Figuring out how much liability coverage to buy isn’t easy, but it’s very important.

General liability covers an entity for bodily injury, property damage, personal and advertising injury, and medical payments to a third party because of negligence of the insured. So, adequately selecting the appropriate limits provides defense costs and indemnification to that third party, which will properly indemnify that claimant.

“As an organization, ask yourself, ‘If my limits are not enough to cover the injury, what happens?’” says Cliff Baseler, vice president at SeibertKeck Insurance Agency. “You hope the insurance company will offer a settlement at your policy limits or you might look at out-of-pocket costs.”

Smart Business spoke with Baseler about setting limits of liability.

How can business owners know what limits of liability to purchase?

First, review the limits that your vendors and customers have on their insurance requirements. Many businesses purchase a $1 million occurrence policy with a $2 million aggregate limit for the general liability policy. From there, adding an umbrella or excess policy provides additional limits over your original policies.

The question becomes how much is enough. It’s a balancing act between purchasing exuberant limits that exceed industry expectations or leaving your company on the short side and potentially exhausting policies. If policies are exhausted, you could be covering claims yourself.
More exposed industries will need to buy higher limits, such as manufacturers that produce products with the potential to impact many people or those who face class action potential.

The challenge for many startup companies is having enough capital to cover the cost of purchasing adequate limits. As a well-established company, it is important to look at the cost-benefit of adding additional umbrella limits. In addition, when looking at job contracts, it is critical to make sure your limits match those of the subcontractor or contract requirements.

How can you use benchmarking to help discover the best liability limits?

A benchmarking report is a tool, not an exact science. It takes into account many different factors, such as location, industry size, revenue, employees, etc., to compare companies in the same industry segment. Benchmarking an organization against its respective industry can provide a range of insurance program premiums, limits and retentions commonly used in the industry.

Having this important tool should allow business leaders the piece of mind that they are adequately insuring their company at a competitive cost. Also, in the event of a claim, it can justify the limits purchased if the claim should exceed that limit.
An informal way to benchmark is by attending trade associations or other industry events, so you can ask peers for their limits of liability. Networking is a great way to understand how liability limits are affecting others, before you have to deal with it.

What do marketplace trends like severability tell business owners?

The severity loss trend — the change in size of an individual loss over a period of time — is staggering. According to Chubb, in 1973, a moderate brain damage injury award was $1.24 million; today, that same award is closer to $5 million.

Chubb reports that in 2010 the median compensatory award in Ohio was $13,000, while nationally 12 percent of all jury awards are $1 million or more. In addition, 57 percent of the total awarded damage for commercial/industrial product liability verdicts is for the plaintiff; the remaining amount is for additional costs. These costs include the rise in mass litigation, the high cost of defending product suits, the need for many experts in complex situations or additional awarded damages. This means $1 million of coverage is not always enough to cover the actual injury. The costs associated with a claim are far greater than what most people perceive as ‘enough insurance.’

There’s no easy answer to finding the right liability limit. It may seem ridiculous for a small company to buy $25 million in limits, but what if it has a large automobile fleet? In the end, the most important tool is to have a proactive relationship with your agent. An experienced client advocate will responsibly inform a client on how to properly balance its limit of liability and dollars.

Cliff Baseler is a vice president at SeibertKeck Insurance Agency. Reach him at (614) 246-7475 or cbaseler@seibertkeck.com.

Insights Business Insurance is brought to you by SeibertKeck

Published in Columbus

Health care used to be one of the more scrutinized types of insurance, but that’s no longer part of the landscape.

Under the Affordable Care Act (ACA), the only criteria that determines price for small group health insurance is date of birth, zip code and whether you smoke or not — making it one of the few insurances where risk isn’t really considered, says Pete Seminaroti, vice president of the Healthcare Division at SeibertKeck Insurance Agency.

But even in the ACA era most business owners need a competitive health plan.

“Why do employers provide benefits? Not only to retain the employees they have, but also to entice a strong candidate as a new employee. Employees look beyond wages to health benefits,” Seminaroti says. “Benefits are important to retain and hire good people, and that still overshadows the other issues.”

Smart Business spoke with Seminaroti about trends in Ohio health insurance.

Who needs to buy health insurance?

Practically everyone needs to purchase insurance, either as an individual or group. If your employer doesn’t provide coverage, you need to enroll for an individual plan.

