Public Sector Risk

For Less Police Violence, Train More

Insurers who help pay for improved police training today may save on future claims.
By: | June 1, 2017 • 5 min read

In the emotionally and politically charged climate surrounding police violence, a consensus emerges from the right and the left, from cops, attorneys, academics and the insurance community: Mitigation depends on more and better training for law enforcement.


Every stakeholder — from the cop on the beat through prison management and the insurance industry — has a role in affecting change.

“Sometimes police have to use force, and then bad things happen,” said Greg Champagne, a sheriff in St. Charles Parish, Louisiana, and president of the National Sheriff’s Association. “The best risk management is the best training a police force can afford. Insurers can help us provide free training.”

Communities are feeling the financial impact of police training. Bloomberg reported in February 2016 that spending on police training in 23 of the 25 biggest U.S. cities grew 17 percent to $317.9 million in 2015 from 2013.

The cost of not training may be even higher. For example, Chicago residents paid nearly half a billion dollars in settlements over the past decade, according to the Chicago Sun-Times, and spent $84.6 million in fees, settlements and awards in 2013.

Costs fall primarily on taxpayers, since most large cities are self-insured. Many smaller cities belong to self-insured risk pools.

Fewer than five insurers cover public entities nationally, said Scott K. Thomason, vice president, public sector, at Arthur J. Gallagher & Co., but the self-insured cities rely on reinsurers, which have a vested interest in improving risk profiles.

Greg Champagne, president, National Sheriff’s Association

“Civil unrest is not created equal, in likelihood and severity,” said Hart S. Brown, senior vice president, organizational resilience, HUB International. For example, riot-type events explode with high energy and emotion but usually dissipate within 72 hours. Labor unrest may last longer but has less geographical impact.

“Carriers and brokers can conduct real risk assessments of the kind of event that’s likely and its cost to municipalities.” Brown said.

Many experts believe that a disproportionate number of claims are caused by a small number of officers, said John Rappaport, assistant professor of law, University of Chicago School of Law.

Insurers “could be bolder” in urging departments to get rid of the bad apples, he said. While carriers don’t want to be perceived as interfering in personnel matters, he said, “this is an occasion for managing risk.”

Training, Training and More Training

In April, the National Association of Black Law Enforcement Officers Inc. (NABLEO) conducted a two-day de-escalation training program. The curriculum aims to unpack “implicit bias,” which the Justice Department defines as “the unconscious or subtle associations that individuals make between groups of people and stereotypes about those groups.”

“Our assumptions of who other people are dictate how we treat them,” said Charles P. Wilson, national chairman at NABLEO. “Assumptions create risk.”

Training aims to change the attitudes and behaviors that can erupt into violence. “How does the officer perceive the other person? How is he speaking to him? What kind of words is he using? How does he interpret body language? How does his cultural lens affect what he sees?”

Implicit bias training is part of the reform in some of the consent decrees the Justice Department reached under the Obama Administration with several troubled police departments.


The current attorney general, Jeff Sessions, is seeking a review of the consent decrees, citing concerns about their overuse and potential stigma for the police departments.

The DOJ action is “a disservice to law enforcement and the community,” Wilson said. “Police have to understand what they’re doing wrong so they can stop doing it.”

The Fraternal Order of Police, which vociferously supports Sessions on its website, may disagree.

“Sometimes police have to use force, and then bad things happen.” —Greg Champagne, president, National Sheriff’s Association

Regardless, said Rappaport, if consent decrees were abandoned, affected municipalities could see more violent interactions and lawsuits to follow. Most of these cities are self-insured, so only their excess carriers might be affected.

And if federal funding for de-escalation and other training were withdrawn, would the insurance industry have a role in picking up the tab?

Derek Broaddus, senior vice president, Allied World Insurance

“Absolutely,” Rappaport said. “Carriers can do the calculations: Do we expect to save more on claims and lawsuits than we spend on training? Research suggests they will.”

Police liability insurers — many of which are non-competitive, state-specific municipal risk pools — are an important “bumblebee” in cross-pollinating best practices, he said.

Just as carriers share positive results about telematics devices installed in police cars, revealing location, speed and response times, they also share technology and training success stories.

The need for thorough training runs the entire law enforcement and judicial gamut, said Champagne.

“Use of force, medical care, automobile crashes — those are the liability triggers. Sheriffs run jails, and they and their deputies have to understand the law and procedures in their operations,” he said.

Body Cameras, Pros and Cons

With some reservations, body cameras attached to police officers’ shirts are almost universally hailed by police organizations, insurers, academics and even the ACLU.

