Monthly Archives: December 2009

Insurance Fraud to Rise in 2010

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We know all too well that insurance fraud (and many other illegal money-making schemes) ramp up in down economies. But what sector of insurance will it hardest in the new year?

According to National Underwriter and the Coalition Against Insurance Fraud, the answer is health insurance. In a survey of 37 fraud bureaus, the Coalition found that the selling of bogus health insurance to small businesses is now the “number one scam.” Other healthcare-related fraud consumers should expect to see in 2010 include medical provider fraud in auto injury and workers comp cases.

Interesting to note is another fraud scheme that has seen a spike during recent, more desperate times — that of the “slip and fall.” Dennis Jay, executive director of the Coalition, stated that incidences of fake slips and falls are “really going through the roof.

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”

And let us not forget computer hacking fraud.

Ed Goodman, chief privacy officer at Identity Theft 911, said at this point he thinks insurance losses from this kind of crime are difficult to quantify because “the insurance industry is very tight-lipped about it,” and “some numbers you see on the cost of data breach losses are questionable.” However, he guessed that the damage “could well be in the hundreds of millions” and involve soaring legal costs.

As with healthcare-related fraud, computer fraud is more common among small businesses due to lack of appropriate tech security resources.

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The following are seven ways small businesses can prevent computer hacking, thanks to AllBusiness.com:

  1. Implement a firewall
  2. Develop a corporate security policy
  3. Install anti-virus software
  4. Keep operating systems up to date
  5. Don’t run unnecessary network services
  6. Conduct a vulnerability test
  7. Keep informed about network security

Fraud in any form means lost revenue, and in these economic times it’s important for companies to increase protection measures and risk management efforts. What type of fraud is your company preparing for in 2010 and how?

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Risk Management Links of the Day: 12.17.09

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credit suisse sanctions 536 million

  • Forbes published a good piece on how Credit Suisse has aided clients from rogue nations like Iran, Cuba, Burma and Libya sidestep U.S. sanctions for nearly a quarter century, an infraction that will cost the Zurich bank $536 million for violating the the International Emergency Economic Powers Act as well as New York State law. “Credit Suisse first started dealing with rogue regimes that were sanctioned by the U.S. government in 1986, when the Zurich-based bank began to assist Libyan customers in evading sanctions by executing payment orders without stating their names, according to U.S. authorities. Later Credit Suisse started to refine its methods, processing payments for clients in sanctioned countries with payment messages that concealed the identity of customers by using false codes. Credit Suisse did this kind of business for other clients in countries that faced U.S. sanctions, including Sudan, Libya, Burma, Cuba, and Charles Taylor’s Liberia, the Treasury Department says.”
  • The SEC approves enhanced disclosure about risk, compensation and corporate governance. “The Securities and Exchange Commission today approved rules to enhance the information provided to shareholders so they are better able to evaluate the leadership of public companies. Beginning in the upcoming annual reporting and proxy season, the new rules will improve corporate disclosure regarding risk, compensation and corporate governance matters when voting decisions are made.”
  • RSA Insurance Group and the WWF (the environmental group, not the wrestling association that was renamed the WWE) began a three-year partnership that will center on conducting joint research efforts into all things Mother Nature and risky.
  • The percentage of commercial insurance buyers who have an exposure insured with Chartis has dropped from 90% in July to 80% now. Still a high number, but a significant drop. Although Barclays is saying that most of those who are still on board with the AIG insurance arm now plan to stay. “Of commercial buyers that insure with Chartis, Barclays said roughly 75% of those customers plan to stay with the unit despite AIG’s troubles, up sharply from 40% of customers who said they would stay with Chartis in July.”
  • A guy named TJ Sullivan who is CEO of CampusSpeak, Inc. has dubbed the crackdown on Greek life shenanigans on campus as “the risk management era.” He explains in more detail: “The emphasis was on rules and policy adherence. It dominated everything: chapter services strategies, fraternity education, volunteer training and duties, consultant training, board meetings, etc. Someone a lot smarter than I will write a book about this, and I’m sure opinions will vary on whether or not it was a good, important era, or a harmful one. Was there any net benefit? Some will say that fraternities and sororities grew stronger during this time. The values congruence crowd will continue to crow about how risk management draws us closer to the values we were founded upon (a weak argument, I’d say). Others will say fraternities and sororities lost their fun, their innocence, and their relevance. One thing for sure, lawyers and insurance agents made a lot of money. Yet, students are still dying from alcohol poisoning and hazing on a regular basis.”
  • A new Swiss Re Sigma study analyzes commercial liability insurance. “Emerging risks due to technological and social developments are a constant challenge: new insights into and changing standards around food safety, environmental pollution, employment practices and the compensation of financial loss are, for example, risks that insurers closely monitor. Roman Lechner, co-author of the sigma study, said: “Fortunately, none of these emerging risks has evolved into the next asbestos — yet.”

