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6 factors impacting identity theft risks

6 factors impacting identity theft risks

The threats posed by cyber attacks and identity theft continue to grow as cyber criminals always seem to be on offense while consumers and insurers are on defense.

A study recently released by Javelin Strategy and Research found that cyber criminals stole more than $16 billion from over 15 million U.S. consumers last year.

A new risk assessment tool, the Identity Threat Assessment and Prediction (ITAP) model developed by the University of Texas at Austin Center for Identity, provides unique insights based on research into the behaviors and methods of identity threats, and aggregates the information to help risk managers assess dangers and vulnerabilities. The information in the ITAP database is collected from news stories and other sources, and the repository currently holds data from more than 5,000 incidents that occurred between 2000 and 2016. Researchers apply a number of analytical tools to this information in order to compare threats, and identify trends and losses.

As a result of their examination of the information, researchers have identified six key takeaways, as well as other data that help to paint a broader picture of the impact of identity theft on consumers and businesses. Here is a look at some of their findings.

1. People make mistakes

The researchers found that human error is a major driver when it comes to identity theft and that hackers frequently exploit vulnerabilities created by mistakes people make. However, approximately 17 percent of the incidents where personally identifiable information (PII) was compromised were termed “non-malicious” or not instigated by hackers, but by individuals without malicious intent.

2. Impact is usually local

Despite the activities of hackers around the globe, the impact of identity theft where PII was compromised seems to be more localized to specific cities, counties, states and regions. The study found that over 99 percent of the cases were limited to either a local geographic area or a particular type of victim. Only 0.36 percent of the theft incidents actually involved the entire country like the Target or Home Depot breaches.

The states with the greatest number of cases of compromised PII were California, Texas, Florida, New York, Georgia, and Illinois according to the ITAP model.

3. The cost is not always monetary

While there are very real financial costs associated with any type of data breach or loss of PII, a larger number of individuals who become victims suffered from emotional stress than those who had actual monetary losses. The University of Texas at Austin researchers found that the “emotional impact is consistently higher than other types of loss.”

The ITAP model identified four different types of loss and the percentages of loss experienced by victims: Emotional distress (72 percent); financial (57 percent); property (56 percent) and reputation (41 percent).

Annual income of the victims doesn’t really seem to come into play either, although 73 percent of adults had their PII compromised as compared to 8 percent of teenagers and 21 percent of seniors.

4. Insiders pose a serious threat

While unknown hackers or foreign countries perpetrate the majority of attacks (62 percent), the researchers found that one-third (34 percent) of the incidents involving compromised PII originated from company employees or family members of affected individuals.

Perpetrators utilize a number of resources to steal the information including computers, databases, computer networks, malware and stolen credit cards. ITAP also differentiates between the various perpetrators involved in identity crimes. Hackers tend to exploit digital or computer-based vulnerabilities, while fraudsters are usually involved in exploiting the information which has been stolen by the actual thieves.

5. Cybersecurity isn’t always the cause

More than 50 percent of the incidents involving identity theft, fraud or abuse identified by the ITAP did not originate from vulnerabilities that were exploited.

Financial losses were associated with particular attributes as part of the ITAP analysis. These were the top five identified: Magnetic stripe ($28.9 million); ATM pin ($24.2 million); fake identification card information ($15.1 million); financial information ($13.7 million) and age ($11.9 million).

6. Identity crime affects all industries

Hackers are indiscriminate when it comes to choosing victims. The ITAP analysis found that a wide range of public and private sectors are impacted with the top five sectors identified as: consumer/citizen; healthcare and public health; government facilities, education and financial services.

The research effort was support by several organizations that focus on cyber protection: LifeLock, TransUnion, Safran, LexisNexis, HID, Generali Global Assistance, and Applied Fundamentals Consulting.

Source : Property Casualty 360
Photo:    Shutterstock

Florida wildfires draw attention to climate change

Florida wildfires draw attention to climate change

Forecast Fire Indices

The wildfires burning across the state of Florida this month highlight the increasing danger a changing climate poses in the southern United States for this type of catastrophic event.

