Insurance Journal Article on Cyber Liability

On March 5th, 2012 the Insurance Journal published an article called "What Insured's Should Know About Avoiding Cyber Liability Exposures".  It was written by Christopher Bomar of  Boomarang Data Backup.  In the article he brings up scenarios of possible insurance claims, where the gaps might be in covering such claims and how to avoid such gaps.  It is a well written article and even has a quote from one of Fey Insurance's very own, Brian Fey. 

Please take a look at the article as it does a great job of showing the current status of Cyber Liability needs, gaps and exposures.

Article: What Insured's Should Know about Avoiding Cyber Liability Exposures

Water Damage Claims

Water damage is one of the most common reasons people make claims on their home insurance. Ruptured pipes, faulty appliances and backed-up drains often lead policyholders to inspect their homeowner policy wording carefully.

Water damage coverage in the homeowner insurance policy is a confusing subject. Usually, the damage caused by water will be covered, but the item causing the loss, such as a leaky pipe or broken appliance hose, will not be covered. While your insurance company will pay for the damaged flooring from a ruptured appliance hose, it will be the policyholder’s responsibility to replace the bad hose. Parts and appliances wear out and it is not the intent of an insurance policy to cover wear and tear.
Flood, which occurs when a nearby tributary or body of water breaches its banks and flows into your home, is not covered under homeowner insurance. You must purchase flood insurance for that. You can purchase flood insurance as long as your community participates in the National Flood Insurance Program.

Self-Insurance Industry Can Learn By Example in the Political Influence Game

This blog has commented previously about how the self-insurance/alternative risk transfer industry needs to get its act together if it wants to exercise the same amount of political power in Washington, DC as many other industries of comparable size.

If you need to be convinced of this conclusion, you may want to take notice of legislative
developments related to whether broker commissions will be excluded from health insurer medical loss ratio calculations in accordance with the Affordable Care Act.

A few months ago, HHS determined that broker commissions would not be carved out of MLR calculations. This prompted the brokers to ramp up their political efforts in Congress to pass legislation to override the HHS final rule.

To put a finer point on this description, the brokers have been making more political
contributions and showing up in Washington, Dc to press their case with key members of Congress.

As of today, the political action committee sponsored by one of their trade groups is more than five times as large as the PAC supporting the self-insurance/ART industry. Another broker trade group expects to have nearly 1,000 members come to Washington, DC for a dedicated lobbying event.

This activity has produced initial success. The Access to Professional Health Insurance Advisors (H.R. 1206), originally introduced in the House last March, now has nearly 180 co-sponsors. A companion bill (S. 2068) has now been introduced in the Senate and has attracted bipartisan
support.

While it still remains a heavy lift to pass significant legislation in an election year, the brokers have made solid progress by any objective standard. The self-insurance/ART industry could learn by example.

Self-insurers and captive insurance companies have good stories to tell for sure, but that is not enough to have real political influence in Washington, DC.

This blog estimates that about five percent of those individuals active in the self-insurance/ART industry directly support political advocacy efforts that would directly benefit their business
interests. Such political participation rate is certainly much higher among the brokers -- and we have illustrated their return on investment.

Clearly, expectations would be different if the self-insurance/ART industry did not have the necessary financial and human resources to leverage significant political influence.

But it does.

The NAIC's Identity Crisis

So just who is the National Association of Insurance Commissioners (NAIC)? Apparently the answer depends on particular circumstances. This has actually been the case for some time,
but more people seem to be paying attention now because of the organization’s “mission creep” at both the state and federal level.

Case in point is a February 28, 2012 letter from Rep. Ed Royce (R-CA) to NAIC president Kevin McCarty and CEO Therese Vaughan requesting clarification of exactly how this collection of insurance regulators is defining themselves.

Rep. Royce’s interest was sparked by recent press reports that the NAIC is re-branding itself
as a “standard –setting” organization rather than a private non-profit organization, as it has previously cited its 501 ( c) (3) status to distance itself from exercising any regulatory authority, thereby enabling the NAIC to sidestep open meeting and Sunshine law requirements.

While there have been grumblings about NAIC’s organizational structure and status for some time, it is now getting more attention largely because of the establishment of the Federal Insurance Office and health care reform implementation requirements, which have more
clearly exposed the NAIC’s activist nature.

So let’s explore the NAIC’s identify crisis a bit.

