All posts by Maria Sassian

Floods

Buyer beware: In Barry’s wake, flooded cars are about to hit the used car market, NICB warns

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Hurricane Barry made landfall on July 13 as the first hurricane of the 2019 season, dumping heavy rain on parts of Louisiana, Mississippi and Arkansas. Unfortunately, whenever there’s flooding there are unscrupulous people ready to unload flooded cars onto credulous consumers, and vehicles flooded by Barry may soon appear for sale around the nation.

The National Insurance Crime Bureau (NICB) warns that buyers should be particularly careful in the coming weeks and months as thousands of Barry-damaged vehicles may reappear for sale in their areas. Vehicles that were not insured may be cleaned up and put up for sale with no disclosure of the flood damage, which is illegal.

“When tragedy strikes criminals have the tendency to swoop in and scam consumers especially when it comes to the resale of flooded vehicles,” said Brooke Kelley, communications vice president of the National Insurance Crime Bureau (NICB).

Flood-damaged vehicles can exhibit a host of problems ranging from electrical malfunctions, mold and mildew, corrosion of various parts and slippery brakes. Corrosion can find its way to the car’s vital electronics, including airbag controllers, warns Consumer Reports.

The NICB offer the following tips to avoid being scammed:

  • Don’t rush to buy a used vehicle, especially if the price looks too good to be true.
  • Look for water stains, mildew, sand or silt under the carpet, floor mats, and dashboard, and in the wheel well where the spare is stored. Look for fogging inside the headlights and taillights.
  • Do a smell test. A heavy aroma of cleaners and disinfectants is a sign that someone’s trying to mask a mold or odor problem.
  • Get a vehicle history report. Check a trusted database service. You can check NICB’s free VINCheck database.
  • Have a trusted mechanic inspect the car’s mechanical and electrical components, and systems that contain fluids, for water contamination.

After a disaster, NICB works with its member companies, law enforcement, and auto auction companies to identify the vehicles that have had an insurance claim filed. Most of the vehicles are sold to parts companies who will dismantle them and resell usable parts that were not damaged by the flooding.

The Vehicle Identification Number (VIN) of vehicles that have been damaged by Barry will be searchable through NICB’s free VINCheck® service as well as the National Motor Vehicle Title Information System (NMVTIS) database.

VINCheck allows car buyers to see whether a vehicle has ever been declared as “salvage” or a total loss by an NICB member that participates in the program. Insurers representing about 88 percent of the personal auto insurance market provide their salvage data to the program. It also alerts users if a vehicle has been stolen and is still unrecovered.

 

Workers Compensation

The gig economy’s impact on workers compensation insurance

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The gig economy, or independent contract work has been around for centuries. Before the Industrial Revolution, and for some years after, most workers were self-employed or worked in small businesses.

Recently “gig work” has received a lot of buzz due to the rise of technology companies such as Uber, Lyft and TaskRabbit that electronically mediate contract work.

The National Council on Compensation Insurance (NCCI) closely examined the gig economy and nontraditional work arrangements in its 2019 Q2 Economic Briefing. Since workers in nontraditional arrangements rarely receive the same benefits as wage and salary workers, this issue has obvious relevance for workers compensation.

Some of the key takeaways from the Briefing include:

  • There is mixed evidence about the rise in alternative work. Large surveys have found little change in self-employment and alternative work in the last 10–20 years, but administrative data (such as tax records) shows these types of work arrangements are growing. The evidence suggests little change in the number of Americans in alternative work arrangements as their primary source of income but increasing numbers of people engaging in alternative work arrangements to generate supplemental income.
  • Today about 30 percent of adults in the U.S. are engaged in some type of informal or alternative work, and lawmakers continue to take notice and investigate ways to regulate workers and companies in this growing sector.
  • About 4.5 percent of households earned some income from electronically mediated work between April 2017 and March 2018—three times higher than the percentage in the first 12 months of the study period, October 2012 to September 2013. Two-thirds of this 4.5 percent had no income from electronically mediated work in the past month—most people only did electronically mediated work occasionally.
  • The risk of workers compensation leakage is likely to rise during and after the next recession, whenever that may occur. (Electronically mediated work was in its infancy during the Great Recession.) When firms shed payroll in a future downturn and workers have difficulty finding traditional jobs, then the labor supply for nontraditional work will increase. At the same time, cost-cutting firms will have incentive to experiment. If firms and at least some workers favor new arrangements, then payroll lost in a recession is likely to shift to nontraditional work during recovery.

