Category Archives: Risk Management

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New NAAIA Report Focuses on Next Steps for DEI in the Insurance Industry

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As Black History Month kicks off, February presents a great opportunity to not only celebrate the history and accomplishments of African Americans, but also to meaningfully assess and advance diversity, equity and inclusion measures with the goal of ensuring lasting change rather than lip service. To that end, the National African American Insurance Association (NAAIA) recently updated its research on its members’ experiences and challenges in the insurance industry, releasing the new study The Next Steps on the Journey: Has Anything Changed? The new research updates NAAIA’s 2018 report The Journey of African American Insurance Professionals, evaluating what progress has or has not been made over the past five years, particularly given the increasing focus on DEI programs and, specifically, many companies’ discussions of DEI efforts after the murder of George Floyd brought the Black Lives Matter movement to the fore.

“On one hand, there is a prevailing sense from Blacks/African Americans in the sector that companies are seeking to find credible and practical ways to solve longstanding inequities,” said Omari Jahi Aarons, executive director and chief operating officer at NAAIA. “However, the report highlights that many of these actions are falling short because they are not addressing inequities at the foundational level.”

For example, most survey respondents agreed that their organizations were committed to diversity (60%) and inclusion (61%), and nearly half felt that their organizations were committed to advancing equity (43%) and equality (48%). Nevertheless, 84% of respondents said they continue to encounter obstacles in their career progress compared to other under-represented groups because of either conscious or unconscious racial bias.

Respondents shared several key changes that risk and insurance organizations can make to “more fully achieve and prioritize diversity, equity and inclusion,” such as enhancing recruitment and talent identification initiatives and placing greater focus on recruiting from HBCUs and institutions with substantially diverse student populations, promoting African Americans to officer-level roles, increasing board diversity across racial and gender identities, addressing compensation and pay inequities, increasing pay transparency, offering more mentorship opportunities and extending support through executive coaches.

To support the advancement, networking and development of African American risk practitioners, the report offers a number of recommendations “to catalyze conversation and action” for risk and insurance professionals, including:

Recommendations for Black/African-American risk and insurance professionals:

  • Demonstrate success: Attracting talent to the risk and insurance industry will depend upon the full engagement of Black/African-American insurance professionals who can illuminate under-informed or unaware communities and constituencies about the opportunities in the industry.
  • Seek and offer mentoring: Throughout the research, mentoring was mentioned as a critical factor for career success and satisfaction. Individual professionals can articulate their respective needs for mentoring and can provide mentoring to, and with, each other.
  • Get and provide exposure: Getting exposure and gathering knowledge about the industry can be a powerful, effective remedy to longstanding barriers for underrepresented groups. Individuals can consider their own social networks to foster partnerships to strengthen industry exposure, increase validity of career opportunities and encourage young people to view risk and insurance as a viable and rewarding career path.
  • Advocate for self and for others: Individual professionals must find ways to take charge of their careers, connect and exchange ideas with other professionals. The research revealed that most participants did not belong to any industry-related associations, which could hinder career progress and success. Expanding networks and deepening ties to the industry should be a top priority for every individual, and membership costs should be viewed as an investment in personal professional development. Facilitated introductions for employers and NAAIA to Black/African-American organizations can also foster engagement and collaboration.

While many organizations have introduced DEI programs and proclaimed support for African American employees since the Black Lives Matter movement took root, the survey found many of these moves lacking in actual impact thus far. “Respondents identified the tragic murder of George Floyd and many other Blacks/African Americans and People of Color as the catalyst for centering conversations on race and the risk and insurance industry has responded with a host of new initiatives to address disparities,” NAAIA noted. “Respondents reported increased exposure from initiatives specifically DEI-related training (57%), support for employee resource groups (35%) and mentorship programs (21%). However, these initiatives have not translated to career advancement.”