Wildfire risk is generally perceived to be a western United States problem, and the majority of major insurance losses caused by wildfires to date have occurred in California; but southern U.S. states have been plagued by wildfires in recent years, including the more than 100 wildfires actively raging across Florida this month.

“Traditionally, we see the wildfire exposures in the western half of the United States, but recently the South is experiencing warmer-than-average temperatures and drier-than-average seasons,” said Jim Clifford, director of safety and prevention programs for insurer USAA based in San Antonio, Texas. “Florida has a history back and forth, having a drought occasionally, and the Everglades have extensive forest — and they tend to burn quite easily when there’s a little bit of a drought.”

Climate change is causing increases in temperature across the Southeast, according to the U.S. Environmental Protection Agency. Heavy downpours have increased in the Southeast, but the region has also experienced periods of extreme drying, according to the agency.

On April 11, Florida Gov. Rick Scott declared a state of emergency because of the wildfires and the high potential for increased wildfires to continue this year as forecasts predict hotter and drier conditions than normal in the state during the coming months.

“That’s really peculiar for Florida, because one of the things wildfires hate is humidity,” said F. Douglas Hoyle, Philadelphia-based loss control director at Pennsylvania Lumbermens Mutual, an insurer of wood and related products. “The humidity has been down significantly in Florida this year, and that’s what experts are saying has led to significant wildfires in Florida.”

Florida wildfires have burned 250% more acreage during the first three months of 2017 than during the same time period last year.

“Three months out, it looks like there might be some hope on the horizon, but the next month in Florida looks to be the worst,” Mr. Clifford said, citing data from the National Oceanic and Atmospheric Administration’s Climate Prediction Center. “Central Florida looks really bad as far as the drought persisting for the next month or so.”

The major modeling firms do not currently have plans to forecast insurance losses related to the Florida wildfires. Wildfires tend to be less costly from an insurance perspective than hurricanes, with the largest estimated insurance loss in the United States caused by wildfire being the $1.7 billion due to the 1991 Oakland Hills Fire, according to Property Claim Services, a Verisk Analytics business.

However, the Fort McMurray fire in the province of Alberta, Canada, became the costliest natural disaster in Canadian history last year, causing a CA$3.6 billion ($2.67 billion) loss, more than twice the cost of the previous largest natural disaster: the 2013 southern Alberta floods, which cost CA$1.7 billion ($1.3 billion) in insurance claims, according to the Insurance Bureau of Canada.

“Wildfire losses are typically dominated by residential properties,” Tammy Viggato, Boston-based scientist at AIR Worldwide, said in an emailed statement. “This is because most wildfires impact the outer regions of an urban area, but don’t penetrate into the center of urban areas where more commercial properties are located, although notable exceptions would be the fires in Fort McMurray and Gatlinburg.”

The 2016 wildfires in Gatlinburg, Tennessee, caused $842 million in insurance losses, according to the Tennessee Department of Commerce and Insurance.

“The Gatlinburg fire burned into the downtown area, and there were a number of businesses that were lost in that fire,” said Steve Quarles, chief scientist for wildfire and durability, Insurance Institute for Business and Home Safety Research Center in Richburg, South Carolina. “That was an eye-opener for the business community.”

In addition to the property losses, business interruption losses can be sizable, as the areas are evacuated and roads are closed, meaning both visitors and employees will likely not be able to access the businesses for some time, which could lead them without enough cash to pay their bills, according to experts.

“People don’t think of all those ripple effects,” said Michele Steinberg, wildfire division manager for the National Fire Protection Association in Quincy, Massachusetts.

Home and business owners can minimize the risks to their properties by creating setback distances between the properties and burnable fuels such as mulch, which is critical because lit embers can come in contact with flammable material and set the property on fire, according to experts.

“To protect businesses, it’s important to do things that minimize the opportunity for these embers landing on or near the building” and resulting in ignition, Mr. Quarles said.

