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Cyber Security: Looking Forward to 2022

cyber security: looking forward to 2022

In July 2020, we all saw the ramifications of a well-performed hack. Twitter experienced the most catastrophic security breach in their company’s history. Elon Musk, Barack Obama, Joe Biden, Bill Gates, and other high-profile Twitter users were all among the hacked users.

This hack caused Twitter to shut down all verified blue-checked accounts. In just a few short hours, this breach of security cost Twitter users more than $118,000 and the company even more in their reputation.

This was more than three months ago. So, what does this mean looking to the new year? 

With most business and social interactions moving toward technology-centered avenues, this can be troubling for business owners. Some questions to keep in mind moving forward:

  • What will your company do if this happens to you? 
  • Did the global pandemic and stay-at-home orders make you more vulnerable to potential cyber-attacks? 
  • How can you protect yourself and your company? 
  • What cyber security regulations are being put in place for 2022? 

Let’s explore.

Consider Investing in Cyber Insurance 

Cyber insurance covers the expense incurred due to a data breach, virus, or other cyber-attacks and fraud. It can also cover legal claims that come from a security breach. As companies utilize cloud software, personal computers and laptops, and other technology-based means to store their sensitive data, their risk for a security breach grows exponentially.

The Identity Theft Resource Center claims that in 2018 businesses experienced 571 breaches in security, which exposed 415 million employee and customer records. 

When you do experience a breach as a company, federal law requires you to perform an extensive list of to-dos. If you have cyber insurance coverage, however, your carrier will take that responsibility on.

2022 Changes

The United Nations (UN) provides information about their role in upcoming cyber attacks. One of the main adjustments for the future is the role that automated systems play in cars. Your Tesla could be a risk moving forward (the report highlights passenger cars, vans, trucks, and buses).

The higher risk associated with “connected” cars is another reason cyber security is crucial moving into 2022.

How Has Your Business Become More Vulnerable?

As businesses moved to a new work-from-home model, cyberattacks increased. With most company communication done through e-mail, Slack, and other online platforms, the risk of a breach increases. This could cause a company to experience massive monetary loss as well as reputation damage. 

Signs You’re at Risk of a Experiencing a Cyber Attack

  • You’re receiving requests for transactions, like direct deposits or electronic fund transfers
  • Unsolicited communications are coming through from unknown companies or people
  • Links within the email do not match—check links by rolling your cursor over the link to see if the two match with the content and the email address!
  • Requests with a high sense of urgency, asking you to complete documentation immediately
  • Requests for usernames, passwords, and other personal details like banking information

What Can You Do to Help Mitigate This Risk?

  • Limit your use of large email attachments and programs that put pressure on your company’s bandwidth ecosystems
  • Do not forward emails with attachments that contain highly restricted or company confidential information to personal accounts
  • Avoid reading, talking about, or leaving confidential information in unsecured work-from-home areas
  • Log-off of work devices when you’re not using them
  • Shred sensitive documents
  • Restart your computer regularly

These tips along with the added security of cyber insurance should prepare your business for potential cybersecurity breaches. Learn more about how cyber insurance can help your company today. Contact us at Benchmark to see how we can partner.

And if you’re wondering why your insurance premiums have skyrocketed recently, learn why here.

 

Cyber Security Coverage in the Age of Ransomware

cyber liability

orange umbrella above regular black ones

how much should I pay to insure my business?

With insurance costs rising, you may be looking at your insurance costs wondering how much you should really be paying in insurance. This largely depends on your industry and the risks associated with your particular business, however, there are some standards that help give you a rough estimate!

Typically business owners spend between 1-3% of their revenue on insurance coverage. A lower-risk business might be closer to the 1% range, whereas a higher-risk business would be around 3%.  The highest-risk businesses can invest as much as 5% of their annual revenue in insurance coverage to offset the possibility of catastrophic losses.

The risk factors that contribute to higher insurance costs include: 

Your Industry

Each industry has an inherent level of risk associated with it. These different levels of risk play a large role in defining your costs. The details of how you run your business can also affect your business insurance costs. If you’re a restaurant allowing your customers to cook their own food (think Korean BBQ), you may have more risk than a typical restaurant owner.

