Category Archives: Risk Management

Commercial Property, General Liability Insurance, Marketplace News, New York, Real Estate Practice Group, Risk Management

Why Property & Liability Insurance Cost So Much for Apartment Buildings , Co-Ops , Condos

Are you wondering why the renewal for your apartment building insurance for your rental building, Co-op or Condo has gone up by north of 20% ? This little primer might help explain why. The Chinese have a proverb, “may you live in interesting times”. If you’re an owner of commercial or residential real estate, especially in New York or New Jersey this proverb is an understatement. Faced with the double jeopardy challenge of escalating costs up & down your P&L in tandem with local laws capping your ability to raise rents if your units are subject to rent guidelines , finding new strategies to maintain your margins and investment yield is an imperative heading into 1st quarter to 2023. This is meant to be a primer for buyers or commercial insurance in the Metropolitan New York region. We have taken care to organize our executive summary into lines of insurance which makes the most sense.

Commercial Property Insurance :

For rental real estate , co-op’s or condominium buildings located in the metro NY region It’s all about C.O.P.E. ( Construction , Occupancy, Protection Class, Environment). When an underwriter looks at an account these are the buckets they use to organize how they will price your account. Buildings that have invested in their properties in terms of not just aesthetics ,(tenant) upgrades, but building safety & infrastructure enjoy the most competitive pricing & coverage terms. These are the items that carriers look for in the properties they underwrite.

  • Sprinkler Systems ( Common Areas Good; Fully Sprinklered Best)   
  • Standpipe Systems
  • 2nd Means of Egress .
  • Twin Parks Fire

    Self Closing Fire Doors.

    • Auditing of Fire Doors
  • Emergency Lighting / Exit Signs
  • Hard Wired Smoke Detectors
  • System to document repairs, maintenance, upgrades.
  • Upgraded Electrical systems
  • Water Sensors & Monitors
  • Boiler Sensors & Monitors
  • Upgrade Schedule communicating the installation of some of the features noted above.

At Metropolitan Risk we encourage building owners to use our infra-red scanning technology to scan your building for electrical hot spots. This is a smart pro-active initiative that can save the property owner much blood & treasure by preventing an electrical fire loss up front by identifying areas of your building where the electrical system may be failing before a fire results.

The insurance carriers we see that give the owners the most credit for these features are Travelers, GNY, FM Global, CNA, AmRisk. If your building lacks many of these features they still may quote the account contingent on how well the portfolio has performed in relation to it’s COPE.

As you read this and say to yourself, jeez we have most of this stuff, yet our insurance is still increasing;  or we are getting cancelled which is puzzling.

Remember when you purchase insurance through an insurance carrier, you are pooling your risk. This means you are getting lumped in with all the other buildings they are insuring. Each year the carriers, through their actuaries set the insurance companies rates based upon the losses the portfolio is incurring AND the cost of re-insurance. For some carriers it’s a double hit as their losses and re-insurance costs increase.

In the last 5 years , property losses are out passing the previous 10. Climate induced impacts are having significant cost impacts on re-insurance costs which get passed down to you the end user buyer. Remember the pooling of risk applies to the insurance carriers, not just the buyer. It’s all part of the cost food chain to transfer risk.

Many insured’s solely think about their buildings and their account performance, however the macros on the economy, portfolio loss performance , and the cost of their re-insurance contracts really dictate the cost of their property insurance. When you purchase insurance you are deeply impacted in a positive and negative way ; the “pooling of the risk”.

COMMERCIAL LIABILITY INSURANCE :

For your rental apartment building , Co-Op Building or Condominium building ,unlike Property Insurance,  which is increasing nationwide due to the cost of re-insurance driven mostly by the macros detailed above; liability insurance has much larger disparities market to market, state to state, locality to locality. New York State & New York City is case in point.

On January 9th, 2022 the Twin Parks Fire sent shock waves through out the New York City Habitational Insurance market; specifically as it relates to liability. In that fire 17 people dies due to smoke inhalation. The 19 story building was rated masonry non-combust which meant it was built primarily with steel and concrete. It had multiple means of egress (ways in & out) , with fire doors protecting the egress. The challenge for the owners and the insurers was the alleged malfunction of the fire door hinges which are self-closing. Due to their alleged malfunction smoke infiltrated the building killing 17 people from smoke inhalation.

What does that have to do with me? Great question; everything. When ever the carriers see a large loss like that come into view they look inward. How many buildings are we insuring that fit that risk profile. The answer was a lot. The determination was made that because the building was NOT fully sprinklered, which would have suppressed the smoke, this type of loss could be inevitable. Thus, the takeaway away for you is that if your building is NOT 100% sprinklered, your rates are going up, by a lot, and many carriers are refusing to insure you as they don’t want a repeat of the TWIN PARKS FIRE.

Sadly, that is only one component of the increase. Due to NY’s Labor Law or the Scaffold Law which imposes strict liability on property owners for workers who fall from a height, payouts on liability claims are significantly higher in New York than almost any other state in the country.

Gallo, Vitucci& Klar who specializes in Labor Law defense. “One of the labor law hotbeds in New York is Lackawanna County in upstate NY, think Buffalo. The Labor Law affects the entire state, not just NYC. That said NYC has a concentration of taller buildings which is why there is more activity there.”

At Metropolitan Risk we wrote an E-Book to help school property owners on the risks inherent in the labor law CLICK HERE to download. For purposes of this article , just understand that the Scaffold Law continues to push insurance costs for property owners much higher in this region than in any other region in the county. Which is a large component as to why your liability insurance costs continue to rise.

EXCESS  LIABILITY INSURANCE :

Similar to liability for essentially the same reasons excess liability insurance costs continue to rise with one notable exception.