USAA offers a discount on insurance premiums for communities in seven Western states participating in the NFPA’s Firewise Communities program, which recognizes those that take steps to prepare for and mitigate wildfire risks. The insurer covers the risk in standard property policies with no differences in contractual limitations or deductibles compared to other covered perils, he said.

“Wildfire losses tend to be pretty easy to adjust,” Mr. Clifford said.

Source: Business Insurance

Minimize your risk of distracted driving with these 7 tips

Minimize your risk of distracted driving with these 7 tips

As the calendar turns to April, families gear up for spring break car trips or college visits. With better weather, more drivers take day trips or plan weekend getaways. This all adds up to  more drivers on the road, and more potential for distracted driving – which also increases the odds of traffic accidents with bodily injuries.

But April is also Distracted Driving Awareness Month, the time of year when the National Safety Council and other organizations join forces to heighten awareness of distracted driving.

According to the National Highway Traffic Safety Administration (NHTSA) distracted driving is defined as any activity that diverts attention from driving, including talking or texting on your phone, eating and drinking, talking to people in your vehicle, or fiddling with the sound, entertainment or navigation system — anything that takes your attention away from the task of safe driving.

NHTSA calls texting “the most alarming distraction” because tests show that sending or reading a text takes your eyes off the road for five seconds. At 55 mph, that’s the equivalent of driving the length of an entire football field with your eyes closed, NHTSA explains.

According to Driver Electronic Device Use in 2015, a Sept. 2016 report from NHTSA, the percentage of passenger vehicle drivers text-messaging or visibly manipulating handheld devices remained constant at 2.2 percent in 2015. Driver handheld cell phone use decreased from 4.3 percent in 2014 to 3.8 percent in 2015, but NHTSA says this was not a statistically significant decrease.

The Property Casualty Insurers Association of America (PCI) is joining nationwide efforts to promote the importance of distracted driving awareness. One of the most frightening trends, PCI says, is the ubiquitous use of smartphones behind the wheel.

“Distracted driving is thought to be one of the leading causes for the rise in vehicle accidents. Whether it’s making a quick call, firing off a text, or adjusting the navigation system, in that short lapse of focus, all too often drivers can cause or fail to avoid a crash. And our increasingly congested roads compound the problem,” said Bob Passmore, PCI’s assistant vice president, personal lines policy.

The implementation and enforcement of distracted-driving laws, which discourage texting while driving and ban handheld cellphone use, are important first steps, PCI says.

“Auto safety is a top issue for auto insurers. We hope the dialogue on distracted and impaired driving will continue, and we urge lawmakers and other industry thought leaders to continue addressing the impact of motorist behavior as an important part of the safety equation,” added Passmore.

Employers and distracted drivers

Not only is distracted driving dangerous for individuals, the Insurance Information Institute ( I.I.I.) points out, but there is a growing concern among business owners and managers that they may be held liable for accidents caused by their employees while driving and conducting work-related conversations on cellphones. I.I.I. explains that under the doctrine of “vicarious responsibility,” employers may be held legally accountable for the negligent acts of employees committed in the course of employment. Employers may also be found negligent if they fail to put in place a policy for the safe use of cellphones.

Here are the top 7 safety tips from PCI and I.I.I. to help you, your employees, your family members and your clients avoid distracted driving.

1. Wear your seat belt.

Whether you’re taking a weekend get-away or just running errands around town, PCI encourages you to buckle up, drive safely and try to be prepared for those who may not. All passengers should be buckled up, even in the back seat.

Seat belts save lives and help prevent injuries. Also, make sure children are in the proper car or booster seats.

2. Plan ahead and allow extra travel time.

With more people on the roads, often driving in unfamiliar territory, the potential for a traffic crash increases. PCI encourages motorists to plan their routes in advance when traveling to new destinations, be patient, and allow for extra travel time.

Some auto accident reconstruction experts suggest that blindly following GPS systems has caused increases in accidents. If you’re going to use an electronic navigation system, check the directions before you start driving to be sure you understand where the system is taking you and where the turns are.

3. Observe speed limits, including lower speeds in work zones.

Stay focused on the road and be aware of changing traffic patterns caused by construction.

