By: John K. Smith, President & CEO
In a world that is finding increasing value in contactless operations, we are seeing even higher levels of technology and automation in business, especially manufacturing. Anyone who has recently planned out, embarked upon, or implemented such a project will tell you how expensive the equipment and the technology can be! Understandably, they want to protect that investment. Changes in operations create changes in risk, so there some risk management issues your clients should consider if they are undergoing or have recently completed this type of upgrade in their business.
First, the cyber exposure that arises from enhanced automation can be significant and it needs to be thoughtfully considered to ensure that their operation is protected! Their technology vendors can assist them in this area. However, a risk will always remain. 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: 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. You can reach out to a PLM representative for more information on 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 to you and your clients to bounce ideas off them.
The second issue is the financial value that your client has added to their operations because of the equipment and software they installed. 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 should share with your clients to consider and take steps to rectify.
Third, as their organization evolves and changes due to the implementation of technology, it can take them much longer to restart operations after a loss, as they have to reacquire specialized equipment and its accompanying software. This can mean longer downtime to rebuild. We encourage you to discuss this with your clients when they are reviewing the amount of business interruption coverage they 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 the carrier. At PLM our goal is to provide peace of mind, so we choose to address their actual business income exposure upfront. We provide a worksheet to help your clients (and their accountants) determine appropriate levels of coverage before a loss, 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. Common issues that prevent insureds from being able to fully realize these benefits include:
- 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. PLM provides 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 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 your clients navigate compliance.
PLM’s Loss Control Department also offers consultation services and resources to assist our policyholders.
- Professional consultation: Our Loss Control Representatives are trained professionals backed by many years of experience in identifying potential loss sources regarding not only cyber and EPLI, but for a broad array of loss sources particular to wood operations. We offer time-tested solutions to address those sources. 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 policyholders on mitigating losses in their organizations.
If you would like to discuss any of the emerging risk management needs for your clients, please do not hesitate to reach out to your PLM Representative or to me personally.
