What to Expect in Business Insurance in 2015

ART JOSETTI
HNI Account Executive

Here's a look at what to expect in business insurance in 2015, courtesy of HNI's risk-management-obsessed brain trust:

Privacy Breaches and Information Technology

Cyber security events ruled 2014. Big companies including J.P. Morgan Chase, Target, Dairy Queen, The Home Depot, Sony, and even the U.S. Postal Service were victims. Expect more similar events in the new year.

In my work at HNI, I'm seeing that many small- to mid-size businesses don't have a sense of cyber exposures. Overall, there's a lack urgency from many organizations, and they can't comprehend scope of loss should a privacy breach occur.

Increasing numbers of employees are working from "the cloud" as mobile technology and telecommuting have gone mainstream. This allows your talent to be extremely flexible, but it also creates new exposures for your data.

What's more, insurance may be positioning "cyber" products incorrectly. Coverage probably should be described as privacy or breach of privacy, instead of cyber attack or cyber terrorism. Watch for this shift in 2015.

And when it comes to privacy breaches, a huge challenge is modeling and quantifying how these emerging threats will affect businesses.

In other IT trends, insurance firms also are looking to increase investment in their own computer infrastructures. They're hungry to change analytics into actionable solutions to gain a competitive advantage.

Environmental and Climate Changes

In terms of extreme weather, 2014 was relatively calm. The biggest weather headline might be Buffalo's record-breaking snow.

Lower-than-normal catastrophe losses, partnered with continuing healthy capital amounts, point to a softer P&C insurance market in 2015. Lower reinsurance rates on property also are a result of lower catastrophic losses. The softer market may be the "new normal" for a while.

Highly publicized catastrophic claims have increased scrutiny of transportation/railroad, mining, energy, and pipeline exposures, which likely will continue in 2015. Drought in the western U.S. has the potential to limit expansion there.

Fracking also is an emerging issue, and it raises questions about exploration and extraction of resources in environmentally sensitive locales.

Global Risks and Terrorism

The pace of economic growth across the globe hasn't been as brisk as some may have hoped. Despite recent good news, there's still a perception of high unemployment and low growth, especially in the U.S.

Leadership, violence, infrastructure changes, business environments (for example, the Russian oligarchy) also present challenges and hesitation to pursue foreign markets. As business becomes more global, supply chains will grow and become more vulnerable. Nationalization of assets should be a concern to multinational organizations with property in potentially unstable countries.

Terrorist groups such as ISIS and al-Qaeda — take your pick of any decentralized militant group not tied to a nation-state — likely will continue to destabilize markets that could otherwise be attractive. The bottom line is that business leaders must continue to follow geopolitical current events in all markets of interest, and watch for ripple effects.

New Talent in Insurance

It's tough to retain talent, and it's even harder to attract young talent to a career in insurance. Sustainability of insurance firms has become a huge issue.

Succession matters. Insurance needs to work harder to appeal to young talent. According to a survey by The Institutes, 50 percent of insurance workers are nearing retirement age.

The survey also found only 5 percent of millennials (people born between 1980-1996) have interest in an insurance career, and 44 percent of that group thought insurance was "boring." To say the insurance industry has some work to do to attract new blood is a bit of an understatement.

Reputation Risk

There seems to be no stopping social media, and there seems to be no stopping what people will share on networking sites. Expect social media profiles to be mined for claims intel. And expect more companies to take social media training for their people seriously. A few strong social guidelines for employees could go a long way toward managing reputation risk.

Social and e-commerce technology also are shaping the way people shop and buy insurance. Customer service is important, but many customers yearn for a more hands-off, educational approach from insurance agents. People don't want to be sold; they want trusted advisors who answer questions.

Honorable Mentions

These trends are even more ambiguous, but they could change the story for business insurance next year. In any case, they're worth filing under "You know, it wouldn't surprise me if..."

Regulatory and Rating Agency Changes

Your business is regulated, one way or another. Shifts in the legislative landscape, laws, and rating agencies no doubt will affect your plans for your growth, and growth and risk can't be separated. Yet another reason to stay on top of current events!

Epidemics and Pandemics

What happens when your business stops because your market is infected, or because illness forces your vendors to hit pause? A visit to the World Health Organization's list of illness alerts reveals warnings about Middle East respiratory syndrome coronavirus, avian influenza, polio, and Ebola, which collected so many headlines this year. Unfortunately, global business and international travel ultimately will accelerate the spread of some diseases.

Over to you: What do you see on the horizon for business insurance in 2015? What did we miss? What did we understate? What are your go-to sources for insurance trends? Please share in comments!