Frequently Asked Questions

There are organizations that assign financial ratings to insurance companies.
Who are they and what do they do?

Insurance is a product where the insurance company promises to make future loss payments in return for a premium you pay today. It is therefore important that you know the financial health of the insurer when you are deciding how much you are willing to pay for the product. For example, holding all other things equal, people should pay slightly more for a life insurance policy from an insurance company with a higher financial rating, or should pay slightly less for the same policy from a company which is not as financially strong. In order to make this kind of informed purchasing decision, a number of private organizations, called rating agencies, rate the financial stability of insurance companies. Major insurance rating agencies include the A.M. Best Company, Standard & Poor's, Weiss Research, Duff and Phelps, and Moody's. Each of these companies uses data obtained from various sources to rate the financial strength of insurance companies. It should be noted, however, that each organization has its own rating standards and therefore the financial grades from two different rating agencies may be different. The best advice usually given to insured’s is to check the financial rating of the insurer from as many rating agencies as possible to determine the range of opinions of the financial health of the company.

How frequently should my business insurance policies be reviewed?

Your Business Insurance policy will have to be reviewed frequently in order to adjust it to your needs. You want to make sure you're covered for exactly what you need and do not overpay at the same time. That's why you need to review your Insurance policies at least one a year and make them relevant to your insurance needs. Loyalty to an agent is good but don’t sacrifice coverage and expertise for a personal relationship or premium savings.

When do I report a professional liability claim?

When to Report a Lawsuit from BIA on Vimeo.
Our clients often ask us when and what claims should be reported to their insurance carrier. Our advice is if you are in doubt whether a claim has been made against you — REPORT IT. It is also very important to read your policy. Most insurance companies have specific language in their policy contracts that stipulate what constitutes a claim and how long you have to report the claim. Most claim definitions will read similar to a "claim is a demand received by you for money or services naming you/your bank and alleging an act or omission, including personal injury or advertising injury, in the rendering of professional services. A demand shall include the service of suit or the institution of arbitration proceedings against you." But claim definitions can also be much broader to include a summons or complaint, a letter or verbal threat, notice of arbitration or a simple EEOC filing by a terminated employee. It is better to report an incident or threat even if there is no exchange of lawsuit papers. The insurance company and their legal team can assist you with the best response and the bank will never have to worry about having a claim denied for late reporting.

What is risk analysis?

Risk analysis is a process by which you consider all possible risks and determine which are the most significant for your bank. Risks to consider are Property Damage, Auto liability, Employee injury, Disaster Recovery losses, Employee Theft, various Liabilities (including injuries to customers or to others), Directors and Officers Errors and Omissions Liabilities as well as Computer Systems Fraud and Cyber Crime coverage.

What causes insurance rates to rise?

The most common reason insurance rates rise are losses. Examples are property, auto, employee injury, employee dishonesty, debit card fraud or theft via computer hacking. The insurance company has to make a profit to stay in business so excessive losses will generate premium increases. Other factors include losses on a larger scale like FDIC lawsuits against failing banks in multiple states, multiple hurricane and wind/hail losses and the ever increasing theft via computers and online banking. Keep in mind some catastrophic storms and natural disasters take a few years to settle and price increases now can be from losses brewing for the past two or three years.

What is the purpose of Property Insurance?

Property Insurance is designed to help protect many of the risks your business can face, including: damage or destruction to your bank, office equipment and inventory. Loss of income in case you have to close-up shop temporarily because of a covered loss.

What is Commercial General Liability Insurance?

Commercial General Liability (CGL) insurance is the most common form of insurance to cover the legal liability of an insured for claims arising out of their business premises, operations, products, and completed operations. There are three basic parts of coverage. Bodily Injury and Property Damage (claims involving injury to people or their property), Personal Injury and Advertising Injury (offenses like false arrest, detention or imprisonment; malicious prosecution; wrongful eviction; or advertising activities that cause slander or libel, violates a right of privacy, or infringement of copyright) and Medical Payments (accidents of bodily injury, regardless of fault, that occur on your premises or because of your operations).

What are the benefits of Commercial Auto Insurance?

Commercial auto liability insurance is required coverage in the State of Texas for any vehicle you might own. There are five basic parts of coverage. Liability Coverage –Covers bodily injury and property damage to a third party and protects you in case you’re sued as a result of an auto accident. Collision Coverage - Helps cover physical damage to your vehicle due to collision or upset. Comprehensive Coverage - Helps cover physical damage to your vehicle due to fire, theft and glass breakage. Rental Reimbursement Coverage - Helps cover the cost of a replacement vehicle for a specified period of time when your vehicle is disabled due to an insured loss. Personal injury protection- medical and wages payments for yourself and passengers. Repo Auto Liability-provides liability coverage for autos the bank may repossess and need to drive to auction, for repairs or test drive.

What are the benefits of Workers’ Compensation Insurance?

