Tag Archive for: errors & omissions

Risk Management in the Cannabis Industry

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There aren’t a lot of resources available for cannabis business owners to protect themselves. Traditional insurance companies and banks have been hesitant to get involved due to fear of being penalized by the federal government and that the industry is a newborn to the global marketplace.

Even with legal issues aside, there are still no standardized and widely accepted risk management tools for the industry. This prevents insurers from being able to properly gauge the amount of coverage they should provide. And if any industry needs insurance and risk management, it’s cannabis. 

In this article, we’ll look at what risks to be aware of in the cannabis industry, what’s being done to mitigate risks at a policy level, and how insurance companies are finally playing a part in protecting cannabis business owners.

Risks in the Cannabis Industry

The production and sale of cannabis is a complex process that has plenty of risk from the moment a seed is planted to the point of sale. Awareness of the inherent risks throughout all facets of your business will help you put proper protections in place and be prepared for potential disasters. 

Employee Theft

Sadly, employee theft is common for a lot of cannabis business owners.

First and foremost is that the cannabis industry is largely cash-based. Because of its federally illegal status, most banks refuse to work with cannabis companies in any capacity, forcing businesses to only operate in cash and lots of it. It’s far easier and even more tempting, for employees to steal cash since it’s more probable to go undetected when compared to businesses that can operate with cashless payments. 

The nature of the inventory also invites itself to all kinds of theft. Due to how expensive and in-demand cannabis products are, they are at an increased risk of being stolen. 

Lastly, the high turnover rate of the industry presents a problem.  A report by the cannabis data company Headset found that 55% of cannabis retail workers left within 12 months. It’s difficult to establish trust or perform proper background checks when the turnover rate is so high. 

Product Tampering 

From seed to customer consumption, cannabis production requires an extensive supply chain that’s exposed to many different factors. One of these factors is an increased risk of product tampering, which exposes your company to serious liability. 

Contamination or unauthorized additions could happen at any point during the production process. A tampered product could lead to serious legal and financial repercussions if it harmed a customer or made them ill. Having the right insurance to protect yourself and your business from a financial catastrophe is more important than ever.

Another potential issue with product tampering is what happens after you sell the product. After-sale product tampering for black market sales is still prevalent, and even though it’s out of your hands, your company could still be held liable. 

Adhering to Regulations

The cannabis industry is developing fast, and it’s easy to get overwhelmed by all the changing laws that come with it.

Compliance regulations change frequently and vary from state to state. The regulations are across all areas of the industry; cultivation, processing and manufacturing, distribution and sales, testing, and even advertising. If a business is found to be out of compliance with state laws in any of these categories, it could face hefty fines, and potentially be put out of business.

Unfortunately, many small cannabis businesses are not prepared with a compliance plan and don’t monitor the constantly changing regulations. It’s vital to do so in order to avoid damaging fines. 

What’s Being Done to Mitigate Risk?

A variety of bills are currently being proposed to reduce the risk for cannabis companies. Insurance companies, including Apex, are also offering to insure cannabis companies from the risk they encounter in their day-to-day operations. 

Clarifying Law Around Insurance Marijuana (CLAIM) Act

The CLAIM Act is a proposed bill that would allow insurance companies to do business with cannabis businesses without fear of federal prosecution. The intent of this act is to reduce the amount of risk cannabis business owners face.

The act would also protect employees working for insurance companies that are engaging in business with a cannabis company. It’s been passed in the house but continues to be voted down in the Senate. 

Secure and Fair Enforcement Banking (SAFE) Act 

The SAFE Act is a proposed bill that would give cannabis companies access to banking services and prohibit penalization for insurance companies working in the industry. Without the possibility of federal prosecution, banks could finally provide cannabis owners with financial safety nets to mitigate risk.

Unfortunately, like the CLAIM Act, this bill has passed the house but recently failed to pass the senate for the third time in late 2022. If either of the bills listed passed, cannabis companies would gain access to a wide range of services to protect themselves. This could also lead to more trust from the investor community, allowing them more financial leeway. 

Insurance Companies Entering the Market

The good news is that some insurance companies are finally insuring certain cannabis companies in legal states. Insurance is a vital risk management tool that helps protect against a variety of potential losses and liabilities. Common insurance coverage for a cannabis company could include product liability, general liability, property insurance, equipment breakdown, loss of income, and much more. 

Interested in Insurance for Your Cannabis Company?

If you’d like to learn more about cannabis company insurance, or what we offer at Apex, contact us today. We love getting to know our clients and how their business works to get them the best pricing and coverage.

How Much Excess Liability Insurance Do Manufacturers Need? 

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Having adequate liability insurance is crucial in the manufacturing industry. However, sometimes general liability insurance might not be enough to keep your business protected. Enter excess liability insurance.

Excess liability insurance is coverage provided for significant unexpected events that can have potentially catastrophic results on your business, ranging from auto accidents to product liability claims.

Excess liability insurance provides just that – excess coverage limits in addition to the underlying liability policy. This additional coverage can be the difference in protecting your business from bankruptcy. 

Read on to learn what excess liability insurance covers, who needs it, and how to know how much coverage you need.

What Does Excess Liability Insurance Cover?

An excess liability insurance policy, also known as excess liability coverage, provides financial protection and higher policy limits if a claim is made that exceeds the limit of an underlying liability policy. 

In simple terms, excess liability insurance provides additional coverage on top of your existing policy.

For example, let’s say you have a $1 million general liability insurance policy and face a $1.75 million claim. You and your business would have to cover the $750,000 that exceeds your general liability limits.

However, if you had an excess liability policy of $1 million on top of your general liability insurance, your excess liability coverage would cover that $750,000 loss. This would keep you financially protected. 

Who Needs Excess Liability Insurance?

Excess liability insurance protects your business from significant losses and reduces the chance that a lawsuit could bankrupt your business. 

