Is There a Good Way to Protect a Crisis?

In some way, that's what every insurance policy was designed to do.

It's the size and severity of the crisis that was always in question.

Now, more than ever, we realize that word can take on many enhanced levels of meaning.

But are business owners properly prepared (and protected) to deal with them effectively?

That's just one of the questions Comber McHugh, RPS National Sales Broker, answers about dealing with those unimaginable events.

Joey: Comber McHugh. How are you doing today?

Comber McHugh: I'm great. I'm great. How are you?

Joey: I'm doing all right. I am doing all right. I was thinking about this. I've always worked from home for quite a bit of time, basically almost my entire professional career, so I've gotten very good at the mute button. But for people that have not been in that environment, I'm curious, how good have you gotten over the last three months of making sure that you're on mute during these calls so that something doesn't slip out, you don't have anything going on in the background? Do you think you've improved your skills a little bit?

Comber McHugh: Oh, I'm usually on mute. Usually on mute.

Joey: That's your default setting?

Comber McHugh: That is my default setting, yeah. I haven't really slipped into the other trap, after three months.

Joey: All right. Well, that's definitely a safe place to be because then you're automatically protecting yourself from anything happening. Have you had any sort of uncomfortable encounters with other people? I've heard some stories of people with conference calls forgetting that they haven't muted themselves. I've been on a few myself. Have you had any good stories?

Comber McHugh: No, I think my observations are more that people forget they're on the camera. It isn't so much about the mute button, but the camera.

Joey: Yeah, the videos, there's a whole new element these days. Because you just pop into a call now and all of a sudden it's on, and you don't even... It's weird because it's like, do they realize their video's on? Because then it's like, you feel weird looking at them, like I wish I could do something. Can I have somebody going knock on their door? Just it's a bad situation.

Comber McHugh: Yes. Yes. And versus an in person visit, you have immediate biofeedback, and you're aware of what you're doing with your body. You're not going to rub your nose or your ears or something else. And I've seen it on the Zoom calls, and it's awkward. You're sitting in someone's house with them rather than at an office setting.

Joey: Have you adopted a few more video calls to kind of keep that face to face live during this time?

Comber McHugh: There is an element of fatigue. So a lot of agents are using teams. They're using Zoom. As they're going back to the office, I feel as though they're disconnecting a little bit from the use of those conferencing techniques. And I think people have reverted back to just pick up the phone, let's have a conversation.

Joey: Well, it's nice to kind of level off a little bit. But what I really wanted to talk to you today, Comber, is just really what's going on in terms of the environment around crisis protection, and what we're seeing in terms of the response that's going on with those types of things. What have you kind of been seeing in terms of that response? Where do you think businesses need to be paying attention to now, in terms of making sure they have the protection that they need?

Comber McHugh: Sure, sure. It's a tough time all over world. This is not a situation that is simply localized. It's not something that people can say, oh, that's happening on the other side of the country. I don't need to worry about it. We've often seen with flood insurance, where people will say, oh, well, that's a hurricane. That affects them on the East Coast. It doesn't really affect me in the central states. Or that's a Gulf Coast issue, it's not something we have to worry about in the mountain states.

And what's happening right now, and it's bringing a lot of attention to cyber... I'm sorry, to crisis coverages is not limited to any one geographic area. There are definitely hotspots, but the COVID virus, as an example, is worldwide. And the after effects of the stress from COVID is definitely ready to flare anywhere in the world. So, much like other situations, people would prefer to think it's not going to happen to me, it's not going to happen here. But the environment of crisis is around us wherever we are. And I think that's evident in the press, evident in social media, and it's time we as insurance professionals look at it face on and say, how can we help during these times?

Joey: Like you said, there's always that element somewhere with almost any insurance policy, of it's not going to happen to me. But I would say that this probably is on the newer side of things, as far as being something that agents have on their radar. What do you think their conversations should be? Because again, I doubt that they're having the conversations like that with their clients on the level that maybe should be during this time. What does that conversation look like for them, with their clients? How should they be approaching this?

