Tag Archives: lloyds

How Sharing Economy Is Reshaping Insurance

The sharing economy is an economic system based on the use of technology to share assets or services between parties (individuals or organizations). Participants in the sharing economy use it because it can provide a more flexible and affordable option than some other economic systems. In this way, the sharing economy makes goods and services available to those who would not otherwise be able to access them. Much has been discussed about how the fast-growing web of consumer-to-consumer transactions that is the largest component of the sharing economy presents new opportunities for the insurance industry. The consensus view among insurers is that this potential market is large, growing quickly and under-developed yet tricky to insure with traditional products as it blurs the boundaries between personal and commercial lines. In April 2018, Lloyd’s published Sharing risks, sharing rewards: Who should bear the risk in the sharing economy? The report contained the following key findings:

  • Consumers in the sharing economy expect to be protected from the risks of transacting
  • Consumers and sharing platforms have opposing views on who bears responsibility for this protection
  • There is a significant untapped market of potential sharers who would be more willing to participate if protected by insurance

Maturer platforms in the sharing economy have established risk management programs and are working in partnership with the insurance industry to develop them further. For the many smaller platforms that make up the vast majority of platforms by number, risk management is at an earlier stage of development. The insurance industry has an important role to play in supporting platforms of all stages of maturity. This study aims to promote dialogue between platforms and insurers and, building on the previous report, has systematically analyzed the sharing economy to understand where insurance can support the growth of the sharing economy while also broadening the geographic scope of research.

This study, carried out by Lloyd’s, the world’s specialist insurance and reinsurance market, and Deloitte scanned the sharing economy for emerging insurance models, conducted a broad review of business and academic literature, surveyed 8,527 consumers across the U.S., China, Germany, France, the U.K. and the UAE, interviewed more than 20 subject matter experts, conducted a platform-only online questionnaire and held two workshops with representatives from sharing economy platforms, innovation experts and insurance practitioners.

See also: The Need for Agile, Collaborative Leaders  

The consumer survey data in this report is not an extension of Lloyd’s previous report as the sample, time period and questions were different.

The objective of this report is twofold:

  • To provide sharing economy platforms with an overview of key risks and the insurance solutions available to mitigate them.
  • To help the insurance market further understand how this sector of the economy needs new insurance products and where the most compelling opportunities for product development are located.

In summary, this research found:

  • Sharing is widespread: Approximately 500 million people across the U.S., China, Germany, France, the U.K. and the UAE have shared assets/possessions or services in the past three years to earn a profit; more than 680 million in these markets consumed them in the same period.
  • Currently, a number of platforms have mechanisms to protect users, ranging from transaction-embedded insurance to guarantee schemes. For users, the protection afforded by a platform is a key consideration in addition to the earning potential on offer.
  • Our market scanning indicates that an increasing number of sharing economy platforms provide insurance to their users that is automatically embedded within each transaction, with 57% of adults who have sold services or lent products in the sharing economy in the past three years being insured by transaction-embedded or personally owned cover.
  • Of those selling services and sharing assets, 37% of home sharers took out or upgraded a buildings or contents policy prior to sharing, and 49% of ride sharers took out a new motor policy or upgraded an existing one. Among delivery drivers, the figure is 37%, and 20% of freelancers took out or upgraded liability insurance before providing their services.
  • In addition, our analysis of the consumer survey identified pockets of high demand for insurance among four specific consumer segments. These groups represent product development opportunities for insurers, brokers and other service providers.
  • This study has identified numerous emerging models of sharing economy insurance; some combine elements of well-established commercial and retail covers in a static policy, and others provide more dynamic cover that fluctuates more in line with underlying risks.
  • Partnerships with sharing economy platforms form a key distribution channel. In addition to offering an opportunity to reduce customer friction in the insurance purchase process by embedding it within transactions, distribution via platforms offers greater potential for customer access, risk selection and pricing power than distribution via the open market.
  • Insurtechs are at the forefront of innovating sharing economy products and services and to date have focused on customer-facing links in the value chain.

