These 3 Risk Categories Worry Brokers and Risk Managers the Most

But despite an awareness of growing exposures like cyber hacking and climate change, few entities are taking proper steps to prepare.
By: | November 2, 2018 • 4 min read

Rapid technological advancement is reshaping the risk landscape for businesses of all shapes and sizes — and the carriers that insure them. A recent survey produced by international specialty insurer Argo Group queried 200 insurance brokers and 150 small- to medium-sized businesses (SMEs) in the UK and U.S. about the top risks on their radar.

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Though opinions diverged on some specific threats, technology was the common thread linking nearly every top risk.

1) All Things Cyber and Tech-Related Liability

All 200 brokers and 126 SMEs ranked cyber threats as a medium or high priority risk over the next year. The survey does not specify, however, what “cyber threat” means to the respondents. Given the many shapes and forms of cyber risk, the category is broad and could encompass everything from a breach of private data, a ransomware or denial-of-service attack, or any type of system shutdown or network failure.

Concern over cyber is not limited to the direct impact to respondents’ respective companies. Forty-nine percent of brokers ranked Russian cyber hacking as the biggest potential global threat to their clients.

The speed of development makes it hard for businesses to evaluate all the risks; by the time risk managers get a handle on the implications of one piece of technology, a newer version has emerged.

Behind cyber, brokers were most concerned about the Internet of Things, drones and blockchain technology. All of which carry an element of cyber risk. SMEs were most concerned with virtual technology, the IoT, and climate change. Seventy-eight percent also said they believe automation and artificial intelligence will create new liabilities.

With the exception of climate change, these concerns reflect an uncertainty that perhaps stems from the pace of technological change and the inability to know where it’s going next. The speed of development makes it hard for businesses to evaluate all the risks; by the time risk managers get a handle on the implications of one piece of technology, a newer version has emerged.

Despite the acknowledgement of cyber as a high-priority risk, SME responses indicate that they may be underprepared. Sixty-one percent said that they do feel prepared, and yet 43 percent reported they did not plan to buy cyber insurance. Other surveys back this up. According to Hiscox’s 2018 Small Business Cyber Risk Report, “sixty‑six percent of small businesses said they were concerned or very concerned about cyber risk. Yet the vast majority haven’t taken the basic steps to prepare. Fifty percent said lack of budget is a challenge or a major challenge.”

2) The Underwriting Talent Gap 

Technology — or lack thereof — may also play a role in one of the greatest risks facing the insurance industry today: an underwriting talent shortage. According to Argo’s report, 35 percent of brokers say slowness to innovate is a factor making the industry appear less attractive to younger workers.

“Across the board, there is some reluctance among both brokers and SMEs to innovate with new technology,” the report states, citing cost as the greatest barrier. Forty-five percent of brokers and 41 percent of SMEs listed cost as the primary roadblock to implementing new tech.

At a time when risks emerge and evolve faster than ever, lack of underwriting talent devoted to understanding these exposures will exacerbate the industry’s greatest vulnerability.

However, 32 percent of brokers also said that a general lack of knowledge about the insurance industry is also driving the talent shortage, suggesting that greater efforts must be made to engage students before they enter the workforce.

At a time when risks emerge and evolve faster than ever, lack of underwriting talent devoted to understanding these exposures will exacerbate the industry’s greatest vulnerability.

3) Geopolitical Instability and Climate Change 

Tech-related risks, however, are not the only areas of concern. An unstable geopolitical environment weighs heavily on the minds of both brokers and SMEs. In addition to Russian hacking and election interference, brokers also ranked the trade war between the U.S. and China (45 percent), terrorism (43 percent), America’s divisive political climate (42 percent), a deteriorating relationship with Iran (26 percent) and escalating tension with North Korea (22 percent) as major global threats.

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SMEs were less concerned with geopolitical risks than they were with climate change. Sixty-seven percent of SMEs said they were cognizant of the long-term impacts of climate change, compared to 47 percent of brokers.

Indeed, losses from natural catastrophes and extreme weather has been rising steadily, with the expectation that they will only continue to grow. According to a report by Scientific American, “The insurance industry is among the most exposed sectors of the global economy to the effects of climate change, and those risks could grow as coastal cities expand.” In 2017, total financial losses from natural catastrophes in both the private and public sector hit $134 billion.

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]

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]