The company, which advises organisations of all sizes on their insurance requirements, and which has worked with a quarter companies in the FTSE 100, has recently launched a new Cyber Risk Consulting Practice. This helps clients to understand their exposure to cyber risks, and to source appropriate insurance cover for these. In a report, it has recently reviewed dozens of ‘off-the-shelf’ cyber insurance policies and identified seven significant common flaws:

1. Cover can be limited to events triggered by attacks or unauthorised activity – excluding cover for issues caused by accidental errors or omissions

2. Data breach costs can be limited – e.g. covering only costs that the business is strictly legally required to incur (as opposed to much greater costs which would be incurred in practice)

3. Systems interruption cover can be limited to only the brief period of actual network interruption, providing no cover for the more significant knock-on revenue impact in the period after IT systems are restored but the business is still disrupted

4. Cover for systems delivered by outsourced service providers (many businesses’ most significant exposure) varies significantly and is often limited or excluded

5. Exclusions for software in development or systems being rolled out are common and can be unclear or in the worst cases exclude events relating to any recently updated systems

6. Where contractors cause issues (e.g. a data breach) but the business is legally responsible, policies will sometimes not respond

7. Notification requirements are often complex and onerous

Bruce Hepburn, CEO of Mactavish said: “There are a number of new cyber insurance policies being launched, but despite a sharp increase in cyber incidents this market is very immature and in many respects untested. Perhaps some of these policies have been rushed to market by insurers eager to capitalise on the growing cyber risks facing organisations, and their desire to spend significant amounts of money to protect themselves against this.

“Very few claims have been made on these new cyber insurance policies, but my bet is that many will be disputed, or settlements will be much lower than clients expected. However, this can be avoided if organisations first understand the cyber risks they face, and then secure a bespoke policy to meet their needs.”

(Source: Mactavish)

The insurance market exists to transfer risk from those who face it to those who can afford to assume it; at a price. In a world that is developing at an ever-increasing rate, risk is also changing, and insurers must constantly adapt the products that they offer to ensure that they are protecting risks that affect the modern world. Over the next few years, it can be expected that cryptocurrency covers will become commonplace and insurers will take a leading role in developing security standards.

At a time when the risk of bank robberies and wages snatches has declined substantially and motoring has become safer, aeroplanes are less likely to crash and other traditional areas of risk are declining, insurers must look to developing areas of risk and provide cover against those risks.

Not long ago, it was necessary, if one wanted to take money from a bank, to pull a stocking over one’s head, saw off a shot gun and take enormous personal risk, as well as the risk of being caught, in an attempt to deprive a near-by bank of cash. Today, the risks for robbers are much reduced but the risk for those holding money is greater. A modern robber can seek to steal money held across the world from the safety of his bedroom. His personal risk is considerably less as is, potentially, the risk of him being caught. The risk to those holding money, however, has changed and has possibly become greater.

While insurers were responsible for many of the innovations that made banks safer, now they must lead the way in enhancing security for those who hold cryptocurrencies. Insurers are working closely with cybersecurity experts to develop standards for their policy holders, often offering discounts for adoption.

Therefore, they are looking at uses of both cryptocurrencies and blockchain in the way in which they work. Already, insurers are being required to hold cryptocurrencies in order to handle some aspects of cyber insurance, particularly when their role may be to negotiate and pay ransom demands from hackers.

While insurers were responsible for many of the innovations that made banks safer, now they must lead the way in enhancing security for those who hold cryptocurrencies.

Where protection is given against cryptocurrency theft, insurers may increasingly seek to protect themselves against currency exchange fluctuations by charging premium, holding reserves and paying claims in cryptocurrencies.

In addition, the development of InsurTech is creating an environment in which insurers must compete to reduce premium levels by increasing efficiency. Expense ratios are already too high and insurers are looking to reduce these substantially on the basis that, if they don’t, their rivals will be able to undercut them.

As part of this efficiency, insurers are exploring uses of blockchain to reduce the frictional costs associated with the provision of insurance cover and obtaining reinsurance for it and some blockchain transactions have been concluded already. Major insurers and reinsurers are investing considerable time and money into this area and, without a doubt, the results of this investment will shortly become common practice.

One idiosyncrasy of insurance makes the creation of a closed contract for blockchain insurance problematic. Every insurance and reinsurance contract requires an insurable interest and proof of loss before any claim is paid. These elements mean that an entirely closed contract, which operates without outside intervention, is difficult. At some stage in the process, an adjustment of the claim will be required and an external element will have to be injected into the process.

That said, steps are afoot, both within insurers and regulators, to look at these issues and determine whether changes to the underlying principles may be effected, which would lift this potential road block.

To survive, insurers must embrace modern risk and modern working practices. The rate of change in the insurance industry is rapid and accelerating and within the next five years, we can expect considerable developments - both in terms of the risks that are assumed and the way in which risks are assumed.

Website: https://mccarthydenning.com/

Amidst a large swathe of planned job cuts at Lloyds, at the beginning of November the bank announced that there was a silver lining - a £3 billion investment programme that will see the country’s biggest high-street lender radically transform its digital strategy. While 6,000 existing roles are being cut from a broad range of areas, 8,000 are being created to focus on areas of digital expansion, including in the group transformation unit. And, the CEO of Tectrade Alex Fagioli points out, it’s about time for Lloyds, as it begins to play catch up with an industry that has quietly been revolutionised by high-street banks and start-ups that have gone all-in on digital banking.