You can find the full report here.

This article was written by Nigel Walsh and Peter Evans.

Forget Big Data; You Need Fast Data

In 1989, Queen released a very successful single called “I Want It All.” The opening repeats the song title twice, then changes subtly to “and I want it now!” This could be a battle cry for today’s fast-moving society.

We’ve all come to expect a rapid response to our requests for service, and we’ve become impatient with those who can’t deliver. We even watch kettles heat up and wonder why they take so long to boil, and we stand and complain about queue lengths.

Whereas consumers might take some comfort (or the opposite) in knowing that most companies they deal with hold vast amounts of data about them, all of this data is historic and, actually, very little is used productively. Yet we are increasingly engaged in real-time conversations with companies either via a mobile app, our PCs or the good old-fashioned telephone, providing real-time data about a need or a problem. So why aren’t companies, by and large, capturing and acting on that data in real-time while they are interacting with their customers? The simple explanation is that acting on data captured in real time is beyond the means of most of the systems built by these companies, and it’s not a trivial matter to change, given that this inevitably means tinkering with legacy systems.

See also: Producing Data’s Motion Pictures  

But there is a solution in sight, and it’s called “fast data.”

Fast data is the application of big data analytics to smaller data sets in near-real or real time to solve a problem or create business value while engaging with a customer or another computer. Fast data is not a new idea, but it’s going to get very important to embrace fast data.

A Fast Data Architecture

What high-level requirements must a fast data architecture satisfy? They form a triad:

  1. Reliable data ingestion.
  2. Flexible storage and query options.
  3. Sophisticated analytics tools.

The components that meet these requirements must also be reactive, meaning they scale up and down with demand, are resilient against the failures that are inevitable in large distributed systems (we don’t want any failures on autonomous cars!), always respond to service requests even if failures limit the ability to deliver services and are driven by messages or events from the world around them.

The chart below shows an emerging architecture that can meet these requirements.

The good news is that you can graft such an architecture on top of legacy systems, which is exactly what ING has been doing.

Unlocking valuable intelligence

Back in the halcyon days, banks were very close to their customers. They knew customers intimately and treated them personally. With the proliferation of customers, products and channels, though, this intimacy has been lost. ING wanted to recapture the “golden era” with a global strategy to make the bank more customer focused, “mobile first” and altogether more helpful.

A typical bank these days captures and processes billions of customer requests, instructions and transactions. In doing so, they capture and store vast amounts of customer data – but, and here’s the startling truth, few (if any) of the major banks use this data effectively for the benefit of their customers.

ING appointed a manager of fast data, Bas Geerdink, to address this problem. His broad international remit is to create a truly customer-friendly, omni-channel experience. To kick start this process, he turned his attention to ING’s vast but disparate data stores, as he was convinced they could unlock valuable intelligence. Historical data can often reveal customer behaviors and trends that are crucial to predictive analytics. For example, past data can be used to plot future pressure points on personal finances – e.g., key payment events can be anticipated and mitigated with predictive analytics.

However, mining this data presents major challenges. Most banks are hampered by disparate and disconnected legacy applications that cannot operate in real time. Confronted with this dysfunctional problem, ING made some fundamental decisions:

  1. Create a single, secure data lake.
  2. Employ a variety of open source technologies (along the lines of those shown in the chart above). These technologies were used to build the over-arching notifications platform to enable data to be captured and acted on in real time.
  3. Work with the legacy application teams to ensure that critical events (during a customer’s “moment of truth”) are notified to this fast data platform.
  4. Trigger two vital platform responses: a. Instantly contact the customer to establish whether help is urgently needed (for example, to complete a rapid loan application); b. Run predictive analytics to decide whether the customer needs to be alerted.

