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Elmore Insurance Brokers

Insurance and the sharing economy

By | Blog

New business models are usually viewed as an opportunity for challengers and a threat to incumbents. But they are also an opportunity for any existing business that can adapt to market forces and evolve its products and services. To use the industry jargon, for every ‘disruptor’ there is also an established player who will ‘pivot’ to remain competitive.

With the rise of the sharing economy, which bypasses intermediaries and is built on mutual interest between peers, the insurance industry is caught between opportunity and threat. The most direct threat is from peer-to-peer (P2P) insurance, which like P2P lending is a growing strand in the sharing economy.

According to the research firm Tracxn, brands such as Teambrella and Friendsurance top a list of more than 70 P2P insurance start-ups worldwide. But capacity in P2P insurance is limited and most companies focus on niche personal lines. At heart, they are technology-driven versions of centuries-old mutual insurance companies. The more important development is the force behind today’s underwriting innovations – namely insurtech. Once perceived as challengers, insurtechs are now viewed as partners, helping insurers to harness the benefits of digital technology.

When it comes to non-insurance P2P models, the field is open for those who can develop new business lines to fill product and service gaps. However, underwriting these models can be challenging and requires a firm understanding of market trends and hard-to-place risks.

Let’s take a closer look at the sharing economy, why it has become so popular across many industries and sectors, and what P2P models mean for the future of insurance.

Tech-based growth

Collaboration is the principle behind the sharing economy, with like-minded people coming together to share assets and services. The term ‘sharing economy’ began to appear in the early 2000s when rapid advances in digital technology, particularly the development of the smartphone, made it possible to easily connect people and support new business platforms. Many of these collaborative platforms have become household names, such as Uber and Airbnb, and PwC estimates that the sharing economy will be worth $335 billion globally by 2025.

Understanding and insuring new models

Insurance has a vital role to play in protecting the sharing economy and helping it to grow. However, as with any business trend, it takes time to understand new commercial relationships and liabilities. Brokers and insurers must carefully follow the trend, assimilate and analyse the market data, and work closely to provide cover that is in keeping with their risk appetites.

Insurers need reliable data to quantify P2P risks, and cover can only be provided if there is a clear insurable interest. Because the sharing economy doesn’t conform to traditional insurance models, and insurable interest is difficult to establish when exchanging assets and services, underwriters are in uncharted territory and must develop bespoke solutions.

For insurers with flexibility and the right focus, the sharing economy is an opportunity to diversify and extend product lines. For example, Lloyd’s stepped in to insure Airbnb in 2012 and now has a sharing economy strategy for P2P products. Another example is the ‘rent anything’ platform Fat Llama, which is underwritten by Hiscox. The presence of established and respected insurers in the sharing space inspires confidence and will encourage further growth.

Elmore and innovation

Brokers shape insurance products and help to manage change as marketplaces and businesses evolve. They are traditionally the innovators in the insurance industry, matching supply with demand, and their role is increasingly important in the fast-moving and ever-changing digital world.

The sharing economy is a by-product of digital transformation, which has led to many new enterprises, and at Elmore we design products to bridge insurance gaps and create confidence in the overall digital economy.

Whether you are a P2P start-up, a challenger bank, or an infosec, we can review your insurance requirements and help you find the right cover. Take a look at our services and the industries we support, and find out how we can protect your business and help you succeed.

Elmore Insurance Brokers Limited.

Home thoughts from…home

By | Blog

The London re/insurance market takes huge pride in developing business through face-to-face interactions. Indeed, it’s what gives the market its distinctive character and power. So, when lockdown was announced, our industry’s USP was almost completely erased.

Insurance brokers are invaluable intermediaries who help a business arrange specialist insurance programmes. As a placing reinsurance broker I help insurance companies all around the world get access to specialist reinsurance products from Lloyd’s and the London reinsurance market. Before the pandemic, I could walk into Lloyd’s with a finely-tuned presentation and rely on the strength of my existing relationships with underwriters, confident that most risks could be discussed in person and a solution found.