Be cautious of the construction workers themselves, who are often in close proximity to the highway—and at great risk.

Many states have increased fines in work zones, yet another reason to be more cautious.

Also, be aware that construction on major highways often takes place at night, when there is less traffic, but reduced visibility.

4. Avoid distracted driving.

When the entire family is traveling in the car, the opportunity for distraction is multiplied.

Remember to put the phone down, and never text while driving.

Be careful when eating on the run, as lunch can be just as distracting as a cell phone. As I.I.I. notes, eating takes both your hand off the wheel and your eyes off the road, so don’t do it. Furthermore, spills can easily cause an accident. If you have to stop short, you could also be severely burned.

Buckle up or secure pets in the back of the car. Never allow your pet to ride in your lap while you’re driving.

5. Have a plan for roadside assistance.

If an accident occurs, be wary of unscrupulous towing companies. Have the phone number for your insurer or a roadside assistance program ready so you know who to call.

Some towing companies take advantage of drivers after an accident, and you could find yourself facing excessive fees or complications recovering your car from the tow yard.

6. Update your proof of insurance.

Before hitting the road, make sure to replace any expired insurance identification cards so you can prove you have insurance in the event of an accident or a traffic stop.

You should also check traffic laws for any states that you’ll be driving through or staying in.

7. Use safe phone habits.

I.I.I. advises drivers to pull off the road to a safe location if you must use the phone or text with someone.

If you must dial from the road, use voice-activated dialing. Program frequently called numbers and your local emergency number into your phone and use voice-activated dialing.

Let your voice mail pick up your calls while you’re driving. It’s easy — and much safer — to retrieve your messages later on.

If you must make or receive a call while driving, keep conversations brief so you can concentrate on your driving. If a long discussion is required or if the topic is stressful or emotional, end the conversation and continue it once you are off the road.

Source: Property Casualty 360
Photo: Shutter Stock

Increasing Risk Complexity Outpaces ERM Oversight

Increasing Risk Complexity Outpaces ERM Oversight

More organizations are recognizing the value of a structured focus on emerging risks. The number of organizations with a complete enterprise risk management (ERM) program in place has steadily risen from 9% in 2009 to 28% in 2016, according to the N.C. State Poole College of Management’s survey “The State of Risk Oversight: An Overview of Enterprise Risk Management Practices.”

Yet this progress may lag behind the increasingly complicated risks that need addressing. Of respondents, 20% noted an “extensive” increase in the volume and complexity of risks the past five years, with an additional 38% saying the volume and complexity of risks have increased “mostly.” This is similar to participant responses in the most recent prior years. In fact, only 2% said the volume and complexity of risks have not changed at all.

Increasing Risk Complexity - WRM

Even with improvements in the number of programs implemented, the study—which is based on responses of 432 executives from a variety of industries—found there is room for improvement. Overall, 26% of respondents have no formal enterprise-wide approach to risk oversight and currently have no plans to consider this form of risk oversight.

Organizations that do have programs continue to struggle to integrate their risk oversight efforts with strategic planning processes. “Significant opportunities remain for organizations to continue to strengthen their approaches to identifying and assessing key risks facing the entity especially as it relates to coordinating these efforts with strategic planning activities,” the researchers found.

According to the study:

Many argue that the volume and complexity of risks faced by organizations today continue to evolve at a rapid pace, creating huge challenges for management and boards in their oversight of the most important risks. Recent events such as Brexit, the U.S. presidential election, immigration challenges, the constant threat of terrorism, and cyber threats, among numerous other issues, represent examples of challenges management and boards face in navigating an organization’s risk landscape.

Key findings include:

NC-State-ERM - WRM

Source: Risk Management Monitor

 

NAIC Releases Market Share Data

NAIC Releases Market Share Data

WASHINGTON, D.C. (March 1, 2017) —The National Association of Insurance Commissioners (NAIC) released two sets of data today on life/fraternal and property/casualty insurers. The reports provide market share information indicating the degree of market concentration in lines of business and identify leading insurance writers.

