All posts by Alex Moses

California Wildfires

Wildfires in California’s wine country started on 8th October 2017. At least eight of the state’s counties experienced the worst wildfires in California’s history.

Forty-three lives were lost.  This included that of a firefighter. This death toll is the largest loss of life from a single wildfire in California.

The Department of Insurance has stated that losses are expected to be more than $3.3 billion. Also, 14700 residences were destroyed.   Furthermore,  nearly 800 businesses were gutted.  Hundreds upon hundreds of vehicles and small craft were damaged as well.  Fifteen major insurance companies involved have been approached to cover these financial losses.

Insurance companies will not want to insure areas previously considered low-risk for fire damage. Risk models will be updated taking the severity of these latest fires into consideration.

The California Department of Insurance has stated that insurance companies are not allowed by law to increase rates as they wish. Higher rates must be requested from the Department. In order to support such requests, data history over many years has to be presented. Raising rates or cancelling fire policies of citizens who have damaged or destroyed properties is against the law.

According to Nicole Ganley from the Property Casualty Insurers Association, insurance companies plan for wildfires in California. They are financially prepared for such occurrences. An amount of $700 billion is available in case of wildfires as well as the backing of re-insurers.

According to Ms Ganley, even with sufficient history, it would take many years for wildfire insurance increases to trickle down to consumers.

Factors other than history are taken into consideration before insurance hikes are affected. Does the home have a sprinkler system? Has the homeowner cleared vegetation away from the residence?

Insurance firms in California use a system called Fireline from Verisk Analytics to determine the risk to insured properties. The three factors are: –

* Fuel – nearby grass or vegetation that can fuel a wildfire;
* Slope – steeper slopes  that can boost the speed and severity of wildfires;
* Access – are firefighters with their equipment able to reach the property with ease?


Bitcoin is an online payment invented in 2008.  It was released as an open-source software in 2009. The system is peer-to-peer. Users can transact directly without needing an agent.  People find this currency attractive as no bank can control it.

Bitcoin. The ledger uses its own unit of account also called bitcoin. The system works without a central repository or single administrator. This has led the US Treasury to categorise it as a decentralised virtual currency. This is often called the first cryptocurrency.

Bitcoins are created as a reward for payment processing work.  Users offer their computing power to verify and record payments into the public ledger. This activity is called mining. There can only ever be 21 million bitcoins. The smallest denomination is called a Satoshi.  Besides mining,  they can be obtained in exchange for different currencies, products and services.

With an estimated $3.5 billion worth of Bitcoins in circulation 82,000 merchants now accept this currency.  Eight million users have set up wallets.   These are accounts where they store and manage the currency. The number is growing.

Bitcoins are a way of using and moving money without a bank account or credit card. The currency fluctuates in value against other currencies. Recently, a Bitcoin was worth about $1144 in U. S. dollars.

Users can purchase this currency, store them in a virtual wallet linked to their smartphone.  They can then scan their account information at participating establishments to pay for merchandise.

Insurers that consider the possibilities of protecting Bitcoin users have other lingering concerns. For one thing, Bitcoin has some volatility. Therefore you can’t have the same approach to storing it as you would a commodity. Volatility in price is one of the things carriers are concerned about. An upward move in price can be beneficial to an owner. However trying to understand exactly how a Bitcoin is created and what causes its price movements is a very complex problem for insurers.

Bitcoins held by an individual or business are protected. This is in much the same way a safe deposit box at a bank secures valuable. Once stored in a virtual wallet, the currency can only be moved or accessed through the use of two “keys” – or codes. One held by the Bitcoin owner and the other held publicly. A person could lose the thumb drive that has the private key on it, then they are no longer able to unlock the Bitcoin wallet.

Investment in Bitcoins has been relatively robust. The growth in investment so far in the short life of the currency has been stronger than the growth of internet-related investments during a similar period in its startup.

Venture capital companies have invested more than $670 million worth of Bitcoins into security-related enterprises. Insurers have viewed Bitcoin use as a cyber security risk. There is a distinction between insuring Bitcoin value and covering the management of a Bitcoin company. The price of the currency cannot be insured but the company could be covered like any other Directors and Officers insurance.

Bitcoin theft insurance is available, however it is pricey and there are only a few policies . However over time more people will get involved.   Thus there will be more consistency in the security of the underwriting.

An interesting aspect of Bitcoin is the anonymity of users.  While every Bitcoin transaction is digitally recorded, parties to the transactions are identified only by account numbers, not names. The anonymity seems to be part of Bitcoin appeal for many users.

Any transaction that is done via email leaves an electronic “track” that can be followed back to the user, so the anonymity is hardly complete.

The vast majority of people in the world do not have bank accounts or credit cards, but many of them do have smart phones.

Bitcoins could become a simple and reliable currency for millions of people. Bitcoin is the cutting edge of where monetary systems may be going, although this would not happen overnight.

If Bitcoin is going to survive as a digital currency, it is going to have to convince investors that their holdings are safe. There has been a huge problem lately as two exchanges recently shut down due to hacker attacks.  This attracted unwanted headlines and added fuel to detractors who believe crypto currencies are untrustworthy stores of wealth.

Falcon Global Capital, a San Diego firm launched a fund this month that will offer investors access to insurance should their bitcoins suddenly disappear, as they have for other unfortunate believers operating in the MX GOX or Flexcoin exchanges.

Insurance Irma

Residents themselves will pay a large proportion of the catastrophe caused by Hurricane Irma. This was stated by Robert Hunter of the Consumer Federation of America.

Insurers have been developing higher wind coverage deductibles. Disclosures of new limits on payouts are often obscured in paperwork.  However, many consumers do not read or perhaps do not understand the documentation.

It is predicted that there will be about 300,000 claims for wind damage and 150,000 flood damage claims. Furthermore, the monetary value of these claims for Irma could reach more than $40 billion or more.

Unfortunately for the insured, there are “anti-concurrent causation” clauses in policies. This means thus that cover for wind damage is excluded if an “uninsured flood” occurs simultaneously. Many policyholders are stunned when they realise that wind coverage could literally disappear through a hidden backdoor in a policy.

The National Flood Insurance Program has $1.5 billion to assist in paying claims, as well as $5.8 billion in borrowing authority. $250,000 is offered for structural damage and $100,000 for damaged or lost contents. The residents need to survey damages as soon as possible. The policy of the NFIP is first to come, first served.

Insurance companies will be using drones to assess damage as the use of insurance adjusters is very costly. Furthermore, this will speed up the payment to the Irma hurricane victims.

Tips for making claims include:

1. Have pictures and videos of losses.
2. Record expenditures of meals and hotel accommodation whilst away from home.
3. Having photos of damaged items could be very useful for insurance companies.

Two percent is the usual deductible of the insured value of a residence. Therefore on a $300,000 home, the deductible would be $6,000.  Most noteworthy is that this amount needs to be paid before an insurance company will pay out any amount to the insured.

Victims of Irma needs to know that the comprehensive section of their auto insurance also covers flooding.

President Trump in his disaster declaration issued for Florida issued the following:

1. Temporary housing rentals to be provided to owners of homes which are currently uninhabitable.
2. Financial assistance for home repairs in order to make houses safe and sanitary.
3. Grants made available to help with medical, dental and funeral transportation.
4. Relief regarding unemployment for up to 26 weeks for those persons who have lost jobs and who do not qualify
for state benefits.
5. Loans at low-interest rates to cover losses not covered by insurance.
6. Crisis counselling will be made available for victims of Irma.

Rideshare drivers have insurance options


Rideshare drivers have insurance options.

When you are driving for Uber, you are covered by their insurance. While the app is turned off, you are covered by your personal insurance. However, while the app is on and you are waiting for a client, you are covered by neither.

In some cases, personal auto insurance policies are being cancelled. This happens when the insurance companies become aware that the driver works for Uber or Lyft. Therefore they are left with no personal auto coverage.

