AI in insurance

Insurance is a complex profession. Could AI replace insurance brokers?  Could a robot do a job better than you? Actuarial models are used for an in-depth analysis of the potential client.

Lapetus, a US-based start-up believes that a selfie can replace that assessment. A potential client sends a good portrait of themselves to Lapetus. Computers then do the rest. The face is analysed in different aspects.  The life expectancy is determined by the computer. Factors such as gender, body mass index and the rate at which the person is ageing are calculated. This process only takes a few minutes.

Warren Buffett of Berkshire Hathaway has warned about the risk of disruption to insurance from AI.

UK insurer Aviva is using AI to do repetitive tasks which were performed by humans. They say that Algorithms are 15 times more productive than humans. Furthermore, insurers say that AI can improve claims processes as well as detect fraud.

Crop insurance is also changing.  Drone technology enables insurers to map terrain in 3D and check plant health from the air.

Zurich Insurance is using robots to decide personal injury claims. The processing time has been cut from an hour to seconds. Accuracy has improved. Because of its machine learning, every new claim leads to further development and improvements.

Siber is a bald, blue-eyed principal of the Buyonic Insurance Agency in Austin, Texas. This insurance android can rate, bind and issue policies on the spot while answering the phone and making robocalls. He speaks every language known to humans and machines. He is able to work 24/7.

Angie Smith, owners of the agency says that Siber never makes a mistake, does not call in sick, does not take a long lunch. She can also take him home after work to do the laundry.


From 18th December 2017, ELDs are required for the majority of drivers. This rule is in force for most motor carriers and drivers who need to keep records of duty status (RODS).

There are exceptions to the ELD rule, including:-

* Short-haul drivers who continue to use timecards;
* Drivers who use paper RODS for not more than 8 out of every 30 days;
* Drive-away-tow-away drivers where the commodity being delivered is the vehicle being driven;
* Vehicles being driven which were manufactured prior to the year 2000.

Many larger carriers already require their drivers to use ELDs. However, the majority of the industry is made up of smaller carriers. 97% have fewer than 20 trucks. The Federal Motor Carrier Safety Administration estimates the cost to install an ELD to be at least $166 per truck for a basic model. The average cost is $419 per unit, depending on features and functionality.

As a result of this rule, there is speculation that there may be more mergers and acquisitions. Apart from this, there is the matter of the insurance impact. Safety scores affect the insurance premium. The higher the safety score with ELDs, the lower the insurance premium. Many carriers get just as favourable rates who run paper logs as those who run electronic logs.

The ELD regulation is new. Insurance companies advise truckers to keep paper records in addition to having the electronic logging device. Using paper records can help spot small discrepancies in the logging method. This is advised for the first few months after ELD installation. Paper records can also provide drivers with information which could assist in adjusting schedules in order to obtain high safety scores.

Progressive insurance launched its SMARTHAUL program and offers the free use of an ELD. This is conditional upon the sharing of data with Progressive. Data collected by these ELDs will help Progressive to better understand the behaviours of truckers. However, this data will not be associated with the trucker’s Progressive insurance policy.

Bond Insurance

Bond Insurance guarantees expected payments of interest as well as principal on a bond.   This occurs in the event of a non-payment by the issuer of the bond or security.

As compensation for its insurance, the insurer is paid a premium (as a lump sum or in instalments) by the issuer or owner of the security to be insured.

Bond insurance is a form of “credit enhancement”.   This generally results in the rating of the insured security being the higher of:-

(i) the claims-paying rating of the insurer and

(ii) the rating of the bond would absent insurance (also known as the “underlying” or “shadow” rating.

The premium asked for insurance on a bond is a measure of the understood risk of failure of the issuer.

Insured securities range from municipal bonds and infrastructure bonds to asset-backed securities (ABS).  (CDO is a type of structured asset-back security (ABS).  Originally developed for the corporate debt markets, over time CDOs evolved to encompass the mortgage and mortgage-backed security (MBS) markets).  domestically and abroad.

The economic value of bond insurance to the government unit, agency, or other issuer offering bonds or other securities is a saving in interest costs.

