Homeowner insurers receive record-high claimant satisfaction rating

Satisfaction among homeowner-insurance policy holders is improving, despite a difficult 2016.

Every year, the J.D. Power U.S. Property Claims Satisfaction Study scores property insurers according to collective claimant satisfaction. For 2016 that score was higher than it ever has been: 859 out of 1,000. This is a marked improvement over 2015's score of 846, which had been the first decrease in five years. 

Most importantly, it's a sign that the industry is becoming increasingly conscious of consumer satisfaction. 

The scoring criteria
J.D. Power ranks insurers by five key metrics:

  1. Settlement: Amount of money offered by the insurer. 
  2. First notice of loss: Initial reporting of a claim or incident.
  3. Estimation process: Assessment of claim or damage to estimate its value. 
  4. Service interaction: Interaction with insurer and customer service agents.
  5. Repair process: Fixing damage following a settlement.

Of these areas, settlement factor was the main driver of the improvements, followed by estimation process and service interaction. This is somewhat surprising (and for that matter impressive) considering incurred losses and loss-adjustment costs increased by 7.6 percent between 2015 to 2016. Additionally, the number of catastrophe-related claims rose – notable climate occurrences such as Tennessee's forest fires, Hurricane Matthew and 1,000-year flooding events in Louisiana certainly had a hand to play here.

Problem areas remain

"Customers want processes that are less time-consuming and more intuitive."

Despite notable improvements, claimants still have several key pain points. Water damage and other claims that are difficult to settle quickly fell by as many as 39 points. According to Property Casualty 360, these lower scores make sense. One of the key findings of the report was that the speed at which claims are resolved is of the utmost importance to customers. 

The other notable concern, according to a separate J.D. Power report, is the dissatisfaction of generation Y (customers aged 21 to 38). As the homeowners of the future, this is somewhat troubling for the industry as a whole. New on-demand insurance startups have potential for better or worse. 

But even this component has a silver lining. In the past few years, property insurers as a whole have rapidly adopted new forms of technology to improve processes. This includes Big Data strategies like the use of telemetry to create use-based auto-insurance policies. Meanwhile, some homeowners can receive rate discounts if they use smart home technology. Then there's the rise of mobile applications:

"Insurance companies are starting to offer mobile applications that can help in offering quotes, reporting claims, accessing information and even allowing customers to summon agents to their home," Property Casualty 360's Joseph Jaafari wrote. 

It all boils down to the fact that customers want processes that are less time-consuming and more intuitive. Technology is not an in by itself, but rather a means to get to better customer satisfaction. 

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The relationship between cyber security regulation and cyber insurance

Regulation almost always has the side effect of increasing risk to an organization's interests.


As of March 1, financial institutions in New York State became obligated to comply with the nation’s first cyber security regulation. In broad strokes, the New York Department of Financial Services now requires that financial institutions structure a formal cyber security policy based on periodic risk assessments.

The immediate priority for financial institutions in New York is to create a risk management framework to sustain ongoing compliance with the new regulation. Also important, according to Law360 contributor Jeff Sistrunk, is having a backup plan in the event that a financial institution experiences a data breach. This is because the regulation gives litigators more leverage as a result of the added liability of the data security rule, or failure to comply entirely with it.

That backup plan, according to Sistrunk, is cyber security insurance.

A burgeoning market

“Investment in cyber insurance is expected to increase in 2017.”

Cyber liability insurance has been a hot-button issue in the past few months. As the fallout from cyberattacks increases – the Yahoo intrusion alone cost $350 million – so does the incentive to invest in cyber insurance. According to PricewaterhouseCoopers, the value of annual gross written premium will cap out at $7.5 billion by 2020.

That said, the market is still relatively young and must undergo a certain amount of maturation. At the moment, there is a significant lack of readily available data pertaining to the actual financial damage caused by cyberattacks, which makes it difficult to assess actual risk exposure. For example, we know that ransomware raked in a whopping $1 billion in 2016. While that information is helpful, there may not be enough of it just yet.