The future role of banks

Partly in response to the Open Banking directive, the bank is now opening up its data to third parties who have been authorized by customers to process certain transactions on their behalf (e.g. paying bills). This is a fascinating development with potentially far-reaching implications. It raises a question about the future role of banks. For example, would the rise of nimble, tech-driven third parties reduce banks to mere processing utilities?

ING is determined not to be marginalized, which is why it has invested in this fast data platform and its building real-time predictive apps – both on its own and with third parties  (such as Yolt). It is a bold and very radical strategy – and, not surprisingly, it raises some searching questions.

Hearing this story made me wonder what types of customer would most welcome this kind of service, and was there any risk of alienating less technology-literate customers?

The bank doesn’t yet have definitive answers to these questions. However, ING is adamant that all technology-driven initiatives must have universal appeal, and that is why ING is introducing change on a very gradual, phased basis.

See also: When Big Data Can Define Pricing (Part 2)  

In the first instance, ING is testing these services on employees of the bank and then on beta test groups of (external) customers. To date, feedback has been extremely positive, and this has encouraged the bank to keep investing. However, Bas emphasizes the need to appreciate customer sensitivities and preferences. For example, there is a fine line between providing a valued service and becoming intrusive – that is why the bank specifically considers factors such as the best, most receptive time of day to make interventions (if at all).

Fraud detection is another intriguing development where fast data is having a significant impact. At the moment, traditional fraud detection systems often lack finesse. When a customer attempts to use a credit card, it can trigger a false positive 90% of the time (or even more). This can be inconvenient both for the bank and especially for the customer (although a false positive is not always perceived in a negative way – it shows the bank is checking money flows). ING is hopeful that its fast data platform will radically reduce the level of false positives as well as the level of fraud.

Other applications of fast data

I’m aware that Capital One has deployed a fast data service and is now able to authorize a car loan in seconds – instant on-the- line confirmation that massively improves the customer experience.

Yet I’ve also heard of instances where data is anything but fast!

Take the Lloyds Insurance market. Currently, some full risk assessments for specialist insurance are completed two weeks after prices have been quoted – quite clearly, this is a risk too far!

We can also see applications in places like the police and military, who often have to capture and act upon a variety of data sources, in real time, in often hazardous and difficult circumstances. Fast data analytics could be used, for example, to predict when supplies of ammunition will run out and to trigger immediate air drops to front-line troops.

The opportunities to change lives with fast data are enormous. Luckily, it’s becoming easier and easier to achieve. The time to start is now.

Key Trends in Innovation (Parts 4, 5)

This article is part of a series on key forces shaping the insurance industry. Parts One, Two and Three can be found herehere and here.

Trend #4 and #5: Innovation in commercial lines

Solutions will continue to evolve from protection to behavioral change, then to prevention — even across complex commercial insurance. Although proliferation of data and increasing transparency of both the buyer and seller will cause disintermediation for simple covers, it will also create opportunities for brokers and intermediaries to innovate solutions and channels for their B2C (non-standard risk pools, retirees/older generation, healthcare gaps) and B2B (emerging and unknown risks, cyber, global supply chains, cross-border liability, terrorism).

We believe the potential for innovation in commercial lines is actually larger than personal lines. Because of the complexity of the commercial insurance ecosystem and new emerging risks, however, the level of innovation seen so far has been relatively modest.

See also: 3 Ways to Leverage Digital Innovation  

Demand and supply of commercial insurance solutions is evolving, driven by:

  • developing markets looking for new solutions
  • the digital economy driving a move away from property risks (which are decreasing as a proportion of the overall economy) to casualty
  • increasing demand for catastrophe insurance (driven, in part, by increasing concentration)
  • macro trends creating emerging and “uninsurable” risk classes
  • new sources of structured and unstructured external data that are changing how commercial insurance is sourced, bought, underwritten/priced and serviced

The competitive landscape is also changing with large global conglomerates setting up captives to self-insure emerging market champions and the continued involvement of alternative sources of capital. Excess underwriting capacity is placing strain on profitability.

