Why mid-market companies need carriers with industry expertise: Risk and insurance

Deep industry knowledge enables underwriters to recognize exposures across multiple lines and build coverage accordingly, leading to seamless solutions.

The middle market — which includes businesses with revenues between $10 million and $1 billion — represents one-third of the U.S. economy, generates a combined $10 trillion in sales and employs millions. This market also has unique needs when it comes to insurance and risk management.

A mid-market business is often large and complex enough to require tailored insurance solutions, yet small enough that many such businesses lack a dedicated risk manager. They may have more difficulty accessing sufficient capital for expansion and may face a number of risks associated with ongoing M&A activity.

This presents a significant opportunity for brokers and agents who work with carriers who have specialized expertise.

“The middle market does business differently than small businesses and large sophisticated customers,” said Marc Orloff, president, middle market North America, Liberty Mutual Global Risk Solutions. “Brokers, agents and carriers have a huge opportunity to add value to companies by helping them better understand the range of risks they face, as well as how to mitigate and manage them.”

Portrait of Mark Orloff

Marc Orloff, President, North America Middle Market, Liberty Mutual Global Risk Solutions

With more limited resources, mid-market companies benefit from having a single point of contact to address their insurance, risk control and claims. “Having all of these areas addressed by one carrier allows for a seamless, gap-free program that addresses all of a business’ unique exposures and ensures that mitigation resources are effectively used to match their coverage,” Orloff said.

In order to fulfill this role, carriers must act not only as insurers, but also as advisors, working with the agent or broker to bring deep expertise in the specific industry insured and a detailed understanding of their particular business.

To illustrate the benefits of specialized industry-specific underwriting, it is possible to examine the complex risks of doing business in two specific sectors: technology and financial institutions.

Evolving Risks in the Technology Sector

All industries have faced cyber risk over the years as threats have grown and evolved. It remains a variable risk with property and general liabilities that underwriters can address in different ways. “But for the technology sector, the combination of digital and physical risks is particularly relevant,” said Mark Kurland, senior director of mid-industry/technology underwriting, Liberty Mutual Global Risk Solutions.

A cyber policy will likely cover financial losses related to a data breach, including costs arising from forensic investigation, notification and reporting, and potential customer claims. But for technology companies making software that controls machinery, electronics and medical devices, a breach or failure can easily lead to property damage or personal injury, as well as the loss of sensitive data.

“Take, for example, the failure of the software that runs a medical device. If this is compromised, whether through nefarious actors or just an innocent programming error, it can result in harm to the user. Process control machines that crash could result in equipment damage. Loss of use of this device then leads to financial loss. These would be considered more traditional general liability or product liability claims than a cyber liability claim that only focuses on the digital data aspect of the loss,” Kurland said.

“Industry specialization in terms of underwriting would bring a holistic approach to companies, brokers and agents. We don’t want to guarantee this in silos because you can have many scenarios that impact both cyber and P&C lines. Having a single underwriter who understands the nuances of this exposure and can coordinate the approach leads to seamless, integrated coverage.”

Having a central point of contact and a coordinated approach also means that the underwriter can leverage its knowledge of capacity, pricing and other market trends across different lines to create solutions that offer the highest value.

Macroeconomic trends increase risks for financial institutions

The financial sector also saw a shift in exposures due to the effects of inflation on loans. This includes mortgage impairment issues and E&O coverage of mortgage borrowers.

Portrait of Mark Kurland

Mark Kurland, Senior Underwriting Director Mid Industries/Technology, Liberty Mutual Global Risk Solutions

“Given the current housing market challenges, customers may be inclined to shop around and move coverage to save money or at least have smaller premium increases. Historically, in a softer market cycle, clients are more likely to keep their insurance with one carrier for many years over the life of the loan while getting stable rates, and there is less chance of a mistake compared to a client switching back and further with market cycles,” Kurland said.

“In some cases, the client has no choice if they are not renewed. This can happen to banks and mortgage lenders with portfolios concentrated in areas with significant natural disasters—such as California’s wildfire-prone coastal areas. This creates an increased potential for borrowers to have their personal homeowner coverage lapse, increasing mortgage impairment and the mortgage lender’s E&O liability.”

Managing this risk requires an acute awareness of risk aggregation, including exposure to not only traditional CAT hazards such as floods and named storms, but also convective storms and wildfires. It also requires close attention to other factors that would affect the adequacy of coverage, including the effect of inflation on the accuracy of property valuations, the availability of capacity and the adequacy of existing structures, and (for institutions with physical locations) the impact of social inflation and abuse of the tort law system.

Again, relying on a single operator that can offer both visibility into these various risks and integrated solutions for them provides smoother coverage and peace of mind for mid-sized financial companies.

Supplementing the image with risk control and claims

Specialized underwriting may be key to middle market risk management, but the ideal carrier will complement seamless coverage with risk management solutions and claims management expertise, providing brokers, agents and businesses with a complete mix of products, services and a deep understanding of macroeconomic conditions and the industry. – specific trends needed to effectively manage risks in the middle market.

“We know we have the products across Liberty Mutual to meet every client’s needs. It already exists. By understanding the client’s true needs at their core, we can be systematic in how we enable these products seamlessly,” said Orloff. “It really all comes down to industry specialization and working with the broker or agent to put the client front and center so we really understand what they’re trying to achieve and then pull the risk and claims controls to close. .” &

Katie Dwyer is a Philadelphia-based editor and freelance writer. She can be reached at (email protected).