To help employers improve their DEI efforts, the report also offered the following recommendations:

Recommendations for employers:

  • Avoid performative actions: DEI-driven activities and training notably emerged in response to the events of the last few years. However, many organizations are “checking the box” by undertaking noticeable, but not meaningful, initiatives. A thoughtful and careful review of DEI initiatives is an important first step to ensuring that they are not merely performative, requiring courageous conversations by several stakeholders about the purpose and intent of each activity or program.
  • Turn barriers into gateways: With intention, employers should ensure that there are measurable DEI goals and outcomes visible at all levels of the organization. Measurements can include internal or third-party pay equity and workload balance analyses or tying compensation to the successful implementation of DEI initiatives, especially at middle managerial levels.
  • Use leverage: More employers could leverage the vast networks of employees and employee resource group participants for recruitment and to influence internal mobility, as well as to increase levels of employee engagement. Often, employers underestimate the power of personal connections and references within minority communities, foregoing opportunities to build awareness and enhance their brands both internally within their organizations and externally.
  • Provide meaningful, substantial support: Supporting NAAIA local chapters through sponsorship, mentoring and partnerships and cultivating multiyear partnerships with Black/African-American community professional, civic and youth organizations can lift a company’s profile. More importantly, these types of partnerships also allow for employers to create greater access to internal subject matter experts to communities that are underserved on relevant macro business and professional development topics (e.g., financial literacy, wealth creation or cybersecurity).
  • Connect human resources, senior executives and ERG leaders: Several respondents noted that beyond nominally sponsoring an ERG, many executives were not directly involved in planning or activities. Most of the ERGs are organized and driven by employee volunteers, which often renders them less effective because of time and work constraints. If human resources, senior executives and ERG leaders can convene to discuss mission, alignment with company goals and resource allocations, there is a greater likelihood of continuous progress.

For more of the report’s findings and recommendations, click here to read NAAIA’s The Next Steps of the Journey: Has Anything Changed?

Understanding New York’s New Insurance Disclosure Requirements

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If your organization operates or could be sued in New York, there has been recent activity on the legal and regulatory risk landscape that risk professionals should be prepared for.

New York’s newly-enacted Comprehensive Insurance Disclosure Requirements legislation opens the door for defendants to request that organizations disclose the details of their commercial insurance programs that may apply to a judgment in the case. These details include policy limits and potentially even access to your claims adjusters. For those with more complex risk financing structures, the law may also lead to the misinterpretation of the organization’s coverages.

For the greatest success in complying with this new regulation, risk professionals must become their legal department’s greatest ally, stepping in to lend their expertise to prevent potential confusion and errors. Risk professionals can be integral in keeping sensitive information confidential, monitoring all disclosure requests and alerting their teams to any discrepancies in the interpretation of the shared information.

Additionally, risk professionals should proactively identify the relevant policies for counsel, mindful that the policy or program must potentially respond to the plaintiff’s claim.

What are the New York Disclosure Law’s requirements and how do they impact your insurance program?

The New York law requires that an insured defendant disclose information about any insurance policies sold or delivered in New York that could be applicable to a plaintiff’s claim. This requires careful assessment to ensure compliance while avoiding potentially unnecessary insurance disclosures.

Depending on the claimed amount and a program’s retention levels, disclosures likely include primary insurance policies and may include excess and umbrella policies as well. 

The disclosure requirements extend to various risk financing structures, including captives, self-insurance programs, risk retention groups and surplus lines insurers. Many claims may not reach the retentions, arguably rendering the insurance policies nonresponsive to the claim.

Other than in personal injury protection cases, the New York law requires that insured defendants provide proof of insurance to other parties within 90 days after answering the complaint. This could lead to the disclosure of incorrect insurance information. To address that risk, risk professionals can instruct counsel to obtain the proper COI for a particular claim and advise that it may need to fine-tune their COI process with outside vendors or brokers.

In the cases where arguments are made that COIs are not sufficient proof of insurance, insureds should be prepared to disclose redacted portions of their declaration pages. 

The New York law also requires insured defendants to identify the claims adjustor assigned to the claim, including a potentially surprising level of detail such as the adjustor’s direct email address. It is critical to keep claims adjusters informed and risk professionals should alert their adjustors before this disclosure is made. Immediately report to counsel any plaintiff communications to the adjustor.

