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The Embedded Risk Engineer

Risk engineers help stay ahead of emerging risks by working directly with underwriters and insureds.
By: | October 1, 2014 • 6 min read

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Not long ago, concepts such as solar panels, nanotechnology, battery-powered electric vehicles and “green” buildings were more pipe dream than reality. Today, with those trends a growing part of the global marketplace, insurers need ongoing, in-depth, real-time data for optimal underwriting in order to give buyers proper coverage and accurate pricing.

As one leader of Aspen Insurance’s loss control risk engineering team, Troy Bickerstaff knows better than most the value of staying ahead of the curve when it comes to emerging trends and their potential impact on insurance buyers.

“Our underwriters at Aspen Insurance are plugged into what’s happening with today’s exciting technology developments,” Bickerstaff said. “By using specialized, dedicated risk engineers to deliver unparalleled support to our underwriting teams, we can meet emerging marketplace needs. For insureds in these areas, the result is the best possible approach to risk management, insurance programs and pricing.”

SponsoredContent_Aspen“We evaluate all possible hazards, including the insured’s quality management system, their safety and quality standards, their recall process – anything and everything that goes into their product. Then, we advise the underwriters during the application process.”
— Troy Bickerstaff, Assistant Vice President and Loss Control Manager, Aspen Insurance

Aspen Insurance utilizes a concept by which an underwriting team includes an embedded engineer who works closely with the team’s underwriters and clients. This dedicated professional focuses on supporting the team in meeting the specific needs of a client and continually advises on the evolution of emerging risks associated within the team’s industry vertical.

Bickerstaff explained that Aspen Insurance’s risk engineering approach differs from other carriers that typically offer a centralized loss control/engineering department, primarily because they provide a general approach to support of underwriting.

“The difference in the various approaches to risk engineering is similar to specialization in medicine. If you need open-heart surgery, would you want a general surgeon or a cardiothoracic surgeon?” he asked. “Similarly, if your business faces specialized risks, you need the deep expertise of underwriters and engineers well-versed in the nuances of your industry.”

Bickerstaff and his colleagues support the underwriting teams across Aspen Insurance in four key ways:

Evaluating individual risk

To best understand a potential insured’s risk portfolio, the Aspen Insurance team reviews each new submission along with an applicant’s website, history of product recall and compliance with industry standards, in addition to certifications to assess what types of exposures may emerge. Bickerstaff noted that Aspen Insurance’s claims team is also involved in this process, including in respect of all risk engineering communications with the underwriting team. This tight collaboration between underwriting, engineering and claims is a key differentiator for Aspen US Insurance in the market.

If a new technology is part of a coverage application submission, Bickerstaff will also launch an engineering review of the risk, delivering valuable information to the underwriters, who in turn can utilize the data to help insureds find ways to improve their products and potentially reduce expensive product liability exposures, and possibly even claims.

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SponsoredContent_AspenWhen a company looking to import foreign-made tires applied for coverage, Bickerstaff created a document outlining all the major “key points for casualty,” including factors such as improper curing, use of over-aged rubber and contaminants in the tire itself. Underwriters then used that report with the potential insured, helping them avoid any potential pitfalls in importing foreign-made tires.

“We evaluate all possible hazards, including the insured’s quality management system, their safety and quality standards, their recall process – anything and everything that goes into their product,” he said. “Then, we advise the underwriters during the application process.”

Conducting a class of risk consultation

Based on underwriting submission trends or individual risks, the risk engineering team often identifies red flags with certain exposures and prepare detailed “guide sheets” outlining key information about the overall risk to support the analysis of underwriting teams.

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SponsoredContent_AspenBickerstaff created two such guide sheets related to electric vehicles, an emerging, popular alternative to gas-powered vehicles. One guide sheet detailed specific fire hazards associated with electric vehicles (higher voltage, weight distribution and battery blockage), while the other focused on specific fire hazards associated with the lithium ion (Li-Ion) batteries used to power electric vehicles, including ways to mitigate associated risks. Both guide sheets proved helpful to companies looking for coverage who manufactured both Li-Ion batteries and electric cars.

“We undertake a very detailed analysis for insureds in which we typically outline the kinds of claims that could happen, the severity, and what measures an insured would need to have in place to proactively minimize claims scenarios. This additional level of risk analysis is something insureds really value and appreciate.”