Consider this:

A person pulls up an app on their phone, types in the position where they are and need to be taken and orders your car. You drive to fetch them.

While you are driving you glance at your phone to ensure that you are driving in the right direction. You hit a car whilst your attention is on your phone. It is not a big accident however bad enough that the other driver calls the police. You have to cancel your pick-up.

The police arrive. Your info is recorded plus the fact that you were driving for a company called Uber. You submit your claim.

your insurance company calls you. Your claim has been repudiated because you were engaged in “rideshare” a business activity. You are now responsible for your own car repairs plus the damage caused to the other driver’s car. Fortunately nobody was injured.

To add insult to ‘injury’, your car insurance policy has been cancelled.

You contact Uber to find out if their insurance policy is going to cover the damage. Unfortunately not says the receiver of your call. They state that as you did not have a passenger in the car, they are not liable for damages.

Uber, Lyft and Sidecar would prefer that you think of them as technology companies. Uber wrote in a legal finding with the CPUC (California Public Utilities Commission):-

Uber operates no vehicles and does not hold itself out or advertise itself as a transportation service provider. In fact and law, Uber does not provide transportation services of any kind and does not own, lease or charter any vehicles for the transportation of passengers. On the contrary, Uber is a technology company that licenses the Uber App to transportation service providers. The transportation service providers pay a fee to Uber to use its software technology; the passenger of the transportation service provider pays the transportation service provider for transportation received.”

Insurance Riders

Insurance Riders

You’ve worked out how much life insurance you need.   A collection of life insurance policy add-ons, called Insurance riders, must be considered. Insurance Riders can give policyholders additional benefits.

They increase peace of mind, that if something goes wrong, there is a Plan B.  When you buy life insurance, available Insurance riders vary by insurance company.   Costs also vary and depend on many factors, including your age, health and type of policy.

1.  Waiver of Premium Insurance Rider:

A waiver of premium rider usually associated with life assurance may be inserted into a policy at an extra cost.  The policyholder must have been disabled for a specific period, for example, six months.  Other requirements may be necessary such as the state of health of the policyholder and must be below a certain age.

2.  Disability Income Insurance Rider:

This is one of the most common riders and one that may be particularly important to younger policyholders (typically, those under 40).

This rider generally cannot be added after you reach age 45, although some insurers make it available through age 50. ( You collect a regular income from the insurance company if you become totally disabled and can’t work.  The policy specifies the amount of the income and whether it’s paid for a certain amount of time or for the length of the disability.  Some disability income riders pay out only if you become disabled from an accident while others pay on accident and sickness.

3.  Guaranteed Insurability Insurance Rider:

This rider provides specific dates on which additional life insurance policies can be bought.  Usually, the older the insured gets, the fewer dates the policy owner has to purchase more life insurance. ( This rider lets you purchase additional life insurance at a later date without undergoing a medical exam or providing any evidence

This rider lets you purchase additional life insurance at a later date without undergoing a medical exam or providing any evidence of your insurability.  Because you never know how your health could change, it makes sense to consider this rider.

4.  Term Conversion Insurance Rider:

Provides coverage for a certain period of time, such as 10, 15 or 20 years.  Permanent life insurance, such as whole life or universal life, provides coverage for your entire life, so your beneficiary receives a benefit no matter when you die.

This insurance rider lets you convert term life insurance into permanent life insurance without undergoing a medical exam.  It is especially attractive to young people starting careers and families who need life insurance but don’t have enough money yet to secure all the coverage with permanent life insurance, which has higher premiums than term life. There will be a deadline for when you must

There will be a deadline for when you must convert if you want to change the term policy to permanent life insurance without providing health information.  Understand the convertibility features before you buy.

5.  Accelerated Death Benefit Insurance Rider:

Accelerated Death Benefit Rider has become standard in the insurance industry and is usually included automatically for free or offered at nominal cost.  The rider lets you collect a portion of the policy’s death benefit if you become terminally ill with a short life expectancy, such as one year.  The policy spells out how much of the death benefit is available before death.  Usually its capped at $250 000 to $500 000.  You can use the proceeds for anything, such as paying medical bills or living expenses.  Even though the insurer offers the rider free, the company may charge a fee if it is exercised.

6.  Critical Illness Insurance Rider:

A rider added to a life insurance policy to protect the insured against financial loss in the event of a terminal illness.

The insurer pays a lump sum if you’re diagnosed with any of the critical illnesses specified in the insurance policy, such as cancer, heart attack, coronary artery bypass, major organ transplant, stroke, kidney failure. (   Instead of reimbursing you for medical expenses, the way health insurance does, the rider provides money to use for any purpose during the course of the treatment.

Instead of reimbursing you for medical expenses, the way health insurance does, the rider provides money to use for any purpose during the course of the treatment.

7.  Child Protection Insurance Rider:

No one wants to consider the possibility of losing a child, so all emotion must be set aside when considering a child protection rider.  Although the death of a child typically would not result in income loss, as would the death of a spouse, the tragedy still would have financial consequences which could be an additional hardship for a bereaved family.  This term life insurance rider provides coverage for final expenses in case the unthinkable happens.  The coverage generally can be purchased in units –  for example $1000.  Basic information about the child’s health is required for underwriting.

 This term life insurance rider provides coverage for final expenses in case the unthinkable happens.  The coverage generally can be purchased in units –  for example $1000.  Basic information about the child’s health is required for underwriting.

8.  Accidental Death Benefit Insurance Rider:

If you die from an accident, this rider provides an additional benefit on top of the policy’s regular death benefit. The option is often referred to as double indemnity when the additional payout equals the original death benefit.  Sometimes the rider also includes additional payment for dismemberment.  You would collect money if you lost a limb or your sight.  Life insurers will consider your occupation and hobbies when determining premiums.

9.  Return of Premium Insurance Rider:

If you live to the end of the term, in exchange for paying the premium, in most circumstances you get all your money back. Some companies use a separate rider where others, like ING, write the return of premiums benefit into a basic policy.  You pay a higher premium for the opportunity to get your money back.  The big question to consider.  How does paying the extra cost for the return of premium rider compare to investing that money and buying a basic term policy instead? To find the answer, subtract the annual premium for a basic term policy from the annual cost of a return of premium policy.  The difference is how much you would have to invest each year during the insurance term.  Then calculate what annual rate of return you’d need on that money to beat the amount you’d get back from a return-of-premium policy.


There is no one-size- fits- all answer to whether any of these Insurance riders are right for you.  You’ll need to weigh policy options to find the best package for your needs. (

Remember – money from the return of premiums is tax-free, but your own investment returns are taxed.  In some cases (depending on age, sex, tax bracket and other factors), you’d need to get more than a 7% rate of return on your investment to beat the return of premium policy

Kidnap and Ransom Insurance

Kidnap and Ransom Insurance

Kidnap and Ransom insurance is meant to guard people as well as companies operating in high-risk areas around the world.  Locations most often named in 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 and scores of insurance companies sell kidnap and ransom insurance policies to reimburse those entities for ransom payments.  An entire criminal industry surrounds the extortion of multinational corporations through kidnap for ransom – a criminal industry that insurance companies are financing by paying ransoms to hostage takers in direct opposition to US government policy.

Seventy one percent of the kidnapping victims were male.  Sixy nine percent of the victims were considered middle class.  These victims were shop owners, students and mid-level professionals.  Security intelligence and other research into the kidnap-for-ransom industry in Mexico have found that organised crime groups are now targeting these middle- class workers in an attempt to expand the number of potential targets.  The kidnappers charge a lower ransom demand, usually around $7, 669 (100, 000 Mexican Pesos), but are able to target a greater number of people.

Between 2007 and 2012 Senior military officers with the Eritrea’s military kidnapped and held for ransom about 30, 000 children between the ages of 16 and 17.  All students in Eritrea are required to 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, and 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 may be written to cover high profile families, non-governmental organisations and multinational organisations.  Some policies include kidnap prevention training.