The DEMISE OF THE “PROGRAM UMBRELLA” : Program Umbrella’s where essentially products where by an MGA “Managing General Agent” would purchase large limits of excess liability coverage , and then turn to retail agents and brokers and give them access to the program for their clients. For a “Premium” the agent or brokers customers could gain access to that particular Umbrella policy purchased by the MGA. Essentially giving real estate owners the ability to purchase at a discount excess liability insurance in “BULK”, getting the “BULK” discount.

As of this time last year there were north of 10 Program Umbrella’s you could bolt into , enjoying liability limits as high a $100 million dollars for your portfolio , or building. Those days are gone. While there are still a few left, the underwriting to get in is uncompromisingly  strict, and the pricing discount for buying in bulk is gone.

In over 25 years of serving building owners and developers I cannot recall a more challenging market for this cohort of insurance buyers. There simply is not enough insurance carriers writing this class of risk to drive pricing back down. It’s classic supply & demand. The carriers putting out paper on the street are calling the shots as they don’t have much competition. They are getting their number because the property owners MUST purchase coverage to comply with their lenders requirements. Lender in turn need to understand the dynamics of this current market and work with their property owners to find a balance.

On top of ALL of this are the new unfunded mandates from the City of New York, New York State and the Federal Government for all types of businesses. It’s a very challenging environment to be a landlord in New York City as the income is capped, but the costs continue to escalate higher than the other side of the P&L.

There are strategies building owners can take to mitigate some of these escalations. That is fertile ground for our next article in the series.

We hope you found this piece informative. Feel free to reach out to a Risk Advisor by calling (914) 357-8444 or simply CLICK HERE.

 

Captive, General Liability Insurance, Line of Insurance, Risk Financing, Risk Management, Risk Transfer, Workers Compensation Insurance

Why Current Economic Conditions Are Perfect To Restructure Your Insurance Program

In our opinion, there is no better time to consider alternative risk transfer as a strategy to get more cost-efficient with respect to your current commercial property insurance, commercial liability insurance, workers compensation insurance, & commercial auto insurance.

As I write this the country and the world are about to exit the covid pandemic. If we frame the current conditions in terms of where we are in the property insurance, liability insurance & workers compensation insurance buying cycle; conditions couldn’t be more favorable to give your company a significant competitive advantage.

Taxes :

Since all 3 branches of government have changes hands in the last several years there are strong tailwinds pushing for significant tax increases which will erode corporate resources. We suggest utilizing a Captive Insurance strategy can give you significant tax efficiencies allowing you to keep the dollars inside your company to help reduce your variable cost structure. DOWNLOAD our Guide to Utilizing Captives by CLICKING  HERE.

Coverage Availability & Rates :

Currently, we are in the through of a “HARD MARKET”; where conditions favor the insurance carriers as they restrict coverage and increase rates. Insurance buyers are frustrated because they have limited options. Further, they feel squeezed, and rightly so. The carriers are pointing to the “Social Inflation” of liability and commercial auto claims due to the insane jury awards. Buyers are pointing to “profits” earned and surplus growth to counter that claim. We think the buyers have a legit gripe.

Risk As Strategy :

Smart forwarding thinking CFO’s and C-Suite Executives understand that if they can leverage their balance sheets by increasing their retentions EFFICIENTLY, they can gain significant cost advantages that they can bake into their COGS (Cost of Goods & Services). If done properly they can reduce their insurance program costs by 35% which allows them to grow profits, market share, or both. Remember every dollar you save in your insurance program falls directly to the bottom line.

To understand if your company could benefit from a partial or full-on program restructuring CLICK HERE to schedule a 15-minute call. In 5 questions we can figure out if the strategy has legs for your org.

Captive, Line of Insurance, Practice Groups, Risk Financing, Risk Management, Risk Transfer

Reduce Costs At Scale By Restructuring Your Commercial Insurance Program

Have you ever wondered how utilizing captives, a high deductible insurance program, alternative risk transfer, self-insured retentions, or retrospective rating plans could further reduce your commercial insurance costs off your already low commercial insurance rates?

Too often business owners are chasing the wrong rabbit. They think that by purchasing their commercial insurance for less than they spent the year before is they accomplished their goal. We get it, it’s an easy benchmark to measure. If you succeed it’s a win; all be it a hollow win unless you really understand what you gave up to get that cheaper price.

Their real goal should be to lower their “Costs”, not the price of their insurance program. Nothing is more expensive to your balance sheet than cheap insurance.

The second huge mistake we see is that although their company has grown, sometimes significantly over the years, they are in essence the same insurance program they were when they were 20 employees; now they are 250, a thousand employees, and yet the commercial insurance is structured in the same way as when they first started.

This is a huge mistake because they are not leveraging their size and scale to reduce their insurance costs. I’m not talking about getting a lower rate because your sales are now at 100 million versus 10 million. That’s actually the illusion the commercial insurance market is selling. They are letting you feel like your reducing costs because of your scale; except they are holding back the best stuff only if you are smart enough to ask. We did a whole piece on the WHY they hold this information back in our “MISALIGNED GOALS” segment. Go there if you want to understand why.

For our purposes focus on the “HOW. First off we are assuming you have strong financials and a solid balance sheet. If you compare your balance sheet today with what it was 20 years ago, it’s probably night and day. Assuming you have solid free cash flow, credit lines, and cash reserves the question becomes, why are we buying so much insurance in the first place? To be clear I’m not talking about insurance limits. That stays the same due to your contractual obligations to your customers and lenders.