The economic value of bond insurance to the investor purchasing or holding insured securities is based upon:-

the additional payment source provided by the insurer if the issuer fails to pay principal or interest when due (which reduces the probability of a missed payment to the joint probability that both the issuer and insurer default).

improved liquidity and

services provided by the insurer such as credit underwriting, due diligence, negotiation of terms, surveillance and remediation.

Bond insurers generally insure only securities that have underlying or shadow ratings in the investment grade category, with unenhanced ratings ranging from “Triple-B” to “Triple-A”.

 The global financial crisis of 2008 seriously harmed their business model, to the point where the continued operation of a number of bond insurers is in doubt.

Not that the insurance term monoline” means only that these companies do not have other insurance lines, such as life or property/casualty.


Bond insurance of residential mortgage-backed securities (RMBS) (RMBS is a reference to the general package of financial agreements that typically represents cash yields that are paid to investors and that are supported by cash payments received from homeowners who pay interest and principal according to terms agreed to with their lenders) commenced in the 1980s.   This expanded at an accelerated pace in the 2000s, leading up to the 2008 financial crisis.

As the housing bubble grew in the mid-2000s, bond insurers generally increased the collateral protection required for RMBS. However, both the bond insurers and the rating agencies that evaluated their credit did not anticipate the collapse of the real estate market.

In addition, following the crisis, the bond insurers became aware that many RMBS they had insured included large percentages of loans that were ineligible for securitisation. They were subject to repurchase obligations by the RMBS sponsors who originated the securitisations based upon certain representations and warranties made by the sponsors of such loans.

Unlike mortgage insurance bond insurance generally provides for unconditional payment of claims.   The insurers reserve the right to pursue contractual or other available remedies. As a result, the bond insurers were faced with billions of dollars of claims to insured security holders associated with their exposure to RMBS following the financial crisis.



In the United States, Bancassurance was banned until the repeal of the Glass Steagall Act in 1999.  It has not caught on as a practice for most forms of insurance.

There is no simple way of entering into bancassurance which is “best” for every insurer and every bank. The goals of the company have to be clear. They should be concise before a strategic plan is agreed upon.

The simplest form of bancassurance is that one party’s distribution channel can have access to the clients of the other organisation. When a bank and the insurance company enter into a distribution agreement,  the bank automatically passes on its ‘warm leads’.  This is from its client base to a competent, friendly insurance company.  A very profitable relationship can result from such an agreement.

Using the bank’s sales channel, the insurance company uses the bank’s sales channel to sell insurance products. Bank staff and bank employees, even tellers become the point of contact and sales to the bank’s clients. Commission is shared between the bank and the insurance companies, however, the policies are managed by the different insurance companies.

Insurance companies ensure that the staff in the banks involved in the sales of insurance products are provided with product information, sales training and marketing campaigns and the BIM model has shown to be a very effective distribution channel.

Many feel that banks have too great a control over the financial industry as well as creating too much competition with existing insurance companies.

In China, bancassurance products have exploded across several product lines. However, in certain countries, bank insurance is largely prohibited. Most sales in U.S. Banks are life insurance, property insurance and mortgage insurance.

Traditional Insurance models (TIM) have to have larger sales teams and also work with third party agents and brokers. BIM (known as the Bank Insurance Model), is very popular in European countries such as Spain, France and Austria,and is also crossed with TIM for what is known as HIM (Hybrid Insurance Model). HIM is a combination of TIM and BIM.

Privatbank Assurance is pioneered by Lombard International Assurance which is a globally used wealth management company. This concept combines private banking and investment management services. Lombard applies expertise to create innovative wealth structuring solutions to meet the unique needs of high net worth clients using life assurance in conjunction with sophisticated financial planning.

Insurance activity in a bank is integrated with the usual bank processes and is referred to as “Integrated Models”. The bank collects the premium, normally by a direct debit order from the client’s bank account at that particular bank.

The workflows are automated between the bank and the insurance companies. The bank receives a commission for these transactions. For more sophisticated products, the bank’s staff has the support of specialised insurance advisors.

Certain life insurance products can only be sold by financial advisors who have obtained a minimal qualification and this is referred to as “Non-Integrated Model” so due to these rules, branch staff have been limited by regulatory constraints. Banks set up a team of financial advisors who are authorised to sell regulated insurance products. Mailing and telesales is the means by which the advisors target the bank’s clients. These financial planners are employed by the bank and they usually receive a salary plus commission from the bank.

