The Fed’s Inflation Fight and the Markets

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Markets have been troubled. Open any brokerage or 401(K) statement and you are likely to see a page of red. It seems that nearly everything has gone precisely the wrong way: bonds are down, stocks are down, and gas prices (along with the price of nearly everything else we purchase) are up.

Fear and uncertainty abound, and the headlines foreshadowing the end of the world are not helping.

And yet…perspective matters.

There are three important points:

  1. While painful, what has occurred is a healthy and needed reaction to the withdrawal of liquidity.
  2. I am beginning to find more optimism in our monetary policy than I have in nearly three decades.
  3. This is not the time to react emotionally. Even if we are pushed into a recession, if history is any indication, we will likely be fine.

With that, let us begin.

Liquidity and monetary policy

As we’ve discussed in previous updates, the U.S. Federal Reserve is the Central Bank to the United States and, as the name states, is essentially the lender of last resort. The Fed (as it is colloquially referred) has very crude tools. It can:

  • Signal what it’s going to do by talking.
  • Raise and lower the rates at which banks borrow (through one mechanism called the Federal Funds rate).
  • Expand its balance sheet by (essentially) printing currency and buying bonds.

For the sake of brevity today, generally speaking, the Fed cuts rates when unemployment is too high and raises rates when inflation is too high (remember the dual mandate).

Yet, for four decades, the Federal Reserve has provided more and more liquidity by steadily lowering rates. And yet, for four decades, growth has been, by and large, strong and unemployment has been, by and large, reasonably low (with some exceptions).

This introduced a strange dynamic where each time the Fed cut rates, it would cut much more deeply than when it would raise rates … hence, rates fell over a long period of time.
This is, in essence, just an expansion of liquidity. If a consumer would want to borrow $10,000 at 5 percent, they would probably be willing to borrow a much higher sum at 3 percent.

More broadly, in the last three years, for example, the Federal Reserve has created (through the Treasury) an additional $5 trillion (yes, trillion) out of thin air to help counteract the economic effects of COVID-19. In 2007/2008, the Fed introduced a bit over $1 trillion to counteract damage from the Global Financial Crisis. To be clear, some of this was absolutely needed and a good deal of it was remarkably effective.

And yet, as with anything, there are no absolute decisions, only tradeoffs. The obvious consequence is we have increased the money supply in the United States and, therefore, the value of our dollars has diminished. This, along with pent-up demand from COVID and supply chain disruptions, caused inflation to rise … and has created a very specific form of inflation referred to as monetary inflation.

As such, once it was clear inflation wasn’t “transitory,” the Fed finally began taking steps to reverse the cycle.

First it signaled it was slowing or stopping the expansion of its balance sheet, then it signaled it was going to raise rates and now it is in the process of raising rates.

As markets (both financial and physical) went up because rates went lower, markets go down when rates go higher. On the margin, the introduction of liquidity makes prices increase and the removal of liquidity makes prices decrease.

This is both logical and, in aggregate, a healthy move to begin focusing more intensely on the real economy and less intensely on the performance of markets.

Market performance during recessions

The question on the minds of many is therefore how far will the Federal Reserve go? Will the Fed bring inflation back down? Yes, I believe so. Will the Fed irreparably crush markets? No, I don’t believe so. Will the Fed push us into a recession? Well, possibly…

Which brings us to Chart 1: market performance during a recession, after a recession, and during “normal” times.

The period following recessions is quite good, however, as markets recover and generally with less of the unhealthy excesses that exacerbated the sell-offs in the first place. These periods are so good, in fact, that over the seven recessions from 1970, the year immediately following the end of the recession were slightly better than “normal times.”

Therefore, what to make of it all and what are investors to do?

