this is the dimension of the imagination rod serling called the twilight zone –
DESCRIPTION
In this session we explore another dimension beyond what is known to the common broker. . It is a dimension as vast as your customer contract and as timeless as an uncovered claim. . - PowerPoint PPT PresentationTRANSCRIPT
This is the dimension of the imagination Rod Serling called The Twilight Zone
A dimension we call The Intersection of Risk.In this session we explore another dimension beyond what is known to the common broker. It is a dimension as vast as your customer contract and as timeless as an uncovered claim. It is the middle ground between products and services, between intellectual property and warranties, and it lies between the pit of the risk manager's worst fears and the summit of an underwriter's combined ratio.
Jose Heftye, FlextronicsJenny Novoa , Gap Sarah Stephens, AonYour Moderator: Alex Tokar, Aon
Scene 1: The Suppliers Big HeadacheScene 2: The Brands Big RiskScene 3: A New Dimension of Possibilities
Scene 1: The Suppliers Big Headache
Contract Demands:50,000,000 Errors & Omissions50,000,000 Intellectual Property Liability Deductible no greater than
Conflicts & Resolution:Third party Intellectual Property Liability does not existPossible utilization of a captive to address future situations
The Guest Star of this scene: Redesign of a smart meter
Contract Demands:40,000,000 Product Liability40,000,000 Product Recall40,000,000 Product Warranty40,000,000 Errors & Omissions
Conflicts & Resolution:Client wanted dedicated limits per the contractUtilized existing program with side agreement to reinstate limits if capacity was erodedSelf-insured product warranty and able to get client to accept lower recall limits
The Guest Star of this scene: Bluetooth automotive manufacturing
Contract Demands:$20,000,000 Products Liability$20,000,000 Product Recall$20,000,000 Consequential Damages$20,000,000 Brand Reputation
Conflicts & Resolution:Thus far Impossible to comply with clients demand for brand reputation. Product Liability & Recall partly evidenced with existing programs.Consequential damages agreed, but self-insured.
The Guest Star of this scene: Electronic Retail Products
Scene 2: The Brands Big Risk
Contract Requirement:Software companies must have E&O and Privacy insurance. Access to our customer data and/or systems could expose large losses.Complaint & Resolution:Vendors claims E&O/privacy are too expensive or limits too high. Evaluate the risk to the company. In certain case we accept the risk and waive E&O.
The Guest Star of this scene: Software Vendors
The Guest Star of this scene: Co-development deals
Contract Requirement:No one wants to accept any risk!Who owns the IP?Who caused the problem?
Complaint & Resolution:Make sure the business has a defined scope of work. We may back off of high limit requests based on the business partner.
Contract Requirement:Big exposures for the company data, technology, infrastructureWe want substantial E&O, GL, property, and privacy limits. Complaint & Resolution:Significant pushback during contract negotiationRisks too big to ignore. Held our ground for higher limits.
The Guest Star of this scene: Outsourced IT & Data Centers
Contract Requirements:Products for infants and children create unique risksRequire higher product liability limits and recall insuranceComplaint & Resolution:Overseas vendors often claim insurance is unavailable or they dont wish to purchaseWe take a tough stance on this one
The Guest Star of this scene: High Risk Products
Scene 3: A New Dimension of Possibilities
The E&O UFOProfessional IndemnityMedia LiabilityHealthcare RisksInternet MediaIntellectual Property InfringementContent LiabilityData Breach ExpenseIdentity Theft InsuranceMedical MalpracticeArchitects & EngineersCrisis ManagementIdentity Theft LiabilityNetwork RiskCyber LiabilityData Breach InsuranceInfoSecSecurity/Privacy LiabilityTechnology Professional Professional LiabilityThird Party RecallClient Quandary:Your client requests to be added as an additional named insured or an additional insured on your E&O policyPolicy Solution:Additional insured status:Makes no sense &/or not availableAlternatives may better meet their goals
The Guest Star of this scene: E&O Requirement on Services Contract
Client Quandary:Handset manufacturer requires that you accept $50MM in liability for failures of your chip as well as any resultant recall costs they incurYou dont purchase any type of recall policyPolicy Solution:E&O coverage for your technology services and products, with an additional coverage grant for third party recall costs
The Guest Star of this scene: Handset Manufacturers Conundrum
Client Quandary:A public entity requires evidence of Cyber Insurance in a contract where you will implement a new online system for residents to pay taxes, citations, and licensing feesPolicy Solution:You carry E&O insurance, but Cyber is not an industry standard term. Be aware of indemnification obligations for data breach expenses - will your policy pay?
The Guest Star of this scene: The Cyber Requirement
Client Quandary:You (the retailer) are hiring a vendor to implement a data-intensive new loyalty programThe program will integrate the existing CRM system with mobile devices and a new social media campaignAt least 4 vendors will be involved directly or as subcontractorsWhat new risks do we face?
And Now The Tables Have Turned ! Vendor risk assessment (financial, technical, legal, security, privacy, quality control, compliance)Contractual risk transferVendor insuranceYour insurance
The End or Is It...?
Jose HeftyeSenior Director, Risk ManagementFlextronics, Inc.847 Gibraltar Dr Bldg 5Milpitas, CA [email protected](408) 576-3726
Sarah StephensVice PresidentAon Risk Solutions Professional Risk Solutions199 Fremont, Suite 1500San Francisco, CA [email protected](415)486-7438 Jenny NovoaSenior Director of Risk Management & SafetyGap Inc.Two Folsom StreetSan Francisco, CA [email protected] (415) 427-3306
Alex TokarManaging DirectorAon Risk Solutions199 Fremont StreetSan Francisco, CA [email protected](415)486-7377