Commercial Insurance Claims Trends

Our previous posts on commercial insurance claims highlighted the importance of reading and understanding your insurance policies. For this final post of the series, we want to look at the latest trends in commercial insurance claims.

Understanding recent trends in business insurance and claims is essential for creating a robust risk management strategy for your organization. As an ever-changing industry, risk management must respond to new threats and developments as they happen.

Strangely enough, there are lessons to be learned from others’ losses. While we look on with empathy, it’s an opportunity to absorb knowledge so that it can help you shape your commercial insurance strategy and overarching risk management plan.

 

Cyber Is Crowned a Top Claim Issue

Technology has been at the forefront of business innovation for years, but the COVID-19 pandemic pushed more organizations than ever to adopt new technology almost overnight.

The healthcare industry, in particular, saw a nearly immediate need for new technology to serve patients remotely. This led to new digital health capabilities and healthcare tech so doctors could work with patients without the risk of meeting in person.

Unfortunately, technology companies weren’t the only ones who took advantage of the world’s need to go digital. Cybercriminals also took their efforts to new heights — and cyberattacks are still on the rise. Ransomware attacks grew by nearly 93% in 2021.

This reality means businesses must make cybersecurity a priority. Secure software and current hardware can help businesses stay in front of cyberattacks. Additionally, companies can invest in employee training to lower the risk of phishing attacks.

Cybercriminals are constantly changing how they attack personal data. Businesses can also use cyber insurance to protect their assets in case of a breach. For example, purchasing cyber insurance could help your business recover from an unavoidable cyberattack, often taking uninsured businesses months.

Downsizing Spurs EPL Claims Across All Industries

Market downturns have led to massive layoffs across industries, especially technology. According to Crunchbase, over 102,000 tech employees have lost their jobs to layoffs in the US tech industry in the first two months of 2023.

When layoffs rise, so do claims of wrongful termination, discrimination, and breach of contract between employees and employers. Laid-off employees may bring lawsuits against their former employer, and businesses must be ready to handle them. With increased legal action against employers comes an increase in employment practices liability (EPL) claims.

EPL insurance is vital to help companies reduce their risk of financial losses if downsizing is necessary. Even if an employee’s claims are baseless, EPL insurance helps cover the cost of defending your organization.

ESG and non-ESG Issues Spark Litigation

Public perception has led many businesses to focus on environmental, social, and governance (ESG) practices. Of course, leaning into ESG criteria can expose your business to scrutiny — and expose you to litigation.

For example, a business claiming sustainable business practices may face issues based on disclosures and transparency. A consumer group may bring litigation forward with claims of false advertising or misleading marketing if they think the company’s practices are not up to modern environmental standards.

But ESG businesses don’t only have consumers to worry about. Some states are implementing anti-ESG legislation prohibiting state financial programs from investing in ESG companies. State employee pensions, for example, might be required to invest in non-ESG funds or stocks.

Without exact parameters on ESG performance, it will continue to be difficult for businesses to navigate disclosure requirements. As new metrics for ESG criteria surface from legislation and regulations, your business must anticipate and mitigate new litigation risks.

Crypto Lawsuits Become a Tell-All Situation 

Cryptocurrency has seen an unbelievable rise — and an even harder fall. The most notable of recent crypto lawsuits is FTX. The FTX bankruptcy and fallout have caused waves across the crypto and venture capital industries alike.

For one, the crypto industry took an enormous hit after the fall of FTX. Crypto markets spiraled down, thus affecting anyone investing in crypto. This nosedive also dampers the crypto industry, which could keep potential new investors from entering the market. 

Some celebrities even face lawsuits related to the FTX crash, such as NFL quarterback Tom Brady and comedian Larry David. A class action lawsuit alleges these spokespeople are partially responsible for losing billions of dollars in the crash. Some argue that these celebrity endorsements lent credit to the crypto exchange, despite its financial woes.

Finally, major investors like Sequoia Capital may have serious litigation from limited partners (LPs). Despite the massive amounts of money these venture capital firms invested, none were offered seats on FTX’s board. From a risk management perspective, this is a serious breach of due diligence and oversight. By withholding board positions, FTX leaders could essentially do what they wanted with investors’ money without the investors’ input.

D&O Insurance Market Impacted by IPO Lull

As the market turned down, many investors turned away from new (often volatile) stock offerings and back to tried-and-true industry giants with long investing histories. With fewer investors ready to invest money into new stocks, many startups and growth companies paused their ambitions to go public.

If fewer companies go public, there is less demand for public directors and officers (D&O) insurance. While private companies can also benefit from D&O insurance, much of the large-scale demand for coverage comes from public companies.

This lull could set up certain businesses for success and cost savings. A company planning for an IPO may see lower D&O rates by putting its IPO into motion during a market downturn. Additionally, being one of the few IPOs in the game could give organizations an upper hand in establishing themselves with investors.

Understanding the details of what coverage your company needs can be confusing. Founder Shield specializes in knowing the risks your industry faces to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you.


What to know more about commercial insurance? Talk to us! Please contact us at info@foundershield.com or create an account here to get started on a quote.

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