Your Expertise

Insurance carriers view business owners with more experience as being in a lower-risk category. Typically you’ll be asked how many years you’ve been in business, what level of education you have, and what your employee’s qualifications are. More highly educated workforces are likely to be assumed to be lower-risk to an actuary at a carrier. 

Your Revenue

Growing your business can cause your insurance costs to grow. Higher revenue leads to more customers, more square footage, and more employees, which, in turn, increases your risk. In addition to the workers’ compensation costs that would of course increase, operational complexity adds to risk, the more hands, the greater the risk of someone getting hurt or something going wrong.  

Your Business Location

Where you work plays a large role in your insurance premiums. The more square footage you have, the physical condition of your building, and the physical location of your business (flood zones, high crime rate, fault lines, etc.) lead to higher costs and an assessment of being a higher-risk company. 

One recent factor that has been raising the costs to insure businesses is changing fire zones. If your business is located in a high-risk fire area, then your insurance is going to be more expensive.  As climate change increases the areas considered high-risk fire zones, many businesses that did not have this increased rate adjustment are seeing their costs rise.  This is true for any external impact (flood zones, high crime rate, fault lines), with the higher risk there will be higher costs for your business. 

Your Employees

The number of employees you have may lead to higher insurance premiums. With more employees, you may need to invest in various different types of insurance, like Workers Compensation, Errors and Omissions, and General Liability. Your insurance premiums can also depend on the positions of your employees. Qualified ALEs will necessarily have different requirements, risks, and costs than Small Business Owners. 

Your Chosen Policy

The more policies you add, the higher your premiums. The nature of your business may determine which policies you need to invest in, other times it can be up to you. AS you assess what coverage you need be aware of what a catastrophic loss would do to your business, your personal finances, and your company’s ability to operate.  Cyber coverage was often overlooked before the recent wave of ransomware attacks, now, business owners are actively looking at their data vulnerabilities. 

Your Prior Claims history

Lastly, your claims history has a large impact on your insurance premiums. If your company has a long history of filing claims for loss or damage, insurance companies will charge higher premiums to cover the risk of insuring your business. If you are looking for ways to reduce your premiums, there are risk-reducing operational steps you can put in place. 

Has your insurance increased this year? Learn why with Benchmark’s Rob Cohen.  READ MORE HERE

Surface Water and Property Insurance

surface water & property insurance

It’s that time of year again where the rain starts to fall, and flooding and other rain-related issues arise that businesses typically don’t have to deal with during the rest of the sunshine-filled year— at least in California.

As a business owner, it’s important to understand how your coverage will protect you during various seasons of your business. First and foremost, did you know that Property Insurance has a surface water exclusion? What does this mean for your business?

What is Surface Water? 

Surface water is also known as flooding but doesn’t always mean a full-blown flood. In this case, surface water is defined as spring thaw, flash floods, excessive rain, storm drain overflow.

Additionally, surface water is any water that runs through or travels over land where it’s not supposed to be located. It’s typically determined as any damage that has occurred by water that filtered through man-made objects, instead of from the ground

Why is there an Exclusion?

Investopedia outlines some of the main reasons behind the exclusion, “The reasoning is that only specific areas are prone to water-related natural disaster events, such as floods, tidal waves, or tsunamis.” The insurance industry wants to make sure policyholders with these specific water-related exposures purchase specific Flood policies that can address these loss conditions.

Surface Water Insurance

The Standard Flood Insurance Policy (SFIP) Forms contain complete definitions of the coverage they provide. Direct physical losses caused by “floods” are covered. Also covered are losses resulting from flood-related erosion caused by waves or currents of water activity exceeding anticipated cyclical levels, or caused by a severe storm, flash flood, abnormal tidal surge, which result in flooding, as defined. However, damage caused by mudslides as specifically defined in the policy forms is covered under “Catastrophe Coverage.”  

An Example

In 2012 there was a court case titled, “Union Street Furniture v. Peerless Indemnity Insurance Company,” where the definition of surface water cost Union Street Furniture and Carpet lost substantial amounts of money. 

