What if Santa had to buy Insurance?

Not only that, but what kind of insurance would he need, and for that matter would he even qualify?

Right off the bat, Santa’s house and workshop are located in a protection class 10. In general terms, this means there would be no responding fire department in the event of a fire at his dwelling or workshop.

While Santa would need property-insurance protection, he would find himself limited to high-risk property markets that may struggle to establish an accurate value for his home and business property. He also doesn’t need a personal-auto policy as his only vehicle – his sleigh – is for business use (this is, however, a commercial-auto exposure, which I will address later).

What’s left? Maybe life insurance? I’m pretty sure Santa would have a tough time finding coverage based simply on his age and, not to be rude, he would also be a few pounds over the maximum acceptable weight.

Sounds like he’s going to face some barriers when it comes to personal insurance, but maybe we could help him out with his business insurance. We already know the property policy is going to be a tough one to write for the workshop, but what about general liability? Santa is a toy manufacturer and that’s not an easy class of business to write. His products are used by children, distributed worldwide, and failure of or injuries from his product could be subject to multiple jurisdictional lawsuits. 

I’m afraid that, with the type of product he is producing and his worldwide distribution, this would also be a tough policy for him to procure.

Santa may also have a need for errors and omissions or professional-liability insurance. He claims he knows when you are sleeping and knows when you’re awake. He also claims to know if you’ve been bad or good…so be good for goodness sake! 

What would happen if Santa arrived when you were awake or, even worse, you had been good but yet your gift was delivered in error to another party currently on the naughty list? Without proper professional-liability protection and the Ebenezer Scrooge of attorneys, Santa might find himself in some serious litigation without the proper cost of defense being provided. 

Now you may be thinking, “Who would take Santa to court?”

But may I remind you that this would not be his first time! You may recall he appeared in court to face some identity-theft claims that arose while he was working for a department store on 34^th street. The charges were later dismissed, but there were still defense costs associated.

Now let’s explore that business-auto policy. We have some big problems here! First, Santa uses a custom vehicle mainly for delivery purposes and while it’s only used one day of the year, his delivery radius is huge, he travels many miles, and let’s not forget about those icy conditions. 

Santa also has some potential loss and MVR issues. The claimant’s grandson insists that Santa was involved in a hit and run when his grandma got run over by a reindeer while returning home on Christmas Eve. Santa also had a theft claim when it was reported the Grinch attempted to steal Christmas. Then there’s the problem of trying to put a value on his vehicle. All in all, I think a commercial-auto policy is out of the question.

Now what he might want to consider is an aviation policy, although he’ll need to go to a specialty market for that. Maybe we could do something to help with his eight reindeer, although I doubt there are any livestock mortality tables for flying reindeer. Perhaps we could try to offer him some kind of equipment breakdown coverage? No, that won’t work – all manufacturing is done by hand not by machine.

This leads me to another tough policy – workers’ compensation.  Oh my, where do I begin? Santa’s workforce uses older manual tools and would be subject to repetitive motion and other injuries. We also have a potential issue as his entire workforce has a height challenge. Hopefully he is in compliance for that but I’m not familiar with what OSHA or ADA requirements exist in the North Pole. 

Santa may need to consider an employer’s protection liability policy. Santa has an aging workforce and, let’s face it, with a diet of mostly candy they could have a lot of potential health issues, so I’m pretty sure workers' comp and group health are going to be tough to get. 

I guess Santa could look to a disability policy for himself, but treading across icy roof tops and sliding down into confined spaces, I’m sure, will make even the most warm-hearted underwriter still issue a decline notice.

Well one thing is clear: being Santa’s insurance agent or company would be a difficult task. I guess Christmas is not meant to be underwritten but to be enjoyed in the company of our loved ones. So parents, assure your kids that Santa will be passing through yet another successful year without incident, albeit self-insured, and, in his words, a Merry Christmas to all and to all a good night.

Employees expect health care premiums to rise because of ACA

Employees understand they that will bear part of the added costs of health care plan improvements mandated by the health care reform law in the form of higher premiums, according to a survey released Tuesday.

