Why your benefits plan must evolve to meet this moment

As the economy continues its recovery from 2020, organizations are seeing their revenue and headcount grow. Now pressure on their talent recruitment and retention efforts, a critical means of staying competitive, is mounting.

The talent pool is expanding as remote work offers an opportunity to court candidates from beyond commuting range. But this also brings challenges as top-tier employees now have far more options and can be enticed by higher pay and other perks. With some companies experiencing turnover of more than 15 percent, employers need to look critically at what they offer.

“Compensation has always been the quick solve in the war for talent,” says Vince Giacalone, Area Vice President, Central Ohio, at Gallagher. “Now, companies must look outside the mainstream solutions and explore employee benefits as a way to not only attract, but retain top-tier talent.”

Smart Business spoke with Giacalone about the role benefit plans are playing in the war for talent.

How did the pandemic affect employee benefits plans?

Across the board, there’s been an increase in major medical spending by employers. That direct injection of capital stems from less utilization. Overall, in 2020, employees utilized health care, and by extension their health insurance, less than was anticipated. That’s because they put off unnecessary procedures, such as dental cleanings and checkups with their physician. And so with the savings organizations gained through low utilization, they’ve been able to implement greater employer contributions and more robust offerings. For example, before the pandemic there may have been one plan option. Now it’s moved more so into a per employee, per class approach, tailoring plans to different employees.

Another trend is the addition of cost-saving measures to make sure that employees can realize the full breadth of their plan. That involves the inclusion of voluntary benefits such as life hospital indemnity plans, vision and dental.

How are benefits evolving to cover remote workers?

Some 50 percent of the workforce is now completely remote with no current plans to come back, so employers should look at how benefits plans need to be structured to accommodate remote workers. That makes understanding certain plan aspects more important, such as network — are hospitals and physicians where employees are now working and living included in the plan network? Employers need to make considerations in their plan design, network and total benefits offerings to include remote employees where they are. That’s led to a trend toward telemedicine as a way to both control costs and to account for the total workforce — those who are remote and those who work on-premise.

Why should organizations address employee well-being?

There’s increased attention on emotional well-being and mental health in organizations’ overall benefits packages. The pandemic has brought to the forefront the idea of whole employee wellness. So employers increasingly are offering voluntary benefits and other well-being products to help employees.

Embracing remote work is one of the main ways employers are addressing well-being. What that really means is understanding where and how each employee works best. It also means understanding the benefits of work-life balance and instituting programs within the organization to try bring that to the forefront.

Gone are the days of benefits that are just major medical and an accident plan. It’s now about life, health, family planning, financial literacy and more. That presents an opportunity for progressive-thinking companies to compete for top-tier talent with the help of a complete benefits package. Whether it’s attracting or retaining talent, offering employees a full, well-rounded benefits package — major medical, voluntary benefits, financial literacy, mental health, coaching, remote work — has never been more important. This is an opportunity to gain a competitive advantage by meeting head on the new day of work, which now includes remote and hybrid arrangements. It’s a chance, through an intentional focus on total employee wellness, to build a work place that attracts and retains talent, because organizations need it now more than ever.

Insights Insurance is brought to you by Gallagher

Opportunities to leverage value in your employee health plan

For many employees, the pandemic brought home the importance of health insurance. But employers are facing challenges with their plans, including rising costs.

“It’s gotten to a point where the CFOs and directors of finance in any size organization have to pay attention to the total health spend, which can rank among companies’ most significant costs,” says Vince Giacalone, Area Vice President, Central Ohio, at Gallagher. “So they’re looking for strategies to control it now and in the coming years in order to get out of what is currently a reactionary position.”

Also, the struggle to find labor, even with the recruitment opportunity that remote work presents, has made a robust benefit program critical. Too often, though, there’s a value disconnect between the hard and soft dollars that are being spent on health insurance. That’s left companies struggling to show plan value to the end user.

Smart Business spoke with Giacalone about the challenges companies are facing with their health insurance plans, and the strategies to proactively address them.

