Cyber Risk Coverage
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Cyber Risk Coverage
Slaying the Dragon
Risk managers struggle and succeed in placing cyber coverage.
By: Anne Freedman | March 1, 2016 • 12 min read
Topics: Cyber Risks | Insurance Industry | March 2016 Issue | Underwriting
[032016_01_cover_story_dragon]
The cyber dragon is devouring billions of dollars in uninsured losses and risk managers are feeling the heat.
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A daily drumbeat of data breaches is scorching even the most technologically savvy organizations. Boards of directors and the C-suites, rightly fearful for their bottom lines, are in turn putting pressure on risk managers.
Many risk managers are seeking to transfer this overbearing and frightening risk by purchasing cyber insurance, but that’s easier said than done. Even as risk managers seek solutions, they face a slew of applications with intricate, hard-to-answer questions on their IT security and exposures, as well as a dizzying array of coverages, terms and conditions.
“The spate of data breaches is obviously creating fear in those who feel the need to buy it,” said Eamonn Cunningham, chief risk officer, Scentre Group, which has about 2,500 employees. “Whether you should actually buy it or not is another question, but the fear is driving behavior.
“The unfortunate confluence of facts is we are dealing with something that is relatively new, is constantly evolving and is coupled with a series of well-publicized incidents that, in my mind, could drive an element of extreme, irrational behavior [to purchase a policy without sufficient analysis],” he said.
Analyzing the Threat
Target, Sony, Anthem, Home Depot, the IRS and the U.S. Office of Personnel Management suffered some of the more recent attention-grabbing data breaches. But with nearly 300 million records leaked and more than $1 billion stolen just in 2015, according to Tech Insider, every organization is at risk.
The greatest external risks are from cyber criminals, according to the “2016 Vormetric Data Threat Report,” followed by hacktivists (hackers with political goals), nation-states, cyber terrorists and competitors.
For most organizations, though, it is employees who pose the greatest danger.
“Employees and negligence will continue to be the leading cause of security incidents in the next year,” according to the “2015 Data Breach Industry Forecast” by Experian.
“Between human error and malicious insiders, time has shown us the majority of data breaches originate inside company walls,” it said.
Analyzing specific exposures is one of the challenges facing risk managers.
[Scott Clark, risk and benefits officer, Miami-Dade County School District]
Scott Clark, risk and benefits officer, Miami-Dade County School District
Scott Clark, risk and benefits officer at Miami-Dade County School District, with 45,000 employees and 355,000 students, said it took about a year of working with the CFO, chief IT officer, internal risk management employees, and an external risk management consultancy to determine the district’s cyber exposures; that was before deciding to go to market.
“We all felt there were a number of moving parts that in the event of a major hack could be exposed,” he said.
One major exposure specific to school districts is student Social Security numbers, which are “practically dormant” until students seek out jobs or credit. It often isn’t until then they find out the information was stolen, Clark said.
“It’s a huge exposure that hasn’t gotten a lot of press outside of public school systems,” Clark said.
“We all felt there were a number of moving parts that in the event of a major hack could be exposed.” — Scott Clark, risk and benefits officer, Miami-Dade County School District
In early February, the University of Central Florida revealed that hackers stole the Social Security numbers of 63,000 current and former students and employees.
To forestall problems, the Miami-Dade County School District reviewed which employees had access to Social Security numbers, said Mike Fox, district director for risk management. “If it was not vital to their job function, we took the access away,” he said.
Working with carriers can help risk managers see these and other risks in a new light.
Clark said that going through the underwriting process “is a great exercise” for risk managers.
“It really forces you to examine from a cyber standpoint your organization at a deeper dive level than you ordinarily would,” he said.
[Mike Fox, district director for risk management, Miami-Dade County School District]
Mike Fox, district director for risk management, Miami-Dade County School District
“It really makes you focus on your operations and maybe some aspects of your operations that you didn’t consider,” Clark said.
“But you can’t do it in a vacuum. You have to reach out to those in the trenches from a data standpoint so you get a full understanding of what exposures are out there.”
One exposure Miami-Dade is working on is third-party access to its systems. The district now requires all vendors to have a policy to address cyber liability and is considering a requirement that all vendors in the future provide proof of actual cyber liability insurance coverage.
But, Fox noted, even with strong firewalls, “the simplest thing will trip you up, a lost thumb drive, a stolen laptop.”
Applying Is Complicated
James Banfield, director of risk management at Texas-based Baylor College of Medicine, with 10,000 employees, said applying for cyber coverage is “a little bit daunting.” The college purchased its first cyber policy in the summer of 2015. Previously it was self-insured.
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“We hadn’t been with a carrier for this risk before, therefore, we weren’t easily able to translate what we do into what [underwriters] wanted, proof of how we monitor things, what tests we do to our systems to determine whether they are vulnerable,” Banfield said.
“One of them wanted our first-born-child-type of information [on the application],” Banfield said.
His broker was able to get the carriers to accept a common application, with the medical college adding specific information upon request.
“It requires diligence and a little bit of tenacity internally to try to get this information that is being requested that may not exist or may not exist in the form the application is requesting,” he said.
In addition to the complexity of applications, carriers deal with the notification expenses in the event of a data breach differently, Banfield said.
One wanted to limit coverage to 2 million individuals. Another wanted a dollar sublimit, while yet another offered full policy limits.
Some offered network extortion coverage, some didn’t, he said. Most did not offer reputational harm coverage. Most sublimited fines and penalties.
Overall, Banfield said the terms and conditions were broad and favorable. He said it was worth buying the coverage and he felt that if there is a loss, his chances of having a claim covered were good.
Reading the Fine Print
There is a huge learning curve in selecting an insurance solution, said Lynda Bennett, chair, insurance recovery practice, Lowenstein Sandler.