As business owners, the ACA has changed the rules for providing coverage. If you employ two to 49 full-time equivalent employees, you aren’t required to provide insurance as a small business. If you have 50 to 99 employees, you are considered a large group and need to provide insurance by 2016. Those with 100 or more employees must provide insurance by 2015. Failure to comply will result in government penalties.

What are the biggest factors to consider when purchasing health coverage?

Obviously, pricing drives most things, when we make a purchase privately or corporately.

Another large factor is the benefits structure. More than ever business owners want to ensure their network of providers, doctors, hospitals and medical facilities is strong. The insurance options have narrowed in the small group market; before, you might have had 50 to 70 choices, and now, it’s been simplified to about a dozen.

An owner also wants to go with a quality company that processes claims efficiently, with few errors. Typically the industry has done a good job of that. When you consider how many claims are processed daily, the number that go awry is minimal.

Finding the right insurance is easier when business owners can draw from their health care adviser’s knowledge. This ensures the owner has their choice of plans with the proper coverage and good network at a price within their budget.

With limited underwriting, are prices rising more than usual? Wasn’t Ohio projected to face large increases?

Over the past couple of years, there was a lot of that going around — Ohio was projected to increase anywhere from 40 to 80 percent.

In truth, some rates have gone up significantly, while other small groups have benefited from the ACA. An increase or decrease can highly depend on your small group’s makeup. In the past, if you had a group with high utilization, you were forced to stay with the same carrier for multiple years and your rates would increase. Now, that same group cannot be penalized because risk is no longer a factor.

What other tools are available to help?

In Ohio, we have a co-op that’s starting to bid out to small groups. It’s supposed to cost 10 to 15 percent less because it has eliminated the top layers of an insurance company. The co-op is run by a board of trustees comprised of the companies that have plans with that co-op. It will be interesting to see how the first year goes. If it’s successful, more co-ops may start.

There has been more interest in certain levels of self-funding. The self-funding industry came out with new structures that don’t expose employers to as much risk. It’s also a way to avoid some of the ACA taxes.

The health care insurance environment will continue to change over the next five years, and having a knowledgeable agent will be crucial in navigating the best course of action. Currently, most businesses still need to offer health insurance, and many employees, given the choice, would prefer for their employer to pick the health plan. Working with your trusted health care adviser, you can create a plan that will work for both the company and offer solutions for the employees.

Pete Seminaroti is a vice president of the Healthcare Division at the SeibertKeck Insurance Agency. Reach him at (330) 865-6578 or pseminaroti@seibertkeck.com.

Insights Business Insurance is brought to you by SeibertKeck

Published in Akron/Canton

In recent years there has been an increase in the number of claims filed against employers arising out of employment practice disputes. Many claims have no legal basis, but employers are still forced to defend themselves — spending time and money.

“Businesses are more likely to have an employment practices claim than a property claim,” says Marc McTeague, executive vice president at SeibertKeck. “There are over 100,000 charges filed annually against employers under statutes imposed by the Equal Employment Opportunity Commission (EEOC). The majority of these claims target smaller businesses. However, no business is exempt.”

Smart Business spoke with McTeague about understanding employment practices liability coverage.

What’s important to know about employment practice claims?

Employment law has grown at an incredible pace since passage of the Civil Rights Act of 1991 and the Age Discrimination in Employment Act, among others. Ambiguities in these laws allow the widest possible interpretation, which in turn opens the door for litigation.

The most frequent types of claims made against an employer are discrimination, sexual harassment, wrongful termination and retaliation. There’s also been an uptick in wage and hour lawsuits. Claims can come from potential hires, former and current employees, clients, suppliers or vendors.

Discrimination can be defined as the termination of an employee, demotion, refusal to hire or promote due to race, color, religion, age, sex, physical or mental disabilities or handicaps, pregnancy or national origin. Think about the times you or someone in the office told an off-color or racy joke to a new employee or client. It’s only a matter of time until this comes back as a claim.

The average claim costs an employer $50,000, and defense costs represent about two-thirds of the total settlement. Without a mechanism to transfer risk, these costs could cripple smaller businesses, or at least damage their reputation. For larger businesses, one uninsured claim can lead to potential shareholder lawsuits.

How does employment practices liability coverage mitigate this risk?