The 2016 market share reports include countrywide direct written premium for the top 25 groups and companies as reported on the state page of the annual statement for insurers that report to the NAIC.

The property/casualty report contains cumulative market share data for the following lines of business: personal auto, commercial auto, workers’ compensation, medical professional liability, homeowners and other liability (excluding auto liability) insurance. The life/fraternal market share report contains cumulative market share data for: life; annuity considerations; and aggregate total of life insurance, annuity considerations, deposit-type contract funds, other considerations and accident/health insurance.

The reports will be refreshed daily through March 3 and then each Monday throughout March. Abbreviated versions of the Life/Fraternal and Property/Casualty reports are also available. The complete 2016 Market Share Reports for Life/Fraternal and 2016 Market Share Reports for Property/Casualty will be available this summer and contain more in-depth information.

For questions about the reports or data, contact the NAIC Research & Actuarial Department.

About the NAIC

The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S. For more information, visit www.naic.org.

Source: NAIC

9 factors impacting claims in 2017

9 factors impacting claims in 2017

Claims digitization will be the over-riding theme for 2017 as these capabilities touch every aspect of the claim landscape. A review of some of the more costly events in 2016 highlights the role of technology and its impact on all areas of claims going forward.

Natural catastrophe events in 2016 dwarfed those from 2015. Per Swiss Re, the first six months of 2015 resulted in a total loss of $46 billion (US) in natural catastrophe events. For the same period in 2016, $68 billion (US) in natural CAT losses were realized — an increase of almost 50 percent. Earthquakes in Ecuador and Japan, wildfires in Canada, and flooding in Europe, all contributed to what will amount to a very large CAT loss year.

From a consumer point of view, overall loss costs from 2010 to 2015 declined by 30 percent for US-based homeowners across a broad number of areas, including wind events (down 50 percent); hail by more than 20 percent; fire (steady decline, no figure available); and theft loss costs, which decreased by 50 percent.

Several factors will impact claims in 2017, ranging from new technology such as autonomous cars and drones to applying analytics to the claims process itself. Among those that will have the greatest influence are:

1. Market trends: autonomous cars

The emergence of self-driving cars will continue unabated into 2017. It raises questions of liability regarding the self-driven car ecosystem — with computers, sensors, software and intelligent infrastructure taking more responsibility for the operation of the vehicle, how will culpability for accidents be determined?

In our current reality, liability accrues to the driver of the vehicle that caused the loss event, however that is determined. With a physical driver relegated to being a monitor of an automated process, this does not seem to be the best way to determine fault going forward.

2. Big data

Our ability to collect and disseminate data has never been more prolific, and that will escalate into 2017 and beyond. Sensors now exist, and the communication infrastructure has evolved to the point where data can be gathered, communicated and analyzed very quickly to arrive at informed decisions/recommendations around potential loss events. This capability can help drive down the severity of the loss event and increase the probabilities of stopping the loss before it occurs.

3. Cyber liability

Cyber liability continues to be an area of increased focus for insurers, and most offer cyber liability products to policyholders that are primarily aimed at the loss of data due to an intrusion. However, there were developments during 2016 that suggest loss of data and the costs to recover it may be far from sufficient.

For example, recent losses in the Iranian oil fields due to orchestrated cyber attacks need to be examined closely. These cyber attacks resulted not only in data loss, but also in physical buildings and contents lost through fires and explosions proximately caused by the intrusion.

This is a whole new realm in the cyber liability arena, and one that most insurers are not including in their products for this space. This claim and loss issue will command significant attention going forward.

4. Claims core systems: Ready for a comeback?

Pivoting to the technology front, although claims enterprise system replacement or augmentation dominated in 2005–2012, the focus by insurers more recently has been on policy and billing administration systems. However, claims-driven technology capabilities are again receiving attention, primarily in the areas of digital capabilities. While the prior activity resulted in a significant increase in claim process automation, there remain significant gaps in analytics, augmentation of internal insurer data with third-party data, and collaboration amongst the eco-system players in claims.

