Catastrophes, higher building costs, and inflation are all impacting commercial underwriting performance and insurer profitability. Proper portfolio valuation is becoming exponentially important as the reinsurance market tightens. So, how can insurance companies better manage their books of business now and into an uncertain future? The answer is rooted in addressing valuation issues by tapping third-party vendors. The answer is tied to partnering with a robust digital platform provider. The answer is collaboration.

In the past, it was easy for insurers to dismiss data as untrustworthy because they didn’t want to invest in it. Now, third-party vendors present necessary advances that help to paint the bigger picture. Platforms like OneShield are the glue that brings these tools together. And, not just for underwriting purposes. In the commercial lines business, customers are generally good risk management partners. OneShield and its customers have seen tremendous engagement with agents and policyholders who want to proactively manage risk. Failing to enable that is a missed opportunity.

Undervaluation Issues

One critical issue plaguing the commercial property insurance sector is undervaluation. Many insured properties are not accurately valued, leading to potential discrepancies when claims occur. This issue is exacerbated by the changing climate, which has expanded the geographic reach of natural disasters.

The Tightening Reinsurance Market

A convergence of global events leading into 2023 resulted in the hardest property-catastrophe reinsurance market in generations. Tightening reinsurance capacity puts pressure on carriers and raises both portfolio-level and granular questions. Commercial insurers are digging into the vulnerabilities and susceptibilities of individual properties.

Beyond Underwriting

A crucial takeaway from a past webinar with OneShield and AAIS was the need for insurers to go beyond traditional underwriting practices to effectively manage a book of business into the future.

We emphasized the value of using data not only for new business but also for existing clients. The webinar showcased how third-party data and insights enhance insurers’ risk management capabilities. Platforms like OneShield act as central hubs that connect these data-driven tools, enabling insurers to engage with agents and policyholders for proactive risk management.

The Path Forward

To remain competitive in the ever-changing commercial insurance space, carriers will need to continue to embrace change along with the unknown, adopting new technology and tools along with data-driven processes to improve loss ratios and customer satisfaction. Each carrier’s path forward is different. What matters most is they begin taking steps to implement new tools and data into their processes that improve loss ratios and customer satisfaction.

About OneShield

OneShield Software provides business solutions for P&C insurers and MGAs of all sizes. OneShield’s cloud-based and SaaS platforms include enterprise-level policy management, billing, claims, rating, relationship management, product configuration, business intelligence, and smart analytics.

Designed specifically for personal, commercial, and specialty insurance, our solutions support over 90 lines of business. OneShield’s clients, some of the world’s leading insurers, benefit from optimized workflows, pre-built content, seamless upgrades, collaborative implementations, and pricing models designed to lower the total cost of ownership. Our global footprint includes corporate headquarters in Marlborough, MA, with additional offices throughout India.

For more information, visit OneShield.com.

The post Commercial Property Preparedness: Bracing for Changing Risks first appeared on AAIS.

What Is Cyber Insurance and Why Does It Matter?

Data is a commodity because of its value to businesses and unfortunately, also to thieves. Information is considered the new oil, with some saying it is the most valuable commodity on Earth. “Businesses and organizations collect, store, analyze, use, and share all kinds of data on a regular basis,” said Tischler. “But if that data gets in the wrong hands, it can cause havoc for business… and data thieves no longer limit their activities to Wall Street. Instead, they find that many small businesses are easier targets.” Few businesses can afford the costs involved in losing crucial data, recreating that data, or perhaps needing an entirely new system due to a computer attack. “Small businesses are at a huge risk by underestimating the big impact a cyber-attack can have on their reputation,” Tischler stressed. “Without adequate protection, they are risking their future business growth and development.”

Cyber insurance is an insurance product that is used to protect businesses and individual users from internet-based risk and more generally, from risk relating to information technology, infrastructure, and activities. “Cyber insurance provides coverage to repair damages to the insurance, computer data, and their systems,” Ducker explained. “So, it provides a collection of coverages that enable an insured entity to actually respond effectively to either restore their data or their systems and get back to business when there’s been a breach of personal information or a breach of their computer systems.”

Elements of Cyber Insurance Coverage

There are a lot of moving parts to a cyber insurance policy, made up of first-party and third-party coverages. One of the more important first-party coverages is data compromised response. Many people often receive a notification in the mail saying that their information might have been compromised by a business. “This happens all the time and is really where a lot of the information is taken,” Ducker shared. Another first-party coverage is computer attacks. This coverage is triggered by the damage an organization is going to suffer as a result of a computer attack that involves their own data or their operational systems. Cyber extortion is a real growing threat to businesses right now. “Cyber extortion coverage is first-party coverage that is designed to help an insured organization respond to a cyber extortion threat, including ransomware and denial of service attacks,” Tischler stated. Cyber extortion covers the cost of the negotiator or investigator retained by the business in connection with a cyber extortion threat. Another piece of cyber insurance coverage is misdirected payment fraud, which is commonly referred to as social engineering coverage. This coverage is triggered when an insurer or their financial institution is intentionally and criminally deceived into transferring funds fraudulently. The coverage pays for direct financial loss resulting from deception. The next coverage element is computer fraud. This coverage actually responds to the direct financial loss through an insurer when an amount is fraudulently obtained from the insured as a result of unauthorized access to the insurance’s actual computer system. Identity recovery is first-party coverage that is designed to provide owners of the insured business with case management service and expense reimbursements to actually recover control of their identities after identity theft. “It combines identity theft insurance with services that help these victims restore their credit history and identity records to pre-theft status,” Ducker explained.