Many business owners choose to have excess liability coverage because they face substantial risks, such as:

  • A high degree of foot traffic
  • The handling or transportation of hazardous materials
  • The personal injury claims that could be leveled against construction, manufacturing, or similar businesses

Why Do Many Manufacturers Opt for Excess Liability Insurance?

Many manufacturers use excess liability insurance as a cost-effective way to increase the limits on their underlying coverage since they may face higher risks than other industries. 

These policies boost coverage on general liability insurance and can help to ensure protection in the event of a claim.

How Much Excess Liability Do Manufacturers Need?

When determining how much additional coverage manufacturers need, professionals may consider several factors. These factors can include:

  • whether a firm has experience with prior large losses
  • what is typical for their industry 
  • whether anything has changed in their business that might affect their risk exposure

​​As an industry, manufacturers tend to buy higher excess casualty limits than other industries. Each business has different needs and there is no one-size-fits-all answer to how much coverage a business needs. 

However, working with a broker and considering these factors can help you make an informed decision about your coverage to ensure you and your business are protected. 

Other Important Policies for Manufacturers

While general liability insurance covers many common risks, it does not provide complete protection. For example, manufacturers should also consider: 

General Liability Insurance

General liability insurance can help to protect a manufacturing company’s income and assets against everyday risks.

For example, general liability insurance can help cover:

  • Medical payments if another person or party is injured on your commercial property.*
  • Property damage if your business or employees cause damage to another person’s property.
  • Advertising injuries if your business is sued for copyright infringement in your advertisement.
  • Bodily injury claims if someone is injured at the site of business.
  • Reputational harm if you face a lawsuit for libel, malicious prosecution, slander, privacy, or wrongful eviction.

Workers’ Compensation Insurance

Workers’ compensation is built on an exchange between employers and employees. In the case of a work-related injury or illness, employees are entitled to effective medical treatment coverage while in return, employers are protected from legal action resulting from those injuries.

A workers’ compensation insurance policy provides:

  • Coverage for the costs of medical treatment, and
  • Lost time or indemnity benefits

Business Owner’s Policy

A BOP bundles general liability insurance with commercial property insurance. This bundle is often at a lower rate than if the policies were purchased separately.

Commercial Umbrella Insurance

Similar to excess liability insurance, this policy boosts coverage on a manufacturer’s general liability, employer’s liability, or commercial auto insurance policy once the limit is reached.

Any Questions?

Apex brings the high-touch service proposition back to San Diego businesses and beyond.

At Apex Risk & Insurance Services, we want you to know and understand your options. We prioritize transparency and provide custom solutions to meet your insurance needs. Then, read on to learn more about the difference between professional liability insurance and errors and omissions (E&O) insurance.

Why Commercial Property Insurance Premiums are on the Rise

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If you’re a real estate investor or owner, you may have noticed a significant increase in insurance costs compared to previous years. In fact, Quarter 3 of 2022 marked the 20th consecutive quarter of increased commercial property insurance premiums, according to the Council of Insurance Agents and Brokers (CIAB).

The average premium increase across all account sizes was 8.1% in Q3 2022, up from 7.1% in the second quarter.

In this article, we will discuss why these premiums are increasing and how commercial property owners can prepare. Let’s get started.

Why Are Commercial Property Insurance Premiums Rising?

According to CIAB, commercial property saw premiums rise an average 11.2% in Q3 compared to 8.3% in Q2. This increase was driven by inflation and a rise in natural catastrophes. 

Let’s discuss.

How Inflation Affects Commercial Property Insurance

95% of insurance brokers agreed inflation was influencing market trends in the third quarter, especially in commercial property. Why? Inflation increased factors such as construction costs. These factors lead to increased property valuations.

How a Rise in Natural Catastrophes Affect Commercial Property Insurance

More than half of respondents reported an increase in commercial property claims in Q3, possibly driven by catastrophes. Floods were up in Q3, with 31% of respondents reporting an increase. 

What Commercial Property Owners Need to Know and How to Prepare

Inflation and Valuation Concerns

Rising inflation rates in the United States may leave many property owners underinsured or without adequate coverage. 

During standard periods of inflation, the rate of inflation increases approximately between 2% and 3% per year. However, the U.S. is currently experiencing an overall higher rate of inflation, especially in industries such as construction. 

In fact, construction material costs are up 20% according to the General Contractors of America. 

Inflation drives the prices of goods and services up, such as the cost of:

  • Goods/Materials
  • Production
  • Labor
  • Resourcing

Additionally, supply disruption, and construction labor shortages, may also result in an increase in these prices. Real estate owners should be aware of these increases and how they affect the value of their property.

Commercial Property Owners Should Insure Property for the Accurate Value

Inflation may cause insurance premiums to increase. As a result, this increase may cause commercial property owners to be hesitant to invest in the right policy and instead opt for minimal coverage. However, many companies recommend that building owners insure their property  for at least 100% of their accurate value, if not more. 

Commercial property owners should be adjusting their policy to compensate for how much their home and renovations are worth. With inflation generating increased real estate values, unfortunately, property owners have more to lose.

Standard Commercial Insurance Coverage vs. Additional Policies

Insurers may require coverage for some natural disasters – such as flooding, earthquakes, and volcanic eruptions –  to be separate policies.  If your business is located in an area prone to these events, be sure to note if they are covered in your commercial insurance plan or if you need to purchase a separate policy. 

For more information about natural disasters and commercial insurance, check out our blog, here.

What Owners Should Do Now

Owners should become familiar with their current policies prior to or early in the financing process to avoid any surprises. With rates rising in the current inflationary environment, it’s important to make sure one has the right relationships in place. These relationships can help real estate owners and investors find innovative solutions to help reduce the cost of their insurance while ensuring they maintain adequate coverage.