What effect has the pandemic had on employer-based health care benefits?

Insurance carriers are still trying to grasp all of the long-term repercussions of this pandemic. That led to a wait-and-see approach this past renewal season. A lot of the carriers, both in a fully insured atmosphere and from a self-insured stop-loss perspective, made a lot of rate passes this year to buy time and get more certainty.

And while that’s happening, employers have tended to scrutinize their health care plans, one of their largest spends, to try to immediately control and save money. They also considered the broader picture and began to question whether they’re prepared for the next event. That caused many employers to look inward and evaluate their partners, especially as it relates to their health insurance program. That’s important in part because health and wellness benefits are being used from a recruitment and retention perspective. With many employers struggling to fill open positions, there’s a need to offer a robust, cost-effective plan to recruit employees. It’s also created an opportunity to align hard and soft dollar savings with that employee recruitment and retention piece.

How has remote work affected health care coverage?

When companies hire out-of-state employees, employers need to consider the proximity of that employee in terms of their network and the hospital system to determine if they’re aligned with a plan that has parity across the U.S. There’s also the compliance piece. Each state can have its own set of rules and regulations regarding health insurance and health care. And so understanding each state’s ERISA laws is paramount to avoid falling out of compliance with the Department of Labor.

But employers should also consider the opportunity. The employee benefit plan can be a way to bind remote employees to the company culture. If done correctly, it can create a unified message about employee health and welfare.

Why are benchmarking and financial modeling important now?

Companies’ health plan brokers and related strategic partners should have been updating them through the pandemic on how to respond to furloughs and changes in head count as they happened. As companies experienced changes to their workforce, the opportunity that arose out of the challenge was finding a way to build the health care plan back up as the company rebuilt itself. That’s where the importance of benchmarking and modeling against the competitive industry landscape comes in.

It’s also a chance to explore a company’s financial funding model to see if it’s a better opportunity for the business and its specific risk profile to self-insure health insurance or to go fully insured and transfer all risk to a carrier. A self-funded feasibility study can further explore that specific risk by evaluating a company’s data and then preparing a guided assessment that helps the company decide.

Companies should seize the opportunity to introduce cost control in their health plan and set up strategies that affect the whole organization for the years to come. There’s a chance now to stop reacting and instead become proactive.

INSIGHTS Insurance is brought to you by Gallagher

How to capture the customer voice to generate new services

Our members tell us what we are good at and where we need to get better. We use feedback from customer satisfaction surveys and industry measurements such as J.D. Power. This information is pure gold because you can dissect it to discover where you need to improve, says David Bano, chief claims officer at Nationwide. It’s like a math equation where you remove pieces to make customer interactions quicker and more convenient.

It’s important to listen to positive and negative feedback equally.

“We use constructive feedback to drive improvement. We use positive feedback to reinforce what we are doing right. Our claims team has almost 8,000 employees, and they are committed to helping people,” he says. “Customer service and innovation go beyond an insurance contract. It’s about solving people’s problems.”

Smart Business spoke with Bano about how to use customer satisfaction to improve overall business.

How do you ensure that feedback gets shared with other relevant departments?

The same team devoted to listening to the voice of customers needs the ability to make process improvements. They can collaborate across the company to create a dynamic service delivery model. Every time you get a new set of information, it should be shared across the team and internalized. You also can look at what other companies are doing and learn from them.

Technology and customer expectations are changing quickly. It’s critical to continue to evolve to serve your customers. Sharing the feedback you receive helps the entire company grow and learn.

Once information is collected, what are the best ways to innovate products or services?

Customer satisfaction should be part of the innovation program to re-engineer your products or services. The most valuable ideas solve multiple problems. Will an activity improve your customer satisfaction, reduce costs or help improve employee engagement? If it hits two of the three, it’s a good idea. If it hits all three, it’s a great idea.

Look for bigger things that solve a large-scale problem. In the insurance industry, that could be hurricane planning or reducing texting while driving. Again, look outside your industry to help drive the right investments into research and testing. It’s also important to work across different functional areas of the company.