But even with those caveats, investment in cyber insurance is expected to increase in 2017, if for no other reason than that cyberattacks are continuing to become increasingly sophisticated. Meanwhile, digitization and even automation are becoming more central to business operations in a variety of industries. And as this happens, the potential for loss spikes – not just in terms of reputational damage and IT downtime, but also in the form of class-action lawsuits.

More regulation: Does it help or hurt? 

“Cyber security regulation is a form of ammunition that could someday guide liability.”

Sistrunk’s argument seems to be that greater cyber security regulation gives litigators something to really sink their hooks into as they bring data breach-related cases to court. In this sense, the regulation does ultimately create an added layer of risk for financial institutions.

The opposite is also true. Showing that an organization has complied with specific cyber security standards laid out by a state-sponsored regulatory body could undercut plaintiffs’ claims. At a minimum, this may serve to limit some of the damages imposed by the court.

Either way, the only certainly seems to be that cyber security regulation is a form of ammunition that could eventually guide liability. It’s also worth noting that New York’s pioneering cyber security regulation could influence regulators in other states to follow suit, which is certainly a development worth following.

At the end of the day, though, cyber risk continues to be a very real threat to financial institutions, regardless of what form that risk takes. As long as this is the case, cyber insurance will continue to have a place in America’s financial institutions.


17 million U.S. homeowners face high environmental hazard risk

Environmental contamination is a very real problem for many homeowners.

A new study conducted by ATTOM Data Solution, curator of the largest property database in the world, has revealed that 17 million U.S. homes, with a combined worth of nearly $5 trillion are situated in environmental hazard zones. 

The researchers analyzed 68.1 million single-family homes and condos spread across 8,642 zip codes. About 25 percent (17.3 million) of these residencies were deemed at high risk of one or more of the following environmental hazards:

  1. Poor air quality: High concentrations of airborne pollutants. 
  2. Superfund sites: A site deemed by the EPA as containing hazardous waster. 
  3. Polluters: Based on the number of facilities included on the EPA's Toxic Release Inventory list. 
  4. Brownfields: Land that may be contaminated by the presence of a former pollutant. 

Areas of greatest risk
The study identified risk ratings by zip code with 455 being the highest and -8 being the lowest, and then ranked those zip codes by risk. The top five areas include:

  1. Denver (80216): 455
  2. San Bernardino, California (92408): 400 
  3. Curtis Bay, Baltimore, Maryland (21226): 380
  4. Santa Fe Springs, California (90670): 356 
  5. Fresno, California (93725): 339

Ever-changing risk landscapes

"Does your plan protect you from these new risks?"

Geographic risk has proven time again to be anything but static. Shifting climate patterns, industry booms and and population influxes are just some of examples of conditions that can influence risk ratings in specific areas. In turn, this raises questions about property casual coverage – specifically, does your plan protect you from these new risks? 

Case in point, the Federal Emergency Management Agency is currently in the process of redrawing flood zones, resulting in many homes and businesses being reclassified as flood-risk properties. This has left many property owners in the position of having to purchase flood insurance, or in some cases, having to explain why they have been erroneously placed in a food zone. What's more, even as FEMA reclassifies flood zones, risk continues to change. 

Similarly, homes and businesses that may be at risk of environmental hazards including unusual weather events (i.e. California's recent super storms), vapor intrusion (when contaminated soil releases chemical in vapor form that mix with indoor air) and microbial contamination (discharge of pollutants into water). All of these, according to Property Casualty 360, can increase the cost of claims.

For homeowners living in areas with high environmental hazard risk, it may be worth meeting with your insurer to make sure you're covered. 

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Finding business stability in a time of economic uncertainty

In times of economic stability, trade credit between organizations is a saving grace. Buyers such as retailers and manufacturers can purchase raw materials on credit, and execute their business initiatives the moment an opportunity presents itself. On the other side of the table, suppliers can lock down a customer's business and ultimately generate their revenue in the form of accounts receivable.

But in times of economic and political uncertainty, like the one we're living in, trade credit becomes a significant risk for both parties involved. If a buyer becomes insolvent and cannot repay a debt, the supplier will have to eat those losses. At the same time, entire enterprises are constructed on the value they derive from trade credit. Jack Cowley, partner at Trade Risk Group, put it best:

"Trade and trade credit is literally the lifeblood of business in the United States."