Some insurers offer grant funding to municipalities to help finance the equipment, said Derek Broaddus, senior vice president at Allied World Insurance, a specialist primary and excess carrier.

Others offer grant-writing training to help put the funds within smaller municipalities’ reach.

The pros? “Body cameras can raise the level of officers’ responsibility because they know they’re being recorded,” said Thomason. They can also influence the behavior of the person on the other side of the lens.

The cons? At $400 to $1,000 apiece, they’re expensive, said Kenny Smith, risk control manager at OneBeacon.

“And then you have the cost of storage, retrieving images, copying and redaction when someone requests them through the Freedom of Information Act,” he said.

“Cameras alone may be prohibitively expensive for an entire police department,” said Brown, “and storage is expensive, whether on a municipality’s own servers or on the cloud.”


Taser International — now Axon — announced in April a program to equip every U.S. police officer with a free body camera and provide police departments with supporting hardware, software, data storage and training, free for one year. After a year, cameras would cost $399 and use of the company’s platform $15 to $89 per month, per officer.

“The image that appears on the evening news can look awful, but it doesn’t show the run-up to the incident,” Broaddus said. “It doesn’t show the pre-arrest history between the participants, the altercation or instigation.”

“When you don’t have the full scope of context, it creates more risk,” said Thomason.

Video footage can stir up negative public perception, Smith said.

“Once it’s released to the public or the media, it can be very damaging. Police departments need to have their procedural ducks in a row before they venture into this thing.” &

Susannah Levine writes about health care, education and technology. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Focus: Cyber

Expanding Cyber BI

Cyber business interruption insurance is a thriving market, but growth carries the threat of a mega-loss. 
By: | March 5, 2018 • 7 min read

Lingering hopes that large-scale cyber attack might be a once-in-a-lifetime event were dashed last year. The four-day WannaCry ransomware strike in May across 150 countries targeted more than 300,000 computers running Microsoft Windows. A month later, NotPetya hit multinationals ranging from Danish shipping firm Maersk to pharmaceutical giant Merck.


Maersk’s chairman, Jim Hagemann Snabe, revealed at this year’s Davos summit that NotPetya shut down most of the group’s network. While it was replacing 45,000 PCs and 4,000 servers, freight transactions had to be completed manually. The combined cost of business interruption and rebuilding the system was up to $300 million.

Merck’s CFO Robert Davis told investors that its NotPetya bill included $135 million in lost sales plus $175 million in additional costs. Fellow victims FedEx and French construction group Saint Gobain reported similar financial hits from lost business and clean-up costs.

The fast-expanding world of cryptocurrencies is also increasingly targeted. Echoes of the 2014 hack that triggered the collapse of Bitcoin exchange Mt. Gox emerged this January when Japanese cryptocurrency exchange Coincheck pledged to repay customers $500 million stolen by hackers in a cyber heist.

The size and scope of last summer’s attacks accelerated discussions on both sides of the Atlantic, between risk managers and brokers seeking more comprehensive cyber business interruption insurance products.

It also recently persuaded Pool Re, the UK’s terrorism reinsurance pool set up 25 years ago after bomb attacks in London’s financial quarter, to announce that from April its cover will extend to include material damage and direct BI resulting from acts of terrorism using a cyber trigger.

“The threat from a cyber attack is evident, and businesses have become increasingly concerned about the extensive repercussions these types of attacks could have on them,” said Pool Re’s chief, Julian Enoizi. “This was a clear gap in our coverage which left businesses potentially exposed.”

Shifting Focus

Development of cyber BI insurance to date reveals something of a transatlantic divide, said Hans Allnutt, head of cyber and data risk at international law firm DAC Beachcroft. The first U.S. mainstream cyber insurance products were a response to California’s data security and breach notification legislation in 2003.

Jimaan Sané, technology underwriter, Beazley

Of more recent vintage, Europe’s first cyber policies’ wordings initially reflected U.S. wordings, with the focus on data breaches. “So underwriters had to innovate and push hard on other areas of cyber cover, particularly BI and cyber crimes such as ransomware demands and distributed denial of service attacks,” said Allnut.

“Europe now has regulation coming up this May in the form of the General Data Protection Regulation across the EU, so the focus has essentially come full circle.”

Cyber insurance policies also provide a degree of cover for BI resulting from one of three main triggers, said Jimaan Sané, technology underwriter for specialist insurer Beazley. “First is the malicious-type trigger, where the system goes down or an outage results directly from a hack.

“Second is any incident involving negligence — the so-called ‘fat finger’ — where human or operational error causes a loss or there has been failure to upgrade or maintain the system. Third is any broader unplanned outage that hits either the company or anyone on which it relies, such as a service provider.”

