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Observations on Dealing With Millennials

Millennials rarely “get it” when it comes to insurance until they purchase a first home. Although their initial insurance purchases are modest, the unsolved challenge is to keep millennials as a future revenue source, members of the Personal Lines Practice Group agreed at a recent conference call.

Here are some of the comments:

“Our book of business is starting to mature. We are missing millennials (generally defined as people born between 1982 and 2002), and that can affect the future of our agency. Are the systems in place that millennials will gravitate to?”

“I have two of my own and they are on their phones all day. Instagram is an area where we may be able to reach them. “

“I’m pulling a lot of kids off their parents’ policies and starting them on their own. Premiums are typically really high. I try to educate them about what is important in a policy. But I think it will come down to ‘I can get it cheaper somewhere else’ once they are truly on their own. They’re all about making sure they have their coffee money and their cocktail money.”

“They give insurance serious attention when they buy a home. Until then, it is price-driven. We try to explain that they may need more than minimum insurance so they don’t have their wages garnished for the next 20 years if there is an accident. Parents gravitate to that conversation and they get it. But the millennials talk to a buddy who found cheaper insurance.”

“We’ve lost a lot of millennials, which is good because they were our biggest problems. The  revenue stream down the road is the issue. Millennials don’t feel they own anything, so it’s hard to get them to buy anything extra. We try to keep the parents informed. Every millennial is the child of a client, as we don’t write insurance for people unless we have a relationship.”

Technology is key

“We’ve complained to our carrier partners about the ease of doing business that millennials want. The determining factor may be how smart and quick our systems are going to be.”

“Technology is our weakest link for millennials.”

“They’d rather go online than pick up the phone and talk about the issues.  They’ve grown up where information is everywhere. Their feeling is ‘We can do our own research’ and we mainly want to be sure we like the person we are dealing with. Referrals and ease of doing business mean everything to millennials.”

Monoline auto

“I have no good program for monoline auto. Nothing is competitive.”

“I think the industry is aware of this but the carriers haven’t bellied up to the bar on it. So the millennials will pick up insurance from Geico or somewhere similar. The second they see a premium of over $1,500, they’re gone.”

“We had a client’s son who found auto insurance that was cheaper because he gave incorrect information on mileage driven. He only calculated the mileage that he drove to and from work. Once he calculated it correctly, we could offer a less expensive policy with better coverage. They don’t realize that the carriers with cheaper policies will check their mileage and come back to them.”

Changing Markets in Florida, California

Florida insurance agents have a new offering, StormPeace, that covers claims that typical policies exclude or that have high deductibles. These include hurricane and wind damage or debris removal when a tree falls. Most claims are paid within three days.

The California earthquake market is changing, with some companies offering a 2 percent deductible rather than the traditional 15 percent.

Uninsured motorists

Uninsured drivers continue to be an issue, with estimates of uninsured motorists ranging from 26.7 percent in Florida to 4.5 percent in Maine. “We suggest maxing out coverage on the policies and also putting it under the umbrella policy.”

Pester to retire

Practice Group Chair George Pester, who has been with JKJ for 38 years, announced that he will retire in June after a “lifetime of joy” in insurance.

 

Claims Managers Hear From Travelers

Phishing attempts, ransom attacks and paper breaches (yes, paper) are the most common cyber and privacy claims today, speakers from Travelers told the Claims Practice Group at a recent conference call.

“Our biggest claims are from phishing attacks. Criminals are finding ways to get into email systems and there is a gold mine of boxes. They’ll set up rules to auto-forward messages to themselves and then move the messages to your delete folder. It used to be that hackers would take over the inbox and send out spam. That is less common today as they are becoming better at hiding their tracks.”

Ransom attacks, in which cyber criminals lock up or encrypt data in a company’s files, are an increasing issue for two reasons. The professional attackers are getting more sophisticated. At the same time, more amateurs are involved.

