Welcome to The Betterley Report Blog on Specialty Insurance

Welcome to The Betterley Report Blog on Specialty Insurance Products.  In this blog, I hope to shed some light on the different specialty insurance products available to commercial insureds, and how individual products differ from one another.  With luck, we’ll be providing information that helps readers choose the right types of products for themselves and their clients.

If you are familiar with The Betterley Report, you know that I write about specialty insurance products designed for commercial insureds of all sizes.  I have been authoring these Reports since the mid-’90s (!), and am fortunate to have many of the leading insurance companies, agents and brokers, reinsurers, attorneys, and service providers, as well as Risk Managers and CFOs, as subscribers.

As I talk with my readers, they often ask me about new developments in the products I cover.  With each Report limited to an annual freshening, we have not had a way to provide interim updates.  I figure that this blog might solve that problem nicely, since I can report on new products and changes in existing products as they are hitting the market.  Since I don’t want to just be an outlet for press releases, I’ll be sure to offer some observations about those products as well.

These Reports are available only to subscribers, and each Report is updated annually.  Some of the products I research are Cyber Risk, Directors & Officers Liability, Technology Errors & Omissions, Employment Practices Liability, and Intellectual Property insurance.  There are 6 Reports each year.

I write The Betterley Report for insurance professionals that want to find out who has the most appropriate insurance product for their clients, and for insurance companies  looking for competitor intelligence.  To be candid, I also write because I believe that comparative information helps drive improvement in the product .  As an independent risk management consultant (which means I advise clients on the types of insurance they need and which insurers they should buy them from, as well as alternatives such as self insurance), improving the breed is a passion for me.

So, welcome – this is a work in progress, and I hope you will join me in moving the specialty insurance products business forward.

Note: just got my first comment on our October issue (covering Side A D&O products), so I’d better get blogging.

Snips from our Intellectual Property and Media Liability Market Survey 2012

We have completed our annual review of the insurance markets that offer coverage for Intellectual Property risks and/or Media Liability risks.  The 2 are combined into a single Report because of the significant amount of overlap in the respective coverages.

We have been writing about IP insurance since the mid-1990s, and continue to be enthused about its potential to cover valuable assets and exposures to lawsuits that are not covered elsewhere.  Media Liability was added more recently (2010) as we found fewer markets in the IP segment, but options for coverage could be found in the media products line.

The market has not been as enthusiastic about IP coverage as I am (especially patent infringement coverage), although progress is being made.  Brokers tell me that the reasons for IP coverage not being more widely purchased is a combination of:

• Lack of knowledge or understanding by the potential insureds and their insurance agents/brokers,
• Cost (whether real or perceived),
• Insureds think they already have coverage (in other policies), and
• Objections from legal counsel, who doesn’t want an insurer involved in the defense

I suspect these reasons are legitimate, and would add “too much work for too few sales” as an explanation of why more Patent Infringement isn’t bought.

Media Liability, on the other hand, is more easily understood and valued (even if the risk is less catastrophic for most), particularly considering the interest in liabilities arising out of social media.  This coverage is now available as an add-on to a wide variety of policies, including Management Liability, Tech E&O, Cyber/Privacy, and others (including BOP-type packages).

Other observations:

• We have added Liberty International to the IP coverage section
• Hiscox as well as OneBeacon are now included in the Media Liability section
• We removed XL from the Media section, as they mostly offer this coverage as an add-on to other products, such as Tech E&O

Next issue (June): Cyber/Privacy Market Survey 2012

Cyber – Can Networks Really be Defended? Implications for Cyber Insurance (and the FBI’s comments about corporate networks and security)

Today’s Wall Street Journal included an excellent piece by reporter Devlin Barrett on the vulnerability of corporate networks to cyber attacks.  Commenting specifically on the FBI’s observations, he noted the deep concern and frustration over the inability of corporations to protect their data.  Pointedly observing that ‘offense beats defense’ and ‘we are outgunned,’ the FBI says that the U.S. is losing the cyber war to the hackers.