UPDATE:

  • MF Global was fined $10 million by the Commodity Futures Trading Commission for three risk management failures related to supervision. “The $10 million penalty imposed by the Commodity Futures Trading Commission is the latest fallout from rogue wheat-futures trades in 2008 that forced the company to take a $141.5 million charge, triggering a restructuring that led to the departure of its chief executive, Kevin Davis.”
  • In his latest View from the Press Box, Sam Friedman gives us some 20/20 hindsight on his previous predictions for 2009. “Way back on Jan. 5, I peered into my crystal ball for the likely Top-10 Property and Casualty Insurance Stories of 2009. Before I reveal what turned out to be my actual picks here on Dec. 21, let’s see how accurate my predictions were.”

Find an interesting link? Email me any stories, videos or images you come across and would like to see included. Or just follow me on Twitter @RiskMgmt and pass it along that way.

All I Want For Christmas Is a Reputation Boost

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This may make me come of as me being overly cynical (which I often am) — and I certainly don’t want to discount the generosity and clear public good that is being done here — but the holiday season has long been a time when companies try to earn goodwill for themselves by doing good will for others. What I mean is that, given the spirit of season and the fact that everyone is in such a positive mindset, many companies see this time of year as the perfect opportunity to get people to view their brand as less of a monolithic, heartless, cash-grab concealed in a logo.

‘Tis the season to convince people you are not Ebenezer Scrooge — at least not all the time.
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Citigroup, one of many financial firms that most consumers would give nothing but coal this December 25, has captured the Christmas spirit better than any other company that I’ve seen by halting all home foreclosures and evictions for the next 30 days. While many companies use the holidays to give away relatively cheap goods or even make worthwhile monetary donations to good causes, the act of easing the pain of families who have suffered the most from the global recession is perhaps the best thing any company could do — even if it is admittedly only a temporary respite for evictions that both homeowners and the bank hopes can be avoided.

The suspension means Citi will halt foreclosure sales and stop evicting homeowners from properties it has already seized. The company projects it will help 2,000 homeowners with scheduled foreclosure sales and another 2,000 that were due to receive foreclosure notices.

Das also said the company is working on “some long-term fundamental alternatives” to foreclosure, but declined to be specific.

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“We know that moratoriums are not permanent solutions,” he said.

Google, on the other hand, is gifting convenience and service to the masses in a way only it can by offering free wi-fi at 54 airports across the U.S. (and on all Virgin America planes) from now through January 15. The stated goal here is allowing people to better stay in touch with loved ones while they travel, but the real purpose seems to be the one operating goal that drives all of Google’s ability to generate revenue: Making people think it’s awesome. Well, mission accomplished, Googleplex.

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(And in genuinely charitable news, the “Search/Email/News Aggregation/Video/Web Browser/Advertising/Map Provider/Whatever Google Wave Is Giant” is also encouraging fliers who take advantage of the access to donate to any of the nonprofits on this list and pledging to match all donations.)

KPMG is one of many companies forgoing Christmas parties this year and instead finding other ways to corporately celebrate the holidays.