[Lynda Bennett, chair, insurance recovery practice, Lowenstein Sandler]
Lynda Bennett, chair, insurance recovery practice, Lowenstein Sandler
“One of the greatest challenges I face is when a client comes to me who has three different proposals from three different carriers and asks, ‘Which is better?’
“One isn’t necessarily better because they are all offering different terms and conditions,” she said. “There is not one that is the gold standard that gives you the best in each and every category that you intend to cover.
“These policies are so complicated. You have to get into the definitions and all of the definitions are embedded in other definitions. It’s mind-numbing and very, very complicated to review,” Bennett said.
Robert Chesler and Janine Stanisz of the Anderson Kill law firm noted that a single cyber policy may contain 60 definitions and 30 exclusions.
David Katz, a partner at law firm Nelson Mullins Riley & Scarborough, said he “spends a lot of time with in-house lawyers on whether they have the right type of coverage.”
One key area is coverage of first-party or third-party claims. For example, does the policy cover only damage to the insured or does it also cover damage a breach causes to third parties, or damage to the insured caused by an incident at another entity, such as a vendor?
Prior agreement on settlement of claims is also important, he said. What settlement formula is applied with respect to payment of damages if there is disagreement between the insured and carrier over a potential settlement?
A delay in notice to either the broker or the carrier of a potential claim also creates certain risks for the insured, Katz said. Sometimes, in the immediate aftermath of a suspected data breach, some companies are so focused on stopping the bleeding that they may not provide the necessary notifications. Others may report information that is later found to be incorrect.
Failure to follow the policy’s set notification procedures and communicate correct information could harm a company’s ability to successfully pursue a claim or defend its reputation, Katz said.
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Many risk managers said they appreciate post-breach services in the form of policy additions, such as notification call centers, credit monitoring, public relations, forensic and legal services.
“You can get all of those services on your own but it helps when you have an insurance company that has assembled a team,” said Baylor College’s Banfield.
As for forensic services provided by cyber coverage, Katz said, it’s important to know whether the scope of services applies only to an investigation to meet notification mandates or whether it will also include an investigation into causes of the breach and ways to remediate the problem.
Including the “earliest possible retroactive date” in a policy is also important because a breach may go undetected for a period of time, according to King & Spalding LLP.
Making the risk manager’s job even tougher is that in a generally soft market, cyber insurance is getting pricier.
Taking the Risk to Market
“There’s truly one hard market out there and it’s cyber,” said Carolyn Snow, director of risk management at Humana, a Kentucky-based health insurance company with 52,000 employees.
[Carolyn Snow, director of risk management, Humana]
Carolyn Snow, director of risk management, Humana
“We just went through a renewal and it was really, really brutal.
“We have a very aggressive security staff and security systems. You can never say you won’t have a loss — you would be foolish to say that — but we do everything we can that’s reasonable to mitigate losses.”
But in health care, there is so much protected information at risk that it gives underwriters pause, she said.
“The one thing underwriters are looking at really hard this year is the number of records [of protected information] you have. That’s a big, big problem for health care companies.
“The [application] information required this year was much more extensive than in prior years,” she said.
“Even after talking with our security people, we got a lot more questions, much more than we had in the past.”
In the end, some carriers declined to quote, including some from the prior program. Humana also took a higher attachment point for its coverage.
What Snow found “very, very unusual” is that the pricing on the higher layers of the tower is nearly as expensive as the primary layer.
“What underwriters think of as the working layer is much higher than it used to be,” she said. “It’s a really hard market.”
Brokers and underwriters, however, said that — except for health care and retail organizations — capacity is ample and they consider the price to be reasonable.
Standard & Poor’s said there are about 50 carriers offering cyber risk coverage, with increasing demand for the solution, newer entrants to the market, and a risk that is evolving.
Lloyd’s of London estimates that there is about $400 billion in annual global losses from hacking, with “only a moderate proportion” being insured.
S&P said the “typical line size for policies for small companies is around $25,000, to a maximum $5 million to $25 million for larger companies. For large companies, policies can be stacked in the form of a tower to provide the theoretical maximum capacity of around $400 million.”
“One of the greatest challenges I face is when a client comes to me who has three different proposals from three different carriers and asks, ‘Which is better?’ — Lynda Bennett, chair, insurance recovery practice, Lowenstein Sandler
Banfield said he found ample capacity. The medical college got six good quotes for its first cyber policy this past summer, he said, noting that pricing hadn’t gone up markedly since the college first looked at cyber coverage about 10 years ago.
Clark at Miami-Dade, said the district’s recent renewal was flat for the second year of its policy offering a $10 million limit per claim and aggregate annual limit, with a $250,000 self-insured retention per claim.
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Scentre Group’s Cunningham said his company is “actively considering” a cyber policy purchase, but he stressed the need to take a measured approach.
Work with carriers that have a mature approach to cyber, he advised, as opposed to newcomers to the field who may only be in the market until they have losses.
He said a lot of capacity is coming on stream. Given that, he said, risk managers have to pick those markets that they believe have a considered understanding of the risks in their organizations.
The underwriters also need to have the capacity to properly underwrite the risk and ultimately provide a product that very closely correlates with what should be the underlying intent between insured and insurer.
Litigation Defines Coverage
Litigation of cyber claims ultimately creates standard definitions for policy wording, but there hasn’t been all that much litigation thus far.
“Most of the losses to date we have seen have fallen within the pre-claim aspects of coverage, the loss prevention or forensics to figure out what happened,” said Bob Parisi, managing director, Marsh FINPRO.
“This is fairly young coverage and there is still a fair amount of uncertainty in the marketplace,” he said.
“As you get a more critical mass of people buying the coverage, you will have more instances of claims that will fall outside of coverage,” he said. At that point litigation will increase, he said.