Comber McHugh: I think agents are having a lot of difficult conversations with their clients already. And some of them may fall into the very awkward position of, well, we don't have the money to pay for insurance now. Or our revenue stream is so abbreviated. We need your advice. How do we structure our insurance going forward? So it needs to just be another element on the table of risk versus budget. And how do we juggle the limited amount of money, to make sure the most shells on the table are actually covered? And it just needs to be added to the conversation, just as though cyber has had to be a new conversation that's been added to the checklist, or employment practices liability.

So it will, most likely ,take multiple conversations for someone to understand the need, unless they're in an immediate hotspot or they have a client or a supplier or a friend or a prospect that has already experienced something that involves the need for a crisis type of insurance policy.

Joey: Yeah. And that's, I think, the multiple conversations thing, everyone always wants to think that, oh, I'm just going to say it once, and if it doesn't happen... There's always this sort of honeymoon like, oh, it's got to happen, this is great, this is fantastic. But then it's really something that if you don't start now, you're not going to give yourself a chance 12 to 24 months down the road, to actually have a shot at that.

And I think you brought up cyber as a good example. And we were on a call the other day with one of the consulting partners and one of the policies that we work with, and they had mentioned that they see this sort of coverage as going the way of cyber. This is something that's going to follow a similar path. Is that something... where would you gauge this coverage in relation to cyber? Because agents are starting to get used to having that cyber conversation a little bit. Is that something that they should kind of use to help frame the conversation?

Comber McHugh: Absolutely. Tremendous parallel. When we've spoken to the folks that are the response providers behind our crisis protect product, they've given us some statistics about what they're seeing, is they are the largest crisis response company in the world, and their name is R3. And they indicate that, a typical year, they would average probably 75 events, during any normal week. And if it were a natural disaster, that would tend to drive it up to around 125. But now, in the condition surrounding the COVID stress, the injustice stress, in environments, they're seeing this jump up to 400.

So just the magnitude of events is also very similar to what we've seen in the cyberspace, where initially, there might have been a large event at a particular large retailer, and people just thought it was a large event, didn't happen to them. But the frequency and the grasp of cyber events became much more all-encompassing. And that's already happening around these crisis events. And it's obvious, but it's not clear to people that it's something that they can insure against, until the dialogue is presented, and until the examples and, really, our jobs as insurance agents puts it in front of them in black and white.

Joey: Yeah. And are there any particular industries that might be better candidates at first? Because like you said, it started with the big companies in the cyber. Obviously, the bigger places had the higher likelihood, potentially. Are there any industries that should maybe be paying more attention to this than others?

Comber McHugh: Geographically, I think that's the first layer of focus. We all know that there are listening devices in urban centers all around the world. And we already know that the volume of gunshots has doubled in the last three months. So, what might be three or four gunshots per square mile, is now doubling to seven to eight gunshots per square mile. So urban areas are statistically very active right now. So anyone in an urban area is already keenly aware, in the statistics would bear out, this is where the risk of a flare up is significant.

Beyond that, you have to kind of look at some of the other feeding factors. Obviously COVID, so wherever COVID is flaring, that's laying the groundwork for the stress that could couple with the concerns around injustice.

And you've got two other large factors looming out there, and that is the economic uncertainty facing the world and the country. Are we headed into deep recession or depression? Are furloughs going to become permanent layoffs? Are extended unemployment benefits going to be discontinued in July? And will there be more food lines wrapping around the corners? All of these are factors that can set up a scenario for a crisis that can impact an insured.

The ultimate one still facing us this year, of course, is the political stress of the election in a few months. So these are all risk factors that people have to see on their windshield as they look out every day, to put together how serious is this for me, based on where I'm sitting.

