Archive for the ‘Property & Casualty’ Category:

Nuts to You (Not the Thieves!): A 360° Approach to Nut-Theft Risk Management

By Greg Merrill & Andy Sharpe

Nut theft is no joking matter—it’s a significant and growing threat to California’s $9 billion+ nut-tree business. With more than 30 nut-theft events in 2015 compared to just one in 2009 and four in 2014, what once warranted only local agricultural area media coverage now garners national mainstream attention. The 2015 price tag? $4.6 million.

That’s enough of a hit to a vital California industry to make the state’s legislature sit up and take notice. Last year, both houses passed a bill—in record time—to establish a statewide, cross-jurisdictional “Agricultural Cargo Theft Working Group.” This funding mechanism would have activated and aligned numerous law-enforcement agencies in helping target these crimes, but Governor Brown unexpectedly vetoed the legislation on September 21, 2016. Additional legislation is in the works to increase criminal penalties for thieves from a misdemeanor to a felony.

Tailoring Insurance Coverage

In the event they are the victim of nut theft, growers should have a strong post-loss solution. As such, it’s important they work with an agent or broker with specialized expertise to ensure they have properly structured insurance placements. The analysis starts with contract review: Who bears the risk, and are there “handoffs” along the path from tree to processor to final end-user? Only when these terms are understood can insurance coverage be negotiated and implemented.

Why Steal Nuts?

They’re valuable: A truckload of nuts, especially almonds, walnuts, and pistachios, can range from $100-500K.
They’re in demand: Touted health benefits and drought have strained supply.
They’re not easily traced: Unlike electronics, nuts don’t have serial numbers!
They vanish quickly: By the time a theft is discovered, the nuts are often already on a ship or broken into smaller loads and dispersed to out-of-state destinations.

The following approaches are available to growers and distributors:

  • Commercial-Package Policy
    There may be some coverage for Business Personal Property Stock in Transit under the basic policy form. However, this transit coverage tends to cover only a limited number of perils, so relying on this extension could lead to an uncovered loss.
  • Cargo/Transit Policy
    Once the shipment is in the correct trucking carrier’s control, ensure the trucking carriers’ cargo policies do not exclude theft for any reason other than employee dishonesty, which is excluded by most cargo policies (this can be easily covered with a separate crime policy). Many trucking cargo policies will exclude or limit theft coverage if the vehicle is unattended or if a trailer is dropped. Additionally, consider requiring a crime policy to cover theft by employees of the trucking carrier (including theft by the dispatcher and/or the driver).
  • Stock-Throughput Policy (STP)
    An STP offers growers and distributors the most comprehensive protection: Goods are covered at all times whether they’re being moved, processed, or stored. An STP can be an “all risk” type of insurance policy that provides seamless coverage from end to end and protects against perils including earthquakes, floods, and contamination.

 

Pre-Loss Risk Control

Growers and distributors should do everything possible on their end to prevent a theft situation, but orchard premises security (i.e., fencing, cameras, a guard service, etc.), is not an end-all-be-all solution. Nut theft is more commonly an act of fraud rather than an act of force.

Perpetrators are often part of organized crime groups, using sophisticated technologies to hack into trucking firms and utilize Department of Transportation databases. “Drivers” show up with high-quality, legitimate-looking paperwork. These forged documents incorporate burner phone numbers and enable thieves to steal shipping information and to quickly move the product to the black market stream of commerce. The thieves, and their loot, become immediately untraceable.

Growers/distributors can take any of the following precautions to prevent theft:

  • Develop a relationship with a few select trucking carriers with whom a consistent protocol can be established to confirm the correct drivers are picking up the loads.
  • Ensure your computer systems’ security is state-of-the-art, and ask carriers about their data integrity.
  • Call the carrier on the phone number provided during the originally contracted shipment and not the phone number given on any shipping documents (given their potential fraudulent nature). Require those firms to advise detailed information at least 24 hours in advance of pick up.
  • Get each driver’s license number and thumbprint.
  • Photograph both the driver and his/her truck.
  • Consider using radio-frequency trackers to ensure the loads end up where intended.

Because of the potential high profits and low risk, nut theft continues to be alluring for thieves and a challenge for growers/distributors. Taking a 360° risk-management approach—contract review, insurance program design, and pre-loss prevention can go a long way towards minimizing or, at best, avoiding exposure to loss.

