A new year is upon us, which means the negotiation of rates at renewal has been on the minds of many risk managers and their brokers. If the sentiment expressed this time last year was that “flat is the new 'win',” things look to be turning out similarly this time around, with a few key exceptions—and a few trends to be mindful of as the year unfolds.

Gary Pearce, vice president of the Risk Management Group for workforce and staffing solutions firm Kelly Services, Inc., noted that the company's primary casualty coverage is a Jan. 1 renewal. Speaking to NU in early December, he expected to renew at unchanged rates after enjoying a “significant” rate reduction in 2014. Pearce did not identify any notable changes in the terms and conditions of the company's policies this time around.

Pearce observed that he's seeing a slight increase in claim activity, but one that's realistically consistent to Kelly Services' business growth—and noted that frequency rates have shown steady declines for several years. “We are, however, seeing a disturbing increase in the frequency of relatively severe claims, which seems to be a widespread phenomenon, according to our TPA,” he adds.

The staffing company's workers' comp rates for 2015 will not increase this year, Pearce says, but “this comes after a significant decrease in 2014.” Additionally, Kelly Services achieved a low-single-digit decrease on its global property renewal last May. “We attribute these results to very favorable loss experience and trying to work with our carriers to sustain long-term relationships,” he adds.

The City of Columbia, Mo., saw some changes in its workers' comp coverage effective Oct. 1, 2014, the beginning of the city's fiscal year. “We were pressured to increase our self-insurance retentions, but we were able to hold for 2015,” says risk manager Sarah Perry.

“We definitely anticipate increases for 2016,” she added.

Perry achieved savings in her property insurance renewals this time, even though the premium paid was higher than the previous year due to an increase in coverage and higher replacement costs.

In the City of Angels, “our policies have remained static,” says Victor Parker, Los Angeles' director of risk management. “We enjoy multi-year rate guarantees on various placements, including property, so we avoid market fluctuations in the short term.”

However, both municipalities—Columbia and Los Angeles—have seen an uptick in litigation and related settlements for most areas, including General Liability, auto, police, employment and workers' compensation liability claims. “We also have dealt more with Fair Labor Standards Act-related litigation in recent years and have paid out some significant settlements,” Parker added. 

At National Financial Partners Corp., Peggy Accordino, vice president and director of risk management, noted a few minor changes in rates. The firm's biggest expense, as one might expect, is Professional Liability cover. “We had some flat renewals for property and liability, but Professional Liability is never flat,” she says. Workers' comp, though, was relatively flat this year, Accordino adds, “even though we had six-digit premiums, probably because we have office workers, not manufacturing employees.”

Exposure trends

Each year, new risks emerge for both public and private enterprises, often the result of evolving technologies. For example, identity theft is a well-known risk, but the threat of social engineering thefts is increasing, some risk managers note. Kelly Services, in particular, is considering an extension on its crime program to increase its coverage against the threat of social engineering thefts.

Social engineering is a classic con game in which someone—either in person, over the telephone, or by computer—tries to deceive someone else into inadvertently providing confidential information. The “social engineer” generally knows just enough information about the person being contacted to convince the victim that the caller is a legitimate business or that there's a valid reason to give the banking, credit card or other personal information asked for.

The number of cyber breaches, especially among large companies, has been startling over the past year. “We only hear about the large data breaches,” Elissa Doroff, vice president, underwriting, and product manager, cyber/technology for XL Group, noted during a presentation at the Annual Insurance Executives Conference last month in New York City. “Actually, there have been more than 73,000 reported.”

Cyber risk is the top risk management concern of Kelly's board of directors, says Pearce. The staffing company bought a broad cyber program a couple years ago and is pleased with it, he adds. Apart from maintaining insurance coverage, the company has been proactive in regularly evaluating its cyber practices and defenses.

At NFP, “Our biggest change is that our professional liability policy previously covered the security of client data, but the carrier didn't want to write that anymore,” says Accordino. This pushed NFP into a separate cyber policy with a “significant” limit, she adds. Most carriers have forensic teams to help discover the source of data breaches or flaws in network security, as well as notification coverage for clients; these types of services are what she considers the best things about the policy.

“We're completing comprehensive cyber risk assessments in some of our operations,” says Parker in L.A. As of yet, the city hasn't purchased a commercial cyber liability policy, and continues to self-insure this risk.

Perry was pleased to report that the city of Columbia for the first time bought coverage for cyber risks, including network security and privacy, in 2014 for the city's fiscal year 2015.  

Through its property carrier, the city also added catastrophic coverage for infrastructure that isn't a building. In her tornado-prone area, for example, bus shelters, street signs and traffic signs wouldn't otherwise be covered. “It gets quite expensive when you have to replace five hundred signs, not just one or two,” she notes.