Amateurs are locking up data but are unable to encrypt it. “This is simply an act of cyber vandalism.”

Sophisticated criminal groups offer call-in numbers, chat systems and even “help desks” to assist companies in paying ransoms. Some ransom requests are as high as $10 million.

“There is a tendency to focus on electronic breaches, but paper breaches are also an issue. They have real costs and happen with frequency. Someone leaves a stack of papers out or loses a brief case. In one recent case, someone mailed a package of W-2 forms. It was sealed incorrectly and all the W-2s were missing when it reached the recipient.”

The key for an independent agent is to stress that a client needs to report a cyber breach immediately. “Cyber claims can look benign and turn out to be malicious. Time is of the essence.”

“There is a tendency of the insured to downplay the risk. It’s not so much that they want to hide it from a carrier but a misunderstanding of how bad it can be.”

“We had an attack on the email system at a small engineering company. One person told me, ‘There’s nothing wrong with my system. I had my own IT person look at it, and I’m reporting it to you out of caution.’ Relying on your IT staff to tell you that you’re fine is almost like asking someone to grade his own paper. A good IT staff should not let the breach happen in the first place.”

Travelers clients are entitled to a free call to an attorney who is a “breach coach.” “I encourage the insured to take advantage of that sort of call. It won’t cost you anything and will give you peace of mind. If it does turn out to be something, you’re able to catch it. If there’s nothing to worry about, you’ve merely wasted half an hour of your time.”

It is important to report any suspicions of unauthorized access to the system. “The free call with the data privacy attorney will let you find out whether it is a big deal.”

Both possible as well as actual breaches of security should be reported. “You don’t need actual proof – only suspicion of it. It someone has gotten into the system without authorization, let us know.”

Most policies cover the forensics costs to determine whether an actual breach occurred. “Often we’ll find that someone got into the network but wasn’t able to access anything confidential. For example, they may have accessed a grocery list but not any social security numbers.”

“We need to educate clients to include IT people in the front end of investigations so you get the IT staff on board. IT people are generalists. You don’t necessarily expect that they will be able to stop all attacks. The takeaway is for agents to encourage clients to think about this when they deliver policies.

Third-party claims for data security breaches still are rare and court rulings are divided. Some courts say that the threat of damage to a third party is not enough – that the third party has to prove that he has suffered actual harm. It’s an “unsettled” area of law.

Travelers has a hotline on its website. If the insured wants to talk to a breach coach, this is possible without it becoming an actual claim.

EPL Common Claims: Sexual Harassment, Age Discrimination and Website Accessibility

Employment Practices Liability claims for sexual harassment are increasing. “We had an average of 10 more claims per month in the last quarter than in previous months.” Plaintiffs also are asking for larger dollar amounts.

About 30 percent of all EPL claims include an aspect of sexual harassment. However, 7 percent of individuals who say they were harassed never talked to a supervisor or manager, and 90 percent never took any formal action. In the current climate, it seems likely that claims may increase.

Age discrimination claims also are resulting from recruitment ads on Facebook. Facebook allows advertisers to target age groups, and some workers over 40 have claimed they were excluded from seeing the postings.

Website accessibility complaints also are an area of concern. Websites need to be accessible to people with seeing and hearing disabilities. Lawsuits have targeted schools over their educational materials, restaurants over online menus and retailers over the online shopping process. Often one law firm will target multiple businesses with “cut and paste” lawsuits by the same plaintiffs. Although the law prohibits awards of damages in ADA lawsuits, plaintiffs’ lawyers usually can recoup legal fees. In addition, there is the cost for businesses to make their websites accessible.

 

Check That Cyber Policies Cover Data in the Cloud

Two key messages came through loud and clear at a recent cyber liability practice group conference call, 1) cyber insurance polices should cover information stored in the cloud as well as on your premises and 2) there should be no terrorism exclusions.

Pushing information to the cloud does not necessarily make it more secure, Cyber Liability Practice Group members agreed at a recent teleconference.

