Trends and traps in specialty liability insurance

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Business Taking to the Skies

Residents of Cambridgeshire in South East England might be forgiven for thinking they were part of a Roswell-style cover up earlier this month when paparazzi flocked to the region to snap secret pictures of unidentified flying objects.

Sadly for UFO enthusiasts, there were no aliens in sight. Rather, behind a wall of hay bales, a team from online retail giant Amazon was testing drones – or remotely piloted aircraft – that will allow them to deliver parcels to shoppers 30 minutes after an order is placed.

The story, reported by The Daily Mail’s MailOnline1 is just one example of how technology is changing the way companies do business. It’s also an example of the type of new risks brokers need to help protect their customers against. This is where specialist liability cover can help.

The rise of remotely piloted aircraft (RPA)

All over the world, companies are exploring how drones can enable them to conduct their operations with greater accuracy and efficiency. Here in Australia, we’re seeing businesses using the technology to carry out activities that are dangerous to people such as inspecting tall buildings, overhead power lines and offshore oilrigs.

But whilst the technology might make it safer for people, RPA’s come with their own unique set of risks. The speed at which they fly and their weight can do a lot of damage if they fly into a building, other aircraft, get caught in overhead power lines, or fall uncontrolled from the sky damaging property or injuring people.

The use of RPA’s is a common exclusion in many standard liability policies, as they are deemed to be aircraft, and clients that use them will likely need special cover or have their existing liability policy amended to provide coverage.

We recently provided a solution for one of our insureds that performs aerial surveying or inspections of buildings and structures. After reviewing the existing Australian Civil Aviation Safety Authority (CASA) licensing requirements and regulations, we were able to endorse their existing Specialty Liability Insurance Policy to provide cover for use of RPAs that do not exceed a defined maximum take-off weight and that did not fly in excess of a defined height above ground level.

The online retail boom

Another trend we’re seeing thanks to technology is the growing number of online retailers seeking liability cover. Some of these businesses manufacture their own product and use the internet as a sales channel, whilst others import products from overseas. A great example is the many websites that pop up when you search for baby goods and equipment.

For brokers looking to place cover, the hard part is getting a handle on their product range, the quality of the products and experience of the business owner. If any of your clients are online retailers importing products from overseas it is prudent to obtain additional information relating to Product Liability exposures, such as the name of the overseas manufacturer, claims history for the past five years and details on warranty claims to name a few.

There are some great businesses in this space that pay a lot of attention to quality control and will have their products tested to make sure they comply with Australian standards or are fit for purpose. But of course there are many others that don’t. Again, additional information like test reports from third party testing facilities that confirm compliance with the nominated Australian Standard all help to identify product quality.

The information trap

The third trend we are witnessing in the liability insurance arena is a steady reduction in the amount of information being submitted with broker insurance applications.

The challenge that brokers face is that it makes it difficult to work out what the business does and doesn’t do to gauge their risk exposures. Without enough detail to go on, the client might not get the cover they need.

Specific standard liability policy exclusions can restrict or eliminate cover. Additional underwriter imposed exclusions should be reviewed in light of the insured’s business activities including: USA/Canada exports cover, work performed on watercraft, use of explosives and work in high hazard locations, just to name a few. And it can also mean missing endorsements that should have been added to the policy but weren’t.

Keeping up with the trends

A significant amount of liability insurance is now transacted electronically. Indeed the auto rated environment plays an important role in the market, enabling brokers to transact effectively and more efficiently.

Straightforward risks suit this auto rated environment, but there are businesses with more complex risk profiles that require bespoke underwriting regardless of their size or turnover. For example, a welder working on offshore platforms, asphalters repairing or laying airport tarmacs or a powerline clearing operation.

Mindful of these emerging trends and the bespoke needs of some businesses, specialty liability cover needs to be wide and include a thorough information gathering process. As an example, we conduct short surveys of clients over the phone to speed up the process, reduce the need to go back and forth and to show brokers and their clients we care about their business. Most importantly, it helps ensure the client gets the cover they need.

 

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Specialty Liability Contact: Ross Gilbert, Calibre Insurance National Underwriting Manager.

Sources:
1. Amazon article by MailOnline: http://www.dailymail.co.uk/news/article-3777872/Pictured-Amazon-s-new-delivery-DRONE-seen-action-time-tested-secret-middle-countryside.html