who knows that John Contractor has a worker’s compensation claim and has been installing exterior siding, not just floors? You’d rather have all the information you can.

How do you get out from between the rock and the hard place? Avoid as much manual work as you can and get trusted information quickly with automated loss runs.

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Here’s what I’ve found in studying automated loss runs:

Enhance ease of doing business – automated loss runs mean real-time access to loss history that can be accessed from an agent’s desk. No more request-for-loss-run letters, no more follow-up phone calls or scans. In addition to traditional searching by business name and address, automated loss run technology can search by an individual’s name to uncover business owners, claimants and drivers within a commercial fleet. Or, they might conduct a location search for historic claims history specific to the property location on policies requiring property coverage.

Would you rather evaluate John Contractor who installs residential flooring, or would you rather be the carrier who knows that John Contractor has a worker’s compensation claim and has been installing exterior siding, not just floors? You’d rather have all the information you can.

Think about this scenario – a management company seeks a commercial package policy for a strip mall with several retail occupants. The insurer conducts a location-based search to obtain loss histories. While no losses are found on the company, it shows that several of its tenants have reported fire losses due to maintenance issues.

Improve customer service – with automated loss runs, carriers get a complete understanding of their risk exposure and can quote an accurate price from the start. Like above, knowing there have been fire events are hugely beneficial for underwriting. From an agent’s perspective, it provides reassurance that their ability to deliver exceptional and consistent customer service won’t be compromised at point of renewal.

Attract appropriate business – agents prefer easy-to-work-with carriers. Using automated loss runs, carriers can realize efficiencies and attract more business from agents. The complete risk profile afforded by an automated loss run ensures that underwriters fully understand their risk exposure.

One last example, we found in a real world book of business review more than 700 in prior claims totaling $13M in prior losses that were not disclosed to the carrier. Using automated loss runs, the carrier discovered that 38% of those claims were attributable to only 5 policies (equating to less than 1% of the claims).

Which hurt worse in this scenario – the rock or the hard place?

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Risk Insider: Tony Boobier

Geovation – Where Innovation meets Location

By: | July 29, 2016 • 2 min read
Tony Boobier holds a WW Executive role at IBM, focusing on solutions for Risk and Finance, and was previously IBM Insurance Analytics leader for EMEA. He can be reached at [email protected]

I’m spending a lot of my time in innovation hubs at the moment. These incubators for start-ups appear to be the new big thing.

Certainly venture capitalists seem to think so, with $2.7b of funding for insurance start-ups in 2015, according to CB Insights,  and this figure most likely to be exceeded in 2016.

Incubators usually provide initial funding, coaching to help secure seed capital, masterclasses, workshops, and events. Beyond these they provide an office environment and a culture of disruptive thinking.

One particular innovation hub which has caught my eye is the London-based Geovation Hub, an innovation center set up by the UK-based Ordnance Survey to explore ‘open and closed innovation’ relative to the use of geospatial data. Ordnance Survey is the UK government agency responsible for the official, definitive mapping of Great Britain.

What would happen if the industry flipped the model on its head, and ‘led’ with location?  What might the new model look like and how would it be monetized?

So – what does this have to do with insurance? In insurance, location is everything.

Where the risks are, where the customers are, where the weather events happen. Location influences customer attitudes, effectiveness of marketing campaigns, supply/demand management of the insurance value chain and many other attributes.

As far as I am aware, the Geovation Hub is unique globally – but replication in one form or another seems inevitable.

With much of the wider innovation focus being on Blockchain, the new shared ledger approach to handling data, it’s important to remember that Blockchain can also have a location component. After all, isn’t geocoding just another form of data?

Technology is increasingly disrupting established business models. The existing insurance approach is to take relatively traditional business models and add a location component.

What would happen if the industry flipped the model on its head, and ‘led’ with location?  What might the new model look like and how would it be monetized?

Changing traditional business models has consequences which go far beyond how income is created. It’s critical that investors and lenders are able to understand how ‘value’ is created.