According to Forbes, “Insurance specialists can look through one’s policies to see if there is any extraneous coverage and provide active risk management to implement different loss control strategies to potentially limit the severity or reduce the impact of a claim.”

Any Questions?

For more information, contact us today or check out our policies. 

Apex Risk is dedicated to providing clear explanations and guidance that addresses real problems that may arise for your business in your unique industry. Learn who we are and why we do what we do, here.

Does Commercial General Liability Insurance Cover Theft?

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Commercial general liability insurance is an essential part of any insurance plan. Why? General liability insurance is crucial in protecting your business.

If someone claims that your business caused them harm or loss and they take legal action against you, that action can cost your business plenty in defense costs and payments for damages.

First, What is Commercial General Liability Insurance?

Commercial general liability insurance, or business liability insurance, protects a business from just that: general claims. These general claims can include bodily injuries or property damage. 

What Does General Liability Insurance Cover?

Commercial liability insurance, can help cover:

  • Medical payments if another person or party is injured on your commercial property.*
  • Property damage if your business or employees cause damage to another person’s property.
  • Advertising injuries if your business is sued for copyright infringement in your advertisement.
  • Bodily injury claims if someone is injured at the site of business.
  • Reputational harm if you face a lawsuit for libel, malicious prosecution, slander, privacy, or wrongful eviction.

These risks can come up during normal business operations. For example, the average cost of a slip and fall claim is $20,000.Without general liability insurance coverage, a business would have to pay these costs out of pocket.

*General liability insurance doesn’t cover employee injuries. Business owners can use worker’s compensation insurance to help cover work-related injuries or illnesses.

What Does Commercial General Liability Insurance Not Cover?

Typically, business liability insurance does not cover:

  • Employee’s work-related injuries or illnesses. To help cover employees’ medical bills or other costs, small business owners (SBOs) can use workers’ compensation insurance.
  • Employment-related claims such as discrimination, sexual harassment, or wrongful termination. These kinds of claims can be covered under employment practices liability insurance (EPLI).
  • Errors in professional services that your company provides to customers. For this, SBOs will need professional liability insurance.

Does Commercial General Liability Insurance Cover Theft?

General liability insurance won’t cover your business equipment or property against theft or damage. You need a commercial property insurance policy to cover these issues. However, it may be possible to bundle a commercial property policy with your business liability for a discount. 

How Does General Liability Insurance Work?

To protect your business, general liability insurance policies must typically be in place when the incident occurs.

However, business liability policies can provide retroactive coverage after you stop paying premiums. This extended coverage can often be purchased for an additional cost when you select your policy.

What Businesses Need General Liability Insurance?

Business owners can benefit from the coverage of general liability insurance in many situations. For instance:

  • Your business is open to the public or clients or vendors.
  • You advertise or create marketing materials for your business.
  • You use social media personally or professionally.
  • You use third-party locations for business activities.
  • You need insurance coverage in order to be considered for work contracts.
  • You have temporary employees.

In particular, small business owners should consider investing in general liability insurance because it protects against common risks that can come up during normal operations.

These risks can be as simple as a customer walking onto property, slipping on a wet floor, and breaking their ankle. General liability insurance can help cover medical expenses for this individual.

What Determines My Insurance Cost?

The cost of your general liability insurance may depend on several factors including:

  • Type of business
  • Unique coverage needs, customized to your particular operations
  • History of insurance claims
  • The size of your business
  • Location

Certain industries and jobs that are more dangerous or have a higher risk of lawsuits may have higher premiums. Larger companies or those with a history of multiple General Liability claims may pay more.

Is Commercial General Liability Insurance Required by Law?

Business liability insurance is not required by law. However, if a business owner fails to purchase coverage, they are leaving their business vulnerable to a variety of risks. Let’s take a look at some examples.

The Risks of Not Having General Liability Insurance

Not having general liability insurance puts your business at financial risk. Facing judgments, legal settlements and lawyer fees without the aid of business general liability insurance can be very expensive and even bankrupt a business. 

How Do I Purchase General Liability Insurance in San Diego?

Apex brings the high-touch service proposition back to San Diego businesses and beyond.

At Apex Risk & Insurance Services, we want you to know and understand your options. We prioritize transparency and provide custom solutions to meet your insurance needs.

Then, read on to learn more about the difference between professional liability insurance and errors and omissions (E&O) insurance.

Renewals: How to Find Savings and Missing Coverage

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 If your business has changed over the past year, you run the risk of potentially overpaying for coverage or leaving your business underinsured.

During the business insurance renewal process, business owners have the opportunity to work with their insurance agents to determine if their insurance policies are still providing the coverage they need at the best available price. 

Watch the video below as Peter Katkov, the founder of Apex Risk and Insurance Services, explains the Apex Proven Process: a method of analyzing your business to determine exactly what your insurance is (and isn’t) protecting. We want you to understand your insurance and use it as a tool. 

Read on to learn more about the commercial insurance renewal process and how you can save while still finding the coverage you need.

What is an Insurance Renewal Process?

Insurance renewals occur at the end of the term of your policy. At this point, you can determine if you would like to renew the same policy with the same insurance carrier or if you would prefer to adjust your policy and/or carrier or negotiate terms.

What Insurance Exclusions Should I Look Out For During the Insurance Renewal Process?

Exclusions limit coverage. The three major types of Exclusions are:

  • Excluded perils or causes of loss
  • Excluded losses
  • Excluded property

Let’s take a look at some of the most common exclusions for commercial insurance.

Common Exclusions in General Liability Insurance

The following exclusions are common in most General Commercial Liability insurance policies.