Good reasons for banks to enter into bancassurance:

Due to the intense competition between banks, there is an increase in administration and marketing costs. As well as shrinking interest margins, there are limited profit margins in traditional banking products. New products such as bancassurance can increase production and therefore enhance profitability

Income that is generated is increased in the form of commissions from the insurance company.

The bank’s fixed costs are spread with the help of the insurance company bearing some of the costs.

The bank staff have more products to offer clients so this increases the productivity of the staff and in turn the efficiency of the bank.

The return on traditional deposit accounts has been of such a nature that customer preferences are changing and they are regarding insurance products and mutual funds in a more favourable light with regard to medium-term and long-term investment.

The main core of profitability for banks has been savings held as deposits for clients. By entering the life insurance business, the banks have found a way to offset some of their losses.

Favourable tax treatment of life insurance which is there to encourage private provision for protection and retirement planning make the purchase of insurance products more attractive to clients, thereby assisting the banks to increase profitability.

For example, the client wants to fund future education costs. He/she takes out permanent assurance. Simultaneously the policyholder can take out a mortgage loan and the bank can have the client assign the policy to the bank as beneficiary which results in a more widely based relationship with the customer.

The benefits of bancassurance for insurance companies:

Source of new business – previously unreached clients.

Source of new business – wide range of products (including banking products).

Both bank and insurers get exposure to the other’s distinctive management style and thus the great opportunity to learn and make improvements in their own operations.

Distracted driving

Researchers analysed data from more than 900 crashes. Researchers found that distracted driving is on the increase.

Distraction, error, impairment and fatigue caused ninety percent of accidents

Drivers who committed the following errors were considered dangerous: –

Reading or writing while driving;
A driver reaching for an item (increased risk by nine times);
Any driver reaching for a cellphone (increased risk by six times);
Some drivers browsing on the phone or reading emails (increased risk by three times);
The driver dialling increased the risk by twelve times.

Distracted driving caused 2,955 accidents in 2014. 431,000 people were injured. 404 people died in fatal crashes that involved the use of cellphones.

Cellphone companies are considering developing preventive technology. This technology aims to stop people from receiving calls and texting while driving. The technology is intended to limit dangerous distractions. It interrupts service so that people do not answer their phones when they are behind the wheel.

One carrier has introduced a valuable service when a phone is detected in a moving car. This feature disables rings and alerts. It thereafter sends calls to voicemail.

Researchers at the University of Utah reached various conclusions about cellphone use. They concluded that talking on a cellphone while driving is as dangerous as driving drunk. Furthermore this applied even if the phone is hands-free. Motorists who talked on hands-free cellphones were 18 per cent slower in braking.  These drivers took 27 per cent longer to regain their speed when they had applied brakes.

Employers are concerned about employees using cellphones whist driving. They are worried that they may be held liable for accidents. Work-related conversations could be conducted by their employees whilst behind the wheel.

Many companies have created cellphone usage policies. Some companies  insist that employees pull over to the side of the road to conduct cellphone conversations. Other companies have completely banned the use of all wireless devices.

If one considers the amount of accidents caused by distracted driving, it should be up to cellphone manufacturers to issue warnings to owners of mobile phones.

Cyber insurers

The cyberattack called WannaCry started on Friday 12th May 2017.  Infection occurred within 24 hours. As a result, the virus spread to 230 00 computers.

The targeted computers ran on Microsoft Windows operating system.  The hackers encrypted the data.   In the result, they demanded ransom payments in Bitcoin.

The services in the United Kingdom provided were thus emergency-only.

A 22 year old web security researcher in England discovered an effective kill switch. He registered a domain name that he found in the code of the ransom ware. This therefore slowed down the spread of the infection.  New versions lack the kill switch.

Petya is a family of encrypting ransomware. Petya targets Microsoft Windows based systems. It prevents windows from booting and then demands payment in Bitcoin in order to regain access to the system. On 27 June 2017, a major global attack began utilising a new variant of Petya.

It is the opinion of Graeme Newman, chief innovation officer at CFC Underwriting that a combination of WannaCry’s wide reach and Petya’s destructive force could thus cost insurers about $2.5 billion in the near future.

