Archives for September, 2016

6 Trends That Will Change Insurance Claims

Expanding data volumes from sensors and other connected technology, intensifying regulation, increasingly volatile weather patterns — these are among the powerful forces reshaping the insurance industry.

Their effect on the claims function certainly will be profound. Nearly every link in the claims process will evolve in the future thanks to:

  • Technological innovations (such as robotic process automation and driverless cars).
  • Significant shifts in claims volumes (less, but more unpredictable, claims).
  • Changing customer expectations (more digital engagement).

There’s little doubt that tomorrow’s claims organization will look and act differently. Smaller, leaner teams will rely on greater automation to focus on higher-value activities. Robust digital channels will handle most low-complexity claims (especially in personal lines).

New Tools and Technology

New tools and technology will take over activities currently performed by loss adjusters, eliminating the need for in-person property or vehicle damage inspections, for example. Proactive loss prevention, especially in the areas of fraud, data breaches and cybersecurity, will be a top priority.

Analytical thinking and complex adjusting skills will be at a premium as data volumes and complexity increase dramatically thanks to:

  • The Internet of Things, including factory and home sensors and telematics systems on cars and trucks.
  • Social media data that provides real-time information about claims severity and localization and helps prevent fraud.
  • Drones used to remotely inspect damage and collect data for underwriting purposes.

It’s possible that retail and personal insurers will reduce their employee base by up to 50 percent, with commercial specialty insurers seeing smaller reductions. Remote working and new sourcing arrangements across complex claims supply chains will reduce real estate costs. Special response units and global catastrophe teams will manage surges and spikes in claims volumes due to increasingly frequent weather events and natural disasters.

In early 2016, EY’s insurance group conducted research to better understand how industry stakeholders — including senior insurance executives, financial technology (FinTech) leaders and analysts — view the future of claims operations. They identified six major disruptive forces that will define the future of claims:

1. Decreasing Claims Volumes

Claims frequency is falling in many lines of business thanks largely to sensors. Improved safety features (like driver assistance and airbags) have greatly reduced the likelihood of auto accidents. In fact, from 1994 to 2014, there was a 39.2 percent decrease in the number of total reported road accident fatalities, according to the U.K. Parliament. Sensors for monitoring homes and businesses are having a similar effect.

2. Modernized Technology

Better technology means more opportunity for innovation. In the future, the vast majority of simple claims (e.g., those less than $1,000) will be settled through automated, rules-based processes, provided that no fraud indicators are present. The simpler products are, the more automated the claims validation process can be.

Modernized claims platforms will enable the capture of more data, as well as more precise segmentations. Streamlined workflows will also enable higher levels of productivity because leaner teams will be able to process more claims. Robotic process automation, in particular, will help alleviate the long-standing talent shortage in claims.

3. The Sensor Revolution

With more devices linked to the ever-growing Internet of Things, closer and more effective monitoring of homes, businesses and individual behavior has become a reality. And it has shifted the focus of claims organizations to proactive monitoring and away from reactive handling processes.

New data sources will be focused on loss prevention and incident management in all lines of business. Insurers must invest in cybersecurity to protect the larger and more valuable data sets available to them.

4. Digital Disruption

Companies such as Uber and Amazon are redefining customer expectations in terms of service interactions, personalized products and efficiency. The customer experience bar is now higher in all industries, including insurance. Within claims, that means better self-service tools. Accurate, timely and transparent information about claims status will be shared or “pushed” proactively to customers and made available through online channels.

Many commercial and corporate clients still turn to brokers for advice, meaning claims service likely is to become a key differentiator. But, in other lines, superior customer service will be associated with the ability to meet customer preferences, rather than the level of human interaction.

5. Better Enterprise Risk Management

Large businesses have vastly improved risk management capabilities because of the wider scope and more stringent health and safety regulations and a greater focus on the return from capital, including insurance arrangements. Better data about claims incidents and clearer insight into the cost of risks are likely to decrease the overall claims volumes from large commercial policyholders.

6. Severe Weather

The increased frequency and often localization of weather-related events mean significant flooding is likely to continue to be a major issue. Claims operations will need innovative technology for advanced warning of such events and operational flexibility to scale up quickly to meet demand spikes. Management of such severe incidents will soon become a business-as-usual activity for claims.