FedEx, for example, is now dealing with the fact that passports, driver’s license numbers and other sensitive information about its customers was left online in a publicly available Amazon S3 bucket.

Terrorist Attacks by Cyber Hackers

Terrorism is another issue where cyber security can come into play, as the recent attack on the Olympics opening ceremony showed. Hackers shut down internet access and telecasts, grounded broadcasters’ drones and prevented spectators from printing reservations, resulting in an unusually high number of empty seats. Indications are that the hackers had the ability to do more damage than they did, but primarily wanted to make a statement.

The message for RiskProNet clients: Check terrorism policies to be sure they cover cyber attacks.

Protect W-2 Forms

With tax season approaching, phishing attacks to obtain W2 forms and the accompanying information are expected to be increasingly common. Last year more than 200 employers were affected.

“This is a good talking point for conversations with clients,” one practice group member suggested. “Be certain that information is being stored and transmitted properly both within and without the organization.”

Online Cyber Policies from RPS

Manny Cho of Risk Placement Services, Inc., joined the call to discuss an online rating system that will provide a quote on cyber insurance and issue a policy in “less than two minutes.” The product is backed by Lloyds of London and fronted by Blue Cross/Blue Shield paper, he said.

In addition to the speed of issuance, a major benefit to the policy is that there are only six questions, and they are easy to answer. The questions cover past occurrences and claims, as well as antivirus protection, outsourcing and backup data storage. There are additional questions if the client wants coverage for crime and deception.

The online policies were first offered about two years and the average premium is around $3,300. Fitch lists RPS as the top cyber carrier in the U.S. with about 20,000 policyholders from all industries.

The policies appeal primarily to clients with revenues under $20 million, although the online portal can be used for clients with up to $100 million in revenue. The typical client is a contractor or manufacturer that doesn’t want to fill out a lengthy application, but also doesn’t want to face possible costs of $15,000 to $25,000 if a security breach occurs.

The portal is now structured so that a second quote from Axis is available for clients with up to $50 million in revenue. Although Chubb also has an online placement tool, its upper revenue boundary is $10 million.

The policy can run from six to eighteen months and can be signed electronically.

 

Data Analytics in Wellness & Controlling Prescription Costs

The use of data analytics in for managing wellness programs and the importance of controlling prescription costs were key discussion points at a recent wellness advisor practice group conference call.

Members have considered or have used Springbot, Benefitfocus and Zywave’s Decision Master Warehouse, although none received top recommendations. One challenge is that few clients have the ability to use such systems.

Data analytics are most critical for clients that self-insure some or all of their exposure. Analytic programs, for example, allow an employer to enter data on people who belong to a Weight Watchers group or a diabetes management program. It could violate HIPPA regulations to track them as individuals, but analytics can be used to see whether the group had fewer claims for medical expenses or took fewer sick days than others with similar health risks.

Quarterly reviews with clients are useful but are difficult to schedule. One agency sets a date for the next quarterly review at the end of each meeting, and this has been successful.

Controlling prescription drug prices

Services can help employees find out if there are possible alternatives for expensive medications, or whether there are significant price differences among local pharmacies.

GoodRX got positive remarks. The employer pays a month fee, and Good RX will help look for the least expensive place to fill the prescription. In the case of some very expensive drugs, GoodRX has found financial help.

RX Help Centers charge an administrative fee of $50 a month but the fee is waived if they are unable to save money for the member. Most participants save $500 to $600 a month. Not only does this help the employee, but it also creates a better claims experience for the employers.

Sometimes local pharmacies are willing to work with a large employer and can offer lower costs than chain pharmacies.

Higher Premiums for Tobacco Users

One client of a member agency is considering charging higher premiums for tobacco users. In order to do this legally, it is important to make resources available to help employees cease tobacco use. There is no requirement for a full-fledged program as long as employees receive information about the available programs. Although some companies will reimburse employees for the cost of tobacco-cessation programs, many programs also are free. The employer does not have to pay for a program.