  • First and foremost, breathe. We have been through inflation, pandemics, wars, poor policies, high rates, low rates, high unemployment, low unemployment, and many other difficult environments before. Incentives drive behaviors and markets are driven by incentives. Those incentives haven’t changed and, as providers of capital, we, as investors, must still rely on those principles above all else.
  • Second, recognize our human brain isn’t very good at market timing. Markets are down and if you have experienced the pain thus far, there is very little expected value in trying to time the market going forward. Even the most sophisticated investment organizations in the world can’t time markets very well.
  • Third, go back to your plan. Market sell-offs are wonderful opportunities to refresh on goals and objectives. Refresh on how much you are spending and whether savings rates are high enough. Dare I say there might even be opportunities (as most equities are now less expensive and most bonds are now yielding more)?
  • Fourth, review your fixed-income (e.g., bond) portfolio. The yield curve is now inverted which means shorter-term bonds are often yielding more than longer term bonds, and those shorter-term bonds are often associated with less risk. There are many other factors involved, of course, but where possible, consider shortening duration (the maturity of the bonds in your portfolio) if you haven’t done so already. Remember, inflation is not yet under control and it is unclear how soon that will happen.

In closing, take a moment to breathe, do not react emotionally, and use the difficult markets as an opportunity to reaffirm your long-term plan.

 

Securities, investment advisory, and wealth management solutions offered by MML Investors Services, LLC member SIPC, a registered broker-dealer, and a registered investment adviser. CRN202506-301948

6 Productivity Tips for Hybrid Employees

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Hybrid work is a big departure from the traditional work arrangement. Switching between two workplaces may be a change, but it doesn’t need to cause your productivity to decline. Here are some tips to consider that may help boost your productivity as a hybrid employee.

Maximize Your Schedule.
Home and office environments are different. Plan tasks based on where you’ll be working. You may find tasks that require focus are best at home while collaborative tasks and meetings are better suited for the office. Different locations may spur creativity and focus in different ways.

Maintain a Consistent Schedule.
Your schedule at home should be consistent with your office schedule. Blocking your calendar each week can help you stay productive and maintain a healthy work-life balance.

Mirror Your Office Setup at Home.
Maintain the same organization at home that you use in the office. Keep your items in the same place on your desk. Consider which items are worth having at each location and which ones are worth shuttling between workplaces. This will save you time each day.

Leverage Technology.
Using technology, such as digital communication, project management tools and cloud-based platforms, can make it easier to jump into any project and stay productive from wherever you work.

Continue Communicating With Your Manager and Co-workers.
Hybrid work may cause you to miss out on key information or lose focus of your manager’s expectations. Using company communication channels and regularly checking in with your manager and peers can help you stay connected and updated on the most recent information and expectations.

Connect Regularly With Your Co-workers.
Feelings of social isolation can lead to a decline in your productivity. Find creative ways to have fun with co-workers even when working remotely, like playing games or virtual happy hours. This can re-energize you and counter feelings of burnout.

While no two work environments are the same, these tips are worth considering as you build a more permanent hybrid work routine that is effective and efficient. The hybrid work model is new and evolving. Communicate with your manager about what is working and what could be improved. Make adjustments when necessary, and when issues arise, keep trying.

Fuel Efficiency Best Practices for Fleets

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Improving the fuel efficiency of a company’s fleet of vehicles can have many financial and environmental benefits, especially with fuel prices on the rise. Fuel can be one of the largest and most difficult expenses to predict and control. Therefore, it’s important for vehicle fleet managers to conserve fuel, maximize efficiency and reduce vehicle emissions by implementing fuel-efficient policies, technology and maintenance strategies.

Best Practices

Managing a fleet’s fuel usage—even for just a couple of vehicles—can feel overwhelming. The following are ways to reduce fleet fuel costs and make operations more efficient:

  • Monitor driving patterns. A U.S. Department of Transportation report found that there can be as much as a 35% difference in fuel consumption between a good and poor driver. Monitoring speeding, braking and acceleration patterns can indicate whether drivers are using good practices on the road or operating inefficiently.
  • Cut engine idling. Idling can burn a quarter to a half gallons of fuel per hour. To reduce fuel and oil waste:
    • Turn off the engine while waiting or making deliveries.
    • Turn off the engine while stuck in traffic.
    • Do not idle to warm up the engine.
  • Improve route efficiency. Route efficiency can be improved with GPS tracking technology to ensure operations are streamlined and drivers don’t spend their day and fuel driving back and forth.
  • Remove unnecessary weight from vehicles. Every extra 100 pounds in a vehicle can increase gas costs by up to $0.03 cents per gallon, which can quickly add up over the course of hundreds of thousands of gallons across multiple vehicles. Only travel with necessary packages or equipment.
  • Schedule maintenance. Preventive and regular maintenance can reduce fuel costs, extend the lifespan of fleet vehicles and ensure the safety of drivers and the community.
  • Check the tire pressure. Tires should be inflated to 75% of the recommended pressure; underinflated tires can significantly lower a vehicle’s average gas mileage. Checking the tire pressure should be a mandatory part of the pre-trip safety check since it not only improves the cost per mile but also helps the vehicle respond properly in unsafe situations.
  • Dispatch the closest vehicle. Business margins and fuel efficiency can be improved by dispatching the closest vehicle to a new delivery or appointment. Fleet-tracking programs can help automate dispatching and routing.
  • Leverage a fleet telematics solution. A fleet telematics solution can help managers gain data and insight into fleet status in terms of individual vehicle performance and overall operations, allowing them to make changes that will help fuel efficiency
  • Provide incentives. Fleet managers can encourage efficient driving by offering drivers incentives, such as recognition or special privileges.
  • Implement driver training. Providing drivers with training regarding fuel-efficient habits can increase their awareness of fuel efficiency on the road. It can help them be mindful of things like keeping gears low when accelerating, changing gears early, driving at slower speeds and learning to read the road more effectively.

 

By implementing policies and practices that monitor and reward fuel-efficient behavior, fleet operations can reduce fuel costs. For more risk management guidance, contact us today.

Personal Cyber Coverage Explained

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Today’s society has grown increasingly digital in nature, with many individuals leveraging smart devices within their daily lives. Although this technology can offer various benefits, it can also make individuals more susceptible to cybercrime. Such incidents have steadily become more common and costly. In fact, the FBI reported receiving more than 800,000 complaints regarding cybercrimes in the past year, totaling $4.2 billion in overall expenses.

These findings emphasize how critical it is for individuals to safeguard themselves and their families from cyber events. That’s where personal cyber insurance can help. Typically offered as an endorsement to a homeowners policy, this form of coverage can provide financial protection for losses resulting from a range of cyber incidents—including fraud, identity theft and data breaches. Keep reading to learn more about the growing need for this coverage and the key types of personal cyber insurance available.

The Growing Need for Personal Cyber Coverage

Technology has continued to advance in the past decade, playing a larger role in how individuals live, work, and entertain. A variety of online platforms have given individuals the ability to stream content, communicate with others, shop for goods and make electronic payments at the click of a button. Additionally, smart devices have allowed individuals to upgrade a number of household appliances (e.g., thermostats, fridges, doorbells and security systems). Altogether, this technology has contributed to the growing adoption of the Internet of Things (IoT), which refers to any devices that connect or send information to the internet. Looking ahead, insurance experts anticipate that the average household will possess as many as 50 IoT-capable gadgets by 2023.
While these devices certainly offer several advantages, increased technology utilization also comes with greater cyber vulnerabilities. As technology advances, so do the tactics of cybercriminals—resulting in more frequent and severe cyber events. Here are some of the most common cyber incident scenarios that individuals and their families may encounter:

  • Bank fraud—This form of fraud entails a cybercriminal gaining unauthorized access to an individual’s electronic bank credentials, allowing them to transfer and steal funds from the individual’s account. According to a recent report from NortonLifeLock, cybercriminals steal over $170 billion each year via bank fraud.
  • Identity theft—Such theft refers to a cybercriminal accessing an individual’s personal information (e.g., Social Security number or credit card number) and using it to commit fraud or other crimes under the individual’s name. The Federal Trade Commission confirmed that nearly 1.4 million complaints related to identity theft were filed last year, up 113% from the previous year.
  • Data loss—In the event that an individual’s device gets infected with a virus or other malicious software (also called malware), they face the risk of losing any valuable data stored on that device. Viruses and malware can come from numerous avenues, including harmful websites, dangerous email attachments or infected USB flash drives—thus making data loss a major threat.
  • Extortion—Ransomware incidents have contributed to a substantial rise in cyber extortion over the last few years. These incidents stem from a cybercriminal using malware to compromise an individual’s device (and any data stored on it) and demanding a ransom payment in exchange for restoration. In some cases, the cybercriminal may even threaten to publicly share the individual’s data if they don’t receive payment. According to cybersecurity experts, ransomware incidents have increased 500% since 2018, with the average ransom payment totaling over $300,000.
  • Cyberbullying—While social media platforms allow individuals to connect with others, these platforms can also, unfortunately, be used for negative purposes, such as cyberbullying. This type of bullying includes refers to harassment, threats or other intimidating language that occurs via electronic means. Although anyone can be a victim of cyberbullying, kids and teenagers are particularly vulnerable. The latest data from Pew Research revealed that 59% of teens have experienced cyberbullying.
    Considering these risks, it’s clear that individuals can’t afford to ignore cybercrime. In addition to implementing effective cybersecurity practices (e.g., using trusted devices, browsing secure websites, conducting software updates, backing up data, creating unique passwords and knowing how to identify potential scams), having adequate insurance in place is crucial. By investing in personal cyber coverage, individuals can properly protect themselves and their families amid cyber-related losses.

