John K. Smith, President & CEO
By the time you read this, it will be officially summer with most areas of the United States open and in a much better place since the pandemic began. We are hopefully out of the woods (no pun intended)!
I am back to traveling and have been out of the office every week for the last six weeks. Even though I am vaccinated, I still wear a mask and keep socially distant, however, I am starting to unwind that routine when and where appropriate. We at PLM are still out of the office working remotely and are investigating the next steps for our organization. We will remain remote until at least the first of September, as we allow vaccination rates to rise, and we get a better handle on what Philadelphia will look like when people come back to the city. Approximately 2,000 people normally work in our office tower. When speaking to our building security team last week, they informed me that more than 200 people were in the building, and that is one of the best days – in terms of the number of people in the building – they have had over the past 15 months! I do believe this number will rise quickly.
I have mentioned more than a few times in my commentary in the past about the uptick in cyber events that are occurring throughout the U.S. In fact, a number of businesses in the wood niche have suffered ransomware and phishing losses. We just renewed PLM’s cyber liability coverage for our own organization, increased our limits by 66% and took a larger deductible. The price quadrupled due to the increased coverage to some degree, but also due to the mounting losses that cyber insurance writers are having to manage!
We are also seeing a rise in Employee Practices Liability Claims (EPLI) associated with COVID-19 as well as ever changing society norms both with our insureds and in businesses as a whole.
Believe me, when business is good, the last thing you want to have to deal with is a cyber or EPLI claim that distracts your attention and that of your leadership team, or potentially shuts you down entirely! Most of our clients enjoy some limited coverage for these exposures, but as loss sizes increase, we suggest you look at your limits and what you are doing to avoid losses in both of these areas. Our insureds who have these important coverages also get complimentary access to valuable resources such as online portals and toll-free advice lines. Our Business Development Representatives are also available to help assist you in setting up foundational programs.
My travels have led me to comfortably say that most of our insureds are having banner years. Sales have skyrocketed, gross margins are up, and while it is not a universal statement, they are busier than they have ever been. Business is robust, with one insured in the manufacturing segment proudly informing me that they were only shutting down a couple of hours a day to do maintenance when needed. When I asked him how much preventative maintenance they were doing on his facility and equipment, the conversation changed. There is a difference between shutting down for maintenance when something breaks and shutting down to do preventative maintenance to keep it from breaking. Which are you doing?
Many are talking about the need for additional staff that they can’t find, and of course the difficulty of obtaining raw materials. Prices are up, not only on lumber and copper, but in just about every class of building material there is. Inventories have jumped and it appears that we are in a sweet part of the cycle.
That begs the question, what would a significant loss do to your business today? Could you afford it? Ask yourself if you and your people are focusing enough on safety. I suspect with all the opportunities in front of you, the answer might be no.
In many cases, you are being forced to hire inexperienced people. Have you really done the job in onboarding them and training them from a safety viewpoint or are you rushing to get them into the workflow and productive?
Several months back, the winter freeze wreaked havoc with more than 50 of our insureds. Many were caught unprepared. It’s due to disasters like this that we have talked about disaster recovery plans for years in commentaries, through our loss control team and during risk management visits to your businesses.
Some insureds are finding that their insurance coverages are inadequate due to the very cost increases that are driving businesses forward! Rebuilding is more expensive today than at any time in my memory. Restocking inventory at these new pricing points is also putting upward pressure on policy limits. Profits are soaring and have to be covered with business interruption coverage that did not anticipate the robust business environment that we find ourselves in.
Of course, I am asking the question, are you properly insured? Have you even thought about this? Our business development and loss control reps report many insureds are avoiding the conversation when it is brought up and we are hearing the same thing when it comes to brokers. Perhaps it is time to take a breath and consider your coverage limits?
Commercial auto, and in particular fleets of more than five or ten vehicles that are operating heavy trucks, particularly in metropolitan areas, continue to see rising prices and limited markets. The industry is still trying to get its arms around the unprofitability tied to this line of business – unprofitability that largely is driven by “social inflation” and the huge settlements that are being presented. Even auto physical damage losses today are becoming problematic, particularly if new vehicles must be purchased as a result of total losses. The supply chain in that area is getting thinner as well.
So, suffice to say business is good, but I think we are in for challenging times as we look over the horizon and come to terms with the low interest rate environment, pandemic spending, the shrinking work force, and a milieu of other issues that face us today as businesspeople.
Rest assured that we at PLM look forward to working closely with you, overcoming the challenges and taking advantage of the opportunities that are plainly in front of us. We very much value your input and comments and invite you to reach out to me at jsmith@plmins.com.