It’s no secret that actuaries provide underwriters with a base rate premium against which quotations can be benchmarked. So why the need for brokers? All re/insurance business involves risk, and with risk comes the need for trust and clarity. While underwriting models are strong and well developed, they may fall short in some areas because of the economic climate, financial stability and other variables. Brokers can cut through any issues or grey areas and ensure that the needs of both the underwriters and the clients are met. And here’s the rub: the best way to do this is for brokers to sit directly with the person making the decision and negotiate the details.

What happens now our face-to-face role has gone? Personally, I used to curse the queuing system in Lloyd’s, but now I’m chasing endorsements to be signed over a three-week period when previously they would have been completed in just hours in the Lloyd’s building. In fairness, much of this is due to teething problems following the sudden need to work from home, and we’ve been learning to adjust; however, work is certainly slower outside of the London environment. In this respect the virtual world is not as efficient as the real one.

Oddly, virtual conferencing (which is now the norm) has allowed/encouraged us to engage at a more personal level with our overseas markets. So, while we’re feeling the loss of our Lloyd’s workplace, we’re developing new face-to-face relationships in different parts of the business – which is good for us and good for our clients.

About Elmore Insurance Brokers

Elmore advises its clients to actively manage risk to optimise insurance. Insurance is a partnership between businesses and insurers, and this partnership depends on a very close working relationship and careful analysis of risks. Elmore provides this focus and expertise, helping businesses to understand and implement risk management best practice.

Written by Nik Pass, Client Executive of the Elmore Financial Insurances Team, Elmore Insurance Brokers Limited.

5 Insurance considerations for firms operating under PSD2

By | Blog

Elmore takes a comprehensive approach to risk identification and risk management, for the benefit of insurance offerings that protect and strengthen any business operating under PSD2. We summarise areas where we support PSD firms:

1. PSD2 risk mapping and identification

We identify and map key risks for PSD2 services and technology offerings along with other business areas, and we outline potential loss scenarios so that maximum probable losses can be calculated.
Following these discussions, firms will have a clear idea of the risks facing their businesses and are better able to judge if they should mitigate, accept or transfer these risks.

2. Silent Review – insurance due diligence

A Silent Review of insurance policies, including suitability of PSD2 Professional Indemnity insurance (PII). This is particularly useful after a change in business model, industry-specific or global regulatory action, or for an impending M&A or fund raise.

During the Silent Review, Elmore will:
• Help calculate the specific requirements of the PSD2 Professional Indemnity Insurance (PII)
• Analyse business activities in light of the coverage purchased
• Review all relevant insurance policy terms and conditions
• Assess the adequacy of the sum insured, deductibles and premiums
• Identify gaps or overlaps in coverage between policies
• Provide peer review analysis

A report with key recommendations and a risk rating is submitted at the end of the review. A higher level of detail is provided if enhanced due diligence is required.

3. Risk transfer/insurance

Elmore provides advice on, and places, insurance into Lloyd’s, the world’s leading insurance and reinsurance market, along with a range of competitive company market and MGA insurers. We look for the most competitive pricing and suitable coverage for our clients.
Through our market presence, we secure tailored solutions for firms operating under PSD2, creating long-term partnerships based on a clear understanding of our clients’ evolving needs in relation to PSD2.

4. Partner with insurers – embedded insurance

There are many ways insurance can help firms operating under PSD2:
• Embedded insurance for your customers – insurance can be an innovative way for a firm to protect its customers from a variety of risk events, including but not limited to:
o Personal or micro SME cyber insurance
o Gadget insurance
o Travel insurance
• Service warranty for your customers – insurers can provide protection for a firm offering a service warranty to its customers without the firm needing to issue any insurance policy to customers.

