I hope this year is shaping up to be your best one yet. Something we’ve done the last couple of years at Brown & Brown Northwest is pick an annual theme, and I’ll admit that I was not always sold on this idea. We’re running a business, not a kindergarten – a sentiment that may not be lost on all of you.
An observation I’ll share, that changed my tune, is that having a theme brings teammates together. It is one more commonality and something we have a lot of fun with. This year, with the Grand Prix returning to Portland International Raceway, what better theme than car racing?
What works so well about car racing is that it is a metaphor for staying competitive and relevant in our respective businesses. Like a race car driver, a business leader in today’s climate must stay focused on what’s ahead and keep his foot on the gas while negotiating the twists, turns, any number of surprises, and other cars gunning to pass him on the track. Just as relevant as the metaphor of the race car driver is the metaphor of the pit crew.
In my last letter I mentioned that the servicing team at Brown & Brown Northwest Insurance is the best in the business, and I’m mentioning it again – it is worth repeating. For all things related to insurance and employee benefits, Brown & Brown Northwest is your pit crew. Enjoy this issue of our newsletter, and as always, reach out to your broker if you have questions or comments.
Focused on the road ahead,
State of the Market: Reinsurance Market Prospective, “Weathering the Storm”
After five consecutive years of falling rates, global property-catastrophe reinsurance1 experienced upward pricing pressure at start of 2018 with significant variance across regions. This was driven in large part by 2017 being the sector’s most expensive loss year on record after hurricanes Harvey, Irma and Maria delivered a devastating triple blow to coastal regions of the United States and the Caribbean. The spate of fierce wildfires in California towards the end of the year added to loss burdens and, when combined with other significant events, pushed insured catastrophe losses marginally above $140 billion for the first time ever.
Recent weeks and months have once again demonstrated the resilience of the reinsurance market and its ability to trade through trying times. During this time, carriers have paid out billions of dollars in claims without incurring significant capital impairments or any agency rating downgrades. This is quite an achievement considering the significant loss experience in 2017. After several years of below average catastrophe losses, last year was a reminder that carriers must be prepared for higher levels of catastrophe losses in future years. After all, insured catastrophe losses have now exceeded $100 billion three times in the last 15 years.
1Reinsurance is insurance that is purchased by an insurance company. In the classic case, reinsurance allows insurance companies to remain solvent after major claims events, such as major disasters like hurricanes and wildfires. In addition to its basic role in risk management, reinsurance is sometimes used for tax mitigation and other reasons.
ACA Update: Spending Resolution H.R. 195 Impact on Taxes
On January 22nd, 2018, President Trump signed into law a short-term continuing spending resolution (H.R. 195) which impacts some of the taxes and fees under the Affordable Care Act (ACA). Key changes to be aware of affect both the Cadillac Tax and the Health Insurance Providers Fee.
Implementation of Cadillac Tax Delayed until 2022
The ACA imposes a 40% excise tax on high-cost group health coverage, also known as the “Cadillac Tax.” This provision taxes the amount, if any, by which the monthly cost of an employee’s applicable employer-sponsored health coverage exceeds the annual limitation (called the employee’s excess benefit). The tax amount for each employee’s coverage will be calculated by the employer and paid by the coverage provider.
Although originally intended to take effect in 2013, the Cadillac Tax was immediately delayed until 2018 following the ACA’s enactment. A federal budget bill enacted for 2016 further delayed implementation of this tax until 2020, removed a provision prohibiting the Cadillac Tax from being deducted as a business expense, and required a study to be conducted on the age and gender adjustment to the annual limit.
The continuing resolution delays implementation of the Cadillac Tax for an additional two years, until 2022. There is some indication that this additional delay will lead to an eventual repeal of the Cadillac Tax provision altogether. Over the past several years, several bills have been introduced into Congress to repeal this tax. Although President Trump has not directly indicated that he intends to repeal the Cadillac Tax, he has stated that repealing and replacing the ACA is a key goal for his administration.
