Categories
Personal Insurance

Insurance Rates are on the Rise

Insurance companies have been warning us for years that we were going to be hit hard with rate increases.  And they meant it!

South Florida homeowners are getting hit with insurance rate increases unlike anything we’ve experienced before.  We’re seeing 30% to 40% increases over what people are currently paying and maybe more for some homeowners.

Why Insurance Rates are Increasing

Insurance rates are on the rise thanks to Hurricanes Irma and Michael in Florida, others in Texas and Louisiana, an extremely active fire season, rising claim abuses, an abundance of court litigation, the spike in reinsurance costs and many other reasons.

In addition, insurance companies are getting stricter on their underwriting requirements, including the age of your home and roof, proximity to water, and the county and state in which you live.

What was acceptable last year may not be acceptable this year. Insurance companies are licking their wounds from all the claims activity and increasing their restrictions.

Coverage You Need

At RMC, we can help you find the best coverage for your needs by maximizing your discounts and making sure you get everything that you are entitled to receive.

Not all insurance companies rate risks or look at claim’s history the same way.  Every home is different and comes with different risk.

Contact Us

Let us help you find the perfect fit for your insurance needs without sacrificing the coverage you truly need. We offer free insurance reviews to help you understand what you have and what you need.

Contact RMC Group for a free review or quote today at 239-298-8210 or [email protected].

Categories
Risk Management

Captive Insurance for the Mortgage Industry

The mortgage industry is flourishing.  Low interest rates and migration out of population centers mean more people are looking for homes, which means more people are looking for mortgage loans. However, with increased business comes increased exposure. While record lending may fuel growth, it also adds risk.

Growing Risks and Exposures

The mortgage industry faces many different types of risks.  Whether a business is a lender or a loan originator, there is exposure. The pandemic has caused shutdowns, forcing many businesses to close; some permanently.  This has resulted in layoffs and job losses. The employment rate, which was recently at an all-time low, is now more than double what it was before the pandemic.

When borrowers lose their jobs there is an increased chance of a loan default. Unemployment, underemployment, and a struggling economy can be tell-tale signs that the housing market is going to suffer, if not now soon. And, as a rule of thumb when the housing market struggles, the mortgage industry suffers as well.

In some cases, a loan originator that sold the loan may be required to buy the loan back or refund commissions.  These losses go directly to the business’ bottom line and are in addition to more traditional risks, such as E&O, legal liability, employee-related claims, and reputational risk that any business may face.

A business may be able to insure against some of these risks.  However, not every risk can be covered commercially, and some insurance coverages may be prohibitively expensive.  Fortunately, there is a solution when the commercial market will not do.  And that is a captive insurance company.

A captive is an insurance company formed by a business to cover the risks and exposures of the business.  It enables a business to buy insurance that is tailored to the specific needs of the business.

Coverage Possibilities

RMC has worked with the mortgage industry for many years. We have helped mortgage companies form and manage very successful captive insurance companies.  Some of the risks that a captive can cover are:

  • Administrative Actions – fines and penalties by governing bodies
  • Collections Risk / Clawbacks – based on EPO’s and EPD’s
  • Directors & Officers – exposures for the officers of the company
  • Deductible Reimbursement – reimburse deducible layers of commercial insurance risk
  • Cyber – broad coverage
  • Loss of Key Contract – losses of revenue because of a lost contract (think Fannie/Freddie Mac)
  • Medical Buydown – layer of employee medical insurance should the company meet the requirements
  • Regulatory Change – operational or revenue losses based on regulatory changes
  • Reputational Risk – covers revenue lost due to a reputational exposure

Mixing Commercial Risk into a Captive

A captive insurance company can cover many types of standard commercial risks.  Some risks can be fully covered by the captive, instead of through the traditional commercial market.  Other risks may be better handled by a combination of a captive and a commercial insurer.

E&O, Fidelity Bonds, Professional Liability, Workers Compensation, General Liability, and Property can all be written by the captive or by a combination of a captive and commercial insurer. In some cases, it may make sense to use a fronting carrier where an admitted company is required. In other cases where an admitted carrier is required, a business can reduce premiums by increasing its deductible, and the captive can write a deductible reimbursement policy.

Taking on the Risk of Your Health Insurance

A mortgage company, like any business, has employees.  And, like any business, health care is a major expense.  Most businesses are unaware that a captive can help them reduce their healthcare costs.  By using its captive to assume some of its healthcare risks, a business can significantly reduce its overall spending while still providing its employees with first-class healthcare.

To discuss your options and to see if a captive insurance company is right for your business, contact RMC today at [email protected] or 239-298-8210.

Categories
Risk Management

Why Your Insurance Keeps Getting More Expensive…

And What You Can Do About It

Why are the policies that you purchased last year to protect your business more expensive this year? Because the insurance market is hardening.

Okay, hardening seems an appropriate word because it is certainly harder for your business to get the insurance that it needs at an affordable cost.  But what does that nice bit of industry jargon actually mean?

It means that insurance companies are becoming more selective about what risks they will take and charging more to insure those risks.

Why is the Market Hardening?