What steps can risk managers take to ensure compliance?

If possible, a risk professional or an attorney familiar with insurance coverage should assume responsibility for an organization’s compliance with these disclosure requirements in all New York cases. This will be instrumental in ensuring responses are uniform and avoiding disclosure errors. 

Creating a checklist, as well as a readily accessible library of COIs, redacted declarations pages, and other pertinent information can help keep the organization compliant with New York’s law. Although there might be differing disclosure requirements, organizations with larger footprints should consider extending this structure across other states as well.

By taking these steps, risk professionals can minimize insurance disclosure disputes, assist with their organization’s compliance efforts, and avoid unnecessary interference with an organization’s insurance program.

4 Steps to Help Organizations Embrace Risk from Emerging Technology

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As companies continue to navigate the changing work environment brought on by the pandemic, it has become clear that business leaders will need to get comfortable revising and adapting their strategies to deal with disruption brought on from new technologies and new regulation. As risk management professionals, these rapid changes have made our job more important than ever to our organizations.

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Yet the majority of our organizations—particularly in C-suites—remain far from giving risk management experts the seat at the table they need to effectively safeguard against enterprise threats, digital or otherwise.

Data from PwC’s Global Risk Survey 2022 shows that executives are starting to recognize these risks: 79% of executives report that they view the breakneck speed of digital transformation as a significant risk management challenge. Moreover, this renewed focus is translating into increased funding, as 65% of organizations are increasing their spending on risk management technology and 56% said they planned to invest in risk culture and behavioral risk in 2022.

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Unfortunately, the survey also found that too many organizations are treating the risk function as an add-on or incorporating risk leaders into strategic conversations too late. Only 39% of business leaders reported adding risk professionals to decision-making processes early, which should be an essential step for executives seeking to minimize risk from the outset. On a broader scale, executives seemed to lack confidence in risk managers, with only 47% of respondents saying they feel “very confident” in their risk function’s ability to build a more risk-aware culture, a key element of any successful risk-focused company.

Particularly as companies invest in emerging technologies, business leaders need to listen more to their risk and compliance functions and integrate them into conversations about how those technologies will be implemented. Artificial intelligence is a great example: when companies rush to implement systems to accelerate efficiency and analyze trends, they risk creating disproportionate bias and violating personal privacy through data sourcing. Risk professionals need to be at the table from beginning to end to make sure that an evolving regulatory environment and other pitfalls are fully accounted for in the organization’s implementation process.

While investment in risk management technology is helpful, it is insufficient without making structural changes to the organization to prioritize the risk function company-wide. Particularly as companies consider adopting emerging technologies, the following steps should be considered not just by risk management professionals, but across the C-suite:

  1. Identify, categorize, and prioritize technology risks across the company. This should be done on a regular basis by a dedicated risk management team, married with the best tools available, with findings routinely reported back to senior leaders. Companies are on the right track here: 65% plan to increase their technology spend this year across data analytics and process automation to support detection and monitoring of risks. This initial step will lay the framework for the establishment of cyber threat intelligence, systems monitoring, and incident response protocols.
  2. Adapt IT governance to the emerging technologies being adopted. Risk professionals should work with IT teams and company leadership to create governance structures that integrate seamlessly with corporate strategy, allowing for alignment of day-to-day operations, effective decision-making, a framework for best practices, and promotion of investments that enhance business objectives.
  3. Update leadership often on the emerging tech regulatory landscape. Whether across data privacy rules, cyber reporting requirements, or other complex technology challenges, a robust compliance program should keep leaders across the company updated as new technologies are implemented. Otherwise, companies risk run-ins with legal authorities and the erosion of trust from their clients and customers.
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  4. Set expectations with leadership that not all risks are one and the same. Understanding the context around each piece of technology will become imperative to understanding its specific risks and the appropriate response strategy, including the maturity and complexity of the business processes to determine true risk to the company. Inherent in this case-by-case evaluation is an understanding of the company’s risk appetite and criteria for acceptable level of risk.