Leverage Your Balance Sheet To Reduce Costs At Scale

By leveraging your balance sheet you could restructure your present insurance program to incorporate some “risk-sharing” through higher retentions than by purchasing a “first-dollar plan. In a “first-dollar plan” the insurance carrier funds the loss from the “first dollar”. Any smart CFO worth their salt knows that any insurance coverage accessed for claims is essentially a credit line in reverse, except the interest rate on that credit line is crazy-expensive.

By increasing your retentions you score a lot of runs with one swing of the bat, pardon the baseball analogy. It’s called a grand slam. As your retentions increase the insurance marketplace looks at you entirely different than simply a purchaser of insurance products. You become a “Risk Partner” with them. This is important because the smart insurance carriers know that when you the end-user has “skin in the game” you generate significantly more underwriting profits than those that simply purchase first-dollar insurance plans. For this risk partner relationship, they give you significant discounts off the total premium for your risk sharing. A first dollar or low deductible insurance plan can never discount their rates low enough to get to the risk-sharing discounts.

Retaining Your Risk

Secondly, you purchase less coverage; the same limits,  because you’re retaining some of the risks through deductibles or retentions.   How you structure that retention matters. That’s another article. You can check out our quick piece on The Difference Between a High Deductible v.s. Self Insured Retention Since you are purchasing less your costs drop far more than just fighting for a lower rate. By taking higher retentions you can lower your costs by magnitude over just getting a lower rate.

Lastly, you can get access to a whole other section of the commercial insurance marketplace that caters to “Alternative Risk Financing” than you would otherwise have access to. You would never see a quote from this marketplace at the lower retention limits because that is not their appetite. They want larger, middle-market companies that want to be risk-sharing partners and not just insurance product providers.

Once you get a taste of what this looks like and how it can benefit you, then you will be tugging at our shirttails for a CAPTIVE STRATEGY.

So if you have been swimming at the same watering hole for years, with the same broker, and the same insurance carriers quoting you every 3 years we suggest you seek a whole new oasis. Call a Risk Advisor today, with 5 simple questions we can test whether this is an option for you.

 

Captive, Line of Insurance, Practice Groups, Risk Financing, Risk Management, Risk Transfer

What Is The Cost To Run A Captive Insurance Program?

How much does it cost to start and run a captive insurance company? It’s the most frequent upfront question we get from organizations that are looking at starting their own captive insurance company for their organization. The short answer is zero, but when we tell business this they’re left in shock.  After we walk them through the process of how we got zero as the price, it makes perfect sense.

Let’s start at the end and work back; reverse engineer this. First off it’s an investment that yields an ROI, not an expense like your current insurance program. A well-run captive generates has gross savings of at least 30% off your current insurance program on average; irrespective of what structure you’re coming from; unless of course, it’s another captive. That’s because the captive shares in the underwriting profits would typically go 100% to your insurance carrier. Curious about Captives? If you want a better understanding of what a Captive is, and how it could fit in your organization CLICK HERE to download our free ebook.  

Further, the risk-sharing mechanism is designed to reduced your upfront premium outlay. Your betting on yourself that your losses will be less than your premium & admin costs. In a well-designed, well-run Captive the results are undeniable. You can only generate & retain these profits, with tax efficiency, in a captive structure. Thus if you back out the cost to run and administer the captive from the profits you generate the cost is ZERO! Someone smart told me years ago that you have to spend money to make money.

In order to consider a captive structure you need these three (3) attributes :

  • Size & Scale: You need to be spending in excess of $500k in your property & casualty insurance program. You can include employee benefits here too if you wish. Many captives are set up to fund employee health expenses to save on their health & benefits insurance premium. The closer you get to $1 mill in total insurance spend, the better this solution looks. As the numbers you expense in your insurance program increase there is a direct correlation by % to your end benefit.
  • Free Cash Flow: In finance terms, you need to have strong financials and good free cash flow. The captive will plug into this “resource” and amp it exponentially for your company by keeping that free cash flow tax free instead of it having the direct profits spill down into the partners’ individual tax return.
  • Underwriting Profits: Too often when we interview companies and CFO’s about a Captive Alternative their main driver is looking for a cheaper insurance quote. They think that by forming a captive they can out run their claims problems and high insurance premiums. This is a fools’ errand. The last thing you want to do is switch places with the insurance carriers if THEY aren’t making money on your account.

Our demarcation line is a minimum of 35% undeveloped loss pic; which is a ratio between incurred claims & premiums paid. If your loss pic is just over that 35% threshold we should have a discussion. If your over 50%, you need to solve your claims problems first before you can consider a captive solution as a potential option.

Breaking Down the Cost of a Captive

You can’t simply compare the “cost” of a captive to the “cost of your current insurance program”, especially in a 1-year snapshot. The correct way to evaluate whether a captive solution is right for your organization purely from a numbers standpoint is a (5) year window. The data set is larger and more representative of your management team. It’s less “noisy” from a numbers standpoint, enabling you to see the big picture.

Further to simply look at this purely in terms of financial implications we suggest is short-sighted as well. This a long-term strategic play. Captives have major strategic advantages as you compete for business on the street than simply buying and expensing insurance year over year.

In our view, Captives are an investment that yields a consistent, measurable ROI, not a cost or expense. It’s an investment in YOU, for YOU! If you want to be at the vanguard and stay 3 steps ahead of your competition we suggest you open up a dialogue of what this solution could look like for you. CLICK HERE to have a 10-minute discussion with one of our Risk Advisors.

General Liability Insurance, Risk Financing

What’s The Difference Between a Deductible & Self-Insured Retention In Your Commercial General Liability Policy?

With respect to your commercial general liability insurance policy; choosing between a high deductible or self-insured retention can have a major impact on your competitive position as your business competes on the street. We we want to give you some direction BEFORE you pick the insurance program structure for your commercial general liability policy.