In this case, there was a large storm that funneled rainwater from the parking lot into their commercial building causing water damage. The case claimed that the water damage was not covered by their insurance policy because the water was deemed to be caused by surface water or flooding. 

Do you need it? 

Take the above example as a learning opportunity. Reach out to your insurance broker to see if it may be a good idea to start investing in a Surface Water Insurance policy. Let your broker know if the topography of your location(s) lend themselves to water damage that fits the definition of “Surface Water”.

Of course, it depends on your specific business situation. If you’re concerned about flood damage specifically, then buying separate flood coverage might be necessary. Flood insurance coverage is available for both commercial and residential properties. With the rainy season approaching in Southern California, there are unpredictable factors that may not be included in your General Liability coverage. 

As a business owner, you have or will need to file some kind of insurance claim. Understanding what that means is essential to your success. Read more about commercial insurance claims, and what you need to know here

Why Is My Insurance So Expensive This Year?

why is my insurance so expensive this year?

 

Download the whitepaper [pdf]


If you’re like most people, your insurance has recently gone up with no explanation. Although we can list factors that might play a part in these increases,  the reason your insurance is going up is a combination of all of these factors.

D&O, EPLI, Property, General Liability, and Umbrella policies are all going up 15% to 30% year over year.

Below are some factors causing increased insurance costs:

Factors Causing Increased Insurance

  1. Increased Risk Factors. The rezoning of certain open areas as high-risk fire zones has increased carriers’ perception of risk and therefore, is driving up prices.
  2. Re-insurance. Insurance carriers purchase insurance similar to a policyholder. However, due to consistent years of catastrophic losses, the availability has been restricted and costs to insurers has increased. 
  3. Labor Shortages. Changes in immigration law, in combination with stricter criteria for classifying 1099 vs. W-2 workers, have added to the labor shortage post-pandemic markets are experiencing.
  4. Supply Chain Disruption. Shipping routes are overrun, ports are backlogged, shipping containers are in short supply, and trains are delayed causing domino-like effects to businesses. With increases in cost and time to deliver goods comes an increased risk of in-transit losses and loss of business market share.
  5. The Pandemic. With all of the increased insurance claims from COVID-related closures, insurance companies have paid out millions in unanticipatable claims.
  6. Inflation. Property values are soaring and insurance premiums are along for the ride. Insurers have become picky about whom they will insure, causing an increase in policy movement from broker to broker and carrier to carrier. 
  7. Increase Cyber Threats. Office-level security firewalls are not present with people working from home. This, in combination with the widespread usage of online payment options in more businesses, has raised the cost of cyber liability coverage.

These seven cost increases are complicated, global, and not going anywhere. Want to know what you can do to get your costs down? 

Next, we wanted to take this opportunity to provide insight into the ever-changing landscape in the insurance sector. You may have noticed strange behavior from insurers, whether you purchase coverage for your home, business, or both.

Below are the forces exerting themselves on the insurance industry today, which have caused the insurance companies to push rates as well as exit certain geographic areas. We hope this information will provide clarity as well as recommendations on how to take control of insurance costs during this time.

Low Bond Rates

It is interesting to know that in a normal economic market, insurance companies use insurance premiums as a loss leader. The premium loss ratio (total annual Gross Written Premiums valued against total Incurred Losses) typically runs from 105% to 108%. 

This means that for every dollar collected, the insurance company expects to pay out over a dollar in claims. The insurance companies offset this loss, however, with much higher returns in their investment income. A significant source of safe return has always resided in the bond market.

Since today’s bond market has much lower than normal yields, with no relief in sight, insurance companies are seeing lower than normal investment returns.

Unmodel-able Losses

For lack of a better word, we give you “un-model-able losses.”

Insurance companies rely on accurate actuarial “modeling“ to predict losses and help set proper rates based on predictable loss scenarios. For the last ten years, however, the global insurance industry (including the re-insurance segment, but more on that later) has been hit with a regular stream of wildfires, earthquakes, mudslides, hurricanes, abnormal freezes to name just a few.

