Tag Archive for: cyber liability

cyber liability insurance protects your business in case of a cyber attack

your guide to cyber insurance: why do you need it?

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The cyber insurance industry is a rapidly growing market that can be difficult to navigate for those seeking or renewing insurance. With underwriting and renewal processes taking longer to complete, read on our full guide on why you need cyber insurance.

why should you invest in cyber insurance?

Cyber insurance covers expenses from data breaches, viruses, 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.

In 2021, a cyber-attack incident occurred every 11 seconds.

If your company experiences a breach, federal law requires you to perform an extensive list of tasks. If you have cyber insurance coverage, however, your carrier will take on that responsibility.

Investing in cyber insurance helps protect your business from financial losses that can come with a cyber attack, and help keep reputation damage at bay.

is your business vulnerable to cyber-attacks?

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

who needs cyber liability insurance?

While some general liability and professional liability policies include some basic cyber liability coverage, some additional coverage may be needed. Businesses that store personally identifiable information (PII) for both employees and customers should have additional coverage.

Cyber breaches can occur in a multitude of ways. They can be executed through phishing emails, viruses, ransomware, or other malicious attempts to corrupt your data. The best way to begin protecting your data is to establish internal safeguards with cyber security. This includes using strong passwords and monitoring electronic device access and access to software tools.

This form of coverage is growing in demand as we shift towards a cyber-reliant world. The National Associate of Insurance Commissioners found that the U.S. cyber insurance market “expanded to $4.1 billion in direct premium in 2020, representing an increase of over 29% from 2019.”

what does cyber liability insurance cover?

There are a few types of coverage within a cyber liability policy. First-party and third-party coverage help ensure you’re protected for whatever comes your way.

first-party coverage

First-party coverage includes coverage for immediate expenses related to the cyber breach. These expenses typically include:

  • The cost of notifying employees and the public
  • Marketing and public relations response that protect the company’s reputation
  • Extortion money
  • Repairing the damage to software and hardware
  • The cost of business interruption and missed income while operations are suspended
  • Other ancillary costs

third party coverage

On the other hand, third-party coverage helps a company defend against lawsuits and legal claims. There are a few lawsuits that may occur. Privacy lawsuits are covered under this coverage in case you have breached the privacy of customers and employees.

Regulatory body fines are covered as well as media liability claims (copyright infringement, libel, or slander). Lastly, breach of contract and negligence claims are covered under third-party coverage.

what does cyber liability insurance not cover?

It’s important to understand what your insurance coverage does not cover. When you review your cyber security protections, you may be able to identify where your vulnerabilities lie. Some common exclusions from cyber liability insurance include:

  • Bodily injury and property damage claims: Any claims of bodily injury or property damage will not be included in your cyber liability insurance policy. However, a general liability policy will cover these claims.
  • Criminal activity: Cyber liability insurance policies do not cover fraud, robbery, employee theft, and other crimes. However commercial crime insurance will cover these claims.
  • Social engineering: A cyber liability insurance policy will not cover when employees are tricked into transferring company funds. This can be an additional add-on with some cyber liability plans.
  • Loss of property: When an employee loses a piece of property, like a phone or computer, cyber liability will not cover the cost. However, a commercial property insurance policy will.

Like many businesses, you likely utilize computers, and other electronic devices to send, receive, and store electronic data. Data is one of your most valuable assets. It’s important to ensure that you protect that data and consider the cost of losing it.

signs you’re at risk of experiencing a cyber-attack

Cyber-attacks occur without forewarning. Sometimes, businesses don’t initially realize that they’re under a cyber attack. Review the following signs that your business is 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 emails 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.

If you realize you’re under a cyber attack, act immediately. First, disconnect your device from the internet, restore your system, and report the attack to your IT department.