Recently the manufacturers of Air Wick fresheners and Dettol cleaners had their manufacturing and distribution channels affected by a global attack.  The Dettol hygiene brand suffered a sales slowdown in India due to the cyber attack that crippled operations.

CFC underwrites approximately $100 million of cyber insurance premiums. It is therefore one of Europe’s biggest sellers of the product.

The global market for insurance then grew to about $3.4 billion in premiums in 2016.  Many businesses are unable to deal with cyber attacks. This is stated in a report from specialist insurers Hiscox. The report found 53% of the companies assessed were ill-prepared to deal with an attack.

In 2016 cyberattack cost the global economy over $450 billion and furthermore over 2 billion personal records were stolen. In the US alone, over 100 million Americans had their medical records stolen.

Homeowner’s Insurance


Homeowner’s insurance (HOI) is a type of property insurance that covers a private residence.  It is an insurance policy that combines various personal insurance protections.  It includes losses occurring to one’s home and its contents. Furthermore, it also includes loss of use (additional living expenses) or loss of other personal possessions.

The cost of Homeowner’s Insurance often depends on what it would cost to replace the house. Typically, claims due to floods or war are excluded from coverage.   Special insurance can be purchased for war and floods.

Homeowners should do annual comparisons on Homeowner’s Insurance policies.  Upgrades to your home improve the aesthetics of your residence but also increase its value.  Whenever an upgrade is done, you should contact your insurance company to ensure that you are not under-insured.  Items such as hot tubs, swimming pools and trampolines leave you more vulnerable to lawsuits.  These items will, therefore, increase your annual payment for Homeowner’s Insurance.

In every state except California, a low credit score can drive up the price of your Homeowner’s Insurance.  Someone with a credit score of 500 probably not only lets bills slip but also the general maintenance of a home which leads to claims.  Laura Adams, of, discourages clients from requesting a low deductible as this may encourage you to make frivolous claims.  In some instances, one claim can result in a 32% hike in premiums.

Insurance carriers give lots of discounts if, for example, your vehicle is insured with the same company as your residence.  Not smoking, being a retiree or living in a gated community can increase the number of discounts that you qualify for with the carrier.  When discounts expire, remembering to request new discounts can help save you money every month.

Many homeowners do not understand what exposures are covered under their home insurance policy. Furthermore, more than two in five Americans (41 percent) believe that a standard homeowner’s insurance policy protects against mould damage.   This misconception could prove extremely costly.  Mould remediation can cost tens of thousands of dollars.  It is often not covered by Homeowner’s Insurance, especially if it was caused by neglected maintenance such as a leaky pipe.

The Insurance Services Offices has standardised the following homeowner’s insurance policy forms in general use:

HO0 – Dwelling Fire Form

A form that provides coverage on a home against fire, smoke, windstorms, hail, lightning, explosion, vehicles and civil unrest.  It does not cover your personal property, personal liability or medical expenses.

HO1 – Basic Form

This form provides coverage on a home against 11 listed perils. The perils include fire or lightning, windstorm or hail, vandalism or malicious mischief, theft, damage from vehicles and aircraft, explosion, riot or civil commotion, glass breakage, smoke, volcano eruptions, and personal liability.

Exceptions include floods, earthquakes.  Most states no longer offer this type of coverage.

HO2 – Broad Form

A more advanced form that provides coverage on a home against 16 listed perils (including 11 on the HO1).

HO3 – Special Form

The typical, most comprehensive form used for single-family homes.  The policy provides “all risk” coverage on the home with some perils excluded, such as earthquake and flood.

HO4 – Contents Broad Form
The contents Broad, is a form for renters.  It covers personal property against the same perils as the contents portion of the HO2 or HO3.  An HO4 generally also includes liability coverage for personal injury or property damages inflicted on others.

HO5 – Comprehensive Form

Covers the same as HO3 plus more.  The contents are covered on an open peril basis.  Thus as long as the cause of loss is not specifically excluded in the policy it will be covered for that cause of loss.

HO6 – Unit Owners Form

The form for condominium owners.  It insures your personal property, your walls, floor as well as the ceiling against all of the perils in the Broad Form.

