President’s Commentary

There are many topics I want to touch on in this commentary. Beginning with a quick look at our current results, the continued weather-related claims, as well as poor results in the general liability and commercial auto areas contributed to our unprofitability from an underwriting perspective through the end of September. This has only been underscored by the dismal investment marketplace. Our production remains strong with exceptional policyholder retention and steady new business. While our growth is outstanding, to be able to grow on a profitable basis would be even better! Our loss control, business development, and underwriting teams are available to work with any of our insureds to ensure a safe working atmosphere. 

The Role of Green Tree Risk Partners 

By now, many of you have heard that we’ve renamed our wholesale insurance agency from ABM to Green Tree Risk Partners (GTRP). Some have asked questions about our intentions on starting a wholesale insurance agency and pairing it with Pennsylvania Lumbermens Mutual Insurance Company (PLM). The answer is quite simple. PLM was founded 128 years ago by a group of lumber dealers in the Philadelphia, New York, and New Jersey regions to provide property and casualty insurance solutions for their unique businesses. What started out as a small mutual fire insurance company has grown to be the largest mutual insurance company that focuses exclusively on the “wood niche” (i.e., the forestry, lumber, hardware, and building material dealer industries). The reality is that no insurance company can do everything. There are lines of coverage that we do not want to underwrite for one reason or another, and frankly, there are businesses in the wood niche that do not meet our underwriting standards. There are also accounts that are outside of our area of expertise. Yet, we understand that those accounts need coverage. Who better to find acceptable partners for those accounts than a wholesale insurance agency that was born out of PLM, and who will work with a retail broker of their choice to find an acceptable market for all parties?  

Thus, Green Tree Risk Partners was created to help businesses operating in the wood niche to find markets beyond PLM for their property and casualty insurance coverages. When we talk to you about GTRP, think of it as an extension of our founding vision. We are not attempting to replace your broker; we are offering solutions by placing lines of coverage or in some cases entire accounts with third-party insurance carriers. These markets may be admitted or non-admitted. In these instances, you would not lose the benefits of PLM and our knowledge of the wood and building materials segment just because there is a line we do not offer or a risk we do not underwrite. In fact, in cases where your insurance may be hard to place, it is even more important than ever to leverage our industry expertise in finding you the best home for your peace of mind.  

We started off by creating a workers’ compensation market through GTRP and have steadily grown that book of business to support the rest of the property and casualty accounts that we write within PLM. For accounts submitted to PLM that do not fit our risk appetite, we are further pursuing them through Green Tree Risk Partners and third-party markets. At the end of the day our goal is to create a marketplace that would blanket the entire forestry, lumber, wood manufacturing, and building material dealers space that is all inclusive either within PLM or within GTRP. For more information on Green Tree Risk Partners, you can visit their website at www.greentreerisk.com or reach out to Angelo Ganguzza at (267) 825-9046 or at angelo@greentreerisk.com. 

The Importance of Cybersecurity 

October was Cybersecurity Awareness Month and with that in mind we conducted weekly cyber training courses for all our employees – that is a total of four cyber training courses during the month for everyone at PLM! This exposure to your business is very real and you do not want to learn about cybersecurity after having to deal with a cyber incident. Similarly to what we did with many of our vendors, we’ve begun to ensure that the brokers we do business with all have strong cyber programs in place. Many of our customers enjoy the benefit of basic cyber liability coverage within their PLM policy. This coverage includes a toolbox of services available such as cyber training, incident roadmap tools, and support when confronted with a cyberattack. For more details, don’t hesitate to reach out to our loss control team, business development representatives, or underwriters.  

Below is a brief that the Insurance Information Institute (III) recently released on cyber that helps bring to light this exposure especially for small businesses. 

Cyberattacks Targeting Small Businesses Hit 3-Year High (Source Axios Media) 

A staggering 73% of small businesses experienced a cybersecurity incident in the past year, with 42% losing revenue as a result, according to research by the Identity Theft Resource Center (ITRC), reported PropertyCasualty360. 

The big picture: Despite the majority of small businesses feeling prepared for such incidents, the reality reveals a lack of basic cybersecurity measures and response plans, indicated ITRC’s Business Impact Report. This disconnect between perception and reality, coupled with the significant repercussions of cyber incidents, highlights the urgent need for enhanced cybersecurity awareness and measures among small businesses, ITRC said. 

By the numbers: 

• 73% of small businesses reported a cybersecurity incident in the past 12 months, marking the highest percentage in the three years of the ITRC Business Impact Report. 
• 42% of attacked businesses lost revenue due to the cybersecurity event, a 3% decline compared to the previous year. 
• 33% of affected organizations used cyber insurance as their primary source of recovery funding, while 29% used cash reserves and 25% extended or opened a new line of credit. 
• 85% of small businesses claimed they were ready for a cyberattack, despite the high number of incidents reported. 