In addition, new entrants and primary distributors are seeking to take greater control of the value chain, including pricing and risk selection. This impact is further enhanced by primary carriers retaining more risk as a result of global scale and balance sheet strength providing diversification and increased understanding of their own risk from solvency modeling.

Many incumbents are already starting to respond.

In the London market, a key component of the modernization program being driven by Lloyds is PPL, a new platform where face-to-face negotiation is supported and facilitated by electronic risk capture, placing, signing and closing. Brokers are also aggressively evolving their risk analytics capabilities through the creation of open architecture platforms that deliver a two-way information flow while leveraging knowledge to shape future risk transfer solutions for evolving needs.

Many carriers are piloting monitoring technology in property (partnerships with security, pest control and energy companies) as well as casualty (sensors and wearables) to drive improvements in risk selection and risk mitigation.

How innovation will drive value creation

Risk monitoring, mitigation and prevention

One of the key trends driving change is the move from risk transfer to risk monitoring, mitigation and prevention.

Organizations are looking for risk prevention and mitigation solutions as they move away from traditional risk transfer mechanisms.

We see three main areas:

  • Telematics for commercial lines (for example in property and marine);
  • Real-time, contextual data capture and AI for risk selection, risk mitigation and monitoring, client on-boarding as well as re-underwriting; and
  • Use of preventive technologies (health tech, slip and fall, work place safety) to mitigate lost time injury and workers’ compensation losses.

Insurance sourcing, buying and selling

As businesses gain greater transparency into their risks, they will continue to optimize their risk management solutions. While direct SME cover, self-insurance and use of captives will continue to grow, emerging risks will provide opportunities for intermediaries and brokers to carve out and source new solutions for their customers. Examples of these will include global supply chains, cross border liability, cyber, catastrophe and terrorism.

Operating model improvements

The commercial market has always been very strong around product innovation, but the operating model has largely stagnated. In some parts of the market, the underlying process hasn’t really changed for more than a hundred years. System limitations further reduce the ability to leverage the data that is captured. There are significant opportunities to enhance operational efficiency in many of the basic functions, including payments and regulation and also in automating underwriting and claims.

Application of technology and data to enable digitalization

There are a number of risk classes where there is significant potential to harness technology and data to improve underwriting, risk selection and pricing, as well as to help businesses understand and then manage their exposure. These include cyber, flood and SME.

Platform-based solutions

Platform-based solutions (rather than point solutions) have the greatest potential to create value, and incumbents will need to assess how to incorporate innovative solutions based on a build, buy or partner strategy.

See also: Q&A With Google on Innovation, Risk  

We hope you enjoy these insights, and we look forward to collaborating with you as we create a new insurance future.

Next article in the series will be about Trend #6. The ability to dynamically innovate (new risk pools, new segments, new channels) and deliver on the customer promise will become the most important competitive advantage (as known risks continue to get commoditized and moved to the direct channels).

The Story Behind the Lemonade Hype

I am a sucker for new stuff. I bet many of you are, as well. If news of the iPhone 7’s release date caused you to immediately organize your camping gear for a week-long sidewalk holiday at your local Apple store, then you know what I am talking about. Beyond our excitement for the next iPhone or Tesla, apparently we also get all giddy for new insurance, as well.

Recently, an insurer named Lemonade has popped up on the scene and has caused quite a ripple. Here are some recent news headlines:

Wow! Give that publicist a raise. That is some quality publicity.

But it was when I saw this headline, “The Sheer Genius of Lemonade – A Whole New Paradigm for Personal Lines Insurance,” on InsNerds that I knew I had to speak out. Next thing I know, my good friend Tony Canas at InsNerds convinced me to write this response.

To start, this article is NOT a criticism of Lemonade or what it is trying to bring to the consumer. Insurance is in desperate need of heart and soul. No, what this article will do is splash some cold water on the hype inferno that appears to have taken over the sane minds of our industry. Allow me to go point-by-point with my issues:

Is Lemonade really peer-to-peer insurance?