To date, most of the litigation involving cyber claims were filed pursuant to commercial policies such as general liability, crime, D&O or E&O, as opposed to a standalone cyber policy.
In one case, Travelers Indemnity Co. is seeking a court ruling that it does not need to defend or indemnify P.F. Chang’s China Bistro Inc. under a general liability policy.
The restaurant chain’s data breach did not trigger the policy, Travelers argued, because there was no bodily injury, property damage, advertising injury or personal injury connected to the incident, as the policies defined them.
That case is still pending.
In another case, employees of Apache Corp., an oil and gas company, were fooled by emails and phone calls purportedly from a vendor notifying them of new bank account information for payment of invoices.
Company employees released $2.4 million to the thieves before the fraud was discovered. Great American Insurance Co., which issued Apache a crime policy, disputed the claim but Apache won its case in court.
“When you think about most policies like fire or property,” said Humana’s Snow, “those policies have been litigated word by word. Cyber hasn’t been litigated that much. The more litigation you have, the more certainty you will have [about coverage].
“What underwriters think of as the working layer is much higher than it used to be. It’s a really hard market.” — Carolyn Snow, director of risk management, Humana
“I think the problem for the buyer and for the carrier is maybe you intended to cover one thing and not something else. The way it is written may cover more than intended. I think vagueness around some of the wording is an issue. Happily it’s not something we have experienced,” Snow said.
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Cunningham said it’s too early to tell if carriers are fundamentally making good on the implicit promises they provide when the insurance contract is written.
“I think there is a lack of history of publicized settlements,” he said.
“If both carriers and insureds don’t approach this in a very diligent manner so as to ensure the underwriter contract correlates with the commercial intent of the insured in going into the marketplace … that mismatch could very well end up in litigation,” he said.
Anne Freedman is managing editor of Risk & Insurance. She can be reached at afreedman@lrp.com.
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Infographic: The Risk List
6 Risks for Global High Tech Manufacturers
Global technology manufacturers face increasingly complex coverage challenges. Presented by Travelers.
By: R&I Editorial Team | March 1, 2016 • 2 min read
Topics: March 2016 Issue
Rank the Risk List [RiskList_0316] [RiskList_0316] [RiskList_0316]
The Risk List is presented by:
[RiskList_0316]
[RiskList_0316] [RiskList_0316] [RiskList_0316]
The R&I Editorial Team may be reached at riskletters@lrp.com.
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Sponsored: State of Vermont
7 Questions to Answer before Choosing a Captive Insurance Domicile
Ask the right questions and choose a domicile for your immediate and long-term needs.
By: State of Vermont | February 22, 2016 • 7 min read
[Vermont_SponsoredContent]
Risk managers: Do your due diligence!
It seems as if every state in America, as well as many offshore locations, believes that they can pass captive legislation and declare, “We are open for business!”
In fact, nearly 40 states and dozens of offshore locations have enabling captive insurance legislation to do just that.
With so many choices how do you decide who is experienced enough to support the myriad of fiscal and regulatory requirements needed to ensure the long term success of your captive insurance company?
“There are certainly a lot of choices,” said Mike Meehan, a consultant with Milliman, an actuarial firm based out of Boston, Massachusetts, “but not all domiciles are created equal.”
Among the crowd, there are several long-standing domiciles that offer the legislative, regulatory and infrastructure support that makes captive ownership not only a successful risk management tool but also an efficient entity to manage and operate.
Selecting a domicile depends on many factors, but answering these seven questions will help focus your selection process on the domiciles that best fit your needs.
1. Is the domicile stable, proven and committed to the industry for the long term?
[ThinkstockPhotos-139679578_700] The more economic impact that the captive industry has on the domicile, the more likely it is that captives will receive ongoing regulatory and legislative support. The insurance industry moves very quickly and a domicile needs to be constantly adapting to stay up to date. How long has the domicile been operating and have they been consistent in their activity over the long term?
The number of active captive licenses, amount of gross premium written in a domicile and the tax revenue and fees collected can indicate how important the industry is to the jurisdiction’s bottom line. The strength of the infrastructure and the number of jobs created by the captive industry are also very relevant to a domicile’s commitment.
“It needs to be a win – win situation between the captives and the jurisdiction because if not, the domicile is often not committed for the long term,” said Dan Kusalia, Partner with Crowe Hortwath LLP focused on insurance company tax.
Vermont, for example, has been licensing captives since 1981 and had 589 active captives at the end of 2015, making it the largest domestic domicile and third largest in the world. Its captive insurance companies wrote over $25 billion in gross written premiums. The Vermont State Legislature actively supports an industry that creates significant tax revenue, jobs and tourist activity.
2. Are the domicile’s captives made up of your peer group?
The demographics of a domicile’s captive companies also indicate how well-suited the location may be for a business in a particular industry sector. Making sure that the jurisdiction has experience in the type and form of captive you are looking to establish is critical.
“Be among your peer group. Look around and ask, ‘Who else is like me?’” said Meehan. “Does the jurisdiction have experience licensing and regulating the lines of coverage for other businesses in your industry sector?”
3. Are the regulators experienced and consistent?
[Vermont_SponsoredContent] It takes captive-specific expertise and broad experience to be an effective regulator.
A domicile with a stable and long-term, top-tier regulator is able to create a regulatory environment that is consistent and predictable. Simply put, quality regulation and longevity matter a lot.
“If domicile regulators are inexperienced, turnaround time will be slower with more hurdles. More experience means it is much easier operating your business, especially as your captive grows over time,” said Kusalia.
For example, over the past 35 years, only three leaders have helmed Vermont’s captive regulatory team. Current Deputy Commissioner David Provost is one of the longest tenured chief regulators and is a 25-year veteran in the captive insurance industry. That experienced and consistent leadership enables the domicile to not only attract quality companies, but also to provide expert guidance on the formation process and keep the daily operations running smoothly.
