This has been an interesting year, to say the least. And, I’m not even talking just about COVID-19. So much has gone on, and so many things have been changing. I think we could all come up with a top 10 list of the biggest adjustments we’ve had to make.
For purposes of this blog, though, I’ll stay focused to the insurance industry — specifically Executive Risk and Cyber Risk. Because you may be feeling the impacts of it, I think it’s important to take a look at where we’ve been and where we’re headed. So, buckle up…because it could get interesting!
Executive Risk and Cyber Risk Insurance at the Beginning of 2020
The year started out with fewer carriers offering products, and executive risk prices increasing for Directors & Officers (D&O) liability. Claim activity has been on the rise, particularly in public companies, and the loss experience has trickled down into the private company space. Some very large claims in the nonprofit world have caused increases there as well.
We’d had several years of flat-to-lower pricing, so it was time to see some increases; however, the change was quick and, in many cases, severe.
Our cyber carriers had a poor year in 2019, and that loss experience is catching up with them and being reflected in the pricing of the policy. Cyber coverage continues to expand, and policies are covering more and more every year. This means more claims come in, and unfortunately, that means loss experience.
On top of this, new carriers continue to come into the cyber marketplace, which is holding pricing down a bit but the tide certainly is moving toward higher premiums.
The COVID-19 Impact to Executive Risk and Cyber Risk Insurance
Fast forward to March, and boom, COVID-19 hit. All of a sudden, everyone was working from home, and clients wanted to know how their cyber coverage would (and will) address remote employees.
It’s a great question! We’ve been working one on one with many organizations on this very item.
In addition, companies in multiple industries are struggling with keeping revenue up and their business models intact. Many, many employees are finding themselves temporarily out of work, and many will not be going back to their prior employer.
With this, insurance carriers quickly started asking detailed questions about employee retention plans and adjusting their programs to mitigate risk for the perceived increased exposure. And all the while, the D&O marketplace continues to firm up as fewer carriers want to take on new clients in these uncertain times.
So, What Is an Insured to Do?
We have a four tips for you.
Get in Front of the Renewal Process
In some cases, quotes are taking much longer than normal as everyone juggles the work from home issue and ever-changing underwriting guidelines. Being out early gives us time to find an alternative when the incumbent or first choice carrier suddenly changes their appetite.
Make Sure Your Submissions Are Complete
This is vital. Insurance carriers have little extra time to go back and forth asking follow-up questions. On an incomplete submission, they’re likely to just decline the opportunity.
Work with us to provide updated information, complete applications, and really sell the story on your company. In many cases, these last months have been very difficult, and we need to show the underwriters there is a plan in place and that your company will be sustainable over the next 12-18 months.
Be Prepared for Change
Few accounts are coming in with no adjustments. Some may see a few endorsement, coverage or sublimit changes. Others may find themselves with new carriers, because the market has shifted.
There is still competition in the marketplace and some clients may see decreases or improvements in coverage. However, the market is trending to more restrictions and higher pricing overall. Good messaging and sufficient time to negotiate are key.
Review Your Insurance Coverages and Limits
COVID-19 has companies considering the value of Cyber Risk Insurance where they’ve not thought much about this risk before. Employment Practices is especially important in this economy as claims rise in times of higher unemployment. A good D&O liability program is valuable for most companies, even smaller or privately held firms. And, be sure to review the General Liability rating basis, Workers’ Comp payrolls, and other reported exposures to make sure your current program is keeping up with changes in your business.
The insurance marketplace for Executive Risk will continue to evolve as the economy shifts and losses come in. Be prepared for the changing market and ask good questions about how you can ensure your program keeps up. If you aren’t sure where to start or simply want to know more, reach out to us!