Commenting on the FBI’s message, Devlin observed:

• Companies don’t do everything they can do, and when they suffer a breach, they call the FBI (which, by the way, currently has a caseload of 2,500 hacking investigations; I’m surprised it’s not more),
• Companies often aren’t even aware they have been hacked, and
• Corporate leadership is inadequately addressing security due to perceived cost and ease of use problems, and worse (my words) lack of comprehension

The FBI is promoting the idea that corporations need to depend less on their ability to prevent breaches and more on managing the breaches that they should assume are ongoing. I’m no technologist, but even I have been concerned for some time that the ability of organizations to defend themselves against hacker attacks is limited.  It looks like the FBI is, too.

So, what are the implications for Cyber insurance?  I have to wonder how carriers can stay ahead of this risk, when the FBI is telling us that the companies that are their insureds aren’t.  Is it possible to price this exposure adequately?

Here’s the video from the Wall Street Journal Wednesday, March 28, 2012:

http://online.wsj.com/video/fbi-cyber-chief-us-losing-war-against-hackers/A782C3CE-59F8-4A30-85BF-74E21A77488C.html

I’d Like to Know Why More Commercial Insureds Don’t Buy Patent Infringement Coverage – a poll

This puzzles me (and since I am finishing our IP and Media Liability Insurance Market Survey 2012, it’s on my mind).

Here’s the link to the poll; let’s see if we can all learn something:

http://linkd.in/GXU166

Great news! The Betterley Report to be published by IRMI

With great excitement about the prospects for the future, it is my pleasure to tell you that I have arranged for International Risk Management Institute, Inc., to become the exclusive online publisher/distributor of The Betterley Report. With a 34-year insurance industry track record, IRMI, as the company is known, is the premier publisher of risk and insurance reference services and has a sophisticated online publishing platform (IRMI Online) on which The Betterley Report now resides.

I will remain author and owner of The Betterley Report with the topics and publishing schedule to remain unchanged. IRMI is taking over the web hosting, administration, and marketing duties in connection with the publication. By including The Betterley Report in IRMI Online, the current year and archived reports are now accessible alongside the many reference products available from IRMI, and the IRMI Online search engine can be used to search the reports. Our commitment to providing independent, objective, and advertising-free information about specialty insurance products remains unchanged.
By allowing me to focus all my energies on writing great reports, this arrangement should help me make the content of The Betterley Report even better while providing a superior web interface via IRMI Online.

I anticipate that the IRMI relationship will bring us even more readers – and that will allow us to have even more (positive) influence on specialty lines insurance products.

I greatly appreciate the many subscribers of The Betterley Report. We look forward to serving their need for information on the specialty insurance products we cover in the years to come. If you have any questions or thoughts, please feel free to share them with me, either by phone (978/422-3366) or email (rbetterley@betterley.com).

Cordially,
Rick Betterley
Betterley Risk Consultants, Inc.

Snips from our Technology E&O Market Survey 2012

Today, we posted our update of our report on Technology Errors & Omissions insurance products.  This Report covers insurance that is purchased by providers of technology products and services, and includes our comparison of insurance products offered by 30 carriers.  The Report is here.

Some of the highlights from the Report:

• Rates are rising; not by a lot (5% or so), but after years of rate decline, this change is important.  The increasing premium base coupled with this rate increase means insureds will be seeing meaningful rises in their insurance costs.
• We don’t expect any onerous contraction in the market; it is healthy, and should remain so.
• However, the spate of data breaches, if considered to be the fault of service providers, has the potential to deteriorate loss ratios and, potentially, further drive up rates (and perhaps drive some carriers from the market).
• There is a great deal of disagreement between carriers as to whether  response costs for a breach of client data while within control of the insured, is covered if it is not the result of an error or omission.  We are concerned about this: we think that service providers would want to – and be expected to – cover a client’s costs of responding to the breach.  This response shouldn’t require the breach to be the result of E&O.  We predict that carriers will offer more explicit breach response coverage for breaches of client data if they don’t already.

