In the midst of hurricane season, small business owners know they need to be prepared for the worst.
But so far, 2016 has proven as quiet as the last three years from a catastrophe perspective.
“For most of the writers in the BOP market, the last few years have been pretty low cat years,” says Dan Gaynor, vice president of commercial lines at The Main Street America Group. “There’s also a lot of capacity in the marketplace right now and low property reinsurance.”
“We view the BOP market as a very competitive and healthy market,” agrees Brian Kearney, chief underwriting officer for select accounts and small businesses at Travelers. “The health of the market is obviously closely tied to the overall health of the economy, so as we see the economy continue to chug along nicely, it’s creating a healthy mix of new businesses coming into the market and existing businesses continuing to grow.”
As a result, “many of the BOP rates will remain flat,” Gaynor predicts. “The good risks may receive a reduction, and the risks that have had some losses or tougher exposures will see a few increases.”
BOP rate fluctuations tend to be “minimal because you’re not dealing with $100,000 policies,” explains Angela Adams, head of casualty, senior vice president for Hiscox USA. “You’re talking $500-1,500 maybe, depending on your TIV and how much that particular BOP will allow you before pushing you into a more sophisticated market.”
Instead of pricing, then, Adams says the biggest BOP changes in the next 12-18 months will involve “clarification in coverage” surrounding cyber, privacy, financial services and more—“particularly if you’re on an ISO form,” she says. “The insurance world is vast, so it takes time to identify what’s going to work and what’s not. They’re slowly but surely coming out with exclusions for things that should have never been covered on the BOP in the first place.”
For example, many BOPs—which usually follow ISO language, even if they contain some proprietary elements—have accidentally covered cyber or privacy claims if their “wording wasn’t tight enough,” Adams says.
Every small business retains the personal identifiable information of its customers, vendors or employees in some electronic fashion, so every small business needs cyber insurance. “Most companies are starting to build cyber into their BOP,” Gaynor explains, noting The Main Street America Group includes a basic level of cyber coverage on every BOP policy but offers insureds the option to remove or expand it. “Some of our competitors will just offer it, and if you want it, they’ll add it to your policy.”
But while most small businesses may not currently purchase standalone cyber liability coverage, that will probably change alongside BOP language.
“As agents and brokers are out there advising their clients, they have to be consciously making the effort to talk about these kinds of things,” Adams says. “What are your clients’ privacy risks? There are a lot of standalone markets out there that quote privacy. There are cyber endorsements on the ISO forms for BOPs, as well as privacy exclusions that have been crafted for the BOP.”
As BOP coverage shifts in response to changing exposures, service staff needs more effective training “so they understand exposures better, understand coverages better and how to meet the clients’ needs better,” Kearney says. “While speed and accuracy are critical components in small business, access to education and training are just as important to ensure your staff has the proper tools to serve as client advocates.”
To get the scoop on emerging BOP classes like technology firms and mobile app developers, keep an eye on IAmagazine.com and upcoming editions of the Markets Pulse e-newsletter.
Jacquelyn Connelly is IA senior editor.