If domestic and global suppliers pulled out of the trade credit game, they'd be pulling the rug out from the under their own feet, and for that matter, the global economy's. In other words, risk avoidance simply isn't an option.

Suppliers need to keep playing the game, and they need to play it well. The best way to do that is to manage their trade risk.

Trading on a tightrope
"The market place hasn't had a lot of experience with bad debt in the recent past," Gene Ferraiolo, TRG partner, said in a recent interview. "But there's a tremendous amount of uncertainly about what will happen in the future."

Specifically, Ferraiolo referred to the political and economic changes that are leaving the future of global markets up in the air. Businesses in the U.S., for instance, are figuring out where they stand in the wake of Donald Trump's darkhorse victory. Across the pond, Brexit has upended countless companies' supply chains, and will continue to be a source of uncertainly as trade agreements are renegotiated between the remaining EU members. To cap it all off, economists predict a slowdown in global economic growth within the next 50 years.

"The most resilient buffer against trade risk is trade credit insurance."

In total, these circumstances increase the likelihood of insolvency, according to Ferraiolo. Beyond that, Cowley added that these conditions may encourage businesses to act more conservatively out of wariness, thereby causing many of them to miss critical opportunities for profit and growth.

On a positive note, there are ways to manage this risk. Ferraiolo and Cowley agreed that the most resilient buffer against trade risk is trade credit insurance.

Creating credible credit
Ferraiolo and Cowley contend that by insuring accounts receivable, suppliers have more liberty within their own market, for several key reasons.

  1. Risk mitigation: In the event that a customer becomes insolvent, suppliers won't have to self-insure their loss. This is the primary benefit of trade credit insurance.
  2. Market credibility: "Buyers have great comfort in knowing that their supplier is in a financially stable position to deliver goods," Cowley said. "Part of that financial stability is the use of trade credit insurance, knowing that the supplier will not fail or go out of business because they were not paid by another company."
  3. Increased sales opportunities: As Cowley worded it, "If I'm willing to sell a customer $100,000 worth of merchandise at my own risk, what would I be willing to sell if I could insure it?" The safety net of a trade insurance policy could give businesses the security they need to pursue new opportunities.
  4. Flexibility: "There is a tremendous amount of customization for these policies," Ferraiolo said. "A company can insure all of their accounts, one account, and anything in between the two." Cowley added: "The product is for them. It's designed for how they do business, not how the insurance company wants them to do business."

Ferraiolo added that there's a backend benefit in the event that insolvency occurs, which is freedom from having to waste management time and effort to chase after salvage – the underwriter will do that for the insured.

The only challenge that Cowley sees in the trade credit insurance market is the competition for coverage. Now more than ever, businesses are scrambling to insure their accounts receivable, which makes it difficult to actually secure coverage, and to make sure that an underwritten plan achieves what the organization set out to achieve. 

But Cowley noted that this is hardly a problem as long as businesses choose to seek insurance through a broker, and ideally, one that will help them keep their plan current.

"These generally aren't policies where the insured buys it and sticks in a drawer until they have a problem," Ferraiolo added. "They're very ongoing, service-intensive policies because the nature of the insured's business is always evolving."

As previously mentioned, it's not just businesses that change, but also the economic conditions in which they operate. Under such uncertain circumstances, the best you can do is protect the assets that matter to your business.

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Businesses, consumers: Should you insure your drones?

Drone coverage will become a more pressing matter as UAV popularity gains momentum.

The use of unmanned aerial vehicles, more popularly known as drones, for commercial and recreational purposes has taken off, and it's left a few big questions up in the air – namely, who should be covered, and to what extent?

It's worth noting that as of this writing, the Federal Aviation Administration does not mandate coverage for UAVs. However, the soaring global market (estimations put its worth at around $21 billion by 2020) may soon necessitate more rigid parameters regarding UAV-related liability. 

Flying into new risk territory

A drone accident can result in any number of losses to the owner of the UAV."