HO8 – Modified Coverage Form

The form is for the owner-occupied older home whose replacement cost far exceeds the property’s market value.

Coverage Classification

For each policy, there are typically 5 claim classifications of coverage.  These are based on Standard Insurance Services office forms.

Section 1 – Property Coverage

Coverage A – Dwelling

Covers the value of the dwelling itself (not including the land).   This is in place to give a buffer against inflation.  HO4 (renters insurance)  typically has no coverage A, although it has additional coverages for improvements.

Coverage B – Other Structures

Typically limited at 10% to 20% of the Coverage A, with additional amounts available by endorsement.

Coverage C – Personal Property

Covers personal property, with limits for the theft and loss of particular classes of items.  (e. g. $200 for money, banknotes, bullion, coins, medals, etc.).   This has led to some calls for more choice.

Coverage D – Loss of use/Additional Living Expenses

Covers expenses associated with additional living expenses (i. e. rental expenses) and fair rental value, if part of the residence was rented, however only the rental income for the actual rent of the space, not services provided such as utilities.

Additional Coverage

Covers a variety of expenses such as debris removal, reasonable repairs,  as well as damage to trees and shrubs for certain named perils (excluding the most common causes of damage, wind and ice), fire department charges, removal of property, credit card/identity theft charges, loss assessment, collapse, landlord’s furnishing, and some building additions.  These vary depending upon the form.


These generally include earth movement, water damage, power failure, neglect, war, nuclear hazard, septic tank back-up expenses, intentional loss and concurrent causation (for HO3).


Flood coverage is available in the form of a separate policy both from National Flood Insurance Program and from a few private insurers.

Coverage E – Personal Liability

Covers damages which the insured is legally liable for and also provides a legal defence at the insurer’s own expense.   About a third of the losses for this coverage are from dog bites.

Claims process

Insurance policies typically require that the insurer is notified within a reasonable time period.   In addition, a claims adjuster will investigate the claim.

Filing a claim may also result in an increase in rates, or in non-renewal or cancellation.  In addition, insurers may share the claim data in an industry database (the two major ones are CLUE and A-PLUS) with Claim Loss Underwriting Exchange (CLUE) by Choice point receiving data from 98% of US Insurers.














Kidnap Insurance



Kidnap insurance is meant to guard people as well as companies operating in high-risk areas.  Locations most often named in kidnap policies include Mexico, Venezuela, Haiti and Nigeria, and certain other countries in Latin America.

Private corporations pay millions of dollars in ransom money every year.  Many insurance companies sell kidnap insurance policies.   An entire criminal industry surrounds the extortion of multinational corporations through kidnap for ransom.

Seventy-one percent of the kidnapping victims are male.  Sixty-nine percent of the victims are considered middle class.  These victims are shop owners, students and mid-level professionals.  Research into the kidnap industry in Mexico have found that organised crime groups are now targeting middle- class workers.  This is an attempt to expand the number of potential targets.

 The kidnappers charge a lower ransom demand, usually around $7, 669 (100, 000 Mexican Pesos). They are able to target a greater number of people.

Between 2007 and 2012 Senior military officers with the Eritrea’s military kidnapped  30, 000 children between the ages of 16 and 17.  Students in Eritrea serve at a military camp in order to graduate from high school.  The officers would call the victims’ family to demand a ransom payment of $7, 500 in order to release the victim.  If the family were unable to pay the ransom demand, the children would be sold to Bedouin traffickers.

Researchers studying kidnap and ransom at Tilburg University in the Netherlands estimated that about $600 million has been paid out in kidnap and ransom money to the military.

Kidnap and Ransom insurance policies cover the perils of kidnap, extortion, wrongful detention and hijacking.  Kidnap and Ransom policies are indemnity policies. They reimburse a loss incurred by the insured.  The policies do not pay ransom on the behalf of the insured.  Typically, the insured must first pay the ransom, thus incurring the loss.  They then seek reimbursement under the policy.

Losses typically reimbursed by Kidnap and Ransom insurance include:

1.  Ransom monies – Money paid or lost due to kidnapping.

2.  Transit/Delivery – Loss due to destruction, disappearance, confiscation or wrongful appropriation of ransom monies being delivered to a covered kidnapping or extortion.