Digital banking provides a great deal of benefits to administrators and alike. Customers are given a more flexible way of banking, accessing their accounts and transferring their money without relying on bank hours. Managers have an unprecedented insight into the activity of branches and can offer services to their customers which they had previously been incapable of. However, the challenges and risks that come with digital transformation have led traditionally large financial institutions like Lloyds to poorly implementing such practices to the detriment of all involved.

In April, a routine systems upgrade at TSB went awry and left 1.9 million customers locked out of their accounts for up to a month. Similarly on Friday 1 June, 5.2 million transactions using Visa failed across Europe as a result of one single faulty switch in one of Visa’s data centres. This isn’t just a continental issue; Atlanta-based Sun Trust – a bank with 1,400 bank branches and 2,160 – experienced a significant outage to its online and mobile banking platforms in September due to a botched upgrade. In all of these cases, the outages weren’t the result of cyberattack or weather-related problems. Instead, these outages came as a result of seemingly insignificant technical factors that had been overlooked – and Lloyds would be wise to heed these cautionary tales.

The challenges and risks that come with digital transformation have led traditionally large financial institutions like Lloyds to poorly implementing such practices to the detriment of all involved.

In the first two instances, cause of the outages are very clear– and they were entirely preventable. TSB rushed into an upgrade by hastily initiating the update across its entire system. For a technical reason that we will likely never know, the update tanked the entire bank and left it at a standstill while it tried to pick up the pieces. Even when it managed to get everything back in place, TSB is now permanently scarred by the event, with its reputation still reeling. The prevention for this would have been a gradual rollout, as opposed to a sweeping installation. If the upgrade was initially piloted with non-essential systems, then the bugs would likely have been spotted early, with little fuss and no media spotlight.

Likewise, the Visa incident came as a result of a single faulty switch and that betrays a lack of understanding of its own systems. It is shocking how few companies have carried out any form of disaster recovery testing on their infrastructure. Administrators are incapable of having a full understanding of the systems they are responsible for without testing them in a controlled and simulated environment. With a controlled disaster test, that faulty switch would have been highlighted and those 5.2 million transactions would have been completed. It’s similar to a car – the reason that MOTs are essential is so that any issues can be highlighted well ahead of them having a serious effect on the vehicle’s performance. Banks must carry out a cyber MOT in order to keep their systems in check and to give IT teams a full working knowledge of any potential issues.

But this is all in the case of preventable issues, and in the modern day accepted wisdom is not if, it’s when outages will happen.

Thus far we’ve only addressed routine operations, but cyberattack is of course an omnipresent threat. Ransomware has spent the past couple of years as the ‘big bad’ in cybercrime, and it is an even bigger threat to the financial sector. Over the past 12 months, the financial services and insurance sector was attacked by ransomware more than any other industry, with the number of cyberattacks against financial services companies in particular, rising by more than 80%.  If a bank were to be hit by a ransomware attack, all online systems for banking and insurance transactions will need to be taken offline, rendering that organisation unable to operate. According to a report from Osterman Research, there is a 50% chance of employees in this industry suffering productivity loss, a 30% chance that the financial and insurance services will shut down temporarily, and a 20% chance of revenue loss and adverse effect on customer perception. In cases of ransomware, data recovery can be very difficult as there is a large amount of customer information stored in a variety of disparate systems. As such, many organisations may feel they have no choice but to pay the fee demanded of them to regain access to the data.

Over the past 12 months, the financial services and insurance sector was attacked by ransomware more than any other industry, with the number of cyberattacks against financial services companies in particular, rising by more than 80%.

Equally as unpreventable are environmental factors. Areas like the Southern States of the USA are frequently dominated by hurricanes and tropical storms which can cause large disruptions to everything from schools to banks. Many of these buildings have to be built with this in mind, and network operations should be created with the same mindset. In the UK, by contrast, we don’t have to deal with such extreme weather conditions, but environmental considerations must be made with the potential for freak accidents. A burst pipe in a shared building or road workers drilling through electrical or network cabling, for example, could see a bank offline for an indeterminate period of time outside of its control. One example of this in action was with National Australia Bank, which suffered a power outage that downed ATMs, Eftpos and online banking across the country for five hours in May.

In all of these situations where outages can occur, banks must make sure they have the capacity to get their systems back online and fast. The best way to do this is by adopting a zero-day approach to architecture. Zero-day architecture won’t prevent an outage, but it will mitigate the effects. It allows organisations to minimise downtime and recover from backups without having to worry about lost data.

A zero-day recovery architecture is a service that enables administrators to quickly bring work code or data into operation in the event of any outages, without having to worry about whether the workload is still compromised. An evolution of the 3-2-1 backup rule (three copies of your data stored on two different media and one backup kept offsite), zero-day recovery enables an IT department to partner with the cyber team and create a set of policies which define the architecture for what they want to do with data backups being stored offsite, normally in the cloud. This policy assigns an appropriate storage cost and therefore recovery time to each workload according to its strategic value to the business. It could, for example, mean that a particular workload needs to be brought back into the system within 20 minutes while another workload can wait a couple of days.

Without learning the lessons of the high-profile outages that have come before it from banks that have undergone their own transformations, Lloyds is doomed to repeat the same mistakes.