After the attack, make sure you file a report with the police and your insurance.

how to mitigate risk

There are ways to decrease your business’s risk of falling prey to a cyber-attack. Being proactive about cybersecurity, and having cyber insurance helps keep your business information secure. Other ways to mitigate risk include:

  • 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.
  • Be aware of third-party risk because 59% of companies experience a cyber breach because of a third party.

cyber claim tips

When submitting a claim, use our tips to make sure you have the most successful outcome.

  1. Prepare and understand your insurance policy beforehand. Before a breach occurs, understand and review your policy, and what it covers. Make sure the structure of the claim fits your business needs.
  2. File your claim correctly. Most cyber insurance claims are first-party claims because the most common types of cyber-attacks are ransomware, malware, and social engineering fraud. However, file a third-party claim if you experience the need for defense in a lawsuit. Once assigned, insurer claim adjusters quickly help mitigate losses and help the legal and forensic response.
  3. Do not wait to report your claim. Once you become aware that there is a breach in your cyber security, the first step is to report and file the claim as soon as possible. No matter what type of breach, do not wait to file a report because it’s easier to give assistance early on during a breach.
  4. Obtain insurer consent. Once the claim is filed, the insurer must give their consent to onboard attorneys, IT professionals, and investigators for the breach.

At benchmark commercial insurance, we offer global capacities with a boutique experience. What we do best is look at your company holistically and use our knowledge of changing policy to give you the security of knowing you’re covered.  It’s true, anyone can get you cheap insurance, but not anyone can be there for you like we can when structuring your policy and filing a cyber security claim.

Curious about what other areas of your company may be putting you at risk for a cyber security breach? Read our article about why email may be your biggest cyber risk here.

 

your business needs cyber liability insurance to protect against cyber attacks

what does cyber insurance actually cover?

what does cyber insurance actually cover?

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Cyber cyber cyber… This is one of the hottest topics in the insurance industry today. You may already have cyber insurance, or you might be considering getting coverage — in either case, you’ll likely be asking,  “what does your cyber insurance actually cover?” 

who needs cyber insurance? 

While some general liability and professional liability policies include basic cyber liability coverage, additional coverage is often needed. Businesses that store personally identifiable information (PII) for employees and/or customers should have additional coverage.

what does cyber insurance protect you from?

Cyber breaches can occur in a multitude of ways. They can be executed through phishing emails, viruses, ransomware, or other malicious attempts to corrupt your data. 

In 2019, The FBI’s Internet Crime Complaint Center (IC3) reported that the losses for business email scams were $1.7 billion. Learn why an email might be your biggest email risk on our blog. 

The best way to begin protecting your data is to establish internal safeguards with cyber security. This includes strong passwords, monitoring electronic device access, and using different software tools. 

Email scams such as Business Email Compromise/Email Account Compromise (BEC/EAC), are sophisticated scams that target both businesses and individuals who perform legitimate transfer-of-funds requests. In addition to those email-based vulnerabilities, there is an increase in other cybercrimes that threaten businesses (especially those that are remotely operated). According to Cybersecurity Ventures, a cyber attack will occur every 11 seconds in 2022, nearly twice the rate in 2019.  With that being said, it’s important to ensure your business is covered in case a cyber attack does occur, with cyber security liability coverage. 

There are a few types of coverage within a cyber liability policy. First-party coverage and third-party coverage help ensure you’re covered for whatever comes your way.

what else does cyber insurance cover?

First-party coverage includes coverage for immediate expenses related to the cyber breach. These expenses typically include:

  • The cost of notifying employees and the public
  • Marketing and public relations response that protect the company’s reputation
  • Paying extortion money
  • Repairing the damage to software and hardware
  • The cost of business interruption and missed income while operations are suspended
  • Other ancillary costs

Third-party coverage helps a company defend against lawsuits and legal claims. There are a number of lawsuits that can occur. Privacy lawsuits are covered under this coverage in case you have breached the privacy of customers and employees.

Regulatory body fines are covered, as well as media liability claims (copyright infringement, libel, or slander). Lastly, breach of contract and negligence claims are covered with third-party coverage. 

