If you havent already heard from your insurance company about Y2K, the next rude surprise is as near as your renewal date. Insurance providers across the nation are trying to exclude Y2K-related problems from policy renewals.
Fearing a repeat of the underwriting mess of the 1980s from a run of pollution and asbestos claims, insurance companies have begun an aggressive effort to inform companies that conventional coverages property, business interruption and directors and officers insurance wont help them if monetary damages result from the millennium bug.
Business owners who want protection from Y2K-oriented damage can get it, but at a price. Premiums for such policies are running about 10 percent of coverage that is, a $1 million policy will cost $100,000. Even then, coverage is available only after a lengthy paperwork process that tells the insurance underwriter precisely how much youve done to prepare for Y2K.
But Brad Norrick, a senior vice president at Cleveland-based J&H Marsh and McClennan, the worlds largest risk and insurance services firm, says you dont have to pay a ransom for coverage, nor do you have to remain exposed.
Marsh & McClennan, for instance, used its muscle to avoid the coverage exclusions that underwriters were creating.
We asked them to tell us what it would take to keep the policies in place and cover any Y2K related problems, explains Norrick. We also told them that if they wouldnt work with us, wed move all our business to underwriters who will.
With assurances in hand, Marsh & McClennan then turned to its clients. Were working with (them) to make sure their compliance programs are enough, he says.
Thats done through analysis reports, which detail how each client company is preparing for Y2K. The report covers issues similar to what underwriters ask on the questionnaires, but Norrick says theres a difference. Weve recommended that our clients not fill out (questionnaires) because they could be used against them as a warranty. The report answers the main concerns underwriters have, without that risk.
Those concerns include:
- What resources are dedicated to the problem;
- When the company expects to be Y2K compliant;
- When the company began addressing the problem;
- Whether the company has met target dates so far.
Norrick says smaller organizations may find they have the same flexibility with underwriters if they talk to them and proactively address concerns.
All underwriters are interested in what companies are doing to prepare themselves, he says. If they look at the exposure and see the effort merits it, most will continue to provide coverage under their separate existing policies.
How to reach: J&H Marsh and McClennan (216) 523-3661