As it begins its massive investment in digital transformation, Lloyds could very easily sink its budget into exciting features that promise to improve the lives of customers and employees. However, without learning the lessons of the high-profile outages that have come before it from banks that have undergone their own transformations, Lloyds is doomed to repeat the same mistakes. You can promise all the features in the world, but without a solid foundation the bank will essentially be a house of cards, ready to collapse at the slightest sign of danger. All banks, regardless of size, must prioritise the minimisation of downtime by having common sense policies in patch management, full knowledge of a system gained through disaster testing and a recovery strategy in place that enables it to get back online at speed.

https://www.tectrade.com

John Kissane is the NY Area President and a Health & Welfare practice leader at Arthur J. Gallagher & Co. - one of the world’s largest insurance brokerage, risk management and consulting services firms with operations in 34 countries and client-service capabilities in more than 150 countries. Founded in 1927 by its namesake, Gallagher fosters a differentiated culture that reflects the company’s roots as a family business and the focus on delivering top-tier capabilities to clients. Below, John speaks to Finance Monthly about the employee benefits services that the company offers and tells us how employers can succeed in an increasingly difficult labor market.

Tell us more about the employee benefits services that Gallagher provides?

At Gallagher, we work hard to understand our clients’ industries, the markets in which they operate, and the unique constraints and opportunities that can affect their success. Rising healthcare costs, workforce issues, hiring challenges, legal risks, competitive positioning, financial strategy, compliance requirements—all of these factors impact employers’ ability to reach their full potential.

We are driven by a desire to help our clients - it’s something that all insurance companies strive for; better outcomes from better performance. That’s why we’ve developed Gallagher Better Works℠, our holistic approach to employee and organisational wellbeing. A better workplace attracts, engages and retains top talent at the right cost. This approach centres on strategic investments in employees’ health, financial wellbeing and career growth. It utilises data to gather insights and apply the best practices that promote productivity and growth.

Through the delivery of Gallagher's comprehensive approach to benefits, compensation, retirement, employee communications and workplace culture, our clients can optimise their annual talent investment, mitigate organisational risk and maximise profitability. Best of all, they gain a competitive advantage as a workplace that simply works better.

What trends are you seeing in the current health insurance and benefits landscape and how do you intend to keep up with these?

Healthcare costs continue to rise and we have seen an increase in creative funding mechanisms focused on bending the trend. Reference-based pricing, gap plans and split-funding products are a few examples. The need to control the cost of care and manage the health risk of employee populations has led to an explosion in solutions over the years. Gallagher is a trusted adviser to our clients. As such, our focus is on solving their challenges and recommending solutions that make sense for their specific organisational goals and objectives. This allows us to be entrepreneurial, and through our global network of professionals, we are connected to a vast array of vendors that can help meet our client’s needs.

What is the biggest challenge that employers face today? What would be your solution?

Attracting and retaining employees is a huge challenge, made more urgent due to the strong economy. Cultural and technological dynamics add to this – younger employees resist the idea of building a long career at one company, while at the same time they require proper skills and training to be productive while there.

How can employers succeed in an increasingly difficult labor market? You start by building a better workplace – one that truly engages key talent. Organisations must align their people strategy with their business goals. By focusing on the full spectrum of organisational wellbeing – and supporting their employees’ physical and emotional health, talents, financial health and career growth ‒ employers are able to realise a better return on their benefits investment.

What do you find businesses commonly fail to consider when it comes to employee benefits?

Far too often, companies fail to take a holistic, long-term approach to their benefits and compensation programs. In the struggle with managing healthcare costs, the “just get through the next renewal” mindset still exists. A recent survey of employers shows that 68% consider benefits and compensation cost management a top priority, yet 64% don’t have an effective strategy in place to achieve that goal. With multiple priorities, competing for employers’ attention, many turn to familiar tactics that no longer work.

A multi-year strategy that encompasses the entire total reward proposition and leverages insights, data analytics and best-in-class tools can lead to reductions in costs without sacrificing the value of the benefits offered to employees and their families.

New research from MoneySuperMarket reveals that a third of Brits (33%) currently use a smart device to monitor their health, capturing data that could help identify health issues and affect the way life insurance premiums are calculated.

With the number of connected wearable devices set to rise further in 2019,  MoneySuperMarket research reveals that millennials are most likely to use werable tech to monitor their health, with just under a third of 18-35 year olds using their mobile phones alone. As the trend for fitness tech continues, some insurance providers such as Vitality are already utilising the data gathered – a move which would be favoured by millennials, with three in four (61%) stating they would be comfortable with sharing their data with a life insurance provider.

The research also shows that half (50%) of those surveyed have both a life insurance policy and a health monitoring device. In fact, when looking at the way future life insurance premiums are calculated, over one in 10 Brits (12%) would happily take out a life insurance policy based on the data received solely from a wearable health monitor. For example, Apple watches now include ECG montiors[1]. Those in the West Midlands (15%) and London (12%) are most likely to opt in for this type of policy, with those in the South West being the least likely (five%). However, despite advances in technology, the majority of Brits (65%) would still prefer to take out a life insurance policy via the traditional methods of questionnaires and forms.

An individual’s lifestyle can also play a big part in how much they pay for life insurance. Smokers, for instance, can pay up to 50% more than a non-smoker for their policy[2]. Wearable tech could reduce premiums for those who demonstrate a healthier lifestyle and also provide rewards and incentives for healthy behaviour, such as reaching a specific step count.

Consumer affairs expert at MoneySuperMarket, commented: “Wearables are beginning to have a significant impact on the life insurance market. They build on the well-established premise that a person’s lifestyle and habits play a big role in determining how much they will pay for cover. The logic is simple: use a device to demonstrate your healthy lifestyle and get lower premiums in return.

“Anything that increases the uptake of life insurance has to be a good thing - it’s vital financial protection for family members in the event of a person’s early death. Understandably, many of us shy away from something that confirms our own mortality, but it is crucially important to have cover in place so that bereaved dependants at least have financial resources to call upon.”

