Doug Houser:
From Rea & Associates studio, this is unsuitable, a business and financial services podcast for entrepreneurs, tenured business leaders and others who are ready to look beyond the suit and tie culture for meaningful measurable results. I'm Doug Houser. On this weekly podcast, thought leaders and business professionals break down complicated and mundane topics and give you the tips and insight you actually need to grow as a leader while helping your organization to grow and thrive.
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We all know that 2021 has been an aftermath of COVID-related changes in so many ways. But what about insurance? While often overlooked, insurance is an investment that protects your hard work and your business, no matter what comes next. So what do you need to know about insurance? Our guest on today's episode of unsuitable is vice president of Overmyer Hall Associates and insurance and risk management expert, Joe Urquhart. He's also an expert in the field of contracting real estate manufacturing. Joe is here to talk to us about the current state of the insurance market and some important considerations as we start to think about 2022. Welcome back to unsuitable, Joe.
Joe Urquhart:
Thank you. As always, I look forward to this and always enjoy getting together and talking risk and insurance.
Doug:
Yeah. And risk is a foremost, I think, in everybody's mind in today's environment one way or another, right?
Joe:
Yes, it is, unfortunately, and all kinds of different shapes and sizes. Yes.
Doug:
Yes. But in all seriousness, to mitigate risk if you're a business owner is something that really, really should be at the forefront of your thought process. There's so many things to think about and that's where he need an expert like yourself that can help guide you through some of those business risk mitigation ideas. So what have you seen happening in the market this year? What should be really top of mind for those business owners?
Joe:
Sure. Through 2020 and so far through 2021, there's a lot of changes. We won't dive in too much in the rate change. We'll save that for September 30th. But it's been for some people a real painful time for their insurance renewal, particularly businesses that have large fleets, large trucks that may not change. I think there is some good news maybe on the horizon that some of the rate changes are going to moderate a little bit. But auto is still driving a lot of the discussion unfortunately. Same with umbrella capacity, we call it, the limits that are available in some of the pricing. We'll get into more details on the 30th. So those have been some real big issues we've been working through with it.
But really from a business risk standpoint, [inaudible 00:03:29] talking about it a lot in our seminars and discussions on a lot of things that I've talked about is the whole cyber environment unfortunately. I don't think we can talk about it enough because some businesses still don't maybe understand it, or don't get it, or want to get it, but there's just a lot of risk going on, people hacking. You hear the term ransomware, extortion, we're personally seeing a lot of our clients get hit with that where they're stealing the information. So we've been spending a lot of time on that.
Really, the other one is just people wanting to steal your cash. You probably see that on the accounting side. There's so many different ways to steal from you now. A lot of it has to be with that cyber exposure, but they're tricking people into sending them money, right? Their free gift.
Doug:
Right.
Joe:
Yeah, let's just transfer $100,000 to some unknown country, right? So we're spending a lot of time talking about to our clients about risk management. How do you protect yourself? Also, do you have proper limits? So we've been seeing a trend to put on the crime policy increasing limits to represent, give them a little bit more security.
Doug:
Yeah, I know. Our cyber risk group has been super busy in conjunction with certainly what you do. You've got to make sure you're protected. Unfortunately, we've had incidents with clients that haven't been protected and it's so disruptive to your business. It's unbelievable.
Joe:
Yeah. The insurance marketplace is really evolving because of the claims and maybe a year, a couple of years ago, you could get cyber insurance fairly inexpensive. Now, it's not that way anymore because of the claims frequency and some of the severity. But what I'll particularly talk about on the 30th is some of those best practices. One, you should be doing them anyway. But a lot of the insurance companies now are making certain risk management, certain security things mandatory. Can you even get coverage or renew coverage? That's something that's a new development that we'll definitely dive into on the 30th.
The other thing on that, and you probably have seen this, the whole work from home as that's evolved over the last year, year and a half is definitely a new risk to businesses. Something we just never thought of before and we're still working through some of those issues right now.
Doug:
You think about that too, and we've talked about this in our state and local tax group, it's like people, for example, don't even think about the fact they might have employees in other states, for example. So what do you do about workers' comp? Right? I mean, Ohio's different, but I'm sure you see that. And it's like, oh my gosh, I never thought about that.