The insurance industry is changing faster than at any time in its history and technology is a huge driver as insurers work to meet and exceed the expectations of their customers. These changes will impact all aspects of the industry for years to come and the result will be an even more dynamic business for those willing to take advantage of these opportunities.


Source:  PropertyCasualty360

Airbnb: A Risky Situation For Building Owners

Greg Offner, a producer with the Graham Co., tells that over the past few years the rental startup Airbnb has taken center stage in the global “sharing economy.” He says in this exclusive commentary that Airbnb offers unique, affordable experiences to travelers and an easy way for renters to make quick cash. But with the cost of travel today, it’s no surprise, he says.

“Airbnb’s popularity has skyrocketed. However, this growing popularity has unintentionally opened building owners up to a new world of risks.”

The views expressed in the guest commentary below are the author’s own.

Although the majority of travelers and tenants use Airbnb responsibly, a handful of horror stories have emerged in recent years. From condos being held hostage by guests citing squatter’s rights to stolen valuables, allegations of sexual assault and damaged property, there is a great deal of risk involved for both the tenant and the building owner. In order to mitigate the risks of Airbnb use in your property, you must take a proactive approach by understanding what your insurance policies cover, communicating your property’s policies and keeping up with the changing insurance landscape.

The Biggest Issue with Airbnb

Airbnb requires its users create a profile to use the platform, but doesn’t employ any additional screening or verification. Virtually anyone can have total access to your building without your knowledge or permission if they’ve booked through Airbnb. This is in stark contrast to the standard industry practices most property owners and landlords follow. Typically, landlords require an extensive application and information-gathering process and a background check for tenants to mitigate the risk of damage and liability. In fact, a building owner has no contractual relationship with the Airbnb tenant, giving the owner little leverage if an incident occurs. Additionally, a building owner’s rights, limitations and duties owed when dealing with an Airbnb tenant might not be fully known, which puts the building owner at greater risk.

It’s not only a risky proposition for building owners. Many tenants assume their renters insurance will provide coverage in the event of damage or theft while leasing their unit through Airbnb. If a loss does occur, a tenant’s renters insurance may respond and cover losses, but there is absolutely no guarantee.

The Market Will Continue to Evolve
As the sharing economy continues to evolve and new companies emerge, so will the risks and the insurance market as a whole. Where there’s a category of risk, the insurance market will eventually find a way to provide an insurance product for it. Lloyd’s is already providing insurance coverage for Airbnb tenants and “sharing economy” endorsements aren’t too far behind. These would provide a layer of protection for tenants and owners, but right now this topic is one insurance scholars continue to debate.

A Proactive Approach
Building owners can protect their businesses from risks associated with Airbnb by considering the following:

Prohibit Use of Airbnb
The best strategy for mitigating the associated risks of Airbnb usage in your property is to explicitly prohibit tenants from subletting their units for any length of time. Property owners should incorporate language into lease agreements specifically prohibiting tenants from using services like Airbnb. Property owners should also include an addendum for tenants to sign that clearly details the property’s position on Airbnb usage and educates them on the risk Airbnb poses to them, their neighbors and the building owner.

Monitor Airbnb
If tenants are aware of the building’s hard stance on Airbnb usage, it will deter them from attempting to list their units on the site. However, there will still be tenants who are willing to circumvent the lease to use the service. It may not be enough to simply ban Airbnb from your property, even via a legally binding agreement, so another effective strategy is to monitor Airbnb and routinely check for listings at properties you own.

Consult with an Insurance Broker
Building owners should consult with their insurance broker to understand how their coverage interacts with a tenant’s coverage. Insurance contracts are complicated documents and may contain exclusions that previously would have been considered innocuous. An insurance broker may recommend  you specify the insurance limits and coverages you want tenants to carry.

A Final Word
As more stories surface about Airbnb gone wrong, we are reminded of the danger of letting a stranger into a property without a proper background check. It’s important to consult with your broker and stay current of trends in the industry to avoid headaches and financial losses as a result of Airbnb.


Source:  GlobeSt.

The Four Biggest Misconceptions About Cyber Threats

Despite frequent media reports of hacking, cyber crime, security breaches, and related events in all parts of the U.S., many middle market companies continue to underestimate their exposure to these attacks along with their need for focused risk management measures, which may include the purchase of specialized insurance.

