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Emerging specialty products: From cyber to sober

New risks demand new coverages, and carriers are responding

By Dave Willis

As 2014 approaches, certain insurance coverages, products and niches may offer new or expanded opportunities for retail agents and brokers. Topping the list, perhaps, is cyber liability.

"Cyber continues to gain more traction in the market, with additional carriers releasing products and with brokers and risk managers becoming more aware of the risks," explains Ziad Kubursi, senior vice president of management and professional liability underwriting at Philadelphia Insurance Companies. "We are seeing brokers and risk managers educating their clients' management teams on the far-reaching impact a cyber event might have.

"The implications for a company go well beyond the bottom line and extend to its reputation," he adds. "An event can also impact internal processes having to do with compliantly managing a breach and coordinating notification in multiple states without being penalized."

Kubursi's company is seeing shorter sales cycles for cyber liability insurance. "Increased media coverage on various exposures resulting from cyber breaches, network shutdowns, and theft of personal data is helping boost awareness," he notes. "The extent of cyber continues to broaden as coverage continues to expand and more companies are looking to manage their exposures."

A new trend he's seeing is the combining of cyber liability and technology E&O in one policy. "This seems to be a natural progression for the product, but it should be managed accordingly because the risk factors associated with each don't converge," Kubursi explains. "This can result in aggregation of risk under one policy, leaving insureds with not enough limits to manage a multiple loss scenario."

He notes that the combination provides an entry into cyber products by pooling risks within a product and providing a more complete solution for someone who is not currently committed to buying a stand-alone cyber liability policy.

Kubursi calls the cyber policy "a perfect complement to any risk management solution. It's one that should be discussed with all businesses in any industry. It's not a question of who should buy cyber but rather, 'Who doesn't have a cyber exposure?'"

Because cyber risks run the gamut from theft of personal information and documents to business interruption to information left on unsecured laptops, virtually all entities are exposed.

"Any company that keeps a database of personal information on clients, operates a loyalty programs or runs a credit card as a form of payment has some exposure that can be addressed by a cyber policy today," he notes. "Brokers and agents can differentiate themselves by understanding client risks and how policies respond."

Health care facility construction

As the general economy rebounds, construction is again picking up. So are the risks associated with it. "We have seen a marked increase in 2013 in construction insurance and risk management opportunities across all sectors," remarks Craig Richardson, senior vice president at ACE Environmental Risk. "Changes brought on by the Affordable Care Act are leading to increased health care construction activity, as providers work to build facilities in which they can deliver new and enhanced services."

When considering construction or renovation projects, health care organizations must take special care to address the environmental risks posed by such work. "Risks associated with construction projects are amplified for health care facilities because of health issues patients may be facing," explains Gerry Rojewski, ACE Environmental Risk vice president. "For example, construction- or renovation-related indoor air quality problems may pose a modest risk for healthy people, but could be life-threatening to patients with compromised immune systems."

To help address the exposures, ACE USA launched a new policy for health care construction and renovation projects that is designed to help minimize pollution liability. "We developed a Healthcare Contractors Pollution Liability (CPL) Owner-Controlled Insurance Program (OCIP) to meet the specific needs of health care facility owners," Richardson notes. The policy provides coverage for hospitals, outpatient facilities, clinics and assisted living operations as well as general contractors and construction managers serving health care organizations. Coverage includes:

• Sudden, accidental and gradual pollution from covered operations; pollution conditions to include fungi and bacteria, including legionella, on an occurrence basis

• Bodily injury, property damage and remediation costs with limits of up to $50 million

• Blanket non-owned disposal sites and supplementary payments

"The Healthcare CPL OCIP policy addresses specific concerns and exposures agents' and brokers' health care customers have during construction activities," explains Rojewski. "This allows brokers to stay in tune with client capital improvement projects that are on the horizon and structure their insurance and risk management projects to meet their business needs."

Agents and brokers also can market the industry-specific product to health care prospects. "Doing so also can serve as an educational refresher for agents and brokers," says Richardson. "Since construction activity has picked up, it's especially important to provide opportunities to educate agents and brokers on key industry-specific insurance products and risk management services. This will serve them well as the number of capital construction projects continues to grow."

Sober living homes

Richard Willetts, CPCU, ARM, program director for NSM's Addiction Treatment Providers Program, says his firm developed a program for what he calls "a niche within a niche … within a niche." The "sober living" or "transitional housing" market is a sub-segment of an addiction treatment program that falls under the company's overall behavioral health care program.

Sober living or transitional housing facilities are supportive environments for people who are getting ready to return to their previous—or a new—living situation. Often they've just finished a residential treatment program; in transitional housing, they benefit from the support of peers who also are early in their recovery.

"It's an industry that's in its infancy," Willets explains. "It's a little bit of the wild, wild West because there are very few barriers to entry. Often you don't need a license to open such a facility.

"Residents often continue with outpatient counseling at a separate location, and many work or go to school at the same time, but they come home at night, where they're around others who are in recovery," he adds. "They're drug-tested and don't have the same rights as a typical rental tenant. If they drug-test positive, they are out."

The number of these facilities is growing, but often they operate under the radar. "You find treatment centers in the Yellow Pages," Willetts explains. "Sober living homes are in the White Pages." The company is working with the National Association for Recovery Residences, which is trying to bring standards and self-regulation to the business. "We are helping them develop guidelines," he says.

Willetts say his company's product for transitional living facilities addresses their specific exposures. "Many of these homes are insured under personal lines policies," he explains. "They hope they don't have a claim because once the insurer gets wind of what's going on, it could cancel the policy or, worse yet, deny a claim based on misrepresentation of the risk."

He describes his company's sober living policy as "a general liability product with some enhanced coverages. For instance, it includes some sub-limited sexual and physical abuse coverage that could address roommate-on-roommate abuse or sexual or other abuse by a resident manager. A homeowners policy wouldn't know where to begin with something like that." The program also can cover property for these facilities.

Agents and brokers can use the policy, which has an online application, to cover local transitional living homes. "They are in virtually every community in the country," Willetts notes. "We insure more than 1,000 of them after just starting the program within the last two years. We take calls daily from folks interested in getting legitimate business insurance."

To find prospects, agents and brokers can search online, check with local zoning or other government officials, and make contact with treatment facilities. "These facilities refer clients to sober living homes," Willetts explains. "Working with treatment facilities and sober living homes can be a win-win for agents and brokers. Interestingly, the treatment centers have certain vicarious liability when they refer folks to these homes, so they want to know they're well run and that they have insurance that is designed for their operations."

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