Brokers & Agents
Private Directors and Officers Liability (D&O) policies are generally combined policies including D&O and Employment Practices Liability (EPL). Although they are typically marketed as Directors & Officers policies, and there are definitely D&O claims, claims frequently come from the Employment Practices Liability side of the form. Private Directors & Officers carriers find it challenging to cope with the high frequency of Employment Practices Liability claims that come with this line of business.
The premiums associated with these policies have been creeping up over the past few years, and now is an appropriate time to investigate and report on the causes. Rather than give you generalities that claims are frequent, here is some of the data that supports what the insurers are telling us.
|2012 EEOC Complaints|
|Top Five States||Total Complaints||Percent Change Since 2010||2010 Total Complaints||Total Population 2010*|
|Year Total||Total Complaints - All 50 States|
* The population totals are included to show that the highest volume of claims generally come from the largest states.
Success in the medical device business is a team sport. One crucial member of a device firm's team is often an insurance broker. The right insurance brokers can help you get the most affordable coverage at the broadest terms. They can help guide you through the insurance maze and help you build a financial bulwark against various risks. If you face a crisis or a claim, they can partner with you and offer resources to come to your aid. In short, they can be invaluable business partners. Thus, a key part of any medical device firm's risk management program should be wise broker selection.
For starters, let's differentiate between an insurance agent and a broker. An insurance agent typically represents the insurance seller, i.e., the insurance company. An agent may have exclusive or non-exclusive contracts with certain insurance companies, and can place coverage only with those insurers.
An insurance broker brings buyers and sellers of insurance together, but represents you, the buyer. A broker can survey the entire insurance marketplace to find the best deal for you — assessing price, service and scope of coverage. For many medical device companies, an insurance broker will be their chief insurance advisor.
What should medical device companies look for in an insurance broker, or when evaluating their current one? Recently, I queried several insurance brokers who work in the medical device and life science space. Here, in no particular order, is a shopping list of fifteen qualities to look for when selecting this key business partner:
This week's tragedy at the Boston Marathon has touched each of us on a very personal level and puts fear in our hearts that this could happen again. As the dust settles at the site, there will be many unanswered questions, and some of those issues will concern terrorism and insurance for terrorism.
What do we know at this point?
- It is being speculated that this is an act of terrorism.
- It is uncertain if it is an act of domestic or foreign terrorism.
- It is, also, unlikely at this point that this will be a Certified Act of Terrorism.
What are the immediate insurance issues that we see from this event?
- Severe injuries and death
- Direct damage to buildings and structures
- Direct damage to property (including vehicles)
- Closure of areas due to direct loss and civil authority
- Debris removal and damage
- Workers Compensation
When I think about businesses/people working out of their homes, the first picture that comes to mind are people working on their computers — in virtual offices, remote offices, and oftentimes offices outside of the United States.
That is why it came to me as a surprise when Yahoo recently proclaimed all their employees had to "come back to work." One news line read "work at home and you will be fired." Clearly this is a change, especially for a high tech company. Marissa Mayer, the president and CEO of Yahoo as of 2013, defends her stance and says it will "separate out the truly productive workers from stay at home slackers who abuse the system." Needless to say, the news is buzzing about this, so time will tell if she sticks to her guns.
While Yahoo is "going back to the workplace," more and more people are choosing to work from their home. The current economy has redefined how people cope with the unemployment dilemma, and many businesses encourage staff to work from home to better maximize their production and as a means to better deal with the demands of work and family.
There was a lot that changed with the Commercial Property Forms in the 2013 series. In fact, most forms underwent some sort of modification. One of the most interesting of the changes was the introduction of an optional coverage available on the Dependent Property Forms for Dependent Properties in the Supply Chain (Business Interruption).
By way of background, the Business Income and Extra Expense forms require that there is direct damage at the premises described by a covered cause of loss that gives rise to a loss of income or need to pay extra costs to operate during the period of restoration. In providing this form of coverage, we have been aware of the exposure to a loss of income due to a physical loss at a location that our insured depends on for various reasons. Recognizing that a loss to a dependent location could cause financial harm to our insured, ISO created Dependent Property Endorsements (CP 1508, CP 15 09, CP 1534) provided on a scheduled basis. What this means is that, for our insured, we identify what company(ies) they are dependent on and schedule those locations on the Dependent Property Form attached to their business income policy.
Brokers who place School Board and Educators Legal Liability insurance are beginning to notice that the marketplace has gotten more difficult. Layoffs from budget cuts have triggered an increase in Employment Practices Liability (EPL) claims, while the tough job market has led to an increased amount of "failure to educate" claims.