Recreational use will most likely account for the majority of market growth in the next few years, according to MarketsandMarkets. As this happens, consumers will be quite literally flying into new risk territory. In terms of property damages, a drone accident can result in any number of losses to the owner of the UAV, but also to any asset that happens to be in proximity of the device. This includes private assets such as homes, lawn furniture and automobiles, but also commercial holdings, and perhaps most pressingly, critical infrastructure, i.e., power lines and traffic lights. 

Consider, for instance, the historic blackout that occurred in the summer of 2003. A single energy company's failure to trim a few branches near a high-voltage line sparked an outage that left approximately 50 million people without power in the U.S. and parts of Canada. The likelihood of a recreational user finding him or herself in the Kafkaesque position of having induced a nationwide power outage is slim, to say the least. Nevertheless, there are plenty of high-risk liabilities; for example, physical injuries caused by drone accidents or malfunctions, and privacy violations from the camera functionality. 

Likewise, some businesses such as Amazon, UPS and DHL are already using drones for commercial purposes. In order to qualify for commercial use of UAVs, businesses must file for Section 333 exemption from the FAA, allowable under the 2012 FAA Modernization and Reform Act. From there, however, commercial drone liability insurance is entirely optional. 

Gauging risk exposure

"Full liability coverage is the most prudent course of action."

Risk exposure for recreational use of drones is arguably diluted compared to commercial use, if for no other reason than that a business is likely to be responsible for multiple UAVs at a given moment. Drones may range in cost from a few hundred to a few thousand dollars, with the highest-end devices sometimes creeping into the tens of thousands of dollars. Business assets such as these, which are not easily replaced, should invariably be insured. 

Where liability is concerned, commercial drone insurance is generally recommended, but may or may not be a priority deadening on its use. Using drones for conservation or environmental monitoring purposes may have low exposure in regard to human safety. However, using drones for surveillance purposes at urban construction sites, for media coverage during public events or for product delivery in close proximity to people and their private property is inherently more risky. In such cases, full liability coverage is the most prudent course of action.   

Recreational drone use tends to be less risky, but the FAA requires registration of personal drones nonetheless. What's more, recreational use of drones has in fact resulted in serious accidents that necessitate expensive medical treatments. In 2015, a 16-month-old toddler toddler lost an eye after being hit in the face with a drone. This isn't to suggest that all drone users should run out and purchase a plan – however, it's worth considering, especially for drone UAV enthusiasts inhabiting cities and areas with dense populations. 

In conclusion: We recommend complete coverage for all commercial uses of drone, and for recreational users who will be operating their UAV in close proximity to other people and private property.


Cyber insurance market shows promise going into 2017

The need to shield against cyberattack losses will contribute to growth in cyber insurance.

With 2016 coming to a close, businesses have begun taking stock of losses related to cyberattacks. Ransomware alone is expected to have cost businesses $1 billion by the end of the year. While an official value hasn't been attributed to total cybercrime-related losses for the year, it's a near certainly that 2016 will surpass 2015's staggering $3 trillion in cyberattack costs.

In response to these losses, experts predict that cyber liability insurance will continue to see growth through 2017 and beyond. 

A $7.5 billion market by 2020
According to PricewaterhouseCoopers, the value of annual gross written premiums for cyber insurance will be worth $7.5 billion by 2020, up from a relatively modest $2.5 billion in 2015.

There's little doubt that this expected increase is in response to the the evermore daunting cyberthreat landscape, which continues to hurt corporate margins. In 2016 in particular, the world witnessed multiple unprecedented cyberattacks, including:

  • Multiple hospitals being held ransom by crypto-malware. 
  • An $81 million digital bank heist (initial target was $900 million)
  • Internet-of-things-distributed denial-of-service attacks that affected industry titans such as Amazon, the New York Times and Netflix. 
  • The revelation of Yahoo's massive data beach. 
  • An estimated $1 billion in ransomware losses. 

The U.S. Department of Justice, the Internal Revenue Service and voter registration systems in several states also contended with cyberattacks in 2016.

As the damage caused by cyberthreats becomes more apparent, the incentive to shield assets against losses with cyber insurance will invariably be greater. 

Defining risk: The big challenge

"Cyber insurance will play a bigger role in 2017, but it's not without inherent challenges."

