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Digital Consumption Opens Up Insurance Exposures for SMEs

The rapid changes that businesses were forced to undergo over the past year have opened up some opportunities for smaller businesses. But with these new opportiunities comes new risks.
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digital consumption opens up insurance exposures for smes

More than one year after the coronavirus pandemic hit the U.S., the rapid changes businesses of all sizes were forced to undergo have turned into long-term strategies. The trends of digitalization, work-from-home and other adjustments are now firmly baked into the bread. However, the accelerated rise may have left some air bubblesespecially for small and midsized enterprises.

Chubb and Accenture recently collaborated on a research project on digital business trends and small and midsized business risk. One trend uncovered by the survey is digital communications and its accompanying spaghetti pile of risk. 

“Having a customer now usually means having a digital relationship with that customer," says Patrick Thielen, senior vice president, Chubb North America Financial Lines. “And in many cases, that means using sophisticated online gathering tools to understand customer preferences, from using cookies to audio listening protocols. Misusing, misplacing or misappropriating that information can mean a breach of customers' trust, which can sever relationships and hurt business."

In addition to following all applicable laws and regulations on data collection and usage, “employee education for front-line staff, such as customer service representatives, is critical when it comes to safeguarding customer data," Thielen says.

The research points to a trend in small and midsized businesses seeking to harness the power of data, with “adopting cloud and artificial intelligence capabilities ranking among the most important technology investments," he says. “But cybercriminals are increasingly turning their attention to smaller companies, which is why a cyber policy, umbrella, excess casualty, product liability and errors & omissions are so important."

Additionally, the study underscored some physical risks in the post-pandemic workplace. “Ergonomics-related injuries like carpal tunnel syndrome or hip pain can develop as a result of poor home office settings, and thus should be considered as risks to be addressed through their insurance programs," Thielen points out.

In fact, 41% of workers reported new pains in their backs, shoulders or wrists while working from home during COVID-19, according to another Chubb study.

“There is also always the risk that an inappropriate employee action will trigger litigation and cause reputational damage to a company," Thielen adds. “Many new, work-from-home pandemic models have heightened that risk, which mandates the need for sufficient employment practices liability insurance, umbrella and excess casualty, and accident and health coverages." 

While new risks and complications may sound like one terrible cake, it does come with some icing—digital business trends have opened up some opportunities previously unavailable to smaller businesses, including exploration of new products and even participation in the global business community.

To help keep clients safe as they pursue those opportunities, agents should be aware that “expansion into business ventures can present risks of non-physical financial injury, in addition to the traditional types of property and liability risks," Thielen says. “And as more companies begin to do business on a global basis, insurance and risk management programs should include a strong multinational component that can provide on-the-ground knowledge and support in each of the business operation localities."

As agents seek to shepherd commercial clients through the new environment, they should “start by proactively working with their small and midsized clients in regularly reviewing existing policies," Thielen adds. “This will ensure all their physical and digital risks are managed and that, in the event of a claim, they can get their operations back up and running with little disruption."

AnneMarie McPherson is IA news editor.

Monday, March 22, 2021
Cyber Liability