Emerging products for 2012
Finding and offering new "value-addeds" to clients
By Dave Willis
As the New Year begins, talk of the economy, politics and a hoped-for insurance market hardening will become prevalent in insurance circles. In the midst of change—and in some cases, as a result of changes—certain insurance products may generate increased interest among agents and brokers and their clients in 2012.
Health care changes over the past few years have led to more Americans going abroad for medical treatment and procedures. The Deloitte Center for Health Solutions' 2008 report, Medical Tourism: Consumers in Search of Value, said that outbound medical tourism could reach 1.6 million patients in 2012, up from 750,000 in 2007.
Tracy Simons, president of Custom Assurance Placements, Ltd., says the trend to access medical care in other countries is driven by "an increase in uninsured people, a drive to reduce medical care costs, patient access to care or procedures, and the effect of governmental changes on health care."
To remove some uncertainty from such travel, Simons' firm provides access to two insurance policies: a travel accident policy, including coverage for accidental complications for the medical tourist; and a liability product for facilitators or employers who engage in medical tourism.
"Travel accident policies pay participants directly for eligible expenses related to an accident or complication," Simons explains. "The need arose from medical tourists asking, 'What if something goes wrong?' In a foreign country, patients may not know how to handle expenses associated with a complication, but of course the providers need to be paid." The policy also includes coverage for death, disability, family coordination, loss of reproductive function, residence modification and more.
The second policy helps other stakeholders in the process. "Medical tourism facilitators help patients find the correct facilities, arrange trips and assist patients in the medical tourism process," Simons explains. "In addition, some self-funded employers offer a medical tourism benefit in their policies. Both have a need for liability insurance."
Retail agents may have among their existing client base firms with a medical tourism liability exposure. "These could be travel agents, medical tourism facilitators, employers or even hospitals," Simons notes. "Agents and brokers can access policies to help these firms cover liability associated with their involvement." In addition, she notes, use of a travel accident policy can provide direct benefits to the patient and help make the patient whole if a complication arises.
Simons encourages agents and brokers to find a knowledgeable partner to learn more about the products and their use. "We are happy to help any agent assess a client's exposure," she notes. "Without formal education programs addressing the subject, it's important to deal with people with experience in this new and emerging field."
Growth in cyber attacks and increased legislation could boost interest in cyber coverage in 2012. "Headlines have raised awareness," says Tim Francis, Enterprise Cyber Insurance Lead for Travelers, "and most states are passing or have passed legislation on how companies with data breaches must respond."
Attacks don't just target large companies with lots of customer information. "Cyber events may even be more likely to happen with smaller firms," he notes. "Criminals are opportunists, and may perceive smaller firms as having less sophisticated systems or more potential vulnerabilities."
Hackers aren't always after money. "Some look to gain access to cause trouble or make a point," Francis explains. "We've seen a rise of so-called 'hacktivism,' where people have an axe to grind." Such attacks are sometimes politically motivated, often associated with ideology. Also, he adds, disgruntled former employees "may create mischief within a company's computer system" to get back at the firm.
Cyber risk insurance helps manage financial and reputational risks associated with a host of cyber events, Francis says. "These can range from an employee causing economic harm by inadvertently transmitting a virus to another party, to organized criminal operations hacking into a company's system."
Insurance policies can help customers manage the event and pay for some expenses associated with it. "This has led more and more companies to purchase the insurance," he notes. "Any type of company that uses technology to do business has some degree of cyber exposure. It's not just tech companies or companies that aggregate a lot of personally identifiable client data."
Agents and brokers can help clients address potential exposure. "First, they need to really understand their clients' needs," Francis advises. "Particularly in the cyber arena, needs may differ depending on the size of the company, its industry and how it uses technology."
Second, he says, know the market. "Learn about the cyber coverages and find a partner that understands various clients' needs," he adds. "Partner with someone who can, if needed, customize coverages, limits and retentions based on the particular risk."
Finally, he tells agents and brokers, "Don't let this be daunting. This is a relatively new risk area, and providers are willing to work with you to help you understand exposures, coverage and how it fits with other insurance you provide."
The need to bring certainty to an uncertain process—contract litigation, the most common form of civil litigation in the United States—may drive interest in a relatively new coverage: contract litigation insurance. According to Kevin Martin, CEO of Sonoma Risk, "Today, contracts that govern most transactions, whether they're with employees, employers, customers or vendors, contain something called a 'prevailing party' or 'loser pays' provision.