Some reasons why are obvious. Insurance companies have had to pay out significant claims for an above-average number of wildfires, hurricanes, and now Covid-19. (Even though many of these claims were denied, it still costs the insurance company to legally defend their position.)

Other reasons are more subtle. Lower interest rates and a fluctuating stock market have impacted insurance companies’ return on investments and lowered their profitability.  Working from home has increased cyber risks and civil movements have led to claims being filed against companies for their diversity initiatives or lack thereof.

Take on Your Own Risk

However, insurance is still a lucrative industry, as the ubiquitous TV commercials, sports stadium sponsorships and high-rise buildings all attest. Especially if the risk can be well-understood and managed.

So perhaps instead of transferring all your business risk to an insurance company that is not particularly keen to take it, you should retain some of the risk yourself.

If you’re willing to increase the deductibles on your policies or self-insure a layer of your employee medical costs, the premiums an insurance company charges you are likely to go down.

You then have two options: 1) simply hold aside money for these risks or 2) create your own insurance company and formalize your role as an insurer. This is known as a captive insurance company.

Captive Insurance Benefits

Creating a captive insurance company can provide better risk management for the parent company because of increased attention, trackable data, and loss control measures. In addition, your own insurance company could invest the premiums, where normally you would lose those premiums to an insurance company, which invests them and retains the investment gains.

RMC Group can help you establish a captive insurance company.  We will do a complimentary risk review of your business and the insurance policies you currently have. This will help you decide if these options are viable for you. To schedule a call with an insurance professional, click here.

Categories
Health and Benefits

A Supreme Court Case That May Impact Prescription Drug

On Tuesday morning, October 6, 2020, the United States Supreme Court heard oral arguments in the case Rutledge v. Pharmaceutical Care Management Association.

What is This Case About?

The case involves a challenge to an Arkansas law known as Act 900.  The law was enacted by the State of Arkansas in 2015 to regulate the amounts that a Pharmacy Benefit Manager (PBM) must pay to a pharmacy when an individual covered under a health plan purchases prescription drugs.  The law was challenged by a trade association of PBMs as a violation of the Employee Retirement Income Security Act of 1974 (ERISA).  While the ERISA issues may be of great academic interest to ERISA lawyers, the case may have a more practical effect on individual consumers.

What is a Pharmacy Benefit Manager?

A PBM is a third-party intermediary between employers that sponsor group health plans that include a prescription drug benefit and retail pharmacies that sell prescription drugs to plan participants.  They are usually engaged by an insurance company to administer a plan’s drug benefits, and their goal is to reduce the cost of prescription drugs to the insurance company.  When a plan participant goes to a pharmacy, it is the PBM that determines how much the pharmacy will be paid for the medication.  That amount is known as the Maximum Allowable Cost (MAC).

In addition, it is often the PBM that reimburses the pharmacy for the difference between the MAC and the co-pay paid by the plan participant.  The PBM is then reimbursed by the insurance company for the amounts that it paid the pharmacy.  A PBM may also be paid an administrative fee or a portion of the difference between the MAC and the amount that the insurance company is willing to pay for the medication.

What Was Act 900 Intended to Accomplish?

A pharmacy does not purchase prescription drugs from a PBM.  It purchases medication from a wholesaler.  The problem that the legislation was intended to address is that, sometimes, the MAC is less than the amount that the pharmacy has to pay its wholesaler for a particular prescription drug.

As a result, Arkansas, like many other states, enacted legislation regulating the MAC that a PBM must pay to a pharmacy; requiring that a PBM set its MAC in an amount that is at least equal to the pharmacy’s purchase price.  The proponents of the legislation argue that many small, independent pharmacies have been forced out of business because their acquisition costs for prescription drugs often exceeded the MAC paid by the PBM.

How Did the Lawsuit Get Started?

The lawsuit was filed by the Pharmaceutical Care Management Association (PCMA), a trade association of PBMs.  The PCMA alleged that the Arkansas statute violates ERISA.  ERISA is a federal law that regulates employee benefit plans and seeks to protect employees.  ERISA contains a preemption provision that precludes states from enacting laws that also seek to regulate employee benefit plans.  Of course, the PCMA was not motivated solely by loyalty to federal law.  It claimed that the law eliminates an incentive used by PBMs to reduce the cost of prescription drugs.

It also likely reduces the profits earned by PBMs and increases the regulatory burden.  The state, of course, argued the opposite.  It claimed the law would protect consumers by preserving smaller, independent pharmacies and providing greater access to less profitable drugs.  The PCMA won in the district court as well as in the U.S. Circuit Court of Appeals for the Eighth Circuit.

How Will the Supreme Court Rule?

It is, of course, impossible to predict what will happen in the Supreme Court.  As of October 6, 2020, when the case was argued, the Court had only eight members.  This means that, if the Justices split, 4–4, the decision of the Appeals Court will be upheld, and Act 900 will be overturned.

In addition, similar laws of many other states would suffer the same consequence.  While each side may have presented its case as important for consumers, the issue is much more esoteric.  The issue is ERISA preemption, which has a long and confusing history.  Justices may react differently to that issue than they would if the case were simply presented as pro- or anti-consumer.