3.  Accidental Death or Dismemberment – Death or permanent physical disablement occurring during a kidnapping.

4.  Judgements and Legal Liability – Cost resulting from any claim or suit brought by an insured person against the insured.

5.  Additional expenses – Medical care, PR Counsel, wage and salary replacement, relocation and job retraining, and other expenses related to a kidnapping incident.

Intended Audience:

The policies cover high profile families, non-governmental organisations and multinational organisations.  Some policies include kidnap prevention training.

Underwriting Considerations:

Insurance underwriters weigh many factors when considering a kidnap policy.  They include the country of residence of the insured and the type of industry of the insured.  The revenue of the insured is also considered as well as the travel patterns of any employees who may be covered in the policy.

Problems with Kidnap and Ransom Insurance:

One of the known paradoxes of Kidnap and Ransom Insurance policies is that those who have them are often not aware.  It can be provided by an employer hoping to protect the company and its assets.  It is believed that an employee with knowledge of his K & R policy might begin to act differently, or even collude in his own kidnap for fraudulent purposes.

Kidnapping in the US;

The risk of kidnap in the US and Canada remains relatively low, and the incidents which do occur are largely a by-product of other crime, including robbery and spousal abuse, or child custody disputes.  The threat of kidnap in North America is heightened by the operations of the violent drug cartels in neighbouring Mexico.

In line with this, the US border states of Arizona, New Mexico, California and Texas are reported to be the most affected by the “spillover”. This is due to their geographical proximity as well as the fact that drugs are trafficked directly into these states.

Cartels facilitate their operations along the borders. The fracking boom is the latest area to be exploited.  According to reports, cartels are taking advantage of activity surrounding the Eagle Ford Shale Play by stealing lorries belonging to energy companies, bribing truck drivers and contractors and possibly even “cloning” vehicles to resemble company lorries, all used to transport drugs.

In addition to this, the new roads which have emerged along the oil and gas fields are “inadvertently” circumventing the US border patrol’s highway checkpoints.  Cartel operations in the vicinity of the US border have previously led to a surge in reports of kidnaps, as well as extortion, violent home invasion, and also murders, and with cartels moving further into Texas, there is a substantial risk that there will be a further increase in such criminal activity in the state.



Beehive theft

Insurance policies are costly for beehive theft.  Very few beekeepers are compensated for their losses. Beekeepers provide millions of hives to California almond tree growers between December and March each year.

Beehive thefts are on the rise. More than 2 million hives are needed to pollinate California almond trees. Experts believe that beekeepers are behind the thefts. They have the knowledge as well as the equipment to take the hives. Up to 200 hives are stolen in one go. The hives are generally unmarked, however, some beekeepers are putting GPS tracking units in their hives. Someone stealing the hives makes pure profit from the honey in the hives without any upfront work.

The problem of beehive theft is also prevalent across England and Wales. Certain strains of Queen bees can fetch up to 180 British pounds each. Bee mortality insurance is furthermore covered when bee losses occur due to “Colony Collapse Disorder” (CCD). The chief symptom is no or a low number of adult honey bees present but with a live queen and no dead honey bees in the hive. Researchers who are trying to find out the cause of CCD are focussing on the invasive Varroa mite. According to a 2007 article, the mite Varroa destructor remains the world’s most honeybee killer. It results in deformed wing virus and acute bee paralysis. The bees also suffer a compromised immune system. New studies are finding that a group of insecticides called Neonicotinoids are also the possible cause of CCD.

Other causes being considered are pesticides, fungi, the use of antibiotics and the long-distance transport of hives.
In addition, malnutrition, poor quality Queens and immunodeficiencies. The USDA is currently piloting two Apiculture insurance programs in various states across the USA. Broken Arrow Crop Insurance can also offer programs for beekeeping operations. These programs are sold via private insurance companies.

BOE Insurance

 Without BOE insurance, you might find yourself using personal funds or taking on debt to meet business expenses.

You might even be forced to close the business. With this coverage, you will be able to keep your business afloat, at least for a period of time. And if you decide to sell your business after becoming disabled, the benefits paid under such a policy can keep your business operating and give you some breathing space to find a suitable buyer.