5. PSD2 M&A and Fund Raises

Firms operating in the PSD2 environment are increasingly active in mergers, acquisitions and fund raises. Elmore can support M&A or fund raise insurance due diligence. M&A insurance allows the buy-side to offer more appealing terms, while the sell-side can reduce the escrow period and have a clean exit. In short, M&A insurance is a deal enabler.

About Elmore Insurance Brokers

Elmore advises its clients to actively manage risk to optimise insurance. Insurance is a partnership between businesses and insurers, and this partnership depends on a very close working relationship and careful analysis of risks. Elmore provides this focus and expertise, helping businesses to understand and implement risk management best practice.

Written by Simon Gilbert, Founder and Managing Director, Elmore Insurance Brokers Limited.

Managing risk: The challenge for challenger banks

By | Blog

Think of an athlete attempting to beat a ‘personal best’ or someone scaling a mountain. Both are individual challenges. In the business world, we’re now used to hearing about another type of challenge, or more accurately, ‘challengers’. Namely, disruptive start-ups who are turning traditional business models on their heads and taking on industry incumbents.

Challenges may be exciting, but they come with risks. For an athlete pushing the limits, there’s always a danger of injury. And if your ambition is to conquer Everest, the hazards are even greater. For a challenger bank, the stakes are not quite so high, but every enterprise carries a risk – especially if it’s breaking new ground.

That’s why challenger banks must protect themselves with the right insurance. Regulations and compliance, corporate responsibility, media scrutiny, and cybersecurity are just some of the things to consider and manage.

Top 5 challenger bank insurable risks

Understanding how insurance can support a challenger bank is as important as identifying the risks facing the business.

1. Regulatory investigation costs

Accountability is higher than ever for challenger banks, and regulators the world over continue to raise the bar for disruptors. Challenger bank insurers know it’s essential to provide immediate support in the event of a regulatory investigation so that any issues can be suitably escalated and addressed. Insurers will typically pay the costs of a specialist regulatory legal expert, to help with any responses to regulators, and will advise on how best to handle a regulatory investigation.

2. Liability from financial crime

Financial crime is one of the key risks for a challenger bank. Controls may not be strong enough when the bank’s attention and energy are focused on developing the business. Criminals will be quick to exploit weaknesses for money laundering and other illicit activities. As the business grows and transaction volumes increase, the criminals can identify vulnerabilities in transaction monitoring which could result in significant liabilities for the bank as a whole, as well as for its directors and officers. Professional Indemnity (PI) and Directors and Officers Insurance will cover the legal defence costs in defending financial claims along with damages or settlements that may be awarded.

3. System glitch

Software development is inherently difficult to predict and plan. By nature, software is intangible and often involves a large number of stakeholders. This can create many risks that can lead to downtime and lost revenues. Insurers will cover increased work costs along with any loss of revenues or net profits during the time of the interruption.

4. Data breach

Acting as controller or processor of (sensitive) personal data exposes a business to a variety of risks which need to be carefully managed. The accidental or malicious breach of customer data will require some form of action to meet regulatory obligations. Insurers will cover the event management costs and resulting liability, including PCI and data protection fines, where insurable by law.

5. Theft of customer funds

When customer funds are compromised in a bank’s environment, for example through authorised push payments (APPs) or social engineering fraud, it can lead to investigation costs along with possible financial loss if the compromised funds are deemed to be the bank’s responsibility. Insurers can cover different loss scenarios including loss in the customer environment. Crime losses often involve significant sums and should be insured for balance sheet protection.

Mapping risks to insurance

We recommend that firms should map key risks to available insurance policies at least once every year. Because circumstances often change for fast-growing businesses, you should monitor work arrangements and styles, new product offerings, new fund raising, and operations in new territories.

About Elmore

At Elmore, we advise our clients to actively manage risks and optimise insurance at all stages of their growth. Insurance is a partnership between a business and an insurer, and when that partnership is based on a clear understanding and assessment of risks, both current and emerging, the business will be fully protected as it matures. If you’re a challenger, keen to develop and grow, managing risk should never be an afterthought.

