Key Insurance Exposures for 2023

The assortment of massive claims events in 2022 has made insurance more desirable for buyers and insurers more nervous.

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2022 saw Hurricane Ian causing an estimated $80 billion in damages, California forest fires, employers wrestling with “back to workplace” policies, company issues stemming from the overturning of Roe v. Wade and numerous cyberattacks. This assortment of events has undoubtedly made insurance more desirable for buyers and insurers more nervous.

What areas are the main exposure points for organizations as we accelerate into the new year, and how can businesses act now to protect themselves? 

Employee Benefit Plan Sponsors Under a Legal Heat Lamp

Under the Employee Retirement Income Security Act of 1974 (ERISA), persons charged with decision-making responsibility are deemed “personally liable.” For the past decade or so, plaintiff lawyers have found that a careful investigation of fee arrangements between employers and outside contractors providing employee benefit plan services reveals little oversight of outsourcing fees. As one might expect, “excessive fee” cases have abounded in the U.S., and this won't slow down. 

Plan sponsors should address this exposure through fiduciary liability insurance to arm sponsors with legal defense and coverage for penalties, expert-led responses and necessary associated notifications.

The Cyber Exposure Saga Continues 

No discussion of exposures would be complete without paying attention to cyber-related exposures, especially ransomware. Clever computer hackers invade a network or computer system, then encrypt it, demanding ransom payment – almost always in cryptocurrency – before releasing it back to the owner/operators. SMBs are especially vulnerable and, worse yet, the consequences of an attack on a small business are catastrophic. It can lead to a tarnished reputation, customer dissatisfaction and, even worse, closures.

See also: 20 Issues to Watch in 2023

Businesses need to strategically rethink their current and often outdated operations and put the proper guardrails in place to help against cyberattacks. Cyber insurance is a security blanket businesses should implement. Insurance is generally available, although annual renewal pricing increases have been in the double digits in 2021 and 2022. Therefore, the quality of the insurance is important. Additionally, commercial insurance buyers must be wary of specific exclusions for cyber exposure on policies under which insurers did not specifically intend to provide the coverage. While this may not appear as a big issue on the surface, there is often insurance coverage found by the courts in the absence of policy exclusions.

Breach of Privacy-Related Allegations

When considering cyber-related incidents, one cannot forget allegations of breach of privacy. Increasing dependence on social media and “culture wars” make potential allegations much more possible and practical. For the knowledgeable insurance buyer, having solid insurance protection to defend against allegations of breach of privacy, as well as pay claim settlements, is increasingly important. Most cyber insurance policies specifically cover breach of privacy, but SMBs are less likely to understand the details of insurance purchased and may even be reluctant to accept the cyber exposure with proper concern. This is a major flaw as SMBs, generally, are targets for data breach efforts. Other traditional insurance products may also address breach of privacy allegations, so a good review of all insurance plans and associated details is a must to determine multiple sources of possible insurance coverage.

Retirement of “Baby Boomers” and Younger Workplace Leadership Can Stir the Pot 

With millennials moving up the ranks in leadership roles and Gen Z entering the workforce, businesses need to take into consideration all the employee protections instituted since the early 1990s around age discrimination and corresponding allegations to ensure they are not perceived to be favoring or overstepping workers' rights on a generational level. This will continue to be bothersome for employers from the standpoint of insurance claims. 

Additionally, with many employers still struggling to implement “return to the workplace” rules and employees trying to hold onto “remote working,” insurance claims are bound to unfold. This makes employment practices liability insurance all the more important as it is a powerful tool to cover businesses against claims by workers suggesting their rights as an employee have been breached – this includes failure to employ or promote and wrongful termination. 

General Increase in Crime Exposure

Last year, mega-retailer Walmart announced that it fell victim to a significant increase in criminal activity. As a likely result, this can lead to corresponding increases in retail costs to customers. A down economy can also cause increases in employee theft, although it may take some time to fully realize this exposure. In 2023, insurance company underwriters will likely want both pricing and deductible increases in many commercial crime insurance policies. NRF’s Retail Security Survey suggests that, on average, retailers saw a 27% increase in organized retail crime incidents in 2021. This number would be expected to rise, based on activity and experience in 2022.

See also: Risk Barometer for 2023

Insurance protection is important, and insurance policy details are critical.

Richard Clarke

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Richard Clarke

Richard Clarke is chief insurance officer at Colonial Surety.

With more than three decades of experience, Clarke is a chartered property casualty underwriter (CPCU), certified insurance counselor (CIC) and registered professional liability underwriter (RPLU). He leads insurance strategy and operations for the expansion of Colonial Surety’s SMB-focused product suite, building out the online platform into a one-stop-shop for America’s SMBs.


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