Risk Insider: Marilyn Rivers

How Do You Insure Angry?

By: | October 12, 2016 • 3 min read
Marilyn Rivers is director of risk and safety for the City of Saratoga Springs. She chairs the PRIMA Institute for the Public Risk Management Association and was named Public Risk Manager of the Year by PRIMA in 2007. The views expressed in this article are those of the author, and not necessarily of the employer. She can be reached at [email protected]

Something’s wrong. The temperament of our communities is touched with anger and mistrust, and I’m not sure how we got here. The temperature of the conversations keeps rising and attempts at normal conversation are trying when dealing with a dissatisfied public.

I’m not sure when the tide of our communication ebbed toward distrust, disengagement and disagreement. I blame it on the onset of reality “in your face” television that has somehow taught our population that confrontation is socially acceptable and rude behavior toward government is expected.

Blatant excess and inexplicable bad behavior has become a norm in our society. It has the capacity to be generationally devastating.

Anger is being manifested in often the simplest of terms – a pothole, a sidewalk or a tree. Claimants are demanding perfection in sidewalk slab heights, the trimming of trees and the anticipation the earth isn’t going to rise up to swallow a tire, car or house.

Make no mistake; society is being scared into a distrust of our governance.

All government is suspect. The election cycle seems to have catapulted everyday governance into a never-ending spiral of constantly trying to figure out how best to provide “normal.”

I’m wondering if we shouldn’t offer courses to public risk professionals on how to use a Ouija board or fortune telling.


Our profession is often perplexed by the notion that somehow we should have perceived the growth of a vine that takes down a neighborhood tree, a river that overflows in a storm or an employee who forgets every shred of education we have ever provided for them to do the job they are sworn to do.

More often than not, our communities’ frustration boils over into anger. Anger feeds malcontent. Malcontent breeds distrust. Make no mistake; society is being scared into a distrust of our governance. Social “in your face” media is exacerbating that trend.

The population marches sometimes for civil rights, but unknowingly contains elements of destruction that subversively kill, maim and destroy property in the wake of justice. We as a people want to do the right thing. Bad things, however, inevitably sometimes get in the way.

How do you insure angry? How do you mitigate the risk of discontent?

Municipalities can invest in insurance programs, self-insure certain risks, mitigate the totality of the risk of their communities, but we cannot mitigate angry because anger is the great unknown.

Anger is personal. It is situational, emotional and full of grief at times. The striking out, blaming of others, and need to act out creates drama, a headline on the evening news and a tear in society each time it occurs.

Risk professionals who guard our communities with risk mitigation efforts try to measure the onset of risk and provide coverage.

There are, however, no temperature scales available to insure angry. No textbook “this is what you do” to stem the tide of destruction that often comes in the wake of that anger.

The best we can do is continue to work hard to maintain our risk efforts, persevere in the face of the malcontent and somehow hope our diligence maintains the integrity of the communities we all serve because we strive each and every day to ensure our country is what our Founding Fathers hoped it to be.

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Risk Insider: Jack Hampton

Hoboken Train Crash: ‘We Have the Technology’

By: | October 4, 2016 • 2 min read
Jack Hampton is a Professor of Business at St. Peter’s University in New Jersey and a former Executive Director of the Risk and Insurance Management Society (RIMS). He was named a Risk Innovator in 2008 by Risk and Insurance®. He can be reached at [email protected]

Lee Majors played the astronaut Steve Austin in a 1970’s TV series titled, “The Six Million Dollar Man.” The character was severely injured in the crash of an experimental aircraft. He was called, “A man barely alive.”

The opening scene captured the American psyche with the catchy dialogue, “We can rebuild him. We have the technology. We can make him better than he was before. Better, stronger, faster.”

So it is with New Jersey Transit in the aftermath of the tragic crash in Hoboken.

A recurring quandary in risk management is how to allocate time and money. Do we make it “just in case,” “just in time,” or “can we can live with the consequences?”

NJ Transit is not alone.

