Insurance Executive

Ten Questions for Dan Olmsted

A private client executive with Ironshore looks for strong building codes and building code enforcement when underwriting high net worth homes.
By: | February 10, 2017 • 7 min read

Ironshore recently achieved approvals to provide private client business in the key New York market. Risk & Insurance® talked to Dan Olmsted, New York-based senior vice president for the private client group about this development and his approach to the segment.

R&I: How long has Ironshore been writing the private client business, Dan?

Olmsted: Ironshore has been in the high net worth sector of the personal lines market since I joined in 2010. We wanted to approach the sector from a specialty angle first and then expand to the admitted capability.

R&I: We note that Ironshore is writing private client insurance on an admitted basis in five states — most recently New York — with plans to expand the business.  Do you have a goal for how soon the coverage will be more broadly available?

Olmsted:  In 2010, we started to offer coverage geared toward homes valued at a million dollars and higher on a specialty basis. Now we are underwriting in five states with the same million dollar valued homes and higher threshold on an admitted basis. What I am focused on is gaining traction in these East Coast states as well as contiguous territories geographically that make sense.

We recently received approval in New York, which was important because it filled out our presence in the tristate area, including Connecticut, New Jersey and Pennsylvania. That’s notable because most brokers and producers write on a geographic territory or regional basis. We are also looking at East Coast centers of business and affluence. We have or will have the capabilities to write around New York, Atlanta, Washington. DC., Boston and Philadelphia.

R&I: Recent reports outline the threat to high-end residential properties on the coasts due to rising seas and climate change. How is Ironshore working with clients to mitigate and transfer the risk of this threat?

Olmsted: I look at two aspects of coastal risk. One is the macro, which I think you are referring to. Then there is the micro, an actual home, whether I’m going to write it and what the terms and conditions are going to be.

We model every home before we write it. We consider wind and storm surge and flooding for the property and tailor the product accordingly. We consider the individual characteristics of the home over a 12 month period. We also assess what mitigation measures might be in place that might address any issues and also how it models.

Dan Olmsted,senior vice president for the private client group, Ironshore

On a macro level, I do tend to be more aggressive in writing where there are strong building codes and strong enforcement of those codes. One organization that I reference is the Insurance Institute for Business & Home Safety. They rank on a regular basis each state for coastal hurricane peril.

They rank the quality of the building codes for the state as well as the quality of the enforcement of the building codes. Florida does very well. They have a 95 percent rating on a scale of zero to 100. Their ranking is so high because they have strong building codes and they enforce them.  I can look at a South Florida location and if I know the year it is built, we can capture a good amount of information.

R&I: That’s interesting. Are there some states in the Northeast, for example, that are stronger than others?

Olmsted: Yes, Virginia and New Jersey have pretty good to very good building codes and enforcement. It’s an evolving environment. As we learn more, we can determine and refine our approach as states amend and improve those codes.  Equally important is making sure states are enforcing codes and that they are not just written on a sheet of paper.

We model every home before we write it. We consider wind and storm surge and flooding for the property and tailor the product accordingly. We consider the individual characteristics of the home over a 12 month period. We also assess what mitigation measures might be in place that might address any issues and also how it models.

R&I: In the case of individual home owners, what are you asking for in terms of mitigation or protection?

Olmsted: In the case of flood, there’s the elevation issue and there may not be anything we can do about that. In terms of the wind exposure, you are looking for hurricane glass, the type of roof, and the pitch and the type of attachment of the roof to the dwelling to determine whether all openings are protected.

R&I: Is that something homeowners are paying more and more attention to?

Olmsted: Yes. Modeling of a residence has become more and more important. The roof, the attachments and the type of hurricane glass can all make a difference in how a home will model. We definitely see a correlation between the steps in mitigation and what ultimately might be the loss in an event.

R&I: It seems to us that high net worth clients highly value umbrella coverage. Having too many policies with too many renewal dates is a headache. How do you view the appetite among high net worth clients for this type of coverage?

Olmsted: There are several different modules that the high end customer needs. A lot of it is built around the property, the home, jewelry, fine art, etc. And then there is the general liability exposure, particularly with a high net worth individual because they can often become a target, or be perceived as a target for a liability loss. People often don’t realize how much they have at risk in terms of liability.