Reference-based pricing is helping employers control costs, several members found. Comments included the following:

  • “We have been telling employees that they have to pay attention to prices.”
  • “Some TPAs negotiate up front before a procedure, while others wait to negotiate until afterward. People have more comfort in negotiating costs in advance.”
  • “We encourage members to be active in seeking preauthorization when something is planned.”
  • “We use a local third-party administrator that helps with pricing. “
  • “In some cases, doctors and hospitals outside the city are happy with reference-based pricing because the payment is higher than Medicare.”
  • “We had two clients where costs were running more than 200 percent over projections. With reference-based pricing, one is at 82 percent and the other, at 96 percent.”
  • “Working with providers is a challenge because some will look at an insurance card and say they don’t take it without looking any further. We have to tell them to type in the payer ID number.”
  • “It’s important to tell employees that they MUST open their mail. When bills pile up and no one says anything, it gets messy. Stress that employees must open their mail and send their bills in immediately.”

Advanced Medical Pricing Solutions (AMPS) in Peachtree Corners, Georgia, got good marks for helping control costs.

 

Claims Managers Discuss Measuring Success

Defining success for the claims department is a major challenge, and Claims Practice Group members are trying different techniques. This was one topic in a wide-ranging discussion at a recent conference call that also touched on the best carriers in handling claims and carrier download challenges.

Following are some of the comments on measuring success:

  • “We focus on customer satisfaction with claims service. However, we can only impact results to a certain extent. We don’t own the files and we can’t drive closure rates in the same way that a claims adjuster can.”
  • “We struggle with comparing individuals within the team. They have different clients, and different clients have different needs. It’s a ‘gut’ check. You can’t measure performance as you can with an account manager.”
  • “We try to measure the timeliness component as far as deliverable information goes.”
  • “Our budget is allocated to sales, and our claims department is considered to be part of the sales process.”
  • “We’ve toyed with measuring the experience modification rate on the workers comp side. But even then you have variables, and it is hard to find something useful to compare.”
  • “We are hoping that some of the new Epic reports will give us better measurements.”
  • “We try to send out surveys while the claims experience is still fresh.”
  • “How do you factor in a situation where there was a denial, but the client is unhappy with the carrier and not with you? What can we do to create a different experience next time?”

Members also discussed the following topics.

Carrier Downloads

Carrier downloads can be challenging. “If you are moving into carrier downloads, fine-turn the process with one carrier before you add another one.”

Carrier Advisory Councils

Serving on carrier advisory councils is “hugely” beneficial. One member agency has representatives on The Hartford and Travelers national councils, Liberty and Zurich regional advisory councils and the California State Compensation Insurance Fund.

“It’s much like the RiskProNet group. You’re getting together with 10 to 15 others claims managers and it becomes a strong networking community. You learn about new programs early on and this helps to facilitate communications. Claims representatives are often left out of new programs.”

CIAB also is a good way to get involved with a strong claims group. The association has a big voice in Washington.”

Claims-Handling Practices

Travelers got top marks for handling claims. They are “easy to work with.” Travelers also “understands the client-agent relationship and how to leverage that. If they have bad news, the Travelers adjustors will let us know. They’ll give us an opportunity to review a denial in advance so we can see it before a letter goes out to the client. It gives us a chance to see where they are with the claim. If they’re right and we agree, we can help explain the denial to the client. Some carriers just send out denials. We find out about it from the client and have to play catch-up.”

“We’re trying to get adjustors at all carriers to give us a heads-up if they are about to deny a claim. About 50 percent of them do.” Another RPNI member, however, reported limited in success in getting advance notice of denials.

AIG has been historically problematic in paying claims, one member said. Major issues have been in California and on the East Coast, one member said, although “I don’t know why.”