For further information or for assistance with your health and prescription drug benefit plans, contact RMC Group.

Categories
Health and Benefits

Reducing Costs with Narrow Network Health Insurance: What Employers Need to Know

Rising health insurance costs continue to burden businesses with increasing overhead expenses. The trend is likely to accelerate as a result of the Covid-19 pandemic.

Premiums for employer-sponsored health plans have steadily increased from 1999 to 2018, more than doubling their costs in the 20-year span. Large employers expected to see a 5- or 6-percent increase in 2020 before Covid-19 struck.

Now, Covered California is projecting premium increases of 4 to 40 percent for employer-sponsored plans nationwide this year — and filings with the District of Columbia support those numbers. Aetna and United Health have asked regulators to approve increases of 7.4, 11.4, 17.4 and 38.0 percent for various plans in the District.

In light of this trend, more and more businesses are turning to narrow network health insurance plans as one way to mitigate rising premium expenses. These plans were fairly uncommon when premiums were much lower. But 18 percent of large companies (i.e., 5,000-plus employees) offered a narrow network plan in 2018. While fewer smaller companies offered these plans, many smaller companies are following the lead of larger employers and are beginning to turn to these plans as a cost-mitigation strategy.

If your business is looking to mitigate the rising costs of health insurance, a narrow network health insurance plan can be the solution. When used appropriately, a narrow network health insurance plan can effectively address rising health insurance costs for both employers and employees. The following are some of the most common questions businesses have about these plans.

What Are Narrow Network Health Insurance Plans?

Narrow network health insurance plans limit provider choice. They are defined by a narrow network of healthcare providers. A narrow network may include physicians, specialists, hospitals, urgent care clinics and other medical providers; it just doesn’t have as many options as a broad network plan. While there isn’t a universal mark for exactly what constitutes a narrow network, all of these plans are more restrictive than their broad network plan counterparts.

In restricting the provider networks, narrow network health insurance plans are similar to health maintenance organizations (HMOs). HMOs commonly also have more restrictive lists of in-network providers.

Are Narrow Network Health Insurance Plans Compliant with the Affordable Care Act?

Not only are narrow network plans generally compliant with the Affordable Care Act (ACA), but they have long been a primary component of the ACA’s cost-controlling strategy.

When the ACA adopted marketplace exchanges back in 2014, approximately 70 percent of the health insurance plans made available through the exchanges were either narrow network or ultra- narrow network plans. These types of plans continue to dominate the individual marketplace today, accounting for 72 percent of marketplace plans in 2019. (For the 2014 survey, a narrow network health insurance plan was defined as a plan where 30 percent of a region’s 20 largest hospitals did not participate in the plan.)

Just as the ACA marketplace exchanges can offer narrow network health insurance plans, an employer can generally offer these plans without worrying about non-compliance penalties. Many narrow network health insurance plans meet all of the ACA requirements. A health insurance professional who has experience with these types of plans can make sure that your business chooses an ACA compliant plan.

How Do Narrow Network Health Insurance Plans Help Control Employers’ Health Plan Costs?

Narrow network health insurance plans help mitigate costs by prioritizing cost, while also ensuring that plan participants have adequate access to healthcare.

First and foremost, narrow network health insurance plans limit the providers that the plan works with. This is often done by lowering reimbursement rates for providers. This results in limiting in-network providers to those providers willing to accept the plan’s rates. In most cases, much more affordable coverage is secured.

Second, these plans usually provide very limited or no coverage for out-of-network claims, which are generally more expensive. By limiting out-of-network coverage, a narrow network health insurance plan can hold costly out-of-network claims in check. In comparison, a plan that offers more out-of-network coverage would have to pay more for these often-expensive claims.

Third, these plans tend to not require primary care referrals for specialist visits. This is a point of distinction between narrow network plans and HMOs, which usually do require referrals. The savings is not insignificant. Even though a single referral visit might not result in a huge claim, the cumulative savings across all participants is substantial when these claims are eliminated.

Results of These Reasons

For these reasons, a narrow network health insurance plans reduces the cost of healthcare. As a result, an insurance company that offers narrow network health insurance plans is generally able to charge lower premiums.

An alternative for cost mitigation is to require its employees to pay a larger share of premiums. However, this is no way to engender employee satisfaction and usually is not the best option. Thus, a narrow network plan is seen by many business leaders as a better cost-mitigation tool.

Narrow network health insurance plans available through marketplace exchanges can save individuals and families about 16 percent on their premiums. Detailed data on employer savings isn’t as readily available because businesses have adopted these plans at a slower pace than individuals. But businesses can normally expect to see their costs drop when adopting a narrow network health insurance plan.

The best way to determine the savings that your business can realize by implementing a narrow network health insurance plan is to engage an insurance professional to conduct an analysis based on your specific situation and plan details. An insurance professional familiar with narrow network and broad network health insurance plans can assist with completing an analysis.

How Do Narrow Network Health Insurance Plans Help Control Employees’ Health Plan Costs?