It’s hard to focus on tactical problems and also think five to 10 years in the future. One way to address this is to split a team, so one group solves today’s problems and the other group is pointed toward the future. Those strategic thinkers can be the disrupters you need. Think about Amazon, it calls the artillery on itself on a regular basis. It’s an organization that keeps re-inventing itself.

Do certain tools or training make this process easier?

You want to combine strategic thinking with good technology choices that remove redundant work. But it’s important to make sure the technology actually solves the problem. For example, insurance companies are using photo estimating, where a driver takes a photo of his or her damaged car. The problem is it doesn’t see the damage underneath. A better solution that gets to the end of the problem is hail-estimating booths. The machine fires hundreds of lasers at a car to get a completely accurate estimate of the damage.

In any industry, prevention is important. In the insurance industry, insurance companies would like to help avoid incidents that might give rise to claims. Once again, this is where technology is key. For instance, a sensor could detect a water leak if it was placed 1 inch above the basement floor, giving a person the chance to do something before it becomes a serious problem.

You have to look into the future and think about what products or services will be needed to not only solve problems, but also prevent them from occurring in the first place. For instance, as transportation needs change, it may be better to have insurance that follows a person, not the vehicle, because maybe they don’t want a car, they only want a ride.

Technology is changing the landscape, but it’s important to incorporate the customer voice to ensure all your products and services provide the best experience. At Nationwide, we call that being “On Your Side.”

Insights Insurance is brought to you by Nationwide

Tips for taking the customer experience to the next level

Less than 10 years ago a customer would call or email a company and expect a response within a couple of hours or so. Even a day or two was generally considered to be acceptable. Now, that same customer might send a message or share a concern over social media, and she expects a response in less than five minutes.

The speed of getting information and providing service has accelerated at an unbelievable rate — and with rapid advancements in technology come higher customer service expectations.

“The experiential bar has clearly been raised. If we look at the customer experience over the past five or 10 years, it’s changed like never before,” says Jasmine Green, Vice President and Chief Customer Advocate at Nationwide. “You have to ask: ‘What do our customers really want,’ and then deliver what they want, the way they want it. This is especially true if your company provides an array of products and solutions like Nationwide does. It’s all about being nimble, quick and consistent.”

Smart Business spoke with Green about how to make strong customer service even stronger in today’s world.

What are the biggest customer-service challenges?

It’s understanding who your customers are and quickly providing the service they want, how and when they want it. Today, new technology is at the center of providing customer service solutions that align with our new real-time service environment.

Another key is understanding the social media space. A few years ago, it was mostly Facebook and Twitter. Now, there are more social media applications becoming available every day and companies need to be focused, nimble and forward thinking as customers’ service expectations continue to evolve.

Companies also need to be agile as today’s customers continue to change their views on the end-to-end customer experience. Many customers view the value they receive based on the quality of the product, the guidance or information received to help them make the right purchase decision, and the service experience after the sale. This customer dynamic is particularly important to companies that provide a wide range of services and products.

Another key tool is an engaged and active social media team. In addition to timely responses to customer inquiries, this team needs to listen and monitor social media channels to address customer concerns and share stories of customer wins — important activities that impact the health and reputation of a brand.

Lastly, if customers have more than one product or service with a company, they need seamless access to the right people, at the right time, across the company. At Nationwide, for instance, the wide breadth of insurance and financial services solutions requires a sharp focus on helping members have a seamless, integrated experience across the company.

How can a company better understand its customer?

It starts with talking to and knowing the customer. For example, Nationwide uses customer insights and data analytics to gain an understanding of customer needs and preferences in order to better serve its members.

Nationwide also regularly has associates and leaders shadow claims associates and participate in agent ride-a-longs to better understand members’ experience. Technology is clearly helpful, but nothing replaces spending quality time with your customers and business partners.

How can employers ensure employees provide best-in-class customer service?

It’s everybody’s job to promote, service and live the brand.

Training is key, with a strong culture of learning and development. It starts with a comprehensive onboarding program, where new hires are taught the company culture and history.