Just over half — 54% — of employees working for large employers expect the premiums they have to pay for coverage will increase in the next 12 months, the National Business Group on Health survey found.

Employees understand “there is no free lunch. You can't add to benefit packages without costs going up,” NBGH President and CEO Helen Darling said Tuesday at a briefing in Washington.

The Patient Protection and Affordable Care Act has forced nearly all employers to upgrade their health care plans to meet new requirements. For example, plans have to extend coverage to employees' adult children up to age 26, while annual and lifetime dollar limits were eliminated.

Still, while employees, as well as their employers, face higher costs because of benefit upgrades required by the health care reform law, few employees are worried that their employers will terminate plan coverage.

Just 10% of employees believe their employers will terminate coverage in the next three to five years.

While only a minority — 40% — of employees say they are familiar with the ACA, more employees are aware of specific provisions of the law.

For example, 69% of respondents said they are at least somewhat familiar with the requirement that individuals, starting in 2014, must either enroll in a health care plan or pay a fine.

How will Obamacare affect YOU!

October 1st is a significant day in US Healthcare history, the first true step in the implementation of the Affordable Health Care Act.

October 1st is the first day that Uninsured Americans may purchase health insurance from health care exchanges. The coverage begins January 1st, 2014 - the enrollment period lasts through March 31st.

What are the effects on employees and businesses?

* Effective January 1st, 2014, most people, with exceptions, will be required to have health insurance or pay a penalty if they don't. The penalty starts at $95 or 1% of your annual income - whichever is higher - and is phased in over time to $695 or 2.5% of income by 2016.

* If you as an individual have job based insurance.......If you like it, you can keep it. You're considered covered. If you don't like the plan, you may be able to change to marketplace coverage by exploring the options and enrolling in a new plan. But be careful, most people with job provided insurance will not qualify for subsidies for coverage through the exchange.

* If you are a full time employee.......The law requires most employers to provide affordable minimum essential health insurance coverage to full time employees or face financial penalties (beginning in 2015). Full time is defined as at least 30 hours per week.

* What employers are affected?........The provisions mandating coverage apply to 'large' employers with 50 or more FULL-time employees. Employers failing to comply, can face penalties (again, beginning in 2015).

Small businesses, with fewer than 50 full time employees, do not have to provide coverage to their employees nor are they subject to financial penalty. Businesses with fewer then 25 full time employees who pay on average less than $50,000 a year may be eligible for the Small Business Health Care Tax Credit if they contribute at least 50% toward employee premium costs.

* If you are a part time employee.......If you do not have job-based coverage, you may be able to buy health insurance in the marketplace exchange and possibly obtain a subsidy based on income to lower the costs. You may also qualify for low-cost coverage or free coverage through Medicaid.

* If you are on Medicare......... You need do nothing. Medicare isn't part of the Health Insurance Marketplace. If you have Medicare, you are already covered and the exchange won't affect your Medicare choices, nor will your benefits change.

*Young People............If a parents plan covers children, they can be added or kept on the health insurance plan until they turn 26 years of age.

* Pre-existing conditions.......No-one can be turned away or charged a higher premium for coverage if they have a pre-existing condition.

Hope this helps!

Cyber: The Risk That Keeps Managers Awake At Night

Email and social media have quickly become the most common way to communicate. Electronic data is growing at an exponential pace. So it should come as no surprise that cyberrisk is fast becoming the largest risk management challenge faced by executives at companies big and small. The cost of a data breach, regardless of its cause, can be incredibly expensive and time consuming. While reported costs vary, costs per breach have been reported as high as $10 million. (NetDiligence Cyber Risk Claims Study, 2013)

Given the high cost per incident, management awareness of cyberrisk is at an all-time high, according to the 2012 Cost of Cyber Crime Study by The Ponemon Institute, a well-respected cyber research firm. The report found that most risk managers view cyber insurance to be a key piece of their strategy for mitigating their company’s cyber exposures. While only about a third of companies in the study currently have a policy, nearly 40 percent say they now plan to purchase one in the next year. So there still is much education and awareness to come.