Businesses can purchase a policy that provides coverage for a wide spectrum of employment-related claims and offers risk management services to help minimize the risk of getting sued. This policy protects the corporation, directors and officers, employees (including leased and temporary), volunteers, and in some cases can be endorsed to include independent contractors (when working for the employer).

The definition of a claim includes arbitration, regulatory and administrative proceedings, and EEOC and Department of Labor investigations.

Limits can range from $500,000 up to $10 million or higher. As your business assets grow, so should your limits. Settlement costs and legal fees are typically included in the policy limits. However, some carriers will provide separate limits for these costs.

It’s important, however, to be aware of the varying contracts and differences in coverage and exclusions from one policy to another. There is no standard form. Sitting down with your trusted insurance adviser will help with this process.

Beyond buying insurance, what preventive measures lower claim risk?

Minimize the possibility of costly claims by:

  • Creating an employee handbook detailing company policies and procedures.
  • Educating employees on sexual harassment and discrimination, and offering sensitivity training.
  • Establishing a procedure for handling employee complaints.
  • Developing job descriptions with clear expectations of skills and performance.
  • Conducting periodic performance reviews.
  • Creating an effective record-keeping system to document employee issues, and what was done to resolve them.
  • Instituting at-will employment.
  • Implementing procedures for hiring, firing and disciplining employees.

Many carriers offer free risk management services. Online resources provide best practices training modules for addressing sexual harassment, discrimination, investigations and termination, while providing links to HR websites.

Marc McTeague is an executive vice president at SeibertKeck. Reach him at (614) 246-7475 or mmcteague@seibertkeck.com.

Insights Business Insurance is brought to you by SeibertKeck

Published in Columbus

Summer time is best spent outdoors. Jumping in the pool. Taking the boat out. Getting away for a road trip on your motorcycle. However, it is easier to enjoy the great weather when you know your summer “toys” are properly insured.

“The season of summer usually conjures up feelings of fun, especially vacations, swimming, boating, fishing, picnics and other outdoor activities, but along with the fun comes responsibility,” says Kevin Franczkowski, client advisor at SeibertKeck Insurance Agency, Inc.

Smart Business spoke with Franczkowski about how to handle insurance for these extra items.

What is personal lines insurance?

Personal lines insurance is a layer of protection that provides coverage for you and your assets, such as your home, car and possessions, against damage, theft and other potential risks.

When it comes to boats, jet skis, RVs, motorcycles, summer cars, pools, etc., what insurance should you have?

Watercraft, such as boats or jet skis, are placed under a marine policy. These annual policies would provide coverage for bodily injury and property damage. Bodily injury is any injury that you caused to someone else’s body, while property damage is damage caused to the boat.

Recreational vehicles (RVs), motorcycles and summer cars require an auto policy separate from your everyday auto policy that is specialized for unique autos. In some cases, a company will be able to add the watercraft and/or special vehicle to your current home policy as an endorsement.

While pools typically are covered under your homeowner’s policy, there are specific requirements to ensure safety. These include, but are not limited to, the depth of the water with diving boards, slides and fence specifications, such as height, area around the pool, self-closing and self-latching gates. Be sure to check with your agent for specific rules and regulations for your pool.

How can you make sure these items are insured to value, and what kind of cost could you be looking at?

While it is important to insure all of your summer toys, it is even more important that they are insured properly and to value; this is critical at a time of loss. The value of the item is best determined by using the year, make, model, value and any customized additions. These details are often reviewed at the annual renewal of your policy for updates and additions.

Premiums also will vary based on many factors. A stand-alone marine policy for a pontoon-style boat valued at $10,000 could have an annual premium of anywhere from $500 to $750, but this is all contingent on the individual’s underwriting information such as insurance score and loss history. Also, some companies provide credits if you package all your insurance, meaning you place your boat with your home and auto. This would also apply to an RV or motorcycle.

Are there ways to save on the premium upfront without jeopardizing important coverage?

Premium savings on ‘toys’ are similar to savings on your current insurance program. Your insurance score, loss history, location, age and marital status will influence the rates applied. The better your insurance score, the lower your premium — just as a high claims history will result in higher premiums.

What else do you need to know about this kind of coverage?