High net worth homeowners do a lot of things to protect their homes and financial investments. For example, a bad accident on a snowy day could wipe out a lot of their wealth if liability is at stake. I say to people, your spouse calls you and says I hit something. The next question is ‘hit what?’ a mailbox or god forbid someone, then there is potential for a much higher exposure.

It makes sense for homeowners to buy as much umbrella protection as they can. People can lose not only what they have today but what they might earn in the future. I always encourage my insureds to buy as much as they feel they can afford.

R&I: What do you see as the key pain points for high net worth clients that a savvy underwriting company that seeks market share would be wise to address?

Olmsted: The general pain point in the high net worth space compared to the non-high net worth space is that clients expect outstanding claims service.  We emphasize claims servicing for taking care of our clients.

In terms of the underwriting process, we provide homeowners more flexibility. There are a lot of rules of thumb that have developed over time in our industry. Just take one for example. If you secure coverage for a million-dollar home, companies will offer a quote which automatically includes 10 percent of that amount will cover other property structures. Seventy percent of that amount would be for contents and so on.

Those are all nice averages but people have different needs. Someone might be in a $5 million home but might not have $3.5 million in contents, particularly if they schedule the contents, collectibles and other belongings.

High net worth homeowners do a lot of things to protect their homes and financial investments. For example, a bad accident on a snowy day could wipe out a lot of their wealth if liability is at stake. I say to people, your spouse calls you and says I hit something. The next question is ‘hit what?’ a mailbox or god forbid someone, then there is potential for a much higher exposure.

We offer insureds the proper coverage amount with the flexibility to buy what they need for the other coverages. A lot of times people will say, well I don’t have what you are assuming I have for contents. Or I have multiple homes and I don’t need loss of use coverage. So, Ironshore offers product flexibility for each insured.

Another area that concerns me is the whole inspection process, which has developed over the last 30 years. The problem is that people are busy. Both couples might work and don’t have time to schedule a walk through for their house. Some homeowners have privacy concerns. To do a good job for the client, we have to walk through the house and conduct a proper appraisal. There are circumstances where there is virtual information online or the residence was inspected two or three years ago. We can then access that information.

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If possible, we try to conduct a virtual inspection. The goal is to get the right value for the client upfront. There is nothing worse than a homeowner getting a quote before an inspector walks through their home.  Two weeks later, they get an increase in their home valuation and a resultant increase in the premium.

R&I: Can you share with us, Dan, your history in the private client area? How did you first come to work in this space?

Olmsted: Initially, I worked at ISO in  product development. I later joined Atlantic Mutual as they were developing their high end product, called the Atlantic Master Plan, which was probably the first true package policy for high end clients. I worked at Atlantic Mutual for 25 years, serving as president and eventually CEO.  And then we sold the business in 2008 to ACE. I joined ACE at that time and then moved to Ironshore in 2010.

R&I: What about work with the private client business do you find most interesting and challenging professionally, Dan?

Olmsted: The thing I like best is that while homeowners try to control the insurance costs, the service component is so important in the product underwriting and the claims handling within the high net worth sector. As an underwriter, you can be creative. You can develop new coverage ideas or new ways to deliver claims servicing efficiencies.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Robotics Risk

Rise of the Cobots

Collaborative robots, known as cobots, are rapidly expanding in the workforce due to their versatility. But they bring with them liability concerns.
By: | May 2, 2017 • 5 min read

When the Stanford Shopping Center in Palo Alto hired mobile collaborative robots to bolster security patrols, the goal was to improve costs and safety.

Once the autonomous robotic guards took up their beats — bedecked with alarms, motion sensors, live video streaming and forensics capabilities — no one imagined what would happen next.

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For some reason,  a cobots’ sensors didn’t pick up the movement of a toddler on the sidewalk who was trying to play with the 5-foot-tall, egg-shaped figure.

The 300-pound robot was programmed to stop for shoppers, but it knocked down the child and then ran over his feet while his parents helplessly watched.

Engaged to help, this cobot instead did harm, yet the use of cobots is growing rapidly.

Cobots are the fastest growing segment of the robotics industry, which is projected to hit $135.4 billion in 2019, according to tech research firm IDC.

“Robots are embedding themselves more and more into our lives every day,” said Morgan Kyte, a senior vice president at Marsh.

“Collaborative robots have taken the robotics industry by storm over the past several years,” said Bob Doyle, director of communications at the Robotic Industries Association (RIA).