The Ponemon study results were validated by independent reports from Advisen and Zurich Insurance Group, as well as Verizon. Viewed together, several significant trends are clear: 

Million Dollar Security Data Breaches
The average financial impact to companies per incident was $9.4 million. Most incidents involved the loss of confidential business information. (The Ponemon Institute: Managing Cyber Security as a Business Risk: Cyber Insurance in the Digital Age)

Evolving Risk
Mobile devices and cloud computing pose an increasingly significant risk. Nearly three-quarters of the risk managers polled said they now have a mobile device security policy. Aggregation of data into large databases also poses an increasing hazard. (Advisen and Zurich: A New Era in Information Security and Cyber Liability Risk Management, October 2011)

Improving Insurance Options
Cyberrisk insurance coverage is a critical part of a risk manager’s toolkit today. Over the past decade, insurance carriers have become more sophisticated and comprehensive in their product offerings. (The Ponemon Institute: Managing Cyber Security as a Business Risk: Cyber Insurance in the Digital Age)
Cyber Incidents Increasing
Data breaches continue to grow. The number of compromised records across the reported incidents “skyrocketed back up to 174 million after reaching an all-time low in the [2011] report of four million.” (Verizon: 2012 Data Breach Investigations Report

More Than an IT Issue

Cyberrisk now ranks among the most important insurable risks, along with natural disasters, fires and other catastrophic events. More than three-quarters of respondents characterized cyberrisk as greater than or equal to losses from a natural disaster, business interruption, fires, etc. (The Ponemon Institute: Managing Cyber Security as a Business Risk: Cyber Insurance in the Digital Age.) 

In many states, a cyberrisk event will trigger regulatory requirements requiring a business to notify affected customers within 72 hours of the breach, as well as find, fix and protect the data from another attack. Credit monitoring is often required to be offered to the customers affected, among other possible remedies. The costs, on average, Ponemon reports, were $188 per record during 2012. Cyber insurance policies will cover the financial costs of the event, up to the limits of the policy. But almost all policies give the company access to a sophisticated response team employing forensics techniques that will meet the regulatory requirements.

Rapid response is critical for mitigating the financial and reputational impact of a cyber event. Bailey points out that if customer records are stolen during an attack, the costs can escalate even faster depending upon the number of records and the industry affected. Even a small company can face a multimillion dollar loss. Having an incident response plan in place is one of the most important things a company can do. Not only will it help engage customers, media and other stakeholders in a proactive way, but also it can prove extremely beneficial in helping to mitigate any damages resulting from a cyberrisk event.

There are generally two types of coverage available under a cyber liability policy:

• Third Party Coverage: This coverage would include security and privacy liability coverage, including coverage for regulatory proceedings and legal defense costs. An important option, especially depending upon your industry, is internet media liability coverage.

• First Party Coverage: This coverage would include the costs of a forensic investigation as well as legal, public relations and notification expenses ‒ including credit monitoring for affected individuals. Reputational costs, usually difficult to identify and assess, are mitigated by these kinds of services. It will also include coverage for loss of business income, and includes the cost of replacing digital assets. It can also include coverage of cyber extortion threats and reward payments.

NetDiligence, in its annual discussion of cyberrisk trends, reported in their 2013 Cyber Claims Study that the average claim now runs about $3.5 million. Claims, the analysis noted, range from a low of $13,000 to a high of $10.5 million.

Costly claims may account for the fact that, according to the Ponemon study, satisfaction with the policies remains high among those who have purchased them. In addition, nearly two-thirds of the respondents also said the coverage is an important part of their risk management strategy and that the mere purchase of coverage “made the company better able to deal with security threats.”

Individual mandate delay would increase number of uninsured!

 Delaying by one year to 2013 the health care reform law requirement that most Americans enroll in a health care plan or pay a fine would reverse - at least temporarily - the expected dramatic decline in the number of uninsured, according to a Congressional Budget Office report.

That mandate, coupled with an expansion of the Medicaid program in many states and availability of federal premium subsidies to lower and middle income uninsured’s to help offset the cost of policies purchased in public insurance exchanges, was expected to reduce the number of uninsured in 2014 to 44 million, down from an estimated 58 million uninsured in 2013, the CBO said in its most recent report.

