The following is an opinion article from Mark Paccione, EVP of Commercial Management Solutions, and Kelly Barron, Vice President, Product Manager, EPL and Middle Market, at AXIS Insurance, looking at what brokers can do to combat underinsurance in private businesses.
The environment in which private companies operate is increasingly litigious. This is exacerbated by a world consumed by political and economic uncertainty. Hackers are becoming more astute, employment law and ways of working are increasingly complex, and businesses are under the spotlight more than ever before. This creates a perfect storm of risks facing those who manage insurance.
Private companies are more likely to fall victim to underinsurance, according to a research study identifying concerns brokers have for their clients. This is due to the fact that many risks that private companies face today were not present when the business was formed, resulting in a protection gap. This leaves private companies vulnerable during a time of need, likely with limited resources, expertise and budget to cope with a problem.
Private companies are particularly vulnerable to these risks. For example, while public companies face hacking attempts on a large scale, shrewd cyber criminals looking to profit by understanding the protection gaps that plague private companies.
Potential Areas of Underinsurance
With these mounting challenges, and limited budgets, brokers can help private companies to identify emerging protection gaps they face and find the right insurance coverage that will help mitigate this risk exposure.
Protecting against problems at the top
A rise in new technology and social media platforms is increasingly empowering stakeholders to challenge businesses- from consumers and employees to regulators and shareholders. Private companies often face antitrust claims. These lawsuits can feature a number of different allegations against a private firm, such as unfair competition, cooperation with a competitor, manipulating the market to raise the costs of production or goods or services, and operating as a monopoly in an industry sector. Seeking directors’ and officers’ liability cover for this area is now an essential pillar of a private company insurance policy.
Employment issues
Employment practices liability is often an essential purchase for private companies. Such liability provides coverage against a range of employment-related issues, including discrimination, harassment, social media bullying, and wrongful termination.
Workplace violence
Protecting against a workplace violence incident is important, particularly if you work in a high-risk sector. Policies can include expense coverage for everything related to an incident, ranging from business interruption expenses, to loss of profits and the hiring of public relations experts or security firms.
Beating the hackers
Cyber is fast working its way to the top of global economic and business agendas. Attacks are increasing, and working their way down from large, publicly traded corporations to now being fully ensconced as an issue every private business owner is likely to face in the future. Recent global cyberattacks, such as WannaCry and Petya, have proven just how rapidly the damage can spread. Many private companies are underinsured in this area, so more needs to be done by insurers and brokers to help firms adapt to this new reality. Insurers often offer risk mitigation and management services that help a company in the event of a breach or suspected breach, this is vital as most private companies do not have CTO’s or CIO’s.
Crime
Crime is a risk faced by all businesses. As the means of committing crimes increase, particularly driven by the rise in new technology, it’s essential that private companies consider this in their insurance mix. Crime insurance can reimburse everything from petty employee theft to sophisticated social engineering schemes.
Claims
A sophisticated claims team can guide and help private firms that may not have resources in house. Insurance companies’ with experienced claims professionals are a valuable resource to private companies and can help to minimise damages.
Private companies face a unique set of challenges across the board, and insurance is not always a top priority, particularly in the absence of an in-house risk manager. It is important that brokers educate the Insured about crucial areas of coverage, and that private companies understand all the risk factors and exposures facing them for which insurance coverage is available. Managing the litany of risks associated with private companies is difficult, but with proper insurance coverage companies will be better equipped to manage their business with minor interruptions and financial loss.
Brokers need to work with private businesses to help tackle the problem of underinsurance. The preceding article was composed by Mark Paccione, EVP of Commercial Management Solutions, and Kelly Barron, Vice President, Product Manager, EPL and Middle Market, at AXIS Insurance.
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