Top 10 Ways Businesses Can Protect Consumers

In a world where customers are frequently being taken advantage of online, a business’s top priority is to protect their most prized asset: the client. With that in mind, the Online Trust Alliance (OTA) has issued its Top 10 recommendations for 2011 to help businesses protect consumers from being fooled. The list includes techniques that businesses can use to help their customers (and even their employees) from deceptive and malicious online threats. Here are the top five:

  1. Upgrade all employees to the most current version of browsers that have integrated phishing and malware protection and privacy controls including support of “Do Not Track” mechanisms and controls. Such controls provide users the control on third party data collection, usage and data sharing of their online browsing activities, while balancing out the value of ad supported online services. Encourage consumers to update their browsers by notifying them of insecure and outdated browsers. In addition consider terminating support for end-of-life browsers with known vulnerabilities by preventing log-ons and providing instructions to upgrade.
  2. Establish and maintain a Domain Portfolio Management program that includes monitoring look-a-like or homograph-similar domains and tracking renewals to prevent “drop catching” of expiring domains. Domain locking is recommended to help guard against unintended changes, deletions or domain transfers to third parties. Such programs and practices can help protect a company’s brand assets and consumers from landing on look-alike sites compromising trademarks and trade names.
  3. Adopt Email Authentication including both SPF (Sender Policy Framework) and DKIM (DomainKeys Identified Mail) to help reduce the incidence of spoofed and forged email, helping to prevent identity theft and the distribution of malicious malware from tarnishing your brand reputation. Authenticated email allows ISPs, mailbox providers and corporate networks an added ability to block deceptive email, reduce false positives and protect online brands and sites from deception.
  4. Encrypt all data files containing customer profiles, email address and or PII, which are transmitted externally or stored on portable devices or media including flash and USB drives.
  5. Upgrade to Extended Validation Secure Socket Layer Certificates (EVSSL) for all sites requesting sensitive information including registration, e-commerce, online banking and any data which may request PII or sensitive information.  Use of EVSSL certificates help to increase consumer confidence of your online brand. When an EVSSL is presented, the address bar turns green providing the user a higher confidence level the site and company they are visiting is a legitimate business.

“The Internet has become a foundation of commerce, communication and community. As such, business and government have a shared responsibility to take steps to curb cybercrime and online abuse,” said Senator Joe Lieberman. “There are a lot of simple, common-sense steps that both businesses and consumers can take to make them more secure. I applaud OTA’s efforts to promote practices which enhance the internet’s integrity, privacy, security and resiliency.” Click for the complete list of OTA’s top 10 recommendations.

2010 Disasters Cost the World $218 Billion and the Insurance Industry $43 Billion

Swiss Re’s latest sigma study (full report; abstract) reveals that the final economic losses resulting from disasters (both natural and man-made) across the globe in 2010 was $218 billion — a number that dwarfs the $68 billion in damages caused by catastrophes in 2009.

With unprecedented flooding, Asia was the region worst hit, with $75 billion of the total occurring there. In relative terms, however, the fallout may be worse for the Latin America/Caribbean region. The $53 billion caused by the earthquakes in Haiti and Chile represents a staggering 1.1% of the region’s GDP. (By comparison, Asia’s $75 billion in losses was only 0.28% of its GDP.)

Here is Swiss Re’s regional breakdown of the number of disasters, death toll and financial fallout.

Insured losses in 2010 totaled $43 billion as a whopping 10 different events caused insured losses of at least $1 billion. This was a huge jump from the $27 billion in insured losses for the global industry in 2009.

In all, 2010 had 304 catastrophic events.

The globe has seen a troubling trend of more natural catastrophes nearly every year in recent decades, and 2010 was no different with 167 natural disasters. On the flip side, the declining trend of man-made disasters the world has experienced since 2005 also held true, with just 137 man-made events. This is perhaps the only positive nugget of information in the entire report. (Although even this silver lining is bittersweet as you will see below when we look at the resulting death toll.)

Worst of all, of course, were the 304,000 people killed by disasters last year, making 2010 the third deadliest year since 1970 (the year Swiss Re first began collecting such data).

In 2010, severe catastrophes claimed significantly more lives than the previous year: around 304,000 were killed, compared to 15,000 in 2009. The deadliest event in 2010 was the Haiti earthquake in January, which claimed more than 222,000 lives. Nearly 56,000 people died during the summer heatwave in Russia. The summer floods in China and Pakistan also resulted in over 6,200 deaths.