4. Are there world-class support services available to help manage your captive?
[Vermont_SponsoredContent] The quality of advisors and managers available to assist you will have a large impact on the success of your captive as well as the ease of managing the ongoing operations.
“Most companies don’t have the expertise to operate an insurance company when you form a captive, so you need to help build them a team,” Jeffrey Kenneson, a Senior Vice President with R&Q Quest Management Services Limited.
Vermont boasts arguably the most stable and experienced captive infrastructure in the world. Many of the leading captive management companies have their headquarters for their Global, North America and U.S. operations based in Vermont. Experienced options for captive managers, accountants, auditors, actuaries, bankers, lawyers, and investment professionals are abundant in Vermont.
5. Can the domicile both efficiently license and provide on-going support to your captive as it grows to cover new lines of coverage and risks?
[Vermont_SponsoredContent] Licensing a new captive is just the beginning. Find out how long it takes for the application to get approved and how long it takes for an approval of a plan change of your captive’s operations.
A company’s risks will inevitably change over time. The captive will need to make plan changes which can include adding new lines of business. The speed with which your domicile’s regulatory branch reviews and approves these plan changes can make a critical difference in your captive’s growth and success.
The size of a captive division’s staff plays a big role in its speed and efficiency. Complex feasibility studies and actuarial analyses required for an application can take a lot of expertise and resources. A larger regulatory team will handle those examinations more efficiently. A 35-person staff like Vermont’s, for example, typically licenses a completed application within 30 days and reviews plan changes in a matter of days.
6. What are the real costs to establishing and managing your captive?
[Vermont_SponsoredContent] It is important to factor in travel costs, the local costs of service providers, operating fees, and examination fees. Some states that do not impose a premium tax make up for it in high exam fees, which captives must be prepared for. Though Vermont does charge a premium tax, its examination fees are considered some of the least expensive options in the marketplace.
It is also important to consider the ease and professionalism of doing business with a domicile in the ongoing operations of your captive insurance company.
“The cost of doing business in a domicile goes far beyond simply the fixed cost required. If you can’t efficiently operate due to slow turn-around time or added obstacles, chances are you have made the wrong choice,” said Kenneson.
7. What is the domicile’s reputation?
[Vermont_SponsoredContent] Make sure to ask around and see what industry experts with experience in multiple domiciles have to say about the jurisdiction. Make sure the domicile isn’t known for only licensing certain types of captives that don’t fit your profile. Will it matter to your board of directors if your local newspaper decides to print a story announcing your new insurance subsidiary licensed in some far away location?
Are companies leaving the jurisdiction in high numbers and if so, why? Is the domicile actively licensing redomestications — when an existing captive moves from one domicile to another? This type of movement can often be a positive indicator to trends in a domicile. If companies of a particular size or sector are consistently moving to one state, it may indicate that the domicile has expertise particularly suited to that sector.
Redomestications made up 11 of the 33 new captives in Vermont in 2015. This trend is a positive one as it speaks to the strength of Vermont. It reinforces why Vermont is known throughout the world as the ‘Gold Standard’ of domiciles.
Asking the right questions and choosing a domicile that meets your needs both today and for the long term is vital to your overall success. As a risk manager you do not want surprises or headaches because you did not ask the right questions. Do the due diligence today so that you can ensure your peace of mind by choosing the right domicile to meet your needs.
For more information about the State of Vermont’s Captive Insurance, visit their website: VermontCaptive.com.
[SponsoredContent]
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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 the State of Vermont. The editorial staff of Risk & Insurance had no role in its preparation.
The State of Vermont, known as the “Gold Standard” of captive domiciles, is the leading onshore captive insurance domicile, with over 1,000 licensed captive insurance companies, including 48 of the Fortune 100 and 18 of the companies that make up the Dow 30.
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2016 Power Broker
Power Broker Rising Stars
The class of 2016 impresses with its size and quality.
By: Dan Reynolds and Tom Starner | March 1, 2016 • 3 min read
Topics: 2016 Power Broker | Brokerage | March 2016 Issue | No Ad
Judging the talent employed by commercial insurance brokers leads us to one conclusion; optimism is the order of the day.
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As we discovered this year, not only are the ranks of high-achieving younger brokers as strong as ever, they are increasing in number.
We’ve renamed our Power Broker® “Under 40” category to “Rising Stars” to better celebrate this wave of talent and to focus on an important point. Yes, this is a younger group of professionals, all of them under 40, but it’s more on point to think of them as the future leaders of this profession.
As Power Broker® winners and finalists, this set of Rising Stars demonstrated a superior level of creativity in finding solutions for their clients, unflagging customer service and a devotion to learning more about their industry.
Just four years ago, the number of brokers honored by this designation hovered around 40. Last, year, there were 54 Power Broker® winners and finalists recognized in the Under 40 category.
Over the next few pages, you will see the names and affiliations of 77 brokers we recognize as Rising Stars. Since the launch of this category in 2009, more than 250 brokers under 40 received the designation.
The majority of the Rising Stars designees come from the Big Three firms and their average age is 36. They represent a powerful wave of talent that is bolstering a profession, which like many other professions will be challenged to replace talent as the baby boomers retire.
For this group of Rising Stars, a career in commercial insurance brokerage is a compelling challenge that results in rich rewards.
“I really enjoy telling ‘the story’ on behalf of my client to the insurance carrier, to pique their interest in an account,” — Ashley De Paola, assistant vice president, Alliant
We first came to know Lockton’s Christopher Keith when he broke into the Power Broker® ranks as a winner in the Workers’ Compensation category in February 2013.
In those days, Keith worked for the Philadelphia-based Graham Co. Keith, 39, said it’s the “entrepreneurial” nature of the business that he finds so rewarding.
