Lessons from Superstorm Sandy
Superstorm Sandy was a catastrophic event by any measure. The damage inflicted on New York City and the surrounding coastal communities was unprecedented. Insured losses are estimated to total between $20 billion and $25 billion. The impact of the storm was tragic but also serves as a reminder for both insurance coverage issues and emergency preparedness.
Flooding was a significant source of damage from Sandy. Unfortunately, it is estimated that 70 percent of individuals and businesses located within the flood zones did not carry flood coverage. Loss due to flooding is not automatically covered under commercial property insurance, but most policies have the ability to add flood as a covered peril. For properties located in or adjacent to a flood zone, coverage is available through the National Flood Insurance Program (NFIP) through a separate policy. The following link provides additional information on the NFIP and includes a Flood Risk Profile you can use to assess your location: http://www.floodsmart.gov/floodsmart/.
Business Interruption claims comprise much of the insurance loss sustained due to Sandy. A 13-foot storm surge struck lower Manhattan, causing widespread damage to infrastructure and office buildings. Many firms were unable to access their office locations and some continue to be displaced months later.
Business Interruption coverage indemnifies the policyholder for the loss of earnings resulting from a covered property loss. Business Interruption insurance should provide coverage for lost profit and continuing expenses a business incurs due to the temporary closure of the business as a result of the event. Flood needs to be a covered peril in order for your insurance to respond to a business interruption directly caused by a storm surge. Extra Expense is commonly included with Business Interruption coverage and would respond to reasonable additional costs a business incurs to keep operating. An example of an extra expense would be the additional cost to rent a temporary office in order to continue operations.
Property policies will typically include a number of additional coverages that could also respond to an event such as Sandy. These coverages generally have specific limits assigned to them, but you often have the flexibility to increase the coverage.
Civil Authority coverage applies when a location’s access is restricted due to an evacuation order from the government. This coverage can apply if your location is within the restricted area even if you do not sustain a direct physical loss. The coverage will frequently have a specific time period or limit that will apply.
Utility Services coverage can provide for direct damage or business interruption due to loss of electrical, water, or communications services. There are limitations based on how and where the utility services are interrupted. Coverage almost always has a specific limit assigned to it and may include restrictions such as excluding loss due to “overhead transmission lines.”
Property Insurance may include coverage for Ingress or Egress. After Sandy, many workers were unable to return to their offices due to damage to surrounding streets as well as reduction of access to commuting options. Ingress/Egress can provide some coverage for this type of exposure but may include limitations on location and source of the restriction. The restriction would have to be triggered by a covered peril.
Dependent Business Interruption can provide coverage due to a loss suffered by a key customer or supplier. The loss needs to be triggered by a covered peril, and the coverage will have a specific limit. Businesses that rely on a key supplier or customer should evaluate this coverage carefully.
Disaster planning is an important component of a risk-management plan for any business. Many businesses are able to continue operations by working remotely, but it takes advance planning and attention to infrastructure in order to be successful. There are many sources to assist you with developing a disaster plan for your business. FEMA’s link for businesses is http://www.ready.gov/business. Many insurance carriers can also provide guidance and tools to assist with the process.
Superstorm Sandy proved that a large storm can have far-ranging impact beyond properties located on the waterfront. Even businesses located in high-rise buildings are not immune to losses sustained due to flooding. The storm had many tragic consequences, but it also provided valuable lessons for evaluating both your insurance and business continuity plans.
At Cleary, we will evaluate your business exposures and work with you to develop a comprehensive plan to safeguard your business. Give us a call today at 617-723-0700.
MetLife Releases Tenth Annual Survey of Employee Benefits Trends
MetLife, the well-known insurance and financial services company, has released its Tenth Annual Survey of Employee Benefits Trends. The survey, conducted in the fall of 2011, included the results of 1,519 interviews with benefits decision makers at companies with staff sizes of at least two employees, as well as 1,412 interviews with full-time adult employees age 21 or older, nationwide.