It’s also important to not over-engineer the customer experience. Most customers simply want a product or service to meet their basic needs first — deliver on that expectation and they will buy more.

As the saying goes: Don’t over promise and under deliver. Be sure you know your customers, engage them where they live (in-person and using technology), and deliver on your company’s promise. That’s how you’ll win today and well into the future.

Insights Insurance is brought to you by Nationwide

As the pace of risk speeds up, it’s time to shift to offense

The world around us is changing, and thanks to technology, it’s doing so at an exponential rate. Customer service is increasingly handled via artificial intelligence. Autonomous vehicles are being test-driven on city streets. There are 10 internet-connected devices for every human on the planet. The future is here.

But these changes, and the explosion of data they make available, fundamentally alter business models, says Mike Mahaffey, Chief Strategy and Risk Officer and Senior Vice President at Nationwide.

“Technology is accelerating the pace of change and therefore the pace of risk,” Mahaffey says. “But we don’t view this as a linear change; it’s exponential. These technologies build on one another. They intersect in ways that are hard to anticipate, enabling process disruption and, at times, entirely new business models.”

Smart Business spoke with Mahaffey about how technology and data are changing the way businesses operate.

What does increased change mean for businesses today?

Faster change isn’t necessarily bad. Incumbent business leaders tend to think of change as a risk to their business model, but startups see it as an opportunity. The reality is, both are true. The pace of change will continue to accelerate, and you can view it as either risk or opportunity, depending on how you’re positioned.

What is the best way to respond?

Many companies will need to embrace a cultural mind shift. In addition to protecting and defending core lines of business, companies that will stay successful over the long term — 20-30 years or more — must also embrace the new opportunities that always accompany change.

Historically, size and scale have been valuable competitive advantages. While that is still true, today companies of all sizes need to be flexible and agile. How to get that done can be the hard part, and there’s no panacea. Some companies have put into place formal innovation teams, disruptive venture investment teams or subsidiaries that represent Version 2.0 of the parent company. No single solution is the right answer for every company; each company needs to stay true to its strategy and culture.

How can companies determine when to move fast and when to move slowly?

There is a time to play defense and a time to play offense. Your strategy and company culture depends on whether or not you have an advantageous, defensible position. You can’t discard a competitive advantage just for the sake of adopting something new and unproven. At the same time, it is difficult to see transformational change coming. New York City taxi drivers thought they were well defended — until Uber turned the industry on its head with a faster, more affordable, more convenient product.

Diversification is arguably the best defense. A well-diversified business model, like the one employed by Warren Buffett, is not one that can be rendered obsolete by a single innovation. If, on the other hand, all you did was operate a taxi fleet, ride-sharing companies like Uber changed your world. A world of autonomous vehicles, leading to fewer cars and fewer accidents, has the potential to greatly benefit society. But if your only product is auto insurance, the handwriting is on the wall.

If you’re not yet diversified, the time to act is now. With technological disruptions, changing dynamics of the workforce, data availability and the accelerating pace of change, companies need to look beyond and focus on their customers’ future needs. They can’t expend all their energy and capital solving today’s unmet needs; some resources must be dedicated to solving the unknown problems of tomorrow. Consumers weren’t complaining about a lack of cell phone functionality until the iPhone came along and combined so many nice-to-haves into one elegant solution, completely and forever resetting expectations.

Insurers are very experienced in data analytics. How should businesses be investing in this?

Not only is the volume of data increasing, it’s coming from new and sometimes external sources, and it’s potentially more predictive. Altogether, it’s driving accelerated investments in newly enabled core capabilities like underwriting, pricing, and claims. Additionally, progress in data science over the past several decades has led to drastic improvements in data mining and machine learning.

Traditional insurance models are now supplemented with new data and data analytics, leading to a much more granular view of the customer. Predictive analytics can be used to better anticipate future needs, which in turn will have a direct impact on sales and marketing strategies.

