Risk Insider: Kevin Kalinich

Lights Out! Can Insurance Help?

By: | January 25, 2016 • 3 min read

Kevin Kalinich is the global cyber risk practice leader for Aon Risk Solutions, focusing on identifying exposures and developing insurance solutions. He can be reached at [email protected]

In “Lights Out: A Cyberattack, A Nation Unprepared, Surviving the Aftermath,” author Ted Koppel suggests that a catastrophic cyber attack on America’s power grid is likely and that we’re unprepared.

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Let’s examine his assertions from a risk management perspective.

• Power Grid Attack Likely?

Clients tell us that they are hacked more frequently than is reported. A Dec. 21, 2015 article, “Biggest U.S. Electric Company Battles Off Steady Cyberattacks,” reported that Duke Energy’s computer systems that manage dams, nuclear power plants and other types of generating plants are under constant attack. A reported cyber attack last month caused one-half of Western Ukraine to lose power.

• U.S. Unprepared?

Opinions differ on whether we have seen improved prevention, mitigation, response and resiliency since the Northeast power outage of 2003. Mr. Koppel described a bureaucracy that is moving slowly and with poor focus against a dynamic threat.

For example, the National Protection and Programs Directorate at the Department of Homeland Security, responsible for coordinating risk reduction to critical American infrastructure, is divided in two separate and distinct parts –- one physical and one cyber-related.

We are, however, seeing certain governmental actions and changes. The Cybersecurity Information Sharing Act of 2015, signed into law December 2015, provides immunity from liability to participating organizations that share certain cyber-threat information with the federal government and vice versa.

Federal and state agencies such as the Federal Energy Regulatory Commission may consider increased fines for grid failures that have ranged from $50,000 to $350,000. By way of example, Florida Power and Light Company was fined $25 million in 2009 for a February 2008 blackout.

However, most reported cases of cyber damage and regulatory action to date relate to protection of personally identifiable information, such as the Federal Communications Commission’s $25 million fine against AT&T and $100 million fine against Lifelock.

• Catastrophic?

According to search engine Shodan, the U.S. has more than 57,000 industrial controls systems connected to the internet. But how do we quantify potential losses? Information on how companies and the government respond to hacks is often protected and sometimes classified, which can defeat transparency.

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A 2015 Lloyd’s of London/University of Cambridge report, “Business Blackout,” sets forth the insurance implications of a cyber attack on the U.S. power grid. The report estimated a hypothetical worst case scenario of $243 billion to $1,024 trillion in direct and indirect losses, with between $21.398 billion and $71.109 billion in estimated insurance industry losses.

Currently there are not enough stand-alone cyber limits to pay for such losses.

Many property and general liability insurers are inconsistent and/or hesitant to cover cyber exposures likely because there’s insufficient actuarial data. Since we don’t have sufficient actuarial data for cyber exposures, we should borrow from other complex modeling situations like typhoons, earthquakes and hurricanes — relatively rare events that could have catastrophic impacts.

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We’ve come to the conclusion that we need to break down the silos between the insurance company property/GL groups and cyber groups, and develop a combined all-risk policy that combines the actuarial data of property losses with cyber experts to identify and quantify frequency and severity. To analogize, a similar approach is used to build terrorism insurance programs, with mixed success (see graphic).

By combining an objective risk management context based on data analytics, we can learn from natural weather incidents and terrorism threats to develop robust public-private partnerships to help improve our preparedness and reduce losses stemming from a cyber attack.

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]