“I like the fact that I am managing my own profit and loss statement,” said Keith, who this year achieved Power Broker® status in the Aviation category.
[Ashley De Paola, assistant vice president, Alliant]
Ashley De Paola, assistant vice president, Alliant
At Lockton’s annual President’s Dinner, he was recognized as the “prototype” Lockton producer.
“I’m very proud of that,” he said.
Alliant’s Ashley De Paola, 33, a 2016 Power Broker® in the Real Estate category, said it’s the quick-paced, evolving atmosphere of commercial insurance brokerage that excites her.
“I really enjoy telling ‘the story’ on behalf of my client to the insurance carrier, to pique their interest in an account,” De Paola said.
Earlier in her career, a client expressed his concern over her age and experience. Her review of his insurance program changed his mind.
“It was very rewarding when he later asked me to work on his business,” she said.
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Beecher Carlson’s Joe Roberta, a 2016 Power Broker® winner in the Private Equity category, has several reasons he likes working in this industry. Top of the list is that this is a very “social industry.”
“I truly enjoy working with people that I’ve been fortunate enough to build long-term relationships with,” he said.
Justin Wiley, 32, Power Broker® winner in the Public Sector category, works for Arthur J. Gallagher & Co., which prides itself on its mentoring efforts.
The company sent Wiley to Orlando, Fla., to work with veteran Rich Terlecki, himself a multiple Power Broker® winner.
“My goal was to learn and gather from him as much intellectual capital as possible,” Wiley said.
Clearly, Terlecki taught him well.
The 2016 Power Broker® Rising Stars
[Morgan Anderson, 38 Arthur J. Gallagher Irvine, Calif. Real Estate]
Morgan Anderson, 38
Arthur J. Gallagher
Irvine, Calif.
Real Estate
[Peter Ballas, 33 Aon Morristown, N.J. At-large]
Peter Ballas, 33
Aon
Morristown, N.J.
At-large
[Brooke Barnett, 37 Marsh Los Angeles Entertainment]
Brooke Barnett, 37
Marsh
Los Angeles
Entertainment
[Herman Brito Jr., 26 Marsh New York Marine]
Herman Brito Jr., 26
Marsh
New York
Marine
[John Byers, 34 Aon Franklin, Tenn. Employee Benefits]
John Byers, 34
Aon
Franklin, Tenn.
Employee Benefits
[Sandy Carter, 32 Beecher Carlson Atlanta Automotive]
Sandy Carter, 32
Beecher Carlson
Atlanta
Automotive
[Brandon Cole, 31 Arthur J. Gallagher Irvine, Calif. Nonprofit]
Brandon Cole, 31
Arthur J. Gallagher
Irvine, Calif.
Nonprofit
[Edward Conlon, 37 Aon New York Financial Institutions]
Edward Conlon, 37
Aon
New York
Financial Institutions
[Chris Connelly, 32 Arthur J. Gallagher Orlando, Fla. Public Sector]
Chris Connelly, 32
Arthur J. Gallagher
Orlando, Fla.
Public Sector
[Anne Corona, 38 Aon San Francisco Technology]
Anne Corona, 38
Aon
San Francisco
Technology
[Cara Cortes, 35 Aon Pittsburgh At-large]
Cara Cortes, 35
Aon
Pittsburgh
At-large
[Uri Dallal, 37 Aon New York Financial Institutions]
Uri Dallal, 37
Aon
New York
Financial Institutions
[Ashley De Paola, 33 Alliant New York Real Estate]
Ashley De Paola, 33
Alliant
New York
Real Estate
[Brian Dougal, 38 Aon San Francisco Real Estate]
Brian Dougal, 38
Aon
San Francisco
Real Estate
[Justin Dove, 29 Arthur J. Gallagher San Francisco Real Estate]
Justin Dove, 29
Arthur J. Gallagher
San Francisco
Real Estate
[Patrick Drake, 27 Aon Southfield, Mich. Utilities, Alternative]
Patrick Drake, 27
Aon
Southfield, Mich.
Utilities, Alternative
[Dan Edelstein, 37 Willis Towers Watson New York Manufacturing]
Dan Edelstein, 37
Willis Towers Watson
New York
Manufacturing
[Tim Farward, 36 Marsh Philadelphia Utilities, traditional]
Tim Farward, 36
Marsh
Philadelphia
Utilities, traditional
[Larissa Gallagher, 28 Aon Southfield, Mich. Manufacturing]
Larissa Gallagher, 28
Aon
Southfield, Mich.
Manufacturing
[Dominic Gallina, 39 Aon New York Real Estate]
Dominic Gallina, 39
Aon
New York
Real Estate
[Kevin Garvey, 37 Aon Cleveland Automotive]
Kevin Garvey, 37
Aon
Cleveland
Automotive
[Matthew Giambagno, 26 Marsh, New York Energy/Downstream]
Matthew Giambagno, 26
Marsh, New York
Energy/Downstream
[Blake Giannisis, 36 Aon New York Real Estate]
Blake Giannisis, 36
Aon
New York
Real Estate
[George Gionis, 33 Aon Philadelphia At-large]
George Gionis, 33
Aon
Philadelphia
At-large
[Debbie Goldstine, 39 Lockton Chicago Manufacturing]
Debbie Goldstine, 39
Lockton
Chicago
Manufacturing
[Sarah Goodman, 36 Marsh New York Pharma/Life Sciences]
Sarah Goodman, 36
Marsh
New York
Pharma/Life Sciences
[Jessica Govic, 30 Arthur J. Gallagher Itasca, Ill. Public Sector]
Jessica Govic, 30
Arthur J. Gallagher
Itasca, Ill.