When making a claim, the first step is to contact the proper authorities to help if someone is injured. Then, you will need to call your insurance agent with the details of the event and secure the contact information needed from all parties. Taking photos and obtaining contact information from witnesses is highly encouraged. Your claims adjustor will assist in the entire process.

Surprisingly, most homeowner’s insurance does not cover summer toys for your kids, such as mini-electric cars and scooters. Considered a toy, these are often overlooked but have the potential to be harmful.

When purchasing ‘toys’ it is best to advise your insurance agent immediately. He or she will make sure they are properly insured to value and be able to offer some safety tips to ensure you have a safe and fun summer.

Kevin Franczkowski is a client advisor at SeibertKeck Insurance Agency, Inc. Reach him at (330) 867-3140 or franke@seibertkeck.com.

To keep up with the latest insurance news and how your company could be impacted, sign up to receive our newsletter at www.seibertkeck.com.

Insights Business Insurance is brought to you by SeibertKeck

Published in Akron/Canton

Summer time is best spent outdoors. Jumping in the pool. Taking the boat out. Getting away for a road trip on your motorcycle. However, it is easier to enjoy the great weather when you know your summer “toys” are properly insured.

“The season of summer usually conjures up feelings of fun, especially vacations, swimming, boating, fishing, picnics and other outdoor activities, but along with the fun comes responsibility,” says Cliff Baseler, vice president at Best Hoovler Insurance Services Inc., a SeibertKeck company.

Smart Business spoke with Baseler about how to handle insurance for these extra items.

What is personal lines insurance?

Personal lines insurance is a layer of protection that provides coverage for you and your assets, such as your home, car and possessions, against damage, theft and other potential risks.

When it comes to boats, jet skis, RVs, motorcycles, summer cars, pools, etc., what insurance should you have?

Watercraft, such as boats or jet skis, are placed under a marine policy. These annual policies would provide coverage for bodily injury and property damage. Bodily injury is any injury that you caused to someone else’s body, while property damage is damage caused to the boat.

Recreational vehicles (RVs), motorcycles and summer cars require an auto policy separate from your everyday auto policy that is specialized for unique autos. In some cases, a company will be able to add the watercraft and/or special vehicle to your current home policy as an endorsement.

While pools typically are covered under your homeowner’s policy, there are specific requirements to ensure safety. These include, but are not limited to, the depth of the water with diving boards, slides and fence specifications, such as height, area around the pool, self-closing and self-latching gates. Be sure to check with your agent for specific rules and regulations for your pool.

How can you make sure these items are insured to value, and what kind of cost could you be looking at?

While it is important to insure all of your summer toys, it is even more important that they are insured properly and to value; this is critical at a time of loss. The value of the item is best determined by using the year, make, model, value and any customized additions. These details are often reviewed at the annual renewal of your policy for updates and additions.

Premiums also will vary based on many factors. A stand-alone marine policy for a pontoon-style boat valued at $10,000 could have an annual premium of anywhere from $500 to $750, but this is all contingent on the individual’s underwriting information such as insurance score and loss history. Also, some companies provide credits if you package all your insurance, meaning you place your boat with your home and auto. This would also apply to an RV or motorcycle.

Are there ways to save on the premium upfront without jeopardizing important coverage?

Premium savings on ‘toys’ are similar to savings on your current insurance program. Your insurance score, loss history, location, age and marital status will influence the rates applied. The better your insurance score, the lower your premium — just as a high claims history will result in higher premiums.

What else do you need to know about this kind of coverage?

When making a claim, the first step is to contact the proper authorities to help if someone is injured. Then, you will need to call your insurance agent with the details of the event and secure the contact information needed from all parties. Taking photos and obtaining contact information from witnesses is highly encouraged. Your claims adjustor will assist in the entire process.

Surprisingly, most homeowner’s insurance does not cover summer toys for your kids, such as mini-electric cars and scooters. Considered a toy, these are often overlooked but have the potential to be harmful.

When purchasing ‘toys’ it is best to advise your insurance agent immediately. He or she will make sure they are properly insured to value and be able to offer some safety tips to ensure you have a safe and fun summer.

Cliff Baseler is vice president at Best Hoovler Insurance Services Inc., a SeibertKeck company. Reach him at (614) 246-7475 or cbaseler@bhmins.com.

To keep up with the latest insurance news and how your company could be impacted, sign up to receive our newsletter at www.seibertkeck.com.