Business overhead expense (BOE) disability insurance also known as Business Expense Insurance, pays the insured’s business overhead expenses if he or she becomes disabled. A BOE policy pays a monthly benefit based on actual expenses, not anticipated profits. It is designed for businesses that rely on a small number of people (or one person) to produce a revenue.

The owner is reimbursed for existing overhead expenses incurred while he/she is disabled, keeping the company up and running while the owner recovers.

The following business overheads are typically covered by a BOE disability policy:
Interest payments on some business debts
Employee’s salaries and payroll taxes.
Postage and stationery
Equipment maintenance
Rentals, leases, or depreciation of office equipment
Taxes on the business property
Insurance premiums for Workers’ Compensation, employee medical and liability
Accounting fees
Professional membership and subscriptions

Policies do not typically cover the salary of a temporary employee hired to do the duties of the disabled, unless a substitute salary expense or similar rider is purchased with the policy. Income taxes and the cost of inventory are some expenses that are not covered.

Benefit periods: BOE insurance policies have short benefit periods that do not usually exceed two years.

Elimination period: BOE policies typically have short elimination periods; either 30, 60 or 90 days.

Maximum benefits: BOE insurance policies offer a maximum monthly benefit, but only reimburses the policyholder for actual overhead expenses incurred if they, are less than or equal to the maximum benefit. With some insurers, any unused benefit can be applied to increase future monthly maximums or to extend the benefit period.

Taxation: BOE insurance benefits are reportable as income and the premiums are tax deductible as a business expense.

Rates: BOE insurance rates are based on the insured’s age (at time of purchase), occupational duties, health status, optional riders selected, benefit period and elimination period.

Once BOE insurance is owned, coverage cannot be increased without providing evidence of medical insurability, unless a future increase option or similar rider is purchased at the time of policy issue.

You may apply for coverage if you are between ages 18 and 60.
The plan is non-cancelable until you reach the age of 65. After age 65, it is conditionally renewable, as long as you remain employed full-time (minimum of 30 hours per week) and are responsible for the expenses of maintaining an office or business.
Benefits can be paid over a period of time of either 15 or 24 months.
Benefits may start after as few as 15 days of disability.
Premiums may be tax deductible as a business expense.
Various options are available, including the ability to increase your coverage at a later date.
If appropriate, return to work assistance may be provided to support your transition back to work.


Cost of the insurance will be based on several variables, including your age, sex (women pay higher rates because statistically, they live longer but are more prone to become disabled). The risk category of your profession, your medical background, whether you smoke, and, of course, the coverage you need. Obviously, you will pay more for a policy that pays $15, 000 a month for two years than a policy that pays $5, 000 for six months. Your payments will rise as you age. The policy that is dirt cheap in your 30s could cost you a fortune in your 60s.

Premiums run between $2, 000 and $10, 000 a year, for coverage between $50, 000 and $75, 000 a year.

The best policies on the market are those that are noncancellable and guaranteed renewable. With that policy the carrier can never ever change any provision of the policy regardless of how many times an insured person files a claim. If the policy is only guaranteed renewable, you cannot be dropped, but the insurance company can raise the premium.

City Risk Index

The University of Cambridge has compiled City Risk Index research on behalf of Lloyds of London for the period 2015 – 2025. The analysis thereby pinpoints the GDP@Risk of 301 of the world’s major cities. The 18 threats identified are either manmade or natural.

The value of this detailed scrutiny of the City Risk Index lies in providing flexibility from upgraded infrastructure to additional insurance protection.

  •  10 Threats account for about 91% of the total GDP@Risk.
  •  Nearly half of the Total GDP@Risk is associated with Manmade threats, including Market crash, Cyber attack, Power outage and Nuclear accident.
  •  Cities with high asset values which are therefore the most financially exposed:
    New York
    Hong Kong
  •  Our interconnected and technologically dependent world presents four Emerging threats, thereby representing one-fifth of the Total GDP@Risk.
  •  Market crash also represents nearly a quarter of all cities potential losses.
  •  Emerging economies such as Asia, Latin America and Africa collectively, 71.47% of the Total GDP@Risk have the most to lose.
  •  Earthquake risk represents more than 50% of the Total GDP@Risk in Lima and Tehran.
  •  The cities of New York and Paris face 60% of the Total GDP@Risk of Manmade threats. These are Market crash, Oil price stock and Cyber attack.