Public Sector
[Robert Hale, 39 Aon London Utilities, traditional]
Robert Hale, 39
Aon
London
Utilities, traditional
[Joshua Halpern, 34 Aon New York Private Equity]
Joshua Halpern, 34
Aon
New York
Private Equity
[Matthew Heinz, 39 Aon New York Private Equity]
Matthew Heinz, 39
Aon
New York
Private Equity
[Charlie Herr, 25 Arthur J. Gallagher Kansas City, Mo. Education]
Charlie Herr, 25
Arthur J. Gallagher
Kansas City, Mo.
Education
[Blythe Hogan, 31 Aon New York Fine Arts]
Blythe Hogan, 31
Aon
New York
Fine Arts
[James Jackson, 35 Willis Towers Watson New York Financial Institutions]
James Jackson, 35
Willis Towers Watson
New York
Financial Institutions
[Sarah Johnson Court, 35 Aon, Miami Fine Arts]
Sarah Johnson Court, 35
Aon, Miami
Fine Arts
[Christopher Keith, 39 Lockton Blue Bell, Pa. Aviation & Aerospace]
Christopher Keith, 39
Lockton
Blue Bell, Pa.
Aviation & Aerospace
[Charlie King, 36 Alliant Houston Energy/Upstream]
Charlie King, 36
Alliant
Houston
Energy/Upstream
[Jonathan Kosin, 37 Aon Southfield, Mich. Construction]
Jonathan Kosin, 37
Aon
Southfield, Mich.
Construction
[Tyler LaMantia, 29 Arthur J. Gallagher Itasca, Ill. Education]
Tyler LaMantia, 29
Arthur J. Gallagher
Itasca, Ill.
Education
[Jeanna Madlener, 37 Wells Fargo Portland, Ore. At-large]
Jeanna Madlener, 37
Wells Fargo
Portland, Ore.
At-large
[Kimberly Mann, 27 Marsh Philadelphia Environmental]
Kimberly Mann, 27
Marsh
Philadelphia
Environmental
[Kristina Marcigliano, 27 DeWitt Stern New York Fine Arts]
Kristina Marcigliano, 27
DeWitt Stern
New York
Fine Arts
[Matt Medeiros, 34 Arthur J. Gallagher Media, Pa. Retail]
Matt Medeiros, 34
Arthur J. Gallagher
Media, Pa.
Retail
[Mary Mulhern, 33 Marsh Chicago Health Care]
Mary Mulhern, 33
Marsh
Chicago
Health Care
[Dennis Nevinski, 31 Aon Chicago Aviation & Aerospace]
Dennis Nevinski, 31
Aon
Chicago
Aviation & Aerospace
[Lee Newmark, 28 Arthur J. Gallagher Itasca, Ill. Health Care]
Lee Newmark, 28
Arthur J. Gallagher
Itasca, Ill.
Health Care
[Jake Onken, 26 Aon Houston Health Care]
Jake Onken, 26
Aon
Houston
Health Care
[Joanna Paredes, 28 Rekerdres & Sons Dallas Marine]
Joanna Paredes, 28
Rekerdres & Sons
Dallas
Marine
[Stephen Pasdiora, 27 Cottingham & Butler Rosemont, Ill. Employee Benefits]
Stephen Pasdiora, 27
Cottingham & Butler
Rosemont, Ill.
Employee Benefits
[Stefanie Pearl, 35 Marsh New York Financial Institutions]
Stefanie Pearl, 35
Marsh
New York
Financial Institutions
[Jason Peery, 37 Aon Newport Beach, Calif. Real Estate]
Jason Peery, 37
Aon
Newport Beach, Calif.
Real Estate
[Adrian Pellen, 32 Aon Chicago Construction]
Adrian Pellen, 32
Aon
Chicago
Construction
[Chris Rafferty, 36 Aon Chicago Manufacturing]
Chris Rafferty, 36
Aon
Chicago
Manufacturing
[Daniel R’bibo, 36 Arthur J. Gallagher Glendale, Calif. Entertainment]
Daniel R’bibo, 36
Arthur J. Gallagher
Glendale, Calif.
Entertainment
[Brent Rieth, 30 Aon San Francisco Technology]
Brent Rieth, 30
Aon
San Francisco
Technology
[Joe Roberta, 35 Beecher Carlson New York Private Equity]
Joe Roberta, 35
Beecher Carlson
New York
Private Equity
[Robert Rosenzweig, 30 Risk Strategies New York Technology]
Robert Rosenzweig, 30
Risk Strategies
New York
Technology
[Patrick Roth, 35 Aon Denver Pharma/Life Sciences]
Patrick Roth, 35
Aon
Denver
Pharma/Life Sciences
[Laura Rubin, 33 Beecher Carlson Boston Utilities, Alternative]
Laura Rubin, 33
Beecher Carlson
Boston
Utilities, Alternative
[Ian Schwartz,31 Aon Los Angeles Real Estate]
Ian Schwartz,31
Aon
Los Angeles
Real Estate
[Christopher Shorter, 36 Aon Houston Energy/Downstream]
Christopher Shorter, 36
Aon
Houston
Energy/Downstream
[Brian Simons, 34 Aon New York Financial Institutions]
Brian Simons, 34
Aon
New York
Financial Institutions
[Andrew Smith, 28 Marsh New York Marine]
Andrew Smith, 28
Marsh
New York
Marine
[Timothy Sullivan, 38 Willis Towers Watson Boston Financial Institutions]
Timothy Sullivan, 38
Willis Towers Watson
Boston
Financial Institutions
[Kurt Thoennessen, 37 Ericson Ins. Advisors Washington Depot, Conn. Private Client]
Kurt Thoennessen, 37
Ericson Ins. Advisors
Washington Depot, Conn.
Private Client
[John Tomlinson, 37 Lockton Encino, Calif. Entertainment]
John Tomlinson, 37
Lockton
Encino, Calif.