Underwriting Considerations:

The major factors insurance underwriters weigh when considering a kidnap and ransom policy include the country of residence of the insured, the type of industry of the insured, revenue of the insured, and 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, as 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”, due to their geographical proximity and the fact that drugs are trafficked directly into these states.

Reports in 2012 highlighted the latest area to be exploited by cartels to facilitate their operations along the borders:  the fracking boom in Texas. 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.



Corporate Average Fuel Economy

The National Highway Traffic Safety Administration (NHTSA) is part of the Department of Transportation. One of its main functions is to administer CAFE.

Administering Corporate Average Fuel Economy (CAFE).

The Corporate Average Fuel Economy (CAFE) are regulations in the U. S. first enacted by the U. S. Congress in 1975 in the wake of the Arab Oil Embargo and were intended to improve the average fuel economy of cars and light trucks sold in the United States. Historically, it is the sales-weighted harmonic mean fuel economy, expressed in miles per U. S. gallon (mpg) of a manufacturer’s fleet of current model year passenger cars or light trucks with a gross vehicle weight rating (GVWR) of 8, 500 pounds (3, 856 kg) or less, manufactured for sale in the United States. If the average fuel economy of a manufacturer’s annual fleet of vehicle production falls below the deferred standard, the manufacturer must pay a penalty, currently $5.50 per 0.1 mpg under the standard, multiplied by the manufacturer’s total production for the U. S. domestic market. In addition, a Gas Guzzler Tax is levied on individual passenger car models (but not trucks, vans, minivans, or SUVs) that get less than 22.5 miles per U. S. gallon.

Historically, it is the sales-weighted harmonic mean fuel economy, expressed in miles per U. S. gallon (mpg) of a manufacturer’s fleet of current model year passenger cars or light trucks with a gross vehicle weight rating (GVWR) of 8, 500 pounds (3, 856 kg) or less, manufactured for sale in the United States. If the average fuel economy of a manufacturer’s annual fleet of vehicle production falls below the deferred standard, the manufacturer must pay a penalty, currently $5.50 per 0.1 mpg under the standard, multiplied by the manufacturer’s total production for the U. S. domestic market. In addition, a Gas Guzzler Tax is levied on individual passenger car models (but not trucks, vans, minivans, or SUVs) that get less than 22.5 miles per U. S. gallon.

Started in 2011 the CAFE Standards are newly expressed as mathematical functions depending on vehicle “footprint”, a measure of vehicle size determined by multiplying the vehicle’s wheelbase by its average width. A complicated 2011 mathematical formula was replaced in 2012 with a simpler inverse-linear formula with cut off values.

CAFE footprint requirements are set up such that a vehicle with a larger footprint has a lower fuel economy requirement than a vehicle with a smaller footprint. CAFE has separate standards for “passenger cars” and “light trucks” despite the majority of “light trucks actually being used as passenger cars. The market share of “light trucks” grew steadily from 9.7% in 1979 to 47% in 2001 and remained in 50% numbers up to 2011. More recently, coverage of medium duty trucks has been added to the CAFE regulations from 2012 and now in 2014, heavy duty commercial trucks have also been added.

President Barack Obama announced plans for a national fuel-economy and greenhouse-gas standard that would significantly increase mileage requirements for cars and trucks by 2016. Obama called it “an historic agreement to help America break its dependence on oil, reduce harmful pollution and begin the transition to a clean energy economy”.

The new requirements mark the first time there has been a nationwide standard for emissions of greenhouse gases. They require an average mileage standard of 39 miles per gallon for cars and 30 mpg for trucks by 2016. This is a jump from the current average for all vehicles of 25 miles per gallon.
Furthermore, Obama said “In the past an agreement such as this would have been considered impossible. It is no secret these are folks who have been at odds, even decades. The status quo is no longer acceptable.”

The new standards cover the model years 2012 to 2016 and are expected to add about $600 to the cost of a new car, the White House said. Administration officials hope the added costs will be recouped by savings in gasoline costs from the higher mileage requirements.

Auto manufacturers have fought past attempts to raise mileage standards but came to the table this time out of fears of patchwork of national standards, particularly because California has been trying to create a more aggressive benchmark for decreasing greenhouse gases. Obama’s moves give the companies certainty in what they must achieve for all models nationwide.
The policy for autos will link together the corporate average fuel economy, or CAFE, standard and the Environmental Protection Agency’s greenhouse-gas standard. That way industry will not have to worry that the administration will regulate those on separate tracks. The standards will be gradually increased each year until they hit Obama’s target in 2016.

The White House predicted significant environmental benefits from the program, with a projected savings over the life of the program of 1.8 billion barrels of oil, and reductions of 900 million metric tons of greenhouse-gas emissions. White House officials called it the equivalent to taking 177 million cars off the road or shutting down 194 coal plants. Obama called the tailpipe emission announcement historic because it avoids a patchwork of standards and has won agreement from so many stakeholders, including automakers, state governments, the Department of Transportation and the EPA.

The U. S. Environmental Protection Agency (EPA) measures vehicle fuel efficiency. Historically, the EPA has encouraged consumers to buy more fuel efficient vehicles, while NHTSA expressed concerns that smaller, more fuel efficient vehicles may lead to increased traffic fatalities. Thus higher fuel efficiency was associated with lower traffic safety, intertwining the issues of fuel economy, road traffic safety, air pollution and climate change. The EPA says fuel economy last year (2013) rose one-half-mile per gallon over the 2012 model year,use automakers have improved gas engines and transmissions and added turbochargers to give smaller motor more power. Although last year’s gain fell short of the 1.2 mpg improvement from 2011 to 2012, fuel economy is up almost 5 mpg since 2004. The EPA is predicting slower growth for this year, but officials still expect the industry to meet government standards that require the fleet to average 54.5 mpg by 2025.

Chris Grundler, head of EPA’s office of transportation and air quality, said the auto industry is ahead of what the EPA expected at this point and he expects improvements to vary from year to year depending on the new models that are introduced.

For example. the aluminium Ford F-150 pickup could raise the average mileage by itself because the F-150 is the top-selling vehicle in the nation. The truck’s reduction in mass is likely to yield significantly better mileage and reduced emissions over the current trucks.

Mazda led all automakers with an average 28.1 mpg. Honda was second at 27.4 mpg, Chrysler, General Motors and Ford were at the bottom of the rankings, because they sell more pickups and SUVs. The midsize Mazda 6 already meets its fuel economy targets for 2019 mainly by reducing wind drag and using lighter weight materials and a turbocharged engine.


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 company’s internal and external environmental analysis and the goals of the company have to be clear and 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 and the bank automatically passes ‘warm leads’ from its client base to a competent, friendly insurance company, a very profitable relationship can result from such an agreement.

BIM (Bank insurance model) is a relationship between a bank and an insurance company. Using the banks sales channel, the insurance company uses the bank’s sales channel to sell insurance products to on-sell its particular policies to the bank’s client base. 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 between the bank and the insurance companies is automated and the bank received 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 gets exposure to the other’s distinctive management style and thus the great opportunity to learn and make improvements in their own operations.

Government Health Program

The Federal Employees Health Benefits (FEHB) forms part of the Government Health Program. It is a system of managed competition through which employees health benefits are provided to :

Civilian Government employees
Annuitants of the United States Government.
The Government contributes 72% of the weighted average premium of all plans. The FEHB program which forms part of the Government Health Program allows some insurance companies, employee associations and labor unions to market health insurance plans to governmental employees.

“Open Enrollment” period:

In the Government Health Program, the employee will be fully covered in any plan he or she chooses without limitations regarding pre-existing conditions. Upon a life-qualifying event such as marriage, divorce, adoption or the birth of a child, changes may be made, even though open enrollment is closed. Part of the premium is paid for by the U. S. Government Agency the employee works for, but does not exceed 72%.

In 2010 about 250 plans participated in the Government Health Program. Employee unions that offer plans are:
National Association of Letter Carriers.
National Insurance Companies, such as:

Blue Cross and Blue Shield Associations.