Insights Business Insurance is brought to you by SeibertKeck

Published in Columbus

Every day more than 10,000 baby boomers turn 65, and during the next 15 years it’s expected that more than 1.3 million home health and personal care aides will be needed to accommodate them. In addition, in-home care can be costly. On average, a caregiver or client will spend $18,000 a year for 20 hours a week of care.

“Long-term care insurance can fund home care that will allow you to remain at home where you are most comfortable, with safety and independence,” says Tim Able, client advisor and life sciences specialist at SeibertKeck Insurance.

Smart Business spoke with Able about how to maximize your long-term care insurance for home health care.

Do people mistakenly associate long-term care with nursing homes?

Yes, but the opposite is also true. According to the American Association for Long-Term Care Insurance, 7.6 million individuals currently receive care at home because of long-term health conditions, permanent disability or terminal illness, but there are just 1.8 million individuals in nursing homes. Many buy long-term care insurance just so they can receive care in their own home.

Who typically uses home health care?

Every day, guardians, care managers and family members make long-term health care decisions for their clients and loved ones. Home health care can be an appropriate solution for those who wish to age at home.

However, it’s important to understand the differences in home care providers to make informed decisions. The Agency for Health Care Administration licenses home health care agencies following a comprehensive survey. A home health agency can assist with personal care and offer skilled nursing services including medication management. Certified nursing assistants or home health aides provide all personal care, and home health agencies are required to have a nurse available 24/7. A home health agency is a good choice when you desire nursing involvement or assistance with daily living.

What’s key to know when hiring a caregiver?

Here are some steps to follow:

  • Look for a home caregiver from a reputable agency, where he or she is licensed, bonded and insured. Also, check that the caregiver is covered by workers’ compensation insurance.
  • The caregiver should be supervised by a licensed professional who makes unannounced visits.
  • When hiring, review two to three references and require a recent criminal background check, as well as random drug tests, TB tests and a recent physical exam. The caregiver should have a minimum of two to three years of experience.
  • If the position involves driving, determine that the caregiver’s driver’s license and car insurance are current and valid.

How does long-term care insurance cover home health care?

Activities of daily living (ADL) refers to what we do on a daily basis to care for ourselves, including bathing, dressing and using the bathroom. Individuals with chronic diseases often have trouble performing some of these ADL, so the measure is used to assess long-term care insurance benefit eligibility.

Depending on your policy, you might have a waiting period before you can access your funds. Does your policy allow you to start collecting benefits on the day you begin receiving assistance, or are you subject to a waiting period of anywhere from 30 to 120 days? It’s important to get advice from your broker when deciding which policy is best.

Also, seriously consider when you can initiate a claim. The waiting period often corresponds to the benefit period, or the maximum amount of time that the insurance company will pay benefits. The longer the waiting period before benefits begin, the longer the company may pay for care. Benefits typically last three to five years.

When is a good time to buy?

Many people don’t realize the significant benefits to purchasing long-term care insurance earlier in life. For the same policy, yearly premiums for policies purchased at age 50 are notably less than premiums at 70. Also, the earlier you purchase, the more likely your application will be approved. By planning ahead, you will be best prepared to secure an affordable policy that helps you stay at home when the time comes.

Tim Able is a client advisor and life sciences specialist at SeibertKeck Insurance. Reach him at (330) 294-1363 or table@seibertkeck.com.

Visit SeibertKeck on Twitter @SeibertKeck or online at www.SeibertKeck.com/page/skmedical.

Insights Business Insurance is brought to you by SeibertKeck

Published in Akron/Canton

Every day more than 10,000 baby boomers turn 65, and during the next 15 years it’s expected that more than 1.3 million home health and personal care aides will be needed to accommodate them. In addition, in-home care can be costly. On average, a caregiver or client will spend $18,000 a year for 20 hours a week of care.

“Long-term care insurance can fund home care that will allow you to remain at home where you are most comfortable, with safety and independence,” says Marc McTeague, president of Best Hoovler McTeague Insurance Services, a member of SeibertKeck.

Smart Business spoke with McTeague about how to maximize your long-term care insurance for home health care.

Do people mistakenly associate long-term care with nursing homes?

Yes, but the opposite is also true. According to the American Association for Long-Term Care Insurance, 7.6 million individuals currently receive care at home because of long-term health conditions, permanent disability or terminal illness, but there are just 1.8 million individuals in nursing homes. Many buy long-term care insurance just so they can receive care in their own home.