Employees likewise benefit from the lower premiums that narrow network health insurance plans offer. Unless an employer keeps the savings to itself, employees can expect to pay less for a narrow network health insurance plan than they would for a broad network health insurance plan.

Additionally, as discussed above, an employee does not need a primary care physician referral in order to see a specialist. An employee’s copay may be only $30 or $50 for a single referral. If the employee needs multiple referrals to specialists in a year, though, the savings can add up to hundreds of dollars. This can be an especially valuable to patients that have complicated health issues and families that have multiple people who need to see specialists.

Do Narrow Network Plans Provide Sufficient Access to Coverage?

While narrow network health insurance plans generally meet ACA requirements and usually provide adequate coverage for most employees, they do have limited networks of providers. An employer might find that it has some employees whose coverage needs are not sufficiently met by a limited healthcare network.

For example, some narrow network health insurance plans may not have certain specialists in-network within a given region. This can create an issue for employees who need to see out-of-network specialists and pay for the specialized care out of pocket as a result.

How Do Narrow Network Health Insurance Plans Fit Into Tiered Plan Structures?

To address the risk of insufficient network coverage, some businesses turn to a tiered plan structure. Tiered plans consist of two or more different health insurance plans. One of these plans is a narrow network health insurance plan, and another is a broad network health insurance plan.

With a tiered plan, employees can select and pay for whichever level of coverage best suits their situation. Those who don’t need extensive coverage can save on premiums by selecting the narrow network option. Those who need more extensive coverage can procure it through the higher-priced broad network health insurance plan.

A tiered plan might not save businesses as much as a strict narrow network health insurance plan could since some employees will likely opt for the more expensive broad network health insurance plan. Nonetheless, this structure is an effective way to reduce health plan premiums while still meeting employees’ needs.

In addition, a tiered network plan can reduce the risk of over-insuring some employees, since employees can tailor their plan selection to their individual needs.

What Other Challenges Come with Implementing Narrow Network Health Insurance Plans?

The limited healthcare provider networks of narrow network plans might create a few challenges during implementation of a plan. However, each of these can be addressed with a well thought-out implementation.

First, employees may not even know the providers who are in their current healthcare network or realize how the list of in-network providers will change. A 2015 study found that 44 percent of people who purchased health insurance for the first time weren’t aware of the providers who were in their network. Often, some people never bother to find out.

To address this concern, human resources representatives can educate employees on the providers in a narrow network (or even a broad network) during open enrollment. This is a best practice regardless of whether a business offers a narrow network health insurance plan or a different type of plan.

Second, some employees might discover that their current providers are not in their employer’s new narrow network health insurance plan. This is a challenge that may be managed by helping employees find new providers who are in-network. It’s generally not an issue after implementation, once employees have made any necessary provider changes. Also, employees who are unwilling to change providers can stay with their current providers by paying the out-of-network costs.

Third, some plans may lack providers in certain specialties. This should be kept in mind as businesses evaluate plan options, and it’s a good reason to consider a tiered plan structure (see Tiered Plan Structures).

Fourth, some employees who need specialized medical care may have to drive long distances for appointments and procedures. Businesses can accommodate employees who are in this situation by offering more paid sick leave. HR representatives can remind employees that a mileage deduction for medical-related driving is available if employees meet certain requirements. The medical mileage deduction for 2020 is 17 cents per mile.

Can Narrow Network Health Insurance Plans Be Paired with Health Savings Accounts?

Health savings accounts (HSAs) are tax-advantaged savings accounts that can be used for medical expenses. These accounts can only be set up in conjunction with high deductible health plans (HDHPs), which meet specific deductible and limit requirements as defined by the IRS.

For 2020, HDHPs must have deductibles of at least $1,400 for individuals or $2,800 for families. Their maximum out-of-pocket limits cannot exceed $6,900 for individuals or $13,800 for families.

HDHPs and narrow networks technically refer to different aspects of health insurance plans. However, the two features are frequently used in conjunction to mitigate costs. Thus, many narrow network plans are HDHPs and can have HSAs associated with them.

Having an HSA option can be helpful when introducing narrow network health insurance plans to employees. Businesses that haven’t yet switched to an HDHP can highlight the HSA as a beneficial feature that can help with both in-network and out-of-network costs. Businesses that already have an HDHP option can remind employees of the HSA feature, potentially using it to quell concerns about increased out-of-network costs.

Do Narrow Network Health Insurance Plans Have Broad or Narrow Pharmacy Plans?

Narrow network health insurance plans can be paired with either broad or narrow pharmacy plans. Choosing these two elements separately gives employers greater ability to adjust their health and pharmacy plan offerings to their budgets and their employees’ expectations.

How Can Employers Find a Narrow Network Health Insurance Plan?

For help exploring narrow network health insurance plan options, contact RMC Group. As experienced professionals in the industry, our team can perform a provider audit to compare your current plan’s in-network providers to those who participate in a narrow network. We’ve assisted multiple businesses throughout the country with narrow network health insurance plans, and we’re ready to help yours too.

