2017 NWCDC Keynote Preview

Caring for Workers ‘The Nordstrom Way’

Learn about Nordstrom's approach to injured worker advocacy during the 2017 National Workers’ Compensation and Disability Conference & Expo.
By: | June 9, 2017 • 3 min read
Topics: NWCDC | Retail | Workers' Comp

Janine Kral is known for her passion when it comes to contributing to risk management’s overall improvement and for fostering workers’ compensation and risk management programs.

Kral, the VP of risk management at Nordstrom, will deliver a keynote address focusing on injured worker advocacy during the 2017 National Workers’ Compensation and Disability Conference & Expo to be held Dec. 6- 8 at Mandalay Bay in Las Vegas.

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Nordstrom is a nationwide retailer characterized by a culture that emphasizes superior customer service — a hallmark that extends to caring for its injured workers.

While injured worker advocacy is currently a hot topic in workers’ comp, particularly among leading-edge employers looking to improve worker engagement, Nordstrom’s workers’ comp program developed by Kral has long embraced the practice.

“Janine is a seasoned risk manager who built a risk management program focusing on internal and external customer service, including employee advocacy,” said Denise Algire, director, risk initiatives, and national medical director at Albertsons Companies. “I am excited to hear and learn from her presentation.”

Kral oversees 75 employees responsible for mitigating a broad array of exposures and reducing Nordstrom’s total cost of risk.

Her group manages claims litigation, purchases insurance, assures regulation compliance, implements loss prevention practices, mitigates employment-related risks, improves business resiliency by coordinating crisis management and emergency response plans, and works to overcome business continuity challenges.

Kral’s tenure at Nordstrom began 30 years ago when the retailer specifically hired her to improve its workers’ comp program and to make certain its injured employees were well cared for.

Today, workers’ comp is only one part of her risk management purview, which now includes a workers’ comp director she collaborates with.

Taking care of injured colleagues isn’t just the right thing to do, according to Kral. It also has practical implications.

Janine Kral,VP, risk management, Nordstrom

“We believe that if you engage the employee and get them to trust that you really are looking out for their best interest — even though sometimes you have to make decisions that are not popular with them — then the decision is going to be easier and they may accept it better, if you have established that trust from the beginning,” Kral said.

At NWCDC, the veteran risk manager will discuss the strategies her team employs to make worker advocacy happen, the outcomes experienced, and how the customer-service philosophy described in the book “The Nordstrom Way,” could just as easily describe the employer’s recipe for managing workers’ compensation injuries.

Nordstrom practices for engaging injured workers includes recognizing which ones will need additional help and understanding what are they looking for.

“We expect our employees to have a relationship with our customers, and every customer has different needs and every employee has different needs,” Kral said. “So [we start by asking] how can we support them when they have a need, when they are injured on the job.”

To make certain that philosophy coupled with other workers’ comp practices continually produce positive results, Kral’s risk management department relies heavily on measuring outcomes.

Metrics reviewed include the number of claimants who seek attorney representation. Evaluating such information helps Kral’s risk management department gauge its worker-engagement performance as well as evaluate the impact on factors such as claims duration.

Kral’s involvement in risk management stretches beyond Nordstrom.

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She has served on the Workers Compensation Research Institute’s board for 20 years. That involvement began when Kral started volunteering her input on WCRI claims research results that proved useful for benchmarking Nordstrom’s program.

“I got so excited about it I kept calling them to say ‘what about this, what about that,’ ” Kral said.

She was later instrumental in encouraging Aon to develop a benchmarking study that allows retail-industry clients to see how their workers’ comp and general liability programs compare against their peers.

“She has been very passionately involved in different risk management groups,” said Algire, who is also an NWCDC program co-chair. “She has been a leader in different employer associations. She collectively shares information about what Nordstrom has done with other employers.”

Roberto Ceniceros is senior editor at Risk & Insurance® and chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at [email protected] Read more of his columns and features.

More from Risk & Insurance

More from Risk & Insurance

Cyber Liability

Fresh Worries for Boards of Directors

New cyber security regulations increase exposure for directors and officers at financial institutions.
By: | June 1, 2017 • 6 min read

Boards of directors could face a fresh wave of directors and officers (D&O) claims following the introduction of tough new cybersecurity rules for financial institutions by The New York State Department of Financial Services (DFS).

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Prompted by recent high profile cyber attacks on JPMorgan Chase, Sony, Target, and others, the state regulations are the first of their kind and went into effect on March 1.

The new rules require banks, insurers and other financial institutions to establish an enterprise-wide cybersecurity program and adopt a written policy that must be reviewed by the board and approved by a senior officer annually.

The regulation also requires the more than 3,000 financial services firms operating in the state to appoint a chief information security officer to oversee the program, to report possible breaches within 72 hours, and to ensure that third-party vendors meet the new standards.