But without the individual mandate, about 55 million people under age 65 will be uninsured in 2014.

On the other side of the fence……

Earlier, the Obama administration delayed to 2015, the ACA requirement that employers with at least 50 fulltime employees offer coverage or pay a $2,000 penalty per employee, minus the first 30 employees.

This delay to a key provision of the ACA has employers in the nation jubilant - however, employers will still have to comply with other provisions of the Patient Protection and ACA unless the Treasure Department expands its delay.

Why did this happen? The fact that regulators have not provided any guidance on how employers are to comply with the requirement to file health care plan enrollment information for all their employees with the Federal Government.

So nothing’s changed. As you were. Keep on Keeping on!

5 Reasons You Should Have Cyber Liability Insurance.

Imagine for a moment that your company has come under attack by a skilled hacker. The hacker has accessed your customers' names and contact information--and worse--your employees' social security numbers. On top of that, your website is disabled so that you can't take orders or collect the payments you need to stay in business.

Wouldn't it be nice to have cyber liability insurance right about now?
Insurance that protects you in case of a cyber attack may seem like something only large corporations would ever need, or could ever afford. But believe it or not, cyber liability insurance makes lots of sense for small companies as well. Here's why:

1. It's more affordable than you think.
"I've seen policies with premiums as low as $2,000 a year, though it can go up from there," says Ethan Miller, partner at the San Francisco law firm Hogan Lovells. You can get coverage as high as $30 million and deductibles as low as $10,000, depending on your needs and what you're willing to pay. Cyber liability insurance is still a fairly new concept, so there's a lot of variation among policies, and a lot of room for negotiation.

2. It can cover more than you think.
Many policies offer "first party" coverage--that is, they will pay you for things like business interruption, the cost of notifying customers of a breach, and even the expense of hiring a public relations firm to repair any damage done to your image as a result of a cyber attack. Having this cash available in the event of a crippling hack can keep the lights on till you're able to resume your normal cash flow. A good policy can even cover any regulatory fines or penalties you might incur because of a data breach.
Business interruption coverage can be especially important for a small business, Miller says, which may not be as diversified as a larger one, or have the same financial resources. "If a larger company has one line of business shut down by a data breach, it may be able to depend on its other lines for revenue. A smaller company may only have one line of business."

3. You probably don't have a risk management team.
Big corporations have entire departments devoted to analyzing the risks the company could face and helping set policies and procedures to protect against them. You don't--but a good insurance carrier can perform a similar function.
"There are a couple of ways insurance can bridge that gap," Miller says. "An insurer might work with a small company to make sure a firewall is in place to protect your network, and make sure you have social media policies that reduce risk." Your insurer may well be willing to help with these areas because the better protected you are, the less likely you are to have a breach that could result in a claim.

4. Even if you don't host your data yourself, you're still responsible.
Is your website and any of your data hosted or stored in the cloud? Take a good look at your contracts: You're still legally responsible. "There's a significant risk," says Karen L. Stevenson, senior counsel at Buchalter Nemer, a law firm with offices in California and Arizona. You can't fully control how a cloud provider handles your data but an insurance policy can protect you if your cloud provider screws up.

5. Your general policy won't cover you.
Typically, a general liability policy specifically excludes losses incurred because of the Internet, Miller says. So a good cyber liability policy can pick up where your general policy leaves off.
Make sure your cyber policy covers laptops and mobile devices as well, to give yourself coverage in as many situations as you can. "Work with your broker to integrate cyber liability with your general policy and employment liability policy," Miller advises. "You want to give yourself the most seamless coverage possible."

Wrong estimate for health care subsidies may be costly!

Millions of people who take advantage of government subsisidies to help buy health insuranc could by next year get stung by surprise tax bills if they don't actually project their income.

The Affordable Health Care Act will offer subsidies to help people buy private health insurance on state based exchanges, if they don't already get coverage through their employers. The subsisidies are based on income. The lower your income, the bigger the subsidy.