A new report from Assurex Global, the world’s largest privately held commercial insurance, risk management, and employee benefits brokerage group, identifies four misconceptions about cyber risks, predominantly among mid-sized and small businesses.

The notion that cyber events primarily affect larger businesses tops the list.

“Even though you may not hear about breaches at $50 million or $100 million manufacturers, they’re happening,” said Mike Richmond, a risk advisory executive at The Horton Group, an Assurex Global partner. “Sometimes that’s because the cyber protection at smaller companies isn’t as sophisticated, so hackers consider them an easy target.”

The second biggest misconception: “My type of business isn’t a target.

“As the growing number of victimized companies attest, that misconception is being debunked nearly every day,” said Richmond. “There’s no question that every enterprise is now a potential target for a cyber attack—public, private, or nonprofit.”

The report cites Symantec’s list of the top sectors breached in 2015 by number of incidents: services; finance, insurance and real estate; retail trade; public administration; and wholesale trade.

The third leading misconception: you can self-insure against a data breach. In fact, the high cost of cyber attacks makes that a perilous option, especially for small and mid-sized companies. The average cost of a data breach for 350 companies participating in the Poneman Institute’s 2015 Cost of Data Breach Study was $3.79 million, up 23 percent from 2013.

“If a data breach occurs today, businesses are almost certain to be subject to defense costs even if customers have yet to suffer any immediate or identifiable loss from the data breach,” said Richmond. “Once there’s a breach, costs can mount rapidly.”

The fourth misconception: many firms believe they’re insulated from financial consequences of cyber events because they outsource their network security, data management, and payment transactions. Yet, according to the report, as the original data owner, a company sustaining an attack will likely be named in third-party lawsuits and be held liable in most jurisdictions.

While a vendor agreement may contain indemnification provisions, there may be caps on indemnification amounts and exclusions for certain types of data breaches. Further, the vendor may become insolvent, bankrupt, or simply not honor the agreement.

“We’re working with customers now to continuously improve their front-end protection,” said Richmond. “Then, adding insurance to make sure that if something slips through the cracks, the company has insurance to pay for it.”

Richmond recommends companies consider two primary types of insurance coverage for cybercrimes: a cyber liability/data breach policy and a commercial crime policy.

Cyber liability/data breach policies can include third-party coverage, first-party coverage, and media liability. Meanwhile, many commercial crime policies can be structured to address certain cyber-related risks otherwise not covered under a cyber liability policy, such as those involving certain phishing scams and corporate account takeover.

Although many firms opt to structure cyber coverage as an endorsement to their package policy rather than purchasing standalone cyber insurance, Richmond noted standalone policies usually have higher limits, fewer exclusions, and are more comprehensive.

“Start with the question, If a data breach happens, how would your company pay for the damages?” Richmond suggested. “This should impel businesses to assess their risks, shore up their risk management, and investigate and purchase cyber liability insurance.”

Source:  Global Trade Magazine

Hurricane Ready Commercial Properties Are More Profitable in U.S.

A new CBRE commercial real estate report finds improving resilience to extreme weather – such as powerful Atlantic hurricanes that are now in season — can reduce costs, drive revenue and ultimately generate greater returns on investment.

“Institutional buyers are attracted to resilient properties for their sustainability, operational efficiency and marketability,” said Quinn Eddins, Director of Research and Analysis, Americas, CBRE. “Incorporating resilience into building design and management practices can lead to deeper bidding pools and, ultimately, higher prices per unit.”

In 2016, meteorologists forecast a 35% chance of an above-normal hurricane season. Up to four storms may become “major” hurricanes, category 3 or higher, with winds over 110 mph. Storms like these can damage properties if they are not properly built to withstand extreme-weather events.

Increasingly, new buildings are being engineered to accommodate extreme weather. For example, the addition of wind-resistant glass can mitigate high-wind damage and the placement of a building’s power center on an upper floor can prevent damage to building systems from flooding and storm surges.

CBRE identified hurricane preparedness practices that increase the likelihood that a building will remain operational when other facilities might go out of service. Using high-quality materials and construction techniques can decrease long-run operating and maintenance expenses, enhance financing options and gain more competitive insurance rates.
Source: WPJ