Property Damage & Disaster Restoration Blog: Long Island & New York City

The Next Big Thing In Insurance Coverage Is Here

Posted on Tue, Dec 13, 2011 @ 10:16 AM

By Amy O' Connor | December 13, 2011

First Published in the Insurance Journal

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Some in the insurance industry are staking their futures on the reputations of others. That is, they are looking to insure reputational risk.

With the boom in social media, interest in reputational risk has itself boomed. The term refers to a company’s risk of having its reputation damaged because of certain events or incidents and the fallout that takes place because of these incidents. In some cases, the effects can be severe enough to put a company out of business.

In recent months, Aon (along with Zurich) Willis and Chartis have also come out with policies that address the exposures of reputational risk and offer risk management services to help corporations keep their reputations intact.

The Reputation Institute in London, England, deals with issues of reputation management and the strategic importance of reputation, its assets and effects on a company’s balance sheet. The Institute also studies how a company will be able to perform, or survive, if a crisis were to occur.

Seamus Gillen, senior adviser at Reputation Institute, says these new insurance policies are just the tip of the iceberg and there are whispers that insurers see this as the next big class of business.

“It has been understood and acknowledged universally that the crystallization of reputation risk creates or leads to value destruction,” he says. “The financial impact on companies which go through a crisis can be significant. Suddenly people all over the world and within financial media have been putting a term on that.”

The Reputational Institute doesn’t offer crisis management, but Gillen says that it often does end up inside companies that are trying to put out fires.

“We are more proactive – what framework companies need to put into place to manage reputation,” Gillen says.

Recently, the Reputation Institute has been increasingly asked to address reputational risk and give input on reputational insurance products, according to Gillen.

“Reputational risk as a concept is really coming into its own. Previously people talk about reputation and brand and PR and all that – now everyone is talking about reputational risk,” he says. “We are seeing a lot of markets reactions to that with the insurance industry seeking to set up products for clients.”

The Reputation Institute doesn’t offer insurance or work in the industry, but Giillen says it was approached recently by a major London insurer about partnering on an insurance product.

Gillen says his organization has stood on the sidelines when it comes to endorsing any insurance coverages or companies. But that is about to change. The institute will only issue an endorsement when it is sure it is the right fit and a worthwhile product. He said there is a deal being negotiated and an announcement could come soon.

“There is no shortage of crisis management people who want to work with us and we are likely to go into the market,” he says. “People need support to make their business a success. It is about taking philosophies of my reputation and risk management to create a coherent strategy. People are coming to us and saying, ‘how can you help me with this?’”

Robert Yellen, chief underwriting officer for the executive liability division of Chartis in New York, says the company launched its new ReputationGuard product because of what it was hearing from its corporate clients.

“At the board level, the number one non-financial concern [for companies] is reputation,” he says. “It is more and more common for the press to glob onto things that put a company’s reputation at risk. The old adage says, ‘It takes 20 years to build a reputation and five minutes to ruin it.’”

Yellen says he has seen a few other coverages in the marketplace that deal with a crisis and insurance responses to the crisis itself, as well as pieces to the policy that deal with reputation and communication in a limited amount or context, but they use named or limited peril coverage triggers.

ReputationGuard was designed to help insureds cope with reputational threats, providing access to reputation and crisis communications firms Burson-Marsteller and Porter Novelli and coverage for costs associated with avoiding or minimizing the potential impact of negative publicity.

There are two categories of coverage:

  1. For reputation attacks: a public attack upon a company’s reputation. The costs of hiring communications experts from the Chartis panel and communications costs.
  2. For reputation threats: acts or events that the company believes, if made public, would have a material impact on the company’s reputation and would be seen as a breach of trust by the company’s stakeholders.

Chartis is not excluding any business segments but is most interested in those with revenues of $500,000 to $2 billion.

Yellen says the product is targeted to middle-market companies because larger companies are more likely to have in-house teams to deal with these issues. The middle-market and smaller companies may also need more assistance in putting the proper risk management procedures in place.