Joe:
Yeah. We have seen that and I think that will continue. That's a great point, Doug, because you'll see that in people, again because of the labor market, which we'd have an hour or two hours conversation on that, but people are hiring people farther away, many times out of state. If they're an office job, they can work from home or maybe they were here in Columbus or in Ohio and they discovered, heck, work from home, I'm going to move down to Florida, or wherever. But it does create a risk, right? So workers' comp is one of the main one. A lot of times businesses don't think about that, but you need to talk about it and address it and make sure you have the really coverage.
Doug:
Yeah, it's really... It moves so fast. I know we've had a couple employees that have moved out of state. They're still very valuable, let's say on the tax side, and we want to keep them, they want to stay with us, but oh gosh, well, we've never had an employee in this state before. Now, all of a sudden we have an employee in North Carolina. What do we do?
Joe:
It's a brave new world, right? You want to keep good employees. You want to attract new employees and you definitely have to be flexible now to do that. Worker's comp is one, but we'll come back to that cyber conversation. What about the security on the computer systems they're using at your house? Are they just getting on their own personal laptop, their own personal computer? Or you are giving them one, they're using their own, what's the security on that? Probably not very good. So it creates some real issues.
Doug:
Yeah, absolutely. Now, unfortunately, we're dealing with again another surge in COVID here, and I know in Ohio, for example, there's legislation that protects civil liability, but still there's so much that's kind of up in the air with that, right? Not necessarily that civil liability piece, but what does a company do? I know this isn't necessarily your area of expertise per se in terms of health coverage or anything, but it's like, what do you do with trying to manage that risk? Do we require people to get vaccinated? Don't we? What can we do? What's right? All these things.
Joe:
Yeah. There is a lot of unknowns there. Just from my standpoint, the liability is a risk or not, I don't think anybody really knows, but a lot of the businesses are trying to decide whether we make vaccination mandatory or not. You also have to deal with our current labor market. So if you come out with that policy and you mandate vaccination, people leave, can replace them? Can you do your work without those particular people? That clearly is a risk to the business. How do you get through that? Who knows what's on the other end?
Doug:
Yeah. It's really crazy to think about. But again, that's where you've got to be in contact with the experts and someone like yourself to make sure that you're aware of the risks, you're aware of the constant change that's going on in all these different areas and that you can really do your best to mitigate that as much as possible, right?
Joe:
That's where you have a trusted advisor team like yourself, your attorney, labor attorney, your health insurance broker, whoever that may be, you bring all those key people to the table and try to figure it out. It's changing all the time, right? They keep moving the goalposts again, so it's a challenging time.
Doug:
Yeah, absolutely. It's really just scary stuff to be honest. But no, on the good side though, I mean, we're dealing with an economy that's doing really well. Most of our clients, particularly our mutual construction clients, doing extremely well. But that presents not only opportunity but things to be aware of as well, increasing payroll and all those types of things. So how are you seeing the market out there in terms of your clientele as they're continuing to grow and deal with some of these challenges?
Joe:
It's really difficult right now. We've been talking about the labor market in Central Ohio for it seems like years now. Now, it's gotten worse. That is really creating some issues on, do you have enough people to do the work, do it on time, do it right, that's really, I think, the heart of it. If you're hiring subcontractors, do the subcontractors have enough people to do the work and do it right and on time? Clearly, we're starting to see some of those issues with projects being delayed, claims on projects from maybe a lack of skilled labor and how you get through that.
And then there's the whole issue with material. I think most of our clients, most of our contractors have figured out the material cost increase part of it now, but the availability of material is really, really difficult. So one of the insurance issues that we're starting to see on certain projects is under builder's risk where you have to keep extending a builder's risk policy because the projects aren't getting done because of material shortage, materials aren't there on time. All of them are significant delays, and sometimes it's just not because of material delays, but that's a big part of it. There's other reasons, labor issues and all kinds of things. That's one thing I will definitely talk about on the 30th is working through those issues of builder's risk extensions, you want to be proactive, and you got to think about those kind of things.
Doug:
Yeah, absolutely. And it's important, frankly, on both ends, you want to be protected. Particularly if you're a sub or something, you don't want to be caught with an owner or perhaps a GC that isn't going to be, let's say flexible and understanding. There's got to be a middle ground where both parties can still feel that they win and are protected.