Written by Simon Gilbert, Founder and Managing Director, Elmore Insurance Brokers Limited.

Claim of the Month: A $1,129,981 crime insurance claim

By | Blog

Overview

A financial services firm suffered a loss of USD 1,154,981 as a result of the confessed dishonesty of an employee who had fraudulently transferred funds from several corporate accounts. The employee remains imprisoned awaiting trial.

Background

The employee worked as a relationship manager for several corporate customer accounts, and transferred the proceeds of the fraud principally to beneficiary bank accounts in the name of an accomplice.

To effect the transfers, the fraudster prepared fictitious transfer forms bearing the purported signature of the corporate customer authorised account signatory.

The fraudulent forms gave the appearance of having been received both as an attachment to an email and in-person at the branch. The signatures on the email instructions had been copy pasted from those genuinely applied.

The dishonest employee confessed to the thefts and attributed them to a gambling addiction. He admitted to forging customer signatures on credit disbursement and funds transfer forms, and said that no one at the branch had dishonestly assisted him. Instead, they relied on his representations that the client was in the branch or that he had verified the instruction by phone.

Insurance Policy Response

Over 70% of crime insurance claims involve dishonest employees or ‘insiders’. In this policy there was a requirement to prove to insurers that the financial services firm had suffered a direct financial loss and that the employee had then achieved an improper financial gain. Both of these requirements were met and insurers agreed to pay the loss in full. The loss was settled within four months of discovery, which was significantly quicker than usual because the employee was in custody and had confessed to all parts of the crime.

Written by Simon Gilbert, Founder and Managing Director, Elmore Insurance Brokers Limited.

What makes a good insurance submission?

By | Blog

During these unprecedented times and hard insurance market conditions, it’s essential to prepare and present a good insurance submission to an underwriter. So, what are the key things to consider about your company’s risk profile?

Background and context

There is always a backstory with a risk presentation. Your business could be an existing policyholder or one underwriters are working with for the first time. Perhaps you operate in a fast-growing sector such as infosec where there are special challenges and requirements. Background and context are essential starting points to help an underwriter judge how to approach and prioritise your enquiry.

Key factors and focus

Before presenting to an underwriter, be certain to clearly demonstrate your motivation and deciding factors. For example, is the priority price, service level or coverage? It’s vital to communicate your buying attitude and challenges to ensure you have the right focus from underwriters.

Right information, right time

Make sure there are no knowledge gaps. You must be fully prepared and have all the correct and relevant information ahead of your deadline. With the majority of us working from home, some turnaround times have increased – and for the moment, at least, it’s not possible for brokers to simply cross the road to get a quote from an underwriter at Lloyd’s of London. Therefore, ensure all your electronic submissions are relevant, accurate, and complete.

For most current submissions, you should include an assessment of how the business has been affected by Covid-19, such as financial impact. And If you are presenting a cyber submission, you should include a ransomware proposal form because of this growing threat. Sometimes you will need many attachments, so make sure everything is clearly labelled and nothing is missing.

Understand emerging and specialist risks

Digital innovations such as crypto and blockchain are transforming the world, but all new technologies and practices have associated risks. Your business activities, geographical reach and customer base may be affected by the rapid pace of change, so you must understand how emerging risks impact any submission when communicating to insurers.  Remember, you must disclose any information that could impact the judgement of an insurer considering insuring your business.

For fintech and infosec businesses, where change is rapid and there are unique needs and challenges, it’s especially important to understand how policy coverage addresses your business. Traditional insurance products may not provide adequate cover for newer risks and business models, so submissions must embrace evolving needs and market trends. This is one of Elmore’s key strengths as an insurance broker. We understand specialist needs, the pace of innovation and regulatory change, and provide the right focus for fintech and infosec businesses.

Written by Tom Abbotts, Client and Operations Executive, Elmore Insurance Brokers Limited.

