Jason Ott is president of Aon Private Risk Management, which works on personal insurance programs, focusing on property and liability issues with over 250 single family offices and over 550 multifamily office clients. He talks about changes in the market for liability insurance:
How do you see the market for liability insurance changing?
Five years ago, it was pretty easy for a broker to obtain $100 million in liability coverage. The underwriters would ask a lot of questions — they would look at the family and their activities — but we were able to secure those very high limits. Then the markets changed dramatically. Some carriers non-renewed or reduced the coverage offerings — for example, moved from $100 million to $50 million. And now, what we’re seeing is at times it can be difficult to obtain $50 million in coverage.
An average individual that I work with would probably have somewhere between $5 million to $25 million in liability insurance. And when you’re working with a family, you might have G1 or G2 at $50 million, and then the second or third generations at $25 million, and then the third or fourth generations would have $5 or $10 million just based on where they are in their lives. What we’re seeing is that it can be hard to get those higher limits.
What is driving these changes in the market?
One reason is that there has been an increase in what we call ‘nuclear verdicts’ — really shock verdicts or payouts. That’s had to do with third-party litigation funding from private equity. These can be bodily injury cases — for example, a horrible car accident where someone is catastrophically injured or killed — or cases like libel or slander. A normal law firm would only go after a case for a year or two. But private equity firms are looking at this and saying, ‘We can fund this for three to five years. We can put the money in with the idea that there will be a large payout.’ Some states are addressing this through legislation, but in other states, it has not been addressed at all. That’s leading to higher payouts, because it’s so lucrative.
Another reason is driving patterns: Cars have more safety features than they have ever had, but we’re distracted. Those fatalities, or accidents where people are catastrophically injured, come with large payouts.
One other issue — which should be starting to even out now — is that we had a slowdown in the courts due to the pandemic closures. There has been a pipeline of cases, with the industry catching up from a two-year slowdown. That’s another thing that’s driving losses in the casualty space. But it made the two most recent years very unprofitable.
What can families and family offices do to protect themselves?
What you’re doing and saying in the media and online on social media is very important. The lower the profile, the better. You can work with a security firm to scrub your activity from the internet or to bury it, and to put best practices in place for the family regarding social media.
On social media, the risks often extend into physical and property protection. If someone in G3 or G4 takes photos inside grandpa and grandma’s house that inadvertently reveals a piece of art or disclose the family’s physical location, and posts it in real-time on Instagram, it can provide bad actors with ideas on how to target the family — potentially creating a situation that could lead bad actors to target a family that might create liability issues, physical harm or theft of property.