Difference Between Self-Insured Retention & Deductible When It Comes To Credit

The first is who is issuing your company “credit”. With a deductible, it’s the insurance company. When a claim needs to be paid out, it’s the insurance carrier that pays the full dollar amount; provided coverage was triggered. The insurance carrier then invoices your company for the agreed-upon deductible amount. Your client (if we are speaking about a liability policy ) is made whole. Thus it’s the insurance companies balance sheet that’s out front, not yours. This is important an important distinction.

With self-insured retention, it’s YOUR companies balance sheet that gets put out front. The reason being; if a claim is presented that needs to get funded YOUR COMPANY pays the claim (up to the retention limit) ; THEN the insurance carrier comes in & funds the remainder of the loss. The point being your customer is issuing you “credit” in hopes that you have the financial capacity to fund the loss.

Difference Between Self-Insured Retention & Deductible When It Comes To Infrastructure

The second big issue is one of infrastructure. When you purchase an insurance policy with a deductible all of the insurance carriers infra-structure comes with it. This may include insurance adjusters, legal representation, engineering & forensics, professional accident investigation e.t.c. An insurance policy that has a deductible structure includes the carrier’s infrastructure for you to leverage.

In a Self Insured retention structure, you must provide the infrastructure. Adjusters, Loss Control Engineers, Legal representation (defense), a professional accident investigation team. At Metropolitan Risk we have all of this pre-built for our clients that choose to leverage the self-insured retention advantage.

Check out our Vlog on Deductibles Vs. Self Insured Retentions

Which structure is best for you?

Too often we meet the executive team of a company that cannot articulate the strategy of how they ended up in a particular insurance program structure. These companies are backed into their insurance programs because the insurance is the cheapest quote they’ve received. We are brought in because their costs keep rising because they started with the wrong goal. Our clients understand the price they pay on their insurance program is a direct result of how they prevent and manage their claims.

If your main challenge is “frequency” we suggest the self insured retention model. The main reason, you have far more control with a self-insured retention. Since it’s your infrastructure, they work for YOU, not the carrier; it’s your money. Thus you have a degree of control and efficiency that you don’t with a high deductible program. Where we see this being the most successful is where there are a lot of small nuance claims, trip & falls as an example.

Insurance carriers are claims processing factories, they just can’t achieve the same results that our self-insured retention clients can because they handle too much volume to give these small claims the kind of attention they need. Thus our clients that adopt this structure significantly compress their claims.

Those that stay inside a deductible program, or worse a 1st dollar plan (the carriers pay all claims from the first dollar). This is what we call the stealth commercial insurance squeeze. This is where the “incurred” claims continue to rise, resulting in commercial liability insurance premium increases! Remember; commercial insurance is essentially a really expensive credit line. The surcharges on these first dollar plans can result in a death spiral if you don’t take action.

A high deductible program works best in severity issues; (where you have 1 or 2 large claims in a policy year, think LABOR LAW!) No need to build out and pay for infrastructure; incurring those costs if you’re not going to materially impact the ultimate incurred loss which is key to achieving your goal. The more you positively impact your claims results the cost of the entire program reduces which is your goal.

Review your current loss history, run a loss pic, analyze what’s driving the results of your claim. Do you have a “frequency” issue or a “severity” issue? Once you understand your main challenge, then pick the correct insurance program structure to leverage. The best way to improve the results of your claims and lower the ultimate cost of your insurance program is to prevent the losses from happening in the first place.

 

Call a Risk Advisor today @ (914) 357-8444 or schedule a 10-minute call to walk through your challenge with our team.

 

Cyber Liability Insurance, Risk Management, Risk Transfer

New York Department of Financial Services Warns Businesses Who Use “Instant Quote” Software of Targeted Cyber Attacks

The New York Department of Financial Services (DFS) has issued a cybersecurity fraud alert to all of its regulated entities, describing a “systemic and aggressive” campaign to steal consumers’ private data.

The DFS has reported from several regulated entities of successful or attempted data theft from websites that provide instant quotes to the end-user.  All entities using instant quote software on their public-facing websites are vulnerable to this type of data theft attack. These attackers appear to be using the stolen data to apply for pandemic and unemployment benefits.

According to this alert, all regulated entities with instant quote websites should immediately review their websites for evidence of hacking. Reports have shown that even when consumer data is redacted, cybercriminals have proven they can easily recover the full unredacted information.

Reports have confirmed several methods that criminals successfully (or attempted) to use to steal consumer data from auto quote websites:

  • Taking unredacted information from the Auto Quote Websites’ HTML (Hypertext Markup Language) that was not displayed on the rendered page, but was visible in the code.
  • Using developer debug tools to intercept & decode unredacted consumer information.
  • Manipulating the technology to access parts of a public-facing website to view where the unredacted data is stored.
  • Purchasing a policy, after requesting a quote, using fraudulent payment methods in order to view the policy owner’s information, including his or her driver’s license number.
  • Requesting a quote and receiving an agent’s contact information to use social engineering to elicit information from the agent.

The DFS has requested prompt reporting of any attempts to steal consumer information from public-facing websites. Reports of unsuccessful attacks have previously been used to identify the techniques used by attackers. This helps the DFS respond quickly to new threats and continue to help protect consumers and the financial services industry.

Any DFS-regulated entity with a website that uses this type of technology should immediately review the following indicators:

  • Data analytics and website traffic metrics for spikes of quote requests. An unusual spike in abandoned quotes occurring in a short time frame was one of the key indicators of this type of attack. On a broader scope, regulated entities should look for an increase in consumer submissions that terminate as soon as consumer data is revealed.
  • Server logs for evidence of unauthorized access to private information. After your IT team has reviewed your web traffic, have them review your server logs for that period. When examining the logs of customer sessions, security teams should check to see if there has been any site manipulation using web developer tools.