Entertainment
[Kaitlin Upchurch, 30 Wortham Houston At-large]
Kaitlin Upchurch, 30
Wortham
Houston
At-large
[Liz Van Dervort, 30 Gillis, Ellis & Baker New Orleans Nonprofit]
Liz Van Dervort, 30
Gillis, Ellis & Baker
New Orleans
Nonprofit
[Rene Van Winden, 36 Aon Houston Energy/Downstream]
Rene Van Winden, 36
Aon
Houston
Energy/Downstream
[Ben Von Obstfelder, 30 Aon Wauconda, Ill. Retail]
Ben Von Obstfelder, 30
Aon
Wauconda, Ill.
Retail
[Michael Walsh, 35 Marsh Boston Real Estate]
Michael Walsh, 35
Marsh
Boston
Real Estate
[Emily Weiss, 29 DeWitt Stern New York Fine Arts]
Emily Weiss, 29
DeWitt Stern
New York
Fine Arts
[Jeremiah White, 38 Aon Frederick, Md. Transportation]
Jeremiah White, 38
Aon
Frederick, Md.
Transportation
[Joshua White, 28 Gulfshore Insurance Naples, Fla. Private Client]
Joshua White, 28
Gulfshore Insurance
Naples, Fla.
Private Client
[Casey Wigglesworth, 37 Aon Washington, DC Fine Arts]
Casey Wigglesworth, 37
Aon
Washington, DC
Fine Arts
[Justin Wiley, 33 Arthur J. Gallagher Orlando, Fla. Public Sector]
Justin Wiley, 33
Arthur J. Gallagher
Orlando, Fla.
Public Sector
[Wendy Wu, 38 Aon Shanghai Automotive]
Wendy Wu, 38
Aon
Shanghai
Automotive
[Susan Young, 30 Marsh Seattle Retail]
Susan Young, 30
Marsh
Seattle
Retail
Dan Reynolds is editor-in-chief of Risk & Insurance®. He can be reached at dreynolds@lrp.com. Tom Starner, a freelance journalist, can be reached at riskletters@lrp.com.
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Column: Roger's Soapbox
Whiplashed by Claims
By: Roger Crombie | March 1, 2016 • 3 min read
Roger Crombie is a United Kingdom-based columnist for Risk & Insurance®. He can be reached at riskletters@lrp.com.
Topics: Claims | Fraud/Theft | Insurance Industry | March 2016 Issue
Insurance fraud: disorganized crime that eventually costs all of us serious money.
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A few unlost dollars added to an insurance claim here; a gang of Russian hackers shooting for the real money there. Why earn when you can steal, one might feel.
It has become traditional in the UK to claim for whiplash injuries following a motor accident. Any sort of motor accident, even a minor one. Sometimes, not even following a motor accident. Ever more inventive claims are a hallmark of the British whiplash scene.
You were in bed, asleep, when a cyclist dinged your wing mirror? The rude awakening caused your neck injury. Your car was stationary when hit from behind at 2 mph? Turning round to see what happened threw your back out.
Thus it is that Britannia rules the waves of whiplash claims inundating insurance company offices.
A few unlost dollars added to an insurance claim here; a gang of Russian hackers shooting for the real money there. Why earn when you can steal, one might feel.
LV= is a British insurer, although what LV equals is unclear. It reports that the UK is the whiplash capital of the world. Such prestige.
One of every 38 insureds claims for whiplash damages annually. Such claims constitute almost eight in 10 of all British insurance claims, cost more than $3 billion a year, and raise the average annual premium by $130.
This is not to pooh-pooh all cervical acceleration-deceleration claims. (That’s the medical term for whiplash.) Awful things happen to people in motor accidents; many of the claims for whiplash and other spinal injuries are, of course, entirely valid.
Many are not. More than half of all British drivers involved in a collision receive a call or text from lawyers or repair shops, suggesting that they claim on their insurance. This despite a series of measures introduced in 2013 to correct “the compensation culture.” The changes included a ban on “referral fees” paid by claims firms for potential clients, and a cap on what doctors may charge for preparing whiplash injury reports.
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The list of parties guilty of perverting the course of claims justice, therefore, includes doctors and attorneys. What exactly does the term “professional” mean these days?
If I’ve sparked your interest in whiplash claims, have a care when searching Google for information on the subject, or you may put more than your back out. A Miss Whiplash leads the Corrective Party, a formally-registered British political grouping that protects the interests of prostitutes. She claims that “the tax man is a pimp and the government is a pimp as well.”
Both live on the earnings of others, so she may have a point.
Miss Whiplash herself was involved in a car accident in 2009 and suffered horribly. She did not claim for her namesake, but instead embraced Christianity. Would that more insurance claimants did the same — after all, remember the Ninth Commandment: Thou shalt not bear false witness.
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Sponsored Content by Hiscox USA
Three Dangerous Overlooked Business Risks
Small and medium sized businesses face very unique and complex exposures.
By: Hiscox USA | March 1, 2016 • 6 min read
“My employees are like family. No one would steal from me.”
“We’re very open with each other, not like some bureaucratic corporation. My workers know they can talk to me if they have a problem.”
“Our systems are secure enough. What hacker would come after a business like us when there are bigger fish to fry?”
Unfortunately, brokers who work with smaller to medium-sized companies (SMEs) are all too familiar with these common myths believed by their clients.
Yet, the data clearly shows that SMEs face significant risks from employee lawsuits, internal theft and cyber breaches.
“A lot of attention is being paid to big companies and big cases, and smaller companies sometimes have a hard time putting their risks in context,” said Bertrand Spunberg, Executive Risks Practice Leader, Hiscox USA.
And with CEOs and CFOs often making the insurance decisions for SMEs, brokers should approach these conversations armed with the tools they need to make a strong business case for Management Liability coverage.