These are classified in insurance-speak as “un-model-able losses.” Actuarial models have not yet been perfected to incorporate these types of losses. When the industry is faced with these events, profitability plummets, and insurance carriers are challenged to find rates that can accommodate the un-model-able.

Reduced Reinsurance Capacity and Increased Cost

Insurance companies “lay off” much of the value of their loss exposure on the “secondary” or reinsurance market. This considered, the reinsurance market is much more sensitive to how losses will affect their rates, as global reinsurers are the backstop for the industry.

As you may expect, reinsurance rates have spiked steadily over the past five to seven years due to consistent catastrophic losses. In some cases, actual insurance writing capacity is depleted to the point that coverage is no longer available in certain industry segments.

The reinsurer’s response to claim severity and frequency is to restrict the availability of coverage and raise the rates to your insurance company. Year over year, insurance carriers have been paying significantly higher rates for the cost of insurance and that cost is passed to the policyholders.

Remapping of “Fire Zones”

To a carrier, all insurance companies have become keenly aware of what they now consider fire zones, as well as the concentration of insured value that resides within these zones.

Both commercial and residential insures have undergone varying degrees of re-evaluating what they now consider to be locations residing in, or adjacent to, a newly established fire zone. You may have had friends, or even neighbors, complain of non-renewal notices they received from their current insurer.

Again, to a carrier, underwriters refuse to discuss any type of exception we may want to make regarding their “fire-zone” evaluation. Each carrier has determined, through their re-insurance treaty with their re-insurance carrier, what they are allowed or not allowed to write.

They will not make exceptions for any policyholder, which means remapping for fire zones has forced many policyholders back into the market due to the non-renewal of many policies. This is a market with a limited supply.

Why Should This Matter to Me?

The simple answer is to remember that insurance companies are for-profit enterprises. Because of the fiduciary responsibility to its policyholders, insurance companies must stay vigilant on profitability.

As we discussed above, the industry typically operates at a premium loss ratio of over 100%. With the forces pressing down on the industry discussed above, carriers have now focused their efforts on becoming profitable on written premium.

So, how much do rates have to rise to take a carrier from a 5% to 10% loss on each dollar collected to a profit of 10% or 15%? Rates have to rise 10% to 20% on average (this contemplates loss-minimal and loss-free accounts) in order for the carrier to be profitable on collected premiums.

Policies with anything approaching, or exceeding a 50% loss ratio for the last three years combined can see premium increases from 50% to 125%.

What Power Do I Have to Control My Premiums?

Believe it or not, policyholders have the ability to take control over policy costs. The insurance underwriters key in on two areas: property age and maintenance/upkeep. Any property approaching 20 to 25 years old or older will require the underwriter to dig into how well the property has been maintained.

They will want to know about tenants (for commercial properties) and updates, or placement, of the following building systems (home or business). For example, electrical, plumbing, HVAC, and roof systems.

If the age of your property is older, many underwriters are simply choosing not to provide quotes for buildings that have not had these systems updated in the past 10 to 15 years. Please create a budget to update these older systems. It will pay dividends for many years to come in the lowest premiums obtainable in the marketplace.

A Final Word

The most impactful measure used by underwriters to measure account quality is historical losses. Underwriters typically look back three to five years depending on the account.

Homeowners’ losses, both home, and auto, are aggregated to a central database used by all insurers. Commercial accounts, however, are not tracked to a central database.

Losses that cause the most heartburn to an underwriter are water losses. Water perplexes the savviest of insurance actuaries. Policies with consistent water damage claims over time are prime for carrier non-renewal. The lowest hanging fruit for property owners is the proactive replacement of all interior plumbing fixtures. Angle stops, water hoses, and toilet fixtures (float and flap) are the most guilty of causing expensive water damage claims. Next up, would be sewer and drain backups. Please snake all drain lines on a regular basis. Simple, cheap, and effective.

As you’d anticipate, older properties require more information as underwriters evaluate the quality of electrical, plumbing, heating/cooling, and roof systems. 

Remember the insurance policy is not designed to be a “warranty” against less than regular maintenance and upkeep. Property owners can go a long way in stabilizing insurance costs over time by creating and implementing pro-active regular maintenance protocols. If you can create an efficient program, you are doing all you can do to protect your insurance costs for the future.