Going into 2022, there is likely going to be a change in coverage. Read our blog cyber security: looking forward to 2022 for more insights. 

cyber insurance for a remote workplace

A recent global industry study conducted by Tenable found that “eighty percent of security and business leaders said their organizations have more exposure risk today as a result of remote work.” 

They listed three main factors that have increased cyber attacks in the 2-year wave of remote office that are important to understand as a business owner moving forward with cyber coverage.

  1. “Enabling a workforce without boundaries.
  2. Expanding the software supply chain
  3. Migrating to the cloud.” 

These three factors are all present in remote workplaces, and give even more reason to understand what your cyber coverage actually covers. 

One question we’ve received from clients is: What happens if a remote employee breaks their work computer while at home? In general, cyber insurance will not cover a broken laptop — but commercial property insurance might. 

okay now my business is covered — now what?

If you have enrolled for cyber coverage, good for you! You’re taking one more step to help create a safe workplace for your employees. Even if your business is protected against cyberattacks, there are some steps you can take to further protect your business. 

read the fine print

It’s important to fully understand what your business is covered for when it comes to cyber risk. At benchmark, we take the time to look into the meaning of a ‘network’ for your company’s policy. The policy might change or be limited to “software, hardware, devices, and other infrastructure owned, operated, or leased by the company.” Knowing what your network entails, how far-reaching it is, and what security protocols you have in place can affect the type, limitations, and cost of your cyber coverage. 

set home-office expectations

In addition to understanding your policy’s details, understanding what your employees’ home offices are like is important to help prevent cyber attacks. A couple of ways to ensure that your remote employees have a safe environment to work is: 

  • Bring in an IT professional to evaluate the laptops and monitors being used or to help install a VPN.
  • Set boundaries with employees about workspace (for example, only use your work laptop, not the family computer that multiple people are using).
  • Provide cyber security training about red flags to avoid.

There are preventive steps you can take to improve your security protocols and reduce the cost of your cyber liability coverage.  To find out more about how we can add cyber to your existing business-coverage, please reach out. 

starting 2022 off right - what to expect for your commercial insurance.

starting 2022 off right – what to expect for your commercial insurance.

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The world of insurance has changed quite a bit over the last year. The new reality of insurance established in 2021 will shape the future for 2022. In this video, Rob Cohen, President of benchmark commercial insurance, speaks about what to expect for your commercial insurance in 2022.  

As we look to the next year for updates in the insurance industry, we’re still seeing a few lines of coverage that are being highly underwritten: cyber liability, and directors and officers liability. Over the next year, you can expect 15 to 40% rate increases on those lines. We’re also seeing a few insurance types, like auto insurance, getting flat rates. Let’s dive in a little deeper.

cyber liability

Cyber security is a hot topic for good reason — cyber crimes are at an all-time high and continuing to grow with an increased focus on digital communication. 

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 action steps to train and help mitigate future risk. With cyber insurance coverage, however, your carrier will take that responsibility on.

As mentioned above, because of the increased need for cyber insurance, we’re seeing more underwriting, in addition to, increased rates.

directors and officers liability

Directors and Officers (D&O) are defined as, “Insurance coverage intended to protect individuals from personal losses if they are sued as a result of serving as a director or an officer of a business or other type of organization. It can also cover the legal fees and other costs the organization may incur as a result of such a suit.” 

With insurance costs increasing, clients are asking what to expect with D&O coverage. Underwriting is still stressed across all lines of coverage, especially in California. The reason behind the increase in underwriting frequency is a higher sensitivity to the current economic environment, in addition to taking into account additional claims activity. 

Alongside D&O insurance, employment practices liability insurance (EPLI) has also been challenged over the last year. Into the next year, you will likely see higher deductibles and higher premiums associated with EPLI coverage, specifically in California. 

auto premiums

Commercial auto for clean accounts is receiving flat rates, but there may still be a few predicted increases in your auto premium to be aware of. 

