Terrorism insurance is a product purchased predominantly by property owners to cover any liabilities and potential losses that may occur should a terrorist attack take place. From one perspective, this type of insurance is a problematic product for insurance companies to offer, writes Philip O’Sullivan, Security Operations Manager at Northcott Global Solutions.
Dependent on region, the odds of a terrorist attack occurring are highly unpredictable, and often prove incalculable for actuary teams. In addition, the range of potential liabilities is significant and each could ultimately prove to represent a colossal loss for insurers if they are not appropriately considered.
It is this mixture of uncertainty and the potential for huge losses, which can prove to be problematic when it comes to setting terror insurance premiums. This is often why most insurance companies do not offer terrorism coverage in property and casualty insurance policies. Nevertheless, some insurance companies do offer such coverage, but require endorsements and authorisations such as multi-dimensional emergency response companies to spread, transfer, reduce or avoid an array of risks to provide terror insurance coverage. Crisis response provisions within policies allow insurers to offer unique insurance products that transcend merely financial risk protection, and begin to address the physical and reputational damage potentially inflicted by an attack. This augments financial and physical risk protection for both the insurer and the insured, and can therefore be presented as a highly attractive insurance accessory to clients. For employers, the physical loss of personnel, assets and reputation can be mitigated by the inclusion of such services, and for insurers the potential for considerable claim pay-outs can be substantially reduced. The advantages of the integration of security and emergency response expertise and services into terror insurance policies can be categorised into four areas.
Claim mitigation
The provision of in-country intelligence, security and rapid emergency response services can help to reduce the size of, or indeed enable the complete avoidance of a claim. This is done by avoiding, preventing and ultimately reacting to a crisis as it occurs. What previously would have resulted in a huge insurance claim is prevented from escalating due to the neutralisation of aggressors, and the extraction of personnel. This measure significantly benefits both the insured and insurer alike. These services allow for client business continuity and minimisation of interruption as well as damage limitation to insured premises and assets. The inclusion of such services within insurance policies mean that the policy itself actively intervenes to prevent the situation from deteriorating. Client claims will naturally be smaller, or indeed absent if the crisis is minimised or prevented by these services. The policy itself prevents its own pay-out, while at the same time proving highly beneficial to its subject.
Support for client
The client benefits significantly from such service inclusion, benefitting from Crisis Management and 24/7 Operations rooms to minimise harm to personnel, assets and premises. Reputational damage can also be reduced with the rapid provision of pre-vetted public relations experts to control and limit harm to the public image of the company of question.
The client will be under significant stress at the time of crisis, and an effective emergency response will minimise this stress, guiding the client swiftly through the situation and extracting vulnerable personnel and protecting assets and premises on the ground. The client is likely to form significant positive feeling toward the insurance company responsible for providing the tools to effectively and swiftly deal with the crisis. This is likely to facilitate both increased demand due to reputation for excellence, as well as repeat custom from satisfied clients.
Process
Often, crises occur, and subsequent claims are made that pertain to volatile regions where it is not possible to effectively investigate a client’s claim. The provision of reconnaissance services such as satellite imagery has enabled claims to be far more informed than previously possible. In one particular case, damage to an abandoned facility was ascertained and examined via the satellite reconnaissance, which informed and streamlined the claims process.
The provision of security and response services through the insurance policy can aid loss adjustors’ work in fluid security situations allowing them to gather information they would otherwise potentially be unable to collect resulting in a better service for the insured and insurer alike, enabling faster and more accurate claims decisions.
Presentation
With an expanding supply of kidnap and ransom, terror and war risk insurance policies, the provision of high end intelligence, security and emergency response services within policies is an effective means by which to stand out, and offer an attractive policy to clients that goes beyond what other vendors offer. Provision of such services allows the delineation of policies based on something other than price. The inclusion of these capabilities could provide a boost first time sales as well as opportunity for client retention. At a time when such insurance products are fairly similar, and are proliferating across the market, the inclusion of specialist services allows for differentiation and a more involved client experience.
Threat
The modus operandi of terrorist related threats is continually changing and evolving. Improvements in technology, continuing proliferation of small arms, improvements in IED manufacturing processes and advances in terrorist intelligence gathering processes, are driving an increasing necessity for effective, integrated emergency response, extraction and security arrangements. Aggressors are better equipped, better armed and increasingly better prepared to carry out a range of damaging attacks against individuals and assets. Growing global geopolitical tensions are further catalysing this increase in risk. Among these drivers are the worsening grievances of militant groups, increasing organised crime, regional conflict and heightening resource scarcity. Further to physical facets of heightening security concerns, developments in corporate manslaughter legislation are pushing businesses to further ensure the safety of their personnel. It is no longer a case of having a sufficient budget to afford a fully integrated medical, travel management, tracking, security and emergency response company at one’s disposal, but of having a sufficient budget to afford not to have one.
About the author: Philip O’Sullivan has an MBA and is a member of the Security Institute. Northcott Global Solutions offer emergency response, medical evacuation and related security services such as crisis management.
