By Christine Graf
Because the insurance industry is constantly changing, insurance agents suggest that business owners stay abreast of these changes by meeting with their agents to review their policies on an annual basis.
John O’Brien, president of O’Brien Insurance in Glens Falls, said this is the only way for agents to ensure that their clients have the coverage they need. O’Brien has been in the insurance business for 40 years. His father, Robert, founded O’Brien Insurance in 1957.
According to Jennifer Longtin, owner and president of Lighthouse Insurance Agency in Ballston Lake, annual reviews don’t always result in additional coverage or increased costs for business owners. She has owned Lighthouse Insurance for 17 years and has worked in the insurance industry for more than 30.
“It’s not always about just adding more expense. It’s really about providing the right protection for whatever their needs are. Insurance should always change as the times change and as the business changes. And honestly, I don’t know any business that stays in business for years and years and doesn’t change,” she said.
During annual reviews with business owners, agents stress the importance of having adequate cyber liability and data breach insurance. This insurance covers costs associated with data security breaches as well as liabilities that can result from the use of social media.
In 2018, New York State Department of Financial Security began requiring banking, insurance, and financial service businesses to develop and implement effective cybersecurity programs.
“It’s been a good thing because they are raising the level of awareness,” said O’Brien. “We are now seeing and hearing and talking to our clients more and more about cyber liability.”
A small amount of cyber liability and data breach insurance—typically $10,000—is included in most business general liability policies. Longtin recommends adding additional coverage and increasing this amount to $50,000.
“If you did have a data breach—it depends on how much data is in there and how many clients were affected—$10,000 is not a lot. There are lot of legal things that you have to do,” said Longtin.
For example, she said business owners must hire forensic engineers to determine how a breach occurred. They must also hire lawyers and notify all their customers about the breach. In some cases, business owners must pay for their customers to receive credit monitoring subscriptions.
“We have seen this shut down businesses,” said Longtin. “Completely shut them down.”
O’Brien said some of his clients purchase what he described as a broader and more comprehensive cyber liability policy. These separate policies provide excellent coverage and cost between $800 and $1,000.
In addition to cyber liability, O’Brien said another “hot topic” in the insurance industry relates to Employment Practices Liability Insurance (EPLI). EPLI covers liabilities related to claims of sexual harassment, wrongful termination, discrimination, and other illegal employment practices.
“Most regular policies do not have EPLI as an automatic coverage,” he said. “You have to buy a separate policy. Some companies might give you a little coverage—kind of a throw in. If you need a comprehensive policy, you definitely want a separate policy similar to the separate cyber liability policies. It’s a tough sell though. You want to think you have great employees and nothing is ever going happen. Let’s face it, you hope that the case. But you just never know.”
O’Brien said it is important to understand that EPLI insurance also offers protection in situations where false accusations are made against business owners. “Someone could bring a lawsuit even if you didn’t do anything wrong. At least by having a policy, you have coverage for defense costs. You don’t want to have to pay an attorney for five years while this thing is being settled. It could go on for years.”
Longtin echoes the same sentiment to her clients. “If you are accused of something or get lawsuit papers, you want your insurance company to defend you. During that defense process, it can be financially devastating if you had to pay that all out of pocket. So, it’s not always about being negligent or being wrong, it’s about going through the defense process as well,” she said.
O’Brien said it is also important for business owners to have enough general liability insurance to protect their businesses. “One of the things we have seen in the past five to ten years is that we are having discussions with clients across the board about whether their general liability—their slip and fall insurance—is enough. A lot of people are questioning that, and we are writing a higher limit of liability insurance than we’ve ever done in the past.”
O’Brien also urges business owners to have adequate insurance to cover the replacement cost of their buildings. “If you own a building and it burns to the ground like what happened unfortunately to our friends at Common Roots, do you have enough money to rebuild the building? That rebuilding cost can be totally different than market value or sales price,” he said.
Additionally, O’Brien said business owners should make changes to their workers’ compensation policies when and if their payroll costs change during the year. If a business owner underestimates their annual payroll at the beginning of the policy term, it will result in an additional premium when their annual workers’ compensation insurance audit takes place.
“That can be a cash flow nightmare for small business,” said O’Brien. “None of us want those hits to our cash flows. What can we do as agents? We can be talking to people all of the time. We can make changes as you go.”
O’Brien said it is larger employers who are more likely to benefit by shopping around for their workers’ compensation policy. “There’s more wiggle room as you get bigger and have more employees.”
When discussing trends in the insurance industry, O’Brien said he is particularly troubled by the high cost of liability and worker’s compensation insurance for those in the construction industry. Contractors in New York pay up to 10 times what contractors in other states typically pay for general liability insurance. This is because of New York’s Scaffold Law, which assigns absolute liability to owners and general contractors in cases where someone is injured on the job—regardless of who is at fault.
“There are contractors in New York State who either went out of business or never went into business because of the cost of workers’ comp and liability. The cost is ridiculously high,” said O’Brien. “In the insurance business, we have talked to our legislative people for years about general contractors in New York State. But nobody wants to work on it. It’s a solvable problem, and other states have tackled it.”
O’Brien admits that insurance is a topic that can be overwhelming for small business owners. He said it is his job to educate and inform his clients and then to allow them to make their own decisions.
In addition to educating his own clients about insurance, O’Brien teaches the subject twice a year at a class called Start-Up ADK. The eight-week class takes place at SUNY Adirondack and is designed for entrepreneurs and small business owners.