First Notice of Loss (FNOL) processes and the collection of information by the claims adjuster still involves significant time and entry of data. One clear trend addressing this is the increasing use of robotic process automation (RPA) to automate data entry activities. If done correctly, RPA replicates the activity of a human in standard data entry by gathering data from multiple sources, standardizing and formatting the data for ingestion, and applying it to the appropriate aspect of the workflow.

5. Applying predictive analytics and AI to claims

There are also many opportunities in the claims process for the use of predictive analytics, although adoption has been slow. There are clear use cases for specific areas — including claim fraud and loss and reserve forecasting — and clear areas of opportunity such as loss forecasting. The benefits of quickly assessing a claim’s severity, forwarding it to the proper claim expert, involving all applicable claim services, and coming to a fair and expeditious settlement to avoid litigation are clearly understood. One key area enabling accurate loss forecasting analytics is the incorporation of sensor-driven data — such as from boilers or related energy-producing vessels where heat, pressure, load and other key data elements can be monitored.

Predictive analytics can also help to prevent fraud. These predictive tools are used to identify data elements likely to or potentially leading to fraud, e.g., auto collision claim coming in from New York City from areas with high congestion; late model sports cars; accident types that suggest fraud (such as rear-end accidents with neck injuries). All these factors tell a story, and predictive tools can help analyze that information.

6. Artificial intelligence

Another technology enabler in claims that will receive increased focus in 2017 is artificial intelligence (AI). Coupled with image and video analytic tools, AI can “learn” how to provide increasingly accurate loss estimates based on a picture or video. Of course, AI has other areas of application in the claims value chain. Subrogation and salvage are two technical areas within claims that will benefit from having AI applied to the existing analytical models; subrogation, specifically, is an area that many insurers feel is under-utilized and sub-optimized.

7. Prioritizing process optimization and customer engagement

Optimizing the overall claims process for policyholders will be another key focus for 2017. Automation efforts in the past decade focused on automating and consolidating internal claims activities. Now, providing smart, easy-to-use and intuitive capabilities for external audiences, like policyholders and claimants is being addressed.

One of the key touch points with customers is in paying their claims, an area critical to customer satisfaction and policy renewals. Start-ups in the insurance space are using automation to address the claim payment process (as well as the quote and purchase process).

Lemonade and Trov are both making the claims process as painless as possible for their insureds. Trov is using text messages to provide a basic “First Notice of Loss” channel. Lemonade accepts a picture or video of the damage, and attempts to adjudicate the claim based on that information and a series of algorithms, as well as information from the policyholder.

8. Drones

Drone use is another utility that is going to make a significant difference in commercial claim processing for instruments that are difficult, expensive or even dangerous to perform damage assessment upon. This includes: bridges, oil well derricks, cell towers, tall smokestacks, and radio and TV towers, which are difficult to access for direct observation and measurement of damage due to hail, wind, precipitation and the like.

Drones provide highly detailed images that can be used for image analytics to assess damage. Having both pre- and post-loss imagery will provide for better damage estimates. The images also can be used to estimate other parameters such as height, distance from other physical objects like bodies of water adjacent to properties. With FAA regulatory clarification, the use of drones in commercial insurance will increase significantly and use cases for personal lines will emerge as well once FAA regulations are fully implemented and understood.

9. Blockchain

Finally, the reverberations from the blockchain technology wave will be felt in the claims process. At a minimum, the potential for reducing fraud in fine arts, classic cars, and related high-value insured objects sector will be significant. If blockchain can be leveraged to create public ledgers where high-value objects are identified and tracked, the occurrence of forged items should diminish over time. There are also potential benefits in areas such as title insurance, where title information can be shared in a public ledger available to multiple parties of the insurance and real estate transaction.

Adopt a test-and-learn approach

There were many opportunities in 2016 to apply digital capabilities to the claim process, and that will only increase in 2017. As with any investment, keeping the business case in mind is always important; however, insurers should take a “test and learn” approach and not expect immediate returns on their investment. The learning aspect will be valuable, and should be recognized as a “benefit” too.

Sources:
PropertyCasualty360
iStock
Article: by Tom Rubenacker