Welcome to iLeads Insurance Market Minute, where we bring you the latest, most relevant news regarding the insurance market. Last week you were reading What’s Key To A Strong Innovation Strategy In Insurance? This week we’re bringing you:
What Insurers Should Know as Ransomware Takes Center Stage*
Cybercriminals aren’t just stealing passwords and data. They’re stealing the spotlight.
Amid the ongoing COVID-19 pandemic that has been a global focus since government shutdowns began in March of last year, insurers and businesses all over the world are now being forced to grapple with another damaging epidemic: ransomware.
Ransomware attacks accounted for nearly one-quarter of all cyber incidents globally last year, according to software company Bitdefender, and they’re on the rise. So far this year, ransomware incidents have afflicted businesses, hospitals, schools, local governments, critical infrastructure, and even insurance companies’ own operations.
An explosion of attacks this year has led state regulators and federal government officials to elevate their focus on ransomware, with The White House ramping up its discussions about the issue in the wake of recent incidents, Reuters reported.
“I think the takeaway is hopefully helping is on the way and that companies are not being left to simply fend for themselves because the government is going to make enforcement and pursuit of these actors a priority,” said Peter Halprin, partner at New York-based law firm Pasich in the most recent episode of the Insuring Cyber Podcast.
Federal Judge Halts Part of Florida’s New Property Insurance Reform Law*
A federal judge has halted enforcement of a section of Florida’s new property insurance reform (SB 76) law that restricts the advertisements and solicitations of roofing contractors.
U.S. District Judge Mark Walker granted the injunction Sunday in response to a complaint by a roofing contractor that the section of the law violates commercial speech rights and the First Amendment.
The legislation, which passed on the last day of the legislative session and was signed into law on June 11 by Gov. Ron DeSantis, went into effect July 1.
Judge Walker found that the section of the law that bans “written or electronic communication that encourages, induces, or instructs someone to contact a contractor or public adjuster for the purpose of filing an insurance claim for roof damage” violates the First Amendment of contractors.
He enjoined enforcement of this section of the new law but did not declare the entire law unconstitutional.
The complaint was brought by Gale Force Roofing and Restoration and heard on Friday in an expedited session.
The advertisements prohibited by the section include, but are not limited to, door hangers, business cards, magnets, flyers, pamphlets, and e-mails. The language does “not indicate that its prohibition applies only to speech that is misleading, fraudulent, or concerning illegal activity,” the judge noted.
Sponsors of the legislation were looking to thwart roofing contracting firms that pressure homeowners to make unnecessary repairs and then charge insurance providers, driving up insurance costs.
The state Department of Business and Professional Regulation unsuccessfully argued that the provision is a reasonable restriction on commercial speech to combat consumer exploitation and fraud, “ensuring that the line between contractor and insurance adjuster is not blurred,” and protecting Florida homeowners from “skyrocketing insurance premiums, or, worse, the inability to secure homeowner’s insurance at all.”
Is this the next great opportunity for insurance agents?*
As businesses and individuals begin to come out on the other side of the COVID-19 pandemic, it’s a good time for insurance agents to consider starting their own premium finance company – especially those that do a lot of business with certain industries.
COST Financial Group, Inc. – an organization that manages and operates premium finance companies owned by insurance agents, agency groups, insurance companies, and general agents – has traditionally seen commercial trucking and general contractor premiums as the most active areas. Now that “the world is opening back up and more people are getting back to work, we are seeing an increase in policies being financed, particularly across those two industries,” said Travis Klingler, executive vice president, finance & business development at COST.
With the trucking industry, truckers need insurance to get up and down the road and they are making their payments, or they cannot work, Klingler noted, adding there tends to be a high rate of late charge income in that industry as well. Agencies that do a lot of general contractor premiums also see high volume, as again contractors must have insurance to bid for the work and to perform it, so there’s high demand for those types of policies.
“In our 30 years of business we have shown the profitability for our finance companies within those industries are higher than the norm,” Klingler said. “If insurance agents haven’t looked into it in the past, it’s beneficial for them now.”
Agents are already arranging premium financing for insureds that need it, usually with traditional premium financing companies, but many states prohibit commission programs meaning the agent does not see any return on their effort. Setting up a premium finance company with COST addresses that issue because the agents themselves reap the benefits of the finance charges as well as any late fee income. If the agency has enough volume, which Klingler states is at least $1 million in annual financed premium, starting a premium finance company is a great option, especially as agencies themselves are stabilizing and many owners are looking for another revenue stream to complement their main line of business. As the pandemic illustrated, in times of uncertainty, income from diverse sources can help companies weather the storm.
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