General Motors hid data on faulty ignition switches. 124 fatalities, 274 injuries.

Takata ignored defective airbags provided to Honda and its other customers. 11 U.S. deaths. Hundreds of injuries worldwide. More than 12 million vehicles recalled.

Nobody cares about New Jersey Transit trains until they crash.

Volkswagen was caught with fraudulent emissions software on its vehicles. Big mistake. Billions of Euros down the drain from government penalties, extra costs, and lost sales.

Samsung had to fix exploding batteries in its Galaxy Note 7 phone. People catching on fire. Billions out the window.

Trains recently experienced two unnecessary crashes after slow to non-existent implementation of positive train control. Amtrak, eight deaths, 200 injured near Philadelphia. NJ Transit in Hoboken. One fatality so far, more than 100 injured.

Risk management is undertaken in the triangle of interest among the Board and C-suite, operating managers, and the risk manager. They have different interests.


C-suite officers and directors often watch from 30,000 feet and do not need trouble.

Operating managers have revenue and expense goals and try to meet them on often faulty risk assumptions and timetables.

The risk manager tries to sensitize everybody, but has no authority to fix faulty ignition switches, exploding batteries, or braking systems on trains.

Nobody cares about New Jersey Transit trains until they crash.

The government had inspected the NJ Transit operations and found serious safety problems. After the crash, officials say they were getting ready to do something. Why did they wait?

We can make the trains safer. But first we must acknowledge that severity trumps frequency.

Enough with a six-sigma mentality. This tool for process improvement made famous by Jack Welch at General Electric reduces defects and errors but must be applied correctly. It does not work for certain decisions.

Six Sigma has a goal of no more than 3.4 defects per million opportunities. This produces fairly flawless results in manufacturing. It would produce one commercial airliner crash every five days in the United States.

We have the technology. We can raise the visibility of risk management and increase transparency of risk at the Board level and in the C-suite.

Most companies have positions or committees on the Board reserved for compensation and audit. They should create a similar role for risk management.

Once created, technology can collect and organize data and create dashboards. C-suite officers and board members can track down information and update the status of risk management.

It can be done easily and visually from a smart phone. Preferably one that does not catch on fire.

It can be done via satellite connection to the Internet from a train. Preferably one with positive train control.

It can be done from a passenger seat in a car without a faulty ignition switch or exploding air bag.

The time is now. We have the technology. We can make risk management better.

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Sponsored: Berkshire Hathaway Specialty Insurance

Why Marine Underwriters Should Master Modeling

Marine underwriters need better data, science and engineering to overcome modeling challenges.
By: | October 3, 2016 • 5 min read

Better understanding risk requires better exposure data and rigorous application of science and engineering. In addition, catastrophe models have grown in sophistication and become widely utilized by property insurers to assess the potential losses after a major event. Location level modeling also plays a role in helping both underwriters and buyers gain a better understanding of their exposure and sense of preparedness for the worst-case scenario. Yet, many underwriters in the marine sector don’t employ effective models.

“To improve underwriting and better serve customers, we have to ask ourselves if the knowledge around location level modeling is where it needs to be in the marine market space. We as an industry have progress to make,” said John Evans, Head of U.S. Marine, Berkshire Hathaway Specialty Insurance.

CAT Modeling Limitations

The primary reason marine underwriters forgo location level models is because marine risk often fluctuates, making it difficult to develop models that most accurately reflect a project or a location’s true exposure.

Take for example builder’s risk, an inland marine static risk whose value changes throughout the life of the project. The value of a building will increase as it nears completion, so its risk profile will evolve as work progresses. In property underwriting, sophisticated models are developed more easily because the values are fixed.

“If you know your building is worth $10 million today, you have a firm baseline to work with,” Evans said. The best way to effectively model builder’s risk, on the other hand, may be to take the worst-case scenario — or when the project is about 99 percent complete and at peak value (although this can overstate the catastrophe exposure early in the project’s lifecycle).

