By Al Sica of The ALS Group
The bed bug epidemic has now reached astronomical proportions. Hotels, movie theaters, businesses, hospitals, dormitories, and apartments are all reporting infestations. According to a survey released by The National Pest Management Association, one out of every five Americans has had a bed bug problem or knows someone who has encountered an infestation in a residence or hotel. For a property owner, not only are these pests a nuisance, but can be very expensive and potentially a public relations nightmare. Two large insurers, Willis and Aon recently announced that they were offering specialized coverage to protect property owners, companies and individuals from losses.
The Insurance industry has recognized this opportunity and responded with two fairly unique solutions. Two large insurance brokers, Willis Group and Aon have recently introduced products to, seemingly, address this problem. As with any insurance “solution” the devil is in the detail and “caveat emptor” is always good advice.
Willis recently introduced Bed Bug Infestation Recovery Insurance, providing coverage for business interruption and extra expense for bed bug infestation within lodging facilities. Aon has aligned themselves with Global Excess Partners and Terminix to create Aon’s Bed Bug Insurance Solutions, a comprehensive insurance solution for hotels, landlords, and property managers, student housing, and corporate businesses. Both companies cover the cost of bed bug elimination, loss of lodging revenue, and are subject to policy limits, terms and conditions. These programs will also provide crisis response and expertise, in addition to helping with loss control.
As with any new product which addresses a unique exposure, we are dealing with policy language that needs to be carefully analyzed to determine its viability. This means that policy terms and conditions could represent a significant challenge to the average insurance layman. From an underwriting perspective, low income housing is not on their prohibitive lists, but we can safely assume that the underwriting will be more extensive. We do know that insurance companies can be opportunistic when it comes to risk. Make sure that your insurance representative has a thorough understanding of your business and your risk exposures.
Ultimately both of the new insurance programs would need to be approached to take advantage of the marketplace. This step will require a carefully processed underwriting package which includes an application (warranty) and information which provides the insurer an understanding of your risk. Once quotes are received, the broker will need to develop a way to analyze the coverage carefully. At the same time it will be important to look at, in conjunction with the insurance program, risk control options to help mitigate risk.
Public awareness about the risks associated with bed bugs is the most significant factor in eradicating these pests. Knowing what to look for is the first step in preventing an outbreak of bed bugs. Managers of facilities with transient residents need to be especially diligent. Take care in purchasing second hand furniture, vacuum frequently, and seal all crevices. When traveling, be mindful of bedding and check luggage before returning home.
A risk management consultant can provide you with independent counseling on these processes and any other concerns you may have with your insurance. Our focus is on becoming your business partner to help you and your company identify and develop management strategies that will help reduce your total cost of risk (TCoR) and improve your bottom line. There is risk associated with everything we do in life. In today’s world, business risk and the ability to quantify it in dollars is increasingly important.
Albert L. Sica is the founder and managing principal of The ALS Group, an independent insurance and risk management consulting firm focused on helping their clients reduce insurance and risk related costs. Visit www.als-uic.com or e-mail Al at asica@als-uic.com, or call (732)395-4251 for more information.