(Source: Money Supermarket)

We speak with thought leader Andrew Morris - a wealth transfer expert who’s dedicated his career to helping clients plan, grow and protect their assets. For over 25 years now, he’s been passionate about helping families with setting up charitable remainder trusts and assisting families with special needs to secure their future through the use of insurance. As a Social Security Analysts, Andrew helps clients maximise and understand their Social Security benefits to optimise their retirement planning.

What trends are you seeing in the current insurance landscape and how do you intend to keep up with these?

The current trend I see in the industry is the tremendous need for an alternative form of guaranteed lifetime income in addition to social security for the aging baby boomer population. Since many major corporations no longer offer a defined benefit type pension plan, many retirees are looking for ways to have a guaranteed lifetime income stream which can only be offered through insurance companies and their living income benefit riders. The recent DOL (Dept. of Labor) legislation regarding the fiduciary rule has made the return of guaranteed lifetime benefit riders popular again, since many companies have now lowered fees and have simplified the benefits to adhere to the new rules.

Another trend that I see in the insurance industry is the need to make sure that older whole life policies are upgraded to make sure that the aging 76 million baby boomer population has adequate life insurance coverage. With the increase in American retirees living longer and the standard life expectancy numbers increasing from age 78 to age 85, life insurance mortality tables had to be updated a few years ago to reflect these longer life expectancy rates. This increase in the mortality tables has left many old policies old and ‘underinsured’. Clients can now enjoy receiving larger coverage increased face values for old permanent life policies for a lower cost or the same amount due to the recent change in mortality tables. The only way I can keep up with the amount of new service for these older policies and aging clients is through the use of technology.

What is the biggest challenge the US insurance sector faces today? What would be your solution?

The biggest challenge the insurance industry faces today is technology and the ability for insurance companies that are considered old and antiquated to keep up by updating their systems for servicing and cybersecurity. As a result, I anticipate that there will be further consolidation within the insurance industry over the next couple of years. With the baby boomer population turning 65 at a daily rate of 10,000 per day, it is an enormous number to keep up with. So, the companies that are not up to speed technology wise will fall by the waste side and will be acquired by larger insurance companies.

The only solution for companies that are currently behind in their technology would be to establish a new strategic alliance or joint venture, where they partner up with a third-party vendor and potentially outsource the work. Very few insurers have all the resources they need to become truly cutting edge. Technological advances are changing business and operating models, which is challenging to an industry that is accustomed to slow evolution.

What do you find businesses commonly fail to consider when it comes to insurance?

Businesses commonly fail to consider the fact that that they are ‘underinsured’ in relation to price. Many businesses will value good price as opposed to the proper amount of insurance for their business. Having a good insurance adviser or consultant can help business owners who are underinsuring themselves to start saving them money. Insurance is one of the most important needs for a small business, yet it is something that many owners skimp on. People don’t reevaluate their insurance needs as their companies grow and numerous small businesses don’t have business interruption insurance in addition to property and casualty coverage, even though it is something that can put their companies and livelihoods at risk. I think that it is vital for company owners to consider and be mindful of the damaging impact that an emergency incident can have if your business is not properly insured.

For more insights into American insurance, Finance Monthly interviewed Joe Montgomery, the Founder and Managing Director - Investments of The Optimal Service Group of Wells Fargo Advisors.

Since you founded The Optimal Service Group in 1975, what are the three biggest observations you’ve made in regard to the US insurance sector?

Number one is going to be the environment they're working in. Since interest rates broke in 1981, the decline of interest rates has taken away the ease of making money in fixed income, which predominantly composes many insurance companies’ investment portfolios. Subsequently, the decline has continued to make a case for the diversification and the exploration of other asset classes to compensate for the decline in interest rates. Thirdly, it has highlighted the importance of developing the expertise of those who manage their investments such that prior to 1981, we would argue, would have been important but now is critical to the success of these companies.

What are the biggest trends you follow today and how do these work in growing relationships with your clients?

As a follow on from the second point we discussed, the expansion of the use of asset classes in order to be able to get an adequate investment return, whatever that may be for that particular company, makes the customisation of the investment process for the insurance company that much more important. Our constant motive to innovate and be ahead of the curve carries over to our diligence in working with our Investment Institute to implement new or broadly underutilised asset classes into our clients’ portfolios.

What do you find are the considerations your clients commonly fail to make when it comes to insurance? How do you help prioritise the important considerations?

When clients need to drive a business with sales, they normally have a focus on the front end of the business i.e. the bringing in new business, competing and pricing. Because that goes through cycles on the underwriting side, the investment side tends to take a little bit of a back seat. We help prioritise these considerations by functioning as an investment consultant to those companies. By delegating us to this role, we are helping make sure the investment policy is written so that the management of the assets can be done on a long-term basis, while not having an overreaction by management regarding changes to the investments each time there is a shock in the underwriting cycle.

What are the biggest obstacles you run into in doing so?

The biggest obstacle for most people in anything is running out of time. They don't have enough time in their day, so they set a priority; frequently because things haven't been broken or they became accustomed to doing well when interest rates were declining. The investment side then does not really become a priority for some companies. Unfortunately, they then realise that a focus on their investments should have taken a higher ranking in their priorities when it’s too late.

Within the institutional consulting sphere, what would you say are the top three insurance challenges and how do you find solutions to these alongside your clients?