Categories
Health and Benefits

Considerations for Self-Funded Health Plans in Light of the COVID-19 Crisis

The COVID-19 pandemic has caused a major disruption to the US economy.  Businesses are struggling to cope.  If your business has a self-funded health plan, here are some things that you need to think about:

1. Plan Amendments

The recent legislation passed by Congress requires employers to cover the full cost of testing for the coronavirus.  If your plan requires cost-sharing with your employees, then you need to amend your plan document.  In addition, you may have to contact your stop-loss carrier.  It has been reported that most stop-loss carriers understand the need for the plan amendment and have agreed to not raise premiums or change other features of their policy.

2. Claims Reserves

A counter-intuitive effect of our current health crisis is that, for many employers, healthcare costs have declined.  The reason is that many hospitals and doctors have limited their practice to treating COVID-19 cases.  As a result, annual physicals and other diagnostic tests have been cancelled.  In addition, patients who are not suffering from COVID-19 symptoms are afraid to go to the doctor or emergency rooms.  However, this reprieve will not last forever.  Once “shelter-in-place” orders are lifted and doctors and hospitals have the capacity to treat patients other than COVID-19 patients, employees and their dependents will once again go to the doctor.  You should continue to make your monthly payments, as required by your TPA, and be mindful of claims that are incurred but not reported.  You do not want to face unexpected costs once the economy ramps up again.

3. Risk Group

You need to understand the make-up of your employee group.  If your employees tend to be older or sicker, you can expect their healthcare costs to increase.  So far, there has been no legislation requiring plans to cover the cost of treatment for COVID-19 without cost sharing.  However, it is possible that that could make its way into future legislation.  You want to make sure that you have planned for any additional costs.

4. Telemedicine

One thing that we have learned from the crisis is the value of telemedicine.  Many patients are turning to telemedicine when they are unable to see their doctors.  If your plan document does not cover telemedicine or you do not have a relationship with a provider, you will want to address those issues.

5. COBRA

Many employers that have laid off or furloughed employees have agreed to pay some or all of the cost of COBRA.  Before you agree to subsidize COBRA costs, make sure that you recognize the full extent of those costs.

The full impact of the COVID-19 crisis on self-funded health plans may not be known for many months.  However, what we do know is that, in order to safeguard your business, you need to prepare for whatever may come.  A healthcare professional from RMC can help you be ready for this or any future health crisis.

Categories
Risk Management

Is a Captive Insurance Company the Solution to Business Interruption?

A restaurant in Washington, D.C. has joined the ranks of businesses suing their insurance company for coverage under a business interruption insurance policy as a result of the COVID-19 pandemic.  The suit claims that the restaurant was forced to close after Washington, D.C.’s mayor issued an order barring sit-down service, thereby limiting its business to take-out and delivery and eliminating 95% of its business.

After closing its business, the restaurant filed a claim with its insurance company.  The carrier denied the claim on the grounds that the restaurant was not forced to close as a result of physical damage to its premises, which is a precondition for coverage under most business interruption policies.  In addition, the carrier claimed that the COVID-19 pandemic falls under a virus exclusion in the policy.

In the suit, the restaurant claims that it was not forced to close as a result of the virus.  Instead, it claims that it was forced to close by reason of the mayor’s order.  In addition, it cites a provision in the policy, which provides coverage if the business is denied access to its premises by government action.

Similar lawsuits have been filed in Illinois, Indiana, Florida and Texas.  In some of those suits, the plaintiff has alleged that its policy did not contain a pandemic exclusion.  However, in others, the issue is the same as the lawsuit filed by the Washington, D.C. restaurant – that the reason for the closure was government action, not the virus.  It could be months, if not years, before these lawsuits are resolved.

So, what do these lawsuits tell the average business owner about insurance?

The lesson to be learned is that commercial insurance may provide less protection than you think.  There is a huge misconception about the business of insurance.  Most people buy an insurance policy expecting the carrier to bail them out when a crisis strikes.  However, insurance companies are not just in the business of paying claims.  Like any business venture, they are also in the business of making a profit.  And, the best way for an insurance company to make a profit is for premiums to exceed claims.  That is why an insurance policy, which may appear to provide broad coverage, may contain a boatload of exclusions.  It is also why a policy will generally require the insured to mitigate its damages and may also impose conditions on the insured’s ability to recover.  And, it is why the plaintiffs in these lawsuits were forced to sue their insurers.

What is a business owner to do?

One option is a captive insurance company.  A captive is an insurance company owned by the business that it insures.  A captive is formed primarily to cover the risks of that business, although it may also be required to insure unrelated risks.  Because the purpose of the captive is to provide real coverage to its related business, its policies can be tailored to the needs of the business in order to maximize the likelihood of coverage.  A captive can provide coverage that is either unavailable on the commercial market or prohibitively expensive.

In addition, it can cover gaps in a business’s existing commercial insurance.  For example, a captive may be more likely than a commercial insurance company to write a business interruption insurance policy that does not require physical damage to property or does not exclude business interruption caused by a pandemic.  A captive can provide greater protection to the business and greater comfort to the business owner.

