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Active Insurance Mitigates Risk for 6 Hot D&O Issues in 2022

Coalition Active-Insurance for D&O

While the digital transformation of the 21st century — especially during the last two years of the COVID-19 pandemic — has allowed businesses to reach customers more efficiently and streamline their operations, it has also brought new business risks. Simply transferring and mitigating risk is no longer enough to protect key stakeholders, whose decisions and oversights are more easily scrutinized online and can lead to more far-reaching public risk.

Traditional Directors and Officers (D&O) insurance coverage protects executive leadership in the event of personal litigation or lawsuits from employees, vendors, and the like. However, Coalition’s Active Insurance can help customers react and recover more quickly to digital risks by combining the power of our scanning technology, real-time data analysis, and comprehensive insurance coverage to create something more responsive to today’s digital environment.

Here are six risks your D&O clients are facing in 2022 and how Coalition’s Active Insurance can help you support them.

1. Transactional risk

All too often, directors and officers on both sides of a merger or acquisition are unaware of the new level of risk they face. During the M&A, leadership needs to ensure there are no conflicts of interest or personal motivations that could lead to litigation. Are the directors and officers acting on a reasonably informed basis and in the best interests of the shareholders and corporation?

As a broker, you understand that a company’s policy may go into runoff at the time of the merger or change of control. However, too often, you aren’t notified of the merger and your client unknowingly moves forward without coverage, leaving directors and officers extremely vulnerable.

+Active Insurance: Unless you are actively searching the web for updates on all of your clients, an M&A event or new PE investment can go undetected. Active insurance does the research for you, continuously scanning the insured’s activities to alert you of any important changes that might impact their coverage. In the same vein, if your client changes its name, operations, or website, or if it adds investors, Coalition can let you know.

2. Cyber risk and data breach

Long gone are the days when cyber breaches were only a threat to massive corporations and technology companies. Each year, the number of data breaches increases, with 2021 as the highest to date, exceeding 2020 by over 17%. Smaller organizations are at greater risk, especially in a post-COVID environment where many were forced to quickly transition to digital operations.

In 2021, Coalition saw a 57% increase in the frequency of attacks against organizations with under 250 employees. An organization’s cyber risk management and response program is now an enterprise-wide responsibility, depending heavily on leadership to establish cybersecurity as a top priority.

+Active Insurance: Where traditional cyber insurance only relies on historical data to predict current and future risk, and is engaged primarily at key moments such as during a claim, active insurance is always working to protect your clients. It provides an extra layer to your client’s risk management program with ongoing digital scans of your company’s profile and the dark web to identify new vulnerabilities or suspicious activity, alerting the company of the attack before it becomes a major issue.

3. Hiring and retaining employee risk

On average, in 2021, more than 3.9 million workers quit their jobs each month, with a record-breaking 4.5 million in November 2021. Recognized as the Great Resignation brought on by the pandemic and shifting priorities among the workforce, this turnover has motivated many organizations to track employee sentiment better. A company’s remaining workforce also looks quite different than it did two years ago, with remote work and distributed employees now the norm.

For directors and officers, this opens up a new level of risk, opening up leadership to employment issues with dissatisfied workers.

+Active Insurance: Active insurance helps track employee sentiment and keeps a pulse on your client’s risk by analyzing whether or not the company is meeting employee needs. This is tracked through online reviews identifying trends of your client’s workforce which could lead to claims.

4. Reputational risk

Digital risk is not only limited to a planned attack. Reputational risk is a consideration for organizations of all industries and sizes. Keeping pace with all of the places an organization can be reviewed is a challenge. A Pew Research Center survey conducted in the first quarter of 2021 established that 31% of adults self-report online activity “almost constantly” and 85% report going online daily. The amount and speed at which information spreads online can be overwhelming without the right help.

+Active Insurance: Coalition’s Active Insurance team keeps a pulse on your client’s profile and reputation. It answers the questions:

  • What is the overall sentiment of the company based on news coverage?

  • What customer reviews exist and where?

  • What organizational changes might be responsible for any negative public perception?

Alerting companies to these shifts in sentiment and helping determine solutions can prevent escalation and litigation down the line.

5. Event-driven litigation

When an event takes place at one of your client’s organizations — such as public claims of discrimination, harassment, or antitrust compliance — it can be difficult for them to stay on top of the claims process. As their broker, you provide advice and guide them through this process. However, oftentimes, as the broker you're often the last to know of key company changes/events.

+Active Insurance: Active Insurance can detect potential issues quicker by scanning for specific violations taking place at your client’s institutions. With both the client leadership and broker awareness in these situations, the right steps can be taken at the right time to avoid costly litigation and fees.

6. Executive compensation

To take an organization to the next operational level, you often need to invest in the right talent. However, it's a catch-22 for many organizations, specifically those in the nonprofit sectors. Publicizing executive compensation for these organizations can lead to issues of executive pay litigation.

+Active Insurance: The right guidance and due diligence can be provided upfront to your nonprofit clients to help make appropriate decisions when it comes to executive compensation. If your client is part of a study showing companies with leaders receiving above average compensation — perhaps making them a target — you should know.

Protect what matters most with Coalition D&O and EPL

Coalition sits at an ideal intersection of technology, security, and insurance. We launched our executive risk products with a broker platform that utilizes real-time financial, regulatory, and transactional data to generate bindable D&O and EPL quotes in minutes, creating a seamless quoting experience for brokers.

Executive risk coverage is available to all broker partners. Interested in offering our executive risk products to your clients? Visit Coalition now to learn how to bring a new approach to executive risks.