Farella’s Insurance Recovery Group lawyers regularly collaborate with and learn from different players and functions within the insurance industry. To provide more value to our readers, we have reached out to a series of insurance brokers to create the Insurance Broker Series Q&A.
How long have you been in the insurance industry?
How did you get into the insurance industry?
Following an early career in the banking industry, I joined my sister to assume ownership and management of one of Silicon Valley’s oldest and most respected independent insurance brokerage firms. As part of my mandate to evolve and grow the business, Johndrow, Leveroni and Vreeburg merged with ABD in 2011.
What trends are you seeing in the insurance industry or markets?
There are many factors in the marketplace today that present opportunity, yet also cause uncertainty and disruption. For example, altering the rules for coverage without a defined process can lead to lower business valuations and affect the future of a company.
There is a definite trend in the new shared economy that combines disruption with “old school” delivery of products and services–think of the local grocery store who had long delivered directly to nearby customers that now has to compete with the likes of Safeway or Amazon for business. The margins are very slim.
And like most consumer products and services, insurance coverages are increasingly sourced and delivered online, a trend that started with selling personal lines such as auto, home and rental policies over the Internet. The small business market has also evolved to a point where clients may never have a need or inclination to speak to an insurance professional, as they can ask and get responses to their questions online, in real time, at any time of day. The growth in client-centric applications and 24/7 “chat” give business insurance customers a much wider array of choices, and demands that we as brokers think differently in how we market, deliver, price, and upsell our services.
That said, 24/7 access and broader coverages also bring opportunities, as cyber-security threats, identity fraud, and uninsured/underinsured risks permeate the online marketplace. Not only must we ensure we vigilantly protect our clients’ personal and business information, we need to look at the security of their entire business ecosystem. As a result, we are seeing an increased demand for corporate fraud insurance, and also individual coverages for phishing, hacking, identity fraud and cyber liability protection.
In this age of cyber leaks, we are also seeing a trend toward businesses wanting to protect themselves with insurance to mitigate trade credits and political risk, patent infringements, and warranties coverages. The consolidation occurring on the carrier side of the business — Chubb and Ace, XL and Caitlin Group, Allied International and Brooklyn Underwriting Agency, etc. — make these policies more complicated, expensive and challenging for brokers to sell and clients to understand. And finally, the plethora of computerized analytical models and risk management software is encouraging companies to take on more risk, and hence purchase less insurance.
What advice are you giving to clients looking to purchase or repurchase insurance?
A very clear path we are following with clients looking to purchase or repurchase is providing them with a thorough and honest review of their specific situation as soon as we begin the business relationship. We are risk management advisors as well as insurance brokers, offering insight into our clients’ uninsured vs. noninsured exposures, as well as ways industry-wide changes may affect their costs for insuring safety in the work place, employee wellness, and other programs not typically covered by “traditional” policies.
What 2 – 3 questions do you wish your clients would ask you?
It’s a complicated business, and clients often don’t know what to ask or how the proper insurance can support their bottom line. The top three questions we always want to make sure we are addressing for each client’s particular situation are:
- What are my uninsured risks? or “What keeps you up at night?”
- Is there an insurance solution that can help us better attract and retain customers?; and
- What can we do to take control of our Workers’ Compensation costs?
How are insurance products in today’s markets changing?
Our insurance products have evolved to provide secure protection against identity theft and cyber hacking of personal information and financial assets. The “Internet of Things” has evolved to a level that allows someone to take control of your home and/or business through your digital thermostat or alarm system. Our increasing role as risk advisors helps clients adopt the right combination of insurance products to help mitigate these threats.
What is the key issue you are facing as it relates to insurance products / policies today?
There are several issues ABD monitors on a continual basis. Business interruption insurance has not kept up with the changing marketplace, and global supply chain management has grown well beyond what the industry is used to underwriting. Insured Values and Indemnity Extensions are always in flux, making them difficult to determine and cost, and potentially causing problems down the line in the claims settlement process. And as stated above, understanding the intent of Cyber Liability is an ongoing challenge, as the policies are ever-changing depending on the range and scope of cyber attacks.
What risks should clients be using insurance products to mitigate that they may not know they can use insurance for?
There are three highly underinsured products that nearly every business should consider depending on their situation: Patent/IP protection insurance in coordination with outside legal services; Credit Insurance, which helps clients to safeguard large receivables; and Cyber Liability, with an understanding of what these policies do—and do not—protect.