Moving on to third-party coverages, there are three that make up a cyber insurance policy. First is data compromised liability. This pays for defense and settlement costs associated with lawsuits arising from a data breach. Then there is electronic media liability, which pays for the cost that’s associated with suits alleging that information posted on a company’s website either violated privacy, infringed on a patent, or defamed another company or individual. The last piece of third-party coverage is network security liability. This coverage pays to defend the insured against claims that their negligent failure of their computer security caused damage to a third party.

Reducing the Risk of Data Breaches and Computer System Attacks

Cyber risks do not discriminate. Even businesses with the best security systems will not prevent all breaches and attacks; if cyber criminals want to get in, they’re going to find a way. So, while there may not be a physical way to reduce these risks, proper planning is essential. “You’re going to need some best practices in place, including creating an incident response plan, conducting cybersecurity assessments, training employees, and obtaining meaningful cyber risk insurance,” Tischler advised. “Remember, cyber coverage continually evolves. So, you’ll need to look for comprehensive cyber insurance coverages that include both the third-party and first-party elements that we have discussed.”

If you would like to view the presentation again in its entirety, please click the video above.

Questions? Please don’t hesitate to reach out to any of the featured speakers through the contact information below.

Stephanie Vasey

Product Manager of Commercial Lines and Inland Marine (AAIS)

stephaniev@aaisonline.com

Beth Ducker

Product Education Manager (HSB)

elizabeth.ducker@hsb.com

Mike Tischler

Client Engagement & Education Specialist (HSB)

statecehsb@hsb.com

The post Webinar: Commercial Cyber Insurance first appeared on AAIS.

Trends in Commercial Property

Dunn started off the discussion by requesting overviews of what the panelist are currently seeing in the market. Coan explained that while inflation isn’t a new trend, COVID did have a larger effect than normal. One point that he likes to make clear, is that inflation is not one in the same. It is different regionally and by state. “Florida has a 7.14 average inflation rate across the state, but Fort Myers and Miami are both over nine,” Coan reported. “Fort Myers is over nine because of [Hurricane] Ian, and Miami is over nine because inflation is driven by the people who live [there].” When developing costs, Coan insisted that it is important to keep in mind regional costs all the way down to zip code and census block level. “When you’re underwriting, you need to understand that different regions are experiencing inflation and cost factors differently.”

Inflation is affecting every American and when it comes to the confluence of factors in the renewal books, Heine has noticed there tends to be a mismatch of pricing terms and conditions. “We’re urging our clients to take a good healthy look at the renewal book to make sure that they’re managing that risk,” he said. “When you’re adjusting values, you have to look at everything.”

Current Challenges and Actions Carriers Can Take to Address Them

Coan reported that more than 50% of homes are short to value. “These [catastrophic] losses all over the country have shown that no one has a book that’s a true value,” he emphasized. “Everyone thinks they have a book that’s insured to value, but you don’t. When you run books of business, you’re going to see the valuations of those books are more than 50% undervalued.” Coan admitted that this is a common problem, even more so on the commercial side. “They get looked at less often,” he stated, “and there’s less information that the carrier is getting from the broker or the agent to write those policies.”

Heine believes carriers are under great pressure due to the tightening capacity. “There are a lot more questions at the portfolio and individual property levels when it comes to the middle market and large commercial,” he said. “At that level of discipline, folks are able to show that they actually have a command over their book and a process to help manage that. Part of what we’re seeing is a gap in terms of what these folks are insuring for and what the reinsurers are looking at.”

In terms of action to help address these problems, Coan believes it starts with data and technology. “You need to have third-party data built in because you can’t have all the information on this risk,” he advised. “It has been proven that vendors like Betterview and e2Value can help adjust the data, dissect that data, and provide customers with really good information on these risks.” Coen stressed that it is important to take advantage of these advances in the marketplace. “If you’re not in a more digital world doing things like incorporating an API and pulling in real-time information so you can give a real-time solution, then you’re going to fall behind,” he claimed. “Everyone understands new technology, so the excuse that customers aren’t going to want to do that is not true. You need to bring in the right data to process your claims, your underwriting, and your submission policies.”

The Way Forward: Progress of Insurers & Technology/Data Working Together

The integration of new technology such as API has been helpful for companies like Betterview when it comes to strategy. “Resources are at a premium wherever you go and or customers were absorbing that,” Heine explained. “Now, it’s like someone flipped that discussion and we’ve decided to absorb that time, effort, and cost. Overall, technology has advanced the actual value of what folks can get over a period of time.”

While there may be some hesitancy to get involved with data and technology providers, especially from legacy carriers, Coan believes it will pay off in the long run. “It actually makes that traditional underwriting and claims process more robust because you’re able to filter out those risks that are functioning and priced correctly and focus more time on where your risk is really valuable,” he assured. “So, you’re not losing any of the traditional core values your company may have. You’re actually enhancing them.”

If you would like to view the presentation again in its entirety, please click the video above.

Questions? Please don’t hesitate to reach out to any of the featured speakers through the contact information below.

Stephanie Vasey

Product Manager of Commercial Lines and Inland Marine (AAIS)

stephaniev@aaisonline.com

John Dunn

Vice President (OneShield)

jdunn@oneshield.com

Jeff Heine

Chief Revenue Officer (Betterview)

jheine@betterview.com

Skip Coan

Vice President (e2Value, Inc.)

scoan@e2value.com

The post Webinar: Property Preparedness & Bracing for the Future of Commercial Insurance first appeared on AAIS.