Health Insurance Providers Fee Moratorium
Beginning in 2014, the ACA imposed an annual, non-deductible fee on the health insurance sector and allocated according to market share. This Health Insurance Providers Fee, which is treated as an excise tax, must be paid by September 30th of each calendar year.
The 2016 federal budget suspended collection of the Health Insurance Providers Fee for the 2017 calendar year only. The continuing resolution will provide a one-year moratorium on the fee for 2019 and specifically declines the moratorium for 2018. Therefore, the Health Insurance Providers Fee will be due for the 2018 calendar year.
Employers are not directly subject to the Health Insurance Providers Fee. However, some insurance providers have been passing the cost of the fee on to the employers sponsoring the coverage. As a result, the moratorium may result in significant savings for some employers on their health insurance rates.
Employers should be aware of the evolving applicability of existing ACA taxes and fees so that they know how the ACA affects their bottom lines. Brown & Brown Northwest will continue to keep you informed of changes.
Critical Cyber Exploits Affect Nearly All Computers
Cyber security researchers recently announced the discovery of two major security flaws that could allow hackers to bypass regular security measures and obtain normally inaccessible data. The flaws, referred to as Meltdown and Spectre, are both caused by design flaws found in nearly all modern processors. These vulnerabilities can be exploited to access all of the data found in personal computers, servers, cloud computing services and mobile devices.
Because Meltdown and Spectre are both caused by design flaws, experts believe that they will be harder to fix than traditional security exploits. Additionally, software patches that have already been released to help address the vulnerabilities can cause computer systems to slow down significantly, which may impact their ability to perform regular tasks.
Researchers believe that Meltdown and Spectre may be limited to processors manufactured by different companies, but also warn that the design flaws that contribute to Meltdown and Spectre have been present for years. Here are some key details about each flaw:
Meltdown: This flaw can be used to break down the security barriers between a device’s applications and operating system in order to access all of the device’s data. Meltdown can be used to access desktop, laptop, server and cloud computer systems, and can even be used to steal data from multiple users who share one device. Although researchers have only been able to verify that Meltdown affects processors made by Intel, other processors may also be affected. Many software developers have already released updates that prevent hackers from exploiting Meltdown.
Spectre: This flaw can be used to break down the security barriers between a device’s different applications and access sensitive data like passwords, photos and documents, even if those applications adhere to regular security checks. Spectre affects almost every type of computer system, including computers, servers and smartphones. Additionally, researchers have confirmed that the design flaw that enables Spectre is present in Intel, AMD and ARM processors that are used by nearly every computer and mobile device. Software developers are currently working on a patch to prevent the exploitation of Spectre, but some experts believe that future processors may have to be redesigned in order to fix the vulnerability.
When Meltdown and Spectre were originally discovered in 2017, researchers immediately reported them to major hardware and software companies so work on security fixes could begin without alerting hackers. As a result, services and applications offered by companies like Microsoft, Google, Apple and Amazon have already been updated to help defend against the flaws. However, you shouldn’t rely solely on a software patch to protect against these vulnerabilities. Here are some steps you can take to protect your computer systems and devices from Meltdown and Spectre:
• Update all of your devices immediately, and check for new updates regularly. You should also encourage your friends, family members and co-workers to do the same.
• Contact any cloud service providers and third-party vendors you use to ensure that they are protected against Meltdown and Spectre. Cloud services and computer servers are especially vulnerable to the exploits, as they often host multiple customers on a single device.
• Install anti-virus and firewall systems to protect against regular malware. Researchers believe that hackers need to gain access to a device in order to exploit Meltdown or Spectre, so keeping your devices free of malware can help prevent data theft.
HR Insights: Top 10 Workplace Discrimination Claims
Retaliation claims are the most frequently filed charge of discrimination – making up more than 48 percent of all charges filed in 2017. The number of retaliation lawsuits may continue to rise in the future due to new regulations proposed by the EEOC.