Highlights
Among the key findings of the survey:
- More than half — 52 percent — of employee’s ages 21 to 30 are very worried about running out of money in retirement. This is a significant increase from 2003, when only 33 percent of employees in this age range expressed the same worry. This indicates how heavily the more difficult economic environment has been weighing on younger workers.
- Workers are less focused on savings growth now and more focused on creating a reliable income stream compared to survey participants ten years ago. This indicates that annuities may have more of a place in employee retirement plans than they did in prior years.
- Voluntary benefits — funded via payroll deductions — are much more prominent now, with tremendous growth at smaller employers. In 2003, voluntary payroll-deduction plans were primarily found at large employers. Now even very small employers are increasingly offering these plans as employee benefits.
- There is a strong correlation between satisfaction with benefits and overall job satisfaction. It is very uncommon for employees to report being satisfied with their jobs while being unsatisfied with their benefits packages, and vice versa.
- The vast majority of employers — 70 percent — plan to maintain or improve their benefits packages, despite the comparatively weak economy. Thirty percent anticipated doing so by increasing employee costs, however.
- Forty-one percent of employers report that voluntary benefits are a significant part of their employee-retention strategy. This is a significant increase from the 32 percent that reported the same a year ago.
- Employees are more appreciative of the value of their benefits packages than they were in years past.
Some of the survey’s findings indicated challenges for today’s employers. Overall, employee loyalty to current employers was lower than it has been for seven years, and fully one-third of employees were hoping to be working somewhere else within a year. Younger employees were significantly more likely than older employees to report wanting to jump ship. In part, this is because 60 percent of companies did in fact reduce head count during the recent economic downturn. Younger employees may have little experience in the workplace beyond this last period of austerity, when companies were actively slashing payrolls, increasing workloads for remaining employees, and cutting benefits.
That said, younger employees are looking more to employee benefit packages to help them achieve their financial objectives than their older cohorts did at the same age.
Workers also rely on their employers even for basic insurance coverages that prior generations routinely bought outside of the workplace. Although their parents bought life and disability insurance at the kitchen table from an agent, over 60 percent of today’s employees get their life insurance coverage and disability coverage through work.
The influx of Generation Y workers, or millennials, now in their 20s, is profoundly affecting the overall employer-employee relationship. These younger workers anticipate more career mobility than their forebears and are less trusting of companies’ commitment to them as workers, perhaps because much of their adult lives has been spent working in an era in which companies were going out of business or cutting back in large numbers. But Generation Y and X workers are more eager for financial education and financial planning services via their employers than previous generations were.
The MetLife survey also found that a significant fraction of employees — 25 percent — were substantially behind in their financial planning objectives. But a recent survey from CreditDonkey indicates that the problem may be even worse than MetLife found: Some 40 percent of Americans don’t have $500 in savings.
Conclusion
Among the most significant findings of the survey was the growth potential in the employer relationships with younger workers. While Generation Y workers are less loyal to their current employers, they are also significantly more likely to value benefits than their forebears were, and more than six in ten reported that they were relying on their employee benefit packages for their long-term financial health. That was true of 55 percent of Generation X workers, 42 percent of younger boomers, and 31 percent of older boomers.
So there is an opportunity there for employees to cement their relationships with younger workers. But they haven’t yet closed the deal.
At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 and we will work with you to create a plan that meets your business objectives, takes into account state and federal laws, and capitalizes on incentives and innovative solutions now being offered.
Client Spotlight
The Boston Debate League was created in 2005 to help improve students’ academic achievement. The league offers a host of after-school, weekend, and summer programs to help Boston students become advocates and intellectuals. Competitive academic debate offers a powerful means of engaging students in their own education and reversing negative trends. Debaters come from across the academic spectrum, including those who do not attend school regularly or are not thriving in the traditional classroom. The Rev. Dr. Gregory Groover, chair of the Boston School Committee, was this year’s Taking Sides for Success honoree. The event raised over $100,000 from the community to support local debate programs. The league’s 2012-2013 debate season began on October 19. Click here to view a complete tournament calendar.