2017 Power Broker

Workers’ Compensation

An Indispensable Partner

Christopher Bailey
Vice President
Willis Towers Watson, Greenville, S.C.

After decades coaching college football, Dave Roberts launched a new venture — Vital Care EMS, a South Carolina medical transportation company. There was a steep learning curve at first, and the company’s experience mod went “through the roof.”

Willis Towers Watson’s Christopher Bailey stepped in and analyzed Vital Care’s program top to bottom, identifying everything from quick-fix issues to long-term improvements. Roberts, the company’s president, credited Bailey with helping him turn things around.

“[He] helped us grow from five trucks and 20 people to 100 trucks and 400 people,” said Roberts. “He’s always given me great advice — even when I don’t want to listen to him.”

Roberts said the company could never have grown so fast without Bailey.

“We’ve been approached by every person in the state to [change brokers] and I won’t even go there,” he said. “I have the highest regard for him.”

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“He is the bomb,” said Dustin Pelletier, franchise owner and operator of the Big Air Trampoline Park in Spartanburg, S.C. Pelletier said Bailey had never worked with a trampoline park before. But he learned the industry so fast and so thoroughly that he soon found better insurance solutions than even Big Air corporate could offer.

“He got me better cover with less expensive premiums — better than corporate,” he said.

In fact it’s so good, said Pelletier, that corporate is asking, “Hey, can we get that guy’s number?”

A Champion for Small Employers

Riley Holman
Insurance Consultant
Dixie Leavitt, Cedar City, Utah

Dixie Leavitt’s Riley Holman understands that often the person managing workers’ comp for a small entity wears several other hats as well. That’s why he makes it a priority to streamline and simplify coverage as much as possible, while offering expert advice on safety improvements that won’t break the bank.

He also understands that even one workplace tragedy can turn a small business upside down in a moment.

Holman saw that playing out with a sand and gravel company in a tough position. A workplace accident had led to a double fatality and a large claim payout.

Carriers were not inclined to take the company on, and they were only able to find coverage with a nonstandard carrier, paying more for less coverage than they needed.

“We were practically uninsurable,” said the company president. “Other brokers said, ‘There’s almost nothing we can do.’ “

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Holman disagreed. He knew of a standard carrier with an appetite for their business. He arranged for underwriters to do a loss control visit to better understand the actual exposures, as well as the measures the company was taking to prevent future incidents.

“Riley leveraged his relationships and brought the carriers out to see the operations and to show that the fatality didn’t tell the whole story,” said the company president.

The new program saved more than $100,000, rescuing the company from being slowly strangled by excessive premiums.

Crisis Averted

Linda Joski, CRM
Area Senior Vice President
Arthur J. Gallagher, Brookfield, Wis.

The Milwaukee Center for Independence was thrown for a loop with a substantial legislative change impacting the state’s workers’ comp law. The law specified that the entity providing financial management services would become the employer of record for workers’ comp purposes for workers providing long-term care benefits under programs administered by the state.

That put MCFI, a nonprofit, in the crosshairs, as the fiscal agent responsible for withholding income taxes for employees of one such program.

The law “would have meant we had to put 18,000 workers’ comp policies in place,” at an expense of about $2.9 million, said Rob Wedel, CFO and vice president of finance for MCFI. It’s a burden that could have buried MCFI. But Gallagher’s Linda Joski came to the rescue.

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“Linda settled everybody down and got the right people in place, connected [the carrier] United Heartland and the state and got everyone on the same page with a viable solution,” Wedel said.

Joski helped arrange one master program for all participants involved, eliminating the administrative burden of single policies. Joski also negotiated using MCFI’s experience mod of .72 rather than the typical 1.00 used for new entities — resulting in additional savings of 28 percent (about $2.3 million).

Joski’s dedication and creativity “saved the state of Wisconsin about $5 million … it was just phenomenal,” said Wedel.

Bringing the ‘Wow’ Factor

Machelle McKenzie, CRM, CIC
Managing Director
Crystal & Company, Houston

Machelle McKenzie’s clients tend to talk about her in extremes — but in a good way.

“If she ever leaves, my business goes with her,” said Cheryl Wyatt, director of human resources for Stronghold Ltd. in La Porte, Texas. “There’s nothing she can’t answer, and I never have to wait for a response. I literally send emails at 2 in the morning … and I actually get her at 2 in the morning.”

Wyatt’s company split into two entities in early 2016, a complex undertaking with a high volume of moving parts.

“We wanted all of our billing to be separate,” said Wyatt. “Machelle had to split out the cost by entity. In particular for workers’ comp, that’s not easy … we work in almost every state.”

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Wyatt was impressed with how quickly McKenzie was able to find a workable solution, not to mention how quickly she completed the project.

“She did it in a couple of weeks,” said Wyatt. “It would have taken me six months.”

Clients value McKenzie’s ability to assess every angle and identify substantive ways to help the business succeed.

For one client, McKenzie recently discovered and corrected a carrier reporting error, bringing the company’s experience mod down from .98 to a more manageable .80. For another, she got a letter of credit reduced from $990,000 to $200,000.