At consulting firm KPMG, thousands of employees spent time last week putting together gift packs of a book and a teddy bear, dressed in a KPMG T-shirt, to be sent to needy children.

Bruce Pfau, KPMG’s vice chair for human resources, said the usual holiday parties didn’t seem right this year.

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“With more and more people seeing the negative effects of the economy, we really thought that it would be more in the spirit of the holidays and a more satisfying experience for our people if we did something that was more focused on community service,” he said.

And then you go out and tell MSNBC and the Washington Post and the Kansas City Star and Fox New York all about what a satisfying experience your community service efforts were, right?

Still, these companies are obviously doing some real good in the world and that is indeed commendable. But, ultimately, let’s not forget that the actual reason many of them are doing it often has less to do with the spirit of giving and more to do with the spirit of positive press generation.

A letter to Father Christmas

Thank Tiger for the New Reputational Risk Insurance

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If it wasn’t for Tiger Woods’ scandalous infidelities, we may have never gotten the announcement we did this morning: the launch of reputation risk insurance.

Launched by DeWitt Stern, the 110-year-old risk management and insurance brokerage firm, the coverage will work to protect brands, corporate entities and advertisers against losses spawned by reputational risk crises.  The company’s managing director had this to say in the Insurance Business Review:

“The Tiger Woods scandal shows how quickly reputations can become tarnished in today’s fast-paced media environment,” said LeConte Moore, managing director of DeWitt Stern’s New York City office. “All the planning in the world cannot protect a brand manager against the unforeseen. Reputation Risk Insurance will provide those forward-looking brand managers and advertisers with a smart and attractive way to protect their investments.”

And protection of investments they will need. If Woods sticks to his break from professional golf, it is reported that TV audiences could shrink by up to 50% — which could stick Nike with a $30 million loss in sales. So far, only Accenture, a Dublin-based consulting company, has ended its business relationship with Woods.

The following sponsors (courtesy of Bloomberg) remain supportive:

  • AT&T
  • Electronic Arts
  • Pepsi
  • Procter & Gamble
  • Golf Digest
  • Nike
  • The Tiger Woods Dubai
  • TLC Vision
  • Upper Deck
  • TAG Heuer
  • NetJets

However, Bloomberg reports that AT&T is “evaluating its advertising relationship with Woods, according to a Dec. 12 e-mailed statement,” Gillette (a Procter & Gamble company) will stop running print and broadcast ads with Tiger, and Pepsi is “talking to his people regularly at this point.”

On the other hand, Nike, Golf Digest and Upper Deck will all rhetorically plan to continue their Tiger-related operations as if nothing happened.

Says Upper Deck:

“Upper Deck will maintain its exclusive agreement with Tiger in both our sports cards and memorabilia categories, and we look forward to his eventual return to the PGA Tour,” Richard McWilliam, chief executive officer, said in a statement Dec. 15. “Tiger and his family have our full support.”

Reputational risk coverage may be too little too late for these companies, as not just Nike, but every Tiger Woods sponsor stands to lose some amount of money from his foolish actions. And as his number of reported mistresses grows every day and talks of divorce swirl, it remains to be seen if Accenture will be the only company to cut their losses . . . and their reputation risk.

