Not many things are what they seem when it comes to an insurance policy so when we find something that seems straightforward and actually is we should all rejoice. “Medical Payments” found in the General Liability policy is a coverage that is what it sounds like it should be, it pays for medical costs that third parties incur. This being insurance of course there is a bit more to it as the 2 minute video below will explain.
Product recall is one of the most confusing coverages in insurance, particularly when it is included in a Product Liability policy. Find out what constitutes “Product Recall Expense” coverage and what is actually covers and does not cover in this 3 minute video.
The first question on our “What’s In My Insurance Policy?” addresses what happens when you lose power (electric, gas, etc.) and can’t operate your business.
As you will see, this is a big coverage gap, coverage is rarely what we think it is. In most cases it is is pretty much non-existent since the most likely loss of power, downed power lines, are usually excluded or have a very low sub-limit.
The “What’s In My Insurance Policy?” is a video series to help insurance buyers better understand what their insurance policy covers and doesn’t cover. We take questions from you, our viewers, so please feel free to ask a question in the comments section or send an email and we will address it in a future episode.
By now I think we have all seen that Marriott was hacked. What I find astonishing is not that they were hacked but how fast the lawsuits have been filed. I have already read about numerous lawsuits, some coming just hours after the hack was announced. For an insurance broker, making a case of why clients need cyber insurance is not a tough case to make, but there is another lesson that can be learned.
The vast majority of companies I speak with believe there is a very low risk that they will have a claim and I tend to agree with them, but that does not mean insurance will not be used. There is very little that prevents your company from being drawn into lawsuits, even if you were not negligent. Getting pulled into lawsuits costs money, possibly a lot of money, even if you are eventually proven innocent. This is why insurance is important, if the allegation is a covered claim then your insurance policy should be paying to defend you.
There are a couple of things to be cognizant of when it comes to the insurance company defending you.
- It could erode your limits of insurance, meaning you won’t have as much insurance to pay claims.
- The insurance company may have the right to choose counsel and decide how to defend the lawsuit. For example, they could decide to settle the claim against your wishes.
- The amount you spend on defense may not start reducing your deductible/retention until you have put the carrier on notice.
- Most policies have some sort of provisions on when you need to provide notice to the carrier which if not followed could jeopardize coverage.
These are just a few things that you want to pay attention to when you are served with a lawsuit. The important thing to remember is that you should make the carrier aware of the claim sooner rather than later, even if you don’t think the lawsuit is going anywhere. I have seen some desperate plaintiffs drag lawsuits on for a long time making even groundless lawsuits quite expensive.
I want to help people better understand their insurance. All too often people and companies only have a high-level understanding of their insurance policies and unfortunately the devil is in those hundreds of pages called a policy. Often times insurance buyers don’t ask the questions that need to be asked when they renew their insurance and this is where I come in. Leave a comment or send me an email and I will answer your questions on a future segment.
Trying to predict where the economy and stock market are going in the short term is a fool’s game and is something I would not bet on. With that disclaimer out of the way I want to point you to two pieces of content I recently consumed that might give us some clues as to where the economy is headed. I would suggest you consume these articles in sequential order.
The first comes from the “Masters in Business” podcast that featured Ray Dalio as the guest, you can find the transcript and links to the podcast here. I suggest you listen to the whole podcast because it is full of great information, but knowing that most of you won’t, according to Mr. Dalio the economic cycle works in the following way:
“Okay, so what happens is in the early part of the cycle, the amount of lending that takes place produces a cash flow which is greater than the debt service payments on that, so that’s a virtuous lending because credit gives buying power.
‘And depending on how you’re using that buying power for using it to create income that’s greater than the debt service payments is a self-reinforcing positive cycle, that normally happens in the early part of the cycle.
Then it pushes asset prices up and what happens is that people start to extrapolate those things going forward. So as the debts continue to rise and they believe this is going to go higher and higher…
‘The bubble stage is also accompanied by the development of shadow banking.
‘There’s a shadow banking system now, you know, in other words it – private lending that takes place outside of the banking system in various ways and it’s not regulated. And there is an incentive to go outside the banking system because the banking system being regulated and being controlled can’t make as much money as going outside the banking system.
‘And so the irony is asset prices are higher, there’s much more leverage in the system, and so why would asset prices be higher or credit spreads be lower when there’s a lot more leverage and the price of everything is higher? It doesn’t make sense but that’s where the bubble is. These are the good times, these are the great times it seems. Right?”
Now, you may or may not agree with Mr. Dalio but I think it would still be worth considering his words when you read this article from ETF.com. Here are a few excerpts:
“Private credit funds invest in nonrated, debtlike instruments that have no readily tradable market or publicly quoted price. Assets under management in such funds were growing rapidly until 2008. However, fundraising activity slowed significantly with the onset of the 2008-2009 financial crisis.
‘The increase of both supply and demand for private credit has resulted in substantial growth in assets under management.”
Again, I would recommend you listen to the entire podcast and read the whole article before making any conclusions.
Where is the economy going in the near term I do not know but I can say with pretty good certainty that at some point we will see a downturn and a recovery. I know…my prediction is bold.
We can learn about risk management and insurance from our daily lives? Think about the times you may have gotten injured or something went wrong in your life that was preventable by incorporating risk management activities into your life. Right now I am going through one of those times in my life.
I am an avid runner but have been suffering through a foot injury all autumn which has prohibited me from running and doing pretty much any other exercise that requires me to put weight on my foot. To add insult to injury (pun intended), the fall is the prime racing season in distance running so I have not been able to race either. Granted, I am no Olympian by any stretch, but I like to challenge myself and get my competitive juices flowing so not being able to race, let alone run, has been very difficult for me.
So how does risk management play into this? First, the injury wasn’t due to some freak accident, it was caused most likely by my lack of doing the ancillary work I should have been doing to take care of my body. If I had stretched, done more strength work, and listened more to my body I probably would not be in the position of having to stay off of my foot. To put it bluntly, if I had done the things (risk management) that I know help prevent injury (loss) but I don’t really enjoy doing I would probably not be injured now.
According to my doctor I will be fine with rest and recuperation but that will take time. Even though I will be fine and my financial cost is limited, that does not mean I will come away unscathed from this injury. There are direct and indirect costs that cannot be redeemed. My stress levels were increased because I could no longer use running and exercise as a release. My health most definitely took a step back. I am sure there were other impacts as well, but the point is even when we are made whole after a loss we still suffer losses that we cannot recover.
We all know there are certain things we should be doing to prevent losses but don’t do them. I don’t do enough stretching, although I like to take comfort in the fact that I am sure I am not the only one not stretching as much as I should. Many companies don’t do the things they should be when it comes to risk management and they too can take solace in the fact their peers aren’t either. There are many reasons why companies don’t implement a risk management program, it could be a lack of resources, either financial or personnel, not knowing how to implement risk management, or it could be they just don’t see an ROI from risk management and therefore won’t even entertain the idea. Whatever the reason might be, in hindsight we all wish we would have done things differently after a loss, especially if we know it could have been prevented.
The less prepared you are the more a loss will hurt, trust me, I am experiencing this right now. Many companies don’t realize that insurance companies want to help you implement a risk management program. Insurance companies realize that investing in preventing a loss is much better for their bottom line then paying claims. What is surprising is how often new clients do not realize that these resources are available and that they cost you nothing, but their prior insurance broker never told them they were available. Your insurance broker should be more than someone who simply transacts an insurance placement on your behalf, they should be helping you manage your risk. This can be done by making sure your policy is actually covering what you need it to cover and helping you find ways to prevent losses in the first place.