Indian Health Services (IHS)

Part of the Government Health Program is the IHS which is responsible for providing medical and public health services to members of federally recognized Tribes and Alaskan Natives. IHS provides healthcare at 33 hospitals, 59 Health Centers and 50 Health Stations. 34 urban Indian health projects supplement these facilities with a variety of health referral services.

The IHS which forms part of the Government Health Program employs approximately 2, 700 nurse, 900 physicians, 400 engineers, 500 pharmacists and 300 dentists as well as other health professionals totalling more than 15, 000 in all. The IHS is one of two federal agencies mandated to use Indian preference in hiring.

Veterans Health Administration (VHA)

Forming part of the Government Health Program, is Veterans Health Administration. To be eligible for VA care benefit programs you must have served in the active military, naval or air service. Veterans who enlisted after September 7 1980 or who entered active duty after October 16 1981, must have served 24 continuous months or the full period for which they were called to active duty.

Preventive Care Services:

The following is offered in VA care :
Counselling on inheritance of genetically determined disease
Nutrition education
Physical examinations
Health Care Assessments
Screening tests
Health Education programs


Ambulatory (outpatient) and hospital (inpatient) diagnostic and treatment services:
Surgical (including plastic/reconstructive surgery)
Mental Health
Substance Abuse treatment
Prescription drugs (when prescribed by a VA physician)

The Military Health System

Part of the Government Health Program is the Military Health System that provides healthcare to active duty and retired U. S. Military Personnel and their dependents. Its primary mission is to maintain the health of military personnel so as to enable them to carry out their military missions, and to deliver health care during wartime.

The Military Health System has a $50 billion budget and serves about 9.6 million beneficiaries, including active duty personnel and their families and retirees and their families. MHS employs more than 137, 000 in 65 hospitals, 412 clinics and 414 dental clinics.

The U. S. Patient Protection and Affordable Act, enacted in 2010, has provisions intended to make it easier for uninsured veterans to obtain coverage. Under the Act, veterans with incomes at or below 138% of the Federal Poverty Line ($30, 429 for a family of four in 2010) would qualify for coverage as of January 2014. This group constitutes nearly 50% of veterans who are currently uninsured.


Part of the Government Health Program is Medicare, a national social insurance program administered by the U. S. federal government since 1966. It currently uses 30 private insurance companies across the United States and guarantees health insurance for America’s aged 65 and older who have worked and paid into the system, younger people with disabilities and people with end stage renal disease.

Part A: Hospital Insurance
Part B: Medical Insurance
Part C: is a public supplement option
Part D: covers many prescription drugs

Part A:

This covers in-patient 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.

Medicare penalises hospitals for re-admission. Medicare will take back from the hospital these payments, plus a penalty of 4 to 18 times the initial payment. The highest penalties on hospitals are charged after knee or hip replacements, $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. These lifetime reserve days require a copayment of $592 per day and the beneficiary can only use a total of 60 of these days throughout their lifetime.

Part B

Part B helps pay for some services and products not covered by Part A, generally on an outpatient basis.
This coverage begins once a patient meets his or her deductible of $147 (2013), then typically Medicare covers 80% of approved services, while the remaining 20% is paid by the patient. This section covers:

physician and nursing services
laboratory and diagnostic tests
influenza and pneumonia vaccinations
blood transfusions
renal dialysis
outpatient hospital procedures
limited ambulance transportation
immunosuppressive drugs
hormonal treatments
durable medical equipment
prosthetic devices
cataract surgery and spectacles
oxygen for home use

Part C

A Medicare Advantage Plan 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.

Part D

Part D adds prescription drug coverage to Original Medicare, some Medicare Cost Plans, some Medicare Private-Fee-For-Service Plans and Medicare Medical Savings Accounts Plans. These plans are offered by insurance companies and other private companies approved by Medicare. Medicare Advantage Plans may also offer prescription drug coverage that follows the same rules as Medicare Prescription Drug Plans.

Homeowner’s Insurance

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, which can include losses occurring to one’s home, its contents, loss of use (additional living expenses) or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.

Homeowner’s Insurance is a multiple-line insurance policy, meaning that it includes both property insurance and liability coverage with a single premium.  The cost of Homeowner’s Insurance often depends on what it would cost to replace the house and which additional endorsements or riders are attached to the policy.  Typically, claims due to floods or war (whose definition typically includes a nuclear explosion from any source) are excluded from coverage, amongst other standard exclusions (like termites).  Special insurance can be purchased for these possibilities, including flood insurance.

People usually shop around when buying a car or an appliance but neglect to do comparisons when taking out Homeowner’s Insurance.  Homeowners should do annual comparisons on Homeowner’s Insurance policies.  Upgrades to your home such as gourmet kitchens or glamour baths improve the aesthetics of your residence but also increase its value.  Whenever an upgrade is done, contact should be made with 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 and 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 are able to 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 amount 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, according to a consumer survey.  More than two in five Americans (41 percent) believe that a standard homeowner’s insurance policy protects against mould damage, according to a survey.  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

A basic policy form that provides coverage on a home against 11 listed perils:  contents are generally excluded in this type of coverage, but must be explicitly enumerated.  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).  The coverage is usually a “named perils” policy, which lists the events that would be covered.

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.  Contents are covered on a named peril basis.

HO4 – Contents Broad Form
The contents Broad, in 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.  On this policy the contents are covered on an open peril basis, therefore 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 and 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).  Typically, a coinsurance clause states that as long as the dwelling is insured to 80% of actual value, losses will be adjusted at replacement cost, up to the policy limits.  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

Covers other structures around the property that are not used for business, except as a private garage.  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.).  Typically 50-70% of Coverage A is required for contents, which means that consumers may pay for much more insurance than necessary.  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, 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.


In an open perils policy, specific exclusions will be stated in this section.  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).  The concurrent causation exclusion excludes losses where both are covered and an excluded loss occurs.  In addition, the exclusion for building ordinance can mean that increased expenses due to local ordinances may not be covered.


Flood damage is typically excluded under standard homeowners’ and renters’ insurance policies.  Flood coverage, however, 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 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

After a loss, the insured is expected to take steps to mitigate the loss.  Insurance policies typically require that the insurer be notified within a reasonable time period.  After that, a claims adjuster will investigate the claim and the insured may be required to provide various information.

Filing a claim may 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.














Green building

By means of green building, consumers can benefit financially as insurers offer discounts on insurance coverage for green building.  The process of building this way is environmentally responsible.   Eco-friendly construction is putting up structures that are beneficial  for the environment. They are resource-efficient.  Local and renewable materials are used.   The construction thereof is energy-efficient.

Buildings often have a negative impact on our environment and our natural resources.  Responsible insurance carriers are happy to reward clients with discounted insurance coverage.  Negative aspects of energy waste include transporting materials hundreds or thousands of miles to building sites. Poorly designed buildings emit hazardous chemicals.  These chemicals are trapped inside the buildings affecting the health of the occupants.

Good building practice includes rammed earth construction.  This involves clay-based materials mixed with water.  This is rammed into a solid wall form.  Straw is a great insulator and bales of straw are used as the central structure of the house.  When compressed, straw is fire-resistant.

Other positive features are:

The use of solar panels for water heating; the collection of rainwater for garden use and the re-use of grey water; low energy light bulbs; cellulose insulation; lead-free paint; locally grown and harvested timber from sustainably managed forests.

Green building projects are increasing in popularity.   Between 2008 and 2010, green building projects increased by 50%.  They are projected to top $135 billion by 2015.  Owners of green buildings see higher property values.   Little changes are insulating water pipes. Bigger changes are installing solar panels and alternative water systems.