Workers’ compensation insurance provides for the well-being of your employees and promotes a positive work environment. Workers’ compensation Insurance was created in order to pay employees’ medical expenses and loss of wages in the event of a job-related injury or sickness.

What is a Financial Institution Bond?

Fidelity coverage required by regulators for financial institutions are available via the Financial Institution Bond. The coverage provided consist of four basic insuring agreements: Fidelity (employee dishonesty), On Premises (burglary, robbery, misplacement, mysterious disappearance and larceny on bank site), In Transit (money in transport by bank employees), Counterfeit Money .

What is Computer Systems Fraud?

The Computer Systems Fraud coverage provides protection against loss incurred by the bank due to the theft of electronic data and fraudulent funds transfers resulting from hacking or other fraudulent, illegal, or unauthorized entry into the bank's computer systems. Coverage extends to losses resulting from the use of third-party vendors contracted by the bank, such as Internet banking service providers and data processors. Also included may be Computer Hacker Theft, Fraudulent Entry of Bank’s computer programs, Destruction of data.

What is Directors & Officers coverage?

Directors & Officers Insurance from BIA on Vimeo.
The Directors & Officers (D&O) Liability Policy was designed to protect the personal assets of the Insured Persons against Losses arising from Wrongful Acts, Additional side A coverage provides a simple, cost-effective solution to maximize protection for the bank’s directors and officers, when they need it most — when the bank is unable to provide indemnification, as in the case of certain shareholder suits, securities law violations, or bank insolvency

What is Side A Coverage?

Side A Coverage from BIA on Vimeo.
D&O liability insurance is useful to attract and retain qualified board members. Their personal assets are at risk every day in making decisions to further the growth and success of your organization. Outside directors, in particular, tend to feel more secure when there is an insurance policy in place to back up the organization’s promise to indemnify.

The side “A” portion of the D&O coverage is protection for individual directors, officers of a board in situations when they are not indemnified by the Bank. Side A coverage is included in most standard Bank D&O policies. Excess coverage can also be purchased in the event the insurance carrier for the primary coverage becomes insolvent, underlying limits may be exhausted in the claim process or for some reason the D&O carrier refuses to defend the board or rescinds the policy coverage. In these scenarios, if Excess Side A coverage is purchased and a covered claim occurs, it should drop down to defend the board members.

Review your D&O coverages and discuss with your insurance agent and your board members. Make sure they feel comfortable with the limits being purchased and help them understand excess layers of coverage may be purchased for the exposures of serving on your board.

What is it and when does the bank need “tail” or extended reporting coverage?

What is a Tail? from BIA on Vimeo.

Most professional liability policies are written on a “claims made basis,” including the bank’s directors & officers coverage, cyber liability and card fraud policies. In order for a claim to be considered for coverage, it must be reported to the insurance company during the policy period. A claim reported today that occurred two years ago should be covered as long as there have been continuous professional liability policies in place and there are no retro dates listed on the bank’s policy.

What if the bank cancels its “claims made” professional liability coverage or for some reason has a retro date added to its current claims made policy? In either situation, the bank should buy a “tail or extended reporting endorsement” to ensure there is a period of time after the cancellation of coverage or the addition of a retro date to report any claims not yet reported. Most bankers buy this endorsement when they are selling their bank and no longer need insurance coverage. They want the extended time period to report any claim incident that might have occurred but has yet to be reported to the bank. Retro dates are the second reason banks buy tail or extended reporting coverage. Retro dates build walls that limit the reporting period for claims. If you are presented with a new or renewal policy that has a current retro date, your coverage has been severely limited and the bank will need to purchase the tail coverage for protection.

What is Employment Practices Coverage?

Employment Practices Liability coverage protects against Losses arising from Wrongful Employment Acts. Loss examples include judgments, settlements, defense costs, and punitive damages (where insurable by law) alleged wrongful termination, discrimination, sexual harassment or certain other violations of statutory or common law relating to employment.

What is Lender Liability?

Lender Liability coverage protects against losses relating to extensions of credit, agreements or refusals to extend credit, loan servicing, or the collection or restructuring of any extension of credit.

What is Fiduciary Liability?

Fiduciary Liability coverage protects against lawsuits brought by employees (plan participants) for losses resulting from the administration of any Employee Benefit Plan offered by the Company. Coverage also includes Voluntary Correction Program Fees. Coverage is provided for judgments, settlements and defense costs arising from the administration of any Employee Benefit Plan or the violation of any responsibilities or duties imposed by Employee Retirement Income Security Act of 1974 (ERISA), or any common law or statutory law relating to any Employee Benefit Plan

What is Internet Banking Liability?

The Internet Banking Liability Policy provides electronic banking coverage for Losses arising from Wrongful Internet/Electronic Banking Acts. These acts are any actual or alleged omission, error, misstatement, misleading statement, neglect or breach of duty committed in connection with the provision of Internet banking services.