According to the Risk and Insurance Management Society, 80 percent of organizations had some form of cyber insurance in 2016. And while those on the front lines agree that cyber insurance will play a bigger, more important role in 2017, many also foresee inherent challenges. 

"It will certainly be more commonplace, but it's still a specialized market with difficulties assessing risk, particularly in the face of a changing cybersecurity attack landscape," Dr. Bruce Roberts, Chief Technology Officer at DomainTools told IT Pro Portal. "I'm just not sure we have enough data to inform an efficient, mature cyber-insurance marketplace."

Dr. Bruce is not alone in this thought, as PwC made specific mention of the challenges associated with developing risk profiles: 

"Part of the challenge is that cyber risk isn't like any other risk insurers and reinsurers have ever had to underwrite," PwC wrote. "There is limited publicly available data on the scale and financial impact of attacks.

That said, PwC hardly sees this as an insurmountable hurdle that will stunt forward momentum of the market, as it added, "We believe there are eight ways insurers, reinsurers and brokers could put cyber insurance on a more sustainable footing and take advantage of the opportunities for profitable growth." These include the implementation of smarter data analytics, rolling policy updates that can be amended in real time, conditional coverage, and partnerships with agencies that can share data and expertise to enhance policy development. 

At the very least, this gives cyber insurance carriers something to work toward in 2017. 

What auto insurers need to know about the CFA report controversy

New research from the CFA is sparking discourse about auto insurance rates.

An advocacy group called the Consumer Federation of America (CFA) released findings Sept. 26 suggesting that income may be playing a greater role in determining auto insurance premiums than driving records. The report made a number of claims, including the following:

  • High earners with DUIs frequently pay less than "drivers of modest means" who have a clean driving record. 
  • "Moderate-income drivers" with flawless records have higher rates than high earners who caused an accident involving an injury. 
  • Medium-income drivers with few points on their record will pay more than high-income drivers with many. 

These findings are based on analysis of premiums offered by "the nation's five largest insurers" in 10 U.S. cities. 

Backlash from the Property Casualty Insurers Association
Shortly after the report was released, the Property Casualty Insurers Association's vice president of policy development and research, David Snyder, issued the following statement:

"The CFA's latest study on auto insurance pricing is flawed and misleading. The central flaw in the report is that it fails to take into account that all the rating and underwriting factors insurers use are proven to increase the accuracy of predicting the risk of loss."

According to the New York Times, Snyder mentioned age as one of the factors the study neglects, as well as driving history, and more specifically, how long the customer has been a licensed driver. These details and others like them are key determinants of the risk profiles assigned to insured drivers, and according to Snyder, a thorough and accurate analysis of auto insurance premiums would require their inclusion. 

"[W]ithout an 'apples to apples' comparison it is impossible to isolate the impact of individual factors as the CFA attempts to do by singling out a driver with a driving under the influence conviction. A component of one profile indicated that the driver went six months without insurance, which is a significant factor in predicting risk."

Outliers and unanswered questions

"The PCI noted that consumers have significant market choice."

One of the most notable outliers presented in the study also happens to be the biggest city referenced in CFA's research: Los Angeles. According to the CFA, in Los Angeles, a city of more than 3 million in the state that has the highest number of licensed drivers in the country, "clean drivers always pay less than the drivers with points on their record." The CFA attributed this to California's consumer protection policies. 

In fact the study used this outlier as an argument for why more consumer legislation is needed in other parts of the country. The PCI, however, noted that consumers have a significant market choice, and the liberty to shop around for better premiums. 

And because the study only references five auto insurers, it remains unclear if the findings actually indicate a strong enough need for new policy. Even if all of these findings are taken at face value, Snyder's argument about market choice raises yet another question: Does this point to a policy issue, or potential problems pertaining to the specific insurers mentioned in the study?

At this point in time, all of these details are somewhat nebulous, and until a deeper dive into the matter is taken, the controversy will remain bloated with unanswered questions.

Health insurance mergers

To merge or not to merge? 5 things to know.

The Justice Department filed lawsuits blocking two mergers of health insurance companies that would whittle the nation’s five largest health insurers down to three gigantic entities.