Successful integration of data analytics is the key to opening new dimensions in how insurance can and should look, dimensions that have parallel applications in other industries as well. To be able to anticipate and address their customers’ needs, companies need to invest in data collection, aggregation, standardization and governance. Perhaps most importantly, they’ll need to invest in data scientists and analysts to be able to effectively harness this rapidly expanding resource.

Insights Insurance is brought to you by Nationwide

Are you in denial about your liability risk for employment-related claims?

“My people would never do that.” “We have a family-like environment.” “I know everybody here and I trust them.” These are the sentiments of employers who have a false sense of security when it comes to employment-related claims, says Chris Zito, president of Zito Insurance Agency, Inc.

“They feel it couldn’t, or wouldn’t, happen to them,” he says. “The problem is when somebody does get terminated that relationship changes immediately — and generally not for the better.”

Employers also use the fact that it has not happened to them yet as rationale that it isn’t likely to occur in the future. Zito says that’s like saying: my house has never burned down, so there is no reason to buy homeowner’s insurance.

Much like in a divorce, once people believe they have been harmed due to unfair or illegal treatment (i.e. termination of employment), an employee’s mindset can change from loyal to vindictive. There are few cases where employees who have been terminated accept responsibility.

Smart Business spoke with Zito about what employers today need to remember about employment practices’ risk and insurance.

Why does employment practices liability (EPL) play such a big role?

EPL claims were relatively uncommon 20 years ago, but their frequency has increased dramatically over the past decade, with claims coming from past, current or even prospective employees. (Some people interview with the intention of getting the employer to say or do something to violate employment law, so they can file a lawsuit.)

As with many types of liability insurance, protection against legal defense costs are as much a reason to purchase coverage as the fear your company will be deemed liable for damages.

Damages alleged in EPL claims often are intangible, so it typically boils down to the current or former employee’s word versus that of the employer. Accordingly, a significant amount of discovery is required to build a defense, including deposition of other employees, review of personnel files, etc., making the cost of defending EPL claims disproportionately high.

Are claims costs rising?

Yes. The combination of increases in the rates charged by law firms and the inflationary impact on settlements continue to inflate claim costs annually.

How does EPL insurance help companies?

In addition to paying for the cost to defend and as necessary settle EPL claims, many of the better policies on the market include access to employment law specialists. These specialists can provide guidance on sensitive employment-related issues — advice that could prevent a claim from occurring. They also can provide guidance about how to mitigate damages if a claim occurs.

What scenarios could fall into this coverage?

Although wrongful termination is the most common allegation in EPL claims, complaints can include harassment, discrimination for age, gender or health related issues, improper evaluations, wage and hour disputes, etc.

Beyond insurance, how do you limit EPL risk?

Keys to preventing EPL claims from occurring or controlling damages in the event they do occur largely center around:

  • Proper communication and education of employees regarding the terms and conditions of their employment.
  • Adequate documentation of employee files regarding disciplinary hearings or actions, as well as performance evaluations.

You also should review all employment related documents, such as employment applications and employee handbooks, to assure the language adheres to the current employment laws in your state.

Is there anything else you’d like to share?

In spite of the fact that some employers remain in denial, most:

  • Have incurred an incident that was settled internally, when no coverage existed.
  • Are aware of situations that could have easily turned into employment claims.
  • Know of other employers who have dealt with employment-related suits.

EPL coverage, even if at a nominal level, should be a standard component in most company’s insurance and risk management programs.

Insights Insurance is brought to you by Zito Insurance

An effective loss control program can safeguard a company, boost productivity

Loss control should be part of the daily operating plan of your business as a means to protect the hard work of you and your employees, says Brian Peck, Assistant Vice President and Loss Control Audit Manager at United Fire Group (UFG Insurance).

“There are unique loss exposures for each and every business and an effective loss control program can help reduce, prevent or avoid losses,” Peck says. “Effective measures to control losses can have a positive effect on your company’s financial stability and continuation of operations.

Smart Business spoke with Peck about the primary types of loss exposure that should be evaluated and how to develop a policy to protect your business.