Man-made disasters accounted for a small percentage of deaths last year, in relative terms, but the 6,446 killed was still a significantly higher number than the 5,970 who died in this manner in 2009. This fact puts a large blemish on the positive news that there were fewer man-made events. There may have been fewer incidents, but the ones that did occur were deadlier and that lower-occurrence/worse-outcome ratio should be going the other way in 2011 as safety, security and other risk management means strive to lessen the impact of catastrophes.

The man-made disasters that claimed the most victims in 2010 were a lead poisoning outbreak at an illegal gold mine in Nigeria in March (400 victims, mainly children), a stampede on a bridge at a festival in Cambodia in November (375 victims) and the collapse of a gold mine in Sierra Leone in March that killed approximately 200 people. Meanwhile, aviation and maritime disasters accounted for more than 800 and 1,100 victims respectively.

Moving beyond the past, the globe has already been badly battered so far in 2011.

The Japanese earthquake and tsunami killed an estimated 18,500 people and caused upwards of $30 billion in insured losses alone, according to some experts. The Christchurch quake in New Zealand also ravaged the insurance industry, Australia floods cost billions and winter storms in the United States did plenty of damage of their own. Who knows what the final fallout will be from social revolutions in the Middle East, but it’s safe to say that there will be some claims.

All this and it’s not even hurricane season yet.

Hopefully, there is no way that more people will be killed by disasters in 2011 than we saw in 2010. But when it comes to economic losses, specifically insured losses, it is already shaping up to be a historic, market-altering year.

Coca-Cola Jumps on the Captive Bandwagon

One of the world’s largest beverage companies has successfully embraced the somewhat modern practice of funding employee benefits through captive utilization.

Coca-Cola recently began reinsuring some of its international pension liabilities through its Dublin-based captive, Coca-Cola Reinsurance Services Ltd. The captive reinsures about $400 million in annuities written by insurers for benefits provided to enrollees in three Coca-Cola pension plans in the United Kingdom and Ireland.

After years of operating their own captive, Coca-Cola Reinsurance Services Ltd., to fund a portion of their employee benefits, the beverage giant will now cover international benefit liabilities through a captive.

Coca-Cola had been handling “quite significant” property/casualty risks in its captives for “quite some time,” said Stacy Apter, senior global benefits consultant with Coca-Cola and a panelist at the conference. “Why would we not be taking advantage of the same efficiencies on the employee benefits side when they are more predictable risks?”

Apter stated that medical coverage, as an example, is similar to a cash flow operation, in that it is not difficult to predict yearly costs. It seems that employee benefit captives would be a good move most sizable companies, though only a handful have fully embraced it.

A few online resources for learning more about the world of employee benefit captives:

  • — “Using Captives for Employee Benefits” covers why employers are using their captive for employee benefits, who has done it so far, how existing transactions have been structured and the primary issues that employers need to evaluate.
  • — “Employee Benefits: Captive Manager’s Key Roles” explores the importance of having the right external partners when choosing a captive and how to ensure appropriate coordination among the internal and external parties involved.
  • — “Employee Benefit Captives: Their Role in Managing Enterprise Risk” is a concise reference that can serve as a reference for further examination of the business issues involved in the placement of employee benefits risks in captive insurers.

The Rising Cost of Disasters

A new report from Allianz analyzes the fact that the insurance claims from natural disaster are becoming more expensive. The key reason is not so much that there are more disasters, just more buildings, more development and more insurance. And as parts of the developing world, specifically China and India, continue to become more affluent, we can likely expect this to continue.

One way this is illustrated is by looking at the most powerful and more deadly earthquakes in each of the past ten years. In some years (2003, 2008 and 2011 so far), the strongest quake is also the most deadly. But in other years, notably last year with the 8.8 magnitude earthquake in Chile killing 507 people and the 7.0 earthquake in Haiti killing more than 200,000, that has not been the case. The two main reasons for this is that the stronger quake either hits a very remote location where people don’t live or it hits a location with modern building codes and shake-resistant buildings.

Markus Treml, seismology expert at Allianz SE Reinsurance, explains.

The Energy factor shows the ratio between the seismic energy released by the two earthquakes. For example, the quake in Chile released 500 times more energy than the quake in Haiti. This table shows that those regions where tectonic plates clash are at highest risk. Six tremendous earthquakes happened in Indonesia in the last decade. All other earthquakes in this table – except Haiti – are also in high-risk zones. The amount of energy released does not necessarily mean more damage or casualties. Instead, weak buildings or secondary effects of earthquakes such as tsunamis or fires are the most common reason for high fatality rates. This was the case in Haiti in 2010, in Northern Sumatra in 2004 and will probably be the case for Japan.

As he mentions, the “energy factor” in the chart below represents how much more powerful the strongest earthquake was each year than the most deadly.