The return on investing in green building techniques now goes beyond good feelings and lower utility bills.  Green buildings may have more upfront costs than conventional but also have a lower overall risk.   Eco-friendly construction reduces risk and energy efficiency raises a building’s economic value.  Instead of costing building owners more to insure new and complicated green additions, insurance rates actually decrease for green buildings and improvements.  Green buildings are safer and more resilient than conventional buildings, resulting in lower overall risk to insure.

Instead of costing building owners more to insure new and complicated green additions, insurance rates actually decrease for green buildings and improvements.  Discounts on green insurance products are justified by safety data linking reduced emissions with accident and damage mitigating behaviour.  Green buildings are safer and more resilient than conventional buildings, resulting in lower overall risk to insure.

There are generally two types of insurance offered for green building.  The first, offered to conventional building owners, is a green-rebuild policy.  A 2-3% increase in premium (covering higher up-front costs of green materials) guarantees that, in case of a loss, a conventional building will be rebuilt to green standards.  Another policy type, offered to owners of already-green buildings, insures existing green modifications against loss.

After years of inertia, the $16 trillion industry has begun to address climate change with mandatory risk disclosures and more products to help businesses and individuals reduce energy use.  In March, insurance regulators adopted mandatory climate-risk disclosure standards for insurance companies with annual premiums of $500 million or more.  These standards require the firms to report to regulators and investors the types of payout risks they may face due to climate change.

Insurance for green building are rapidly gaining traction in the marketplace.  The first commercial green policy was offered by Fireman’s Fund Insurance Co. in 2006.  Now several large companies offer insurance coverage for green building.  By 2009 over 22 companies offered 39 insurance products related to green building.

In the case of a loss, Fireman’s Fund Green Certification covers a rebuild to one level higher than pre-loss certification level and offers broad coverage of alternative green technology including vegetated roofs and underground water recycling systems.

Policyholders with Energy Star buildings are also eligible for a 5% discount.  Fireman’s Fund also covers lost tax incentives and utility discounts and, when losses exceed $10, 000, pays for a commissioning agent to oversee repairs and verify replacements.

Travellers Insurance Company provides an add-on Green Home Upgrade to its current policies and gives a 5% discount for homes already LEED certified.  Small businesses also qualify for additional green enhancements up to 5% of the total los

Although there are benefits to “going green” in the construction, development and operation of buildings, there are also risks unique to green building that will test the boundaries of coverage under typical liability insurance policies.

In light of the relatively new nature of green construction, below are some of the issues one could expect will have to be litigated.  Part of the appeal of green building is its self-sustaining nature, and there are few better examples of those types of measures than vegetative roofing and alternative power and water systems.




Other driver

You may be driving below the speed limit and obeying the traffic signals. Another driver ploughs into your car. In each instance, it does not necessarily mean that the other driver’s insurance company should pay your medical and car repair bills.

The small details of the accident matter. Rules vary from one state to another.   There must be proof of negligence for the other driver to be liable.

Attorney Benjamin Zimmerman, a partner with Sugarman & Sugarman, a firm of attorneys in Boston, claims that if negligence cannot be proved, then you cannot win the case and if you cannot win the case, insurance companies know that and therefore will not pay.

An important aspect to a successful claim is to prove the other driver is at fault as quickly and as thoroughly.

In states with no-fault auto insurance systems, your own insurance generally pays for your medical bills. This is regardless of who was at fault.

In some states, such as New Jersey it is illegal to operate a motor vehicle that does not have liability insurance coverage. In some jurisdictions. liability coverage is available either as a combined single limit policy, or as a split limit policy. Virginia does not require that the other driver carry car insurance.

There are instances when the other driver’s insurance company may refuse to pay out, even if you think it should pay out.

A sudden incapacitating medical event is a defense and is more common than people might think. The other driver may have a heart attack or stroke. If he did not have enough warning of this, the person may not be liable if he loses control of the vehicle. On the other hand, if this person was aware of his medical condition, he should not have been driving a car is is therefore liable.

Another example is that of a pregnant woman who hit a car. The attorney representing his client managed to establish that the pregnant woman had enough time to pull to the side of the road safely. This could have happened  before she was feeling flushed and fainted. Her insurance company then had to pay his client’s claim.

A collision from a fire truck racing to an emergency: The standard for proving that an emergency vehicle driver was liable is much higher than the standard for other drivers. Local and state jurisdictions have varying rules and timelines for filing claims against them.

Many lawyers do not want to take on these types of cases as there is a tremendous amount of red tape involved.  Most emergency vehicles enjoy immunity from liability for negligence.

If  the other driver hits you because of an accident with a hit and run driver, depending on the state, you may be able to claim under your own uninsured motorist coverage. Should you be hit by the other driver who fails to stop, this is regarded as a criminal offense in all states in the USA. The police are supposed to provide immediate assistance.

In most instances, a vehicle insurance policy covers you and other licensed drivers in the household who are listed on the policy and any person that you give occasional permission to drive the vehicle.

However, when a thief takes a car, there is no permission or consent. Therefore, the car owner’s insurance will not pay. If the thief was caught and he had a policy, his insurer would also not pay because insurance does not apply to criminal acts. You could sue the thief, but the chances of recovering any money damages are minimal. In some states, the car owner may be found partially liable if he did something negligent, which led to the theft, for example, he left the keys in the car whilst the engine was on.

There are instances when an accident occurs which is nobody’s fault. A deer may jump out in front of a vehicle causing it to hit someone else. A driver could be partially liable if he was exceeding the speed limit.

Certain states have comparative negligence laws when liability is calculated on a percentage basis. One party may be 30 per cent liable and the other party 70 per cent liable.

Comparative negligence laws dictate how the responsibility for an accident will be shared between the parties directly involved in an accident, where bodily injury or property damage was suffered.

The insurance company will make the injured party an offer based on what it believes to be the amount of negligence of its insured. The insurance company may interview the involved parties, including witnesses, and may also review the accident report in order to determine the amount of the offer.

An insurance company may believe that its insured was not more than 50% or more at fault.  They may not offer to pay any damages for the loss. The other driver may negotiate with the insurance company until a settlement is reached or until the two parties reach an impasse.

If a settlement cannot be reached, the courts make the final determination of comparative negligence.

Business Owner’s Policy

Business Owner’s Policy

A Business Owner’s Policy (BOP) is a special type of commercial insurance. It is designed for small and medium-sized businesses.  It combines general liability insurance and property insurance into a single policy.  A Business Owner’s policy typically offers a reduced premium, often making it a more cost-effective option than separately purchased policies. Specific coverage included in a business owner’s policy varies among insurance providers.   Most policies require that businesses meet eligibility criteria to qualify.

Just as you would protect your home and its contents, you should also cover your business assets against a loss.  Ensure that the coverage is adequate.  The most common is to insure for replacement value.  That way, if you do suffer a loss, you will not be out of pocket to get back to business as soon as possible.  You will have to adjust your coverage periodically as you acquire or dispose of property.  You should also be careful to update the replacement values as time goes by.

Insurance companies evaluate potential customers by looking at the risks inherent in their businesses.  Fire risk is one of the main factors in determining the cost of property insurance.  Building or leasing a fire-resistant building should reduce premiums significantly.  You should also make it a point to keep your premises neat and tidy.  A location with piles of boxes and debris is a much higher fire risk.

Ways to reduce risks

1.  Check smoke detectors on a semi-annual basis and maintain written records.

2.  Maintain all fire safety equipment.

3.  Maintain emergency lighting and illuminated exit signs in proper working order.

4.  Develop a daily inspection routine of the premises, taking immediate steps to correct any hazards.

5.  Avoid overloading electrical outlets.

6.  If you live in a flood-prone zone area, determine whether your property is above or below the flood-stage water level.

7.  Know the history of flooding in your region, the warning signs of flooding, and the items you need to be prepared.

8.  Keep disaster supplies on hand.

Standard Coverage

A typical business owner’s policy includes property and liability insurance.  The property insurance portion of a Business Owner’s policy is available most often as named-peril coverage. This provides compensation only for damage caused by events specifically listed in the policy (typically fire, explosion, wind damage, vandalism, smoke damage etc)

Some BOPs offer open-peril or “all-risk” coverage;  this option is available from the “special” BOP form rather than the “standard”.

