What Employers Say About the Future of Employer-sponsored Health Benefits
By Casey Kirkeby, Strategy Consultant
Employer-sponsored health benefits have faced several threats over the past few decades, but just like hard-working employees they protect, they still endure and remain the primary method of coverage today.
One of the most impactful changes has been the introduction the Affordable Care Act (ACA). The Employee Benefits Research Institute (EBRI) recently published a report examining the ACA’s impact and other government health care solutions on employer-sponsored health plans. The study interviewed 26 benefits executives from various industries whose organizations covered over 1.2 million individuals and spent more than $6.5 billion on benefits in 2021. Their data reflected that both employers and employees still viewed employer-sponsored health benefits as an important feature of the employment relationship. Who would have though, right?! While this public option doesn’t guarantee ongoing success and stability, it will hopefully help shield employers from future challenges like legislative policy changes, economic difficulties and labor market shortages. Just like any good relationship, the employer/employee benefit relationship takes hard work, trust, and transparency.
As health care costs rise, employers are looking at any option to control costs. One arrangement that has been quite popular in the Lower 48 is the ICHRA (Individual Coverage Health Reimbursement Arrangement). Since it’s inception in January of 2022, many employers have adopted the ICHRA, directing their employees to private exchanges so that the employee is able to make plan design decisions for themselves apart from the traditional one-size-fits-all model. There are important considerations to take into account before an employer jumps to this model and the process is still clunky, but it can be a good fit for some employers. However, employers and employees have been slow to embrace the ICHRA because it lacks control over healthcare costs and creates additional administrative burdens that the employer has to absorb.
Another survey conducted by the National Business Group on Health concluded that most employers plan to continue offering health benefits to their employees as part of their overall compensation package. Specifically, the survey found that 92% of large employers offer health benefits and expect to continue doing so in the future, with an increasing focus on virtual health and digital solutions.
Employers are always exploring different ways to control costs, such as offering high-deductible health plans, Wellness Programs, Employee Assistance Programs surrounding mental health, and incentivizing employees to use cost-effective providers. But for now, employers remain confident in their ability to provide affordable health benefits to employees as an important attraction and retention tool.
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Stronger Hurricanes to Put More Properties at Risk
This article is from RISQ Consulting’s Zywave client portal, a resource available to all RISQ Consulting clients. Please contact your Benefits Consultant or Account Executive for more information or for help setting up your own login.
Over 13.4 million properties not currently exposed to hurricane-force wind damage will face increased risk over the next 30 years as climate change propels more intense storms, according to new research from First Street Foundation.
“Compared to the historic location and severity of tropical cyclones, this next generation of hurricane strength will bring unavoidable financial impacts and devastation that have not yet been priced into the market,” said Matthew Eby, founder and CEO of First Street, a nonprofit research and technology group.
First Street’s models also estimated the average annual loss due to tropical cyclone damage rising to $19.9 billion, with about $1 billion in higher exposure in Florida alone.
Other regions that face lower exposure now will be even more at risk in the future, First Street warned. The study projected losses in the Northeastern United States to increase by 87% over the next three decades as hurricanes track further north.
“The northward increase in hurricane activity may significantly impact buildings that have not been built to a code that considers the wind speeds they will likely face over the next 30 years,” researchers said. “Additionally, the count of properties with any average annual loss from wind will increase by about 55%, with about 2.2 million newly-impacted properties by 2053.”
The total number of storms isn’t expected to change, but the intensity will, according to the report. Historical evidence already illustrates rising risk: The proportion of major hurricanes (Categories 3, 4, and 5) has quadrupled since the 1980s, from 10% of all tropical cyclone events to over 40% today. First Street attributed the change to rising air and sea-surface temperatures fueling storms, as well as increased moisture levels in the air and shifts in wind patterns.
“Hurricanes affect communities within the United States more frequently and severely than other natural disasters,” said First Street in the report. “As a result, tropical cyclones have caused a total of $1.194 trillion (consumer price index-adjusted) in losses in the United States between 1980 and 2022, with an average cost of approximately $21 billion per event.”
Understanding evolving risk can help insurers set property rates more accurately, assist communities in developing resiliency plans and allocating resources, and give property owners information on how to better protect themselves and their homes and businesses, First Street said.
For more risk management news and insights, contact RISQ Consulting today.
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The Trendiest Benefits for 2023
This article is from RISQ Consulting’s Zywave client portal, a resource available to all RISQ Consulting clients. Please contact your Benefits Consultant or Account Executive for more information or for help setting up your own login.
There’s no denying that employees’ needs have changed over the past few years. As such, employers can offer benefits to meet evolving worker needs shaped by lingering effects of the COVID-19 pandemic, a tight labor market and rising inflation. Many workers are paying more attention to their benefits and wondering how to stretch their dollars further.