BUT, the government doesnt know how much money you're going to make next year. And when you apply for the subsidy this fall, it won't even know how much you're making THIS year.

So unless you tell the government otherwise, it will rely on the best information it has, your 2012 tax return, files this spring.

What happens if you or your spouse gets a raise and your family income goes up in 2012? You could end up with a bigger subsidy then you are entitled to. If that happens, the law says you have to pay back at least part of the money when you file your tax return in the spring of 2015.

That could mean smaller tax refunds or surprise tax bills for millions of middle class families.

R & R

As many of you know, I suffered a surprise but massive heart attack back in late February.

Am recovering steadily and will be back stronger then ever.

Thanks for all the kind wishes.

Richard

Are ACOs fundamentally flawed?

Many of the hundreds of accountable care organizations being created around the country are doomed to fail, three healthcare experts argue in a commentary in The Wall Street Journal.

They maintain the ACO model is largely based on flawed assumptions about the personal and economic behavior of doctors and patients. The concept mistakenly assumes ACOs can be successful and save money even if doctors don't make major changes to how they provide care and patients don't change their behavior or assume accountability.

To achieve high-quality, low-cost care, the industry needs to embrace reform approaches that go beyond the ACO model, such as shifting more care to less-expensive walk-in clinics staffed by nurse practitioners, according to the WSJ commentary.

The healthcare experts also recommend revising protective licensing procedures to allow, for example, highly trained nurses to administer anesthesia for some types of procedures, rather than anesthesiologists, according to the WSJ commentary.

Meanwhile, just last week the National Committee for Quality Assurance announced its first six accredited accountable care organizations: HealthPartners in Minnesota, Billings (Mont.) Clinic, Children's Hospital of Philadelphia, Essentia Health in Minnesota, Kelsey-Seybold Clinic in Houston, and Crystal Run Healthcare in New York. The voluntary NCQA accreditation, based on an assessment of 14 standards and 65 elements, is valid for three years.

Mid-market firms charged higher premiums for health insurance!

Mid-market companies on average were charged substantially higher premiums for group health insurance coverage in 2012 than larger firms, according to a study released Monday by Automatic Data Processing Inc.

Companies with between 1,000 and 2,499 full- and part-time employees were charged an average $10,351 per employee in 2012, 16% more than employers with more than 5,000 or more workers and 8.3% more than employers with between 2,500 and 4,999 workers, according to ADP's study. The average annual per-employee premium cost across all employers surveyed was $9,562.

Chris Ryan, ADP's vice president of strategic advisory services and co-author of the study, said in an email that several factors are likely to blame for midsize employers' cost disadvantage.
Midmarket firms “lack the size and scale needed to negotiate more favorable agreements with health plans, networks and TPAs. They are also less likely to operate self-funded health plans with the potential to reduce premiums,” Mr. Ryan said, adding that recent ADP research also suggested that “larger employers are more likely to have the financial wherewithal to provide employees with a health and wellness program to help contain premium costs.”
“Larger employers may be more effective in communicating and implementing consumer-driven health plans, and may also have more effective practices for conducting audits to ensure member eligibility,” Mr. Ryan said.

ADP's “2012 Study of Large Employer Benefits,” the first of its kind for the Roseland, N.J.-based payroll processing firm, examined health care costs and participation rates among 300 employers with more than 1,000 employees. In total, the study encompassed more than 2 million covered lives, including employees and their dependents.
Beyond headcount, certain other demographic factors were found to be predictive of higher-than-average health benefit costs. Manufacturers, professional and scientific services firms, health care providers and information technology firms were charged between 3% and 13% per employee per month more for group health benefits than the average employer, according to ADP's study.

In part, those industries' higher health care costs were driven by the average age of their respective workforces. Manufacturing companies were charged $899 per employee per month in premiums, the highest of any industry surveyed, and had an average employee age of 45.5 years. Conversely, employers in the hospitality and food services industry incurred the lowest monthly per-employee premiums in 2012 ($596) and the lowest average employee age (36.9 years) of any industry group surveyed.