  • Expected or Intended Damage
  • Contractual Liability
  • Liquor Liability
  • Workers’ Compensation
  • Employer’s Liability
  • Pollution
  • Aircraft, Auto, and Watercraft
  • Mobile Equipment
  • Damage to Your Product
  • Damage to Your Work
  • Damage to Impaired Property or Property Not Physically Injured
  • Recall of Products, Work, or Impaired Property
  • Personal and Advertising Injury
  • Electronic Data
  • Distribution of Material in Violation of Statutes
  • Damage to Property

How To Save Money During Your Commercial Insurance Renewal

Compare Your Coverage and Risks

The commercial insurance renewal process provides an opportunity to review your policy and determine where you could use more coverage and where you have coverage that you don’t necessarily need. 

You can scan your policy for savings by ensuring that you’re not ensuring yourself for risks you don’t face. 

For instance, if you don’t have employees, you don’t need employment practices liability coverage.

Ask About Loss-prevention Programs

Speak with your insurance provider about ways to reduce risk in your business. For example, this can include taking measures to prevent a cybersecurity attack, implementing a workplace safety program or instituting disaster preparations. These practices can reduce the risk of a claim and therefore, may result in a price break.

Be Proactive

Being proactive is another great method of saving money on business insurance. This means business owners taking measures to prevent accidents and reduce insurance costs.

Check out our Comprehensive Commercial Insurance Renewal Checklist, here.

How to Know If You’re Missing Coverage When Renewing Your Commercial Insurance

To properly prepare for your insurance renewal, ask yourself the following questions:

  • Has your business moved to a new location?
  • Has your number of employees changed? 
  • Are you offering any new goods or services?
  • Does your business have cyber security coverage?
  • Have you purchased new equipment?
  • Have you purchased new vehicles?

The answers to these questions can reveal if you have any gaps in your coverage. 

How Do We Save Our Clients Money and Find Missing Coverage? Let Us Introduce You to the Apex Proven Process 

At Apex Risk & Insurance Services, we use the Apex Proven Process to learn about your business, strategize to assemble the right program for you, and use our deep industry and market knowledge to leverage the best pricing and coverage. 

This leaves small business owners with more time to do what they do best: Run their business knowing that their company and employees are protected.

We take the time to understand the full operations of your business. We use this information to do a deep dive into the insurance program, asking questions including:

  • What coverage do you have?
  • What are the limits?
  • How much does it cost?

We utilize these comparisons to find where improvements can be made in your program.

First, We Analyze

We conduct an analysis of your business operations and your risk exposure. We then compare these figures to the current insurance policy you have in place. 

Then, We Report

We produce a report that summarizes the difference between your existing coverage and existing operations. This allows us to design a path to fix any issues and fill in any gaps in coverage.

We Take on the Heavy Lifting

We understand that switching insurance plans is a big commitment. That’s why we do our analysis and research, and build a plan before doing the work for our client on the backend.

Learn more about the Apex Proven Process and why we do what we do, here. 

Where Can I Find Commercial General Liability Insurance in San Diego?

Apex was founded to fill the service and consultative gap left by agency consolidations in the insurance marketplace. These consolidations have left customers who are used to a boutique service approach with no personal connection to their team.

Apex brings the high-touch service proposition back to San Diego businesses and beyond.

Check out our commercial insurance policies, then, read on to learn what makes us different.

Let’s Talk National Disaster Coverage: Are You Covered for Named Storms? 

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In the last few years, we’ve seen a spike in the number of natural disasters, such as earthquakes, storms, and hurricanes. With hurricane season just barely coming to a close while Hurricane Ian swept through communities and caused tremendous damage, many business owners may be wondering: what happens if an event like this hits my business? What am I covered for? What will happen next?

In this article, we’ll discuss the different types of catastrophic storm coverage, how a named storm can impact your insurance policy, and what you can ask your broker about to ensure you’re covered. Let’s get started.

Types of Natural Disasters and Commercial Insurance Coverage

Coverage can vary depending on both the type of natural disaster and the area in which the business is located. 

Tornados

According to the National Oceanic and Atmospheric Administration, more than a thousand tornadoes hit the United States each year. 

Similar to hurricane coverage, commercial insurance typically covers wind damage and can reimburse owners for damage caused by rain and hail. 

Floods

Owners tend to underestimate the risk of floods, but 90% of natural disasters include some form of flooding and, as we’ve discussed, most insurance companies require flooding to be a separate policy. We highly recommend considering investing in a separate flood policy to protect your business. 

Earthquakes

Earthquake coverage is also sold as a separate policy from commercial insurance but can help protect businesses against a variety of earthquake-induced effects, such as collapsed gas lines, crumbling or cracking walls, as well as damage to the interior and exterior of buildings. Insurers vary in the type of coverage they provide for earthquakes, so owners should clarify what exact damage is protected in their policy. 

To learn more about coverage for events such as wildfires and volcanoes, check out our Guide to Natural Disasters and Commercial Insurance. 

Hurricanes

Most standard commercial insurance policies cover losses resulting from wind, such as a roof being damaged or torn off, broken windows, and exterior damage. Additionally, policies should cover water damage resulting from rain leaking into the building. 

However, flood insurance is a separate policy. If a business is located in an area vulnerable to floods, owners will need to invest in flood insurance to protect their business against losses. 

Let’s discuss how a named storm or hurricane can affect your insurance policy. 

Named Storm or a Hurricane: How Does It Affect Your Insurance Policy?

Some insurance policies have a special deductible – the amount the policyholder owes before the insurance company starts paying its share of the loss –  for losses caused by named storms. These are called catastrophic event property deductibles or “CAT” deductibles.  What does this mean for policyholders? Let’s discuss.

What Are Catastrophic Event Property (CAT) Deductibles?

CAT deductibles are a significantly higher out-of-pocket expense to the policyholder and apply to specific events -such as named storms, hurricanes, floods and earthquakes – rather than to all perils. 

How Do CAT Deductibles Work?

The three most popular forms of CAT deductibles are:

  •  A high fixed dollar amount deductible
  • A percentage deductible
  • A deductible expressed in terms of National Flood Insurance Program (“NFIP”) limits

High Fixed Dollar Amount Deductible

A catastrophic event property deductible may be a fixed dollar amount. This amount will apply to a particular property, location or, more commonly, per occurrence. 