Why are the proposed mergers, totaling $85 billion, making Uncle Sam so nervous? And why are insurers pushing back? For example, this week Aetna announced plans to withdraw from health care exchanges in more than two-thirds of the counties where it participates.

Here’s a look at the key issues involved:

  1. Lack of competition could create a crisis.
    American companies and individuals benefit from competition in the marketplace, according to William Baer, the Justice Department’s antitrust chief, who filed the lawsuit blocking the mergers in July.

    During a CNBC video interview, Baer said the proposed mergers could reduce competition, drive up premiums, decrease quality and discourage innovation.

    He could be right: The LA Times reported that hospital and insurance mergers that took place in the 1990s and early 2000s were disastrous for consumers, with price increases of up to 40% in communities that lost competition.

  1. The big five could become the mammoth three.
    Currently the five largest health insurers are UnitedHealth Group, Anthem, Aetna, Cigna and Humana. The proposed agreements would create an Aetna-Humana merge and an Anthem–Cigna merge.

    The agreement between Aetna and Humana raises competitiveness concerns primarily in the Medicare market, limiting options for seniors. Anthem and Cigna’s deal is a concern due to its large size and the companies’ geographic overlap, which would limit choices for major employers with a workforce in multiple states.

  1. The Affordable Care Act (Obamacare) is a two-edged sword.
    Health reform legislation outlined opposing goals:


More choice. One major provision of the Affordable Care Act is to provide people with more health care choices and affordable policies. In an ideal world, competition would spur innovation and drive costs down. But in reality, major insurers are withdrawing from exchanges created by the Affordable Care Act because they’re losing money in those markets.

Better collaboration. Health reform’s success depends on decreased duplication, evidence-based treatment protocol and better utilization. This reshaping of the practice of medicine includes incentives for removing barriers and capturing value.

Mergers have the potential to improve this collaboration and generate economies of scale. As Aetna claimed with its merger announcement, “The combined entity would drive consumer-focused, high-value health care.”

  1. The government has an anti-trust mindset.
    This isn’t the first merger roadblock in health care, and it won’t be the last. The New York Times reports that the current administration “has not been shy about quashing deals – especially in health care.”

    Not only have mergers among large hospital systems been blocked, but the government contributed to the failed merger between Pfizer and Allergan by announcing new tax rules that made the deal less attractive.

  2. Merger mania continues.
    Although these mega mergers are under scrutiny, smaller mergers continue across the U.S. among insurers, hospital systems, pharmaceutical companies and others.

    As a case in point, independent hospitals are being gobbled up by larger health care systems, with 112 hospital acquisitions announced in 2015, according to management consulting firm Kaufmann Hall.

    In addition, doctors are giving up independent practices in favor of employment by hospitals or large health systems, and insurance companies are joining forces to increase their negotiating clout. The CIT Healthcare Industry Outlook expects this consolidation to continue as a strategy to improve efficiencies, lower costs and increase revenues.

This is an ongoing saga that won’t come to a quick conclusion. The merger announcements came during a three-week span in summer of 2015, lawsuits challenging the mergers were filed this summer, and rulings aren’t expected until early next year.

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OSHA injury reporting changes may affect workers comp insurers

As OSHA makes changes to its injury reporting policies, workers compensation insurers may be affected.

As the Occupational Safety and Health Administration makes changes to its workplace injury and illness reporting guidelines, workers compensation insurers may have to reconsider their internal risk management and accident prevention policies.

OSHA's Improve Tracking of Workplace Injuries and Illnesses rule will require employers in high-hazard industries to meet electronic recordkeeping guidelines for reporting workplace injuries and illnesses. In addition, they must make these records publicly available as data to be posted on OSHA's website. According to a report in Business Insurance, this should provide an additional incentive to workers compensation insurers to prevent workplace safety incidents, as this information is used by OSHA to publicly shame repeated violators and their workers comp insurers.

"OSHA has made a habit of naming both employers and their workers comp insurers in news releases about citations."

Speaking at a National Advisory Committee on Occupational Safety & Health, David Michaels, assistant secretary of Labor for Occupational Safety and Health, said the agency has previously made a habit of naming both employers and their workers comp insurers in news releases about citations and fines issued for violations of safety regulations.