Next issue: Intellectual Property and Media Liability Market Survey 2012 (April)

Poll results are in: thoughts and a summary on renaming Cyber Insurance

Little did I know when I created my simple LinkedIn poll on ideas for renaming Cyber Insurance that we would receive 122 votes and 27 comments.  Since it is now closed, here are the results:

The poll was limited in that it required the participants to choose from 5 names, and did not allow an answer of ‘none of the above.’  Happily, some of the comments included their own suggestion.

Summarizing the poll results:

• Information Security Insurance – 63 votes (52%)
• Network Security Insurance – 23 votes (19%)
• Privacy Insurance – 16 votes (13%)
• Data Breach Insurance – 14 (11%)
• Network Breach Insurance – 6 votes (5%)

There were several suggestions offered up; some of the more creative included:

• Complete Data Breach insurance (which tried to get at a description of all kinds of data, not just electronic, which is an important distinction; won’t fly with the insurance industry, but I like the attitude)
• Information (or Data) Wellness insurance (doing healthy things to better manage exposures)
• Information insurance (to simplify the name, similar to life insurance, auto insurance, fire insurance, etc.)

And there were some great comments, such as:

• The term Cyber focuses insureds too much on technology risk, and may encourage investments in technology solutions while ignoring risks that arise from non-tech risk
• And from one commentator, although he didn’t originally like the term ‘cyber’, he has warmed to it, because:

- It means nothing (which means we can apply the definition we want to it)
- It is catchy (true)
- Some people actually know what it generally means

What does all of this say about the product term Cyber Insurance?

I took away the following:

• There’s a lot of unease about the accuracy of the product term Cyber, which seems to emanate from the idea that this line of insurance (should) cover a lot more than cyber-related risks
• Suggestions seem to focus on Information instead of Cyber.  I like that idea, since (as noted) cyber-based data is only one source of claims.  Claims can result from loss of data that occurs not only through network breaches but also through other  channels, such as lost or stolen laptops, thumb drives, disks, tapes, and paper records.  I believe that Information includes cyber but is not restricted to cyber, so is a more accurate term.
• But, before we go about changing names (not that I have that kind of influence), cyber has been the term for some time now, and many users know what it means.  We might change it to a more current (accurate?) term, but will it really be understood any better?

I promised a free copy of The Betterley Report Cyber Insurance Market Survey 2011 and our Middle Market Purchasing Opinions on Cyber Insurance Study to the best suggestion.  Although there were many good ones I thought Erich Bublitz of ThinkRisk showed great insight when he commented:

“It is difficult naming the coverage in part because the coverage varies so much from market to market and what is a good description for one policy is not a good description for another policy. However, keeping the term Cyber is doing a disservice to the industry and to the insureds. When people hear cyber, they assume IT which often makes the IT leader assume this coverage is being bought to cover IT and they then want to make the case they could better spend the money on a firewall or IDS. Additionally, we as an industry want, and the data security industry want, clients to start thinking about enterprise risk management, rather than IT risk management. The term cyber is not helping make the transition to ERM.”

I’d like to thank the 122 participants in the poll and the many others that read the comments, even if they didn’t offer any themselves.

Snips from EPLI Market Survey 2011

Posted our 2011 EPL Insurance Market Survey 2011 last week; here are some of our observations:

• Rate adequacy and expense control continues to be the story, with carriers finally convinced of the need to obtain higher rates.  (Note: I could probably have said that better; carriers have been convinced for years – now they are executing, and the intermediaries and consultants are willing to accept it).
• 34 carrier products included – we added Zurich after some years away (Zurich/Steadfast was in our original survey of 5 carriers way back in 1993) and Arch.
• Carriers removed from the Survey this year: CoverX/First Mercury (sold to Crum & Forster) and Evanston, which hasn’t responded to information requests for 2 years running.  Evanston promises to provide information for the 2012 Survey.
• More carriers bringing out industry-specific products, especially for health care.
• Established EPLI carriers extending the product to their Business Owner Package-type products.
• Value-added Risk Management services continue to be added and improved.
• And lastly, but not surprisingly – real wage & hour coverage remains scarce.   We wish it were otherwise.