4/4/2018. The Changing Nature of Personal Risk

Transcription

1 The Changing Nature of Personal Risk April 4,

2 To Receive CPE Credit Participate in entire webinar Answer polls when they are provided If you are viewing this webinar in a group Complete group attendance form with Title & date of live webinar Your company name Your printed name, signature & address All group attendance sheets must be submitted to training@bkd.com within 24 hours of live webinar Answer polls when they are provided If all eligibility requirements are met, each participant will be ed their CPE certificates within 15 business days of live webinar Wesley Madara Sr. Regional Business Development Manager for the Midwest Region Chubb Personal Risk Services wmadara@chubb.com 2

3 The Changing Nature of Personal Risk Needs Assessment for Personal Risk Management Risk Management is a Critical Component of Wealth Management Agenda The Red Flags that create a need for personal risk management When to engage a specialist risk advisor Selection criteria for a qualified risk advisor 3

4 Wealth Creates Risk As families accumulate wealth, their insurance profile inherently becomes more complex. As families transition from accumulation to wealth protection, often their insurance protection does not. A trusted advisor is in a unique position to recognize potential red flags that create risk and recommend an appropriate insurance advisor. Personal Lines Specialty Coverages Breaking down the coverage: Is my Trust/LLC better protected than my family? Is it Business or Personal? Coverage for Collections Cyber Liability Exposures Medical Evacuation Coverage Employment Practices Liability Coverage Personal Directorship Liability Coverage 4

5 Family Profile Needs Core Personal Insurance Products Annual Insurance Review Risk Assessment & Risk Management Highly Specialized Insurance Products & Services Mass Market Affluent High Net Worth Ultra High Net Worth Every-Day Incidents Percentage of Wealthy Households Having a High Level of Concern* About Being Sued Due to the Following Incidents An auto accident 47% A worker or household employee is injured while on your property 31% A visitor is injured while on your property 29% Being accused of misdeeds or being held liable for incidents in connection with volunteer work 22% Being sued as a result of a side-business you conduct on your property 19% Being accused of libel, slander, or invasion of privacy 18% Your pet causes someone injury or does serious property damage 18% Being accused of sexual harassment, discrimination, abuse, or wrongful termination by a nanny or other household employee 17% A dispute with a neighbor 15% An altercation involving you or a family member 14% Other 20% *Based on a rating of eight or higher on a ten-point scale, with ten being the highest level of concern. Personal Liability Survey of Wealthy Households 5

6 Recognizing the Red Flags Client Experiences a Liquidity Event or Wealth Transfer (selling a business, divorce, inheritance, etc.) The Risks The family s net worth significantly increases. The client who sells their company. A Trust or LLC is formed to create favorable tax implications. The Likelihood There are many life events for a family: marriage, divorce, buying or selling a home, children leaving for college, purchase or sale of a business, inheritance, etc. All life events precipitate a potential gap in personal insurance coverage. The Impact Without an appropriate risk analysis, a client s net worth or future earnings could be threatened. 6

7 Family Hobby Generates Revenue The Risks A client starts with a few Thoroughbreds but soon finds success in breeding. The winery, which is also the secondary home, has a visitor slip and fall during a tasting. The Likelihood More family offices are purchasing land, in addition to large homes. Emergence of technology has allowed farms to sell directly to the public increasing profit margins. The Impact Increased revenue could cause a loss to be excluded on a homeowners policy. In the absence of specialized coverage the coverage is limited. A Passion Collection Becomes an Investment The Risks Collector wants to use their Ferrari Daytona on a road rally in Italy. In order to fund a new venture, you decide to take a loan out against a painting. The Likelihood The collector has to determine how to ship the vehicle; ocean cargo or air freight. The strong growth of the Fine Art market has increased the use of art equity loans. The Impact Paperwork and customs expertise are essential to prevent the vehicle from sitting in customs for days or weeks. Local insurance can be required and the US policy may not respond. 7

8 Client Conducts Personal Business Online The Risks Hackers utilize crimeware and phishing attacks to perpetuate identity theft. An ineffective firewall allows personal information to be viewed by domestic staff, personal advisors, family and friends. The Likelihood About 3.1 million Americans were the victims of smart phone theft in 2013, according to Consumer Reports Annual State of Net Survey. That s nearly double the 1.6 million thefts that the company projected in The number of crimewarespreading sites infecting PCs with password stealing crimeware was at 44,000 sites in The Impact A targeted phishing attack could divert thousands or even millions from a client s bank or investment account. A client will spend a considerable amount of time and money restoring their identity. Client Frequently Travels Overseas The Risks The client s spouse is injured and requires immediate medical attention. A medical facility is located far away from the location of an injury and the health care system in the country is substandard. The client is kidnapped and held for ransom. The Likelihood Ultra high net worth families are almost four times more likely to travel internationally than average income earners. Medical evacuation expenses are exorbitant use of an air ambulance alone costs more than $100,000. Kidnap and ransom is a growing criminal business. The Impact Medical evacuation and treatment overseas could cost hundreds of thousands of dollars. Navigating the medical system in foreign countries can be difficult and costly. 8