Joey: Yeah. And I want to go back, you talked about just that conversation of coverage, what is covered, what should they be worried about, what needs protected? And the default in a lot of ways is a lot of businesses will try to look to, I have coverage in this area of this policy. As opposed to something that's specifically designed to handle that. What do you think is some of the more important events that would come in a more robust crisis management situation, that might not be taken care of as extensively with a standard policy?

Comber McHugh: Yeah. And this becomes a kind of a universal question. Think back to flood insurance, when people's homes are flooded, they think, oh, I have homeowners insurance. It should be covered there. And I think we've all learned, but I'm always surprised we haven't all learned that flood is not part of homeowners insurance. So, a typical business will have a business owner's policy, and their hope is that everything's in there. But in reality, a lot of things are excluded. A lot of things may just have incidental coverage, but they're not crafted to provide the resources and breadth of coverage that can be secured in a genuine crisis policy, which pretty much has its roots in the concept of kidnap and ransom and terrorism and all the related violence that can be associated with those types of incidents.

So what we've put together with the crisis protect product, really is all-encompassing with responses for 20 specific triggers that include civil commotion and unrest, various types of extortion and kidnap and ransom, saw vicious attack, active shooter type of situations, and drills down to the idea of property coverage, business income coverage, the costs to board up businesses, the cost to demolish buildings, the cost to bring insecurity, as well as the financial loss. So business income, when a business can't be transacted, whether that's due to a direct impact or an indirect impact. If the area where a business operates has been shut down by civil authority, that is absolutely a trigger in our policy.

 There's the human aspect as well. A lot of these things will be very stressful to employees, and they can be impacted, or their families can be impacted. And this policy triggers response to help those people with counseling and advice. So the policy is meant to help businesses prepare for crisis events, actively work through crisis events, and recover after crisis events, with both consulting and pure dollars to respond for loss.

Joey: Yeah. Because it goes so much beyond just the physical loss or the things that kind of like you said, actually impacted in the physical environment. I think one of the things that maybe goes unnoticed to a different level is like you said, that consultancy ,in terms of a lot can be mitigated, a lot can happen in that kind of initial window of do you do the right things quickly? Talk to me a little bit about what that looks like and how agents should be approaching this conversation, and what this looks like for a client, because that can make or break the difference of dramatically compounding the issue further.

Comber McHugh: Sure, sure. Very similar to, let's say, an employment practices liability policy, a crisis protect policy comes with the ability to pick up the phone and call the confidential advice givers, the people that actually talk you through a crisis, when it actually hits the fan. And talk to them in advance, to say what practices, what procedures should be in place to use some of the information that's available through the portal that comes with the policy? To go through the checklist to say, do I have an incident response plan? Do I know who to call? Do I know what to do? Do I have all the numbers for police and emergency assistance? To run a parallel. If you were a chemical manufacturer, you would have an incident response, you would run mock drills of what happens when the chemicals spill on the ground, who do I call? What do I do? Does everyone know what their role is?

We're seeing more companies do active shooter role-plays in the office. And that would be an example of take that concept and expand it beyond the idea of an active shooter. So, the services before there is a crisis include preparations on a very theoretical level, but encouragement to actually walk through what you would do when this happens. You get the same with an APLI policy. There's consulting around HR practices, as well. So that's a familiar concept when talking about this coverage.

Joey: Yeah. If I had to guess, I would say it's something that either people aren't aware of as much as they probably should be, and it probably goes under utilized more than it probably should be, as well.

Comber McHugh: Yes.

Joey: And believe me, those shooter drills are real, because anybody that's got kids in school now, it's like they come home, and they tell you they're doing these drills. And you don't know how to feel about it. You're like, what's happening? I'm not even quite sure what's... because you didn't have to do that when you were growing up. And the fact that your kids are in a world that... I didn't have to do it. And it's just something that is part of their life. It's very crazy.

Comber McHugh: Yeah.