"These are cases in which the employer's actions really were egregious, one or more workers were hurt very seriously and the actions taken by employers should have been stopped long before the workers got hurt," Michaels said. "I had a discussion with one executive at one [insurance] carrier saying, 'Why did you list us on the press release, we had nothing to do with this. I said, 'That's exactly right. The workers compensation carriers should play a role in this.'"

Collaboration between insurer and client crucial 
Business Insurance had previously reported that OSHA has begun naming both cited employers and their workers compensation insurers in instances where citations and fines were above $40,000.

"For some companies, the damage to their corporate image may be more of a deterrent than the fines OSHA may issue," the agency said in a statement released to Business Insurance. "Likewise, we recognize that workers compensation insurers can have a role in influencing companies to implement safety and health management systems and reduce the risk to employees."

Many states require workers comp insurers to provide accident prevention services to employers. However, even if this is not required by law, insurers are encouraged to offer these programs. As PropertyCasuatly 360 reported,  a properly run workers' compensation insurance program is the property and casualty coverage where a business has the most opportunity to reduce its claims and cost.

PC360 recommended that workers comp insurers work with employers to implement the most current methodologies for evaluating and tracking the performance of the workers' compensation program, including determining what areas of the company have the highest risk for injury. Insurers should also make sure the company's executives understand the cost of a workplace injury beyond immediate compensation, especially as OSHA changes may present public relations challenges. Businesses can also use this information to evaluate their insurer and grade its performance in helping the organization to mitigate its risks.  

FAA releases new rules on drone use

The FAA has released new guidelines for drone use.

The Federal Aviation Administration has recently released new rules that clear the way for low-level small drones to be used for education, research and routine commercial use, though home package delivery will require additional regulations.

As Reuters reported, commercial drone operation had previously been illegal in the U.S. unless the pilot received a specific waiver from the FAA. Under the new rules, which go into effect in August, drones weighing less than 55 pounds and flying under 400 feet high and 100 miles per hour, can be used within sight of an operator, for the following approved purposes:

  • Agriculture
  • Academic/educational use
  • Aerial photography
  • Research and development
  • Bridge, powerline, pipeline and antenna inspections
  • Rescue operations
  • Wildlife nesting area evaluations

There are still several restrictions. Drones cannot be flown over people, and they cannot be used at night unless equipped with special lighting. The drones must also stay at least five miles from airports. Operators must be at least 16 years old and will have to obtain a remote pilot certificate. To qualify for the certificate, the pilot must either pass an initial aeronautical knowledge test at an FAA-approved knowledge testing center or have an existing non-student Part 61 pilot certificate. The Transportation Security Administration will also conduct a security background check of all remote pilot applications prior to issuance of a certificate.

"With this new rule, we are taking a careful and deliberate approach that balances the need to deploy this new technology with the FAA's mission to protect public safety," FAA Administrator Michael Huerta said in a statement. "But this is just our first step. We're already working on additional rules that will expand the range of operations."

Implications for insurers
According to The Chicago Tribune, some states may impose additional regulations on drone use, including requiring operators to purchase insurance. For their part, many property & casualty insurers are already moving to get their licenses to operate the devices, which can be a useful tool for adjusters.

Many adjusters have already been using drones, as PropertyCasualty360 previously reported. Drones are sometimes used by adjusters when doing inspections of properties, particularly in situations where gathering evidence for claims can be dangerous. This includes rooftops damaged by flood or fire or homes that were hit by natural disasters such as tornados. With drones, insurers can take photos or video required during inspection without putting adjusters at risk for injury. 

Drones can also be useful for quickly surveying large areas affected by storm damage more quickly than adjusters can on foot. This is especially helpful following tornados and floods which result in downed trees and power lines, resulting in limited access to certain areas.

Through drones, adjusters are able to complete their inspections more quickly, allowing claims to be settled sooner. As Reuters noted, the U.S. Interior Department has been using unmanned aircraft systems since 2009 to conducting its wildlife and vegetation surveys in protected areas or areas affected by wildfire.

The full set of new guidelines are available from the FAA, and it totals more than 600 pages. One other point of note: even under the new regulations, drone use remains banned in Washington, DC, due to security concerns.