Companies will have until September 1 to comply with most of the new requirements, and beginning February 15, 2018, they will have to submit an annual certification of compliance.

The responsibility for cybersecurity will now fall squarely on the board and senior management actively overseeing the entity’s overall program. Some experts fear that the D&O insurance market is far from prepared to absorb this risk.

“The new rules could raise compliance risks for financial institutions and, in turn, premiums and loss potential for D&O insurance underwriters,” warned Fitch Ratings in a statement. “If management and directors of financial institutions that experience future cyber incidents are subsequently found to be noncompliant with the New York regulations, then they will be more exposed to litigation that would be covered under professional liability policies.”

D&O Challenge

Judy Selby, managing director in BDO Consulting’s technology advisory services practice, said that while many directors and officers rely on a CISO to deal with cybersecurity, under the new rules the buck stops with the board.

“The common refrain I hear from directors and officers is ‘we have a great IT guy or CIO,’ and while it’s important to have them in place, as the board, they are ultimately responsible for cybersecurity oversight,” she said.

William Kelly, senior vice president, underwriting, Argo Pro

William Kelly, senior vice president, underwriting at Argo Pro, said that unknown cyber threats, untested policy language and developing case laws would all make it more difficult for the D&O market to respond accurately to any such new claims.

“Insurers will need to account for the increased exposures presented by these new regulations and charge appropriately for such added exposure,” he said.

Going forward, said Larry Hamilton, partner at Mayer Brown, D&O underwriters also need to scrutinize a company’s compliance with the regulations.

“To the extent that this risk was not adequately taken into account in the first place in the underwriting of in-force D&O policies, there could be unanticipated additional exposure for the D&O insurers,” he said.

Michelle Lopilato, Hub International’s director of cyber and technology solutions, added that some carriers may offer more coverage, while others may pull back.

“How the markets react will evolve as we see how involved the department becomes in investigating and fining financial institutions for noncompliance and its result on the balance sheet and dividends,” she said.

Christopher Keegan, senior managing director at Beecher Carlson, said that by setting a benchmark, the new rules would make it easier for claimants to make a case that the company had been negligent.

“If stock prices drop, then this makes it easier for class action lawyers to make their cases in D&O situations,” he said. “As a result, D&O carriers may see an uptick in cases against their insureds and an easier path for plaintiffs to show that the company did not meet its duty of care.”

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One area that regulators and plaintiffs might seize upon is the certification compliance requirement, according to Rob Yellen, executive vice president, D&O and fiduciary liability product leader, FINEX at Willis Towers Watson.

“A mere inaccuracy in a certification could result in criminal enforcement, in which case it would then become a boardroom issue,” he said.

A big grey area, however, said Shiraz Saeed, national practice leader for cyber risk at Starr Companies, is determining if a violation is a cyber or management liability issue in the first place.

“The complication arises when a company only has D&O coverage, but it doesn’t have a cyber policy and then they have to try and push all the claims down the D&O route, irrespective of their nature,” he said.

“Insurers, on their part, will need to account for the increased exposures presented by these new regulations and charge appropriately for such added exposure.” — William Kelly, senior vice president, underwriting, Argo Pro

Jim McCue, managing director at Aon’s financial services group, said many small and mid-size businesses may struggle to comply with the new rules in time.

“It’s going to be a steep learning curve and a lot of work in terms of preparedness and the implementation of a highly detailed cyber security program, risk assessment and response plan, all by September 2017,” he said.

The new regulation also has the potential to impact third parties including accounting, law, IT and even maintenance and repair firms who have access to a company’s information systems and personal data, said Keegan.

“That can include everyone from IT vendors to the people who maintain the building’s air conditioning,” he said.

New Models

Others have followed New York’s lead, with similar regulations being considered across federal, state and non-governmental regulators.

The National Association of Insurance Commissioners’ Cyber-security Taskforce has proposed an insurance data security model law that establishes exclusive standards for data security and investigation, and notification of a breach of data security for insurance providers.

Once enacted, each state would be free to adopt the new law, however, “our main concern is if regulators in different states start to adopt different standards from each other,” said Alex Hageli, director, personal lines policy at the Property Casualty Insurers Association of America.

“It would only serve to make compliance harder, increase the cost of burden on companies, and at the end of the day it doesn’t really help anybody.”

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Richard Morris, partner at law firm Herrick, Feinstein LLP, said companies need to review their current cybersecurity program with their chief technology officer or IT provider.

“Companies should assess whether their current technology budget is adequate and consider what investments will be required in 2017 to keep up with regulatory and market expectations,” he said. “They should also review and assess the adequacy of insurance policies with respect to coverages, deductibles and other limitations.”

Adam Hamm, former NAIC chair and MD of Protiviti’s risk and compliance practice, added: “With New York’s new cyber regulation, this is a sea change from where we were a couple of years ago and it’s soon going to become the new norm for regulating cyber security.” &

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]