These are just two suggestions by the DFS. There are a number of other ways cybercriminals can access information. Regulated entities should also follow their usual procedures for detecting and responding to cyber incidents.

The DFS has suggested the following steps for entities that are using Instant Quote websites to collect information:

  • Conduct a thorough review of website security controls, including but not limited to a review of its Secure Sockets Layer (SSL), Transport Layer Security (TLS) and HTTP Strict Transport Security (HSTS), and Hypertext Markup Language (HTML) configurations.
  • Review public-facing websites for browser web developer tool functionalities. Verify and limit the access so that users cannot adjust, deface or manipulate the website content using web developer tools.
  • Review and confirm that its redaction software for consumer information is properly implemented throughout the entire transmission of the data.
  • Ensure that privacy protections are up to date and effectively protect the data by reviewing which applications use the data, who has the authorization to view the data, and most importantly where is the data stored
  • Search and scrub public code repositories for proprietary code.
  • Block any IP addresses of suspected unauthorized users and consider a Quote limit per user session or IP address.

Any questions regarding the alert from the NY Department of Financial Service should contact their department directly, at CyberAlert@dfs.ny.gov

 

If you have any questions regarding your own cybersecurity. Contact one of our Risk Advisors at 914-357-8444 or visit our Contact Us page to schedule a 10-minute meeting.

 

Claims Management, Commercial Auto, Construction Practice Group Content, Food & Beverage Practice Group Content, General Liability Insurance, Human Services Practice Group Content, Interview, Other, Risk Management, Transportation Practice Group Content, Workers Compensation Insurance, Workers Compensation Premium Audits

A Fireside Chat with A Claims Adjuster

Our Claims Advocacy Team got to sit down with a workers’ compensation claims professional who specializes in high exposure claims. They discussed a high exposure claim that wasn’t reported timely to the carrier after the incident occurred.  

 

Please Note: This article has been edited for clarification and to protect the identities of those involved in the interview.

 

We’ve decided to call this interview a “Fireside Chat with a Claims Professional”, please tell me, are you actually in front of a lit fire or a fireplace or at least a match? 

Yeah, I have a nice scented candle lit, some nice ambiance for the room. 

What is your current role in the claims process? 

I oversee about 500 files, not directly managing the day to day activities and tasks to move a claim forward, but looking at it from a strategic standpoint, whether it be return-to-work, a settlement, or the resolution of some litigated matters.  I also assist clients in resolving their existing claims files.

Can you describe what a heavy litigated file/high exposure claim is?

Yeah, high exposure is really like your catastrophic claims. For example, someone who might be a paraplegic, quadriplegic, someone that suffers from a traumatic brain injury, or spinal cord injury. Those are leaning towards your high exposure. 

Heavy litigated are files that are going to essentially set a precedent in future case law and how it can impact lawyers and insurers in the future. 

Is the insured involved in the process at all? Or by the time that the issue reaches your hands is it completely out of the insured hands? 

I feel like most of the time the employers (named insured) are aware that I’m working on their files as a resource. Oftentimes I can be involved in the claims review process to help bridge some of the gaps that may be present, with the knowledge to move that file forward. 

 

However, It depends on the account and the type of policy that’s written because they (the insured) may be hands-off. They may have paid their deductible and then the claim is no longer the named insured’s problem. So they leave the claim up to the carrier going forward. 

 

You mentioned once their deductible is paid they often have a hand-off approach because it is no longer ‘their money’. Does the claim, the amount paid on the claim, and the amount paid from the deductible have an effect on their insurance? 

 

It has an impact on their rating. It affects their E-Mod (Experience Modification factor rating). What this means is when the insured goes out into the market place the following year when they are up for renewal,  that claim may show up. the incurred (paid + reserve) impacts their ability to be written for new insurance and essentially tells them what premium they’ll be paying.

 

From what you just told me, it doesn’t make sense for the insured to take a hands-off approach? Does that sound fair? 

 

I certainly think that they (the insured) should be involved because this directly affects and impacts their future with Mod ratings and what they’re going to pay for in the future. But many people still take the backseat approach. 

 

Though this often depends on the level of comfort they have with their carrier. So while I say it’s a backseat approach. It may seem a little hands-off because they feel confident in their carriers’ ability and what we put forth.  They know that we’re going to mitigate their losses as much as possible to bring it to a resolution. 

 

That’s a great point. I imagine this is true with a long-standing client, a company who’s been insured with you for a long time, they know the team and have the same players handling their claims, and they can kind of step back because they know that your team has their best interest at heart.

 

Seasonal/Winter Claims

 

So you’ve seen it all, as you’ve climbed the ranks in insurance and the claims world. Is there one type of claim you encounter where you just roll your eyes when it comes because it is the most common type of claim? This could be a winter claim, an industry-specific claim. 

 

I call them your classic injuries. The two most common ones that are seasonally driven are your slip and falls. They are the most common denominator in terms of what you see for December, January, February March claim volumes that come in. Slip and Fall will rank really high for what we see. 

 

Aside from that, lifting injuries are common as well. 

 

Are these injuries specific to a particular industry?  Do you only oversee construction, real estate, healthcare or are these claims kind of general and not industry-specific? 

 

I think claims like these are industry-specific. Your transportation carriers/delivery services, you typically see slip and falls from the parking lots or while they’re making a delivery to someones’ home. The same goes for lifting injury, that’s primarily where you see those.

