Insuring the businesses of tomorrow: Program enhancements in the pipelineBy Ron Beiderman, Elliott Burn | November 19, 2018
The growth of new business opportunities and private investments are creating new risks in commercial lines. This is especially evident in two areas – marijuana and management liability. Both of these topics, along with general liability and commercial property rating, were discussed at a session at the 2018 Verisk Risk & Analytics Summit called Insuring the Businesses of Tomorrow: Program Enhancements in the Pipeline.
There’s a growing divide in the United States about the uses and benefits of marijuana. In addition, despite contention with federal law, some states have enacted laws generally designed to approve marijuana for medical use and others have enacted laws that generally seek to approve it for recreational use. It’s not clear how this divide will affect the growing marijuana market. But when it comes to insurance, one thing appears certain: the risks are real and many will need to consider how such risks should be addressed. Product liability, theft, and employees working under the influence are just a few of the risks that some insurers can face if the businesses they insure are part of the marijuana supply chain.
To address these risks, we are planning to begin filing marijuana exclusions for our Commercial General Liability Program in December. That will be followed by similar exclusions for Commercial Property, Businessowners, Auto Dealers, and Commercial Inland Marine.
But it’s not only exclusions. We’re also hosting panel meetings and talking to customers about developing options to cover marijuana. We plan to have more information about these coverage options in 2019.
Management liability for private companies
Private companies are also presenting a growing market for management liability insurance. While management liability has traditionally been purchased by public companies, private firms account for more than 65 percent of all companies in the United States, according to the latest data from the U.S. Census. And the leaders of private companies still face many of the same risks, including liability for mergers and acquisitions activity, regulatory investigations, derivative suits, discrimination, and sexual harassment.
To help insurers serve this growing market, we’ve introduced a new management liability insurance program for private companies. The program’s proprietary advisory rating model can help insurers price worldwide coverage for private companies across several lines of business, including directors and officers (D&O), employment practices liability, and fiduciary liability. It also features a higher level of rating granularity, factoring in a wide range of classes and risk sizes for employment practices liability developed using the latest modeling techniques. There are also options to include coverages for crime as well as kidnap and ransom.
General liability rating and size of risk
As new businesses emerge and evolve, it’s critical that rating information adapts to help keep pricing commensurate with the risks. At ISO, we’re using predictive analytics and robust data to investigate whether the relationship between exposure amounts and General Liability premiums should vary as the risk size increases. The current ISO rating structure for General Liability assumes a one-to-one relationship between exposures and premiums (i.e. 10 times the exposures means 10 times the premium). Potentially, larger risks may have better loss control measures (implying discounts) or may have additional exposures that smaller risks don’t have, such as deep pocket issues (implying surcharges). At the end of this project, we may introduce an optional rating plan that takes into account impacts of size of risk for General Liability.
Rating commercial properties with precision is also critical to insuring new business. That’s why we’re planning to revise our Specific Commercial Property Evaluation Schedule (SCOPES) manual and rating program, which is used to help develop loss costs associated with buildings and their contents. The goal of the revision is to provide the most up-to-date program and improve the predictivity of our advisory prospective loss costs. The revision, which is planned for 2019, will also introduce some parallel changes to current class rated risks.
Want to learn more?
For more information about our new coverage programs, contact Ron Beiderman. For more information about our rating programs, contact Elliot Burn.
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