 

 

Disaster Preparedness

IBHS CEO Impact Report: Do hail Impacted Rated shingles measure up?

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By Roy Wright, President & CEO, Insurance Institute for Business & Home Safety

High-performing impact-resistant shingles can prevent avoidable damage caused by hail attacking roofs. Consumers should have confidence that products labeled as “impact resistant” live up to their expectations. This is the predicate for the Insurance Institute for Business and Home Safety’s (IBHS) groundbreaking work to improve roof performance against hail.

One month ago, IBHS reached an institutional milestone by releasing the IBHS Hail Impact Test Protocol for Asphalt Shingles—a new test method that uses best-available science for predicating performance of asphalt shingles when exposed to hailstorms. This is the first performance scorecard rating of eight asphalt shingle products labeled as impact resistant. By bringing together years of work in the field and in the lab, IBHS continues to be a leader in the hail research space.

IBHS’s new test standard combines the results of lab and field work that advanced industry understanding of hailstone mass, strength, and kinetic energy. Applying those findings allows us to manufacture hailstones in our lab and mimic the way natural hail attacks a roof. We assess damage from the top side of the shingle – the same way a claims adjuster would – and use artificial intelligence along with experts to evaluate the performance range.

 

Hail Cannon Testing. Photo courtesy of IBHS

Yet this milestone is just the beginning. The IBHS Hail Impact Performance program is poised to drive change and innovation across industries for years to come.

With the performance of eight products now rated and released, three new products are already at the IBHS Research Center in Richburg, South Carolina awaiting testing at the specific request of the relevant product manufacturers. These new arrivals demonstrate our commitment to ongoing testing of new products brought to the market. In addition, we are committed to retest products every two years, ensuring performance scorecards remain up to date and offering manufacturers the chance to improve product offerings based on our results.

Exclusively for the member-companies supporting the IBHS mission, we have provided a data set that expands on what is publicly available and provides greater quantitative insights and relative consumer price comparisons. We answered questions live during a Hail Impact Standard Question and Answer webinar for the IBHS Members as we strive to help put this data to work for the insurance industry.

Roofing manufacturers have actively engaged with our research team throughout the development and release processes and continue to be engaged. Some have been excited to share the results while others look forward to the next round of testing. Each manufacturer has been on our research center campus observing testing, asking questions, and striving to put their product at the top. Since the release last month, we have already had manufacturers back at the research center talking with our researchers and continuing to push for improvement.

IBHS research is inspiring conversations to drive shingle performance forward, and that will pay dividends to the Members of IBHS, to the insurance industry, and to consumers. These conversations, initiated by the performance data, are only possible with the commitment IBHS, and IBHS Members, have made to resiliency. And these very same conversations are stimulating awareness of impact-resistant shingle performance in order to improve shingles and to inform consumers of their options.

Through this new work, we are showing the insurance industry and consumers which products live up to those expectations of resilience.

 

 

Disaster Preparedness, Earthquakes

California Earthquakes: How Modern Building Codes Are Making Safer, More Resilient Communities

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By Sean M. Kevelighan, CEO, The Insurance Information Institute

 

 

The earthquakes that hit southern California on July 4 and 5 gave us all reason to reflect on a natural disaster that infrequently makes headlines here in the U.S.  A major seismic event occurring near several population centers is the sort of thing that many fear—but it’s also something insurers study constantly to make sure quake-impacted affected areas can recover and rebuild.