Types of property covered by a Business Owner’s policy usually include:

Buildings:  Owned or rented business premises, additions and additions in progress, outside fixtures.

Personal business property:  Any items owned by the business or business owner or owned by a third party but kept temporarily in the care, custody or control of the business or business owner.  To be covered by a Business Owner’s policy, business property must be stored or kept in specified proximity of business premises (e. g. within 100 feet of the premises).

In addition, many business owner’s policies include business interruption insurance as part of their property coverage.  Business interruption insurance provides up to 12 month’s income for covered businesses when they are forced to shut down operations because of a covered property event.

The liability portion of a business owner’s policy offers coverage for third parties who suffer bodily injury, property damages, advertising injury or personal injury on a covered business premises or caused by the business’s owner or employees.  This coverage typically takes the form of compensation for legal fees related to third-party lawsuits over such incidents (including lawyer’s fees, settlements and court costs).  In addition, BOP liability coverage may include compensation for medical expenses that result from an injury to a third party on a covered business’s premises for up to one year after the incident occurs.  In addition to standard coverages, most insurance providers offer optional additions or endorsements on business owner’s policies that business owners can use to tailor a policy to their specific needs.

Exclusions and Optional Coverages

Business owner’s policies do not include the following types of insurance:

Liquor Liability insurance for businesses that sell or manufacture alcohol

Professional liability insurance

Worker’s Compensation

Health Insurance

Disability Insurance

Auto Insurance

Often commercial fleet insurance is not covered in a Business Owners Policy, and needs a separate policy.  Another exclusion often seen in a business owners’s policy is equipment breakdown or mechanical equipment breakdown insurance, which also may be known as boiler and machinery insurance.  This type of coverage will cover repair or replacement of equipment and some revenue loss in the event of a loss as it impacts your business and its day to day operations.  Furthermore, take a look at debris removal.  You may have flood insurance, but not debris removal, or only a small coverage limit.  Imagine the cost of removing a total loss before having to rebuild.

Many insurance companies offer businesses the option to customise a BOP based on specific coverage needs.  Optional property endorsements that can be added to a BOP include coverage for certain crimes, spoilage of merchandise, computer equipment, mechanical breakdown, forgery and fidelity bond, but the coverage limits for these inclusions are typically low.


Business owner’s policies are not available to every business.  Eligibility requirements vary among insurance providers, but typically include limitations to:

Class of business (eligible classes include small restaurants, retail stores, apartments, office-or service based businesses, wholesale distributors and contractors).

Location of the majority of business operations (most BOPs require businesses to complete primarily on-premise business).

Size (area) of a business’s primary location.

Revenue :  Less than $5 million sales per annum.

Employees:  Less than 100 employees in the business.





Hypothetical hacking of a cloud service provider, as well as cyber attacks on computer operating systems worldwide, could result in losses of $120 billion. This is a report by Lloyds of London in conjunction with Cyence, a risk modelling company. Cyence has raised $40 million to help insurers understand the impact of cyber risk.

Insurers are struggling to obtain accurate estimates, however, the problem is that they lack historical data. Many companies have yet to purchase cyber policies. By October 2016 only 29 percent of U. S. businesses had done so.

Cyence allows the insurance industry to figure out the impact of cyber risk in terms of dollars and likely incidents. The available platform combines risk modelling, cyber risks and big data. It assists the insurance industry in devising transformational insurance products. Cyber risk accountability and hazards are basic in comparison to other insurance options.

The software community accepts that code is not released without error. It is estimated that for every 1000 lines of code, there will be approximately 15 – 20 bugs. (McConnell 2004). These bugs lead to weaknesses through which malicious actors bypass safeguards or misuse systems.

Code volume and complexity is growing. The original Apollo 11 mission, i. e. the mission that landed people on the moon, consisted of 145,000 lines of code (Johnson 2012). Today’s cars run more than 100 million lines of code.

The ageing of software over time is another problem. Companies run risks by running older operating systems. Not only are they at risk but also companies they deal with outside the network.

The recent “Wannacry” attack showed that the longer software is out in the market, the more vulnerable it becomes. Cyence wants to assist the insurance industry in this regard when the company is promoting cyber risk insurance products.

Netcraft reported that “More than 600,000 web-facing computers which host millions of websites are still running Windows Server 2003, despite it no longer being supported.

Cyence is bringing these facts to the attention of the cyber risk insurance community.



Private Health Insurance

Private Health Insurance may be obtained on a group basis.  A company may choose to cover its employees.  On the other hand private health insurance may be purchased by individuals for their own account. According to the United States Census Bureau, about 60% of Americans are covered through an employer.   Approximately 9% purchase private health insurance directly.


As part of an employee’s benefit package, employers pay for private health insurance on behalf of their employees. Most private health insurance in the United States is therefore employment-based.  Employers in general pay about 85% of the insurance premium for their employees and 75% for their employees’ dependents. The employee pays the remaining part of the private health insurance premium due.

Regarding private health insurance in the United States, the range of products is similar to those provided through employers. However, average out-of-pocket spending is higher in the individual market. Examples are higher deductibles, co payments and other cost-sharing provisions. A major medical health insurance policy is the most commonly purchased form of individual health insurance.  It is primarily a catastrophic plan. However, qualified preventive benefits are still covered at 100% without any waiting period or copayment.

Most consumers in the individual market do not receive any tax benefits. Self-employed individuals receive a tax deduction for their private health insurance for additional tax benefits.

Age and health status affect premiums significantly in states that allow individual medical plan underwriting. The Patient Protection and Affordable Care Act, which came into effect in 2014, prohibits any discrimination against or charging higher rates for individuals based on pre-existing medical conditions.

The Hartford Courant, the largest daily newspaper in the U. S. state of Connecticut, reported in August 2008 that competition was increasing in the individual health insurance market. More insurers were entering the market with an increased variety of products as well as a broader spread of prices.

New Types of Private Health Insurance

High-deductible health plan (HDHP)

These plans primarily provide for catastrophic illness.  They thus have higher deductibles than traditional health plans. Very little coverage is provided for everyday expenses.  Therefore they have potentially high out-of-pocket expenses. Various forms of savings plans are coupled with these plans.

Tax-preferenced health care spending account

In 2003 President George W. Bush signed into law the Medicare Prescription Drug Improvement and Modernisation Act.

This law created:

Health Savings Accounts (HSAs) which are tax-deductible. In order to deposit pre-tax funds in an HSA, a consumer must be enrolled in a high-deductible insurance plan. There are a number of restrictions on benefit design. The minimum deductible is $1200 for individuals and $2400 for families.

Untaxed private bank accounts for medical expenses, which can be established by those who already have private health insurance. Withdrawals from HSAs are only penalised if the money is spent on non-medical items or service. In order to deposit pre-tax funds in an HSA, a consumer must be enrolled in a high-deductible insurance plan.

There are a number of restrictions on benefit design. The minimum deductible is $1200 for individuals and $2400 for families. In order to deposit pre-tax funds in an HSA, a consumer must be enrolled in a high-deductible insurance plan. There are a number of restrictions on benefit design.
To deposit pre-tax funds in an HSA, a consumer must be enrolled in a high-deductible insurance plan. There are a number of restrictions on benefit design.

Limited benefit plan

These plans pay for routine care and especially relevant do not pay for catastrophic care.

Discount Medical Card

This option is becoming more popular. These cards are not insurance plans but provide access to discounts from participating healthcare providers. While some offer a degree of value, there are serious potential drawbacks for the consumer.

Due to the higher prices of and limited access to private health insurance, discount medical cards are growing in popularity. After private health insurance price hikes, some small businesses and individuals drop their private health insurance.  They then obtain discount medical cards.