“There is very compelling data demonstrating the extent of exposure for these companies. And insurance protection that comes with risk management services yields an excellent ROI that brokers should be confident bringing to their clients,” added Spunberg.
Employee Lawsuits
You never know who will sue you.
According to the 2015 Hiscox Guide to Employee Lawsuits, American businesses have an 11.7 percent chance of having one of their employees file a charge of discrimination. Employees can file charges through the Equal Employment Opportunity Commission — the federal body responsible for enforcing fairness laws in the workplace — or through an equivalent state organization.
Some states have more stringent laws than federal guidelines and therefore place employers at even greater risk.
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Source: The 2015 Hiscox Guide to Employee Lawsuits.
“A lot of employment charges have no merit and don’t go anywhere, but the potential for damage is so huge that employers must take them seriously. If they go wrong, they can go very wrong,” said Spunberg.
For small to medium sized businesses, discrimination charges that trigger defense costs and/or settlements have an average price tag of $125,000.
Even a bogus charge can seriously damage a company’s reputation.
“Employment issues are often litigated in the court of public opinion, and smaller businesses may not have the brand power to overcome negative public perception,” Spunberg said.
Wage and hour litigation is also on the upswing. Failing to give workers paid breaks for meals or rest within a certain time period constitutes a violation of the Fair Labor Standards Act. SMEs are not always aware of changing regulations — and also more likely to break them if they are trying to grow business with a smaller staff.
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Download the 2015 Hiscox Guide to Employee Lawsuits
In some smaller SME organizations where employees know each other, and sometimes are literally family, executives simply don’t believe that a member of their workplace “family” would bring formal charges.
Hence, only an estimated one in five SMEs purchase employment practices liability insurance. But all it takes is one slighted employee to incur hundreds of thousands in defense and settlement costs.
“Basic levels of protection are very inexpensive to secure, and EPL insurance has been a buyers’ market for years,” Spunberg said.
Crime and Embezzlement
SMEs tend to view embezzlement as a problem of major corporations with more complex accounting practices and management hierarchies. But just the opposite is true.
The majority of employee thefts occur in organizations with 500 employees or less, according to The 2015 Hiscox Embezzlement Watchlist. Among these companies, the average loss from employee theft was $842,403.
The trust and familiarity that often exist in SMEs can blind executives to potential theft and insider fraud. The belief that happy, long-term, close-knit employees would never steal from an organization is a common myth.
As is the belief that the person responsible for signing the checks needs no monitoring.
In many cases, the CFO or another official with access to the company’s funds and bookkeeping are the perpetrators of insider theft.
“You could have a bookkeeper that’s been around for 20-30 years, and has been stealing little by little the whole time. That can add up to big numbers,” said Doug Karpp, Crime & Fidelity Product Head, Hiscox USA.
The highest median losses from theft were caused by vendor frauds — when an employee steals by making payments to a vendor that has not actually provided services. That “vendor” may be a business registered to the employee, or to a friend or family member.
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Source: The 2015 Hiscox Embezzlement Watchlist: A Snapshot of Employee Theft in the US.
“SMEs often do not have a robust vendor approval process; they tend to work with someone they know or has been recommended to them without going through a bid process or background checks,” Karpp said.
They also may not have the resources for loss control measures like data mining, fraud hotlines, fully opinioned CPA audits including a review of internal controls, and dedicated fraud department.
SMEs can enact simple risk mitigation measures like having two people sign every check, or conducting random surprise audits once or twice a year. But the best protection against losses is a strong crime insurance policy. Without one, the majority of stolen funds may never be recovered.
For more information, click below to download the brochure.
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Data Security
Headline-grabbing cyber breaches happen at big-name companies that have both more money and more data than a typical SME. But just because hacks at lesser known companies don’t make the front page doesn’t mean those business leaders should rest on their laurels.
Hackers may not specifically target an individual SME, but they don’t have to in order to gain access to customer data.
“Most network vulnerabilities are discovered through the use of automated scripts that troll the internet indiscriminately. Hackers cast a wide net and see where they might be able to infiltrate a system,” said Matt Donovan, Cyber & Data Risks Product Head, Hiscox USA.
Furthermore, most breaches are due to employee errors and lost devices, not sophisticated hacking attacks.
Sixty percent of SMEs close after a breach because the costs associated with forensics investigations, notification and lost business are so high, according to a Hiscox PRO resource guide entitled “Privacy 101.”
Privacy and data protection issues are becoming increasingly important in boardroom discussions, as executives are being held accountable for breaches or the loss of customers’ personal information.
For more information, download the Hiscox PRO resource guide below.
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Insurance ROI
Small and medium sized businesses may not be able to fund a risk management department and enforce all the protocols that larger organizations do, but they can protect themselves with Management Liability insurance that comes with value-added services
“Even with tighter budgets, ROI is high on coverage for these risks because pricing is low,” Donovan said. SMEs would also gain ancillary risk management services offered by carriers.
Some carriers have partnerships with law firms that can help prevent and mitigate tense situations. They might work with forensics teams and subject matter experts who provide best practices and response advice.
Brokers can argue that by purchasing a policy, SME clients get not only insurance, but a whole suite of risk management tools and experts at their fingertips. With the help of carriers, they can learn how to tighten up EEOC compliance, fraud detection and deterrence, and cyber security protocols.
To learn more about the unique exposures faced by SMEs and Hiscox’s corresponding solutions, visit http://www.hiscoxbroker.com
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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 Hiscox USA. The editorial staff of Risk & Insurance had no role in its preparation.
Hiscox is a leading specialist insurer with roots dating back to 1901. Our diverse portfolio includes admitted and surplus products for professional liability, management liability, property, and specialty products like terrorism and kidnap and ransom.
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