Who typically uses home health care?

Every day, guardians, care managers and family members make long-term health care decisions for their clients and loved ones. Home health care can be an appropriate solution for those who wish to age at home.

However, it’s important to understand the differences in home care providers to make informed decisions. The Agency for Health Care Administration licenses home health care agencies following a comprehensive survey. A home health agency can assist with personal care and offer skilled nursing services including medication management. Certified nursing assistants or home health aides provide all personal care, and home health agencies are required to have a nurse available 24/7. A home health agency is a good choice when you desire nursing involvement or assistance with daily living.

What’s key to know when hiring a caregiver?

Here are some steps to follow:

  • Look for a home caregiver from a reputable agency, where he or she is licensed, bonded and insured. Also, check that the caregiver is covered by workers’ compensation insurance.
  • The caregiver should be supervised by a licensed professional who makes unannounced visits.
  • When hiring, review two to three references and require a recent criminal background check, as well as random drug tests, TB tests and a recent physical exam. The caregiver should have a minimum of two to three years of experience.
  • If the position involves driving, determine that the caregiver’s driver’s license and car insurance are current and valid.

How does long-term care insurance cover home health care?

Activities of daily living (ADL) refers to what we do on a daily basis to care for ourselves, including bathing, dressing and using the bathroom. Individuals with chronic diseases often have trouble performing some of these ADL, so the measure is used to assess long-term care insurance benefit eligibility.

Depending on your policy, you might have a waiting period before you can access your funds. Does your policy allow you to start collecting benefits on the day you begin receiving assistance, or are you subject to a waiting period of anywhere from 30 to 120 days? It’s important to get advice from your broker when deciding which policy is best.

Also, seriously consider when you can initiate a claim. The waiting period often corresponds to the benefit period, or the maximum amount of time that the insurance company will pay benefits. The longer the waiting period before benefits begin, the longer the company may pay for care. Benefits typically last three to five years.

When is a good time to buy?

Many people don’t realize the significant benefits to purchasing long-term care insurance earlier in life. For the same policy, yearly premiums for policies purchased at age 50 are notably less than premiums at 70. Also, the earlier you purchase, the more likely your application will be approved. By planning ahead, you will be best prepared to secure an affordable policy that helps you stay at home when the time comes.

Marc McTeague is president of Best Hoovler McTeague Insurance Services, a member of SeibertKeck. Reach him at (614) 246-RISK or mmcteague@bhmins.com.

Visit SeibertKeck on Twitter @SeibertKeck or online at www.SeibertKeck.com/page/skmedical.

Insights Business Insurance is brought to you by SeibertKeck

Published in Columbus

On Feb. 12, President Barack Obama signed the executive order, Improving Critical Infrastructure Cyber Security, which will set cybersecurity standards for certain private companies.

However, remarks by Lisa J. Sotto, chair of the U.S. Department of Homeland Security (DHS), Data Privacy and Integrity Advisory Committee, raised red flags. She said: “I would suggest that these standards will become the standards by which companies will be judged, so that if there is a cybersecurity event there may be negligence claims that follow if the standards are not complied with. Also, there could be shareholder suits, if a company suffers damage as the result of a cybersecurity event where they’re not complying with the cybersecurity framework.”

“If the government says, ‘We’re officially setting the bar and if you’re not above it you’re going to be found negligent,’ then companies will need an insurance policy that will defend them,” says Karl Henley, vice president at SeibertKeck Insurance Agency.

Smart Business spoke with Henley about possible implications of this executive order.

What is the executive order’s goal?

After failing to pass the Cyber Intelligence Sharing and Protection Act of 2012, the Obama administration wanted to protect what it felt was critical infrastructure — private companies. This executive order establishes the foundation for a ‘framework’ between the private sector and government, seeking to set standards for certain industries. The goal is to improve communication and awareness so the private sector can take steps to protect itself.

Currently, only some private industry sectors have set cybersecurity standards, such as the credit card processing industry. This is the government’s first attempt to set a wider standard for all private companies.

Do you think many are aware of this?

Large corporations should be aware, but this could have been missed by many middle-market and owner-managed businesses that may not have an in-house compliance group to stay on top of developing regulations.