Benchmarking Surveys

MarshBerry is a source for benchmarking surveys, although no one was aware of a specific program for claims departments.

Outsourcing

Outsourcing is a solution for handling unexpected growth or tasks, two members said. They reported success with using ReSourcePro and Patra Corp. “We work with ReSourcePro for data-entry tasks that are important but no fun to do.” ReSourcePro has been able to handle extra work with no advance notice.

 

 

Patrick Hernandez to Lead Cyber Liability Practice Group

Patrick Hernandez, Account Executive / Cyber Liability Practice Leader at SullivanCurtisMonroe, has been named chair of the RiskProNet Cyber Liability Practice Group.

Patrick joined SCM’s Irvine office a year ago after serving as a senior underwriter for Chubb and a commercial surety underwriter for Travelers.

He is a graduate of the University of Notre Dame Mendoza College of Business.

He succeeds Brendan Rooney, who has left RPNI member AHT to join Crypsis, a cyber liability forensics firm.

The Cyber group meets on the 3rd Tuesday of the month at 9:00 AM Pacific time (11:00 AM Eastern)

 

New Federal Cyber Regulations to Impact Defense Contractors

New regulations with the acronym DFARS are in effect now for defense contractors, even though there is no regulatory body and no enforcement procedures have been developed yet. That is likely to change soon, members of the Cyber Liability Practice Group said at their recent teleconference.

DFARS, which stands for Defense Federal Acquisition Regulation Supplement, gives 110 guidelines in NIST Special Publication 800-171. Defense contractors have been told that their contracts may be at risk unless they comply with the regulations that went into effect Dec. 31, 2017.

Some assistance is available from the Manufacturing Enterprise Partnership, a national network for manufacturers with chapters in all 50 states.

Top Cyber Carriers for RPNI Members

The group also discussed cyber carriers, including the recently formed Coalition, with which members have had good experiences.

Top carriers for placements by RiskProNet members include

  • AIG
  • AXIS
  • Beazley
  • CFC Underwriting
  • Chubb
  • CNA
  • St. Johns
  • The Hartford
  • Travelers

Coalition, formed a little less than a year ago, consists of executives with both cyber experience and federal government experience. “They’re a good combination of technical expertise plus insurance knowledge,” one member said.

Members also discussed forming a committee to work with carriers to develop policies that respond to current needs in the market.

Current Security Threats

A brief discussion of the current security threats, Spectre and Meltdown, also was on the agenda. They can impact processors designed by Intel, AMD and ARM – or virtually every computer, smartphone, tablet and PC. One researcher told The Guardian that Meltdown is “probably one of the worst CPU bugs every found.”

 

 

2018 Trends: Standing Desks, Chatbots + More

Standing desks, healthful snacks and a focus on overall well-being are among the wellness trends for 2018. Here’s what members of the Wellness Practice Group are seeing:

  • An interest in turning wellness programs into a profit center.
  • We’re seeing a shift from wellness to overall well-being. We’re focusing on more than weight loss and cessation of tobacco use.
  • Are people getting enough sleep, for example? Sleep deprivation can affect both productivity and health. Flexible hours can help people accommodate their personal sleeping schedules.
  • Artificial intelligence software and chatbots can make wellness information available 24/7.
  • Vending machines offering healthful snacks are popular. Employees can use payroll deduction or credit cards to purchase snacks.
  • We’re trying to get away from the stigma attached to mental health programs. We want to discuss what people need to bring to the workplace to be successful and productive
  • One practice group member is using Real Appeal weight loss program, although there is a concern as to whether some of the programs are too elementary.

Standing desks are believed to promote health. However, additional space for the large desks is an issue.

From a practice group conference call of Jan 8, 2018

 

1st Responder Contracts Can Be Critical in Pollution Claims

A contractual relationship with a first-responder is critical in a pollution claim, according to Brad Maurer, J.D., C.P.C.U., at American Risk Management Resources, a wholesaler specializing in environmental liability,

“Charges by first responders can mount up quickly unless you have a contract that provides 24/7 response with agreed-upon rates,” Maurer told the Claims Practice Group at s recent teleconference.