Tiger Woods Reputation Risk

The company and Woods announced in October 2008 that the National would be held at the Congressional Country Club in Bethesda, Maryland, from 2012 to 2014, with an additional three- year option for 2015 to 2017. Woods won the tournament in July, collecting $1.08 million.
2. Electronic Arts Inc. The video-game publisher, the world’s second-largest, said Dec. 11 that it has no plans to change strategy related to Woods products. “We respect that this is a very difficult, and private, situation for Tiger and his family,” David Tinson, a company spokesman, said in an e-mail. “At this time, the strategy for our Tiger Woods PGA Tour business remains unchanged.”
In early 2010, Electronic Arts, based in Redwood City, California, will introduce a new online version of the game in which users can play through a Web browser instead of a console. Chief Executive Officer John Riccitiello said earlier this month that it will be an important part of the company’s strategy to expand online sales.
Tiger Woods video games from Electronic Arts have generated $675 million in U.S. sales, according to industry researcher NPD Group Inc.
3. PepsiCo Inc. The world’s second-largest soft-drink maker is in regular communication with Woods’s agents, Massimo d’Amore, chief executive officer of the Americas beverages business, said at a Dec. 14 Beverage Digest Conference in New York.
“We feel very badly about his personal life and we wish him all the best,” d’Amore said. “We are talking to his people regularly at this point.” He declined to specify the nature of the talks.
PepsiCo announced in October 2007 its first endorsement agreement with Woods; the financial terms weren’t disclosed at the time. Before the golfer’s Nov. 27 car crash triggered reports of infidelity, Beverage Digest reported that PepsiCo was discontinuing the Tiger Focus line of Gatorade sports drinks.
4. Procter & Gamble Co. Woods, tennis champion Roger Federer and soccer’s Thierry Henry were signed as ambassadors for the company’s Gillette brand in February 2007. The company said on Dec. 12 that it will stop running Gillette print and broadcast ads featuring Woods. It plans to phase out Web site and retail promotions in coming months, said Mike Norton, a spokesman.
The brand ambassadors were chosen “not only for their sporting accomplishments, but also for their behavior away from the game. They are as much champions in their personal lives as they are in their sports,” Gillette said in the 2007 statement.
5. Golf Digest. Woods became a so-called playing editor at Golf Digest in June 1997, contributing tips and instruction monthly. The work benefits the Tiger Woods Foundation. The publication declined to comment on details of the contract.
“Golf Digest has had a long-standing relationship with Tiger Woods to provide instruction articles for the magazine, and we do not have any plans to change that,” Meg D’Incecco, executive director of public relations, said in an e-mailed statement Dec. 15.
6. Nike Inc. The world’s largest athletic-shoe maker signed Woods to an endorsement contract in December 2006; the financial terms weren’t released. It now pays him about $25 million to $30 million a year to wear its products, with the iconic swoosh logo, Christopher Svezia, an analyst at Susquehanna Financial Group LLP in New York, said in a telephone interview. The company also sells Woods-branded clothing, belts and shoes.
Nike’s golf business generated $648.3 million in sales in the company’s last year ended May 31, according to a regulatory filing. That represents about 3.4 percent of the company’s $19.2 billion in worldwide sales.
The golf division isn’t changing its advertising plans, Beth Gast, a spokeswoman for the Beaverton, Oregon-based company, said in a Dec. 9 e-mail.
7. The Tiger Woods Dubai. Woods designed a golf course for the unit of Dubai Properties Group. “Tiger Woods’s name brings enormous value to the project, and we are proud to share with him some of the key developments that have taken place since he reviewed the project during his last visit,” Abdulla Al Gurg, project director, said in an August 2008 statement, which introduced Woods’s plan for the course.
In a Dec. 15 statement, Tiger Woods Dubai confirmed that “it remains committed to the completion of its centerpiece Al Ruwaya Golf Course, and that progress continues on the first golf course designed by Tiger Woods Design.” The company added that it “does not comment on the personal lives of our valued partners.”
8. TLC Vision Corp. The Mississauga, Ontario-based operator of eye-surgery centers performed corrective eye surgery on Woods in October 1999. It named him as its spokesman in February 2000. The terms of the multiyear contract weren’t disclosed.