It's an interesting combination of time and cycles where people should have enough time to pay attention to the investment side by getting the policies in place before there is a crisis situation. Additionally, because of the decline in interest rates, as mentioned earlier, the constant search for yield is more prevalent now than ever. And because companies had to move away from just the traditional high quality bonds they used, they are now in uncharted waters which has resulted in a learning curve. The questions many insurance companies are asking themselves now are ‘How should we develop the investment expertise necessary to allocate appropriately in today’s environment’ and ‘Should we develop in-house or hire a team externally?’.

Another challenge we see is navigating how portfolios are structured within the highly regulated and restrictive insurance industry. We are able to utilise our knowledge and 28 years of experience in navigating these highly regulated industries to mold a strategic asset allocation that is built with enterprise level objectives and risk as the backdrop.

You are charter member of both the Barron’s Top Institutional Consulting teams and the Top 100 Financial Advisors and have remained on each list. How do you feel such accolades incite confidence in your clients?

All accolades and any honours are appreciated and humbling. As far as our clients, we think the accolades hopefully provide some comfort along with the research they should do before working with us or anyone in this industry. Furthermore, we believe they provide some confidence that our experience and background can add value to our clients’ businesses.

How do you continue to uphold this reputation today?

That's basically a combination of the strength, experience, background and training of our team, as well as our constant due diligence and professional development. One of the big things we are able to do for our clients in terms of adding value to their portfolios is spending the time to look for resources, developing them and then helping determine the best way to apply them.

For the past 16 years, Melanie White Terry has been working through her financial advisory firm, Harbor Financial Group. Her clients are primarily busy and highly successful professionals or entrepreneurs that have comfortably broken the six-figure barrier and want to secure their legacy.

Harbor Financial Group helps clients crystalise their objectives and take the time to understand what they want to accomplish from a business and personal perspective; giving them piece of mind.

What are the typical challenges that clients approach you with in relation to the management of their finances?

Most people don’t have the time, knowledge or inclination to implement all of the ideas and opportunities they want to pursue. Many have done some good planning. They have existing relationships with very good advisers. They have spent a lot of time talking about these things but, for some reason, the job never gets done. We will never undo any of the good work that they may already have in place, we tend to focus on their areas of vulnerability. We take responsibility for seeing their plan to fruition.

We typically explore some or all of the following seven areas:

• Family income and security
• Asset Shifting
• Asset Distribution
• Estate Equalisation
• Business Succession
• Asset Protection and Estate Depletion
• Charitable opportunities

What are the most important aspects that need to be ironed out in order to achieve satisfactory result and a well-organised retirement plan for your clients?

Understanding my clients’ objectives is paramount. I want to know how they feel about the areas they would like for us to consider: security for themselves and their spouse, estate distribution, general terms of their will or plan, succession plan, key employees, and tax issues.

It is also important to gather information about their family, business, real estate, liquid assets, qualified plans, life, disability and long-term care insurance, liabilities, charitable giving, and advisers.

Identifying issues and gaps in their planning and how they feel about them is critical.

Lastly, our clients should have enough discretionary income and/or sufficient assets to be able to either execute or at least begin the plan and the willingness to learn about what might be non-traditional planning opportunities.

How do you assist clients with finding out if they are compliant with federal requirements applicable to retirement? What are the key issues that they face in relation to compliance? 

We collect statements to support all of the information that we gather and keep up with the changing laws and regulations by taking applicable continuing education courses and leaning on the consultants on our team that have a wealth of expertise in tax law as attorneys and CPAs.

Additionally, we do a proper fact-finding analysis to determine their time horizon, investment risk tolerance and ensure that they are in plans for which they qualify, based upon their income, employer plan offerings, business structure, employee information etc.

How can your clients ensure that as much of their estate goes to their family on their death? 

Insurance is one of the foundations in a comprehensive planning strategy. We assess the amount and type of coverage they have already relative to their objectives and determine if there is a gap to fill.

We tend to recommend that our clients have enough life insurance to replace their income and pay off liabilities to creditors and Uncle Sam. When appropriate, we may recommend establishing appropriate trust documents.

Disability income insurance is recommended to protect what could be their greatest asset; their ability to earn an income.

Long-term care planning is recommended to protect assets because most of our clients did not budget for an additional $7,000-10,000 per month of expenses to self -insure above their retirement expenses.

Does Harbor Financial Group offer any solutions in respect of maintaining and growing wealth for future generations of the same family?

We make it a common practice to reach out to beneficiaries and other family members of our clients to address their planning needs as well.

Contact details:

9861 Broken Land Parkway, #150

Columbia, MD 21046

Telephone: 410-740-4719

Website: harborfinancialgrp.com

Email: mwhite@ft.newyorklife.com

Austin Newkirk began his insurance career at a local agency in his hometown of Toccoa, GA and later on transitioned to Country Financial for an expansion of opportunities. Currently a sales leader for the firm’s local office in Toccoa, his role involves finding new ways to market Country Financial’s products and recruiting new businesses and individuals. Below Austin tells us about his passion for insurance and how this passion changed his life!

What are the typical insurance matters that you assist clients with?

Each day I assist our customers with typical insurance matters such as servicing current policies and making sure that they are taken care of properly. I process payments daily, work on claims and make any policy changes that a client may request - these are just a few of the many things I do for my customers.

What drew you to this field?

Insurance was not my first choice as a career. I am an extrovert and I love to socialise. As I grew older and began college, I started thinking about different career paths that interested me. At that time I had no idea what I wanted to do. While in college, I served as a parts sales manager at AutoZone. I loved the job and the socialising, but there was no opportunity for advancement within that company. I started reading online and the idea about a career in insurance hit me like lightening! I love the customer service side of this job and being able to help people with something that truly makes a difference in their lives is a phenomenal feeling.