 

 Construction is a fall from heights, that’s typically the most common one.  

 

Then the healthcare we see lifting injuries because your home health aides, they’re typically assisting with a client/patient, having to maybe get them up out of bed. Some of those patients are unable to help themselves get up, and typically these employees have to just lift 150 pounds to 200 pounds by themselves with no assistive device to help them do that. We see a lot of lifting and back injuries & neck injuries from that.

 

It sounds like our essential workforce, especially during COVID times are the ones getting injured the most.

Yes. I can agree with that. 

Most Expensive Claim That You Personally Have Seen 

 

What is the most expensive claim you’ve seen? For clarification when I say the most expensive claim it can be a specific body part that is a high dollar amount.

It depends on how high you’re looking to go. I’ve seen some claims that are multi-million dollars.

 

What was that? A multimillion-dollar claim? What was that Injury? 

 

Without disclosing too much detail, one employee rode in the back of a pickup truck of another employee, as they departed the employer’s location and a severe injury was sustained. It’s a multimillion-dollar claim because this employee needs 24/7 care and will need to live in a facility probably for the rest of their life. 

 

That’s tragic and I don’t think many insureds think about claims on that level. Maybe large corporations, like the transportation organizations we discussed earlier (UPS, FedEx, DHL.) Those companies have a large workforce at a national level, so maybe they’re more familiar with those. But smaller commercial clients, don’t see or even think that this could even happen, and now they’re looking at a multimillion-dollar loss that they didn’t budget for when running their business. 

 

Absolutely, and when we start to look at what happened and gather the facts around the event we start to ask questions like “What is your policy about having employees on site after work?” and if there is any surveillance footage of the location and what was actually happening. 

Having that information and the punch cards to show when they came in and when exactly they left.  in a lot of states, there are a number of “coming and going” rules that would either support the acceptance of or denial of that accident/injury, being considered within the course and scope of employment.

 

This ties into my next question, from your side of things I’m sure it’s frustrating when these claims, and you see that more could have been done from the insured standpoint. How can the client help in the claims process so it doesn’t get to your level? At least so they do everything they possibly can to help your team out, to help the adjuster out before it gets to you and it becomes a multimillion-dollar claim.

 

What we see very often, and in the example, we just talked about this claim wasn’t reported to us until several months after the accident happened.

 

Wow. 

 

It is so important to get it to us, even if they are not sure if it would be covered under Workers’ Comp. Oftentimes they (the insured) might think it’s covered under liability or if it’s a motor vehicle accident they strictly put it in as an auto claim. 

 

My advice would be to file that incident report, that first report of injury as soon as the incident happens. Let the carrier investigate it and be sure to really partner with the carrier to ensure that you’re getting them the information that they’re requesting. Preserving any evidence is crucial as well. 

 

So if you have surveillance footage be sure to take that and send it over right away. Witness statements are critical.  When you speak to someone right after an event happens the event is going to be right fresh in their head.  As opposed to trying to track someone down a few months from now, or even a week from now, their recollection of the event might vary. These witnesses might have also spoken to other employees about things being said around the workplace and you risk getting a skewed version of what actually occurred. 

 

Even include the profile for the employee: what’s going on? Oftentimes you’ll see they’ve run out of vacation time and now they’ve filed this claim. Then, we learn from other employees that this person was just taking a vacation. So all that information about what’s going on in this employee’s life and other things they’re aware of like disability claims that were previously filed for this employee in conjunction with just responding to the investigation as soon as it happens is pivotal.

 

I gather that a lot of times in an instance where this doesn’t happen, the insured is afraid of the repercussions and the carrier is going to penalize them. However, you don’t get penalized for doing the right thing, which is if you know something happened, report it. This way the carrier can work with you and guide you and do the investigation early on instead of 4 months out. 

 

So circling back to the example you gave us. What happened in the time it took for that event to hit your desk? 

 

In this situation, it was a case of “Everything that can go wrong, did go wrong.” The insured originally never put it through to workers’ comp. Why? 1. They were trying to pay for anything out of pocket to avoid having the claim show up on their claim history. Secondly, they heard this employee had passed away. The employer didn’t realize that the employee had survived the accident. 

 

Once we finally did receive the claim, the employees that participated in the internal investigation before it reached the carrier were no longer available for comment. 

 

This sounds interesting.

 

I’m not sure if that answered your question, but I’m not sure if this approach helped anybody because the state where this incident occurred is a state that requires you to get prior authorizations, and the employee already incurred several million dollars worth of care before this claim even reached us. There was no direction and we couldn’t negotiate the rates with the home healthcare. At this point, we’re trying to go backwards to try to project what could occur in the future. 

 

What a mess. 

 

This approach doesn’t work well from the financial standpoint either because it doesn’t help the injured worker and then the carrier is trying to quickly piece together to make a decision before the state’s deadline for when you have to file a decision. There is a lot of scrambling. 

 

This sounds so stressful. The insured may be able to self-pay but those accidents need to be very minor. Even if the insured does self-pay there are still forms that need to be filled out and the insured is required to keep them on hand but it sounds like in this instance it was a major accident, to begin with. 

 

Thank you so much for sharing. This touches on what a lot of clients are asking and are worried about. At the end of the day, they all want the best insurance rates and the best insurance coverage, but the only way to achieve that is cooperation and reporting things timely when an employee is injured. 

 

It sounds like in this instance the insured didn’t try to reach out to the injured employee because they didn’t know if he was still alive.

 

There was no contact made. In fact, it was asked for us to not contact the family until we (the carrier) had the full scope of what was going on because at that point we didn’t want to contact the family and give them unrealistic expectations of what would be covered.  The insured definitely learned a lesson on what not to do next time. 