What they’re saying: “The good news is that small business leaders are focused on data security and privacy protection. However, we still have a lot of work to do,” said Eva Velasquez, ITRC president and CEO. 

The takeaway: Despite a high incidence of cyberattacks on small businesses, there’s a significant gap between perceived readiness and actual preparedness, highlighting the need for more robust cybersecurity measures and incident response plans. 

Go deeper with Triple-I’s cyber resources:  

• Cyber Insurance: a Key Part of a Robust Business Strategy 
• Cyber: State of the Risk 

Here are some additional key takeaways and advice regarding simple things your company can do to prevent cyber threats.  

We are often surprised to see the number of organizations that don’t have multi-factor authentication (MFA), adequate backups, or employee cyber training. These are among the top cyber defense mechanisms. MFA requires somebody to have two forms of proof before accessing your system, such as a password and a special code sent to your cell phone. If a hacker tricks you into giving up your password through a phishing attempt, they must also have your cell phone to get the second code to log in. Microsoft and most systems offer MFA and it isn’t too difficult for your IT department or partner to enable it. In the case of ransomware, should you fall for a phish or other technical vulnerability, having current backups can allow you to restore your data and get back up and running without the need to obtain encryption keys from a criminal. Finally, training and awareness ensures that your company has a “human firewall” to spot phony communications on e-mail, telephone, or text. Continuous training helps your team keep pace with cyber tactics that are constantly evolving, such as the current scam to use “QR” codes with malicious links.  

I also thought I would share one more tidbit here. When an employee is impacted with a cyber event at home, they become distracted. Distracted employees make mistakes and can cost your organization money. One way we have tried to keep our employees safe and focused is by purchasing identity theft protection for everyone at PLM.  

Rise in Fraudulent Claims 

For the first time in my 25 years at PLM, we are seeing an increase in suspected fraudulent claims being submitted. This is particularly true with the roof losses that we are seeing. Relatively minor damage to roofs is being dramatically overstated in hopes of securing a larger claim payout. These insureds are claiming sums well in excess of amounts needed to repair the damage or in appropriate cases, replace the roof. In many of these claims, a public adjuster has been employed by our insureds. Please be aware that in several jurisdictions, submitting a fraudulent claim is a felony. For many years, PLM has employed the services of an Independent Fraud Investigation Team where we rarely needed to use their services. With the significant increase in fraudulent claims, we are now employing their services well above our historic pattern.  

We have a 128-year reputation of claims excellence, performing thorough claims investigations on an effective and efficient basis, and paying what we owe when we owe it. At the same time, we have an obligation to all our policyholders, as a mutual insurance company, to protect both our interests. In order to protect those interests, when a confirmed attempt has been made to defraud PLM, we will prosecute as appropriate any and all attempts to commit fraud to the fullest extent of the law. 

Breakroom Hazards 

Take a quick walk through your breakroom. While doing so, ask yourself the following question, “When was the last time I replaced that microwave or that refrigerator?” Once again, we suffered a major loss when a decades old refrigerator malfunctioned and burned down an over $5 million business. The last two times we had similar losses, it was a malfunctioning microwave, and my all-time favorite, a hair dryer in the ladies room. These appliances don’t last forever! If you can’t remember when they were last replaced, I suggest the time is now. Why not give all your employees a nice holiday present and order new appliances for the breakroom today! 

Portable Sawmill Program 

Several years ago, after a decade long hiatus, we began insuring portable sawmills for woodworkers and artisans. The program is going fairly well. While we have a tight underwriting process, we’ve enjoyed some success to date and are working on expanding this aspect of our business. Many of you may be thinking that a portable sawmill policy must be a pretty small policy, and you would be right. The fact of the matter is that more than 50% of our business is made up of accounts that pay us less than $10,000 a year in premiums. There really is no account that is too small for us to consider, and if someone tells you differently, call me! 

Recently we have become aware that one of the manufacturers has rolled out battery-operated portable sawmill equipment. You may recall an earlier Lumber Memo that dealt with the problems we were having with lithium battery chargers. Let’s make sure we follow those guidelines on any portable mills that are battery-operated. If you want to discuss portable sawmills, call Vince Pace in our office at (267) 825-9250 or email him at vpace@plmins.com. 

Don’t forget we are also interested in hardware stores. At the beginning of this year, we launched HardwareXpress, our program to bring fast and competitive quotes for smaller, one-location hardware stores. Call Sydney Stenson at (267) 825-9360 or email sstenson@plmins.com for more information. You can also find more information on our website at www.plmins.com/hardware. 

On a final note, we publish this newsletter, the Lumber Memo, around five times a year. In addition to my commentary in each issue, we share cyber tips, risk management guidelines, as well as emerging risks. You can access all our prior issues of the Lumber Memo on our website at www.plmins.com/about/newsroom/lumber-memo/. As always, if you have any questions or comments, please do not hesitate to contact me directly at jsmith@plmins.com or by calling me at (267) 825-9246.