What are the primary types of loss exposure?
The three primary areas that most companies focus on are property, liability and business income.

Property coverage exposures result in loss to buildings or personal property in which your company has a financial interest, whether the property is owned or leased. There are hazards common to all businesses that should be evaluated. These include electrical, heating, plumbing and housekeeping.

In addition, there are special hazards that are unique to a company’s operation that need to be evaluated. For example, a body shop using oil-based paint for its spraying operation has a much higher fire exposure than an operation using water-based paint.

With liability, you’re looking at exposures that result in an organization’s legal responsibility for injury or damage to another party due to negligence, something that can be devastating to a business’s operation. Effective quality control measures are important to assure products are manufactured or installed to specifications. Effective documentation is also critical to help in loss reduction if a liability claim were to occur.

Finally, business income losses are generally attributed to property and/or liability loss exposures that result in an interruption of operation.

If you’re a growing company and you lose your building or lose the use of highly specialized equipment due to a fire or some other calamity, the result could be loss of revenue, loss of customers or even a shutdown of your business. You need a program in place to continue operations as you work to get back to earnings stability and growth.

What is the difference between loss control and risk management?
Loss control is often used interchangeably with risk management.

Risk management is more holistic and includes risk control, but also includes risk finance. Independent agents work with policyholders on a risk management basis to put in place an insurance program that can not only transfer financial risk in the event of loss, but also assist in loss control measures.

How do you develop a comprehensive insurance policy to address loss control?
From a loss control standpoint, there are considerations to take into account when developing insurance coverages. For example, an effective loss control program that controls the frequency and severity of losses can help determine the type and amount of self-retention, such as deductibles and policy limits, to be carried in the insurance policy.

Loss prevention and loss reduction measures such as fire protection and supervisory systems can have an effect on the policy rate structure. Aggressive fleet control programs such as distracted driving policies, drug testing and telematics again can also make a big difference on rates.

When a loss occurs, the indirect costs can be much higher than the direct costs (costs covered by insurance). Indirect costs such as loss of customers and growth opportunities can have a negative financial impact on a company, but are often overlooked.

Loss control should be a major component of operating a business and should take into account both direct and indirect costs that occur with a loss. Not only does it reduce risk, it has other benefits such as improving product quality, increasing production and boosting employee morale.

Your agent and your insurance carrier’s loss control representatives can assist you in protecting your business. There are independent safety consultants specialized in evaluating loss exposures who can also help with your loss control program.

Insights Insurance is brought to you by United Fire Group (UFG Insurance)

How working with a licensed insurance agent can help protect your business

Small- and medium-sized businesses frequently have insurance needs that are not covered by the basic property, liability, auto and worker’s compensation coverage policies they have, says Karen Harpole, Corporate Manager for Small Commercial Business at United Fire Group (UFG Insurance).

“Unfortunately, they often don’t discover these coverage gaps until the claim occurs,” Harpole says. “They work under the premise that everything is covered with their existing policies. But in the world of insurance, there is just no way to cover everything.”

One of the best ways to fill these gaps and protect your business is to build a strong relationship with a licensed insurance agent.

“You need the help of an insurance professional who can tailor coverage to protect your business interests, your assets and your future,” Harpole says.

Smart Business spoke with Harpole about basic insurance policies and how to work with your agent to supplement that coverage and secure the future of your business.

What do basic insurance coverage policies provide?
It starts with general liability insurance, a foundational coverage that provides damages and defense if either you, your employees or your products or services cause (or are alleged to have caused) bodily injury or property damage to a third party.

It pays damages that your business is found liable, up to the policy limits, as well as attorney fees and other legal defense expenses.

Property provides coverage for damage from fire, hail, windstorms, burglary and theft and other common perils that occur to your building and any personal property used in your business.

If you run your business out of a home, you should be aware that your homeowner’s policy will typically exclude coverage for any business operations conducted in the home. You would need separate coverage for business operations.

Auto insurance will protect any vehicles that your company owns, leases or maintains. Coverage includes liability and physical damage, as well as medical pay, uninsured and under-insured and no fault coverage, which can be added to the policy by endorsement.