 

Something as simple as reaching out to the employee who was injured, or reaching out to the family if you can’t get the employee,  and they’re not showing up to work is a big step and a huge help to the claims team and to the employer as well. They should know where their employees are. 

 

I find it very important for the employer to be engaged in this process. Whether they are a short-term or a long-term employee. Following up and showing that area of concern, asking them when they might return to work. It makes that employee feel valued. It could also result in a quicker return to work.

 

A great point you’ve touched on. 

 

The employer/employee relationship  

 

I ran into an issue where I was trying to encourage one of my clients to reach out to an employee that had gone MIA for a little bit. Their response was they didn’t want to because they were afraid that the employee would consider it harassment and the employer’s view was “this employee is out on workers’ comp. We have no right to speak to them.”

 

I think a lot of insureds feel this way:  once the employee is out on workers’ comp they’re not allowed to speak to the employee. But, what you’re telling me is this is not truly the case. 

 

To my knowledge, there is no employment law that prevents the employer from checking in on their employees. Disability does that to check in with their employees to check-in and see how they’re progressing and how they’re healing. The employer may not be able to ask directly “When are you returning to work” but they can ask how they’re progressing. 

 

Depending upon the relationship between the employer and the employee, the employee may be forthcoming with more information. 

 

A lot of times these folks are just home and don’t have many other people to talk with. A lot of them are isolated, working-class individuals. So their family, friends, and everyone else is at work, so they’re longing for social interaction. The employer reaching out shows the employee that they’re concerned about their wellbeing and the employee can be eager to come back.

 

It sounds like this is just the kind thing to do. 

I don’t know of any law that stops someone from doing that so we encourage reaching out to the employee. 

I wasn’t meaning this from any legal standpoint. I just meant a lot of employers are like “Well they’re out on workers’ comp. We’re not talking to them”. They’re still your employees.

Especially when some of these employees have been with the company for 15+ years. How do you let this accident happen and not show empathy or concern for how the employee is doing? I think from the carrier side of this we’re in situations where we can’t have direct contact with the employee because they’re attorney represented. Therefore the employer is our outlet to keep us updated.

 

Oftentimes they (injured workers) go to a doctor’s appointment and they give their employer a call with an update: “I just went to my  Dr.’s appointment and I’m going to be out for another 4 weeks. I need to go to physical therapy and then go back to the Dr.’s.” 

 

As a carrier, it takes us a longer route to get this information because we have to call the provider to get information, and sometimes it takes two weeks plus to get the office notes, depending on how long it takes the physician’s office to have their notes dictated. 

 

It’s often helpful to the carrier if the employer maintains that relationship with the employee. It can help get that person back to work sooner, which benefits the claim. 

 

You’re detailing a really important dynamic which we try to communicate to our clients, and it’s nice to hear the same from you, another claims expert. It’s a group effort and the insured is a key player in how these claims can end up. It starts with keeping in contact. Once the adjuster loses contact with the claimant due to attorney representation it sounds like the employer is the key person to maintain that contact and relay important information to you guys. 

 

I think that this is something a lot of people often overlook because it’s not common knowledge.

 

Exactly what I was saying. 

 

This has given us a lot to think about, to share with our clients. Is there anything else that I didn’t touch on that you were hoping to talk about? Any inside scoops.

 

You know, I gave an example of a catastrophic claim and there are other claims out there. What I think is always a challenge for employers is the accident description itself. Sometimes that’s where they start scratching their head. The employer starts asking themselves “Do I report this? Do I not report this? Should I be taking a hands-on approach? Do I let the claims team just handle it?”

 

The employer may not want to reach out during the investigation period, because the employee may start asking questions that they don’t have the answers to. 

 

Right. 

 

I’ve seen all sorts of things, and the issue is that there are various grey areas in claims that can affect whether or not the claim will be accepted by the carrier. 

 

You mentioned some of the more common areas of claims and can some of those be prevented? 100% Yes, but some will inevitably happen. The other side of this is the quicker we can get these resolved, and the greater involvement we can have earlier on, the more likely we will help the injured employee return to work sooner. The more we can do to prevent these accidents from occurring, the safer the staff is and the better things can be. 

 

Risk Management 101. Preach! Thank you so much for your time. Our fireside, Vanity Fair-esque interview. This was a lot of fun! I may be reaching back out to you for a summer edition of this!  

 

Claims management is an integral part of your insurance purchasing process. If you have any questions or need help with claims management within your organization contact one of our Metropolitan Risk Risk Advisors for information on our available programs. 

Claims Management, Construction Practice Group Content, Line of Insurance, Risk Management, Workers Compensation Insurance

Protecting Your Workforce From Winter Related Illness

Winter weather creates new challenges for employers trying to protect their employees from work-related accidents. Snow and Ice. How are you protecting your employees from potential slip and fall incidents related to snow and ice? According to OSHA, 20% of all workplace injuries are due to trips, slips, and falls. 

Types Of Cold Related Illness

Every year, around 1,330 people die of exposure to the cold. These deaths are preventable with the proper clothing. The four types of Cold related illnesses are hypothermia, frostbite, chilblains, and trench foot.

Hypothermia

When your body is exposed to cold temperatures, the body begins to lose heat faster than it can be produced. Prolonged exposure will eventually use up the body’s stored energy.