Review your policy and consider enlisting the help of your broker to determine if the deductible is per event, per season, or per calendar year. Why? If multiple named storms damage your property within the same coverage period – a calendar year, for instance – you may have to pay the deductible more than once. 

Percentage Deductible

These percentages can range from one to 10% of the value of the property. Let’s take a look at an example:

If a homeowners policy has a 5% named storm deductible on a $500,000 house, the policyholder would be responsible for paying $25,000 out of pocket.

Deductible in terms of National Flood Insurance Program (“NFIP”) Limits

A flood deductible may be expressed in terms of NFIP limits.  For example:

  • “equal to the maximum NFIP limits available per building and its contents whether purchased or not.” OR
  • “equal to the amount recovered under an NFIP policy.”

What is the National Flood Insurance Program?

Floods can happen anywhere and to anyone. It is important for business owners to protect their most important assets from a flood. These assets likely include, for example, their property, their business, and their possessions.

However, as we’ve discussed, flood insurance is a separate policy. This policy can cover buildings, the content in the buildings or both. 

The National Flood Insurance Program (NFIP) is managed by FEMA and is delivered to the public by a network of more than 50 insurance companies and the NFIP Direct.

The NFIP provides flood insurance to “property owners, renters and businesses, and having this coverage helps them recover faster when floodwaters recede. The NFIP works with communities required to adopt and enforce floodplain management regulations that help mitigate flooding effects.”

Contact your insurance company or agent to purchase flood insurance.

Ready to Find the Right Insurance for Your Business? 

At Apex Commercial Insurance Services, we focus on giving small to mid-market businesses the attention they deserve. 

For more information, contact us today or check out our policies. Apex Risk is dedicated to providing clear explanations and guidance that addresses real problems that may arise for your business in your unique industry. Learn who we are and why we do what we do, here.

January 1st Rate Filings Update: Why Insurance Rates Are Increasing 

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Insurance rates are rising; from workers’ compensation to global property insurance to cyber security insurance, insureds can’t help but notice a spike in prices.

Why are insurance rates increasing?  Several factors have contributed to this rise, ranging from inflation, ongoing supply chain disruptions and the labor shortage. Let’s dive into why. 

Why Are Insurance Rates Increasing?

Many factors contribute to the rise in insurance rates. These factors include, according to analysts at Fitch Ratings Inc.

  • High inflation
  • Supply chain disruptions and the labor shortage
  • A rise in natural catastrophe claims
  • An increase in D&O claims
  • A spike in cyberattacks
  • A rise in workers’ compensation claims

These issues have put the sector’s earnings under pressure and led to price increases for 17 consecutive quarters. Let’s take a closer look.

How Inflation is Affecting Insurance Rates

During standard periods of inflation, the rate of inflation increases approximately between 2% and 3% per year. However, the U.S. is currently experiencing an overall higher rate of inflation, especially in industries such as construction. 

In fact, construction material costs are up 20% according to the General Contractors of America. 

Inflation drives the prices of goods and services up, such as the cost of:

  • Goods/Materials
  • Production
  • Labor
  • Resourcing

When these services cost more, so does the cost of repairing or replacing properties, assets and so on. This leads to a rise in insurance rates to cover the increasing cost of repairs and replacements.

Effects of COVID-19: Supply Chain Issues and Labor Shortages 

According to the Global Insurance Market Index, global commercial insurance prices increased 9% in the second quarter of 2022 – down from an 11% increase in the first quarter – continuing a trend of moderating rate increases that began in Q1 2021.

Supply disruption and construction labor shortages, may also result in an increase in these prices. Why? These issues and labor shortages can cause goods and services to be more expensive and make the cost to repair or replace them higher as well. 

A Rise in Natural Catastrophe Claims Means a Rise in Natural Disaster Insurance Premiums

In 2020 and 2021, U.S. insurers paid $176 billion for natural catastrophe insurance claims alone, the highest total in a two-year period for commercial insurance claims relating to natural disasters. In 2021, 20 separate billion-dollar weather-related events occurred in the United States.

Many insurance companies are raising their rates to make up for the high number of big pay-outs resulting from natural disaster claims.

Increased Directors & Officers (D&O) Insurance Claims

The Directors’ & Officers’ (D&O) liability insurance market experienced huge rate increases in 2020; with some of these increases peaking at over 70%.

According to FitchRatings, possible reasons for spikes in D&O insurance premiums include increased mergers, class action lawsuits, and the cost of regulatory investigations.

Learn more about why Directors’ & Officers’ (D&O) liability insurance rates are rising, here. 

Spikes in Cyberattacks Trigger a Rise in Cyber Security Insurance Premiums

Cyber insurance, also called cyber security or cyber liability insurance, covers businesses against losses resulting from data breaches.

Since 2020, cyber-attacks have changed significantly and become even more common with the increase of remote and hybrid work models. These attacks can be much more nuanced than in the past.  For example:

  • Phishing emails have fewer red flags and instead include a subtle change. For instance, an email from one of your vendors may have a different bank account to pay your bill. 
  • Ransomware attacks are on the rise due to innovations in technology.
  • Ransomware attacks have also moved onto a larger scale, such as the attack against Microsoft Windows Remote Desktop Protocol (RDP) credentials to gain access to victim networks.

In its 2021 report, the U.S. Government Accountability Office found that a number of insurers reduced coverage limits or increased premiums for higher-risk industries. These industries may include:

  • Academic institutions 
  • Health care 
  • Public sectors

Learn everything you need to know about changes in cyber insurance, here.

Worker’s Compensation Insurance

Employers in California are required to purchase workers’ compensation to protect against work-related injuries and illnesses.