“Everyone has a reputation at stake, that is a common theme among business,” says Yellen. “People can argue that small businesses, like generic component manufacturers, don’t care, but in the regions we sell to, that’s not a mentality we see. Everyone cares about their reputation.”

Willis is taking a more segment specific route with its new Hotel Reputation Protection 2.0 policy, which responds to incidents that lead to, or are likely to lead to, hotel business losses from adverse publicity through any medium, from traditional to new media.

The policy provides cover for lost revenue based on RevPAR figures, a performance metric in the hotel industry that measures revenue per available room. The coverage also covers the cost of hiring a crisis management consulting firm during the first weeks of an incident.

“This product provides immediate assistance to a client who is suffering an incident which through social media will damage their brand,” says Laurie Fraser, Global Markets Leisure practice leader for Willis Group Holdings in London.

Fraser says the product was predicated on research in reputation, causes of concern to hotels, worldwide figures for incidents and the magnitude. It was designed in consultation with hotels. In the first week the product was launched, there were 32 inquiries, according to Fraser.

“Brand and reputation is an area of increasing importance and concern, especially among our hotel clients,” says Fraser.

Gillen agrees that insurers have a huge opportunity to help companies prevent a crisis with insurance products and access to outside resources.

“Unequivocally, in my view the biggest value piece [of reputational risk insurance] is to help the client understand and help prevent a crisis from happening in the first place,” says Gillen.

Gillen says there is no shortage of reputational risks from social media and the Internet in general, from corporate manslaughter, money laundering, corporate corruption, and terrorism. Consumers also have more awareness of how to affect a company’s fate.

“Companies need to be very careful about where they position themselves in order to get where they want to go because it can be fatal if they don’t take it seriously,” he says.

The combination of all the potential risks, says Gillen, is enough to make reputational risk insurance a hot commodity.

“I think [reputational risk insurance] will take off because there will be enough people out there that want some reassurance and their boards wanting reassurance that the company has the best crisis responses in place,” he says. “This is probably an idea that’s time has come.”

Executive Concern

The concern over reputational risk is reflected in the results of a new survey by Lloyd’s. The 2011 Lloyd’s Risk Index polled 500 C-Suite and board level executives in North America, Europe, Asia and elsewhere to assess corporate risk priorities and attitudes around the world. Business leaders were asked to rank the biggest risks they now face. In 2009 reputational risk was ranked ninth, in 2011 it came in third.

According to Lloyd’s, a 2010 study (Oxford Metrica Reputation Review) of the world’s 1,000 largest companies found 80 percent of companies lose more than 20 percent of their value at least once in a 5-year period because of a major reputational event.

“Business fails to protect itself from reputational damage at its peril,” says the Lloyd’s report, which claims certain business practices can directly increase the likelihood of reputational risk, including operating in new territories without a thorough understanding of local geopolitics, as many international companies operating in Nigeria have discovered.

 

 

 

About Amy O' Connor

O'Connor is associate editor of MyNewMarkets.com.

 

Tags: insurance journal, long island, property damage, risk, insurance, restoration, new york city

Winter Is Here, And So Are Your Frozen Pipes!

Posted on Mon, Dec 12, 2011 @ 11:29 AM

Everyone in New York knows that the winter season in the Northeast can be treacherous and cause major damage to property structures.  Whether you are a homeowner or business professional, it is important to become educated on preventing frozen pipes.

Why Do Pipes Freeze?

Water has a unique property in that it expands as it freezes. This expansion puts tremendous pressure on whatever is containing it, including metal or plastic pipes. No matter the "strength" of a container, expanding water can cause pipes to break. Pipes that freeze most frequently are those that are exposed to severe cold, like outdoor hose bibs, swimming pool supply lines, water sprinkler lines, and water supply pipes in unheated interior areas like basements and crawl spaces, attics, garages, or kitchen cabinets. Also, pipes that run against exterior walls that have little or no insulation are also subject to freezing.