The very public proceedings involving Penn State University have recently reminded us that sexual abuse and molestation are critical claim issues for schools. Any article written about a class of business that touches Personally Identifiable Information (PII) and doesn't mention Cyberliability fails to address another major source of trouble.
Based on these and other factors, insurers are either non-renewing business or re-underwriting their book, which leads to a restriction in terms.
In April of 2013 the ISO modified the Commercial Property Forms. It was one of the biggest changes in forms that we have seen in years with the majority of forms taking on some type of change.
Effective April 2013, many of the Commercial General Liability forms also have a new edition date. Some of the changes are minor but carry new edition dates of existing form numbers, and there are some forms that are first being introduced. It is a multistate revision and some of the specific state forms have also taken a change or introduced new forms. Some of the ISO changes have already been adopted in insurance company forms while other changes represent clarification of the "intent" of the form.
There are new multistate endorsements that are being introduced:
- Primary And noncontributory — Other Insurance Condition Endorsement
- Additional Insured — Owners, Lessees or Contractors — Automatic Status for Other Parties When Required in Written Construction Agreement
- Total Pollution Exclusion For Designated Products Or Work Endorsement
- Liquor Liability — Bring Your Own Alcohol Establishments Endorsement
- Amendment of Personal and Advertising Injury Definition Endorsement
- Designated Location(s) Aggregate Limit Endorsement
Specifically we will highlight those changes that have any significant impact and new endorsements to the form series. It goes without saying that any form that narrows coverage requires that we notify our insureds to avoid any gap in coverage as they renew on the new CGL edition date. All of these changes will be discussed in more detail in the Insurance Community class on March 19th.
Call it what you want ... lead generation, business development, canvassing, door to door, talking with referrals, follow up from a networking event, asking for referrals or even making the "Dreaded Cold Call." You can disguise it anyway you want. You are prospecting!
Prospects may come from a variety of sources that include your warm or natural market. You may also receive a steady flow of prospects from centers of influence, such as attorneys, doctors, accountants or VIPs in your community. What about referrals from clients or friends? You may even belong to associations and business networking groups. What about social media? (compliance permitting).
Skeptics say that prospecting is dead. It's not. And it never will be. The decision to prospect is yours alone.
In almost 25 years in this industry, I have never seen such desperation. One of the unfortunate results is that many good agencies that have worked hard, done things well, and are not grasping at straws, are still at a competitive disadvantage. It is much like the situation faced by the most responsible citizens bailing out the most irresponsible or incompetent (take your pick) individuals and companies.
The categories in which this is occurring are widespread. Here are some important examples:
1. Certificates of Insurance. The changes to certificates have caused widespread carnage, frustration, anger, and virtually every other negative emotion imaginable. One item that is not being discussed much publicly is the difference between agencies following the rules versus agencies that are not following the rules. In particular, the question is whether to issue certificates that violate contracts, copyrights, and regulations. There is no question some agencies are doing so knowingly or, if ignorant, they are living in a deep, dark hole.
Neither companies nor associations nor many regulators (the Wisconsin Department of Insurance is a notable exception and there may be others of which I am not aware) have done much to correct the abusers. The result is that sometimes the agency willing to violate the rules, contracts, and copyrights make sales they would not otherwise make. By being silent on this issue, companies, associations, and some regulators are assisting the irresponsible — and the responsible are paying the price.
2. Premiums payable. An even more verboten subject is whether all companies and brokers are truly requiring all agencies to pay premiums on time. My theory, based on my experience, is they are not. I understand that many companies are so desperate to hang onto whatever premium they can that they would prefer to work this out rather than lose their premiums. But the best agencies lose as a result because this amounts to a handout.
Sales is really simple. It's a contact sport — being in the presence of the prospect or client either by phone or face-to-face. Sometimes when we get away from the basics and fundamentals we find ourselves full of fear, worry and anxiety. I heard a wise man once say, "Work, don't worry."
I remember what Tom Vanyo said to me at a sales meeting in May of 1984, "If you don't make a major change today, you will be doing exactly the same thing next month or next year." I had been putting off keeping track of the number of calls I made each day and how many new prospects I talked to. I personally thought that keeping track of my numbers was a waste of time and paper.
At first it was depressing. The numbers were so revealing. I thought I was so productive. I couldn't believe how much time I was wasting each day. The numbers told me how few new prospects I was actually talking to each week. After all, prospecting is the foundation of all successful salespeople. After disciplining myself to keep track of each dial, contact, prospect, and sale, I was able to determine how many dials it took to reach a qualified prospect which turned into a sale. By keeping track of my numbers it began to motivate me. Each day I could see real progress.