Annmarie Geddes Lipold, President, Lipold Communications, LLC

Baribeau Offers Cyber Insurance Presentation

Annmarie Geddes Lipold, President, Lipold Communications, LLCLast Tuesday, the Kansas City Actuaries Club honored me with an opportunity to discuss cyber insurance from a journalistic perspective.

The presentation included a market update, data breach statistics, underwriting practices, actuarial challenges and emerging cyber risks.

I greatly appreciate the Kansas City Actuaries Club for the chance to talk about this important emerging insurance line. Even better, all of them were great fun!

If you want to learn more about cyber insurance, check out my Contingencies article on the topic and look for my next article in Leader’s Edge in May. I am also working on another cyber insurance article from the actuarial perspective for Actuarial Review for publication later this summer.

Also, remember to follow my blog so you won’t miss any of my future articles. Just click on the “follow” button on the bottom right hand corner of this page. 

Cyber Coverage and the Actuarial Challenge

Major cyber attacks are almost becoming the flavor of the month. Sony, JP Morgan, the Home Depot, the U.S. Postal Service, the Target Corporation — the list goes on and on.

If there is anything more challenging than preventing cyber attacks, it is figuring out how to cover the growing risk.

As I cover in my recently released Contingencies article, “Plugging Data Security Breaches,” underwriting is especially difficult. Since the cyber insurance market is growing exponentially, carriers are eager to snap up market share. Meanwhile, their actuaries are concerned about carrying greater liability and pricing.

When it comes to pricing, like any emerging type of insurance, lack of historical data is a big actuarial challenge. Without historical data, actuaries cannot drive using the rear view mirror. Unfortunately, at some point, it seems there will be enough cyber breaches to address that challenge.

At the same time, actuaries will need to use future-forward data and assumptions to prepare for the unimaginable. As I cover in an Actuarial Review article, these challenges are similar for actuaries dealing with terrorism coverage. Because cyber risks and attacks are becoming more serious and hard to anticipate, I predict that the federal government will eventually offer a backstop for cyber insurance just like for terrorism coverage. Technological innovations, as outlined in a previous Contingencies article, will help actuaries rise to these challenges.

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Without historical data, actuaries cannot drive using the rear view mirror.
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The good news is that insurers are getting smarter on how they offer cyber coverage and pricing. To even procure cyber coverage, customers must demonstrate meaningful and defined risk management strategies. I predict that insurers will require even more risk management as best practices continue to emerge.

Cyber Terrorism Threat Continues to Emerge

As for predicting the unimaginable, cyber attacks are also rising to the level of acts of terrorism. A year ago when the Target breach was making headlines, companies were concerned about facing the liabilities for cyber attacks that usually went after the personal and financial information of their companies and customers.

The recent cyber attack on Sony however, is a different animal when hackers threaten violence at movie theaters that show a particular film. This is especially true if the CIA is right and the attack came from the North Korean government. Even if the current theory, that former Sony employees were behind the attack, is correct, this new way of threatening businesses and individuals is likely to be another factor actuaries will need to consider when pricing coverage.


The truth is, nobody knows what is next. While my new article also talks about a Cybergeddon that could cripple the U.S. economy or even worldwide, there is also grave concern that attackers will destroy utility computer systems, which has repercussions too terrible to imagine.


If the past is the best predictor of the future, I have full faith that actuaries will work through their challenges. After all, they are not just number crunchers, but creative thinkers who can use technology to its best advantage.

Why the Terrorism Risk Insurance Act is Necessary

Screen Shot 2014-09-10 at 12.44.33 PM 2Tommorow is the 13th anniversary of Sept. 11, 2001, so it is fitting take a look at why the Terrorism Risk Insurance Act of 2002 needs its third re-extension.

I cover this in “The TRIA Challenge,” which was recently published in the Casualty Actuarial Society’s Actuarial Review magazine as the September/October cover story and includes a sidebar on TRIA’s impact on workers’ compensation. TRIA needs to be passed by December 31, 2104 to be extended.

I wrote my article in June — and what a difference the past few months have made in the nation’s concern regarding terrorist attacks by fundamentalist Islam groups.

