October 27, 2011

Cyber Liability Summary

Filed under: commercial insurance — cleavelandinsurance @ 3:39 pm

 

There is still great confusion between what an Internet Liability exposure is and a policy covers, and what a Cyber Liability exposure is and what it covers.  As a result, many agents do not see the exposures that exist and are not being adequately educated as to why and how they can sell these products to all of their commercial customers.  Hopefully, we can shed some better light on this.  The best way I can explain it to you, so that you can explain it to your “non-insurance” customer, follows.

Internet Liability has been available since the late 1990’s and was developed in order to respond to exposure that existed from business who began to develop websites as a means of advertising and informational tools.  Part of the concern that arose was libel, slander, plagiarism, and other personal injury exposures arising from non-GL hazards which were excluded by most D&O policies.  Some underwriters developed the Internet Liability policy to protect the insured against perils arising from the information they put out.  This is what Internet Liability covers-  EVERYTHING GOING OUT.

 

Eventually, e-commerce boomed and many businesses began allowing business and financial transactions as well as collecting customer information.  Exposures and hazards were dramatically increased, and Internet Liability policies themselves were not enough the adequately cover this new risk.  As a result Cyber Liability policies were created, which provides coverage for EVERYTHING COMING IN.

Cyber Liability consists of multiple coverage pieces that an Insured can select from, including Network Security and Privacy, Data Breach and Identity Theft coverage amongst the perils covered.  This coverage is especially important to any commercial company.

Whereas some companies have an Internet Liability exposure, most small commercial insured web sites have only contact information, history, or details on the operation, and not much more.  Likelihood of internet liability perils resulting in claims are highly minimized for these companies.  However, all of those companies are connected to the Internet, and all have the possibility of cyber attacks and intruders coming into their systems and networks and stealing information.  Even highly protected networks face these exposures.

October 3, 2011

Study Says WC Premiums Tied to Stock-Market Performance Rather Than Claims

Filed under: commercial insurance — cleavelandinsurance @ 3:25 pm

Study Says WC Premiums Tied to Stock-Market Performance Rather Than Claims

September 20, 2011 | Subscribe Now By Phil Gusman, PropertyCasualty360.com

NU Online News Service, Sept. 20, 1:30 p.m. EDT

A new study says rising workers’ compensation premiums are more closely associated with decreases in the Dow Jones Industrial Average and interest rates on U.S. Treasury bonds rather than higher claims payments, an assertion challenged by an industry association.

The study was released by the University of California’s UC Davis Center for Healthcare Policy Research, which conducts research on health-care access, delivery, costs, outcomes and policy.

J. Paul Leigh, UC Davis professor of public health sciences and senior author of the study, says, “Insurance companies appear to have been setting premiums according to their returns on the stock and bond markets, not according to the number of claims they have. They invest because they need a financial cushion to pay for claims and, if they lose, raise premiums to recoup their losses.”

UC Davis says it examined U.S. Bureau of Labor Statistics data on incidence rates for injuries and illnesses, along with data from the National Academy of Social Insurance on workers’ compensation costs to employers and benefits to workers and medical providers from 1973 through 2007. The information was compared with Dow Jones Industrial Average indices and Treasury bond interest rates.

UC Davis says its researchers found that while premiums increased from 1992-2007, claims decreased 1 to 2 percent each year. Claims for serious illnesses and injuries varied, but decreased overall. Furthermore, UC Davis says that for the entire 35-year timeframe of the study, rising premium rates were closely linked with the DJIA or Treasury bonds. “As either the Dow or interest rates on Treasury bonds fell, premiums rose, and vice versa,” UC Davis says.

Leigh contends that understanding workers’ compensation trends is important so policymakers can establish regulations that protect workers and contain costs.

“Insurance commissioners and legislators who regulate premium increases should pay greater attention to trends in claims rather than to insurance companies’ returns on investments in allowing premium increases,” he says. “More effort should also be directed toward policing contractors and smaller businesses to assure they aren’t circumventing workers’ compensation laws.”

However, Trey Gillespie, senior workers’ compensation director for the Property Casualty Insurers Association of America (PCI), states that insurers’ rates are based on loss-cost data, which is based on claims data and not investment income or losses.

He also points to medical inflation as a factor that impacts workers’ comp rates. “The study seems to overlook and minimize the impact of medical inflation on rising workers’ compensation loss costs,” he says. “Medical costs in the workers’ compensation system grow faster than the consumer price index and the medical price index and have grown to 59-60 percent of the total workers’ compensation benefit costs nationally.”

He notes that employers have worked with insurers to implement safety programs and prevent injuries, but lower claim frequency has been offset by an increase in the average medical cost per lost time, from $8,200 per claim in 1991 to $27,700 per claim in 2010.

Regarding the correlation to the stock market, Gillespie says, “Nationally, workers’ compensation premiums are down 29.3 percent for the period running from 2005-2010. This includes a period of time in which investment income was down as a result of the poor financial markets.”

Gillespie also says insurance carriers have been operating at calendar-year loss ratios that have exceeded 100 every year since 2006.