Earthquakes and other natural disasters are facts of life. The International Code Council (ICC) helps to create resilience through modern building codes that enable households and communities to rebound faster and more completely after an earthquake.

The ICC reports:

 “On the morning of July 4, a 6.4 magnitude earthquake rattled through Southern California, with another 7.1 magnitude quake striking the region the following evening.

“The damage resulting from these events could have been significant. Thanks to the modern, up-to-date building codes in California – based on the International Codes (I-Codes) – the Searles Valley Earthquake resulted in no loss of life and minimal structural damage. The I-Codes are keeping us safe, and this event reminds us of the importance of adopting and effectively implementing current model building codes as a key defense against natural disasters. Building codes save lives.

“According to structural engineers working with the Earthquake Engineering Research Institute, the homes and buildings experiencing the most severe damage date back to the 1930s, ’40s and ’50s. Modern buildings built using model codes experienced damage that was largely limited to nonstructural elements or contents.”

We encourage you to read the entire article to learn more about the essential role of building codes in creating a “resilience culture” to make our communities safer and more productive.

Business Risk, Earthquakes

Got Earthquake Insurance? Businesses Should AssesS Their Readiness for “The Big One” and Other Natural Disasters

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By Loretta L. Worters, Vice President – Media Relations, Insurance Information Institute

Every year businesses temporarily shut down – or close forever – because of a disaster.  The 6.4- and 7.1-magnitude earthquakes which struck near Ridgecrest, California late last week are stark reminders of a quake’s ability to disrupt a business’ operations. Even though many California businesses are in seismically active areas, only one out of 10 commercial buildings are insured for quakes, according to the California Department of Insurance.

Depending upon a business’ location, the threat to its operations may come from risks other than earthquakes, such as a hurricane, tornado, or wildfire. Forty-plus percent of U.S. small businesses do not reopen after a disaster impacts them, the Federal Emergency Management Agency (FEMA) estimates. But by taking measures to prepare, businesses can increase their chance of recovering financially from a disaster.

Steps businesses can take in the aftermath of this month’s southern California earthquakes:

1) Review Insurance Coverage: It is important businesses have the right amount and types of insurance for their needs and risk profile. There are two types of policies that can be purchased by a business owner.

  • A Businessowners Policy (BOP) is commonly purchased by small businesses. BOP policies combine property, liability, and business interruption coverages in one policy and are usually less comprehensive than a commercial multiple peril (CMP) policy. Business interruption coverage, also known as business income insurance, reimburses a business owner for lost profits and continuing fixed expenses during the time a business stays closed because of a covered event, such as a hurricane, tornado, or wildfire.
  • A Commercial Multiple Peril (CMP) policy combines several coverages—such as property, boiler and machinery, and general liability—into a single policy. It is typically less expensive to buy a CMP policy than to buy these coverages individually. Boiler and machinery insurance, also known as Equipment Breakdown Insurance, also usually extends to air conditioners, heating, electrical, telephone, and computer systems.
  • Commercial Earthquake Insurance Is Sold Separately: Earthquake-caused property damage and business interruption is not covered under either a standard BOP or CMP policy. Businesses in earthquake-prone parts of the U.S. must consider a separate policy or an endorsement to an existing policy which specifically mentions earthquake-caused damage. Earthquake insurance carries a percentage deductible ranging from 10 percent to 15 percent.

There are some areas of a business that automatically include coverage for earthquakes.  Commercial auto provides coverage for loss or damage from temblors.  This can include damage from falling debris, fire, or other events.  Injury to employees at work because of an earthquake is also a covered loss under workers’ compensation insurance.

2) Develop a Business Recovery Plan: Businesses that are forced to close following a disaster run the risk of never being able to open their doors again. But by developing a business disaster recovery plan, they will be able to determine how their operations will be restored after a natural or operational disaster. Moreover, the Insurance Institute for Business & Home Safety (IBHS) offers a free, customizable toolkit to help businesses plan for any type of business interruption.