The fourth core is worker’s compensation insurance. It covers the business’s liability under the state worker’s compensation laws to give benefits to employees for accidental injuries they sustain or a disease they may contract that arises out of the course of their employment.

What are some risks that are typically excluded by the basic coverages?
One example would be business interruption or business income insurance, which protects earnings until you’re able to open your doors again following a loss that shuts down your company for a period of time.

It provides coverage for ongoing expenses even though you aren’t able to generate income. There are variations, however, so it’s good to work with an independent agent who can tailor a policy to meet your unique needs.

Other examples are professional liability or errors and omissions (E&O); employment practices liability (EPLI); cyber liability and directors and officers (D&O) coverage.

What’s the best way to identify potential gaps in coverage?
Work with an independent agent to discuss your insurance package.

You can sit down with your agent and go through a checklist that explains the coverage you have and the gaps that might exist based on your current coverage. Your agent can advise you of gaps that are critical and need to be addressed versus those that don’t pertain to your company.

Most agents can offer what’s known in the industry as value-adds such as loss control, risk management tools or general safety training.

These types of services would typically come at a high cost if purchased independently, but can often be provided at a small fee or even free of charge, in some cases, through your agent.

You may be able to mitigate a risk by simply eliminating a practice that doesn’t offer any valuable benefit to your company.

The key is having these conversations on a regular basis and making sure that as your needs change, your coverage adjusts accordingly. If you’ve done your due diligence and found an agent you can work with, it should give you peace of mind that your business and future are well protected against unwanted accidents. ●

Insights Insurance is brought to you by United Fire Group (UFG Insurance)

The cybercrime threat is real

Small- and medium-sized businesses are increasingly vulnerable to cybersecurity attacks and need to take steps to protect their assets, says Jennifer McDonald, Senior Product Development Analyst at United Fire Group (UFG Insurance).

Unfortunately, many of these companies fail to see the threat. It could be that they don’t think they have anything a hacker would want. Or it might be difficult to believe that such a crime could occur in their business.

“No one is immune,” McDonald says. “Just as you do disaster planning to prepare for a fire in your building or a tornado or some other physical damage, you need to think about your data and what you’re doing to make sure it’s secure. You also need to educate your employees and reduce the risk that they could inadvertently allow a hacker into your system.”

The methods hackers use to attack continue to evolve.

“We’re starting to see crossover from cybercrime to incidents where a hacker can cause real world property damage,” she says. “You need to be educated about what’s going on in the world of cybercrime.”

Smart Business spoke with McDonald about what you can do to reduce your risk of becoming a cybercrime victim.

What is the cost to your business when a cyberattack occurs?
The cost of a cyberattack comes in the form of time and money, as well as damage to your reputation.

There will often be forensic analysis that needs to be done on your machines, depending on the scope of the breach. You need to see how the breach occurred, what computers were compromised and where the virus is now. These are all things that can take significant time.

In terms of money, the average cost per compromised record in a cyberattack is a minimum of $154, according to Traverse City, Michigan-based Ponemon Institute. Verizon Business estimates the overall average cost of a data breach at anywhere from $36,000 to $50,000.

There is also the damage to your reputation and the time it takes to restore credibility with your customers after a breach has occurred that may have exposed confidential information.

What is the government doing to protect against cybercrime?
There is no legislation in the U.S. to assist cybercrime victims. The best option for companies is to work with a firm that specializes in cybersecurity breaches.

Part of the problem is that a lot of these attacks come from overseas from countries that are doing little to stop the hackers. In some cases, the governments in these countries may not even want to take on hackers out of fear that they could be targeted next.

How can a company protect itself?
The best tools to protect against cybercrime, in addition to a strong cyberinsurance policy, are awareness and preparation. You need to know what’s going on and where your company may be vulnerable to an attack.

Work with your insurance agent and cyber insurance company to address these weak spots and to develop best practices to reduce your risk.