What will be impacted?

The areas that will be impacted are defined as critical to our country and economic infrastructure, such as financial services, and electrical, water, water treatment and fuel suppliers. Before July 12, the secretary of the DHS will identify where a cyberattack could cause catastrophic problems, regionally or nationally, for public health or safety, economic security or national security.

Executive orders cannot make mandates, so this will be voluntary for most. However, courts may choose to use these as the standard for negligence. Government contractors will be incentivized to comply as a criterion for contract selection.

What are the cybersecurity implications?

One positive is the improved flow of information from government to the private sector about cyberthreats. CIOs and IT staff will have improved access to timely information about potential hazards.

However, Sotto’s remarks are troubling. Anytime someone in government uses the words ‘negligence,’ ‘judged’ and ‘claims,’ it’s generally not good for businesses. It will be critical that companies minimize potential weaknesses in cybersecurity infrastructure.

What does this mean for insureds?

A general liability policy excludes most cyber-related losses, so insureds will need to fill coverage gaps with a cyber liability policy.

It also will be important to keep informed as insurance policy language changes to incorporate the standards within your policy. Good dialogue around your business model, Internet presence, and interaction with customers with an informed adviser or the right consultants will be essential to helping companies adapt and protect themselves from negligence claims. Director and officers executive liability policies, often overlooked by non-publicly traded companies, generally cover the defense of shareholder suits.

What are some next steps?

The private sector, in conjunction with the National Institute for Standards and Technology, is being asked to help design the standards and develop a fluid framework, as cyberattackers frequently change tactics. The proposed framework will be published Oct. 10, with the final due Feb. 12, 2014.

Karl Henley is vice president of SeibertKeck Insurance Agency. Reach him at (330) 294-1358 or khenley@seibertkeck.com.

To keep up with the latest insurance news and how your company could be impacted, sign up to receive our newsletter.

Insights Business Insurance is brought to you by SeibertKeck

Published in Akron/Canton

On Feb. 12, President Barack Obama signed the executive order, Improving Critical Infrastructure Cybersecurity, which will set cybersecurity standards for certain private companies.

However, remarks by Lisa J. Sotto, chair of the U.S. Department of Homeland Security (DHS), Data Privacy and Integrity Advisory Committee, raised red flags. She said: “I would suggest that these standards will become the standards by which companies will be judged, so that if there is a cybersecurity event there may be negligence claims that follow if the standards are not complied with. Also, there could be shareholder suits, if a company suffers damage as the result of a cybersecurity event where they’re not complying with the cybersecurity framework.”

“If the government says, ‘We’re officially setting the bar and if you’re not above it you’re going to be found negligent,’ then companies will need an insurance policy that will defend them,” says Cliff Baseler, vice president at Best Hoovler Insurance Services Inc., a SeibertKeck company.

Smart Business spoke with Baseler about possible implications of this executive order.

What is the executive order’s goal?

After failing to pass the Cyber Intelligence Sharing and Protection Act of 2012, the Obama administration wanted to protect what it felt was critical infrastructure — private companies. This executive order establishes the foundation for a ‘framework’ between the private sector and government, seeking to set standards for certain industries. The goal is to improve communication and awareness so the private sector can take steps to protect itself.

Currently, only some private industry sectors have set cybersecurity standards, such as the credit card processing industry. This is the government’s first attempt to set a wider standard for all private companies.

Do you think many are aware of this?

Large corporations should be aware, but this could have been missed by many middle-market and owner-managed businesses that may not have an in-house compliance group to stay on top of developing regulations.

What will be impacted?

The areas that will be impacted are defined as critical to our country and economic infrastructure, such as financial services, and electrical, water, water treatment and fuel suppliers. Before July 12, the secretary of the DHS will identify where a cyberattack could cause catastrophic problems, regionally or nationally, for public health or safety, economic security or national security.

Executive orders cannot make mandates. However, courts may choose to use these as the standard for negligence. Government contractors will be incentivized to comply as a criterion for contract selection.

What are the cybersecurity implications?

One positive is the improved flow of information from government to the private sector about cyberthreats. CIOs and IT staff will have improved access to timely information about potential hazards.

However, Sotto’s remarks are troubling. Anytime someone in government uses the words ‘negligence,’ ‘judged’ and ‘claims,’ it’s generally not good for businesses. It will be critical that companies minimize potential weaknesses in cybersecurity infrastructure.