Conclusion

If you do not already have a captive, it may be too late for you to obtain coverage for the COVID-19 pandemic under your existing insurance.  However, if this crisis has taught us anything, it is that another crisis is around the corner.  It may not be a health-related crisis.  But we can say with certainty that something is likely to interrupt your normal business operations in the future.  Now, is the time to prepare for the next crisis.  A captive can be a vital part of your risk management plan and help ease the pain caused by the next crisis.

If you are interested in learning more about captives and other risk management solutions, contact RMC Group.

Categories
Business Insurance Personal Insurance

What You Need to Know About Coronavirus and Your Homeowners Insurance

Your homeowners insurance safeguards you against financial loss in the event your home and belongings are damaged. It also covers you if you’re found liable for an accident on your property. So, what does this have to do with the COVID-19 pandemic?

COVID-19 has affected nearly every aspect of daily life. It’s impacting businesses across multiple industries and changing the landscape for many types of insurance.

But what about homeowners insurance?

The virus itself doesn’t have much of an impact on homeowners insurance.  But, the fallout may. People are spending more time at home working and schooling their kids. It’s a good time to double check and make any necessary changes to your insurance coverage.

Also, if you find yourself needing to make a claim, the claims process may have changed.  Your insurance company may not be sending claims adjusters into the field. Insurers are moving toward an online claims process during the pandemic. That means you will be recording damage via photo and/or video and submitting evidence to the company online.

Read on to learn more about:

  1. How COVID-19 and related lifestyle changes might affect your needs for homeowners insurance coverage
  2. How COVID-19 could impact your insurance claims
  3. How insurers are responding and adapting to the pandemic

Your Homeowners Insurance Coverage Needs

Coronavirus doesn’t impact personal property, so it’s unlikely that you will need to make any changes to your property coverage. However, the virus does impact the amount of time that people spend at home, and more time at home means more potential for accidents. You may find that you need more, or different, liability coverage.

Many people are at home working remotely for the first time. This arrangement often translates to more business assets under your personal roof. If you fall into this category, a home business endorsement might be necessary to cover your work assets, like computers and other equipment.

If you rent out a property or a room on home sharing apps like Airbnb, it’s very likely that travel restrictions and social distancing are keeping people from using your vacation rental. You should be able to temporarily halt your coverage until you need it again.

Let’s explore each of these in more depth.

Liability Coverage

If anyone in your household, including pets, causes damage to someone else’s property, then your personal liability coverage will protect you.

Now that your neighbors and kids are home from work and school, more people are out walking around.  It’s even more important that you take measures to protect yourself.

Look around your property and consider what might attract a child who’s out wandering the neighborhood. Do you have a pool? A backyard swing set that’s not fully fenced? A dog that sits outside on a leash or in a run? Any of those could result in an accident that exposes you to liability.

Adults could get hurt on your property as well.

A dog out for a walk might decide to follow a scent, causing someone to trip and fall. You never know what will happen.  So, it’s a good idea to have at least $300,000 of personal liability coverage on your home insurance policy.

If you do have a pet, find out whether you’re covered for animal related damages. Some policies exclude certain breeds.

Home Business Equipment Coverage

If COVID-19 has you working from home, find out how much of your business property is covered under your homeowners policy. Most policies only cover $2,500 for business equipment, and you may have more in your makeshift home office.

Fortunately, many insurers offer business equipment endorsements to protect your work equipment. These endorsements give you up to $5,000, and in some cases up to $10,000 of coverage. Call your agent to find out your options for increasing your business equipment limit.

Short-Term Rental Coverage

Do you have a room or second property that you rent out through Airbnb, VRBO, or a similar company? Unless you rent regularly enough to need business coverage, your coverage probably takes the form of an endorsement or rider on your regular policy.

There’s a good chance that you’re not using that coverage right now and won’t need it for a while. Ask your insurer if you can pause the coverage until you need it again.

How COVID-19 Impacts Homeowners Insurance Claims

Even before the coronavirus pandemic, online and automated claims processing started to become a trend. Now, social distancing means that it’s no longer an option for most people to have an adjuster come to their homes, so virtual claims are the new norm.

Much of the claims process is the same. The primary difference is that, after you file a claim, you won’t wait for someone to come inspect the damage. Instead, you write up a report in your own words, make a list of what was damaged or stolen, and take photos or videos as evidence of the damage. Then you’ll submit your report and evidence virtually and await your reimbursement.

Insurers might still insist on sending adjusters for larger claims, but you can expect that to happen less frequently.

How Are Home Insurance Companies Responding?

Online claims adjustment isn’t the only process that insurers are changing during the crisis. Some are offering financial aid and forgiveness to customers who are experiencing financial difficulties due to closures and cancellations.

In California, Insurance Commissioner Ricardo Lara has called for companies to offer a minimum 60-day grace period for payments. Pennsylvania, Wisconsin, and several other states are also asking insurers to waive late charges and extend grace periods. David Sampson of the American Property Casualty Insurance Association (APCIA) has asked all insurers nationwide to be similarly flexible and to relax deadlines around claims filing.

Many companies in the homeowners insurance space are extending inspection deadlines in cases where homes require repairs for policies to remain in place. Insurance company representatives may be working from home, but policyholders shouldn’t expect disruptions in service.