Across the globe a market crash is seen as the biggest global risk. It could therefore wipe off $1,05 trillion off the global map.

Johannesburg, South Africa’s biggest city  stands to lose the most GDP in monetary terms. (R93.5 billion).

Johannesburg faces two major threats. One is man-made and the other natural. 35% of GDP@Risk is in Johannesburg. This city is South Africa’s financial centre. The second major threat is HIV infection. This city has one of the highest rates of the infection globally. Cape Town, Pretoria, Durban, East Rand and Soweto similarly face these two threats. Being the financial centre, Johannesburg is especially relevant as it also has the additional likely risk of Cyberattack.



Tornado Alley is where tornadoes cause severe damage. These areas include Oklahoma, South Dakota, Texas, Kansas and Nebraska. The National Weather Service received reports of 18 tornadoes across the south of the USA on 2nd May 2018. The largest is what chasers refer to as a wedge tornado. This implies that the tornado is as wide as it is tall.

Many insurance companies deny valid claims for tornado losses. Report the event immediately to your carrier. Resist the urge to clean up. Document as much as you can with photographs and videos. Call the insurance company to report a claim. Ask for an advance. Some companies make an immediate payment of $1500 to $5000 when the damage is significant. If your home in uninhabitable, ask if the insurance company will cover the expense your family may incur whilst residing elsewhere. Demand frequent updates after you have put in a claim.

These insurance claims are challenging. Roofs are torn off. Doors and windows are shattered. Therefore this results in both wind and water damage. Whichever type of damage has occurred can lead to disputes between homeowners and insurance companies. Water damage must be claimed separately. Flood water is a different peril. It may not be covered at all. Neighbourhoods far from where the tornado touched down may be affected. Thus owners of businesses and homes miles away from the tornado may need to submit damage claims.

Regarding tornadoes, many exclusions however may apply. Your policy may have mould exclusions. Mould will not be taken into account. Furthermore, if your roof is older than 20 years at the time of the tornado, the insurance company will take depreciation into account. Whilst most replacement cost policies will allow you to recover the depreciation, recent endorsements by the Insurance Services Office allow carriers to pay actual cash value on roofs older than 20 years. Cosmetic damage is excluded as well, therefore matching of shingles and undamaged portions of the roof will not be matched.

Government Health Program

The Federal Employees Health Benefits (FEHB) forms part of the Government Health Program. This is whereby employees health benefits are provided to:

Civilian Government employees and Annuitants of the United States Government.
The Government contributes 72% of the weighted average premium of all plans. Furthermore the FEHB program allows some insurance companies to offer health insurance plans to governmental employees.

In the Government Health Program, the employee will be fully covered in any plan he or she chooses without limitations regarding pre-existing conditions.  Changes may, however, be made upon a life-qualifying event. Thus this may occur even though open enrollment is closed.

The Military Healthcare system is part of the Government Health Program. It is the Military Health System that provides healthcare to active duty and retired U. S. Military Personnel and their dependents. Therefore its primary mission is to maintain the health of military personnel.  This, therefore, enables them to carry out their military missions. As a result, it delivers health care during wartime.

Part A of the Government Health Program  covers inpatient hospital stays including semi-private room, food and tests. The maximum length of stay is typically 90 days. The first 60 days would be paid by Medicare in full except for one copayment of $1, 216 at the beginning of the 60 days. Days 61-90 require a copayment of $304 per day.

Part B penalises hospitals for re-admission. Medicare will take back from the hospital these payments. Furthermore, there is a penalty of 4 to 18 times the initial payment. The highest penalties are charged after knee or hip replacements. For example, $265, 000 per excess readmission. The goal is to encourage better post-hospital care.
The beneficiary is also allocated “lifetime reserve days” that can be used after 90 days. Furthermore, these lifetime reserve days require a copayment of $592 per day

Part C covers a Medicare Advantage Plan and is a type of Medicare health plan offered by a private company that contracts with Medicare to provide you with all your Part A and Part B benefits. Medicare Advantage Plans include Health Maintenance Organisations, Preferred Provider Organisations, Private Fee-for-Service Plans, Special Needs Plans and Medicare Medical Savings Accounts Plans.