Rise of the Robo-Broker

Over the past couple years, we have seen the advent of the robo-advisor in the financial services industry. Companies like Betterment or Advizr use software to automate the financial planning and advice they provide for customers. The benefit is clear: automation allows the company to operate with less overhead and then passes those savings along to the customer. Naturally, companies are trying to replicate this model in the insurance industry with robo-brokers but will that be a good thing for business owners?

A robo-broker will probably be an online portal where you can enter in your sales, class codes, etc. It will most likely offer suggested limits or coverages based on your industry and cookie-cutter risk management techniques. It places your company in a box. It boils your business down to its SIC code and assumes you operate in the exact same manner as all of your competitors. The problem is you don’t. Your business is unique, your employees are unique, your goals are unique and your risk management program should be as well. Since the computer treats your company as a generic class code, it cannot help you anticipate and mitigate your unique loss exposures. A generic risk management program is considerably less effective than if it was tailored specifically for your company.

Another aspect of robo-brokers is the automation of your policies, which isn’t necessarily a good thing. The ‘set it and forget it’ mentality works with personal finance because your goals, and how to achieve them, rarely change. Insurance, on the other hand, should be as fluid as your company. The world your business operates in is constantly changing and as your company reacts to it, so should your risk management program.

By the nature of the insurer-agent relationship: a robo-broker will not save you, the policyholder, any money. As you probably know, your insurance agent is compensated by the insurance carrier with commission. Insurance carriers pay a standard commission for each line of business to all of the brokers they work with and this commission schedule is filed with the government. Insurance agents are also not legally allowed to give up commission in order to get a lower premium for the client. So, a robo-broker who uses software automation to decrease its payroll and other costs does not, and legally cannot, pass those savings to the policyholders.

Now think back on your professional relationship with your current agent, could that be handled by a computer? Could everything your agent does for you be substituted by inputting some information online and having a robot take care of the rest? If yes – you may have a serious problem.

Knowing that a robo-broker may actually be a detriment to your risk management program by offering the bare minimum service and not saving you money, why would you accept a human broker who does the same? The majority of brokers all have access to the same insurance carriers, either direct or through a wholesaler. All of your competing brokers can each get you the same policy for the same price so the difference between them is their value to you. You should pick a broker based on his or her individual expertise and trustworthiness. You want a broker who works to help your company achieve its goals throughout the year, not just drops off a renewal annually. If you want to get away from automated risk management, whether it’s by a computer or human, call Insurance Solutions & Services today.

Cyber Threats from Social Engineering

Today, one of our staff received an email from my email address stating that I needed her to send a wire transfer, and was she available to do so.  We have spent hours discussing cyber threats to our company and our clients, and our staff is trained to be aware of suspicious emails, but in this case, the email address sending it was not just similar to my email address, but it was my actual email address!  Ultimately, our staff member was able to determine that the email was fraudulent and no harm was done, thanks in part to our policies and procedures. 

This type of social engineering is on the rise and is a great concern to every company.  There are several popular types of attacks, including:

• Baiting- an attacker may provide a device, like a flash drive which is infected with some type of malware.  The recipient of the flash drive loads in on their computer, installing the malware, and affecting their workstation or server.  Often, the USB flash drive is just left lying around and the person unwittingly loads it to determine what it is.

• Phishing- Often a fraudulent email is sent, disguised as a legitimate email, but is intended to trick the recipient into taking some action, divulging personal information, or somehow deviating from your normal technology protocol. 

• Scareware- Often an attacker will attempt to trick the recipient into thinking their computer is infected with malware or illegal content that has been downloaded inadvertently.  A solution is then offered which allegedly fixes the problem; the alleged fix is really malware.

• Spoofing- This is probably one of the hardest ones to defend against, in that the email address appears to be exactly the same as an email address you are familiar with, or exactly the same as an internal email address.  It is generated from an external source, often from an origin that cannot be traced.

There are many types of attacks, and dealing with them should include a sound cyber security policy addressing the policies and procedures your company has implemented to keep your systems safe.  There are insurance products that can provide coverage for the ensuing damages from an attack.

A big issue we have seen on the rise is a type of phishing where the sender asks the recipient to wire transfer a sum of money to a specific location.  Since the email is bogus if the money is wired it is tough, if not impossible, to recover.  This presents a unique problem for the client in that many crime policies will not respond as it is considered voluntary parting with the money and not a theft or employee dishonesty loss.  Many insurance companies are able to endorse their policy to include social engineering losses.

At Insurance Solutions & Services, Inc., we assist our clients by reviewing their security procedures and protocols to determine the appropriate risk management and insurance program to respond.  Feel free to contact us for a review of your cyber security program.

How Low Can Your Bid Go? Check Your Workers Compensation Premium.

If you are a contractor who bids for local or state jobs, you may have experienced losing a bid every now and then.  While I am sure you simply moved on to the next bidding process, did you stop to wonder how the winning bidder was able to bid so low and still maintain profitability? Obviously, the contractor that keeps his expenses the lowest will see the highest profits. What is not so obvious is how to keep one particular expense, which likely adds the most to your bottom line, the lowest it can be. The culprit expense is your Workers’ Compensation premium. If you haven’t reviewed your classification codes, your claims history or haven’t implemented back-to-work or safety programs, read on. We'll cover how to lower your Workers’ Compensation premium which will ultimately make your company more competitive when bidding for municipal or state contracts.

The first step to ensuring that your Workers’ Compensation is priced correctly is to review your classification codes.  Are your office personal classified as roofers or other field titles? If so, this can make your Workers’ Compensation much higher than it should be. Review the Workers’ Compensation policy to see what each of your employees is classified as and make changes if necessary.  Auditing and review of your current payroll for inaccuracies or deductions you can take, like overtime, Davis-Bacon Act wages, etc. can help lower your cost.  Confirming that subcontractors have valid certificates of insurance, and deducting valid business expenses like auto allowances can have the same effect. Your organization’s classification codes and payroll dollars are the foundation for the base premium.  An error on these numbers could cost severely.

The next factor in determining a Workers’ Compensation rate is the past three years of claims history, which contributes to your experience modifier.  The more claims against your Workers Compensation policy, the higher your experience modifier will be.  This, of course, increases your premiums. If you haven’t had an accident, ask your carrier for a loss run just to make sure there aren’t any accidents incorrectly reported. If you had an accident, unfortunately, this will show on your loss runs for the next three years. You can, however, control how much these claims will cost by implementing “back to work” programs.  The gist of these programs is that employers maintain communication with injured workers and, if possible and through permission of the physician, find work that can accommodate the worker’s injury.  By bringing the employee back to work, the claim will cost less by mitigating lost wage payments and ultimately will affect the claims reporting on your policy and shouldn’t hit your experience modifier as hard.

Various States have programs that can assist in lowering workers compensation costs, e.g. a certified safety committee credit, a contactors credit program, etc.  Utilize these whenever possible to lower your costs.

Finally, making sure safety procedures are developed and enforced will mitigate the risk of an injury. Depending on the type of work your organization does, you may want to institute a two-person rule when workers need to carry heavy objects over a certain weight limit; institute the use of safety harnesses for employees working in high areas or other procedures that would make sense for your individual organization.  After these policies are put into place, be sure to they are communicated to the employees and enforced.  

Keeping your Workers’ Compensation premiums low will take investigating your current policy and pre-planning when it comes to implementing procedures that keep your claims  low or non-existent.  While this takes effort, it will be worth it if you are able to keep your expenses low enough to be the lowest bidder in municipal and state bid processes.