Whether it is called peer-to-peer — or fashionably referred to as P2P — Lemonade ain’t it. Lemonade is a standard insurance company. You pay premiums, and the company pays claims from the general pool of funds. There are no peer groups insuring one another. There is no distribution model of peer invitations or referrals. The only “peer” element of the business model is that you will, as a customer, be grouped with others like you for the sole purpose of dispersing any underwriting profits to a charity of the group’s choosing. Now, there is a reason for this, but, seriously, was anything I just described even remotely connotative of peer-to-peer? Want to know what peer-to-peer looks like, see Friendsurance or Guevara.

Screen Shot 2016-11-17 at 9.31.55 PM

Is Lemonade really insurtech?

Sure, Lemonade is an online-only firm. And, yes, you can buy its insurance products through an app on your phone, where a bot named Maya will help you with your coverage selections, but Lemonade is still just an insurance company with a fancy website. I can buy insurance from other insurance companies where I can choose from dealing with a website, walking into an agent’s office or calling an agent over the phone. Lemonade has eliminated two options and given me a sole option that is little different from what I could have had before. And before you start screaming, “But I don’t want to call anyone or drive to any office,” just keep in mind that having options makes the experience better. Insurance is complicated enough that, occasionally, I would like to call someone or walk into an office and scream my head off. I deserve that option!

See also: Could an Incumbent Act Like Lemonade?  

What about the bot and the machine language? Isn’t that technology? It is technology in the sense that there are computer scientists engineering a robot to replace a human. But if the experience is crummier than just dealing with a human, it is a wasted effort.

In an attempt to play fair, I will reverse my position on this one — if it can be shown that the robot can handle the firestorm that comes when the company is hit with its first major natural catastrophe.

But isn’t it awesome that Lemonade’s underwriting profits go to charity?

One of the big marketing ideas coming from Lemonade is the unique feature of aligning the interests of policyholders and the insurer by taking excess profits and donating them to charity in the name of the peer group. Fraud is a big deal in insurance, and most insurers have systems in place to detect and counteract fraud. The charity angle from Lemonade is an attempt to prevent fraud from happening by linking the monetary loss because of fraud not to the big-bad insurer but to a softer, more sympathetic victim. Fundamentally, if you are a Lemonade policyholder and your claim is fraudulent is any way, you are depriving some charity of much-needed funds.

It is an interesting concept, but I don’t believe it will have much of a financial punch. The first drawback is that property insurance — being exposed to natural catastrophes (CAT) — is subjected to infrequent but occasionally massive losses. What appear to be underwriting profits in the quiet years between CATs are really opportunities to strengthen your balance sheet for the inevitable hit. As Lemonade expands to other states, its inability to build surplus because of the charity and the corporate status (see below), will really hamper the company’s business model. Lemonade is now, and will fully be, reliant on reinsurance to back its entire program. That by itself is not terrible, but, with full reliance on reinsurers, the excessive profits that the company thinks it will avail itself of, in reality, just go to the reinsurer. Think about this: If the reinsurer is taking all the risk, why would Berkshire Hathaway or Lloyds of London (two of the reinsuring entities for Lemonade) not want to profit from the transaction? These excess underwriting profits will simply transfer from insurer to reinsurer. My prediction is that the charitable donations will, in most years, be nonexistent or minuscule in comparison with premiums paid.

My second issue with the charity angle is that I don’t think it will bring the alignment of interest that Lemonade expects. One reason is that, if I am correct about the excess profits not materializing, then just the intermittent scheduling of charitable givings makes the whole exercise uninteresting to the insured, in my opinion. If Lemonade can’t provide a significant charitable donation in most years, the alignment will lose its appeal simply because the policyholders won’t be able to hang their hats on it. Perhaps worse, the charity angle may lose effectiveness because Lemonade is also marketing that it pays claims “super fast.”  Super fast claims handling (which, on Lemonade’s website, the company touts as a check in minutes), invites fraud. I think there is a major conflict of the business model. If your marketing message is that you can get a claims check in a few minutes without having an adjuster or claims rep work the claim, then your message is music to those upon whom the charitable message will have no impact. An an insurance buyer and seller, I know that out of super low prices, super fast claims handling and excess profits to charities, I can only choose one of those angles. More than one seems difficult. Getting all three strikes me as impossible.