Benefits have always been crucial for attracting and retaining top performers. For 2023, employers are uniquely positioned to offer more than just a health care plan, including holistic benefits, resources and perks that today’s workers most need. This article highlights benefits that are likely to be popular in 2023.
Voluntary Benefits
It’s no secret that health care costs in the United States have risen sharply over the past two decades and will likely continue to increase. Health care affordability is top of mind for employers and employees alike. As employers search for ways to manage their health care costs, some are considering voluntary benefits as a strategy to round off their offerings. A rising number of organizations recognize that voluntary benefits are advantageous to employees and their families—and many come at no cost to the employer.
Consider the following popular secondary benefits employers are offering:
- Accident insurance
- Critical Illness
- Hospital indemnity insurance
- Disability insurance
- Life insurance
- Identify theft protection
- Pet insurance
Voluntary benefits can provide value to employees without raising an employer’s costs, making them powerful tools for attracting and retaining top workers.
Financial Wellness Benefits
Many employees are feeling financially strained due to record-high inflation. Not only will inflation impact employees’ decisions about benefits, but it may also result in a need for financial wellness education and guidance.
However, financial wellness benefits must go beyond only offering educational resources to be impactful. Organizations can boost their attraction to today’s workers by offering the following types of desired financial wellness benefits:
- Retirement plan options with matching contribution
- Health savings account contribution
- Flexible spending account contribution
- Financial planning assistance and coaching
- Lifestyle spending account
- Transportation benefits
- Employee discount or purchase program
- Financial reimbursements (e.g., tuition or student loan repayment plans, caregiving support funds and professional development stipends)
With any of those offerings, education will remain a necessary component to increase employee utilization. Employers are uniquely positioned to help employees understand the importance of these benefits and can help them increase their financial literacy with additional resources and tools.
Health Care Full Premium Coverage
As health care costs continue to skyrocket, some employers choose to pay 100% of employees’ monthly health care premiums. For reference, the Kaiser Family Foundation reports the monthly average for employer contributions in 2021 was 83%. This type of benefit is more common in small organizations. Fully paid health plans could be a key differentiator for workers weighing their employment options.
Family-friendly Benefits
Family-building benefits are becoming increasingly popular with employees, as they inclusively support the unique and complex ways individuals and couples build their families. Employers are also focusing on ways to support reproductive health care. Such benefits can provide employees peace of mind as employers demonstrate their emotional and financial support for employees’ decisions to build a family.
Additionally, many employers are increasingly prioritizing parental leave. According to Mercer data, 70% of employers are already offering or planning to offer parental leave in 2023, while 53% are providing or planning to provide paid adoption leave. Adoption and surrogacy benefits are also on the rise, in addition to access to fertility treatment coverage.
To round out family-friendly benefits, large employers are also considering on-site childcare or access to backup childcare services.
Summary
Organizations can start optimizing benefits packages by evaluating employee preferences and thinking about ways to improve offerings or tailor them for their workforce. To ensure offerings and investments will resonate with employees, organizations should consider surveying them first. It’s important to keep a pulse on employees and see what they find most valuable and necessary for their overall well-being as lives continue to be impacted by COVID-19, inflation and any other personal challenges.
Reach out to RISQ Consulting to learn more about trending employee benefits.
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War Exclusions and Cyber Coverage
This article is from RISQ Consulting’s Zywave client portal, a resource available to all RISQ Consulting clients. Please contact your Benefits Consultant or Account Executive for more information or for help setting up your own login.
Wars can cause widespread devastation and emotional turmoil among affected communities. These conflicts may also result in significant losses for impacted businesses. Yet, securing adequate insurance coverage for damages stemming from acts of war could prove particularly challenging. In fact, war exclusions are commonly found within commercial insurance policies. Although these exclusions are fact-specific and often vary between policies and insurers, they generally state that damages from “hostile or warlike actions” by a nation-state or its agents won’t receive coverage. Such exclusions were created to help protect insurers against potentially systemic losses that may arise amid attacks by governments, their militaries or associated groups.
Cyber insurance policies are no exception to war exclusions. However, the rise of nation-state cyberattacks and the increased instances of international cyberthreats have posed questions regarding how these exclusions should be interpreted in the realm of digital warfare. Additionally, recent court cases and insurance industry adjustments have both broadened and narrowed the scope of war exclusions, thus further muddying the waters for policyholders.
Considering the continued expansion of digital exposures, the complexities of cyber coverage and the evolving policy language surrounding war exclusions, businesses must think proactively when evaluating their insurance programs for proper protection against cyberwarfare. This article provides more information on war exclusion developments and related cyber insurance implications, as well as best practices businesses can use to better safeguard themselves against nation-state cyberattacks.