When adopted purposefully, emerging technologies can make companies more efficient, more profitable, and better stewards for their employees, clients and communities. Risk is often unavoidable for early adopters of emerging technologies, but it can be mitigated if C-suites equip their risk functions with a holistic strategy and a voice in key business decisions. As C-suites and organizations seek to adapt to a changing world, their success will hinge on the extent to which risk management is incorporated into their strategies.

Recovery in the Aftermath of a Hurricane

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The 2022 hurricane season may be nearing its end, but it is clearly not over just yet. With Tropical Storm Nicole approaching landfall and expected to reach the U.S. as a Category 1 hurricane, Florida residents are once again in storm preparation mode and in the coming days, they will be dealing with the storm’s impact. The aftermath of a hurricane presents many risks—while the storm may be over, the danger is not. Any storm that damages power lines, gas lines or electrical systems, puts you and your business at risk due to fire, electrocution or explosion.

Proceed With Caution

Even once we enter the recovery phase, it is important to take precautions in flooded areas. Never drive across flowing water; a few inches of water may cause you to lose control of your vehicle and as little as a foot of flowing water will carry away a small car. Similarly, avoid wading in floodwaters. They may be contaminated by agricultural or industrial chemicals, or hazardous agents. Remember that standing water can be dangerous as it may be electrically charged from underground or downed power lines.

Before entering a building that has suffered wind or flood damage, conduct a preliminary inspection to make sure it is stable. If there is extensive damage, have a professional engineer or architect certify that it is safe. A professional should also check the gas, water and electrical lines and appliances for damage.

When using a generator for building system power, be sure that the main circuit breaker is off and locked out prior to starting the generator and that there is no exposed electrical wiring or equipment. This will prevent inadvertent energizing of power lines or uninsulated circuitry and help protect utility line workers and building occupants from possible electrocution.

Rebuilding and Restoring

Damage to your business can have a dramatic and far-reaching impact, so it is best to be prepared for the worst. It is natural to want to get back to a storm-hit property as soon as possible, but a little extra caution can go a long way in these circumstances.

Once the property is deemed safe by local officials, specially trained recovery teams in appropriate personal protective equipment can help assess the damage and work with management to implement an action plan to safely get your business back up and running. It is important to photograph and document all damage and notify your insurance agent as soon as possible. Then you can proceed to make temporary repairs to protect the building and its contents.

Preparing for the Future

An average hurricane season produces 14 named storms, of which seven become hurricanes, and three become major hurricanes. Recovery is never a one-and-done proposition—there will always be other hurricanes and hurricane seasons. Regardless of whether or not you experienced damage this year, if your business is in a hurricane prone area, or has the potential for a hurricane, you need to put your hurricane preparedness plan into action by building your hurricane kits, gathering needed supplies, and training your employees in pre- and post-hurricane activities. Do not wait for the next storm to form, as, it becomes increasingly more difficult to acquire the necessary equipment and supplies for your location once a warning has been issued and a storm looming in the not-too-far distance. 

NOAA’s main function is to monitor weather and distribute alerts and warnings. Since 2019, NOAA has been utilizing models that provide a more realistic expected arrival times for storms. Having the ability to better pinpoint a storm’s arrival enables businesses to better prepare their locations and their people for the impeding storm. This technology also helps to reduce loss-of-life and injury, in addition to the potential catastrophic financial impact a hurricane can have on a business.

The recovery period that storm-impacted Florida businesses are in following this year’s storms presents a great opportunity for learning. It is essential that organizations have a process in place to assess weaknesses and strengths in their hurricane readiness plan before the next event. What went well before, during and after the storm? What can be improved or implemented to address any unexpected challenges from this event?

If history has taught us anything, it is that a common thread across the responses to all natural disasters is a lack of awareness and preparation. As one of nature’s most destructive events, hurricanes are powerful and far-reaching, often causing dangerous storm surges that can be felt hundreds of miles inland. With potential maximum wind speeds of 200 mph and the ability to drop more than 2.4 trillion gallons of water in a single day, hurricanes are not to be taken lightly. By identifying areas of vulnerability and taking actions to prepare, businesses can potentially reduce the impacts of a catastrophic hurricane.