Signs of Hypothermia:

Early Symptoms

  • Shivering
  • Fatigue
  • Loss of coordination
  • Confusion and disorientation

Late Symptoms

  • No shivering
  • Blue skin
  • Dilated pupils
  • Slowed pulse and breathing
  • Loss of consciousness

First Aid for Hypothermia

  1. Move employee to a warm room or shelter
  2. Remove their wet clothing
  3. Warm the center of their body first-chest, neck, head, and groin-using an electric blanket, if available; or use skin-to-skin contact under loose, dry layers of blankets, clothing, towels, or sheets.
  4. Warm beverages may help, but do not give alcoholic beverages. Do not try to give beverages to an unconscious person
  5. After their body temperature has increased, keep victim dry and wrapped in a blanket
  6. If the victim is unresponsive begin CPR

 

Frost Bite 

Frostbite is caused by freezing. It causes loss of feeling and color in the affected areas. Frostbite most commonly affects the nose, ears, cheeks, chin, fingers, and toes. It can cause permanent damages to body tissue and severe cases can lead to amputation. 

 

Symptoms:

  • Reduced blood flow to hands and feet (fingers or toes can freeze)
  • Numbness
  • Tingling or stinging
  • Aching
  • Bluish or pale, waxy skin

First Aid

  • Get into a warm room as soon as possible.
  • Unless absolutely necessary, do not walk on frostbitten feet or toes-this increases the damage.
  • Immerse the affected area in warm-not hot-water (the temperature should be comfortable to the touch for unaffected parts of the body).
  • Warm the affected area using body heat; for example, the heat of an armpit can be used to warm frostbitten fingers.
  • Do not rub or massage the frostbitten area; doing so may cause more damage.
  • Do not use a heating pad, heat lamp, or the heat of a stove, fireplace, or radiator for warming. Affected areas are numb and can be easily burned.

Chilblains

 Chilblains are the inflammation of blood vessels in the skin in response to repeated exposure to cold but not freezing air. 

Symptoms

  • Small, itchy red areas on your skin, often on your feet or hands
  • Possible blistering or skin ulcers
  • Swelling of your skin
  • Burning sensation on your skin
  • Changes in skin color from red to dark blue, accompanied by pain

First Aid

  • Keep hands and feet warm and dry
  • Wear gloves & socks
  • Change damp gloves and socks when needed
  • Move affected person inside

Cold related illnesses aren’t the only hazard that an organization faces with winter. Slip and fall injuries are more prevalent in the winter as well.

Cyber Liability Insurance, Risk Management

Social Engineering:A Growing Cybersecurity Risk

Social Engineering

This past summer we wrote an article about the dangers of social engineering and how to prepare your organization for a socially engineered cyber attack. To reiterate: Social Engineering is the use of fraud to manipulate individuals from their personal information. This means driver’s licenses, passports, medical records, and bank information, are all examples of records that can be accessible to social engineers to steal information from you.

Why you and your organization should be aware of Social Engineering 

Social engineering can impact your personal data as well as your business’s data. These cybercriminals rely on the ability to manipulate individuals rather than hacking computer systems to invade a target’s account. Hackers know not to go through any protected systems because humans are much easier to break down. Hackers find out any small piece of information and take advantage of human weaknesses to gain access to personal information. Thus, playing an important role in individuals educating themselves on these cyber risks and their extreme dangers to your confidential information.

Attack methods

Social engineering has three types of styles and methods in using psychological tricks to steal your personal information.

Physical Social Engineering Attacks

Starting with Physical social engineering, hackers attack by dumpster diving or tailgating, trashcans, open access to the property and office receptions are also examples of the typical vectors associated with physical social engineering.

Technical Attacks

Technical social engineering attacks by password hacking and online profiling and the typical vectors include malware, unsecured network systems, and social media.

Socio-Technical engineering

Socio-Technical engineering attacks by phishing and watering holes, the typical vectors include emails, social media posts and compromised websites.

Social media

Social profiling is one of the easiest ways in hacking someone’s account in gaining information from that person to use against them and steal their identity. The problem and potential impacts grew from the popularity of social media platforms; social media users are a gift to social engineers since all their official records are online. For example, A social media post “I hate my job” can attract hackers. The post will be noticed and the hacker will get personally target the individual.  The criminal will pose as a bogus recruitment consultant will extract personal information as a trusted source. These social engineers have worked profile by profile to build targeted social profiles; through analysis of information, social media posts, pictures, or any holidays/birthdays.

Where are cybercriminals investing?

To understand more about cybercriminals and social engineering, the use of phishing techniques is now very well-established in cybercrime. New techniques are coming out every day when it comes to cyber threats. These techniques include social profiling, fake voices, deep fake voices, and mouth mapping. The growing performance of computer systems have made mimicking specific voices possible. The majority of investment goes into, “voice conversion” and “text-to-voice.” Voice conversion involves two voices (the source and the target) and the application of software to convert one voice to another. text-to-voice conversion allows a mimicked voice to say whatever the user of that software submits via text.

Researchers expect full voice conversion and text-to-voice to be available services on mobile phones and create mimicked voices in about 3-5 years; this will conclude into serious economic/political consequences of cybercrime. Mouth mapping is another technique that is becoming popular in cybercrime; this includes, complementing existing fake voice technologies and is well suited to political and journalist targets. This technique is also applicable to social media and web conferencing.

A solution to Social Engineering

Social engineering is a crucial component of any written policy on cyber liability protection relating to individuals and companies.  With this in mind, make sure you and your organization have cybersecurity awareness training to recognize the specifics of cybercrime and social engineering; bits of pieces of information given to hackers from different user’s accounts without the users even being aware of it. Putting into place, risk management, frameworks, security strategies, and analytics tools will consider the threat.

At Metropolitan Risk, we offer a comprehensive Cyber Risk Assessment to ensure that businesses are protecting themselves from cyber attacks with the best resources possible. Click here if you are still looking for more info or you have any questions. We have a team of Risk Management specialists who are here to help!