A person with a pre-existing condition may find the card attractive as the pre-existing condition may make them only eligible for high-priced policies. No medical examinations are required. All people regardless of age or pre-existing condition pay the same cost.

Unfortunately there are consumers who are under the wrong impression.  They believe that the cards are insurance policies. There is no data on how many people have a discount medical card. Promoters of discount cards are generally not regulated or licensed. This results in few standards that apply to sales or sales methods. Marketing materials that are used include scare tactics, misleading information and exaggeration to attract buyers.

Short Term Health Insurance

These plans have a short policy period (typically months) and are intended for people who only need private health insurance for a short time period.  Temporary health plans offer individuals and families an affordable solution.  The application process is quick and easy.   There is peace of mind that comes with knowing you have health insurance should an accident or unexpected illness occur.

This type of coverage helps protect your health and finances when you are in between major medical insurance plans. Because temporary health insurance plans are not intended for the long term, their benefits are less robust than major medical plans. They are not considered qualified plans under Obamacare and, therefore, do not include the essential health benefits. A temporary health insurance plan will not prevent you from owing a tax penalty for going without minimum essential coverage. Additionally, temporary plans may still deny applicants or limit coverage based on pre-existing conditions.

Health Care Sharing

A health care sharing ministry is an organisation that facilitates sharing of healthcare costs between individual members who have common ethical or religious beliefs in the United States. Twenty eight states have laws that recognise health care ministries as distinct from health insurance organisations.  240, 000 Americans participate in health care sharing. Among those 240, 000 participants, more than $180 million are shared per year to pay for one another’s medical bills.

Perpetual Home Insurance

Perpetual Home Insurance is quite a rare option that a homeowner would choose over and above traditional home insurance. This policy is written to have no term, or date, when the policy expires. From the effective start date, the coverage exists for perpetuity.

The insured deposits money, called a deposit premium, with the insurer.  It is many times larger than the cost of a non-refundable annual premium for a traditional home insurance policy. When you no longer need the coverage, the deposit premium is returned to you.

The deposit required for perpetual home insurance is usually 15 – 20 times the annual cost of a traditional insurance. The perpetual home insurance company invests the deposit.  It uses the proceeds of investments (interest and dividends) to cover claims, administrative costs and of course profits. Since the insurance company has your deposit, you lose the ability to invest in alternatives like stocks bonds and savings accounts.

The best reason to choose a perpetual home insurance policy is for the tax benefits.

Payments for traditional home insurance are not deductible. That is to say, if you pay $1000 per year for insurance and you are in a 25% marginal tax bracket, you must earn $1, 333 to pay the insurance plan. (25% of $1, 333 is $333 – the portion that is taken by the government). The non-cash insurance benefit from a perpetual home insurance company is, however, not taxed as income to the recipient.

All things being equal, a perpetual home insurance plan is the fixed rate? $1000 of insurance that often accompanies a perpetual home insurance policy. This allows you to purchase additional insurance as your property value increases at a predefined purchase rate.


While it may at first seem that the $15, 000 deposit premium is the most significant component of the risk, it is not. As with any insurance decisions, the most important question is whether the company is prepared to pay in the event of a substantial claim.

This is the question that should be asked of all insurance companies, both traditional and perpetual. It would serve a purchaser well to investigate the company as well as its financial performance before signing up. Fortunately, in the United States, there are considerable capital retention regulations placed on most insurance companies where you are only at risk in the event of a claim. With a perpetual company you constantly have the deposit premium at risk.

Essentially you are gaining the tax and fixed purchase-rate benefits at the expense of increased risk.


If we assume perpetual home insurance costs 16 times an annual insurance policy, that means an average tax-free return of 6.25%. If you are in the 25% tax bracket, this is equivalent to an 8.31% return.

You can then compare this with other taxed and tax-free options (like mutual bonds) to determine whether the investment makes sense. Of course, the 16 x assumption is important. If the number rises, say to 25 X, it may be better to invest in something else and simply buy the traditional annual option.


Given that you are investing a sizeable lump sum of money into a single company, we think perpetual insurance makes sense only for the people who have:

More than $100, 000 in non-home, non-retirement investment assets;

Are in a tax bracket at least 25% (the higher the bracket, the bigger the advantage);

View their perpetual policy as a component of an overall coordinated investment strategy;

Have no high interest credit card or other debt;

Are willing to put in the effort to evaluate the insurance company.

An example:

As of the end of 2013, Baltimore equitable had assets of $156, 000 million, nearly all of it liquid, and liabilities of $47, 000 million in the form of deposits. It means they could refund every dollar of deposit they hold 3.3. times.

A few companies that offer the coverage:

Mutual Assurance
Cincinnati Equitable
Baltimore Equitable
Philadelphia Equitable

BOE Insurance

The ability to continue business operations while the business is  disabled can be reassuring to your customers, creditors and employees. 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.

Casualty Insurance Part 2

Part 2 of Casualty Insurance covers five important categories:

Umbrella Liability
Excess Liability
Workers’ Compensation
Professional Liability (Medical malpractice)
Environmental liability


There is a distinct difference between an Umbrella and Excess Liability policy.  They come under the heading of casualty insurance.

Umbrella Liability provides excess limits of liability above your underlying policies.  It may also provide protection when no underlying insurance applies. This also broadens your businesses’ insurance program in order to help close gaps in coverage.


In 1855 Georgia and Alabama passed Employer Liability Acts; 26 other states passed similar acts between 1855 and 1907. These acts permitted injured employees to sue the employer.  They then  had to prove a negligent act or omission.

Workers’ Compensation is a form of casualty insurance. It provides  wage restoration and medical benefits to injured employees.

Almost every business whether large or small in the United States that has employees has to handle the problem of Workers’ Compensation. Most states essentially require employers to buy a casualty insurance policy. The purpose is to manage their obligations to workers who are injured or become ill as a result of workplace hazards.

Beginning in 1911, an historic compromise solution was devised by the various states. Wisconsin was the first.   Other states quickly followed, enacting a “no fault” system. This was intended to make sure workers received fair and speedy medical treatment and financial remuneration for injuries and illness at work. The compromise system also established limits on the obligations of employees for these workplace exposures.

Today, modern Workers’ Compensation laws provide fairly broad and specific benefits to workers who suffer workplace injuries and illnesses.

These compensations include lost income, medical expenses, death benefits and job-related rehabilitation. Employers who do not carry workers’ compensation insurance and comply with a state’s requirements, leave themselves vulnerable to paying these benefits out of their own pockets as well as facing penalty charges by the states.

The states differ in that most jurisdictions employers can meet their obligations by purchasing a casualty insurance policy from an insurance company. However, five states and two U. S. Territories (North Dakota, Ohio, Puerto Rico, the U. S. Virgin Islands, Washington, West Virginia, or Wyoming) require employers to get coverage exclusively through state-operated funds. If you are an employer doing business in any of those jurisdictions, you need to obtain coverage from the specified government-run fund. These are commonly called monopoly state funds. A business cannot meet its workers’ compensation obligations in these jurisdictions with private insurance.


Medical malpractice insurance covers doctors and other professionals in the medical field. It is for liability claims arising from their treatment of patients.

The cost of medical malpractice insurance began to rise in the early 2000s after a period of essentially flat prices. Rate increases were due in part to the growing size of claims, particularly in urban areas. Among the other factors driving up prices was a reduced supply of available coverage.  Several major insurers exited the medical malpractice business because of the difficulty of making a profit.

The frequency of claims has fluctuated. In the 1980s, the number of medical malpractice claims filed appeared to increase. Reasons for the increase are not entirely clear, but several contributing factors have been suggested. In addition to the fact that people became more litigious than in the past, the crisis of the 1970s which was extensively reported by the media, may have made people more aware of the possibility of suing for damages. Other factors were the loss of an intimate relationship between families and their doctors and the use of medical experts to testify in malpractice cases. Physicians have also accused lawyers of being excessively eager to bring malpractice suits because of the high fees the lawyers can collect when their clients win.