9 Family Employs a Nanny or Housekeeper The Risks An employee falls and breaks her ankle. She sues for medical bills and lost earnings. A former employee initiates an employment practices liability suit for wrongful termination. An employee steals several items of valuable jewelry. The Likelihood Employment practices liability is one of the fastest growing areas of litigation. Employment practices liability expensive to defend and the average verdict exceeds $450,000. The Impact In the absence of adequate liability coverage, the client needs to tap into investment or bank accounts to fund both the defense and verdict of an unexpected lawsuit. Client Serves on a Board of Directors The Risks Shareholders of the public company sue the company and the board of directors for mismanagement. The client accepts a seat as the chair of the audit committee for the private company. The nonprofit board purchases inadequate liability limits. The Likelihood Recent court cases show that Sarbanes-Oxley requirements are being applied to private companies. 9 in 10 claims against non-profit organizations are made by their own employees. The Impact A client sued in his capacity as a board member as well as personally and incurs millions to defend and settle the lawsuit. 9

10 Family is Well-Known in the Community The Risks The family is vulnerable to personal security threats such as home invasion, child abduction, stalking and carjacking. The client is a target for a lawsuit alleging personal injury or bodily injury. The client volunteers their home for charitable causes and a visitor is injured on-site. The client incurs significant expenses in defending a lawsuit, even when it is found to be groundless. The Likelihood The U.S. Department of Justice estimates that more than 1.3 million home invasions happen each year. Each year 58,000 children are victims of stranger or nonfamily related abductions. 1.4 million Americans are stalked annually. 50,000 car hijackings occur each year. The Impact The client incurs emotional distress and some financial loss as the result of a personal security violation. The Red Flags Faced by Family Offices Technology savvy Travels overseas Employs domestic staff Serves on the board of a public, private or non-profit organization Well-known in community Experiences a wealth transfer Personal assets held in Trust, LLC or Limited Partnership High value homes Collections of jewelry, art, or other valuable items 10

11 Addressing the Red Flags Personal Risk Management The Wealth Management Process The Risk Management Process Risk Identification Create Plans to Achieve Goals Implement and Manage Plans Risk Assessment Define/Adjust Lifestyle Goals Manage Risk Risk Mitigation Risk Transfer 11

12 Specialized Insurance Solutions High limits of liability Identity theft coverage Personal security protection Medical evacuation coverage Personal kidnap & ransom Personal Directorship Liability protection Luxury home insurance Flood, Wind & Hail coverage Valuable articles and collections management Yachts Aviation Luxury automobile coverage Four Steps of Personal Risk Management Risk Identification Risk Assessment Risk Mitigation Risk Transfer Interview the client to gather potential exposure to risk in the following categories: Real Property (Homes, Vacation Homes, Condos ) Personal Property (Autos, Collections, Yachts, Aircraft) Personal Security Personal Liability Quantification and analysis of risk based on the following factors: Stage of Life Current insurance portfolio Magnitude of risk as identified in the previous step Solutions to prevent and minimize exposure to identified risks. For example: Water, fire, and intruder detection systems Software and internet firewalls Trusts and LLC s Develop an insurance solution most suitable to the remaining risks, including: Self-insurance Property & Casualty products 12

13 The Universe of Risk Advisors Independent Agents and Brokers Captive Agents and Direct Writers Direct Response Companies The Right Risk Advisor Understands the risks confronting Family Offices Utilizes a risk management process rather than a policy comparison process Ascertains the breadth of risk and its frequency and severity before identifying solutions Represents multiple insurers including those with highly specialized product portfolios 13

14 Conclusion Family Offices require personal risk management as part of their overall wealth management. Trusted Advisors need to recognize risk characteristics and align themselves with a qualified risk advisor. Chubb. Insured. 14

15 BKD, LLP is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: The information contained in these slides is presented by professionals for your information only and is not to be considered as legal advice. Applying specific information to your situation requires careful consideration of facts & circumstances. Consult your BKD advisor or legal counsel before acting on any matters covered. 15

16 CPE credit CPE credit may be awarded upon verification of participant attendance For questions, concerns or comments regarding CPE credit, please the BKD Learning & Development Department at This presentation is necessarily general in content and intended to provide and overview of certain aspects of personal risk management in the financial planning process. This presentation is advisory in nature and is for informational purposes only. No liability is assumed by reason of the information this presentation contains. The information provided should not be relied upon as legal advice or a definitive statement of the law in any jurisdiction. For such advice, a listener or reader should consult their own legal counsel. Chubb is the marketing name used to refer to subsidiaries of Chubb Limited providing insurance and related services. For a list of these subsidiaries, please visit new.chubb.com. Insurance provided by U.S. based Chubb underwriting companies. All products may not be available in all states. Coverage is subject to the language of the policies as actually issued. Surplus lines insurance sold only though licensed surplus lines producers. This presentation is copyrighted and is the property of Chubb. Any use of this presentation without Chubb's prior, written consent is prohibited. Chubb, Box 1615, Warren, NJ

17 Thank you 33 17