As reported by The Hill, just yesterday, NBC News poll showed that 47 percent of Americans believe the U.S. is less safe than it was before September 11. That’s a huge difference from the 28 percent who felt that way last year and the two in 10 Americans who had those feelings a year after the 9/11 attacks.

Truly, the last couple months have been disturbing. Given the recent headlines about the terrorist group ISIS (called ISIL by President Obama) and the Israel’s conflict with another terror group, Hamas, and evidence of terrorists using the nation’s permeable southern border for entry, it is a wonder that more Americans are not concerned. (Or are too many Americans just not paying attention?)

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For terrorism coverage, everything from U.S. foreign policy to a watchful security guard can affect the risk of terrorism attacks.
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If you are interested in an explanation of TRIA or want to know the legislative progress, you will find that in my article. My piece also explores the challenge of pricing coverage with little relevant historical data (just like cyber coverage, which I cover in an upcoming article) and frightening actuarial cost estimates for a truck or nuclear bomb in Manhattan.

While there are those who want to reduce the role of government in many areas, the federal government should have a backstop for costs from unthinkable terrorist attacks. Terrorism coverage is the only coverage of which I am aware where the private insurance industry is covering risk when mitigation is mostly left up to government intelligence agencies and law enforcement. That is different from workers’ compensation, where insurers can reward safer workplace practices with the experience modifier or cyber coverage policies that require certain safeguards before selling coverage to organizations.

For terrorism coverage, everything from U.S. foreign policy to a watchful security guard can affect the risk of terrorism attacks. If the insurance industry perceives greater risk, then terrorism insurance prices can spike, and making terrorism courage available and affordable is the whole point behind TRIA. Meanwhile, legislative language has suggested an increase in insurer co-payments for TRIA, which the American Insurance Association opposes.

From an actuarial point of view, I like what Michael Angelina, the vice president of casualty for the American Academy of Actuaries, told me for the article. “If I feel the threat is more likely than prior belief, all else being equal, I am going to increase rates to account for this increase in frequency and additional uncertainty.”

Given that this week’s poll data shows that ordinary Americans feel less safe, it will be interesting to see how the actuarial community reaches its conclusions to develop future rates.

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Thank You Tech Cast Global!!!

TechCast Global, which contributed significantly to my Contingencies article about disruptive technology and its effect on actuaries, the Screen Shot 2014-07-13 at 4.16.52 PM copyinsurance industry and the rest of us, posted my blog and article about in the news section of their website.

This is not the first time TechCast has been a good source for my forward-thinking work. Another article I wrote, Fully Exposed, for Leader’s Edge magazine, covers the future of health care and the financial, ethical and insurance implications.

For the unfamiliar, TechCast produces reports on the future of everything from agriculture to economic development around the world. The organization predicts events by a degree of possibility. The website is www.techcastglobal.com.

Meanwhile, my article continues to receive retweets from folks around the world. The article was challenging to research and write, so I am pleased by the response.

More of my articles will be published soon. The topics are: cyber coverage, terrorism reinsurance and how insurance agents can harness new technology to inspire retention. Whether for publications or websites, my goal is to produce quality content for clients who share my philosophy of publishing factual and helpful information to attract and retain readership.

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Thanks to Jim Carroll

Internationally recognized futurist Jim Carroll published his impressions of my article, Fast Forward: Emerging Technology and Actuarial Practice.  “It’s a great article,” he wrote while offering a summary of the piece. To view it, please click here. http://www.jimcarroll.com/2014/07/trend-the-future-of-insurance-and-the-actuarial- profession/#.U7qwZ_ldXTp. Thanks for the mention and for your contributions to the article. To read my posting on the article, please click here. Enjoy!

Disruptive Technology, Actuaries and the Rest of Us

Disruptive technology — defined as a new technology that unexpectedlyFAST FORWARD displaces the established one — will change most professions.

In the future, we will collaborate in the Cloud through mobile technology and intelligent interfaces while monitors track our vitals and aerobic activity. Big data will be fed into mega computers that will automate calculations and analysis. Insurance will be based more on the individual situations of people and companies.

