You don't need me to tell you what a crazy world we're living in, but it may be helpful to know what modern risks to consider prior to shopping for business insurance. Along with good old fashioned fire, wind, water and theft, there are a whole host of other insurance considerations today's entrepreneur should have on their radar. And just like always, those entrepreneurs who run their businesses conservatively, with an eye towards risk management, will be rewarded. But those who don't will suffer the wrath of penalties and ever-increasing rates.
If you think about all the insane technological advances in just the past 20 years, it should put things into perspective just a bit. Take for example mobile devices. In the late 1990's, insurance companies were first trying to figure out how to grapple with drivers who now had phones glued to their ears while driving. But at least their eyes were still focused on the road. Maybe five or six years later, texting became the rage and so drivers' eyes were then on their screens with vehicles still in motion. A much deadlier combination.
In 2024, we humans still haven't conquered the many challenges associated with texting while driving. And it's illegal to do so for good reason. But that hasn't stopped most people from doing it. Integrity Check: What do we do when driving down the road and our phone "dings"? We instantly look at who texted us, of course. Don't deny it.
Who do we turn to after causing a major accident after taking our eyes off the road for a split second to check that text message? Your insurance agent, naturally. And if you're a business owner who owns company vehicles that your employees are driving around, you're even more vulnerable. Multiply that texting-while-driving risk factor times however many employees you have, and it becomes apparent that an associated cost is going to affect your premium (and every other policyholder for that matter).
So yes, the distracted driving situation has DRAMATICALLY turned the insurance industry on its head and carriers still don't know what to do about it, other than making everyone else pay for bad actors. Sure, there are GPS monitoring programs available, but they're not catching on as quickly as the insurance companies would like. Every time I've mentioned this option to my business clients it often results in the "too much big brother" reaction. I get it, but at some point, the incentive to allow more intrusiveness may outweigh higher auto premiums.
Besides the obvious perils of driving vehicles on roadways, there are many more modern risks that entrepreneurs should be privy to. These include, but are certainly not limited to:
Cybercrime
Looting, Rioting, & Civil Disobedience
More frequent and violent weather damage
Wildfires
Increases in litigation/lawsuits
Let's briefly look at each of these situations separately:
Cybercrime:
It's a hacker's paradise out there in the "interwebs". I don't claim to know how cyber criminals do what they do. But I do know high level tech professionals whose jobs' it is to stop them, either militarily, or in the commercial realm. The short story is that you really can't stop cybercrime, but there are reputable commercial insurance carriers that offer cyber-related coverages and oftentimes have third party arrangements with IT recovery and consulting companies that can be included with the coverage upgrade. These coverages are RARELY included in a standard business owners insurance policy or package. But if they are, they are extremely limited in coverage. My advice to businesses that collect any kind of customer credit cards, banking info, social security numbers or dates of birth is to bite the bullet and chock up the extra dough for cyber coverages. It may cost a few extra hundred or a few extra thousand dollars a year, but the alternative could be much, much worse.
Looting, Rioting, and Civil Disobedience:
Does May 2020 ring a bell? How many urban-located businesses experienced (and continue to experience) burglary, theft, arson, vandalism, and assault? All one needs to do is log onto Twitter or TikTok for 5 minutes and watch video after video of miscreants destroying the livelihoods of hardworking business owners. While they'll likely never be held accountable (because that is the world we're living in), you, Mr. or Mrs. Business Owner, will still be held accountable to your landlord for the damage or loss to your leased space. Not to mention the claim you'll need to file for stolen inventory, or the physical harm an employee may endure from trying to stop a criminal. This falls under the auspices of Workers Compensation coverage, which is also contained under the "umbrella" of commercial insurance. All of the above scenarios have had severe consequences on the insurance industry, and subsequently, all policyholders in a similar risk pool. This is an especially important risk consideration that is more relevant today than any other time in recent history.
More frequent and violent weather damage:
Has anyone spoken recently with property owners in Florida? They'll likely tell you that insurance coverage for their homes and businesses is becoming increasingly harder to obtain and/or afford due to the increased potential of severe hurricane damage. Consider the huge migration from the congested Northeast (New York and New Jersey in particular) to Florida and the Coastal Carolinas during the Covid frenzy. Imagine moving to these places only to discover months after settling in that your mortgage is now in jeopardy because your insurance carrier is pulling out of the state due to their incapacity (i.e. inability) to pay claims. If you have a mortgage, like most American property owners do, you need to insure it as a condition of the contract. What happens if you can't? This is real, and it's happening at an alarming rate.
Wildfires:
When I lived in Southern California in the late 90's, there were a few controllable wildfires that broke out east of San Diego. It was certainly scary then, but the fires were not annual events like they have been the past decade or so. I recently read that homeowners insurance for mega mansions up and down the California coast can easily cost hundreds of thousands of dollars, if not a million dollars a year in premium. I would assume commercial buildings share a similar fate. Many national carriers spread their risk portfolios out over many states. So what happens in California can impact policyholders in New Jersey, and vice versa. I do miss living in California at times, but it seems completely unaffordable anymore. I don't know what lies ahead for that once-great state, but it doesn't seem good.
Increases in litigation/lawsuits:
Before they became obsolete, the thickest section of any phonebook was that of the Personal Injury Attorney. Take a drive up I-95 from Philadelphia to New York and count how many Personal Injury/Workers Comp lawyer billboards you see, all promising maximum settlements. Where do those settlements come from? The pot of gold at the other end of the rainbow? Nope. An insurance company most likely. If you factor in the staggering poverty that so many Americans find themselves in today, is it any wonder insurance fraud is rampant? I'm not advocating for, or suggesting that anyone commit such an act, but it's an issue that business owners need to be increasingly aware of. If you have a business that is located anywhere pedestrians are walking, you could fall subject to the ol' "slip-and-fall" claim. There are also countless stories of commercial vehicles with wrapped in corporate lettering that become the targets of unscrupulous fraudsters. While some claims are legitimate, others may not be. One thing is for certain: there are no shortage of attorneys ready to discover what kind of liability limits you're carrying for them to go after.
In General:
We hear an awful lot about the core group of trusted advisors that business owners should have at the ready, including a good accountant; a good lawyer; a good financial advisor; a good banker; a good commercial realtor. But rarely does a good insurance broker get mentioned. I don't know why that is. I speculate that it's because it's such a vague industry that no one fully grasps (not even insurance brokers!), and it's usually an afterthought leading up to the lease closing. But the thing is, if more entrepreneurs brought a reputable insurance agent/broker into the fray sooner, rather than later, it would put the entrepreneur in a more advantageous position by giving the insurance professional more time to find a better deal, ultimately saving substantial money for the entrepreneur.
In Closing:
So the takeaway is, it's impossible to plan for every real or perceived disaster that lurks around every corner. And even if we could, it would likely be cost prohibitive. The trick is to take calculated risks, and strike a balance between what risk you can tolerate and what your budget allows. A solid insurance broker will be one of your greatest assets, just like your attorney, accountant, realtor, etc. He or she will be able to guide you, based on the experience he or she has had with other businesses similar to yours. And a really good agent/broker can likely put you in contact with other advisors you may not have in your arsenal yet. Whatever the case, breathe easy and grab life by the horns!
Gabe Schick is a licensed insurance agent/broker operating in the states of Pennsylvania and New Jersey, offering quality insurance products and services through Bean, Mason & Eyer, Inc., and can be reached directly at (609)240-1767, or by email at save@agentgabe.com. His website can be found at www.AgentGabe.com for more information.