What are some of the complexities of working within insurance?

Insurance is very complex and helping people understand it can be just as challenging. When working within insurance, there are so many different aspects to focus upon, but at the same time, so many resources to help you learn. Insurance is constantly changing and there is always something new to learn.

What are the challenges that you’ve been facing recently in relation to changes in what customers expect in terms of insurance products and services?

In the insurance industry, one challenge you will always face in relation to changes in what customers expect are rates – they are constantly fluctuating. It is a battle that all agencies fight. It is especially difficult when a long-term customer with a clean record comes in and we have to tell them that the state has raised the rates. At this point, we, as professionals, have to show these customers value in what we do to keep their business.

Technology and systems are always changing and this can cause customers to be uneasy toward any change - especially when trying to show customers new products and services. Sometimes change must happen due to ever-changing factors in the insurance business and customers’ lives. With these changes, we must prepare to assist our customers with any new updates that are happening frequently. Programs are added and removed, making everything change which, in turn, can upset our customers and sometimes, the agent too. Due to mandated insurance laws, every company and its agents should always be prepared to adapt to new changes in the insurance industry.

What do you hope to accomplish in the future?

Working in insurance has changed my life. My goal is to open my own office in just a few short years and run a successful insurance business of my own. I’m going to continue to love the career path I have chosen and continue to help service my clients to the best of my abilities.

I encourage any person who’s not sure what career path to take to look into the insurance industry. It is a sector that will always be around and there is always opportunity for advancement. The satisfaction of helping a person identify their needs and providing them with a solutions is very satisfying and it makes me feel like I have helped someone in need.

To hear about Environmental Impairment Liability Insurance, Finance Monthly reached out to one of the US’ leading experts in the field - Susan K. Neuman, Partner at the Hickey Smith law firm who provides counselling and coverage advice to parties to contaminated property transactions and to environmental insurers.

As one of the US’ leading experts on environmental insurance for owners, buyers and developers of contaminated properties, what are the complexities of resolving disputes in relation to Environmental Impairment Liability (EIL) Insurance?

There are a number of complexities in EIL coverage. The term EIL refers to a policy which covers liabilities caused by pollution conditions, new or pre-existing/historical, at a specific site; a more current term is Site Pollution Liability (SPL). Underwriting EIL/SPL policies has a highly technical aspect. For example, underground storage tank (UST) policies are underwritten, based on the age, construction, contents, and leak detection method of the tanks as required by federal and state regulations. Another complexity is the modular structure of current SPL policies and their coverage for very specific risks rather than public tort liability covered by CGL policies. Also, unlike CGL policies, they are non-standardised and coverage turns on whether the language is unambiguous. Unlike earlier versions of the policy, the current SPL policy was designed to facilitate contaminated property transactions, and to do this successfully, legal coverage expertise is required. In 1997, there were a handful of brokers that had this sort of expertise. However, as the product became commoditised, brokers without it placed policies that were poorly drafted and resulted in claims and losses.

What have been any recent trends in the EIL insurance field in the US?

Recent trends in environmental insurance include several mergers since 2014. ACE bought Chubb and kept the Chubb name, XL bought Catlin to become XL Catlin, Ironshore merged with Liberty (the new name is still not clear).

Then there is AIG, which was the major SPL provider back in 2015. The company suddenly cancelled its site pollution program and non-renewed almost $1 billion in premium. It still writes blended casualty and pollution products, which is a growing market generally. Elsewhere, brownfields insurance for redevelopments and M&As continue to pose difficulties for underwriters who want protection from long-term potential moral hazards associated with known conditions and voluntary testing. A key driver for environmental insurance business is contractual obligations. Emerging issues include renewable energy, including coverage for solar redevelopment of brownfields, and coverage for post-remedial institutional and engineering controls liability that can address the moral hazards concern.

Can you tell our readers about the recent ‘unavailability of EIL insurance’ in the US?

The ‘Unavailability of EIL Insurance’ is another complexity in the field. The availability rule, set forth in the landmark Owens Illinois 1994 decision, requires that, under the pro rata allocation method, if a policyholder decides not to buy available insurance for a particular risk,  it must cover a portion of the costs associated with claims arising during that period. If, however, there is no insurance available for purchase in certain years, the unavailability rule applies and the policyholder doesn’t have to pay a share of costs attributed to those years. This rule makes sense in the context of thousands of separate asbestos products liability claims and the permanent unavailability of asbestos products liability coverage after 1985, when asbestos was excluded from all CGL policies. It makes no sense at all in the context of one regulatory claim for cleanup costs arising from one very long occurrence (pollution condition) at a manufactured gas plant (MGP) site. In this context, the unavailability of EIL insurance is a fallacy in every sense.

In the recent Keyspan v. Munich Re decision, the NY Court of Appeals affirmed the 1^st Dept. Appellate Division decision rejecting the unavailability rule and held that Keyspan, not Century, had to bear the risk for loss associated with periods, outside of Century’s policy periods, when insurance was unavailable. However, under the leading 2nd Circuit Court of Appeals Olin v. INA decision, coverage for these periods was available from policies Keyspan could have purchased between 1980 and 1985. The policies were claims made, and they covered pre-existing conditions without a retroactive date. In addition, they only had a single claim made trigger of coverage with a reporting tail of indefinite length, so a claim not made until 1995 would be covered. In addition, in 1995 and a few years thereafter, Keyspan could have purchased a broadly worded and loosely underwritten cleanup cost cap (CCC) policy that would have applied to investigation as well as remediation costs. This information was undoubtedly included in an expert’s report which Keyspan received, but failed to submit with the original motion. It subsequently did everything possible to suppress these facts. This case is the best example of how the unavailability rule acts as a disincentive to the purchase of insurance and management of environmental risk.