Do you back up your data? Do you use passwords to protect your systems and do you change those passwords on a regular basis? Do you have a policy for when an employee is terminated to prevent an employee who left on bad terms from hacking into your system?

Smaller businesses may not be able to afford a full-time person to monitor these tasks, but there are a number of resources from free online quizzes to consulting firms that can assist you in protecting your business.

How valuable is employee training?
It’s critical that you educate employees to know the actions that could make it easier for an attack to occur.

Some companies embed photos with all internal emails so that if you get an internal email without a photo, you know something is wrong. You can also do mock viruses. Send an email to employees that include a suspicious-looking link and track how employees respond.

Place flash drives around the office and see who picks them up and tries to use them. Work with your team to ensure everyone understands the best practices to preventing an attack. ●

Insights Insurance is brought to you by United Fire Group (UFG Insurance)

How to make a reliable evaluation of potential insurance carriers

Financial strength should always be an important consideration when evaluating an insurance carrier’s ability to provide the most comprehensive coverage for your business, says Dawn M. Jaffray, Senior Vice President and CFO at United Fire Group (UFG Insurance).

“You’re obtaining a policy based on something that may or may not happen and you’re paying a premium for that coverage,” Jaffray says. “You need confidence that if there is a loss, fire or major catastrophe, your insurer will be there to minimize the disruption to your business.”

The inability to predict when, how or if a disaster will occur can make this a difficult question to reliably answer.

Fortunately, there are plenty of resources available to help you assess the financial strength of insurance carriers and gauge their ability to give you as the policyholder the support you need.

Smart Business spoke with Jaffray about this evaluation process and the value of building a trusting relationship with your agent and your insurance carrier.

How can you assess the financial strength of an insurance carrier?
There are a number of financial measures you can use to make an accurate assessment as to the carrier’s financial strength:

■  Third-party rating agencies, such as A.M. Best Company – These agencies provide an independent opinion on the financial strength of an insurance company.

■  Risk-based capital – This figure shows the minimum amount of capital that an insurance company is required to have to support its overall business operations.

■  Policyholder surplus – This figure shows the difference between a company’s assets and liabilities.

■  Claims reserves – A figure that shows the funds set aside for the future payment of claims that have been incurred, but not settled.

These metrics should provide tangible, substantive evidence that either a carrier is well-positioned to respond when your company runs into trouble, or it’s not. If it’s a publicly traded company, there is even more data at your disposal through the company’s required financial filings.

Through your research, you should be able to get a good sense of the carrier’s balance sheet, its assets and its approach to its investment portfolio. Focus on the areas that demonstrate the carrier’s level of financial strength and use those findings to inform your decision.

What other factors are important in the evaluation of an insurance carrier?
Stability, longevity, reputation and industry expertise are all factors that can provide you with confidence that the carrier is up to the challenge of helping your company through a loss or a catastrophe.

Look into how a carrier services its clients. Does it have a local presence, allowing you to build a more personal connection either with the carrier itself or through the agent that manages your policy?

If you’re a growing company, examine the carrier’s growth plan and its capacity to continue providing the service you need as your business expands across the country and potentially around the world. Enterprise risk management should be important to any business.

What types of proactive options are available to possibly prevent certain problems from occurring in the first place? What is the company’s approach to new liability concerns such as cyberrisk?

Find ways to get in front of potential problems before they happen. These value-added services can go a long way in maximizing the benefit of your insurance expenses and minimizing your long-term costs. Look at what value-added service the insurer can give you beyond your policy.

How important is regular dialogue with an agent or carrier?
If it’s a retail operation, the dialogue doesn’t change a lot and you may not need to talk very often. But if you’re making changes to your business such as adding warehouse space or purchasing new equipment, you may want more communication.

When you meet, ask plenty of questions. If your service providers don’t know about a problem that your company is having, they can’t help you. Be open about your company’s needs and work with your providers, and in this case your agent or insurance carrier, to develop a policy that meets your needs and protects your business. ●

Insights Insurance is brought to you by United Fire Group (UFG Insurance)