 

Executive Protection to Guard your Balance Sheet

executive protection to guard your balance sheet

Executive protection is a necessary investment for companies to survive. This important balance sheet protection tool can be the difference between survival or peril in today’s litigious environment. 

As you look to protect your business from executive risk, it’s important to understand the different types of risk associated with it. Executive protection is broken down into different categories.

Here’s a breakdown of what Executive Protection covers.

Employee Practices

Employment practices can mean numerous things: wrongful termination, sexual harassment, discrimination, and hostile work environments. 

Within the main categories listed above, there are many subcategories that have proven to be a risk. For example, an employee could file an EPLI for emotional negligence. 

There are many factors that are increasing liability risk for 2021. With most offices returning to in-person work environments, the risk runs even greater. 

COVID-19

COVID brings another element to potential ELPI claims. Some of the potential situations that could occur with returning to the office or adopting a hybrid model include: 

  • An employee feels emotional neglect for having a hard transition to in-person work after working from home for a year.
  • Employees might feel that higher-ups have conducted the health and safety aspect of COVID-19 at a lower standard.
  • An employee refuses to follow new guidelines and regulations stated by the Occupational Safety and Health Administration (OSHA).
  • An employee returns to the office and contracts COVID-19 from a co-worker.

These examples only begin to predict what could happen in the future. 

Fiduciary 

Based on the law passed in 1974, there are regulations that businesses must have as baseline coverage for all employees. If these basic guidelines are neglected, then there’s a liability risk. Some examples of failing to meet guidelines might include: 

  • Improper enrollment or terminations
  • Resulting in lost or incorrect benefits
  • Errors in counseling when administering health or welfare plans
  • Resulting in lost or incorrect benefits
  • Giving poor or negligent advice on investing employees’ retirement plans
  • Making risky investments in a defined benefit pension plan
  • Wrongful denial or improper change in benefits
  • Imprudent selection of and/or monitoring or third-party service providers

There are other terminologies that are thrown around in the workplace, like Errors and Omissions (E&O) that follow similar guidelines. 

Media

Media liability coverage protects the insured against claims arising out of the gathering and communication of information and is critical to any media organization. The variety of claims being asserted against the media, and the size of jury verdicts against media organizations, are constantly on the increase. 

According to data released by the Libel Defense Resource Center, the median jury award against media organizations in 1990 was $500,000; in 1997, it was $2.3 million. 

Cyber and Tech

Cyberwarfare is not just for meddling in elections and extorting multinational corporations. Companies of all sizes and types can fall victim to enterprising hackers and cyber extortionists. The question all companies must ask themselves is not “what is my data worth to someone else?” but “what is my data worth to me?” Of course, well-crafted IT protections are a crucial first line of defense, but if the protections fail, could your company shoulder the cost of an uncovered claim or ransom payment?

Cyber insurance coverage is likely broader, less expensive, and more crucial to your business than you would think. 

Trade Credit

Another fancy term is trade credit. This can basically be broken down to the idea that trade credit protects manufacturers, traders, and service providers against losses from non-payment of commercial trade debt due to bankruptcy, insolvency, or very late payments.

Intellectual Property

IP insurance covers companies for the legal costs associated with pursuing infringement or theft of IP. It also covers legal defense costs for policyholders accused of IP infringement or theft. There are two basic types of IP insurance:

Infringement Defense: Covers policyholders for infringement claims brought against them.

Abatement Enforcement: Gives the insured the financial resources to enforce their IP rights and pursue infringement claims.

In today’s increasingly perilous and litigious business environment, every company faces risk. It is unfortunate that any of your company’s many constituents—including employees, investors, customers, suppliers, competitors, government agencies, and creditors—pose a financial risk to your business. Any one of them, however, could sue your company or target it for criminal activity.

As you look to protect your business from these potential threats, enlist the help of an insurance mentor. At Benchmark, we invest in our clients’ protection and we aim to ensure your business remains risk-free. Reach out to us today to start a conversation about your business’ risk!

Executive Protection to Guard your Balance Sheet

Executive Protection to Guard your Balance Sheet