In 2017, the Equal Employment Opportunity Commission (EEOC) resolved more than 99,109 workplace discrimination claims—securing more than $398 million from employers in the private and public sectors as a result of these claims. Discrimination lawsuits can be very time-consuming and expensive for employers, and can result in a loss of employee morale or reputation within the community.
Top Causes of Discrimination Claims
According to the EEOC, the following are the top 10 reasons for workplace discrimination claims in fiscal year 2017:
1. Retaliation—41,097 (48.8 percent of all charges filed)
2. Race—28,528 (33.9 percent)
3. Disability—26,838 (31.9 percent)
4. Sex—25,605 (30.4 percent)
5. Age—18,376 (21.8 percent)
6. National origin—8,299 (9.8 percent)
7. Religion—3,436 (4.1 percent)
8. Color—3,240 (3.8 percent)
9. Equal Pay Act—996 (1.2 percent)
10. Genetic Information Nondiscrimination Act—206 (0.2 percent)
These percentages add up to more than 100 percent because some lawsuits were filed alleging multiple reasons for discrimination.
What Employers Should Do
Employers should take the following steps to protect themselves from retaliation and other discrimination claims:
• Audit their practices to uncover any problematic situations.
• Create a clear anti-retaliation policy that includes specific examples of what management can and cannot do when disciplining or terminating employees.
• Provide training to management and employees on anti-retaliation and other discrimination policies.
• Implement a user-friendly internal complaint procedure for employees.
• Uphold a standard of workplace civility, which can reduce retaliatory behaviors.
For more information on discrimination claims and for tips on how to protect your business, contact Brown & Brown Northwest today.
New Hijacking Threat to Voice-Activated Technology
Voice-activated assistants like Google Assistant, Siri by Apple, and Amazon Alexa were built to make our lives easier and are becoming increasingly popular as the world embraces Artificial Intelligence technology. About 20 million homes already have a voice-activated assistant, according to Consumer Intelligence Research Partners. Big tech companies continually compete to have the most effective product on the market. One way to accomplish this is to personalize the product to individual users. However, this tailoring requires a great deal of personal information to be shared with the device, which can be a goldmine for cyber-criminals.
Each digital assistant is always listening and programmed to listen for a “wake word.” The Google Assistant takes orders once a person says “OK Google” while Siri responds to “Hey Siri” and Amazon Alexa activates once it hears “Alexa.” Researchers claim to have found a way to hijack the voice-activated assistants, referred to as a “Dolphin Attack,” by using ultrasonic audio commands to access the device without the user’s consent. Researchers hacked 16 devices using the Dolphin attack, including: iPhone 4 to iPhone 7 Plus, iPad mini 4, MacBook, Apple Watch, Nexus 7, Samsung Galaxy S6, Huawei Honor 6, Amazon Echo and the Audi Q3.
How likely is an attack?
A broadcasting device must be within five to six feet of the victim and needs a reasonably quiet location. A smartphone needs to be unlocked before any sensitive activity, such as viewing websites, is allowed. The Dolphin Attack does not work on devices trained to respond to only one person’s voice, which is a feature on the Google Assistant. Both Apple and Google allow “wake words” to be turned off to prevent activation without permission.
You can Protect Yourself
Be sure to use strong passcodes and get to know your smart devices and their privacy settings. Do not allow the device to store all your passwords, credit card data, and contact information. Be aware of current issues happening in the industry and ask your providers questions.
In the Community: BBNW Fundraising Efforts Benefit Local Charities
Teammates David Murray and Jackie McCloskey partnered with AmTrust to deliver custom gift baskets to Boys & Girls Aid, Oregon’s oldest non-profit working to find forever homes for foster and adoptive children across the state.
1, 2, 3, 4, we declared a Penny War!! This war makes cents – literally!! Portland teammates are fighting by donating pennies and bills, matching donations, and “sabotaging” each other with silver coins. The clear winners in this war will be these great charities: for Make-A-Wish, RentWell, and Metropolitan Family Service.