Greg Merrill is Senior Vice President and Director of Crop Insurance Services at Ascension’s Pan American Insurance Agency, Inc. business unit. Greg has been helping agribusiness clients manage a wide range of operating risks for more than 13 years. Andy Sharpe is Regional Transportation Leader for Ascension’s Transure business unit. For more than 15 years, Andy has focused on transportation risk management and insurance, and is a renowned industry specialist.

Workers’ Compensation Bulletin: New Computation Rules in California for Experience Modifications Coming January 1, 2017

workers-compensation

For the first time since 2010, the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) is changing the formula for calculating experience modifications, effective January 1, 2017. This could impact your Workers’ Compensation premiums.

What is an Experience Modification?

Experience rating is a method that compares an employer to other companies in its industry class based on their historical claims experience. It is expressed as a percentage—called an experience modification factor, or “Ex Mod”—and utilizes past loss experience to help predict future losses. The Ex Mod is applied against premium and either penalizes a company (if its loss experience is worse than the industry average) or rewards it (if its loss experience is better than the industry average). Experience modifications create a powerful incentive for employers to prevent claims and control claims costs.

How is it Currently Calculated?

The experience modification rating process uses what is known as a split point of $7,000. An insured’s actual losses below $7,000 are considered primary and go into the formula at full value. Losses above the split point (to a maximum of $175,000) are considered excess losses and have less weight in the formula. Dividing losses into primary and excess components gives greater weight to loss frequency, which is typically more controllable by the employer, than to loss severity, which is typically caused by less predictable catastrophic claims. The current formula, in effect since 2010, is a one-size-fits-all approach for all employers regardless of company size.

How will it be Calculated Starting January 1, 2017?

WCIRB found that the pattern of claim frequency and severity in California has changed over time, and the single $7,000 fixed split point was “no longer producing optimal results.” On January 1, 2017 it will be implementing a variable split point methodology where, depending on the size of the employer, there will be 94 different primary loss split points between $7,000 and $75,000. Losses above an insured’s split point will no longer be used in the experience modification calculation. The overall effect of the change will be to give greater weight to claims frequency while claims severity, although still a factor, will be limited at no more than $75,000.

What is the Potential Impact?

The WCIRB states: “While the variable split point plan represents a fundamental change in the values used to calculate experience modifications, there is no expectation that experience modifications for California employers as a whole (emphasis added) will change.” However, each individual insured’s experience modification will be dependent not only on its losses, but also on its size. Under the new formula, insureds whose split points increase above the current $7,000 level will have a greater amount of their losses designated as primary and will be more negatively affected by frequency than severity.  This in turn could lead to an increase in their Ex Mod. On the positive side, the $75,000 excess cut off limits the impact of catastrophic losses which should especially benefit smaller employers.

Ascension Will Be At The CSLN Annual Leadership Conference 2016

Ascension is pleased to announce that we will be sponsoring a booth at The CSLN Annual Leadership Conference 2016, at the Dana Hotel on Mission Bay, San Diego, California, from April 14th  and 15th 

Hosts Nichole Bogue and Jeff Chenu will be discussing insurance/risk management options unique to the Independent/Supported living care community. We look forward to seeing you there!

Click here for more information on the conference and to register.

Upcoming Free Seminar – Market Update: Creative Solutions for a Changing Market

Please join us for a seminar and panel discussion, led by Shiraz Saeed, Cyber Specialist at AIG, and John Simios, ARM, AAI, Vice President, Captive Resources LLC.

This seminar will focus on sharing ideas and expertise regarding creative risk transfer solutions and assessing new and growing exposures for middle- market companies.

Questions Answered/Topics Covered:

  • Market Update: Property & Casualty and Employee Benefits
  • How can I assess my Cyber Risk?
  • Am I large enough for a Captive? Isn’t that only for large companies?
  • What are rates doing? Should I expect an increase in next year’s renewal?
  • Regulatory Environment Changes: OSHA, ACA Compliance
  • Learn about current Trends and Best Practices

Date:
Thursday, October 29th, from 8:00am to 10:00am
Location:
Charlotte Country Club, 2465 Mecklenburg Avenue, Charlotte, NC 28205

RSVP to Michael Betters

A Proactive Risk Approach Can Help Stem Injuries

Steven J. Billings, MBA, is a risk advisor in Ascension’s waste management practice. In this article, which he co-authored for Waste360 with George H. Lucas of Schul + Baker Partners, he discusses ways to increase safety in the waste and recycling industry.

Serving approximately 70,000 professionals worldwide, Waste360 is the leading information and services provider to the solid waste, recycling, organics and sustainable communities and plays a critical role in connecting industry professionals worldwide.

Read the full article.