In fact, we’ve written an entire article about it! Learn a few reasons why auto insurance premiums are increasing in this blog post. 

auto technology

The rise of technology brings a plethora of pros and cons to the insurance field. As reported by The Centers for Disease Control and Prevention (CDC), there are eight deaths a day due to a distracted driver.

They list the three main types of distraction as:

  • “Visual: taking your eyes off the road
  • Manual: taking your hands off the wheel
  • Cognitive: taking your mind off driving.”

The statistics have shown that distracted driving has increased with the increase in technology in vehicles (think about the 17-inch screen that is now installed in Teslas).

The rise in distractions creates a greater financial risk for insurance companies, hence the rise in auto insurance premiums. Some insurance companies even have a “Distracted Driver Policy” because it has become so common.

driver shortages

They call it ‘The Great Resignation’ for a reason. According to The American Trucking Association, “without substantial action, by 2030 and at current trends, the driver shortage could grow to 160,000.”

What does this mean? The demand for drivers has increased over the last few years as a result of the cultural shift toward delivery and convenience. Nearly “one million new drivers will need to be trained and hired in the next decade to keep pace with increasing consumer demand and an aging workforce.” 

With a shortage of drivers, there is a sense of desperation to find any somewhat-qualified person to help transport supplies. In turn, this has resulted in a higher risk of accidents due to a lack of experienced drivers handling large machinery and vehicles. Which, you guessed it, increases auto insurance premiums.

workers’ compensation 

Workers’ compensation coverage seems to be remaining pretty flat. However, if you have a high X-Mod or you have a consistent loss experience over the last two or three years, you will likely see an increase in rates.  

There are a few things to consider when looking at the future of your workers’ compensation coverage.

covid-19

First and foremost, the effect of COVID-19 on your business. The regulations regarding COVID-19 and other standard health requirements vary from state to state, so it is important to understand what your state requires as far as coverage and claims.

Some states, like New York, will include covid-related claims and provide benefits in workers’ compensation coverage if there is reason to believe the individual was exposed at the workplace. 

remote work environment

The lines have blurred between work and home. Employers have lost some sense of control over their employee’s working conditions. In order for a workers’ compensation claim to hold up, the employee must be able to prove that their injury or illness resulted while performing a task for their company. A greater obligation has been placed on the employer to take extensive measures to make sure the employee’s home-office setup is safe.

rising premiums

We’ll likely see a rise in claims over the next year. Not because there is greater risk in working conditions, simply due to the fact that unemployment was high last year therefore the claims and worker’s compensation benefits decreased. 

Because of the rise in claims and cost of benefits, we’ll likely see a rise in premiums.

a final word

Unfortunately, not a lot of great news in the insurance realm. However, this puts greater pressure on your insurance broker to make sure that they’re turning over every rock to find the best rates and coverage for your unique business. 

Speaking of rates, a lot of our clients wonder whether or not working with a larger brokerage firm influences their rates. Check out Peter Katkov, of benchmark commercial insurance services, speak about the difference between larger and smaller insurance brokerages. 

preparing for potential bottlenecks in your business and supply chain

preparing for potential bottlenecks in your business and supply chain

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Are there red flags in your supply chain that may lead to bottlenecks? If there are, a bottleneck may impede product delivery in the new year, and that is not ideal. 

So, what can prevent potential bottlenecks before they damage your company’s ability to deliver? And what is a bottleneck? It can be complicated, so let’s dive into the details.

what is a bottleneck? 

A bottleneck can occur on all levels of manufacturing when resources are pushed past their maximum capacity. A bottleneck limits a company’s full potential, and is, of course, to be avoided.