When traditional robots joined the U.S. workforce in the 1960s, they were often assigned one specific task and put to work safely away from humans in a fenced area.

Today, they are rapidly being deployed in the automotive, plastics, electronics assembly, machine tooling and health care industries due to their ability to function in tandem with human co-workers.

More than 24,000 robots valued at $1.3 billion were ordered from North American companies last year, according to the RIA.

Cobots Rapidly Gain Popularity

Cobots are cheaper, more versatile and lighter, and often have a faster return on investment compared to traditional robots. Some cobots even employ artificial intelligence (AI) so they can adapt to their environment, learn new tasks and improve on their skills.

Bob Doyle, director of communications, Robotic Industry Association

Their software is simple to program, so companies don’t need a computer programmer, called a robotic integrator, to come on site to tweak duties. Most employees can learn how to program them.

While the introduction of cobots into the workplace can bring great productivity gains, it also introduces risk mitigation challenges.

“Where does the problem lie when accidents happen and which insurance covers it?” asked attorney Garry Mathiason, co-chair of the robotics, AI and automation industry group at the law firm Littler Mendelson PC in San Francisco.

“Cobots are still machines and things can go awry in many ways,” Marsh’s Kyte said.

“The robot can fail. A subcomponent can fail. It can draw the wrong conclusions.”

If something goes amiss, exposure may fall to many different parties:  the manufacturer of the cobot, the software developer and/or the purchaser of the cobot, to name a few.

Is it a product defect? Was it an issue in the base code or in the design? Was something done in the cobot’s training? Was it user error?

“Cobots are still machines and things can go awry in many ways.” — Morgan Kyte, senior vice president, Marsh

Is it a workers’ compensation case or a liability issue?

“If you get injured in the workplace, there’s no debate as to liability,” Mathiason said.

But if the employee attributes the injury to a poorly designed or programmed machine and sues the manufacturer of the equipment, that’s not limited by workers’ comp, he added.

Garry Mathiason, co-chair, robotics, AI and automation industry group, Littler Mendelson PC

In the case of a worker killed by a cobot in Grand Rapids, Mich., in 2015, the worker’s spouse filed suit against five of the companies responsible for manufacturing the machine.

“It’s going to be unique each time,” Kyte said.

“The issue that keeps me awake at night is that people are so impressed with what a cobot can do, and so they ask it to do a task that it wasn’t meant to perform,” Mathiason said.

Privacy is another consideration.

If the cobot records what is happening around it, takes pictures of its environment and the people in it, an employee or customer might claim a privacy violation.

A public sign disclosing the cobot’s ability to record video or take pictures may be a simple solution. And yet, it is often overlooked, Mathiason said.

Growing Pains in the Industry

There are going to be growing pains as the industry blossoms in advance of any legal and regulatory systems, Mathiason said.

He suggests companies take several mitigation steps before introducing cobots to the workplace.

First, conduct a safety audit that specifically covers robotics. Make sure to properly investigate the use of the technology and consider all options. Run a pilot program to test it out.

Most importantly, he said, assign someone in the organization to get up to speed on the technology and then continuously follow it for updates and new uses.

The Robotics Industry Association has been working with the government to set up safety standards. One employee can join a cobot member association to receive the latest information on regulations.

“I think there’s a lot of confusion about this technology and people see so many things that could go wrong,” Mathiason said.

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“But if you handle it properly with the safety audit, the robotics audit, and pay attention to what the standards are, it’s going to be the opposite; there will be fewer problems.

“And you might even see in your experience rating that you are going to [get] a better price to the policy,” he added.

Without forethought, coverage may slip through the cracks. General liability, E&O, business interruption, personal injury, cyber and privacy claims can all be involved.

AIG’s Lexington Insurance introduced an insurance product in 2015 to address the gray areas cobots and robots create. The coverage brings together general and products liability, robotics errors and omissions, and risk management services, all three of which are tailored for the robotics industry. Minimum premium is $25,000.

Insurers are using lessons learned from the creation of cyber liability policies and are applying it to robotics coverage, Kyte said.

“The robotics industry has been very safe for the last 30 years,” RIA’s Doyle said. “It really does have a good track record and we want that to continue.” &

Juliann Walsh is a staff writer at Risk & Insurance. She can be reached at [email protected]