According to Chubb’s 2013 Private Company Survey:
• Seventy-three percent of companies use outside service providers to administer their employee benefit plans. Yet, only 46 percent of private companies take measures that can help reduce their fiduciary liability exposure, including adequately reviewing administrative fees being charged to their plan and assessing whether the plan operates in the beneficiaries’ best interests.
• Twenty-one percent of companies use cloud providers to store and retrieve data. Of those, only 54 percent have an incident response plan for cyber breaches, including the theft of confidential customer information.
• Forty-two percent of the companies have a broad exclusionary policy against hiring employees with criminal backgrounds, a violation of some states’ laws.
• Sixty-eight percent of the companies use social media—up from 39 percent in 2010—but only 12 percent are concerned that they will be sued for allegedly making defamatory posts, and only 49 percent have a written social media usage policy for their employees.
“Many private companies have not taken the loss prevention measures and have not purchased the appropriate insurance to help insulate themselves from litigation, government fines and their related financial and reputational consequences,” said Tracey Vispoli, senior vice president and specialty insurance global customer segments leader, Chubb Group of Insurance Companies. “This is surprising in light of the fact that a large number of these firms have been sued in recent years by employees, customers, government agencies and other parties, and many are planning to participate in activities such as mergers that can increase their risk profile.”
In the past three years, nearly half of private companies surveyed have experienced at least one loss event related to directors' and officers' liability, employment practices liability, fiduciary liability, crime, workplace violence or cyber liability. In the next 12 months, 40 percent of the survey participants are likely to merge with or acquire another firm, reduce the size of their workforce and/or cut back on employee benefits.
The Chubb 2013 Private Company Risk Survey was conducted by Pollara, an independent public opinion and market research firm. Pollara interviewed executives at 450 U.S. for-profit private companies, more than 90 percent of which had annual revenues of less than $25m.
Source: Chubb Group