Joe:
You certainly hope so. I think, I would say maybe the majority of projects are that way. But you get some owners, or some maybe CMs, or whoever, pick anybody, sometimes they're not. They got a hard schedule to keep and they don't care, right? Get it done. But I think owners are coming around now, particularly owners, to understand the marketplace that we're in, the labor issue, material supplies issue, and really just cost when we go to rebid or bid out a project, or maybe you're going to get a change order and the change order comes in at significantly more than you thought, how you work through that. It's a challenging time, for sure.
Doug:
Yeah. It's all stuff that's pertinent and it certainly needs to be dealt with and addressed. Well, I got to ask you, Joe, I'm going to get off topic here, but I know you're a Blue Jackets fan. What do you think of their off-season moves thus far? They've done some retooling, rebuilding here. What do you think of the [inaudible 00:13:26]?
Joe:
I knew you were going to ask me about that, Doug. All I'm going to say is I'm really excited for the season to begin. Hopefully, let's hope, right, that we can actually go to games, and it's crowded and packed, and it's loud again. That's really what I'm looking forward to. But I think they'll do fine. I think they made some good moves, even though I know some of the fans aren't happy about losing Cam and some of the others, but you got to change. You got to keep growing. I'm anxious to see what they'll do with the goalies. Maybe they got one more big trade in them, but we'll see. I'm excited as always [inaudible 00:13:58] the Jackets.
Doug:
Yeah, absolutely. It's fun. It's hard to believe the season will be getting underway here before we know it.
Joe:
Well, today is like 100 degrees out. I am ready for fall.
Doug:
Right. Well, when this airs, for those don't know, we do have and Joe mentioned it briefly, we have our fall construction event coming up September 30th. So hopefully, those in the audience can join us for that where you'll get more in-depth insight from Joe, as well as some other experts we'll touch on some topics such as the lease accounting change and how does that impact state and local tax risk perhaps, and some other pertinent topics. So a quick morning session, but we look forward to hosting everybody for that down at Ohio State.
Joe:
Doug, I can't wait for that. Clearly, again, hopefully depending on how things go, they'll be in-person for limited number of people. I can't wait to just get back and network, and see people, and actually talk about it. Just real quick. Just in addition to some of the things we've touched on insurance and risk related, clearly talk about outlook on rates and coverage, things we need to be thinking about and budgeting, touch base on cyber, best practices for cyber, builder's risk [inaudible 00:15:19] is an issue we need to take that into account. So we'll talk about that a little bit. And then the whole auto risk management. That's really, really important for businesses that have large fleets. So we'll do more of that deep dive on our best practices that insurance companies are looking for to put you in a position to get favorable proposals, favorable premiums on the auto.
Doug:
Yeah. Now overall, are the insurers fairing pretty well? They're not getting hammered with major loss events at this point or are they?
Joe:
Really, they are. But a lot of the results, if you look at the financial results all look pretty good for insurance companies. But again, there's a couple, we call them lines of business that are just very problematic and it's the auto. Now, the auto is going into the umbrella of the excess layers. A lot of it has to do with this term and we'll touch on this on the 30th also, but it's called social inflation, and what these insurance companies are finding are some of the judgment, some of the lawsuits that we go to settle are just very large, very significant. They're going through what we call the underlying limits of auto. You might have a million dollar auto policy, but they're going up into the umbrella now, and the frequency of those large settlements is increasing. That's creating some issues.
Doug:
Yeah, yeah. Obviously, something to be aware of and certainly to think about for the business owners out there. So hopefully, we can get folks that'll join us on September 30th and hear more.
Joe:
[inaudible 00:16:54] as always.
Doug:
Yeah. Well, Joe, you and the team at Overmyer Hall are just the best experts around, and we value your insight and perspective on all of this. Thanks again, and certainly look forward to continuing to work with you and have you on the podcast again sometime soon.
Joe:
As always, thank you and appreciate it.
Doug:
Absolutely. Thanks, Joe. And if you want more business tips and insight, or to hear previous episodes of unsuitable, visit our podcast page at www.reacpa.com/podcast. And while you're there, sign up for exclusive content and show notes. Thanks for listening to this week's show. Be sure to subscribe to unsuitable on Apple Podcasts, Google Podcasts, or wherever you're listening to us right now, including YouTube. I'm Doug Houser, join us next week for another unsuitable interview from an industry professional.