Court Case Developments
In recent years, court cases regarding insurance claims filed for damages resulting from the 2017 NotPetya cyber incident have narrowed war exclusions as they pertain to digital warfare. Specifically, a New Jersey trial court’s 2021 ruling in the case of Merck & Co. v. ACE American Insurance Co. determined the insured’s “all-risk” property policy should provide coverage for damages caused by the alleged nation-state incident, highlighting that the policy’s war exclusion failed to include language on digital warfare.
The NotPetya incident involved a series of global ransomware attacks that targeted thousands of systems and hundreds of companies across several countries, costing billions of dollars in damages. The majority of the attacks occurred in Ukraine shortly before the country’s Constitution Day, leading cybersecurity experts to believe the incident was a politically motivated event perpetuated by the Russian government. In addition to Ukraine, affected countries included France, Italy, Poland, Germany, the United Kingdom and the United States.
Merck & Co., a U.S. pharmaceutical company, was among the companies impacted by the incident. The company reported damages to nearly 40,000 of its computers, totaling $1.4 billion in overall losses. Although the company’s $1.75 billion all-risk property insurance policy offered coverage for damages resulting from the destruction or corruption of computer data and software, its claim for the incident was denied. The company’s insurer, ACE American Insurance Co., cited the policy’s war exclusion as justification for denying the claim, categorizing the incident as an act of hostility on behalf of the Russian government.
Following the rejected claim, Merck & Co. filed a lawsuit and took its insurer to court. The court ultimately ruled in favor of the insured, explaining that the policy’s war exclusion wording didn’t specifically address digital warfare, causing the insured to reasonably believe that the exclusion only applied to losses resulting from traditional, physical acts of hostility.
The court also emphasized that, with nation-state cyberattacks on the rise, the insurer should have changed the policy’s language to clearly incorporate digital hostilities within its war exclusion if it wanted to negate such coverage. Because it failed to do so, ACE American Insurance Co. was ordered to pay out the insured’s claim.
Insurance Industry Developments
In response to the previously mentioned court case (and similar rulings), insurers have made various adjustments to protect themselves from facing unanticipated claims and subsequent losses related to cyberwarfare. Primarily, insurers are increasingly apprehensive in selecting policyholders, thus utilizing more extensive application processes and requiring insureds to provide detailed documentation on their cybersecurity practices. Furthermore, insurers are exploring ways to ensure their policy language—namely, the wording within war exclusions—provides clear and consistent guidelines for what is and isn’t covered, particularly in the scope of digital warfare.
Global insurance industry leaders have also adopted initiatives aimed at addressing coverage concerns related to cyberwarfare. For example, global insurance marketplace Lloyd’s Market Association (LMA) recently introduced four new coverage exclusions for insurers to consider. These exclusions, which were designed specifically for standalone cyber insurance policies, contain varying restrictions regarding protection against losses caused by digital warfare—ranging from no coverage whatsoever to limited coverage for incidents that fall below certain thresholds.
Insurers across the globe can adopt these exclusions directly or use them as a reference point for crafting their own specific policy exclusions. These exclusions are intended to help insurers possess greater certainty in determining possible cyberwarfare liabilities and broaden the scope of war exclusions as a whole. Yet, it’s important to note that the LMA’s exclusions may still present clarity issues and misinterpretation concerns regarding the extent of coverage provided amid various incidents.
After all, some industry experts have argued these exclusions’ introduction of ambiguous terms and use of vague guidelines for identifying attack attribution could lead to further coverage confusion. In addition, it’s unclear whether they will create conflicting or overlapping coverage complications when applied within wider insurance programs.
As a result, it’s critical for insurers and insureds to openly communicate about policy definitions and specific coverage capabilities, especially as it pertains to protection against digital warfare. Such communication will help ensure both parties are on the same page, minimizing potential issues when claims arise.
Cybersecurity Best Practices
Apart from fostering open communication with their insurers about coverage for losses stemming from digital warfare, it’s also vital for businesses to take steps to prevent and mitigate these losses. Such steps may also reduce potential insurer apprehensions when it comes to providing adequate coverage for damages caused by cyberwarfare.
Businesses can leverage the following best practices to help avoid and effectively respond to nation-state cyberattacks:
- Understand specific exposures. Different businesses have varying digital exposures to nation-state cyberthreats. Therefore, it’s best for businesses to assess their specific operations and determine their likelihood of being targeted by foreign attackers. Senior leadership teams and trusted IT professionals should be actively involved in conducting these assessments. From there, businesses should adopt security measures and digital procedures catered to their particular exposures.