Location influences customer attitudes, effectiveness of marketing campaigns, supply/demand management of the insurance value chain and many other attributes.

Think for example what might happen if cab rides were free of charge, funded entirely by advertisers who used screens inside the cab to market their products.

Is there an insurance equivalent? Free retail insurance – but what would be the ‘trade off’?

So – I have to be honest. I don’t know the answers. I don’t even know all of the questions. But I am beginning to think harder about the future.

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Sponsored: Starr Companies

To Keep Cool in a Crisis, Companies Need a Comprehensive Solution

Corporate security threats now come in many forms, and mid-size companies should be prepared to cover them all.
By: | August 4, 2016 • 6 min read
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Threats against corporate security come in many forms, from intentional acts of violence to civil unrest to cyber-attacks. The perpetrators don’t discriminate by company size or sector, and the consequences can range from several thousand dollars lost to several lives lost.

The recent shooting in an Orlando nightclub that killed 49, for example, or last year’s San Bernardino shooting that killed 14, are somber reminders that terrorism and violence can erupt anywhere and in any type of business. In addition to loss of life, violence can translate into business interruption and property damage. In Ferguson, Mo., riots lead to over $4 million in property damage.

Cyber-attacks have also become commonplace, with hackers infiltrating private networks to steal data or hold it ransom.

Is your organization prepared for these risks?

“A lot of companies have a crisis response plan on paper, but they don’t have outside resources to come to their aid if there is an incident,” said Reggie Gibbs, Underwriter and Product Manager, Starr Companies.

Mid-size companies especially tend to lack comprehensive insurance coverage and crisis management services for a variety of security events due either to limited resources or an underestimation of their exposure.

Starr Companies’ Cyber and Terror Response (CTR) solution provides three coverages as well as crisis response services tailored to meet the needs of these companies. Each of its components addresses a common security threat.

SponsoredContent_Starr_0816“We don’t just want to indemnify the security risks our clients face; we want to help them actively manage them.”
 
— Reggie Gibbs, Underwriter & Product Manager, Starr Companies

Terror and Political Violence

“Political violence can be defined as a strike, riot, protest, or any type of unrest that gets out of hand and turns violent,” said Gibbs, who specializes in terrorism and political violence, workplace violence, and crisis management.

In the case of the Ferguson protests, any first party property damage or third party liability incurred by the disruption would be covered under the terrorism and political violence segment of the CTR solution.

In the case of a terror attack, organizations cannot necessarily rely on TRIA to pick up property losses. In the case of the Orlando shooting, for example, the likelihood of TRIA being invoked is low because property damage will not meet the threshold for coverage to kick in.

TRIA, reauthorized in 2015, provides a federal insurance backstop in the event of a terror attack. The U.S. Secretary of the Treasury, U.S. Attorney General, and U.S. Secretary of Homeland Security must declare an attack to be an act of terrorism, and property damage must exceed $5 million to trigger TRIA.

“We would still view the Orlando shooting as an act of terror, however, because of who the shooter claimed he was working for regardless if the ties to terror groups are clear or not. Therefore, our coverage would apply,” Gibbs said. Even if TRIA was enacted, however, companies would still have a lot of pieces to pick up following an attack. They may have injured or deceased employees, or face legal action from third parties.

Workplace Violence

For these situations, and any other incident of violence not driven by terrorism, the workplace violence component of Starr’s CTR solution would act as an umbrella to cover other liabilities such as legal liability, loss of life benefits, psychiatric care, and other crisis response services.

One such incident struck a Boston-area Bertucci’s in early May. An attacker wielding a knife drove his car into a Boston shopping mall before making his way into the nearby restaurant. He killed five, including restaurant workers and patrons.

“There was no ideological or political motivation behind it. He was just deranged.” Gibbs said. “Our workplace violence coverage can handle the loss of life benefits for both the employees and patrons killed in situations like this one.”