The cost of workers’ comp, however, has been steadily rising for the past few years, and with the most recent Pure Premium Rate Filing from the Workers’ Compensation Insurance Rating Bureau of California® (WCIRB), there’s no sign of slowing.

But why are these rates rising in the first place?

Changes in the workforce, medical inflation, and wage inflation have all played a part. Read on to learn what rising workers’ compensation rates mean for California employers.

In July of 2022, the WCIRB submitted its September 1, 2022, Pure Premium Rate Filing to the California Department of Insurance (CDI).

In this filing, the WCIRB proposed a set of increased premium rates. On average, these rates are 7.6% higher than those approved the year prior on September 1, 2021.

According to the WCIRB, the average of the proposed September 1, 2022, advisory pure premium rates is $1.56 per $100 of payroll.

Read more about why workers’ comp rates are rising, here. 

Any Questions?

For more information, contact us today or check out our policies. 

Apex Risk is dedicated to providing clear explanations and guidance that addresses real problems that may arise for your business in your unique industry. Learn who we are and why we do what we do, here.

 

Your Small Business’s Guide to Employment Practices Liability Insurance (EPLI)

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In simple terms, workers’ compensation covers physical injuries and illnesses whereas EPLI is for claims that an employee’s rights have been violated.

Additionally, business owners are required to purchase workers’ compensation insurance for their employees. If a business employs one or more employees, workers’ comp is required under California Labor Code Section 3700.

EPLI, on the other hand, is not. This results in many business owners opting out of EPLI because they believe all issues with employees will be covered under workers’ comp; however, this is not the case.

Learn more in our full guide to worker’s comp for small business owners.

It’s important to note that EPLI is a type of professional liability insurance and provides coverage in entirely different situations than workers’ comp.

Let’s take a look at what EPLI typically covers.

What Does Employment Practices Liability Insurance Cover?

EPLI can cover lawsuits over employee allegations of:

  • Sexual harassment
  • Discrimination
  • Retaliation
  • Wrongful termination or demotion
  • Mismanagement of benefits
  • Defamation
  • Breach of employment contract
  • Negligent evaluation
  • Failure to employ or promote
  • Wrongful discipline
  • Deprivation of career opportunity, and
  • Wrongful infliction of emotional distress

What Isn’t Covered by EPLI?

As with any insurance policy, EPLI has some exclusions and limitations. Generally, EPLI doesn’t cover claims for:

  • Bodily injury
  • Intentional acts (assault, battery, criminal conduct), and
  • Privacy violations 

Additionally and perhaps most importantly, EPLI protections almost always exclude wage and hour claims or only provide limited coverage to include defense costs, not repayment of back wages.

Wage and hour-based claims include claims relating to:

  • Overtime
  • Minimum wage
  • Rest and meal periods, and
  • Bonuses

Why Your Small Business May Face an EPLI Claim

Approximately 3% of businesses with fewer than 50 employees purchase EPLI. Many small-business owners are unaware that EPLI coverage exists, or they decide that coverage is optional or too costly.

In addition, many businesses owners make the mistake of assuming they don’t need EPLI because:

  • All issues with employees will be covered under workers’ compensation insurance, and/or
  • Employees would never sue them or their business

However, both of these assumptions are false and can be costly mistakes for business owners to make.

Now, let’s discuss some situations in which a business owner may face an EPLI claim.

Do I Need Employment Practices Liability Insurance?

Any small-business owner with employees should consider investing in employment practices liability insurance. However, EPLI is especially important for industries with high rates of employee turnover.

Why? Small businesses are at higher risk of EPLI claims.

Small Businesses are at Higher Risk of EPLI Claims

While all businesses should invest in EPLI coverage, small businesses need this protection the most. Why? In general, smaller businesses face a greater risk of employment-related lawsuits for several reasons.

These reasons may include but are not limited to:

  • Small businesses may not have a designated human resources (HR) department
  • Small businesses may not have detailed records of employee performance and strict guidelines that govern the hiring and firing processes, and/or
  • Small businesses have a smaller staff and often closer relationships among the team, resulting in more emotional reactions when an employee is laid off or fired

What Happens If I Don’t Purchase Employment Practices Liability Insurance?

It’s wise to buy basic EPLI coverage if your business can afford it. Businesses that choose not to purchase EPLI face a range of risks.

For instance, the average U.S. company faces a 10.5% chance of having an employment claim filed against them. Further, the probability can increase to more than a 50% chance in some states, like California and New Mexico.

According to Nerdwallet, events including the #MeToo movement “and increased media attention to workplace discrimination have led to an increase in employee claims against all types of businesses.”

“The average claim takes 318 days to resolve and costs $160,000, so insurance can be critical to your business’s survival.”

Looking to Purchase Employment Practices Liability Insurance?

Small business owners already have a lot on their plates. They shouldn’t also have to worry about purchasing the correct employment practices liability insurance, too.

At Apex Risk & Insurance Services, we use The Apex Proven Process to learn about your business, strategize to assemble the right program for you, and use our deep industry and market knowledge to leverage the best pricing and coverage.

This leaves small business owners with more time to do what they do best: Run their business knowing that their company and employees are protected.
Check out our commercial insurance policies, then, read on to learn how to protect your business from cyberattacks (another big risk small businesses face!)

 Your Comprehensive Commercial Insurance Renewal Checklist

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Trust us – you don’t want to skip your annual commercial insurance renewal. Why? If your business has changed over the past year, you run the risk of potentially overpaying for coverage or leaving your business underinsured.

During the business insurance renewal process, business owners have the opportunity to work with their insurance agents to determine if their insurance policies are still providing the coverage they need at the best available price. 

We understand business owners have a lot on their plates and simply renewing their existing insurance policies is a tempting and common option. That’s why we’ve prepared a comprehensive commercial insurance renewal checklist – to make starting the process as simple as possible and let you do what you do best: run your business. Let’s dive in.

What is a Commercial Insurance Policy? 

