Overall, in Chubb’s experience, the trend is for a majority of BOP claims to be related to property exposures, she explains. Examples include water damage and wind, hail, or storm damage. Other examples include slips and falls, and power outages.
These types of claims are common in the restaurant niche, notes Strommen. “On the liability side, we see claims related to slips, trips and falls. On the property side, we’re seeing a lot of water damage claims,” she reports. In recent years, extreme temperature fluctuations in the Northeast have led to an increase in water damage claims due to frozen pipes.
Chasin agrees with Strommen that claim frequency remains stable, while claim severity continues to increase. PAK Programs commonly sees slip-and-fall claims from its business owner clients.
“Parking lot potholes, snow and ice, wet floors, and changes in elevations all present liability hazards, which expose insureds to medical payments, loss of wages, and pain and suffering claims,” he says.
“Pot holes, snow and ice, wet floors, and changes in
elevations all present liability hazards.” — Larry Chasin, CEO, PAK Programs
Fires are also a consistent, and increasing, cause of loss. “Extension cords used as permanent wiring, overloaded circuits, and animal damage to wiring all present fire risks. Fire loss has expanded with current wildfire patterns; the evacuation zones are growing larger. Even a small fire causes smoke damage, requiring business closure and leading to loss of income,” Chasin says.
Even without direct fire damage, loss-of-power claims are commonplace when wildfires strike, he adds. “Poorly maintained power-line infrastructure along with increasingly dangerous weather systems — fire, hurricanes, convective storms, and weight of ice and snow — have increased the frequency and severity of power outages. Businesses can’t operate without power, which affects heating, cooling, and refrigeration, internet connectivity, and point-of-sale systems.”
This is particularly risky for businesses in the food and beverage market, where spoilage losses occur, in addition to lost income.”
Logan is seeing an increase in claims for wrongful termination under employment practice and ransomware and phishing under cyber.
Cyber Risks — An Increasing Concern
According to the Principal Employer Well-Being Index, released in November 2019, a study of the top concerns of small and mid-size business employers (between two and 1,000 employees), cybersecurity was the number-one area in which employers said they needed advice from outside advisors, at 29%. Eighty percent of the employers surveyed were taking action to improve cybersecurity, starting with employee training — a critical move, because 76% of their employees have access to personal customer information.
With cybersecurity of such importance, it’s no surprise that more business owners are interested in cyber coverage. “The 2019 Travelers Risk Index found that nearly half of the small businesses surveyed worry about a security breach,” says Dinshaw. Travelers has been commissioning its Risk Index since 2014, and 2019 was the first year that cyber has been the top concern among businesses of all sizes.
As concerns about cyber threats increase, a higher percentage of businesses are taking proactive measures to safeguard against risks, including purchasing cyber insurance policies. More than half — 51% — of survey participants reported getting cyber insurance, up from 39% in 2018. However, a sizable number of businesses reported they had not implemented such preventive best practices.
Although more businesses are taking steps to prevent a cyber event, “it’s still alarming that nearly half don’t have the proper insurance coverage,” notes Tim Francis, enterprise cyber lead at Travelers. “With cyber risks continuing to evolve, there is much to consider when trying to protect a network.”
Having a well-protected computer network that can keep out bad actors is vital for a company that protects sensitive information, such as personal and financial data. “The costs of a data breach can be substantial,” Dinshaw warns. “Cyber insurance should be an important component of any good risk management strategy because the vast majority of companies, no matter their size, are vulnerable to a cyberattack and would benefit from the support and services that come with a cyber insurance policy,” Dinshaw says.
Shaver points out that more than half of Chubb’s BOP customers buy either a stand-alone cyber policy or an endorsement to their BOP that covers elements of data breach expenses and privacy liability.
Cyber has become a vital component of any business owner insurance program, stresses Strommen, of ProHost USA. “The risks are myriad and complex, and small businesses are vulnerable to attack.”
More BOPs are including at least some coverage for cyber, but the coverage limits and terms differ widely from one policy to the next, Strommen points out.
The better coverage options include pre-breach risk management resources, first- and third-party claim coverage, data breach response coverage, and more.
“Understanding the details of a cyber coverage component to a BOP is an excellent topic for discussion between business owners and their insurance advisors,” Strommen advises.