In the best cases, though, violence can be prevented altogether.

“If an employee reports a stalking threat, the policy would cover the expense of security guards,” Gibbs said. “In this case, it’s more of a pre-workplace violence coverage. It would de-escalate the situation.”

Cyber Liability

SponsoredContent_Starr_0816Attacks can also be non-physical.

Cyber extortion in particular is on the rise. Phishing scams lead employees to click on malicious links, unknowingly downloading ransomware onto their internal networks. The cyber criminals then hold companies’ networks ransom, asking for a sum of money in return for the release of data or to prevent a business interruption. The ransoms can be low — amounts that organizations can afford to pay.

“The hackers don’t want to attract the attention of law enforcement or regulatory agencies,” said Annamaria Landaverde, National Cyber Practice Leader & Professional Liability Underwriting Manager, Starr Companies. Landaverde specializes in the cyber component of the CTR coverage. “The FBI may not get involved if someone asks for $5,000. They are more likely to get involved if someone asks for $5 million.”

Since companies are not required by law to report cyber extortion —like they are for data breaches — many choose simply to pay the ransom and move on without generating any negative news headlines.

Starr_SponsoredContent“The hackers don’t want to attract the attention of any law enforcement or regulatory agencies. The F.B.I. won’t get involved if someone asks for $5,000. They will get involved if someone asks for $5 million.”

— Annamaria Landaverde, National Cyber Practice Leader & Underwriting Manager, Professional Liability Division, Starr Companies

“A California medical center recently had an incident like this where the hackers asked for $17,000 in ransom,” Landaverde said,” but the amounts can vary.”

While the ransom itself may seem manageable, many companies fail to recognize other costs associated with the identification and removal of the malware from their system. There may also be costs associated with forensics investigations, legal experts, public relations firms, third party lawsuits, and notification and credit monitoring.

“The cyber arm of the CTR coverage extends to liability that an organization would suffer as a result of a breach, or failure of security of the insured’s network,” Landaverde said. That includes not just cyber extortion, but outright data theft or denial-of-service attacks.

Crisis Management Services

SponsoredContent_Starr_0816“We don’t just want to indemnify the security risks our clients face; we want to help them actively manage them,” Gibbs said.

The fourth component of Starr’s CTR solution – crisis response — provides two outside consultants to insureds, with one specializing in “hard” security services like guards or instances of cyber extortion, and another focusing on crisis communications.

Without these outside services, there is only so much insurance can do in the aftermath of a crisis. Experienced consultants provide a range of security preparedness and response services to complement coverage and help insureds recover from an episode of violence or cyber event.

“From a communications perspective, our consultants can manage the public relations front to create clear and consistent messaging, but they can also stay in touch with families after a terror or other violent attack to make sure everyone stays informed,” Gibbs said.

They also serve as a first point of contact for insureds immediately after an event. If they need guidance quickly, consultants await at the ready.

“When a client purchases the product, they get a 24-hour hotline set up with one of our consultancies,” he said. “They can report an incident at any time, and our consultant will help either resolve a situation or deal with the aftermath in whatever way they can.”

While the Cyber and Terror Response package provides a comprehensive solution tailored for mid-size companies, Starr also offers standalone cyber liability and crisis management coverage on a primary and excess basis.

“For companies with greater exposure to a particular type of risk, or who simply want higher limits or greater customization, we have those standalone polices.” Landaverde said.

For more information on Starr Companies’ Cyber and Terror Response solution, visit https://www.starrcompanies.com/Insurance/CyberAndTerrorResponse.

Starr Companies is the worldwide marketing name for the operating insurance and travel assistance companies and subsidiaries of Starr International Company, Inc. and for the investment business of C. V. Starr & Co., Inc. and its subsidiaries.
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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Starr Companies. The editorial staff of Risk & Insurance had no role in its preparation.




Starr Companies is a global commercial insurance and financial services organization that provides innovative risk management solutions.
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