“Tiger Woods is important to TLC Vision,” James Hyland, a spokesman for TLC Vision, wrote on Dec. 9 in an e-mailed statement. “Our relationship with him continues without change. This is a private matter and we have no further comment.”
9. The Upper Deck Co. On May 24, 2001, the provider of trading cards and other sports memorabilia signed Woods to a “multiyear, multimillion dollar deal,” the company said in a statement at the time.
A week later, the Upper Deck, based in Carlsbad, California, and Shop At Home Inc. — now Naples, Florida-based electronic retailer Summit America Television Inc. — announced an exclusive licensing agreement with the golfer. The deal made the Upper Deck “the first major worldwide collectibles company to produce Tiger Woods trading cards and autographed memorabilia,” according to the statement.
“Upper Deck will maintain its exclusive agreement with Tiger in both our sports cards and memorabilia categories, and we look forward to his eventual return to the PGA Tour,” Richard McWilliam, chief executive officer, said in a statement Dec. 15. “Tiger and his family have our full support.”
10. TAG Heuer. The Swiss watch maker, part of LVMH Moet Hennessy Louis Vuitton SA, is re-examining its ties with Woods, who has been one of its brand ambassadors. “Over the coming weeks, we will assess our options with Tiger Woods,” TAG Heuer said in a Dec. 15 e-mailed statement.
TAG Heuer signed an endorsement agreement with Woods in 2002, effective the next year, according to a statement at the time. The company has featured Woods in advertising. It also tapped him to help design products including what it says is “the world’s first-ever professional golf watch.”
11. NetJets Inc. The luxury aviation company, which Warren Buffett’s Berkshire Hathaway Inc. acquired in 1998, has listed Woods as a fractional aircraft owner since at least 2001. In the December 2009 edition of NetJets Fast Facts on its Web site, the Columbus, Ohio-based company names Woods among other prominent clients including Federer, Aetna Inc. and General Electric Co. Woods is also part of its “Only NetJets” advertising campaign.
NetJets didn’t respond to requests for comment.1. AT&T Inc. The largest U.S. phone company is evaluating its advertising relationship with Woods, according to a Dec. 12 e- mailed statement. AT&T, based in Dallas, served as the presenting sponsor of the golfer’s annual Tiger Jam benefit concerts in Las Vegas and sponsors the PGA Tour’s AT&T National, hosted by Woods. It began a multiyear agreement in February to place the AT&T logo on Woods’s golf bag.
The company and Woods announced in October 2008 that the National would be held at the Congressional Country Club in Bethesda, Maryland, from 2012 to 2014, with an additional three- year option for 2015 to 2017. Woods won the tournament in July, collecting $1.08 million.
2. Electronic Arts Inc. The video-game publisher, the world’s second-largest, said Dec. 11 that it has no plans to change strategy related to Woods products. “We respect that this is a very difficult, and private, situation for Tiger and his family,” David Tinson, a company spokesman, said in an e-mail. “At this time, the strategy for our Tiger Woods PGA Tour business remains unchanged.”
In early 2010, Electronic Arts, based in Redwood City, California, will introduce a new online version of the game in which users can play through a Web browser instead of a console. Chief Executive Officer John Riccitiello said earlier this month that it will be an important part of the company’s strategy to expand online sales.
Tiger Woods video games from Electronic Arts have generated $675 million in U.S. sales, according to industry researcher NPD Group Inc.
3. PepsiCo Inc. The world’s second-largest soft-drink maker is in regular communication with Woods’s agents, Massimo d’Amore, chief executive officer of the Americas beverages business, said at a Dec. 14 Beverage Digest Conference in New York.
“We feel very badly about his personal life and we wish him all the best,” d’Amore said. “We are talking to his people regularly at this point.” He declined to specify the nature of the talks.
PepsiCo announced in October 2007 its first endorsement agreement with Woods; the financial terms weren’t disclosed at the time. Before the golfer’s Nov. 27 car crash triggered reports of infidelity, Beverage Digest reported that PepsiCo was discontinuing the Tiger Focus line of Gatorade sports drinks.
4. Procter & Gamble Co. Woods, tennis champion Roger Federer and soccer’s Thierry Henry were signed as ambassadors for the company’s Gillette brand in February 2007. The company said on Dec. 12 that it will stop running Gillette print and broadcast ads featuring Woods. It plans to phase out Web site and retail promotions in coming months, said Mike Norton, a spokesman.