These are industry-wide guidelines and patterns, but every insurer will be making its own decisions. If anything about your coverage is in question, give us a call. We are standing by and fully operational to provide you with customer support.

Categories
Technical Memorandum

Family First Coronavirus Response Act [Technical Memorandum]

On March 18, 2020, President Trump signed into law the Family First Coronavirus Response Act (the “Act”).  The Act contains a number of provisions to provide relief during the Covid-19 crisis.

Here are some of the important features:

1. Emergency Paid Sick Leave Act

The Act provides up to two weeks of paid sick leave to all employees of employers with fewer than 500 employees.  The Act covers both full-time and part-time employees, although part-time employees may not be entitled to a full two weeks of paid leave.  Part-time employees are entitled to paid leave equal to the number of hours they work on average over a two-week period.

Paid leave under the Act is triggered by one of the following reasons:

  • An employee is subject to a federal, state or local quarantine order related to Covid-19.
  • An employee has been advised by a healthcare provider to self-quarantine as a result of exposure to Covid-19.
  • An employee is experiencing symptoms of Covid-19 and is seeking a medical diagnosis.
  • An employee is caring for an individual who is subject to a self-quarantine or isolation order or has been advised by a healthcare provider to self-quarantine.
  • An employee is caring for a child whose school has been closed.
  • An employee has any other qualifying condition under rules to be set forth by the Secretary of the Treasury or the Secretary of Labor.

The Act requires the Secretary of Labor to issue regulations to help employers calculate paid sick leave no later than April 2, 2020.  In addition, the amount of paid sick leave is capped.

2. Emergency Family and Medical Leave Expansion Act

The Act provides up to 12 weeks of Family and Medical Leave if an employee is unable to work because the school or day care facility for a child under the age of 18 has been closed or the child’s babysitter or nanny is unable to work as a result of a Covid-19 emergency declared by the federal, state or local government.  In order to be eligible, an employee must have worked for at least 30 days for the employer.  In addition, the first 10 days of leave may be unpaid.  The Act simply adds another reason an employee may take Family and Medical Leave.  It does not increase the amount of leave available to an employee beyond what is already available under current law.

3. Testing for the Coronavirus

The Act requires that health plans, whether group or individual, and whether fully-insured or self-insured, cover the entire cost of testing for Covid-19 at no cost to the employee.  This means that an employee may not be charged co-pays, deductibles or any other type of cost-sharing.  The testing may occur at a healthcare provider’s office, an urgent care center or an emergency room.  In addition, the Act covers telemedicine visits.  The employee need not obtain preauthorization.  The only requirement is that the testing be for Covid-19.

The Act only covers testing for Covid-19.  It does not include treatment for Covid-19.  However, there is nothing in the Act to prevent an employer or a health plan from covering the costs for treatment as well.

4. Tax Credits

The Act also includes tax credits to help an employer pay for the cost of paid sick leave and the expansion of Family and Medical Leave.

This legislation may just be the beginning.  As the crisis develops, Congress may enact other legislation to help Americans deal with the crisis.

Categories
Business Insurance

Why Cyber Insurance is Important for Business Owners

How vulnerable is your business to a cyberattack?

Many businesses think that cyber insurance is only necessary for large companies like Yahoo, Target, and Equifax, but hackers don’t just target the “big guys.”

In 2018, Beazley Breach Response Services reported that 71% of investigated incidents targeted small to medium-sized businesses (SMBs). A full 13% of attacks specifically target small businesses, and according to the US Securities and Exchange Commission, about half of those companies go out of business within six months of an attack.

[content_band bg_color=”#e8f4f8″ border=”all”] [container] [custom_headline style=”margin: 0; 0; 0; 0;” type=”center” level=”h4″ looks_like=”h4″ accent=”true”]Key Takeaways[/custom_headline]

  • Cybersecurity breaches affect all types of companies, including small businesses.
  • The most common cyber attacks are related to employee error and malicious actors.
  • Costs of a breach average around $158 per record.
  • Without cyber coverage, companies have to fund sensitive and legal notification processes, infrastructure redesign, and other breach-related expenses out-of-pocket.
  • Cyber coverage is available to help you handle the direct costs of an attack, as well as the costs of a lawsuit and the expenses associated with lost productivity.[/container] [/content_band]

What Makes a Company Vulnerable?  

There are many ways a hacker can enter your company’s systems, but your employees may be your biggest vulnerability.

About 20% of the time, an attack happens due to accidental disclosure of sensitive information, often because an employee misaddressed a message or left a server running without the proper security protection.

Another 10% of attacks happen because of malicious insiders.

After that, the next most common type of attack is social engineering, which happens when a hacker tricks an employee into granting access to sensitive information.

In a phishing attack, for example, an employee gets an urgent request by email or phone that looks legitimate—often, it looks like it’s from the employer itself. The email asks for sensitive information like passwords or bank data, which the employee provides because they believe the request to be legitimate.

In other social engineering attacks, hackers physically pose as IT support personnel and access company systems, all because employees didn’t check credentials before they let the hacker into the building.