Joey: But the one thing I was kind of interested about was just, with insurance, there's always a requirements, qualifications on things to get policies in place. But this one is actually interesting in the fact that it's pretty easy. It's a fixed premium. Talk me through that. I was very surprised at how easy it is for, again, just the level of coverage.

Comber McHugh: Yes, yes. This product is meant to be easy. So it's using the same concept that's been so successful on our eCommerce portal, which is a quote bind and issue in under five minutes. We understand everyone's time is valuable, so we have streamlined the underwriting process and the pricing. This product is available for a flat premium of $2000 for risks with under 250 million in annual sales. That's considered a small account in the global perspective of crisis. So those accounts are able to qualify for easy $2000 premium pricing, based on there being no more than five locations to be listed for the property coverage. If there are other locations, they wouldn't be listed for that $2000 premium, but those locations would still have access to consulting services, if something were to happen in a distant outpost, so to speak.

The application is very simple, just listing the locations and the property values at those locations. And it's a $2000 quote for every type of business, except for public entity and schools. The product will need to be expanded, and the pricing will be different because obviously, those exposures represent a very different hazard exposure than a business, so to speak.

Joey: Yeah. And the fact that, like you said, it's up to five locations, and those locations can be selected, right? You can just pick which ones you think are the most viable, which I thought was pretty interesting.

Comber, I've got two more questions for you. And we've talked a lot about kind of a new coverage that agents might not have on the radar maybe as much as they should. If you had to give one sort of piece of advice, we talked about doing it early, making sure we start that conversation, but is there one thing that you would like to see them do beyond that, to really start to kind of have a more meaningful conversation about the totality of exposures and risks that our businesses are open to these days?

Comber McHugh: Strategically, when you're sitting in front of a client, you have to try to put yourself in their shoes. You have to understand what keeps them up at night. You may know some of these people very personally, because you've gone to school with them, you go to church with them, you sail with them, you go out socializing with them. You may already know what some of their personal concerns are as entrepreneurs or as managers or as administrators or leaders.

And it's a constant juggle of understanding their tolerance for risk, yet suggesting every way they can transfer a risk. And that's always a delicate dance. Obviously, if they've been able to save money in one corner, then you start shining the light on areas that they could consider for additional coverage. We've seen it happen for the last 10 years with cyber liability, where it may not have been an early conversation, but with continued exposure to the facts and the opportunity to shift the risk, people turn around amazingly quickly. With cyber, we've seen so many conversations start today, maybe around a renewal. Nothing happened immediately. And then we get the call back within a couple months, six months, usually before the renewal, in many cases, to say, remember what we talked about? I think we're ready because we just heard something that really made sense, and now we'd like to see that coverage again. So I think the point is the conversation has to be had, and it has to be repeated, and always be available to discuss.

Joey: All right, Comber, last question. And we've talked a lot about different options that are kind of broadly across the industry, in terms of this coverage, but I'm more curious about your particular outlook. What are you most excited about? It doesn't have to be crisis, it doesn't have to be cyber. What's really the thing that has got your attention, moving forward, in terms of insurance? What are you excited about?

Comber McHugh: I'm actually thrilled by all the disruption that we've experienced in the last three months. I've spoken to so many people that, granted, it is life changing in horrendous ways, in so many ways, in economic ways, but there is an absolute sense of opportunity, creativity, excitement to try things that they haven't tried before, to recognize opportunities that perhaps have been hidden, haven't been apparent, or just didn't exist before. And there's a tremendous energy to say, how can we, rather than we don't want to.

And I think that just represents a tremendous energy to recognize things in front of us, as individuals and professionals, and to try to pair together opportunities and generate results. That's going to translate from restaurants that have been creative to schools that have to be creative to parents that have to be creative. And in schooling, we are all hyper alert and aware to opportunities for improvement. And I see that translating every day in our insurance marketplace.

Joey: Awesome stuff, Comber. Really appreciate it. Was a lot of fun. Thanks for the time.

Comber McHugh: Good to talk to you, Joey. Thank you.