As shown in the illustration below, the base of the bottle is overwhelmed and the neck of the bottle is too small for the demand of the supply chain. 

preparing for potential bottlenecks in your business and supply chain

Image courtesy of Chris Hohmann

As a manufacturer, there are five types of bottlenecks to be aware of: 

  • Poorly Designed Processes
  • Employee Absences
  • Overworked Machinery
  • No Automation
  • Poor Forecasting

These types of bottlenecks can be broken down into the categories of: People, Machines, and Processes.

people bottlenecks

employee absences

As mentioned above, human error is a part of the industry. One of the main factors of bottlenecks occurring is a high amount of employee absences. The processes that are set in place to avoid equipment failure are only as strong as the number of employees that are at work. With employee absences, there is a higher chance that small errors will occur.

If people are filling in roles out of desperation, then they are not well versed in the processes in place. One way to try and avoid this is to train employees on all of the roles involved in manufacturing, in case an employee is put into a position they’re not fully comfortable performing.  

machine bottlenecks

overworked machinery 

Just like people, if a machine is overworked, it will not be performing at its top level of productivity. If the machinery is overworked to meet the demand, there is a high risk of a bottleneck occurring.

Although the easier choice is to push machines to their maximum capacity (or further) in order to meet a deadline, this decision is asking for trouble.

process bottlenecks

lack of automation

We live in a world of technology.

In the manufacturing industry, technology should be used to help prevent bottlenecks. Automation is sometimes included in machinery or can be externally used. Regardless, there are benefits to using automation and technology in manufacturing.

Manufacturers have used automation not only to keep track of numbers but also to identify the physical location of machinery. Another benefit of automation is that with technology comes usable data. Data collection can be a huge tool in predicting future bottlenecks and learning from past mistakes.

Automation creates a smoother process of combining people and machinery.

poor forecasting

Although it’s true that some machine failures or bottlenecks are impossible to predict, poor forecasting can be a catalyst to missing major red flags that can disrupt your supply chain.

An example of poor forecasting is not maintaining structure in properly storing supplies and materials.

To use forecasting to your advantage, it’s helpful to predict when there might be increased demand. Then, make sure the right amount of inventory is available and that the machines can handle this level of demand to avoid a bottleneck.

poorly designed machine processes

If one part of the machine doesn’t work, the entire machine will most likely fail. If there are detailed processes laid out with preventative measures, however, there is a decreased chance of machine failure.

The efficiency of said processes can also be affected by human contact within the manufacturing line. Human error is common, so keeping employees up-to-date with understanding new machinery and processes is crucial in avoiding bottlenecks.

This includes:

  • Implementing preventative action to keep machinery up-to-date with industry standards
  • Not letting parts function beyond their lifespan

Along with preventive measures, there is value in training employees the proper response to a machine failure that resolves the situation quickly. This can prevent bottlenecks.

red flags in your supply chain

Is there a way to see where bottlenecks might occur? Well, aside from the processes mentioned above, acknowledging that there are red flags in manufacturing is crucial.

Some red flags in your supply chain may include: 

  • Unpredictable lead time
  • Internal reporting and delivery issues 
  • Slow product phase movement 
  • Not enough workers at one stage or another of production/ processing/ delivery 
  • Disorganized delivery scheduling 
  • Lack of product lifecycle tracking 

Identifying and addressing these red flags early on can help prevent bottlenecks. When it comes to equipment failure, however, sometimes a delay is inevitable. Read on for more on how to prepare.

how to prepare for equipment failure

There is not much that can be done if major equipment failure takes place. 

One key way to try and avoid equipment failure, however, is to create a diversified pool of vendors that you collaborate with. This means hiring locally, offshoring, and “near-shoring”. Doing so streamlines processes, provides backups and is one way to improve and balance your supply chain. 

what do I do after a bottleneck occurs?

So, you’ve experienced a bottleneck. What now? 

Bottlenecks have both short and long-term effects on a business.

After a bottleneck occurs, it’s important to evaluate what happened, why it happened, and how to avoid a similar situation in the future. The bottleneck you experience will help your company learn and grow when you look at it from the perspective of a learning opportunity.