Website: http://www.hickeysmith.com/

Finance Monthlyhad the pleasure to speak with Tracy Alan Saxe, President and CEO of Saxe Doernberger and Vita P.C. (SDV) - an insurance coverage practice firm that represents policyholders in insurance coverage matters. With offices in Connecticut, Florida and California, the firm advocates across the nation to resolve disputes with insurers on all lines of coverage, including general and professional liability, commercial property, business interruption, directors and officers, and pollution coverage. Below, Tracy tells us more about it.

Your career began as a general litigator – can you tell us about that experience? What drew you to the insurance field?

I began my career at a small general practice firm of less than 20 lawyers, in Stamford, Connecticut. There, I tried many cases of all types – both civil and criminal. Beginning in the 1980’s, I worked in insurance coverage doing asbestos insurance coverage work. I began working in this area after a friend of mine from law school who was in-house counsel at Combustion Engineering (later owned by ABB) asked me if I was interested in doing insurance coverage work. At that time, they worked on a lot of asbestos claims and insurance coverage disputes. Initially, I thought that it sounded boring, but once I began doing insurance coverage work, I realised that I loved the intellectual challenge that came with it and started turning away other types of work. By the 1990s, I was doing insurance coverage work to the exclusion of all else. I found insurance coverage to be the most interesting and exciting type of work that I’ve had the chance to do – the exact opposite of what I thought it would be!

It’s been three decades since that day and I haven’t looked back! I find it very exciting to work in this field, on behalf of policyholders. I take great pride in the fact that we level the playing field for policyholders who are up against insurance companies whose sole focus is to use their vast resources to find the areas of a policy that reduce coverage. It’s much more rewarding to be fighting for David than Goliath.

By 1994, I was Co-counsel on a major coverage matter with Anderson Kill and after a couple of years, they asked me to open their Connecticut office for them - something that I happily did. After about three years, it became clear to me that there was a better way to service our clients. This area of law benefits from an efficient, creative and nimble organisation that a large firm typically does not provide. In 1996, We changed the name of the firm, but everything else stayed the same. We started with three lawyers, and today we have 28 lawyers in three offices nationwide.

Over the years, we’ve seen considerable organic growth and we continue to expand. The other very exciting thing about doing insurance coverage work is dealing with liability policies. A liability policy is when Person A is bringing a suit against Person B and Person B is then seeking insurance coverage for that suit. These are called third-party liability policies that are supposed to provide for the expense of Person B’s defense fees and to pay for any settlement or judgment against them. In those matters, we get a bird’s-eye view of the strategic decisions about what goes on in the suit against Person B, which is defended by a different set of lawyers. Our goal is to get the insurer to pay the lawyers’ fees, as well as our client’s settlement. This dynamic gives us the opportunity to work with lawyers all over the country who are very good at their specific field, but don’t do insurance coverage work, adding to our strategic ability.

How can potential insurance disputes be minimized in relation to coverage, so that litigation can be avoided?

There are many ways to do this. Thoughtful strategies on the purchasing side of insurance are important. When it comes to commercial property coverage, we make sure we’ve figured out what the client’s business interruption valuations are. In other words, what type of losses they are likely to sustain because of a business interruption of any sort, making sure they get proper coverage for that. Then, our lawyers look at the actual policy language, with the claim scenario in mind, to make sure that the endorsements give the client the coverage that they expect. In addition, we review your contractual relationships with vendors, customers, sub-contractors, sub-consultants, landlords, tenants, or any variety of contractual relationships, to make sure they have properly specified the insurance coverage that is required of them and to what extent they are required to be an additional insured, to what extent they expect indemnification and the opposite. This is to say to what extent they are providing additional insured coverage to other parties and to what extent they indemnify them, making sure that any indemnity they give or get is actually covered by the respective insurance policy.

On the other side of a litigation avoidance is for our lawyers to come in before bringing any sort of suit against an insurance company, making a thorough examination of where the coverage is and making a thorough rebuttal of denial letters. We work with our clients’ insurance broker to approach the resolution of the matter, in a business-like environment rather than a litigation setting. We try to help them understand the facts, laws and policies that apply and present this in a cohesive fashion so they can put their best foot forward.

What strategies do you employ to successfully defend against a coverage issue?

The most important thing is a detailed understanding of all the key issues and the policy, what laws might apply in which state and where the suit might be brought. Most of the cases that we work on are very large and the way we look at each case is very strategic. When compared to typical litigation, our work is more like three- or four-dimensional chess. For instance, it is very common that the insurance policy we are fighting with the insurance company about has ‘no choice of venue’ or ‘choice of law’ provisions. Our clients are almost uniformly national or global entities which means that the lawsuit can take place anywhere in the country or in other parts of the world as well. The law that’s going to apply could be determined differently in each jurisdiction where the suit might be brought, thus, what we often end up doing is looking at anywhere from four to seven issues that might decide the outcome of the case, before we even decide whether a suit should be brought. We look at each issue under the various different laws that might apply in the specific jurisdiction and then make a strategic determination of where a suit should be brought - if it needs to be brought.

We also need to be fully prepared with the facts that support our position.