The Next Frontier in Claims Audits

Joe Picone, CPCU, AIC
Claim Consulting Practice Leader
Willis Towers Watson, Glen Allen, Va.

Jenny Novoa, director of risk management for The Gap, threw down the gauntlet for her broker, Willis Towers Watson’s Joe Picone: Help us find a better way to evaluate third-party administrators (TPAs). More specifically, Novoa wanted to measure TPA performance based on outcomes rather than using standard “best practice” audits.

“We had to figure out how to build a tool to do that,” said Novoa.

Picone rolled up his sleeves and dug in, recruiting additional stakeholders from Foot Locker, Saks Fifth Avenue and Corvel.

To build the new audit tool, Picone, Novoa and the team incorporated numerous factors into the claim process such as employee co-morbidities, failures in the return-to-work process and life events as well as the hiring process and performance management.

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They completed audits using both the new tool and the old tool, and compared the results, which turned out to be a revelation. Using the traditional audit tool, some claims scored high even though they had poor outcomes, while some with good outcomes had lower scores.

For example, a file that received a perfect “100” score on a best practice audit may have exceeded expected medical disability guidelines by 400 percent.

Using the outcomes-based audit tool, there was a far higher correlation between high scores and good outcomes. It’s a “very cool tool,” said Novoa — the first of its kind in the industry.

Rolling Into Claims Success

Dennis Tierney
Director of Workers’ Compensation Claims
Marsh, New York

Power Brokers love a challenge. Marsh’s Dennis Tierney got that and more when he took on Motivate International as a client. A global bike share leader, Motivate International partners with governments and brands in major cities around the world.

The company was at a crossroads after the acquisition of a troubled bike share operator. The acquired company, which didn’t have a risk management department, had amassed $10 million in claims in only three years.

“Our broker at the time was on cruise control,” said Grant Barkey, Motivate’s risk manager. “We needed somebody who was strong on claims, someone who understood our business.”

Barkey partnered with Tierney and his team at Marsh, and he is effusive when explaining how far things have come since then.

“My entire team is pretty rock star,” said Barkey. “[They] really turned around our claims and claims management.”

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One key hurdle, said Barkey, was that carriers didn’t really understand the bike share business, which is a fairly young industry, or its sometimes nuanced exposure. But Tierney got it, Barkey said, and strove to make sure that carriers could wrap their heads around it.

The company ultimately ended up with a new carrier, said Barkey, and Tierney has been instrumental in ensuring that the carrier has a solid handle on Motivate International’s exposures. The company has made incredible strides in closing out open claims and setting up special handling agreements with the carrier.

 Finalists:

Jeffrey Breskin
Director
Crystal & Company, Los Angeles

Carol Murphy
Managing Director and Casualty Growth Leader
Aon, Chicago

Thomas Ryan
Managing Director
Marsh, New York City

Teri Weber
Partner
Spring Consulting Group, Boston

More from Risk & Insurance

More from Risk & Insurance

Risk Report: Entertainment

On With the Show

Entertainment companies are attractive and vulnerable targets for cyber criminals.
By: | December 14, 2017 • 7 min read

Recent hacks on the likes of Sony, HBO and Netflix highlight the vulnerability entertainment companies have to cyber attack. The threat can take many forms, from the destruction or early release of stolen content to the sabotage of broadcast, production or streaming feeds.

Brian Taliaferro, entertainment and hospitality specialist, JLT Specialty USA

“Cyber attacks are becoming the biggest emerging threat for entertainment companies, bringing risk to reputations, bottom lines and the product itself,” said Brian Taliaferro, entertainment and hospitality specialist, JLT Specialty USA.

For most entertainment firms, intellectual property (IP) is the crown jewel that must be protected at all costs, though risk profiles vary by sub-sector. Maintaining an uninterrupted service may be the biggest single concern for live broadcasters and online streaming providers, for example.

In the case of Sony, North Korea was allegedly behind the leak of stolen private information in 2014 in response to a film casting leader Kim Jong Un in what it considered an unfavorable light.

This year, Netflix and HBO both faced pre-broadcast leaks of popular TV series, and Netflix last year also had its systems interrupted by a hack.

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Online video game platforms are also ripe for attack, with Steam admitting that 77,000 of its gamer accounts are hacked every month.

The list goes on and will only get more extensive over time.

Regardless of the platform, any cyber attack that prevents companies from producing or distributing content as planned can have huge financial implications, particularly when it comes to major releases and marquee content, which can make or break a financial year.

“People and culture are the biggest challenges but also the keys to success.” — David Legassick, head of life science, technology and cyber, CNA Hardy

The bottom line, said David Legassick, head of life science, technology and cyber, CNA Hardy, is that these firms have a combination of both assets and business models that are inherently open to attack.

“Vulnerabilities exist at every point in the supply chain because it’s all tech-dependent,” he said, adding that projects often run on public schedules, allowing criminals to time their attacks to maximize impact.

“The combination of IP, revenue and reputation risk make entertainment a hot sector for cyber criminals.”

Touch Point Vulnerabilities

Film, TV, literary and music projects invariably involve numerous collaborators and third-party vendors at every stage, from development to distribution. This creates multiple touchpoints through which hackers could gain access to materials or systems.