The brand ambassadors were chosen “not only for their sporting accomplishments, but also for their behavior away from the game. They are as much champions in their personal lives as they are in their sports,” Gillette said in the 2007 statement.
5. Golf Digest. Woods became a so-called playing editor at Golf Digest in June 1997, contributing tips and instruction monthly. The work benefits the Tiger Woods Foundation. The publication declined to comment on details of the contract.
“Golf Digest has had a long-standing relationship with Tiger Woods to provide instruction articles for the magazine, and we do not have any plans to change that,” Meg D’Incecco, executive director of public relations, said in an e-mailed statement Dec. 15.
6. Nike Inc. The world’s largest athletic-shoe maker signed Woods to an endorsement contract in December 2006; the financial terms weren’t released. It now pays him about $25 million to $30 million a year to wear its products, with the iconic swoosh logo, Christopher Svezia, an analyst at Susquehanna Financial Group LLP in New York, said in a telephone interview. The company also sells Woods-branded clothing, belts and shoes.
Nike’s golf business generated $648.3 million in sales in the company’s last year ended May 31, according to a regulatory filing. That represents about 3.4 percent of the company’s $19.2 billion in worldwide sales.
The golf division isn’t changing its advertising plans, Beth Gast, a spokeswoman for the Beaverton, Oregon-based company, said in a Dec. 9 e-mail.
7. The Tiger Woods Dubai. Woods designed a golf course for the unit of Dubai Properties Group. “Tiger Woods’s name brings enormous value to the project, and we are proud to share with him some of the key developments that have taken place since he reviewed the project during his last visit,” Abdulla Al Gurg, project director, said in an August 2008 statement, which introduced Woods’s plan for the course.
In a Dec. 15 statement, Tiger Woods Dubai confirmed that “it remains committed to the completion of its centerpiece Al Ruwaya Golf Course, and that progress continues on the first golf course designed by Tiger Woods Design.” The company added that it “does not comment on the personal lives of our valued partners.”
8. TLC Vision Corp. The Mississauga, Ontario-based operator of eye-surgery centers performed corrective eye surgery on Woods in October 1999. It named him as its spokesman in February 2000. The terms of the multiyear contract weren’t disclosed.
“Tiger Woods is important to TLC Vision,” James Hyland, a spokesman for TLC Vision, wrote on Dec. 9 in an e-mailed statement. “Our relationship with him continues without change. This is a private matter and we have no further comment.”
9. The Upper Deck Co. On May 24, 2001, the provider of trading cards and other sports memorabilia signed Woods to a “multiyear, multimillion dollar deal,” the company said in a statement at the time.
A week later, the Upper Deck, based in Carlsbad, California, and Shop At Home Inc. — now Naples, Florida-based electronic retailer Summit America Television Inc. — announced an exclusive licensing agreement with the golfer. The deal made the Upper Deck “the first major worldwide collectibles company to produce Tiger Woods trading cards and autographed memorabilia,” according to the statement.
“Upper Deck will maintain its exclusive agreement with Tiger in both our sports cards and memorabilia categories, and we look forward to his eventual return to the PGA Tour,” Richard McWilliam, chief executive officer, said in a statement Dec. 15. “Tiger and his family have our full support.”
10. TAG Heuer. The Swiss watch maker, part of LVMH Moet Hennessy Louis Vuitton SA, is re-examining its ties with Woods, who has been one of its brand ambassadors. “Over the coming weeks, we will assess our options with Tiger Woods,” TAG Heuer said in a Dec. 15 e-mailed statement.
TAG Heuer signed an endorsement agreement with Woods in 2002, effective the next year, according to a statement at the time. The company has featured Woods in advertising. It also tapped him to help design products including what it says is “the world’s first-ever professional golf watch.”
11. NetJets Inc. The luxury aviation company, which Warren Buffett’s Berkshire Hathaway Inc. acquired in 1998, has listed Woods as a fractional aircraft owner since at least 2001. In the December 2009 edition of NetJets Fast Facts on its Web site, the Columbus, Ohio-based company names Woods among other prominent clients including Federer, Aetna Inc. and General Electric Co. Woods is also part of its “Only NetJets” advertising campaign.
NetJets didn’t respond to requests for comment.