What does this mean for insureds?

A general liability policy excludes most cyber-related losses, so insureds will need to fill coverage gaps with a cyber liability policy.

It also will be important to keep informed as insurance policy language changes to incorporate the standards within your policy. Good dialogue around your business model, Internet presence, and interaction with customers with an informed adviser or the right consultants will be essential to helping companies adapt and protect themselves from negligence claims. Director and officers executive liability policies, often overlooked by non-publicly traded companies, generally cover the defense of shareholder suits.

What are some next steps?

The private sector, in conjunction with the National Institute for Standards and Technology, is being asked to help design the standards and develop a fluid framework, as cyberattackers frequently change tactics. The proposed framework will be published Oct. 10, with the final due Feb. 12, 2014.

Cliff Baseler is vice president of Best Hoovler Insurance Services Inc., a SeibertKeck company. Reach him at (614) 246-7475 or cbaseler@bhmins.com.

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Published in Columbus

In 2002, President George W. Bush signed the Terrorism Risk Insurance Act (TRIA) requiring insurance carriers and the federal government to establish a risk-sharing partnership for future losses. It was created as a result of 9/11 as a temporary measure to allow time for insurance carriers to develop their own solutions. Originally set to expire in 2005, the act has been extended twice, and will now expire in 2014.

“The private markets alone cannot and will not provide the level of terrorism insurance our economy demands,” says Shelley White, assistant vice president at SeibertKeck. “The threat of terrorism has become a greater concern for businesses in today’s uncertain and rapidly evolving global climate. It should continue to be part of a comprehensive risk management program.”

Smart Business spoke with White about terrorism coverage today and where problems still occur.

Why was the TRIA created and how does it work?

For property and casualty insurers, 9/11 losses paid out a reported $40 billion from property, business interruption, aviation, workers’ compensation, liability and life insurance lines. As the largest disaster in the industry’s history, carriers were reluctant to continue providing coverage. State regulators agreed to allow carriers to exclude terrorism from policies, and coverage was soon unavailable or extremely expensive.

The TRIA was created as a temporary federal program of shared public and private compensation for insured losses to allow the private market to stabilize, protect consumers by ensuring the availability and affordability of insurance for terrorism risks, and preserve state regulation of insurance. Carriers set the price of coverage within the limits imposed by regulations.

With the federal backstop in place, commercial lines policyholders could choose to purchase or reject terrorism coverage from existing insurance programs; the program doesn’t extend to personal lines policyholders. This offer continues today with most coverage lines, except workers’ compensation policies where insurers and qualified self-insured employers cannot exclude terrorism coverage because of lifetime medical care for on-the-job duties.

What changes were made when the program was extended?

In 2007, the government modified and extended the act through Dec. 31, 2014. Several provisions changed, including:

  • Revising the definition of a certified act of terrorism to eliminate the requirement that the individual(s) is acting on behalf of a foreign person or interest. Some property insurers add exclusionary language related to non-certified terrorism coverage.

  • Updating the payout cap to $100 billion per year for insured losses.

  • Requiring the Treasury Department to establish a procedure for allocation of pro-rata payments in the event that a terrorism loss exceeds the cap.

When purchasing terrorism coverage, how much do premiums increase?

The cost for the TRIA on an average risk is usually a single-digit percentage of the policy premium. Higher risk businesses such as financial institutions, real estate, health care and utility companies tend to be in the double-digit percentages.

Many policyholders, regardless of size, continue to decline terrorism coverage — not considering themselves targets. Larger risks often feel the coverage doesn’t provide enough to protect their exposures.

What are some of the continuing problems with terrorism coverage?

It is the insurance industry’s goal to work with Congress on creating terrorism insurance renewal past 2014. Terrorism coverage provides market stability.

There will be a significant effect on real estate lending if this backstop disappears.  Mortgage-backed securities, for example, will be in default. Private markets aren’t able to offer coverage without the federal backstop and cannot offer the level of insurance our economy demands.

The Government Accountability Office is working to assess options and review proposals, and Congress is encouraging greater private market participation. We’re optimistic that a long-term solution will be reached.

Shelley White is an assistant vice president at SeibertKeck. Reach her at (330) 865-6582 or swhite@seibertkeck.com.

 

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