Evaluating long-term exposures

As a natural extension of the risk consultation effort, Bickerstaff also conducts long-term research and keeps abreast of different types of exposures through monitoring various media and publications, attending lectures and maintaining research contacts on the academic level. Insureds use Bickerstaff’s research to strengthen their loss control efforts, thereby potentially reducing claims and, as a result, keep overall costs down.

“For areas such as nanotechnology or ‘green’ buildings, we conduct research and create guide sheets,” he said. “But we also constantly stay abreast of the long-term aspects of the risks in those areas, keeping up with industry changes and the evolution of specific technologies”.

Providing added risk management expertise directly to insureds

Finally, the risk engineering group provides additional support for insureds via a face-to-face policyholder consultation at the insured’s location, if necessary.

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SponsoredContent_AspenBickerstaff visited a commercial lawnmower manufacturer and identified several cost-saving enhancement opportunities: guidance on contractual wordings, recommendations for strengthening the weldment inspection program and education on managing increased liability exposures due to the use of temporary workers during the company’s peak manufacturing season. As a result, with that added data, the insured was able to reduce costs and potential claims.

“Among the many advantages we offer to insureds, a key benefit we offer is to ensure that our underwriting is based on the underwriters’ full knowledge of the risk, including access to the best available, most accurate data about the unique exposures relevant to the industry, technology, or niche,” Bickerstaff said, adding that the engineering team’s expertise helps underwriters deliver the best possible outcome, but even more importantly, Aspen Insurance’s specialized, integrated risk engineering strategy ultimately benefits the insured.

“The difference in the various approaches to risk engineering is similar to specialization in medicine. If you need open-heart surgery, would you want a general surgeon or a cardiothoracic surgeon? Similarly, if your business faces specialized risks, you need the deep expertise of underwriters and engineers well-versed in the nuances of your industry.”

“Insureds can feel comfortable and confident they are buying a high-quality, value-added, fairly priced product to meet their specific needs,” he said. “With many of these new, emerging risks, that is a critical benefit to them and a competitive advantage for us.”

To learn more about how Aspen Insurance’s loss control risk engineering and underwriting teams can support your organization, contact your broker.

Troy Bickerstaff, Assistant Vice President and Loss Control Manager at Aspen Insurance, can be reached at [email protected].

This article is provided for news and information purposes only and does not necessarily represent Aspen’s views and does constitute legal advice. This article reflects the opinion of the author at the time it was written taking into account market, regulatory and other conditions at the time of writing which may change over time. Aspen does not undertake a duty to update the article.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Aspen Insurance. The editorial staff of Risk & Insurance had no role in its preparation.




Aspen Insurance is a business segment of Aspen Insurance Holdings Limited.

More from Risk & Insurance

More from Risk & Insurance

Risk Focus: Workers' Comp

Do You Have Employees or Gig Workers?

The number of gig economy workers is growing in the U.S. But their classification as contractors leaves many without workers’ comp, unemployment protection or other benefits.
By: and | July 30, 2018 • 5 min read

A growing number of Americans earn their living in the gig economy without employer-provided benefits and protections such as workers’ compensation.

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With the proliferation of on-demand services powered by digital platforms, questions surrounding who does and does not actually work in the gig economy continue to vex stakeholders. Courts and legislators are being asked to decide what constitutes an employee and what constitutes an independent contractor, or gig worker.

The issues are how the worker is paid and who controls the work process, said Bobby Bollinger, a North Carolina attorney specializing in workers’ compensation law with a client roster in the trucking industry.

The common law test, he said, the same one the IRS uses, considers “whose tools and whose materials are used. Whether the employer is telling the worker how to do the job on a minute-to-minute basis. Whether the worker is paid by the hour or by the job. Whether he’s free to work for someone else.”

Legal challenges have occurred, starting with lawsuits against transportation network companies (TNCs) like Uber and Lyft. Several court cases in recent years have come down on the side of allowing such companies to continue classifying drivers as independent contractors.

Those decisions are significant for TNCs, because the gig model relies on the lower labor cost of independent contractors. Classification as an employee adds at least 30 percent to labor costs.

The issues lie with how a worker is paid and who controls the work process. — Bobby Bollinger, a North Carolina attorney

However, a March 2018 California Supreme Court ruling in a case involving delivery drivers for Dynamex went the other way. The Dynamex decision places heavy emphasis on whether the worker is performing a core function of the business.