According to the 2019 Cost of Cybercrime Study by Accenture and Ponemon, the growth rate of these kinds of people-based attacks is higher than for any other type of cybercrime. As long as you employ humans, naturally fallible as they are, you are vulnerable to cyberattacks.

What Can a Cyberattack Cost You?  

Cyberattacks are expensive, more so than most companies can handle without coverage. The average estimated cost is $1.1 million per business, but when you factor in those companies that don’t calculate their expenses after an attack, that number increases to an estimated $1.7 million. This breaks down to around $158 per record to recover from an attack.

Approximately 54% of costs are tied to productivity loss as the company gets back on its feet. Other expenses include the costs of notifying customers and even ransom paid to hackers. There are also direct costs paid out to third-party service providers like lawyers and IT departments.

Mandated Customer Notifications  

Most states legally require companies to notify affected customers of data breaches. Healthcare industries in particular must abide by HIPAA, which has a strict Breach Notification Rule. And if you have any customers in the EU, you’ll have to notify them in accordance with the GDPR.

Even if you’re not legally obligated to disclose a breach, customers want to hear bad news from you first. If they read about the breach in the news online, your reputation will suffer severe damage long-term. By simply notifying people up-front, you behave ethically and show that you care enough to own up and address the issue.

Attacker Ransom Demands

Hackers may ask for ransom when they successfully capture critical information or shut down a business’s systems. If the business owner doesn’t pay, they’ll keep the system disabled. The attacker may even increase the ransom amount if they know that they have the upper hand.

The less responsive you are to ransom demands, the more it will cost you in the end. Beazley Breach Response Services has seen ransom demands as high as $2.8 million.

The Cyber Insurance Solution

Cyber insurance, also called cyber coverage, can help you to cover ransoms, pay to have your systems restored, and fix whatever vulnerabilities caused the breach. Still, fewer than 20% of businesses are buying cyber insurance. Without cyber coverage, most businesses are forced to cover the costs of cyber attacks out of their own pockets.

Cyber coverage can save your bottom line and your reputation. It’s time to learn more about it.

What Is Cyber Coverage? 

Cyber coverage is an insurance policy that protects the policyholder against an online attack, whether from ransomware, malware, or any other type of hack.

Who Needs Cyber Coverage and Why?  

The more information you have stored online and the fewer resources you have to pay the costs associated with a breach, the more you need cyber coverage. Keep in mind that standard business insurance policies tend not to cover cybercrime, so you’ll need special cyber coverage if any of the following apply:

  • You handle personally identifiable information (PII) or electronic protected health information (ePHI), like financial account details, contact information, medical histories, etc.
  • Your website stores customers’ login data including email addresses and passwords.
  • You use third-party services like database managers, eCommerce marketplaces, or suppliers.
  • You allow employees to use their own devices for work purposes.
  • You use connected tools to manage clients’ private lives, including finances, mental health, and medical services.

Above all, your finances should determine whether you need cyber coverage. If you don’t have enough to cover these costs, not to mention ride out the lulls that occur when customers lose faith in your security, you need cyber coverage.

What Coverage Does Your Company Need?  

A comprehensive cyber insurance policy should cover expenses related to a breach, including the extensive costs of notifying clients that their sensitive information has been compromised.

  • Network security coverage is probably the most important coverage type for most companies. It takes care of the direct costs that your business incurs when a breach happens: customer notification costs, network restoration, IT forensics, and so forth.
  • Privacy liability coverage addresses the lawsuits and legal fines resulting from the exposure of customer information. This coverage lets you pay legal fees, settlements, and even government fines if you’re found to have violated privacy laws.
  • Network business interruption coverage can help you to recover lost profits and cover costs when a hacker takes your system down in a ransom attempt.

What Kinds of Claims Have Been Filed?   

It’s hard to tell how many claims companies have made on their policies, but some of the largest claims have gotten a fair amount of media attention. For example, when Equifax was hacked in 2017, the company announced that its cyber insurance coverage allowed it to pay out $60 million in recoveries from a $125 million policy.

The rest of the policy covered other costs of the breach, but there were still expenses left to pay. In the end, Equifax paid $314 million out of pocket.

There have been many more such incidents, though payout information has not always made the news. Still, the hacks get covered, such as in 2016 when three states’ fishing and hunting license systems were hacked, shutting down sales of those licenses.

Municipal and state governments have also been targets of hacks. In 2017, cybercriminals hacked the Kansas Department of Commerce data system and accessed 5.5 million Social Security numbers. The state ended up paying $175,000 for legal services and $60,000 for IT support—and those costs don’t include state-paid credit monitoring for victims.

In Conclusion

No one is immune from cybercrime. An honest mistake or a deceiving email from a clever hacker can send your customers’ sensitive data directly into the wrong hands. The cost of that disclosure can be astronomical. In addition to the costs of notifying customers and authorities of the breach, you have breach investigations, infrastructure rebuilding, and even lawsuits to fund.

Cyber insurance can keep you protected. It can be the difference between a breach that takes you down and one that shows your business’s strength, and it’s within your reach. Find out what your cyber liability options are by speaking with an RMC Professional today—click here for a quote.