A commercial insurance policy covers the business, its employees, and its owners. Commercial insurance protects businesses from losses that may occur as a result of normal business functions.  

Since there are a variety of situations that businesses and owners need to protect themselves from, there are multiple different types of commercial insurance. These forms of business insurance are often split into general liability, property, executive protection, and employment protection. 

What is an Insurance Renewal Process?

Insurance renewals occur at the end of the term of your policy. At this point, you can determine if you would like to renew the same policy with the same insurance carrier or if you would prefer to adjust your policy and/or carrier or negotiate terms.

Are Insurers Obligated to Offer a Renewal? 

Insurers are not legally obligated to offer a renewal of the same policy. In fact, insurers may receive a letter from their insurance provider stating that the company is not renewing one of your business insurance policies. Why does this happen?

In most cases, a non-renewal notice has more to do with the insurer than with you. For example, the company may wish to stop offering that form of insurance or provide coverage for companies within your industry. 

However, there are some cases in which non-renewals are specific to the business. For instance, your insurer may have concluded that you have incurred too many accidents or losses, have not maintained your property, or have failed to comply with its loss control recommendations. 

It is important to note that while insurers are not required to offer a renewal, they are required to provide a 60-day notice of non-renewal. 

Are Insurers Obligated to Notify Insureds of Changes in Coverage?

An insurer has an obligation under California law to call an insured’s attention to changes in their coverage. These changes may include, for example, more limitations or exclusions. 

When coverage is reduced upon renewal, a process often referred to as “skinning down” the policy, the insurer must provide adequate notice of the exclusion, limitation, or reduction. 

How Long Does Commercial Insurance Last? 

Business owners should review their commercial insurance policies for renewal every 12 months (or, more accurately, 12 months after they take out the insurance policy). One year is the standard duration of an insurance policy for most types of insurance.

What Questions Should You Ask Before Renewing Your Business Insurance?

To properly prepare for your business insurance renewal, ask yourself the following questions:

Has Your Business Moved to a New Location?

A new location likely means changes in your general liability insurance. These changes may include, for example, moving into a different commercial space, expanding to a new location, or opening an additional office. 

New locations may also mean a reduction in your insurance premiums. For instance, if the new location is smaller or includes enhanced safety features, such as a wired alarm system or sprinklers. 

Has Your Number of Employees Changed?

Staff changes suggest it is time to adjust your workers’ compensation policy. Remember: under California Labor Code Section 3700, if a business employs one or more employees, the business must provide workers’ compensation coverage for each employee. 

The insurance renewal process is the perfect opportunity for business owners to verify that they are carrying appropriate workers’ comp coverage for all their employees.

Find everything you need to know in our full guide to workers’ compensation insurance for small businesses.

Are You Offering Any New Goods or Services?

If your business is offering new goods or services, you may need to adjust your professional liability insurance. 

Does Your Business Have Cyber Security Coverage?

Cyber insurance, also called cyber security or cyber liability insurance, covers businesses against losses resulting from data breaches. This form of insurance primarily applies to businesses that run secure networks as part of their daily operations.

While this coverage is often included in professional liability or general liability policies, the renewal process is an excellent time for business owners to verify that they have adequate cybersecurity insurance since it is sometimes purchased as a standalone policy.

Read on to learn more about cyber insurance.

Have You Purchased New Equipment?

It is essential for business owners to ensure any new equipment is covered in their commercial insurance policy. Why? The cost of your business insurance is based on several factors, including the type and amount of equipment you own. 

Have You Purchased New Vehicles?

If you’ve bought or sold a business vehicle, added delivery services, or changed existing service areas, you may have to adjust your commercial auto insurance. 

Where Can I Find Commercial Insurance in San Diego?

Apex was founded to fill the service and consultative gap left by agency consolidations in the insurance marketplace. These consolidations have left customers who are used to a boutique service approach with no personal connection to their team.

Apex brings the high-touch service proposition back to San Diego businesses and beyond.

At Apex Risk & Insurance Services, we use the Apex Proven Process to learn about your business, strategize to assemble the right program for you, and use our deep industry and market knowledge to leverage the best pricing and coverage. 

This leaves small business owners with more time to do what they do best: Run their business knowing that their company and employees are protected.

Check out our commercial insurance policies, then, read on to learn what makes us different.

Why Some Properties are Getting Too Expensive to Insure

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Many Americans are experiencing rising insurance premiums and in extreme cases, some properties are becoming too expensive to insure. How can this be the case? Properties in disaster-prone states have experienced a surge in premiums due to factors including climate change.

Why Are Insurance Premiums Rising in Disaster Prone Areas?

Insurance premiums are already higher in areas prone to natural disasters such as volcanic eruptions, floods, hurricanes, and tornadoes. 

In 2020 and 2021, U.S. insurers paid $176 billion for natural catastrophe insurance claims alone, the highest total in a two-year period for commercial insurance claims relating to natural disasters. In 2021, 20 separate billion-dollar weather-related events occurred in the United States.

Climate change threatens to increase the number of natural disasters that hit the United States. This increase, coupled with the increase in rebuilding costs, may cause some properties to be too expensive to insure. 

For example, coastal properties will be exposed to damaging erosion and rising sea levels as a result of the climate crisis. These exposures can increase the risk of issues such as flooding in buildings. Additionally, many buildings in California are at risk of being exposed to wildfire, which may also drive up premiums. 

What Do These Changes Mean for Property Owners?

As a result of these spikes, some building owners may simply choose to purchase another commercial property in an area with less risk. However, the situation isn’t that simple for everyone. 

For instance, some building owners may have inherited the commercial property or  be hesitant to purchase property in a lower-risk area for other reasons. This may lead some owners to choose not to adequately protect their property. 

How Can Building Owners Navigate These Increases?

Commercial property owners may consider inquiring about discounts for taking steps to reduce potential damage from natural disasters and/or climate-related events. These steps may include storm-proofing a building, for example. 