"Any time someone is involved in a lawsuit, there's a certain level of fear and uncertainty surrounding the outcome of the litigation," he adds. "It doesn't matter whether you're the plaintiff or the defendant." Besides simply worrying about winning or losing a case, parties are now concerned about the added cost of paying the winner's attorney's fees.
According to Martin, contract lawsuits are common. "There are reportedly 4.5 million filings each year," he says, "and more than half contain a 'loser pays' provision." Such suits aren't limited to certain types of business. "Because business is conducted through contracts, contract litigation is a risk that runs across all industries," he adds.
Standard insurance policies exclude coverage for contract disputes. "In many cases, the attorneys' fees awarded to the winning party far exceed the damages," Martin notes. "The financial burden for litigants paying their attorneys' fees, plus those of the other party if they lose, can be devastating."
Contract litigation insurance protects litigants from the risk of having to pay their adversary's attorneys' fees. All businesses and individuals involved in a breach of contract dispute where a prevailing party provision exists in the contract or state statute are eligible for the product, which is underwritten by Zurich.
"Coverage can be purchased when customers actually need it—after litigation begins, and up to 12 months thereafter," Martin notes. As litigation progresses, the ability to offer coverage decreases as the uncertainty of the lawsuit increases.
Contract litigation insurance is available nationwide with no premium commitment through US Assure Insurance Services, Inc., a national insurance brokerage and program administrator that is distributing the product Sonoma Risk developed. Martin says comprehensive marketing support and training opportunities are available to those interested in incorporating the program into their business offerings.
Martin encourages agents and brokers to take advantage of these opportunities to learn more about the product and its advantages to their customers. "Contract litigation insurance represents a valuable tool agents and brokers can use to help mitigate client risk by reducing their financial exposure," he says.
Another product gaining interest can protect owners of North American construction projects from the unexpected—unexpected finds, to be exact. "Brokers and insureds came to us citing specific examples of archaeological discoveries within a project site, which caused construction delays and subsequent increased expenses, along with potential loss of revenues," says Frank Tricamo, product line manager—construction property, for Lexington Insurance Company.
Such finds range from Native American artifacts and burial grounds to ships and more. "Contractors have come across artifacts, particularly in the early stages of the projects, when sites are cleared, excavated and graded," he adds. "Of course, these unexpected discoveries may stop a project or slow it down. And that can cost the owners money.
"The product is definitely generating interest, in large part due to its uniqueness," Tricamo says. An endorsement of Lexington's builders risk policy, LexArchaeologySM, as it's called, extends coverage for delay in completion, rental income, gross earnings, soft costs, archaeological expenses, and extra expense losses incurred during a delay resulting from unexpected discoveries. Similar coverage is available in Canada, through Chartis Insurance Company of Canada.
To be covered, projects must be federal undertakings subject to Section 106 of the National Historic Preservation Act of 1966. Plus, Tricamo says, they must have had a cultural resource survey conducted in the planning process and received written approval from federal agencies and authorized lead agencies (Army Corps of Engineers, Department of Energy, Bureau of Reclamation, National Park Service) to start construction under Section 106. Canadian projects are subject to similar requirements.
"The unique factor of this coverage is that, unlike traditional property coverage that requires direct physical loss or damage as a trigger for time element coverages, the trigger for the LexArchaeology endorsement is simply the discovery of archaeological resources at the project site," Tricamo explains.
"Buyer interest is strong when, in the early stages of planning, it is determined that the project may have an exposure," he adds. "Retail and wholesale brokers and agents can recognize the particular details of projects on behalf of their clients and work with them to complete the application form. Remember, though, that the product is not available on a stand-alone basis. Certain eligibility requirements exist and there are minimum premiums and maximum limits available, subject to risk factors identified through the application."
As agents and brokers serve clients and work to attract prospects in the coming year, they should continually seek out differentiation opportunities. By working closely with insurance providers, seeking out information online and at industry events, and combing trade publications and their marketplace guides, agents and brokers can find new ways to bring value to insurance buyers in 2012 and beyond.
For more information:
Web sites: www.customassurance.com
Web sites: www.travelers.com
Web site: www.usassure.com/contractlitigatio
Web sites: www.lexingtoninsurance.com www.lexcasts.com/viewCast.php?lexcastId=123