Screen Shot 2016-11-17 at 9.32.08 PM

A broker by any other name…

Lemonade is a broker by another name. Another of Lemonade’s selling points is that insurers have a conflict of interest because they make money by denying claims. Lemonade purports to have absolved itself of this conflict by not actively acting like an insurer. Here’s how:

Lemonade is actually two companies. It is a risk-bearing insurance company AND a brokerage firm. When you buy a policy from Lemonade, the 20% fee goes immediately to the brokerage firm. The remaining 80% stays with the insurer. The paper on which the insurer is based is a B-corporation, which essentially makes it a non-profit. So it is the brokerage part of the business that is the money maker. That is the entity that secured all that seed-funding. Sequoia Capital knows a thing or two about making sound investments. It doesn’t do non-profits. And once the fee from the premiums the policyholder pays gets swept into the Lemonade’s brokerage company, it will not be used to pay claims, at all… ever. It is income, free of insurance risk. If the insuring entity ever goes insolvent, all the fees will be protected.

There is nothing wrong with this. The model has already been used successfully by other insurers. But, by acting as a broker, Lemonade has shifted its risk from the risk of loss or damage of the client toward that of a trusted adviser that only has one product to sell and gets a 20% commission for selling that one product. What if its product is NOT the best choice for the client? Will Maya the bot steer the buyer elsewhere like a traditional agent would? No. How forcefully will Maya point out all the flaws and gaps of Lemonade’s ISO style homeowners policy? Will Maya give direction to the insured about the flood or earthquake policy the client really should have but can’t buy through Lemonade? Somehow, I can’t match the hype and excitement of seeing a broker selling an average product, even if it’s sold via a robot.

See also: Why I’m Betting on Lemonade  

Lastly, I want to challenge the major premise of Lemonade — that insurers make money by denying claims. As a professional in the business for 20 years, I find that this is the one selling point that Lemonade and its marketing keeps touting that upsets me the most. It upsets me because it isn’t true. In fact, I have seen the opposite. I have seen emails or communications from senior executives to staff adjusters onsite during a natural disaster that flat out instructed adjusters to move quickly, be fair and, if there is any doubt about the damage, settle IN FAVOR of the policyholder. I am not naive enough to believe insurers never play fast or loose with their claims handling, but, by and large, insurers pay their claims. In the property area in which Lemonade competes, those policies it sells are legal contracts. Many a court battle has been fought to word the contract so that claims can be settled quickly and fairly. Lemonade is implying that it will be different; it is almost implying that it won’t deny claims. Are there really claims that insurers have denied (and acknowledged via the court system) that Lemonade would not have denied? I seriously doubt it.

Look, I like new things. You like new things. Lemonade is the new thing on the 300-year-old block. But the shiny new aspects that Lemonade is bringing to the table don’t appear to be worthy of the hype, in my opinion. I give them an “A” for effort in maximizing the hype to drive attention and sales. But insurance is all about the long game. The real key performance indicators (KPIs) are retention, combined ratios and customer satisfaction. Those will take years to sort out. Is Lemonade truly in it for the customer; does it really want to revolutionize the business model; or is the exit strategy already in place?

The world is watching. I hope it succeeds.

Is Terrorism the New Normal for Insurers?

After several mass shootings across the U.S. – in Orlando, San Bernardino, Charleston and elsewhere that, whatever the motivation, created terror – the insurance industry is responding with new “standalone terrorism” coverage.

Does this reflect a level of acceptance of such incidents, and of gun violence, as a “new normal,” something we’ll just need to live with?

