Three ways midsize companies create business value with insurance

In this article, Liberty Mutual Global Risk Solutions’ Marc Orloff, president of the North America middle market, and Mark Kurland, senior director of underwriting for middle market multi-industry/technology, discuss three ways industry-specific insurance programs can help midsize companies manage risks, build resilience, and create business value.

Midsize companies — known as “middle-market enterprises” — are a powerhouse for the U.S. economy, accounting for 33 percent of revenue and 30 percent of all private-sector jobs. Despite generating a whopping $13 trillion in revenue annually, however, this middle market is still too often neglected as a discrete market with its own problems. Given this unique set of challenges, America’s 300,000 midsize businesses can benefit from the right insurance programs to manage risk effectively.

Many of those challenges stem from falling into a grey area between large and small. For example, despite employing more than a third of all American workers, midsize companies can face greater challenges in attracting talent and succession planning. When it comes to funding, they may be too large to qualify for government programs aimed at supporting small businesses, but not large enough to access capital or leverage other sources of support easily. These constraints can hamper digitalization and globalization efforts, which, in turn, hinder attempts to grow.

Liberty Mutual Global Risk Solutions’ Marc Orloff, president of the North America middle market, and Mark Kurland, senior director of underwriting for middle market multi-industry/technology, outline three ways industry-specific insurance programs can help midsize companies build resilience, create business value, and protect their bottom line.

“Business is done differently in the middle market,” says Orloff. “Brokers, agents, and insurance carriers have a tremendous opportunity to add value by helping them better understand the full range of risks they face, and how to mitigate and manage them holistically.”

Unlike larger firms that might have many risk-management relationships, middle-market businesses can benefit greatly from a single provider who provides specialized underwriting to address risks across the entire organization. That way, the full scope of industry-specific exposures and market trends can be considered and planned for. This holistic, integrated approach allows underwriters to compare capacity, pricing, and the market to limit coverage gaps and/or overlaps and achieve the best value for customers.

According to Orloff, midsize businesses are complex and require tailored insurance solutions, but unlike enterprise companies, many of them lack an in-house risk manager. “Having a single point of contact to handle their insurance, risk control, and claims needs enables a seamless, gap-free program that addresses a business’ unique exposures and helps ensure efficient utilization of risk mitigation resources to align with their coverage,” says Orloff.

From labor shortages and supply chain disruption to severe weather and cyber threats, a variety of risks continues to evolve and challenge businesses in different ways. Working with an insurance partner with industry expertise enables a company to understand how major risks might affect operations and what that means from an insurance perspective so it can focus on what it does best.

As an example, exposure to cyber events affects businesses of all industries and sizes. The cyber insurance market is expected to double over the next five years, reaching nearly $100 billion by 2030. But while all midsize businesses should have cyber on their radars, the impact of an event on a company can be very different depending on the industry. 

As an example, for a tech company producing software that controls machinery, electronics, or medical devices, a malfunction — whether due to nefarious actors or an innocent programming error — can result in property damage, bodily harm, and/or loss of sensitive data.

“Cyber remains a fluid risk, with property and general liability exposures that underwriters can address in different ways. But for the technology sector, for example, the conflation of digital and physical risks is especially pertinent,” says Kurland.

From an insurance standpoint, injury or equipment damage would be considered a traditional general liability or product liability claim rather than a cyber liability claim, which focuses on the digital data aspect of a loss.

“You don’t want to underwrite this type of risk in silos or without an industry-specific lens,” says Kurland. “In tech, cyber events can impact both cyber and property and casualty lines, so it benefits companies to have one underwriter who understands the nuances of this exposure and can coordinate the approach to deliver seamless, integrated coverage.”

The types of risks facing a business can vary depending on its industry, geographic location, and more. However, all businesses need to navigate the turbulent economies and their effect on insurance costs and available capacity. For midsize companies with limited budgets, partnering with the right insurance carrier can make all the difference.  

An overview of the challenges facing financial institutions in the property market helps underscore the advantages of developing a long-term partnership with a trusted industry expert.

“In the financial sector, there have been shifting exposures because of the impacts of rising inflation on borrowing and personal lines market volatility on insuring mortgaged properties,” says Kurland.

This is especially true in areas with significant natural catastrophe exposures — like coastal areas of California with wildfire hazards — where there’s an increased potential for borrowers to have a lapse in their personal homeowner’s coverage.

“For banks and mortgage lenders with portfolios in these areas, this can increase mortgage impairment and mortgagee errors and omissions (known as “E&O”) liability and may make it more challenging to maintain these coverages,” notes Kurland.

Managing this set of risks is no easy task and requires a full picture of a client’s aggregate risk along with its exposure to CAT perils (e.g., flood, hurricanes, convective storms, wildfires). Other factors, such as the current capacity of physical locations, the effects of inflation on property valuations, and the potential impact of social inflation and legal system abuse on premises liability claims, should also be closely reviewed.

Bottom line? Working with a single carrier that has visibility into these various risks versus spreading your program out across multiple carriers through business cycles can help ensure more stable coverage and peace of mind.

In times of economic uncertainty, a trusted insurance advisor can be a differentiator for midsize companies, helping them navigate turbulent markets and position themselves for future growth.

“We know we have the products across Liberty Mutual to meet any client’s need. That already exists,” says Orloff. “But by understanding the client’s true needs, we can be systematic in how we enable those products seamlessly. It all comes down to industry specialization and putting the client front and center.”

To find out more about how Liberty Mutual can help midsize companies mitigate risk and strategize for future growth, check out our middle-market offerings here.