A Conversation With ... Craig Henley

Have supply chain issues impacted property insurance claims or policies? 
It’s on all fronts. On the commercial side, if you have a builder’s risk policy where an entity is going through its construction phase, those policies typically run a 365-day period. They’re getting extended now. That’s adding to the cost that builders are incurring, but that’s all across the board. We are really seeing it, too, in the renewals because it’s that typical domino effect. Supply chain is limited, cost of construction goes up, so now the cost of the insurance required for the building goes up, so premiums go up; now it costs more if there is a claim. Typically, you can expect a year-over-year increase in premium just for inflationary adjustments. Inflation is at 8%, so that number adjusts rapidly. Those increases are higher, and that’s really where the biggest challenge is coming. Those renewals are taking such a steep jump. 

Have you seen clients try to scale back coverage to save money?
I always tell my clients it doesn’t make sense to reduce coverage to save premium. You’re putting yourself in a worse situation than you were before. It puts probably more stress on us as an independent agency where we have multiple carriers because now there’s more pressure. Can we find something that’s less? Can we look at coverage options? It just forces us as agents to be more educated about what the coverages are and have more specific conversations around what are their business needs. Where is it headed? How should coverage adapt to that? I haven’t seen anybody that is scaling back, but they are watching it closer. If you have property coverage on a building on a policy that you wrote, let’s even go back pre-COVID, and you’re going to experience your inflationary increases, 2%-3% a year. COVID comes around and now there’s these challenges and this shortage. If you haven’t gone in and adjusted the coverage on that building or that home, that client could potentially be at risk of not having enough coverage in the event of a total loss or even in a partial loss. I think there’s more pressure than ever on agents to do their job and do it well. 

How can clients protect themselves from cyber risk?
There have been some very, very big companies that have been hacked and they probably spend millions on cyber risk. If it can happen to the big companies; it can happen to the little ones, too. It’s something that businesses should have that conversation with their agent: What are my exposures? What options do I have to protect against that risk? Then at that point, determine does the premium that it requires, can I justify the expense? Even the simple credit monitoring if (an attack) happens, it’s somewhere around $1,000 a year and (businesses pay for) two years of credit monitoring. So, when I’m talking to a business, I tell them, if we’re considering cyber liability and we have an exposure, imagine if you had to pay $2,000 for every single one of your customers because your information was hacked. You do some math. Wouldn’t take long to ruin a business.

What percentage of your clients have this type of coverage?
It’s probably 50%. If the risk is there and you explain the risk, they’re more prone to look at the coverage. I think you’re seeing it’s happening more and more. 

What are the ways you’re seeing data impact insurance, perhaps in regard to premiums or determining liability?
It’s a very big thing right now. It’s called telematics. Carriers used to put devices on your car; you could hook it up to the data port and it would monitor your driving. That has transformed into telematics with phones. So, now it’s apps. Not only can it monitor hard braking, rapid acceleration, speed, time of day, but it can also measure distracted driving. Are you the person that’s picking your phone up? The phones are smart. If you’re using Google Maps and your phone is sitting there but it’s communicating, it’s not going to ding you. Almost every carrier now gives the option to sign up for some form of telematics. An insured doesn’t have to sign up, but the discounts are usually substantial, like 10%, just to sign up. When the renewal comes around, you can pick up discounts based on how well you drove. Eventually, I think drivers will be rated on how they drive. The worst part about (auto coverage) is if you’re in a category that happens to have more bad drivers than others, you’re going to pay more premium and you could be the best driver in the world.