Preventing Frozen Pipes

Before the onset of cold weather, prevent freezing of water supply lines and pipes by following these recommendations:

  • Drain water from swimming pool and water sprinkler supply lines following manufacturer's or installer's directions. Do not put antifreeze in these lines unless directed. Antifreeze is environmentally harmful, and is dangerous to humans, pets, wildlife, and landscaping.
  • Remove, drain, and store hoses used outdoors. Close inside valves supplying outdoor hose bibs. Open the outside hose bibs to allow water to drain. Keep the outside valve open so that any water remaining in the pipe can expand without causing the pipe to break.
  • Check around the home for other areas where water supply lines are located and are in unheated areas. Look in the basement, crawl space, attic, garage, and under kitchen and bathroom cabinets. Both hot and cold water pipes in these areas should be insulated. A hot water supply line can freeze just as a cold water supply line can freeze if the water is not running through the pipe and the water temperature in the pipe is cold.
  • Consider installing specific products made to insulate water pipes like a "pipe sleeve" or installing UL-listed "heat tape," "heat cable," or similar materials on exposed water pipes. Many products are available at your local building supplies retailer. Pipes should be carefully wrapped, with ends butted tightly and joints wrapped with tape. Follow manufacturer's recommendations for installing and using these products.

Before the onset of cold weather, prevent freezing of water supply lines and pipes by following these recommendations:

If you have an issue related to frozen pipes, contact us immediately to alleviate the potential of further property damage to your home or business.

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Tags: cold weather, freezing cold, winter, long island, water damage, new york, frozen pipes

Advanced Restoration, Water Damage, and Moisture Detection

Posted on Mon, Dec 05, 2011 @ 10:49 AM

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Advanced Restoration Corp. has been in business for over 20 years.  In that time we have seen the evolution of moisture meters in the water damage mitigation industry.  Through much trial and error with different brands and types of moisture meters over the years we have fine tuned our moisture detection equipment to utilize the best the industry has to offer.

Advanced Restoration Corp. has chosen to stock our Project Managers and Emergency Response Teams with the finest selection of moisture meters and moisture measuring instruments that are vital to any water damage mitigation.

Moisture meters are necessary on EVERY water damage to find the answers to these very important questions:

  • What Is Wet?
  • How Wet Is It?
  • Is Equipment Working Properly?
  • Is It Dry? 

We Utilize Every Tool In Our Toolbox

Advanced Restoration Corp. has many valuable tools at their disposal to detect moisture inside a structure.  They all should be utilized to get an accurate assessment of the moisture intrusion and extent of water damaged building materials.

Thermal Imaging shows temperature differences in building materials.  It does not show what is wet.  Moisture Meters ALWAYS are used in conjunction with our thermal imaging cameras to confirm the presence of moisture hidden in building materials.

We Utilize Our Moisture Meters To:

  • Take relative humidity and temperature readings and apply psychrometric calculations in order to determine the specific humidity of the structure in various locations, including outside air and the exhaust of the dehumidification equipment.

  • Monitor the specific humidity levels to make sure our equipment is running properly, the ambient humdity levels continue to decrease in our drying chamber and we are not causing any secondary damage by accidentally increasing the humdity level (installation of air movers) without the proper dehumidification.

  • Take moisture content readings from various building materials and in a multitude of locations to determine the extent of the water damage and the progress of the drying of the building materials throughout the drying process.

  • This would also include getting a dry standard moisture content measurements of known building materials from other locations in the structure so we can use a comparison of measurements in finding out what is the normal moisture content if these building materials had not been saturated with water.

All these  measurements are recorded and updated daily so that we will have accurate information to know when the drying process is complete.

 
Click on the names below to see videos of some of our preferred moisture meters:

Tags: long island, water damage, moisture meter, moisture detection, moisture content, restoration, moisture, new york city

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