By: John K. Smith, President & CEO
Automation and technology have become widely adopted tools to help businesses streamline operations by improving efficiency and quality. Even more technology and automation tools continue to be applied in business, especially manufacturing.
If you have recently planned out, embarked upon, or implemented such a project, you know how expensive the equipment and the technology can be! Understandably, you will want to protect that investment. Changes in operations create changes in risk, so there some risk management issues you should consider if you are undergoing or have recently completed this type of upgrade in your business.
First, the cyber exposure that arises from enhanced automation can be significant in nature, and it needs to be thoughtfully considered to ensure that your operation is protected! Your technology vendors usually can assist you in this area. However, a risk will always remain.
Your broker and PLM can help address this risk with a cyber liability insurance program. Our program goes beyond the necessary cyber liability coverages available in the market. It includes valuable support services: such as access to experts in cyber extortion and data breaches, experienced and dedicated cyber claims specialists, and an eRiskHub® online portal designed to help businesses prepare for and effectively respond to data breach and cyber attacks. Please do not hesitate to reach out to a PLM representative to discuss the benefits of our cyber liability program, both in coverage and in supporting services. Further, the expertise of our loss control specialists and IT professionals are always available if you have ideas that you would like to bounce off them.
The second issue is the financial value that you have added to your operations because of new equipment and software. Unfortunately, we have seen losses where insureds were underinsured because they had not updated the value on their insurance policy to reflect this enhanced automation. Again, this is something you need to consider and take steps to rectify.
Third, as your organization evolves and changes due to the implementation of technology, it can take much longer for it to restart after a loss, as you have to reacquire specialized equipment and technology that goes with it. This can mean longer downtime to rebuild. We would encourage you to consider this when you are reviewing the amount of business interruption coverage that you are carrying.
Some insurance companies will claim that their policy covers the actual loss sustained, but losses must be proved when they occur. This can be a complex and time-consuming process no matter who the insurance carrier is. At PLM our goal is to provide peace of mind, so we choose to address your actual business income exposure upfront. We provide a worksheet to help you (and your accountant) determine appropriate levels of coverage before the loss occurs, thus streamlining the claim handing process at the time of loss.
The purpose of the Business Income coverage is to put the customer in the same financial condition they would have been had the (covered) loss not happened. After collecting the business income settlement and posting it to the financial statement, the net profit should be equal to what would have been had no loss occurred. The following common issues prevent businesses from being able to fully realize the benefits of their business income insurance policies:
- Projecting anticipated sales
- Identification of continuing and non-continuing expenses
- Seasonal sales variations (assume the loss is at peak of season)
- Earnings – are they increasing or decreasing?
- Bottlenecks in operations – the amount of time to replace equipment
Finally, some technology projects will result in a change of staffing with certain members struggling to survive in an environment that requires a different skill set. Human resource-related actions need to be skillfully guided to avoid any Employment Practices Liability (EPLI) issues that may arise. This is a daunting task for most businesses, especially those without a large human resources department to consult.
We’re here to help. We provide most of our insureds a basic level of coverage for Employment Practices Liability related losses and an EPLI risk management “toolbox.” This toolbox includes a toll-free Legal Advice Line to connect you with general counsel from experienced attorneys, well-versed in federal and state employment law. It also includes access to a website that provides a model employee handbook, web-based training modules, a best practices checklist, and a library of employment related articles that can help you navigate compliance.
PLM’s Loss Control Department also offers consultation services and resources to assist our customers.
- Professional consultation: Our Loss Control Representatives are trained, experienced professionals backed by many years of experience with wood operations. They are here to identify your safety needs and provide time-tested, relevant solutions to protect your employees and operations. This includes administrative and operational policies and procedures, physical plant surveys, training, and several other consultation tools.
- Online Loss Control Center: PLM offers a vast collection of safety resources on our Loss Control Center located on the PLM website at plmins.com/loss-control/. The Loss Control Center has a library of guides ranging from operational challenges like taking a proactive approach to business interruption to tips on building a fleet management policy. There are downloadable guides, checklists, and safety tools to aid our customers on mitigating losses in their organizations.
If you would like to discuss the changes in your operations and the emerging risk management needs, please do not hesitate to reach out to your PLM Business Development Rep or to me personally.