Artificial intelligence is already disrupting the medical field when computers can more effectively diagnose than doctors. Lawyers’ efforts to find precedents are already becoming automated and (sigh) computers can produce basic news articles.

Actuaries are not immune, as I explain in my article, “Fast Forward: Emerging Technology and Actuarial Practice.”Published in the American Academy of Actuaries’ July/August issue of Contingencies, I believe it highlights disruptive technologies that will affect all of us both professionally and personally. I hope you will check out the article and enjoy seeing a glimpse into the future of the actuarial profession and the insurance industry.

In many ways, the article is a call to action for the actuarial profession, but it should also be a wake up call for the rest of us who also grow tired of the constant learning and adapting to technology that is necessary to maintain professional relevance.

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“…the article is a call to action for the actuarial profession, but it should also be a wake up call for the rest of us…”
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In summary, for actuaries to excel in the future, they will, both literally and symbolically, have to let go of their beloved Excel spreadsheets and other tools.

The fact is Excel is quite limited compared to what is becoming possible through technology and will likely go the way of the slide rule and calculator. Personal computers and laptops simply cannot hold the data or offer the processing power of GPGPU chips that come from the gaming graphics world, the article explains.

What do you think? Let the world know by commenting below.

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The Other Reason for Rising Workers’ Comp Premiums

Actuarial ReviewWorkers’ compensation premiums are on the rise with little hint of near-term relief.

To figure out why, workers’ comp experts first look under the hood to check out claim costs.

Claim costs, however, are not going up at an alarming rate. A high unemployment rate means lower risk exposure.

Medical costs are not increasing as much as in the past either. This is despite the opioid epidemic and that workers’ compensation insurers often pay more for the same procedures as health insurers.

But now there is another explanation for why workers’ compensation premiums are rising.

That is, insurers are seeing dismal returns on allowable investment instruments, making it harder for them to offset workers’ compensation costs. As a result, they need to charge higher premiums to remain solvent and profitable.

This is expected to continue as long as investments such as U.S. Treasury yields offer returns running very closely to the inflation rate and are not expected to improve anytime soon. Since insurers purchase long-term bonds, the current yield will hardly help insurers offset some of the costs of writing workers’ compensation insurance in the years ahead.

This is just part of the current workers’ compensation story. To learn more, check out my article, “Workers’ Compensation: Future Turbulence Ahead,” which is the cover story of the May/June issue of the Casualty Actuarial Society’s Actuarial Review magazine.

The article also explains how economic, political and underwriting trends are likely to shape workers’ compensation in the next few years. Think of the article as a workers’ compensation status report.

Enjoy! And, feel free to let me know what you think!

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What Happens After Actuaries Retire

Actuaries in RetirementIs there life after actuaries retire?

The answer is a resounding “yes” — and that more abundantly!

That was my conclusion after writing my article, “Actuaries in Retirement: Snapshots From the Future,” which was recently published in the Actuarial Job Seeker supplement of Contingencies magazine.

Being an actuary is an identity forged by passing rigorous exams, working beyond full-time hours and keeping up with continuing education. Many actuaries continue in their professions after retiring from full-time work but they also pursue activities they simply did not have the time to do before.

Besides featuring the stories of different actuaries, the piece also covers how to mentally prepare for retirement, which should be helpful to non-actuaries as well.

Enjoy!

Actuarial and IT Professionals Need Each Other

The Dance of Actuaries and IT ProfessionalsFrom developing innovative solutions to satisfying mounting compliance requirements, actuaries and IT professionals must learn to come together.

Unfortunately, both groups are often at odds. Competing priorities, resources, deliverables and even communication can cause great frustration.

Too often, they avoid each other — and to the peril of their organizations. Opportunities get lost. Mistakes become costly.

My article, “A Delicate Dance: Successfully Managing Actuarial and IT Departments,” published in the latest issue of the American Academy of Actuaries’ Contingencies magazine, identifies why both pros need each other and how they can move forward — together.

I hope you enjoy the piece. And of course, I welcome your feedback!