Other factors such as geographic location and the “richness” of the benefits provided contributed to the disparity in benefits costs among industries, the study noted.

Supply chain disasters and disruptions can cause lasting reputation damage!

Supply chain disruptions frequently result in a direct financial hit for businesses, but the damage a disruption can inflict on an organization's reputation can have much longer term consequences.

Global sourcing strategies such as just-in-time inventory, competitive wages and cheap raw materials also can pose hard-to-quantify risks from second- and third-tier suppliers that could subject businesses to Foreign Corrupt Practices Act penalties, environmental violations and regulatory actions as well as reputational damage, experts say.

A recent example is the November fire at a Bangladesh factory that killed more than 100 garment workers, many of whom reportedly were locked in the building. The factory was making clothing for Wal-Mart Stores Inc., Sears Holdings Corp. and The Walt Disney Co., among others.

In 2011, Wal-Mart audited more than 9,000 factories and the factory in Bangladesh was not authorized to produce merchandise for the Bentonville, Ark.-based retailer due to safety standards. However, a supplier reportedly continued to subcontract work with the Bangladesh factory.

For companies, cyber threats get MORE costly!

Cyber security will become an increasingly complex and costly part of doing business, but caution and preparedness is a better alternative than getting hacked or duped by cyber thieves, security experts have stated.

IT managers are grappling with vulnerabilities and security risks as companies move more of their networking operations off-site and into the so-called data cloud, and as more personal computing is done on smart phones and mobile devices.

Companies are also facing increasingly high stakes for preventing security breaches, as both clients and the government demand that companies do more to protect themselves from security lapses.

Outbreaks of attacks in recent months and years show a growing push by organized crime, sovereign nations and internet activists to exploit weaknesses in the data security of US networks and their users.

The websites of large banks, for example, have been hit with what are called 'denial-of-service' attacks. While banks have not reported sensitive customer data being stolen during these attacks, their websites have repeatedly crahsed forcing customers to bank offline.

A big concern for IT managers is the growing demand that companies let their workers use their own personal devices - be it laptops, tablets or smart phones - to connect with a companies servers.

Known as BYOD (Bring you own device), the trend is proving to be a nightmare for IT managers. In essence thay now have to secure something they don't have control over.

Small businesses, which typically lack the IT expertise, are particularly vulnerable and appear to be more of the focus of hackers' attention.

A continued sign of the growing threat is the emergence of Cyber Liability insurance policies to help businesses deal with the costly aftermath of a cyber attack.

Becuase standard General Liability insurance policies will not protect from a cyber attack, insurers have introduced specialty coverage that can help defray costs of a breach. This can include the costs of notifying customers, conducting forensic investigations and even liability for class-action lawsuits.

Solving the Unsolvable – Sandy Offers Wake Up Call for Updating Wage and Hour policies!

Tropical storm Sandy created havoc for businesses trying to rebuild as quickly as possible but it is important to remember that there are NO emergency exceptions to wage and hour laws.

Many states have deadlines for providing paychecks to employers and they typically do not make exceptions for natural disasters. Some states have a financial penalty for each day a paycheck is late.

The Department of Labor projects that approximately 80% of all US employers are in violation of Wage and Hour laws to some degree.

Wage and Hour claims include issues such as:

-         Misclassification of workers between exempt and non-exempt.

-         Failure to pay for meal and break periods.

-         So-called “donning and doffing” claims.

-         Allegations of failing to pay for “Off-the-clock” work.

-         Failure to include bonuses and commissions in the computation of base pay.

One recent study by a major employment law firm showed that 88% of employment class actions that they handled in 2011 involved Wage and Hour issues which can cost employers MILLIONS of dollars.

The insurance marketplace has historically failed to provide a solution for this exposure and typical EPLI policies outright exclude coverage………Until Now.

2012 into 2013 - New Year Blessings to All!

A Happy and Prosperous New Year to all my followers, friends and clients!

2012 was a challenging year to say the least - Sandy, SandHook, Aurora, the Fiscal Cliff, Mark Sanchez....

2013 can ONLY be better.

Best to all!