So, you now know how to prevent a bottleneck—but do you know how to prevent a cyber-attack? Read on to learn why email may be your biggest cyber risk.

Cyber Security: Looking Forward to 2022

cyber security: looking forward to 2022

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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

why email may be your biggest cyber risk

why email may be your biggest cyber risk

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When you hear the word “cyber risk,” what do you think of?

If you think of Facebook or strangers sending sketchy links over text, you’re not alone. But, you are wrong.

In 2019, The FBI’s Internet Crime Complaint Center (IC3) reported that the losses for business email scams was $1.7 billion. So, your email might be your biggest cyber risk, what does that mean for you? Let’s break it down. 

BEC Scam 

The FBI defines a Business Email Compromise (BEC) scam as, “Also known as email account compromise (EAC) — is one of the most financially damaging online crimes. It exploits the fact that so many of us rely on email to conduct business— both personal and professional.” 

They also list what BEC scams can often look like: 

  • “A vendor your company regularly deals with sends an invoice with an updated mailing address
  • A company CEO asks her assistant to purchase dozens of gift cards to send out at employee rewards. She asks for the serial numbers so she can email them out right away. 
  • A homeowner receives a message from his title company with instructions on how to wire his down payment.” 

The listed scenarios were all fake, and cost companies thousands (sometimes hundreds of thousands) of dollars. 

The rise in Cyber Security breaches has jump-started many companies into investing in cyber security insurance. This is a great way to protect yourself and your company, but there are preventative measures that can be taken. 

How to Avoid BEC or EAC Scams

There are some steps you can implement to avoid the financial downfall of a cyber attack. 

Company Policy

Set clear policies about what should be responded to within the company email. This also implies that the company email is not used for general things (for example, signing up for a clothing discount). Within company policy, there should be a rule for not sending personal passwords or information over email. 

Social Media

Social media has changed what a company might share with the world. The information that is shared with the public can be informative about the industry, but should NOT be stating that the whole company is out of the office for a day off. 

Employee Knowledge

Train your employees to look out for red flags in their inboxes. This could look like anything from emails from outside the company, to emails asking for personal information. Emails can be included in a broad cyber security training, considering their high-risk factor. 

Has the recent rain caused any alarm for flooding at your commercial property? Learn more about the surface water exclusion that is most likely a part of your property insurance. 

Tax Codes

changes in tax codes – what you need to know

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Tax changes are coming. 

Have you prepared for the changes that may begin at the end of the year? If you haven’t started thinking about it already, it’s about that time.

Here are a few of the proposed changes that are looking to go into effect starting next year. 

Income Tax Changes

 

Your tax liability might be at risk to change, although it all depends on your current financial situation. Some of the main changes will affect your bottom line. For example, if your income exceeds $400,000, then you are likely to be impacted.

Along with higher tax rates, itemized deductions will also be prevalent in tax code changes. The proposed changes include a $10,000 limit on local and state taxes. 

Carried Interest Tax Changes

The last time carried interest tax changes were drastically changed was in 2017. It looks like there will be more change coming. Some lawmakers introduced the “Carried Interest Fairness Act of 2021” which if passed, would “tax carried interest at ordinary income tax rates and treat it as wages subject to employment taxes.” 

Capital Gains Tax Changes

The proposed changes would increase the applicable tax to a higher marginal income rate. This would conclude with the total being 43.4% on long-term capital gains. 

Estate & Gift Tax Changes

President Biden has proposed that the current Estate & Tax Changes that are meant to extend until 2026 be looked at closely. 

How to know if these tax changes will affect you?

If you are a business owner or individual whose income is above $400,000 then odds are you will be affected by these tax changes. 

Increased tax rates will mean it’s hard to know how much you’re paying to insure your business. Learn what the general costs are for your business.  READ ON… 

Why Is My Insurance So Expensive This Year?

why is my insurance so expensive this year?

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Download the whitepaper [pdf]

why is my insurance so expensive?

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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.