At SDV, we find that the quickest settlements come when we are fully prepared to aggressively litigate a case. If not handled aggressively or if you don’t have a comprehensive strategy to start with, cases tend to drag on and become very, very expensive. This is where SDV’s experience as trial attorneys adds great value to our clients. In this area of law, it is critical for clients to have a firm that has experienced general litigators who have tried cases to verdict representing them from Day One. Many cases in this area of law are multi-dimensional, and they can move through a number of stages in litigation. A client needs to know that the firm representing them has attorneys that can build a successful case with trial in mind.

How is mediation used to resolve disputes within the sector?

We find that many cases are helped by mediation and if it’s used at the right time, an early resolution is possible. That’s because many firms do not appreciate that the mediation process is not always a zero-sum game. If used strategically and timed correctly, mediation can help both sides understand their cases first, which in turn, helps both sides begin to see the opportunities where resolution is possible. Mediation is very common in the sector - probably almost every case that we work on involves mediation. Some cases could even require more than one mediation (with a third-party mediator) or a court- side mediation conducted by a magistrate or a judge. It has also become a common practice for us to go through these dispute resolution processes without any suit pending. We often have face-to-face negotiations and include mediation as part of this process.

It is critical for clients to have a firm that utilises this alternative dispute resolution process in a strategic and effective way. Once again, it is helpful to our clients that our partners came to this area of law with decades of experience resolving civil cases through mediation.

What motivates you about working within the field? What are your goals for the future?

I find it very exciting to work in this field, on behalf of policyholders. Typically, my corporate clients are busy working on other things and insurance is not their day-in/day-out business, and neither is litigation. Insurance companies on the other hand are solely focused on insurance, so they are naturally better prepared for this battle than the policyholders. I take great pride in the fact that we level the playing field by coming in with the type of expertise that matches or exceeds the insurance companies’ own expertise on insurance coverage disputes.

Our goals for the future is to continue to build our high-quality clientele and reputation for doing high-level, complex insurance coverage work on behalf of policyholders.

Contact

Saxe Doernberger & Vita, P.C.

Website: http://www.sdvlaw.com/

Email: coverage@sdvlaw.com

Phone: 203-287-2100

This month, Finance Monthly caught up with Aubrey Mills – a mother, Ms. California Woman of Achievement 2018 and a Business Development Leader at World Financial Group. Below, Aubrey tells us about her passion for educating families, individuals and businesses in ways to make money, save money, and stay out of debt. 

What does your daily work consist of and what do you believe you bring to your clients?

Most of my time is spent building relationships with clients and associates. I don’t want to just hire people and have them work for me; I want them to build careers and lives they are proud of. I want to get to know my clients so that I can best guide them on financial decisions. Learning how people work or what makes us think differently was important, not just so I could be a better saleswoman, but so I could better serve my clients. I studied Human Nature and Communication, so I could better understand people. I’m currently learning to better understand other cultures because I believe that everyone deserves the opportunity to be educated financially. I teach free classes to the community and I want to be as effective as possible.

What attracted you to the insurance field and what drives you to push further the boundaries of your work?

I never wanted to work in finance. I came from a low-middle income family and had always assumed that finance people were older men. I once heard a woman speak about finances and I remember two things about what she said: she was raised by a single mom (I’m a single mom) and how hard it was for her growing up that way, and the Rule of 72. It was one of those awakening moments. I didn’t want my children to feel deprived growing up. The Rule of 72, or compound interest, showed me how little I needed to save for retirement and my children’s college fund and how fast my debt was doubling. I have had friends whose spouses didn’t have life insurance and they suddenly passed away. I couldn’t stand to just sit by and continue to watch that happen. Money doesn’t bring a spouse back, but it allows the family to properly grieve.

You commonly work with military families; what challenges are presented for these clients, particularly in the insurance sphere, and how do you help them overcome these?

My biggest obstacle is conveying to them that the insurance they have will not necessarily remain the same when they exit the military. Most of our service members are young and they get a basic ‘money talk’ when they enter, but this is not sufficient. I believe strongly in doing whatever we can for our service members, not just to equip them for keeping us safe and free, but to have a rich and full life after they leave the military. I don’t feel like we are doing enough - not even close. Many of our service members join right out of high school and they now have an income they didn’t have before, so of course they want to spend it. I know when I was aged 18-20, all I did was work, so I can then shop. But this wouldn’t have been the case if I had known what I know now, 13 years later.

Education and getting young people to see the value in saving are two of the most important things I can provide them with.

What have been some of the most difficult issues you have dealt with alongside clients?

Anytime I have an older client with multiple investments, it gets tricky. They have a fear of losing money and a fear of change. Even if they aren’t in guaranteed accounts, they have a hard time switching. That’s where the friendship and rapport that was built comes in. You really must know who they are and how they communicate. You want to build trust, so you can have those hard conversations.

As a thought leader in this field, what would you say must change to ensure a fair and just future for your clients when it comes to insurance?

First of all - be you. Whatever that means. People like you need help from you. When I first started in the industry, I thought I had to fit a mold. It wasn’t until I allowed myself to be unapologetically me that things changed. I love to laugh. I use humour to ease tension and those hard conversations. I’m a bit goofy and I’ve learned that it makes it easier to help others learn as opposed to being uptight and rigid. So just be you.

Secondly - integrity, 100% of the time. I see people come into the industry and they get so blinded by the amount of income you can make, and they chase it. The business that pays is the business that stays. You can’t keep clients and agents if you don’t have integrity and heart.

Website: http://www.worldfinancialgroup.com