The cost of defending a medical malpractice lawsuit continues to climb, as does the cost of liability insurance premiums for some specialists according to a report by the American Medical Association (AMA). The average expense of defending a physician against a medical liability claim in 2010 was $47, 158 – an increase of 62.7% since 2001.

In 2010, 63.7% of closed claims against physicians were dropped, withdrawn, or dismissed without any payment. Each of these claims costs an average of $26, 851 to defend, accounting for more than one third of the total annual defense expenses.

Of the claims that reached a jury verdict, 8% were in favour of the physician or other medical provider and 0.6% were in favour of the plaintiff.

The average medical liability indemnity payment to the plaintiff in 2010 was $331, 947 – an increase of 11.5% since 2001. The portion of medical liability insurance policies with limits exceeding $1million has increased from 28% to 41% since 2001.


If a company has never in their area of business considered environmental risk mitigation, it is likely that their insurance cover excludes environmental liability. Insurers commonly exclude Environmental Liabilities, also called “Pollution Insurance”. It is cover that is specifically requested. Once in place, environmental liability insurance helps to create peace of mind for all concerned.

Deepwater Horizon created what was said to be the largest, man made oil release into the Gulf of Mexico in April 2010. Called the BP oil Spill, the oil flowed for 87 days and discharged approximately 4.9 million barrels of oil. The well was sealed on 19th September 2010. Experts said that had environmental liability insurance been in place, the accident would never have taken place, due to insurance requirements for robust risk protection measures.

Oil drilling is a risky business, but we need oil to sustain world infrastructure. Mandating environmental insurance could make energy exploration at sea unaffordable due to the high cost of putting precautionary measures in place, in order to meet the safety requirements of the insurer.


Chargeback Insurance

In the event that a business has to pay for charges related to a credit card chargeback, there is a chargeback insurance coverage a company can purchase to cover such an eventuality.

When an acquirer (bank) or Independent Sales Organisation (ISO) signs a business up for a merchant account, they are taking on the risk that the merchant will stay solvent and not owe money to various card issuers due to chargebacks, not shipping goods or other reasons.

A merchant may not be fraudulent, but they may have a poor product that results in a lot of refunds. Some merchants may receive a lot of chargebacks from third party fraud.  Some merchants may be fraudsters themselves. There are many risks an acquirer takes on when they underwrite a merchant.

In case a merchant cannot cover the cost of their chargebacks, a Chargeback Insurance policy protects that acquiring bank or ISO.

If a business is unexpectedly hit by many chargebacks in a short period of time and the charges are immediately deducted, a business could become severely cash strapped, while trying to locate documentation. Banks and other financial businesses such as PayPal often charge merchants a penalty or a processing fee per chargeback, to discourage bad business practices.

Additionally, credit card companies such as Visa and Mastercard issue steep penalties to banks that continue to service merchants with frequent chargebacks.   This penalty is usually passed on to the merchant involved. It is not uncommon for merchants that continue to frequently incur chargebacks to be charged in excess of $100 per chargeback. If chargeback frequency continues, the merchant’s bank may discontinue service altogether. A business should check if their bank requires a reserve to cover any future chargebacks. Some banks can demand a reserve as high as $5, 000.


Often the merchants themselves cause chargebacks. Hidden system errors could be the problem. Two common merchant errors are:

Recurring payment chargebacks may be filed against specific types of merchants that have a recurring payment system for on-going services such as gym or magazine subscriptions. A cardholder cancels a recurring payment or claims to have done so. Such a chargeback can be filed against merchants that allow for payments in instalments, particularly if the payment plan is not clearly defined at the time of the purchase.  In such a situation, chargeback insurance would be well worth having.

Authorisation errors can occur when the merchant tries to override a declined transaction, particularly if the override is done with voice authorisation. Multiple deposits made to complete a single authorisation can result in chargebacks.


This type of chargeback may be true criminal fraud and it is one of the most common types of chargeback. The cardholder claims that a charge was made on their card without their permission. It sometimes happens that a family member has used the card without the cardholder’s knowledge or permission.


There is a type of fraud known as friendly fraud. A consumer makes an online shopping purchase with their own credit card. After receiving the goods the consumer asks for a chargeback from the issuing bank. Once approved, the chargeback cancels the financial transaction and the consumer receives a refund of the money they spent. When a chargeback occurs, the merchant is accountable, regardless of whatever measures they took to verify the transaction.

Although chargebacks cannot be completely avoided, steps can be taken to reduce their occurrence.

The business name provided to financial institutions should be a name which customizers recognize. Sometimes customizers do not recognize a business name next to the purchase on their credit card and then think it is a fraudulent transaction.

Receipt signatures on credit and debit cards should be checked against the signature on the back of the card.

If a credit card is declined, one should not continue to run the transaction.

The authorisation obtained should be for a total amount and not broken in several smaller amounts.

If a purchase is made online or by phone, the Address Verification System should be used to ensure that the customer is providing a correct billing address.

A shipper must provide proof of delivery and a customer’s signature if the item is expensive.

A business can get chargeback insurance that reimburses the cost of a product or service and the loss of profit if a chargeback stems from a stolen or counterfeit credit card, signature mismatches or post-purchase shipping address charges.

There are banks which offer sophisticated chargeback defense systems as part of their merchant services. These electronic dispute systems can allow you to manage chargebacks more efficiently and speed resolution. They also provide online reporting tools that will notify a business quickly of chargeback and retrieval requests.

Drone Use

U. S. companies are urging federal aviation regulators to speed up the use of drones in disaster response and relief operations in the United States.

The consulting firm’s 32 Advisors propose the use of drones for  various purposes.  These range from response planning and damage assessment to supply delivery.

The view from above is key for humanitarian response, which explains why satellite imaging has played a pivotal role in relief operations for almost two decades now. Satellites do however present a number of limitations. These include cost, data sharing restrictions, cloud cover, and the time needed to acquire images.

In contrast drones can capture aerial imaging at a far higher resolution. They move quickly and at a much lower cost. Unlike satellites, members of the public can actually own drones. This means that disaster-affected communications can launch their own drones in response to a crisis.

Groups like SkyEye in the Philippines and CartONG in Haiti are actively training local communities to operate their own drones for disaster-preparedness purposes.

April 24 2015 is the deadline for public comment on newly proposed FAA drone regulations. The 52 page report from 32 Advisors is sponsored by companies that are involved in drone technology.  They hope to use the devices to cope with hurricanes, earthquakes, wildfires and other disasters. The sponsors include Boeing Co, Lockheed Martin Corp, United Parcel Service inc, IBM Corp, Willis Group Holdings Ltd and Zurich North America.

The use of drones for civil and commercial operations is officially banned in the United States. This is unless the operation wins FAA approval under a process that many have found to be too slow. The proposed rules that would lift the ban are not expected to be finalised until late 2016 or early 2017.

More than 1700 migrants are believed to have died attempting to cross the Mediterranean from North Africa to southern Europe this year.  800 deaths occurred in one incident mid-April. The International Organisation for Migration has warned that the death toll could exceed 30,000 by the end of the year. The team conducted test flights at a simulated disaster city at Texas A&M University. Using infrared cameras, the aircraft could spot people trapped in the rubble.  They relayed these images back to humanitarian response teams for more effective delivery of aid.

Drones are used to identify structural damage to buildings.  Victims could be helped with claiming insurance. In addition speeding up the process by which communities can be rebuilt. However, the researchers found that for drones to be effective in such missions, they need to get into the air within 24 hours of a disaster.

Aerial, marine and ground robots have been deployed at 35 disaster events. This includes the 9/11 terrorist attacks in New York and Typhoon Haiyan, which killed over 6,000 people in southeast Asia in 2011.

Small marine machines were used to clear underwater debris after the Haiti earthquake in order to allow aid shipments to arrive.

The use of drones on off-shore oil rigs is also being researched, where machines can assist with raising the alarm when workers fall overboard.