Rough Notes November 2017 : Page 36

F US FOCUS ON N SECURITY S E C U URITY R I T Y Security market poised to grow as use of video surveillance increases By Lori Widmer If Memoori. That same report estimates that the global security products mar-ket will reach $42 billion by 2020. 2017 could have a label, it would be the year of video surveillance. As body cameras become part of the security officer’s uniform, the market is responding. In fact, the worldwide security market is poised to grow at a rapid pace—from an esti-mated $69.63 billion in 2016 to more than $112 billion by 2021, according to a MarketsandMarkets.com report. That’s a boon for the security products industry. In 2015, world sales of security products surpassed $27.2 billion, with video surveillance equipment alone topping $14.68 bil-lion. That’s a 10% increase over 2014, according to The Physical Security Business 2015 to 2020 report by Market influences Karen Izzo, president of Izzo Insurance Services, says the security guard industry is now inextricably tied with technology. The marriage of what Karen calls “boots on the ground” with electronic equipment is what’s driving success within the security industry. “This combination of physi-cal and technological defense lessens exposure to liability claims because of undetected intrusion,” she says. “For the same reason, we see a reduction in guard injuries.” Technology, says Tory Brownyard, president of The Brownyard Group, will continue to drive the industry. “We see new technology almost weekly,” he says. Tory says he’s seen a significant number of inquiries regarding body cameras and if firms might get some credit on their premiums for using them. “At this time, there are no addi-tional credits—it’s just too new.” Still, Tory believes the impact on the industry will be a positive one. Guards, he says, will be more inclined to follow protocols, “not to mention that all the video footage can be used as a training tool. On the claims side, it’s going to reduce claims expenses because not a lot of investigation will be needed.” Currently Tory has seen increased demand on the security industry due to natural disasters. He says as Hurricane Irma hit the state of Florida, guard firms were being called ROUGH NOTES 36

Focus On Security

Lori Widmer

Security market poised to grow as use of video surveillance increases

If 2017 could have a label, it would be the year of video surveillance.

As body cameras become part of the security officer’s uniform, the market is responding. In fact, the worldwide security market is poised to grow at a rapid pace—from an estimated $69.63 billion in 2016 to more than $112 billion by 2021, according to a MarketsandMarkets.com report.

That’s a boon for the security products industry. In 2015, world sales of security products surpassed $27.2 billion, with video surveillance equipment alone topping $14.68 billion. That’s a 10% increase over 2014, according to The Physical Security Business 2015 to 2020 report by Memoori. That same report estimates that the global security products market will reach $42 billion by 2020.

Market influences

Karen Izzo, president of Izzo Insurance Services, says the security guard industry is now inextricably tied with technology. The marriage of what Karen calls “boots on the ground” with electronic equipment is what’s driving success within the security industry. “This combination of physical and technological defense lessens exposure to liability claims because of undetected intrusion,” she says. “For the same reason, we see a reduction in guard injuries.”

Technology, says Tory Brownyard, president of The Brownyard Group, will continue to drive the industry. “We see new technology almost weekly,” he says. Tory says he’s seen a significant number of inquiries regarding body cameras and if firms might get some credit on their premiums for using them. “At this time, there are no additional credits—it’s just too new.”

Still, Tory believes the impact on the industry will be a positive one. Guards, he says, will be more inclined to follow protocols, “not to mention that all the video footage can be used as a training tool. On the claims side, it’s going to reduce claims expenses because not a lot of investigation will be needed.”

Currently Tory has seen increased demand on the security industry due to natural disasters. He says as Hurricane Irma hit the state of Florida, guard firms were being called to augment the manpower and curb looting and violence in the storm’s aftermath. “We’re focused on educating them that they have to have the proper licensing and contractual arrangements.”

From Karen’s perspective, the security guard market has seen fewer liability claims and workers compensation claims, which has reduced insurance costs for guard firms. She adds that technology is helping to further reduce the firms’ exposures at on-site jobs.