Changing Jobs During a Pandemic

By | Blog

We’ve lived with Covid-19 for more than a year, and no-one has escaped its effects. Apart from the tragic loss of life, many of the things we take for granted have also disappeared. For example, our familiar office environment and work routines.

Working from home has become the ‘new normal’ for most people, while many others have been furloughed or, worse, made redundant. Against this unsettling backdrop, the thought of changing jobs  – a challenge at the best of times – seems daunting.

For Elmore, rather than being knocked back by the pandemic, it has been a time of continued growth. Thanks to the benefits of technology, the firm has embraced remote working and has even hired new staff.

I’m one of the new hires, having joined the firm in lockdown. It’s a novel experience to start a new job while compelled to work from home and unable to mix with colleagues, but the team has made me very welcome and technology is bringing us together. In fact, as a technology-focused insurance broker, Elmore has made the transition to home working very smooth.

Apart from being able to do my job just as effectively as if I were in an office, I also have the benefit of more time because I don’t have to commute. Time lost to travel is time gained for studying and perhaps obtaining professional qualifications.

Although I’m comfortable working from home, and Elmore has made it easy for me to start my new role, I look forward to meeting my colleagues face to face once the pandemic is over.

Written by George Pearson, Junior Client Executive, Elmore Insurance Brokers Limited.

Insurers’ Supply Chain Under Attack

By | Blog

Even cyber security experts get caught out. A recent cyber-attack on multinational technology provider DXC Technology, which among other services provides incident response for clients, has shown that even experts are vulnerable to attack. This demonstrates the systemic risk of an industry being reliant on one major supplier.

Lessons from the Xchanging cyber-attack

DXC’s managed services subsidiary, Xchanging, experienced a significant ransomware attack which lasted almost four weeks. The firm worked hard to restore access to its operating environment and kept insurers and brokers up to date with progress, but good comms alone doesn’t keep clients happy. The significant delays in processing claims and premiums will live long in the memories of all involved in the related insurance transactions. A poorly handled cyber event can be an easy way of destroying trust that a firm has spent years building. Transparency is key.

Not all firms adopt a transparent approach. After all, finding out a business is subject to possible regulatory or governmental investigation can be disconcerting. Plus, it’s expensive to manage a cyber event publicly and in challenging times a firm may have other spending priorities.

This means that cover-ups happen, but the cost of a cover-up is likely to be higher than the cost of managing an attack well. For example, Uber tried to cover up a breach and was fined USD148m. While the urge to ignore, deny or even remove potentially incriminating evidence is understandable, it must be resisted.

Supply chain risk

It is often said that the weakest link in a business’s cyber security is its supply chain as a firm’s vulnerability increases with its dependence on a critical supplier. This point is illustrated by the DXC cyber event, which has raised questions about the reliability of one supplier responsible for settling USD100bn of premiums and claims for the insurance industry.

Scrutinise risk registers

Cyber risk isn’t just down to a company’s anti-virus or firewall malfunctioning. It comes down to the core operational controls required to monitor and maintain good working practices. A firm should explore every risk, including business interruption, reputation harm and supply chain failure. After all, the likelihood of a solar flare from the sun damaging satellites, communication systems and power supplies has the same probability and impact as a global health pandemic.

It’s essential that firms keep an up-to-date and comprehensive risk register, which is accompanied by insurance mapping to define what risks are insured against and which are not. DXC will more than likely be considering its own business interruption for both lost revenues and the cost of handling the ransomware attack, along with its liabilities to the insurance industry for causing major disruption.

About Elmore Insurance Brokers

Elmore Insurance Brokers Limited advises its clients to actively manage risk to optimise insurance.  Insurance is a partnership between businesses and insurers. This partnership can be significantly enhanced by focused engagement to understand and implement risk management best practice.

Written by Simon Gilbert, Founder & Managing Director, Elmore Insurance Brokers Limited.

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