3) Take a Business Inventory: Creating a business inventory includes listing equipment, supplies, merchandise, and commercial vehicles. An inventory facilitates the filing of a business insurance claim.

Herein lies the fault:  Businessowners, by their very nature, are risk takers; trailblazers in their respective fields.  Risk-taking is a crucial component of launching and building a successful business, be it with capital investment, hiring employees or marketing strategies. But entrepreneurs who don’t purchase the right type and amount of coverage, including earthquake insurance, end up jeopardizing the enterprise they worked so hard to build, leaving themselves, and their business, on shaky ground.

Health & Safety

THE FOURTH OF JULY, 2019

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Before you head off to enjoy the barbecues and fireworks, it’s time for our annual Independence Day fact file. Here is this most American of holidays by the numbers, courtesy of the Census Bureau:

  • In July 1776, an estimated 2.5 million people lived in the 13 colonies . According to recent projections, there are 330 million residents as of July 1, 2019.
  • The oldest signer of the Declaration of Independence was Benjamin Franklin of Pennsylvania, age 70.
  • The youngest signer, at age 26, was Edward Rutledge of South Carolina.
  • $368.6 million worth of fireworks were sold in 2012 through establishments classified as NAICS 453998 and all other miscellaneous retailers (except tobacco stores).

 

Have a safe and happy holiday!

Homeowners Insurance

What a Shocker: Florida Tops the List for Lightning Claims

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By Loretta L. Worters, Vice President – Media Relations, Insurance Information Institute

Authorities believe a lightning strike caused a home to go up in flames in the Riverview area of Florida on Friday, June 14, ironically just days before Lightning Safety Awareness Week (June 23-29) commenced.

Often referred to as the lightning capital of the nation, it is no revelation that Florida ranked first for lightning caused homeowners insurance claims in 2018, with 7,108 claims, followed by Georgia (5,539) and California (4,909), a new addition to the line-up. Texas, which had ranked second in 2016, fell to fourth place (4,559).

The number of lightning-caused homeowners insurance claims decreased in 2018—the third straight year it has done so—yet the average cost per claim has soared since 2016.  The I.I.I. findings, based on national insurance claims numbers, determined that more than $900 million in lightning claims were paid out in 2018 to nearly 78,000 policyholders.  The cumulative value of claims caused by lightning rose six percent between 2016-2018.

With increased labor and construction costs as well as a consumer appetite for smart home products, it’s not surprising that lightning-related homeowners insurance claims costs have risen.  The average cost per claim rose eight percent from 2017 to 2018. However, the average cost per claim between 2016 and 2018 increased 21 percent – a veritable bolt from the blue!

 

Insurance Industry

From the I.I.I. Daily: Our most popular content, June 14 to June 20

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Here are the 5 most clicked on articles from this week’s I.I.I. Daily newsletter.

To subscribe to the I.I.I. Daily email daily@iii.org.

 

 

 

 

Homeowners Insurance

Are impact-resistant roof shingles all they’re cracked up to be? The IBHS is on the case

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By Jennifer Ha, Head of Editorial and Publications, Insurance Information Institute 

Hail damage is a growing problem in large regions of the United States and causes about $1 billion in damage to crops and property each year, according to the National Oceanic Atmospheric Administration (NOAA). As such, after years of field and lab research, the Insurance Institute for Business Home and Safety (IBHS) has recently released the results of its first hail impact performance program—the IBHS Impact Resistance Test Protocol for Asphalt Shingles—designed to track impact-resistant roofing products and to demonstrate the IBHS performance standard for impact-resistant shingles.

To test its standard, IBHS bought the most widely purchased impact-resistant shingles available to consumers and tested them in its lab under simulated real-world conditions, which it has now published on its website. The site includes disclosures, test standards and Member-only data.