Here is some of his advice on pollution claims, as well as comments from practice group members.

In the case of a product spill, focus on the recovery of the product. As an example, consider a leak from an above-ground storage tank for diesel fuel. If the fuel goes outside of the containment area, it is prudent to sample the soil to be determine whether mitigation is required.

Suppose the spilled fuel soaks cardboard boxes at a nearby manufacturing plant. This can be considered physical damage to the cardboard boxes rather than a toxic effect.

Reporting Guidelines

Reporting a situation is critical for two reasons.

  • First, it is a legal obligation and failure to do so can result in fines and penalties for the insured. Different states and government agencies have different thresholds for what needs to be reported. Make certain the loss control and claims people are notified promptly.
  • Second, you want to understand your total obligation for cleanup. If it is significant, most policyholders prefer to have an environmental consultant in charge of interaction with first responders. Again, this is when a contract is important.

Avoid speculation. Be factual, describing water from a burst pipe or soot from a fire. However, don’t speculate on whether contaminants may be present in the water or soot.

Reporting claims quickly also can help mitigate additional claims. For example, a senior housing facility had significant water damage. It was important to alert the environmental carrier promptly because of the possibility of mold, potentially affecting residents’ health.

When an incident occurs, document the response and take samples.

Cautionary Reminders

  • After Hurricane Harvey, flooding disabled the refrigeration system at the Arkema plant that manufactured organic peroxide. The resulting explosions and wastewater tank overflows contaminated surrounding properties, resulting in lawsuits from first responders and neighbors plus OSHA fines of $91,724.
  • Remember that a fresh water loss can turn into a Category 3 water loss if the water is not cleaned up within three days. Category 3 water is contaminated with pollutants, including fungi and bacteria, and coverage is excluded from most property and liability insurance policies.

Checking Coverage

A challenge is that environmental insurance policies are not standard. Check them carefully.

  • Some policies cover crisis management services, including having a public relations firm interact with the public and media.
  • Business interruption coverage can be included in an environmental policy.

Brad can be reached at (608) 824-3347 (office), (608) 345-7641 (cell) or Maurer@armr.net.

 

 

Knowing What to Ask For in Cyber Liability Insurance

Changing verbiage and changing cyber liability coverage standards are among today’s challenges, members of the newly formed Cyber Liability Practice Group agreed at their first teleconference.

“Different carriers have different names for the same coverage. We’re struggling with how to explain it. Instead of using the carrier’s verbiage when we talk to a client, we generalize it and add a disclaimer that there may be different terminology. We’ve had more success in presenting it this way,” one member said.

Another Practice Group member took a different view. “We prefer to go agreement by agreement and explain what each section covers.”

Most practice group members work with two to five carriers, with Travelers, Hanover and The Hartford being among the most popular.

If you are considering a new carrier, one member stressed, ask about its training and track record in breach response. “It’s hard to demonstrate that on a policy form, but the value of good breach response is immense. We should highlight the carrier’s record when we are selling cyber liability coverage.”

Most carriers are willing to make changes or additions to forms upon request. “The problem is knowing what to ask for,” one person said.

Court Cases

  • A recent high-profile case involved New York-Presbyterian Hospital, which allowed unauthorized filming of two patients for a television series. The hospital previously was fined $3.3 million after health information was placed on a shared date network accessible on the Internet.
  • The decision in Carpenter v. United States, in which the Supreme Court heard oral arguments last month, is expected to have a major impact on privacy laws. The specific issue here is whether a law enforcement agency can obtain cell phone records showing a caller’s location without a warrant.

The Cyber Liability Practice Group meets on the third Tuesday of the month at 8:00 AM Pacific time (11:00 AM Eastern).

 

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