Under the Dynamex court’s standard, an electrician called to fix a wiring problem at an Uber office would be considered a general contractor. But a driver providing rides to customers would be part of the company’s central mission and therefore an employee.

Despite the California ruling, a Philadelphia court a month later declined to follow suit, ruling that Uber’s limousine drivers are independent contractors, not employees. So a definitive answer remains elusive.

A Legislative Movement

Misclassification of workers as independent contractors introduces risks to both employers and workers, said Matt Zender, vice president, workers’ compensation product manager, AmTrust.

“My concern is for individuals who believe they’re covered under workers’ compensation, have an injury, try to file a claim and find they’re not covered.”

Misclassifying workers opens a “Pandora’s box” for employers, said Richard R. Meneghello, partner, Fisher Phillips.

Issues include tax liabilities, claims for minimum wage and overtime violations, workers’ comp benefits, civil labor law rights and wrongful termination suits.

The motive for companies seeking the contractor definition is clear: They don’t have to pay for benefits, said Meneghello. “But from a legal perspective, it’s not so easy to turn the workforce into contractors.”

“My concern is for individuals who believe they’re covered under workers’ compensation, have an injury, try to file a claim and find they’re not covered in the eyes of the state.” — Matt Zender, vice president, workers’ compensation product manager, AmTrust

It’s about to get easier, however. In 2016, Handy — which is being sued in five states for misclassification of workers — drafted a N.Y. bill to establish a program where gig-economy companies would pay 2.5 percent of workers’ income into individual health savings accounts, yet would classify them as independent contractors.

Unions and worker advocacy groups argue the program would rob workers of rights and protections. So Handy moved on to eight other states where it would be more likely to win.

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So far, the Handy bills have passed one house of the legislature in Georgia and Colorado; passed both houses in Iowa and Tennessee; and been signed into law in Kentucky, Utah and Indiana. A similar bill was also introduced in Alabama.

The bills’ language says all workers who find jobs through a website or mobile app are independent contractors, as long as the company running the digital platform does not control schedules, prohibit them from working elsewhere and meets other criteria. Two bills exclude transportation network companies such as Uber.

These laws could have far-reaching consequences. Traditional service companies will struggle to compete with start-ups paying minimal labor costs.

Opponents warn that the Handy bills are so broad that a service company need only launch an app for customers to contract services, and they’d be free to re-classify their employees as independent contractors — leaving workers without social security, health insurance or the protections of unemployment insurance or workers’ comp.

That could destabilize social safety nets as well as shrink available workers’ comp premiums.

A New Classification

Independent contractors need to buy their own insurance, including workers’ compensation. But many don’t, said Hart Brown, executive vice president, COO, Firestorm. They may not realize that in the case of an accident, their personal car and health insurance won’t engage, Brown said.

Matt Zender, vice president, workers’ compensation product manager, AmTrust

Workers’ compensation for gig workers can be hard to find. Some state-sponsored funds provide self-employed contractors’ coverage.  Policies can be expensive though in some high-risk occupations, such as roofing, said Bollinger.

The gig system, where a worker does several different jobs for several different companies, breaks down without portable benefits, said Brown. Portable benefits would follow workers from one workplace engagement to another.

What a portable benefits program would look like is unclear, he said, but some combination of employers, independent contractors and intermediaries (such as a digital platform business or staffing agency) would contribute to the program based on a percentage of each transaction.

There is movement toward portable benefits legislation. The Aspen Institute proposed portable benefits where companies contribute to workers’ benefits based on how much an employee works for them. Uber and SEI together proposed a portable benefits bill to the Washington State Legislature.

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Senator Mark Warner (D. VA) introduced the Portable Benefits for Independent Workers Pilot Program Act for the study of portable benefits, and Congresswoman Suzan DelBene (D. WA) introduced a House companion bill.

Meneghello is skeptical of portable benefits as a long-term solution. “They’re a good first step,” he said, “but they paper over the problem. We need a new category of workers.”

A portable benefits model would open opportunities for the growing Insurtech market. Brad Smith, CEO, Intuit, estimates the gig economy to be about 34 percent of the workforce in 2018, growing to 43 percent by 2020.

The insurance industry reinvented itself from a risk transfer mechanism to a risk management mechanism, Brown said, and now it’s reinventing itself again as risk educator to a new hybrid market. &

Susannah Levine writes about health care, education and technology. She can be reached at [email protected] Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]