According to Kyle Bryant, regional cyber manager, Europe, for Chubb, there is nothing unique about the type of attack media companies suffer — usually non-targeted ransomware attacks with a demand built in.

“However, once inside, the hackers often have a goldmine to exploit,” he said.

He added targeted attacks can be more damaging, however. Some sophisticated types of ransomware attack, for example, are tailored to detect certain file types to extract or destroy.

“NotPetya was designed to be non-recoverable. For a media company, it could be critical if intellectual property is destroyed.”

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As entertainment companies have large consumer bases, they are also attractive targets for ideological attackers wishing to spread messages by hijacking websites and other media, he added.

They also have vast quantities of personal information on cast and crew, including celebrities, which may also have monetary value for hackers.

“It is essential to identify the most critical information assets and then put a value on them. After that, it is all about putting protection in place that matches the level of concern,” Bryant advised.

As with any cyber risk, humans are almost always the biggest point of vulnerability, so training staff to identify risks such as suspicious messages and phishing scams, as well as security and crisis response protocols, is essential. Sources also agree it is vital for entertainment companies to give responsibility for cyber security to a C-suite executive.

“People and culture are the biggest challenges but also the keys to success,” said Legassick.

“Managing the cyber threat is not a job that can just be left to the IT team. It must come from the top and pervade every aspect of how a company works.”

David Legassick, head of life science, technology and cyber, CNA Hardy

Joe DePaul, head of cyber, North America, Willis Towers Watson, suggested entertainment companies adopt a “holistic, integrated approach to cyber risk management,” which includes clearly defining processes and conducting background checks on the cyber security of any third party that touches the IP.

This includes establishing that the third parties understand the importance of the media they are handling and have appropriate physical and non-physical security at least equal to the IP owner in place. These requirements should also be written into contracts with vendors, he added.

“The touchpoints in creating content used to be much more open and collaborative, but following the events of the last few years, entertainment firms have rapidly introduced cyber and physical security to create a more secure environment,” said Ryan Griffin, cyber specialist, JLT Specialty USA.

“These companies are dealing with all the issues large data aggregators have dealt with for years. Some use secure third-party vendors, while others build their own infrastructure. Those who do business securely and avoid leaks can gain an advantage over their competitors.”

Quantification Elusive

If IP is leaked or destroyed, there is little that can be done to reverse the damage. Insurance can cushion the financial blow, though full recovery is very difficult to achieve in the entertainment space, as quantifying the financial impact is so speculative.

As Bill Boeck, insurance and claims counsel, Lockton, pointed out, there are only “a handful of underwriters in the world that would even consider writing this risk,” and sources agreed that even entertainment firms themselves struggle to put a monetary value on this type of exposure.

“The actual value of the IP taken isn’t generally going to be covered unless you have negotiated a bespoke policy,” said Boeck.

“If you’re in season five of a series with a track record and associated income stream, that is much easier, but putting a value on a new script, series or novel is difficult.”

Companies for whom live feeds or streaming are the primary source of revenue may find it easier to recoup losses. Determining the cost of a hack of that sort of service is a more easily quantifiable business interruption loss based on minutes, hours, ad dollars and subscription fees.

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Brokers and insurers agree that while the cyber insurance market has not to date developed specific entertainment products, underwriters are open for negotiation when it comes to covering IP. The ball is therefore in the insured’s court to bring the most accurate projections to the table.

“Clients can get out of the insurance market what they bring to the equation. If you identify your concerns and what you want to get from insurance, the market will respond,” said Bryant.And according to Griffin, entertainment companies are working with their brokers to improve forecasts for the impact of interruptions and IP hacks and to proactively agree to terms with underwriters in advance.

However, Legassick noted that many entertainment firms still add cyber extensions to their standard property policies to cover non-physical damage business interruption, and many may not have the extent of coverage they need.

Crisis Response

Having a well-planned and practiced crisis response plan is critical to minimizing financial and reputational costs. This should involve the input of experienced, specialist third parties, as well as numerous internal departments.

Ryan Griffin, cyber specialist, JLT Specialty USA

“The more business operation leaders can get involved the better,” said Griffin.

Given the entertainment industry’s highly public nature, “it is critically important that the victim of a hack brings in a PR firm to communicate statements both outside and within the organization,” said Boeck, while DePaul added that given that most cyber attacks are not detected for 200-plus days, bringing in a forensic investigator to determine what happened is also essential.

Indeed, said Griffin, knowing who perpetrated the attack could help bring the event to a swifter and cheaper conclusion.

“Is it a nation state upset about the way it’s been portrayed or criminals after a quick buck? Understanding your enemy’s motivation is important in mitigating the damage.”

Some hackers, he noted, have in the past lived up to their word and released encryption keys to unlock stolen data if ransoms are paid. Inevitably, entertainment firms won’t always get so lucky.

Given the potentially catastrophic stakes, it is little surprise these firms are now waking up to the need for robust crisis plans and Fort Knox-level security for valuable projects going forward. &

Antony Ireland is a London-based financial journalist. He can be reached at [email protected]