Warehouse storage also poses modeling challenges for similar reasons. For example, the value of stored goods can fluctuate substantially depending on the time of year. Toys and electronics shipped into the U.S. during August and September in preparation for the holiday season, for example, will decrease drastically in value come February and March. So do you model based on the average value or peak value?

“In order to produce useful models of these risks, underwriters need to ask additional questions and gather as much detail about the insured’s location and operations as possible,” Evans said. “That is necessary to determine when exposure is greatest and how large the impact of a catastrophe could be. Improved exposure data is critical.”

To assess warehouse legal liability exposure, this means finding out not only the fluctuations in the values, but what type of goods are being stored, how they’re being stored, whether the warehouse is built to local standards for wind, earthquake and flood, and whether or not the warehouse owner has implemented any other risk mitigation measures, such as alarm or sprinkler systems.

“Since most models treat all warehouses equally, even if a location doesn’t model well initially, specific measures taken to protect stored goods from damage could yield a substantially different expected loss, which then translates into a very different premium,” Evans said.

Market Impact

That extra information gathering requires additional time but the effort is worth it in the long run.

“Better understanding of an exposure is key to strong underwriting — and strong underwriting is key to longevity and stability in the marketplace,” Evans said.

“If a risk is not properly understood and priced, a customer can find themselves non-renewed after a catastrophe results in major losses — or be paying two or three times their original premium,” he said. Brokers have the job of educating clients about the long-term viability of their relationship with their carrier, and the value of thorough underwriting assessment.


The Model to Follow

So the question becomes: How can insurers begin to elevate location level modeling in the marine space? By taking a cue from their property counterparts and better understanding the exposure using better data, science and engineering.

For stored goods coverage, the process starts with an overview of each site’s risk based on location, the construction of the warehouse, and the type of contents stored. After analyzing a location, underwriters ascertain its average values and maximum values, which can be used to create a preliminary model. That model’s output may indicate where additional location specific information could fill in the blanks and produce a more site-specific model.

“We look at factors like the existence of a catastrophe plan, and the damage-ability of both the warehouse and the contents stored inside it,” Evans said. “This is where the expertise of our engineering team comes into play. They can get a much clearer idea of how certain structures and products will stand up to different forces.”

From there, engineers may develop a proprietary model that fits those specific details. The results may determine the exposure to be lower than originally believed — or buyers could potentially end up with higher pricing if the new model shows their risk to be greater. On the other hand, it may also alert the insured that higher limits may be required to better suit their true exposure to catastrophe losses.

Then when the worst does happen, insureds can rest assured that their carrier not only has the capacity to cover the loss, but the ability to both manage the volatility caused by the event and be in a position to offer reasonable terms when renewal rolls around.

For more information about Berkshire Hathaway Specialty Insurance’s Marine services, visit https://bhspecialty.com/us-products/us-marine/.

Berkshire Hathaway Specialty Insurance (www.bhspecialty.com) provides commercial property, casualty, healthcare professional liability, executive and professional lines, surety, travel, programs, medical stop loss and homeowners insurance. The actual and final terms of coverage for all product lines may vary. It underwrites on the paper of Berkshire Hathaway’s National Indemnity group of insurance companies, which hold financial strength ratings of A++ from AM Best and AA+ from Standard & Poor’s. Based in Boston, Berkshire Hathaway Specialty Insurance has offices in Atlanta, Boston, Chicago, Houston, Los Angeles, New York, San Francisco, San Ramon, Stevens Point, Auckland, Brisbane, Hong Kong, Melbourne, Singapore, Sydney and Toronto. For more information, contact [email protected].

The information contained herein is for general informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product or service. Any description set forth herein does not include all policy terms, conditions and exclusions. Please refer to the actual policy for complete details of coverage and exclusions.



This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Berkshire Hathaway Specialty Insurance. The editorial staff of Risk & Insurance had no role in its preparation.

Berkshire Hathaway Specialty Insurance (www.bhspecialty.com) provides commercial property, casualty, healthcare professional liability, executive and professional lines, surety, travel, programs, medical stop loss and homeowners insurance.
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