Coverage

Even with the introduction of video surveillance, coverage is tightening. “Pricing seems to be steady with no drastic changes,” says Angela Ward, assistant vice president of underwriting at MJ Kelly Company. And while new products are not being introduced, says Blair Brownyard, vice president of Brownyard Program Insurance Services, the market is still seeing products being offered that are new to the security industry, though not to insurance. “The new products that are being carefully offered by the insurance industry include cyber and drone/unmanned aerial vehicles (UAV) products offered as stand-alone and endorsements to security industry policies,” says Blair. “Both areas are proving to be endemic to the security industry, with cyber security becoming an easy crossover for security firms and UAV operations as a helpful tool in security, as well.” Blair adds that coverage is widely varying across carriers.

There is an uptick in the number of requests for cyber liability, says Tory, who says he’s seen more demand for excess and umbrella limits on that, as well as higher limits for GL, workers comp, and commercial auto. “The clients’ specs are calling for those higher limits.”

Ironically, pricing is being influenced by factors outside of the security market, he adds. “The commercial auto on the whole is experiencing a hardening due to the loss experience—in 2016 the combined ratios for all carriers was 110%. We believe the driving force for this is distracted driving.”

That poor loss experience, Tory says, is carrying over to the other lines of business. “Carriers are not able to get all the rate increase they need to make up that 110% on the auto alone. So they’re putting those increases across all lines.”

Claim drivers

That’s not to say that the security industry doesn’t have its own claim pressures. Angela says assault and battery and personal and advertising injury claims are the more common drivers. Plus, “armed security will still be significantly higher than an unarmed risk. Clientele can definitely be a factor. Nightclubs, bars and taverns, and concert security are among the highest risk severity clients,” she points out.

One trend that Karen says is impacting claims is the increased demand on security guards to perform tasks that fall outside of their job description. “At a retail store they may be asked to move products or bring in shopping carts, resulting in injury and workers compensation claims. At a nursing home, they may be asked to deliver newspapers to the doors of residents, resulting in an unmanned desk and the potential for liability claims.”

Tory sees this as an issue, too, particularly within healthcare. “We’re seeing guard firms being brought into very serious claims both from the GL and workers comp standpoint. Guard firms are being called to replace or supplement private police. The guards are being called to provide not only protection, but to restrain patients and help put them on dollies.”

Karen says it’s that kind of expansion of duties that requires the most diligence by guard firms. “Clear direction from security management instructing guards to stick to their security duties is critical. Guards naturally offer assistance at posts while they are stationed. Helping someone may be the courteous thing to do, but they are not hired to be concierge attendants—rather than security professionals. Good training teaches the guards to stick to their assigned duties, lessening both liability and workers compensation claims.”

Blair adds that contractual and indemnification liability claims are still large claim drivers. “The review of contracts is very important to the client for transferring risk. Larger settlements tend to be associated with large property management clients and retail/commercial clients who demand unfavorable contract wording for the security firm, and the client job locations tend to have more exposure in public hazards. Retailers can’t demand that the security companies they insure avoid a certain type of job or client, but they can alert them to the risk level of potential clients in their business development,” he says.

Advice

Karen says that agents and brokers that specialize in the security industry can bring a level of understanding to the risk management process. She encourages brokers and agents to study the market and become more educated in existing and evolving security exposures.

Also, Karen says brokers should be asking security program providers about specific loss control and claims management programs provided free of charge to policyholders. “Documented proof of effective claims handling results ultimately reduces insurance costs to the guard companies,” she adds.

That expertise comes in handy, and Angela says agents and brokers must take charge of educating their insureds. “As with any quote, properly explaining coverages and possible gaps in coverage to the insured will help the agent bind. Helping the insured understand the high probability of claims in their industry and the need for the coverages allows the insured to make the best choice for his or her insurance needs.”

The author

Lori Widmer is a Philadelphia-based writer and editor who specializes in insurance and risk management.

ÒThis combination of physical and technological defense lessens exposure to liability claims because of undetected intrusion.

For the same reason, we see a reduction in guard injuries.”

—Karen Izzo
President
Izzo Insurance Services

Read the full article at http://browndigital.bpc.com/article/Focus+On+Security/2920995/448423/article.html.

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