By Tory Brownyard, president, BrownyardGroup

The Great Recession has reconfigured many industries, includingthe public sector. Local governments are cutting back across theboard, including their police departments. A 2011 survey by theFraternal Order of Policeestimates that the U.S. lost between 12,000 and 15,000 swornofficer positions since the beginning of the recession; theInternational Association ofChiefs of Police estimates that 10,000 positions have beenlost.

While police forces shrink—and governments respond to tragedieslike December's elementary school shooting in Newtown, Ct.— thedemand for private security guards has grown. For example, inDetroit, some private security companies have seen an 80 percentincrease in business since the beginning of the recession. Thisstrong demand has further bolstered an industry that had beengrowing at a rate of between 7 percent and 12 percent per year forsome time.

Read related: “AddressingRisks in Public Spaces After Newtown.”

As the private security industry grows, we continue to seea competitive insurance market for security guard firms, which needto protect themselves for liability in incidents that occur undertheir watch. For agents and brokers eyeing this growing industry,it's important to understand the risks involved, as well as themany factors that affect the availability and pricing of liabilitycoverage.

Specialties affect risks

Security guard firms can be hired to protect many differenttypes of clients, from a sleepy gated community to rowdy sportsevents. Each type of client has very different risks, which meansthe availability and price of coverage varies.

For example, guards working in retail stores experience frequentclaims, though not always severe ones. They are likely to see falsearrest, false detainment or invasion of privacy claims stemmingfrom suspected shoplifting. Store owners expect the security guardsto absorb all the risk, from both a safety and insuranceperspective.

Guards protecting low-income housing see some of the most severeclaims. These properties are more likely to exist in high-crimeareas, which puts guards in danger more often. These guards arelikely to be sued for failing to provide adequate security in thecase of violent crime—the types of claims that threaten policylimits.

In both cases, an agent may find it difficult to find coverageat a reasonable price for their client. However, you can talk toyour client about mitigating the risks characteristic of theirindustry. For example, guards working in retail environments canlimit their role to observing and reporting suspicious activitiesto managers or police.

A lack of specialization can also be a problem, as any start-upor younger security guard firm will find. Insurers often view themas risky because they cannot demonstrate in-depth industryknowledge that helps prevent claims. You can encourage yourstart-up clients to focus on their strengths for a better chance ofsecuring coverage.

Better training lowers risks

Ideally, security guards receive specialized training for theindustries they serve, but even basic training standards sometimesare lacking. Different states have different training requirements,and some do not have any. Though national training standards forfundamentals are lacking, agents can encourage firms to examinetheir internal training standards and look for areas ofimprovement.

Situational training prepares guards for the risks involved in aspecific industry. Using the above examples, guards working inretail settings need to be prepared for very different incidentsthan those working in low-income housing. Guards should also beinstilled with an understanding of proper use of force in theenvironment they serve. And when incidents do arise, guards canhelp mitigate claims with proper handling. For that reason, morefirms are offering training in documentation and litigationawareness.

Read related: “Lootersand Loss: Securing Property in the Wake ofSandy.”

Why should agents be worried about training? Proper training canhelp manage a security firm's risk, as well-trained guards makefewer mistakes and handle incidents better. Be aware of any guardfirm's training programs when placing their business, and encouragethem to institute high-quality training.

To arm or not to arm

Since guards who carry firearms are at a greater risk forhigh-severity claims, some insurers will not provide coverage forarmed guards. This is something to take note of in the aftermath ofthe Newtown tragedy, with politicians and observers calling forarmed guards in schools. As it stands, security firms that provideguards with firearms may have to pay significantly more forcoverage, or settle for non-admitted markets.

In light of the recent rash of mass shootings, businesses andpublic places have many questions about keeping their customers andvisitors safe. More often, private security guards are becoming acommon answer. Agents looking to become a part of this growingniche should do their homework in order to evaluate potentialclients and find the specialty coverage they need.