The importance of cyber BI covering negligent acts in addition to phishing and social engineering attacks was underlined by last May’s IT meltdown suffered by airline BA.

This was triggered by a technician who switched off and then reconnected the power supply to BA’s data center, physically damaging servers and distribution panels.

Compensating delayed passengers cost the company around $80 million, although the bill fell short of the $461 million operational error loss suffered by Knight Capital in 2012, which pushed it close to bankruptcy and decimated its share price.

Mistaken Assumption

Awareness of potentially huge BI losses resulting from cyber attack was heightened by well-publicized hacks suffered by retailers such as Target and Home Depot in late 2013 and 2014, said Matt Kletzli, SVP and head of management liability at Victor O. Schinnerer & Company.


However, the incidents didn’t initially alarm smaller, less high-profile businesses, which assumed they wouldn’t be similarly targeted.

“But perpetrators employing bots and ransomware set out to expose any firms with weaknesses in their system,” he added.

“Suddenly, smaller firms found that even when they weren’t themselves targeted, many of those around them had fallen victim to attacks. Awareness started to lift, as the focus moved from large, headline-grabbing attacks to more everyday incidents.”

Publications such as the Director’s Handbook of Cyber-Risk Oversight, issued by the National Association of Corporate Directors and the Internet Security Alliance fixed the issue firmly on boardroom agendas.

“What’s possibly of greater concern is the sheer number of different businesses that can be affected by a single cyber attack and the cost of getting them up and running again quickly.” — Jimaan Sané, technology underwriter, Beazley

Reformed ex-hackers were recruited to offer board members their insights into the most vulnerable points across the company’s systems — in much the same way as forger-turned-security-expert Frank Abagnale Jr., subject of the Spielberg biopic “Catch Me If You Can.”

There also has been an increasing focus on systemic risk related to cyber attacks. Allnutt cites “Business Blackout,” a July 2015 study by Lloyd’s of London and the Cambridge University’s Centre for Risk Studies.

This detailed analysis of what could result from a major cyber attack on America’s power grid predicted a cost to the U.S. economy of hundreds of billions and claims to the insurance industry totalling upwards of $21.4 billion.

Lloyd’s described the scenario as both “technologically possible” and “improbable.” Three years on, however, it appears less fanciful.

In January, the head of the UK’s National Cyber Security Centre, Ciaran Martin, said the UK had been fortunate in so far averting a ‘category one’ attack. A C1 would shut down the financial services sector on which the country relies heavily and other vital infrastructure. It was a case of “when, not if” such an assault would be launched, he warned.

AI: Friend or Foe?

Despite daunting potential financial losses, pioneers of cyber BI insurance such as Beazley, Zurich, AIG and Chubb now see new competitors in the market. Capacity is growing steadily, said Allnutt.

“Not only is cyber insurance a new product, it also offers a new source of premium revenue so there is considerable appetite for taking it on,” he added. “However, whilst most insurers are comfortable with the liability aspects of cyber risk; not all insurers are covering loss of income.”

Matt Kletzli, SVP and head of management liability, Victor O. Schinnerer & Company

Kletzli added that available products include several well-written, broad cyber coverages that take into account all types of potential cyber attack and don’t attempt to limit cover by applying a narrow definition of BI loss.

“It’s a rapidly-evolving coverage — and needs to be — in order to keep up with changing circumstances,” he said.

The good news, according to a Fitch report, is that the cyber loss ratio has been reduced to 45 percent as more companies buy cover and the market continues to expand, bringing down the size of the average loss.

“The bad news is that at cyber events, talk is regularly turning to ‘what will be the Hurricane Katrina-type event’ for the cyber market?” said Kletzli.

“What’s worse is that with hurricane losses, underwriters know which regions are most at risk, whereas cyber is a global risk and insurers potentially face huge aggregation.”


Nor is the advent of robotics and artificial intelligence (AI) necessarily cause for optimism. As Allnutt noted, while AI can potentially be used to decode malware, by the same token sophisticated criminals can employ it to develop new malware and escalate the ‘computer versus computer’ battle.

“The trend towards greater automation of business means that we can expect more incidents involving loss of income,” said Sané. “What’s possibly of greater concern is the sheer number of different businesses that can be affected by a single cyber attack and the cost of getting them up and running again quickly.

“We’re likely to see a growing number of attacks where the aim is to cause disruption, rather than demand a ransom.

“The paradox of cyber BI is that the more sophisticated your organization and the more it embraces automation, the bigger the potential impact when an outage does occur. Those old-fashioned businesses still reliant on traditional processes generally aren’t affected as much and incur smaller losses.” &

Graham Buck is editor of He can be reached at