Additionally, commercial property owners can speak with an experienced insurance agent before purchasing a property and review the factors that may increase premiums. If the property has already been purchased, an insurance agent can make sure they find the right insurance for their situation. 

We use The Apex Proven Process to learn about your business, strategize to assemble the right program for you, and use our deep industry and market knowledge to leverage the best pricing and coverage. 
Interested in learning more? Read on for the full article from CNBC.

As climate change threatens more homes, some properties are getting too costly to insure

As climate change threatens the U.S. with more natural disasters, it’s becoming increasingly costly for Americans to insure their homes ⁠— and it’s only expected to get worse, according to experts.

“These things are occurring more often, and they’re causing more damage,” said Jeremy Porter, chief research officer at First Street Foundation, a non-profit focused on defining U.S. climate risk.

Indeed, there were 20 separate billion-dollar U.S. natural disasters in 2021 — including a deep freeze, wildfires, flooding, tornado outbreaks and other severe weather — costing a total of $145 billion, according to the National Oceanic and Atmospheric Administration. 

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The uptick in costly climate events, combined with rising costs to rebuild, labor shortages and “demand surges” after natural disasters have triggered higher homeowners insurance premiums, experts say.

“We’re seeing drastic increases,” said Pat Howard, managing editor and licensed home insurance expert at Policygenius.

Some 90% of U.S. homeowners saw premiums jump from May 2021 to May 2022, costing an average of $134 more per year, according to a Policygenius report.

The average increase is 12.1% nationwide, compared to one year ago, but surges have been higher in disaster-prone states like Arkansas, Washington and Colorado, the report found.

Some homeowners have hidden flood risks

Water-damaged items sit outside a house in Squabble Creek, Kentucky, on July 31, 2022, after historic flooding in Eastern Kentucky.

Water-damaged items sit outside a house in Squabble Creek, Kentucky, on July 31, 2022, after historic flooding in Eastern Kentucky.

Seth Herald | Afp | Getty Images

Brad Wright, a certified financial planner and managing partner of Launch Financial Planning in Andover, Massachusetts, said erosion and rising sea levels are growing concerns for clients interested in coastal properties.

When someone considers buying a home along the beaches of southern Maine, for example, there are always questions about flood risks and the cost of insuring the property. Depending on the answers, they may choose another home.

Still, owners may unknowingly purchase or own in flood-prone areas. While the Federal Emergency Management Agency identified 8 million properties at risk for 1-in-100-year flooding, First Street Foundation found nearly double the amount in a 2020 report. 

These family houses have been around forever, and they may not have a mortgage, so flood insurance may not be required.

Brad Wright

MANAGING PARTNER OF LAUNCH FINANCIAL PLANNING

Standard homeowners insurance policies don’t cover flooding, but protection is available through FEMA or private coverage, which may be required by mortgage lenders. While the average yearly premium is $985, according to ValuePenguin, experts say the cost may be significantly greater in high-risk areas.

Last October, FEMA revamped its program to more accurately assess flood risk, causing insurance premiums for some coastal properties to rise to $4,000 or $5,000 annually, up from just $700 or $800, Porter from First Street Foundation said.  

These hikes may be prohibitively expensive for lower-income families or retirees, especially those who may be living in a property inherited from family, Wright said. 

“These family houses have been around forever, and they may not have a mortgage, so flood insurance may not be required,” he said. “But they should have it anyway.”

Wildfire risk may be costly to insure

TOPSHOT – Flames burn to the Klamath River during the McKinney Fire in the Klamath National Forest northwest of Yreka, California, on July 31, 2022. – The largest fire in California this year is forcing thousands of people to evacuate as it destroys homes and rips through the state’s dry terrain, whipped up by strong winds and lightning storms.

The McKinney Fire was zero percent contained, CalFire said, spreading more than 51,000 acres near the city of Yreka. (Photo by DAVID MCNEW / AFP) (Photo by DAVID MCN

Flames burn during the McKinney Fire in the Klamath National Forest on July 31, 2022.

David Mcnew | AFP | Getty Images

Although wildfires are covered as part of the standard homeowners insurance coverage, policy premiums in fire-prone areas have also become more costly, according to Michael Barry, chief communications officer at the Insurance Information Institute.

“The home insurer is looking to price the policy to reflect the risk,” he said.

For example, premiums rose by nearly 10% in California from May 2021 to May 2022, according to Policygenius, with the increase in costly wildfires partially to blame.

If you move into an area that’s prone to wildfires or flooding, that cost goes up dramatically because the carrier is passing that on to the consumer.

Bill Parrott

PRESIDENT AND CEO OF PARROTT WEALTH MANAGEMENT

Bill Parrott, an Austin, Texas-based CFP, president and CEO of Parrott Wealth Management, has also seen rising premiums in high-risk regions.

“If you move into an area that’s prone to wildfires or flooding, that cost goes up dramatically because the carrier is passing that on to the consumer,” he said. “That’s a big expense for a lot of people.”

Nationwide, at least 10 million properties may have “major” and “extreme” wildfire risk, according to First Street Foundation.

How to reduce premiums in high-risk areas

Regardless of where you live, it’s critical to do your homework before purchasing a property, suggests Barry of the Insurance Information Institute.

Before making an offer, you can use free tools like ClimateCheck or Risk Factor to measure long-term climate risk for a specific property. 

‘Climate migration’ could become a problem as climate change accelerates

Current homeowners may ask their insurance provider about discounts for taking steps to mitigate possible damage from climate events, such as storm-proofing your home, said Howard from Policygenius.

You may also save money by shopping around and bundling home and auto policies. Homeowners insurance is no longer a “set-it-and-forget-it” type of thing, he said. 

And if you have sufficient emergency savings, you may consider lowering your premiums by increasing your deductible, Howard said.