- Have a plan. Cyber incident response plans are essential for businesses across industry lines. These plans establish timely response protocols for remaining operational and mitigating losses amid cyber incidents. Successful incident response plans should outline potential cyberattack scenarios (including those involving foreign attackers) and methods for maintaining key functions during these scenarios, as well as individuals responsible for doing so. These plans should also help determine when to contact external parties (e.g., law enforcement, legal counsel, IT specialists and insurance professionals) for assistance in investigating and resolving cyber incidents. Plans should be properly communicated and routinely reviewed through various activities—such as penetration testing and tabletop exercises—to ensure effectiveness and identify ongoing security gaps. Based on the results from these activities, response plans should be adjusted as needed.
- Utilize proper security software. A wide range of security software can help businesses better detect and deter nation-state cyberattacks. Essential software to consider includes network monitoring systems, data backup and encryption services, antivirus programs, firewalls, multifactor authentication capabilities, endpoint detection products and patch management tools. Such software should be utilized on all workplace technology and updated regularly.
- Follow government guidance. Lastly, businesses should ensure their cybersecurity practices align with guidance from applicable government agencies, such as the Cybersecurity and Infrastructure Security Agency (CISA).
Conclusion
In summary, digital warfare has become a growing concern amid expanding nation-station cyberthreats. By understanding how their insurance policies will respond to losses stemming from cyberwarfare and taking action to minimize these losses, businesses can successfully navigate this evolving risk landscape.
For additional insurance guidance and solutions, contact us today.
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Nonstandard Auto Insurance
This article is from RISQ Consulting’s Zywave client portal, a resource available to all RISQ Consulting clients. Please contact your Benefits Consultant or Account Executive for more information or for help setting up your own login.
When a driver buys auto insurance, the insurance provider will make a calculated risk by agreeing to cover them. In exchange for coverage, the driver pays the insurance company an insurance premium (typically monthly, semiannually or annually). This premium is based on various risk factors, including age, marital status, credit history, vehicle type and driving history. Sometimes, if a driver has significant operating risks, they may not be able to be covered as part of standard, low-risk insurance pools. As a result, they may be required to buy nonstandard auto insurance.
However, needing nonstandard auto insurance isn’t as uncommon as you might think. According to research from Verisk, a data and analytics company, 20% of premiums paid for auto insurance are for nonstandard policies. Other industry experts say this number could be as high as 40%.
While the average nonstandard auto policy won’t look much different from a standard plan, it often costs more overall. Nonstandard policyholders often find it a bit more challenging to find affordable coverage. Keep the following general guidelines in mind when getting coverage.
Who Typically Needs a Nonstandard Auto Policy?
There are a handful of groups of people who would typically need to purchase a nonstandard auto policy. One group includes drivers with major traffic violations or other significant operating risks on their records. A driver might earn this designation if they:
- Are under 25 years old
- Carry an SR-22 certificate, which certain states impose on drivers who commit certain driving offenses
- Have a tarnished driving record with numerous infractions for reckless driving
- Have had a DUI or OWI charge
- Drive a vehicle with a salvage title
- Have previously driven uninsured or underinsured
- Have a poor credit rating (most states allow insurers to consider credits when setting your rates)
- Carry a foreign license or have no driving record in the United States
- Have a high risk of accidents
Outside of this group of high-risk drivers, other individuals may need to purchase a nonstandard auto policy if they have a luxury vehicle, racecar or another type of vehicle that has a higher risk of theft or large losses.
These indicators show an insurer that, statistically, this driver may be more likely to have another high-cost claim or accident that the insurer would need to pay for on the driver’s behalf. Since the driver is now a greater cost risk to the insurer, they will have to compensate for that risk by charging the driver a higher premium. Every insurance company is different, which is why it’s important to work with a qualified agent to determine what type of coverage may be necessary.
Differences Between Standard and Nonstandard Policies
The primary difference between standard and nonstandard auto insurance policies is their cost. Nonstandard policies are offered only to drivers with the highest risk of causing accidents or filing significant claims on their policies. The higher cost that comes with the policy is designed to cover the additional cost and more frequent claims filed by these drivers, on average.
Some insurers don’t offer nonstandard policies, which might force drivers who have been newly classified as nonstandard to look for coverage from an entirely new insurance carrier. Still, nonstandard auto policies will generally contain all the coverage options available to regular drivers, and an agent can help a driver customize a policy to fit their needs.
Residual Market Auto Insurance Policies – Coverage for the Highest Risk Drivers
At times, some drivers will have such high operating risks that they will be unable to obtain insurance through even a nonstandard plan. To still get the coverage you are required to carry, they will have to obtain coverage through the residual market. The residual market is a pool of drivers managed by state regulators. When you apply for coverage through the residual market, your state’s Department of Insurance will then require one of the insurers operating in their borders to issue you a plan. Residual market plans are often among the most expensive policies available and should only be considered as a last resort.
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