I don’t think so. In fact, the responses of insurers illustrate their key role: helping individuals, businesses and other organizations deal with unforeseen harm and tragedy, and recover from it.

As cited by Carrier Management in August, the FBI’s “Study of Active Shooter Incidents Between 2000 and 2013” reported that 70% of incidents took place in either a commerce/business or educational environment. The findings establish an increasing frequency of incidents, the report said.

Until this year, insurance didn’t respond to “lone wolf” shooting incidents because of two factors. One is the parameters set forth by the Terrorism Risk and Insurance Act (TRIA). Staggered by the massive losses from the 9/11 attacks, Congress passed legislation that provided for similar, large events. To qualify for coverage through the act, losses from a terrorist event must total at least $5 million – far exceeding the property damages that have resulted from shootings and similar attacks.

See also: How to Develop Plan on Terrorism Risks  

The other factor is the lack of clarity regarding what’s covered by commercial general liability insurance. In the same article, John Powter, president of GDP Advisors in McKinney, Texas, says the general liability part of a commercial policy doesn’t clearly cover or exclude active shooter incidents. “There is a concern, or gray area, with the general liability policy – in reality, it was never designed to cover an active shooter incident,” he said.

The shift in the nature of terror

Earlier this year, Insurance Business reported on research by KPMG that noted that the changing nature of ideologically motivated crime has yet to be addressed by insurance coverages.

“There is a shift in the nature of terror,” the publication quoted KPMG partner Paul Merrey as saying. “In the 1990s, it was about property damage. The incidents we’re seeing now are about maximizing casualties. There is a gap between what insurers are providing cover for and what customers actually want.”

He added that the gap will “go from a gray area to excluded,” as was the case with cyber risks – which, in turn, led to entirely new cyberrisk insurance.

In a similar response, insurers introduced new standalone terrorism insurance earlier this year.

Bermuda-based insurer XL Catlin introduced an “active assailant” policy in February. The policy provides “time element” coverage, which includes business interruption and extra expense coverage.

Ben Tucker, head of U.S. terrorism and political violence insurance for the company, told Insurance Business that “the level of awareness is increasing quite dramatically, and it’s not limited to large-risk management types of exposures.” The company has received inquiries about the coverage from agents and brokers representing school districts, public buildings and small hospitality firms.

The policy, the publication reported, is triggered when an event involving a handheld weapon affects three or more people. In this policy, “affects” has a broad definition: a person affected could simply be a witness to such an event.

GDP Advisors in February introduced an Active Shooter Insurance Program underwritten through Lloyd’s of London. Powter told Carrier Management that the coverage originally was intended for educational institutions, but soon after it was launched GDP received inquiries from banks, hotels, sports venues, amusement parks and other businesses.

The real value: preventing injuries and losses

Powter added that the “real value of the policy” is in its provision of risk management and crisis response services. Those are important, he said, because many businesses and educational institutions are now learning how to best respond if an incident occurs at their facility.

And that’s perhaps the most important response by insurers. When they insure any organizations, insurers take steps — risk management services — to help prevent losses from occurring.

Those services are especially valuable to businesses and other entities that have purchased active assailant coverage. Students and teachers at schools where shootings have occurred said that the safety drills and procedures they practiced helped to minimize injuries and losses and, perhaps, save lives.

Does coverage for such attacks imply an acceptance of them? Only in the same sense that other types of insurance imply an acceptance of fires, storms or other natural disasters. They’re incidents that could happen, and require specific safeguards, preparation and insurance.

See also: How to Find Coverage for Terrorism Risks

Society must address the threat of terrorism, whether via large attacks or the actions of one individual. Anyone who follows the news is familiar with the many options being discussed and debated by policymakers.

But as those threats persist, insurers must deliver both preventive measures and coverage for damages, whether to property or the psyches of survivors and witnesses. That’s the type of response we expect from insurance companies.