It is on record stating that “when individual insurance commissioners gather as members
gather as members of the NAIC, they are not considered a governmental or public body, but rather are a private group. As an organization, the NAIC does not have any regulatory
authority.”

Well, I guess the validity of this statement depends on how you define the term authority.
While technically true that the NAIC cannot mandate state compliance with any
“standards” it develops, such authority is effectively exercised indirectly through the organization’s accreditation program.

Another interesting observation is that 501 ( c ) (3) organizations are generally restricted
from engaging in political or lobbying activities. But apparently the NAIC does not feel
confined by the U.S. tax code as it regularly dispatches lobbyists to the U.S. Capitol to influence members of Congress on insurance-related legislation.

They certainly have been engaged in an ongoing effort to kill or neuter legislation designed
to modernize the Liability Risk Retention Act. Their most recent objections include
giving the Federal Insurance Office any oversight responsibility with regard to RRG regulation and the establishment of federal corporate governance standard for RRGs.

In related news, the NAIC represented itself as a “standard setter” on insurance issues in a
recent friend of the course brief to the Maine Supreme Court involving premiums charged for health insurance. As part of its brief, the NAIC said it had the right to participate because ‘through the NAIC, state insurance regulators establish standards and best practices, conduct peer review and coordinate their regulatory oversight.”

Rep. Royce concludes his letter by asking NAIC officials to respond to three specific questions:

1. What is NAIC’s status? Is it a trade association? Is it a formal part of “the national system
of state-based insurance regulation in the U.S..”? If so, why did it (a) testify to Congress,
when asked specifically about its status, that it does not “hold ourselves out as some kind of …national regulatory system”; and (b) insist to NCOIL that is not considered a public body” and “does not have any regulatory authority”?

2. Does NAIC agree that as a self-described “private group,” it may not “regulate in the field
of interstate commerce”?

3. As a 501( c ) ( 3) non-profit corporation, does the NAIC not file a Form 990, a routine financial statement for non-profits, with the Internal Revenue Service (IRS)? If the NAIC has been formally exempted by the IRS from filing this information, please provide written documentation of this exemption, and explain why the NAIC feels it necessary to keep this disclosure from public scrutiny.

We look forward to seeing the NAIC’s response and will report on it accordingly. In the
meantime, this blog can report that there is no record of the NAIC filing 990 reports.

Kathleen's Pregnant Pause

“I’m not sure that is going to work,” commented House Energy and Commerce Committee Chairman Fred Upton.

Fellow committee member Rep. Phil Gingrey chuckled later as he asked out loud “So, what is she talking about? Here’s the bill, pay it – that’s what they do.”

These pointed comments were prompted in response to testimony delivered by HHS Secretary Kathleen Sebelius during a March 1 committee hearing on the Administration’s evolving policy on health plan contraceptive coverage requirements for religious institutions.

Ms. Sebelius began her testimony by explaining that organizations affiliated with religious institutions would not have to cover contraceptives if they objected on grounds of conscience.
Instead, insurers would be required to offer birth control free of charge to the employees of those organizations.

So what about self-insured religious organizations (of which there are many)?

After pausing to consider the question, Secretary Sebelius replied that the organizations’ third party administrators might be enlisted to provide contraceptive coverage.

Of course, TPAs are not insurance entities and therefore by definition cannot provide “coverage” for anything. Same issue for ASO providers event though they are connected to insurance entities. These are inconvenient facts to be sure.

But not to worry, as Secretary Sebelius reassured everyone that the department would reach out and “have dialogue with folks”before proposing a rule in the near future.

Perhaps there should have been some “folks” in the room when this health care reform plan was hatched in the first place.

Radio Frequency Indetification Thefts

Credit cards are gradually moving away from the swipe and process cards to the wireless transfer of financial data. This make shopping lines move quicker but it does create a new kind of theft. The technology is called Radio Frequency Identification (RFID). All you do is hold a card near a RFID scanner and the data is transferred. The problem with this is that computer savvy criminals can create scanners that steal your financial data right off your credit card, even if it is still in your wallet. Credit card companies are becoming aware of this issue and have worked to solve the problem with on off switches on the card that are triggered when a finger presses the chip that is imbedded in the card. One other way to prevent scanning theft is to purchase a RFID protected wallet. For example the HuMn Wallet has material that doesn’t allow RFID scanners to scan cards in the wallet.
So be sure to take precaution if your new credit card has the RFID chip imbedded inside. Ask if you can have a card that has the on/off switch and if not look into purchasing a RFID protected wallet.