Types of Personal Cyber Coverage

Personal cyber insurance varies between insurers. However, there are a number of key coverage offerings available:

  • Online fraud coverage—This coverage can offer reimbursement for financial losses that may result from the various types of online fraud, such as phishing scams, identity theft or unauthorized banking.
  • Online shopping coverage—Such coverage can help pay for the cost of any goods that were purchased online but arrived damaged upon delivery or didn’t get delivered whatsoever.
  • Identity recovery coverage—This coverage can provide reimbursement for the expenses associated with recovering from an identity theft incident (e.g., rectifying records with banks or other authorities, hiring a consultant to assist with credit restoration and taking unpaid time off from work to recover from the incident).
  • Data restoration coverage—Such coverage can help compensate the cost of having an IT specialist recover a device and restore any data stored on it if the device gets infected with a virus or malware.
  • Data breach coverage—This coverage can offer reimbursement for the necessary notification and recovery services in the event that private, nonbusiness data entrusted to the policyholder becomes lost, stolen or published.
  • Cyber extortion coverage—Such coverage can help pay for the expenses associated with responding to a ransomware event (e.g., consulting an IT specialist to mitigate the extortion attempt and restoring compromised devices or data).
  • Cyberbullying coverage—This coverage can provide reimbursement for the costs that come with recovering from a cyberbullying incident resulting in unlawful harassment or defamation of character. These costs may include psychological counseling services, legal advice, temporary relocation expenses and social media monitoring software. This coverage can also offer protection if an individual or their child faces engages in cyberbullying and faces subsequent legal action from the victim.

Because personal cyber insurance is still a relatively new type of coverage, it is usually only available as an add-on to an existing homeowners policy. Further, certain insurers only provide this coverage as an endorsement for high-value homeowners policies. Yet, some insurers may offer standalone personal cyber coverage. Moving forward, insurance experts expect the personal cyber coverage market to continue growing, allowing for more widely available policy options. In any case, individuals should consult trusted insurance professionals to discuss their specific coverage capabilities.

For further risk management resources and insurance solutions, contact us today.

Harden Your Cyber Defenses Immediately!

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In a March 21, 2022 statement, President Joe Biden cautioned businesses in the private sector to harden their cyber defenses, reiterating earlier warnings related to potential cyberattacks against U.S. organizations by Russia.

“I have previously warned about the potential that Russia could conduct malicious cyber activity against the United States, including as a response to the unprecedented economic costs we’ve imposed on Russia alongside our allies and partners,” Biden said. “It’s part of Russia’s playbook. Most of America’s critical infrastructure is owned and operated by the private sector, and critical infrastructure owners and operators must accelerate efforts to lock their digital doors.”

While there is no evidence of an imminent attack tied to the Russia-Ukraine crisis, Biden’s top cybersecurity officer Anne Neuberger noted that the everyday cyber risks businesses face and the potential for Russia-led cyberattacks call for urgency.

“There is no evidence of any specific cyberattack that we’re anticipating for,” Neuberger said. “There is some preparatory activity that we’re seeing, and that is what we shared in a classified context with companies who we thought might be affected.”

While declining to offer more detail on the type of preparatory actions seen by threat intelligence researchers, Neuberger said officials are focused on patching known vulnerabilities at all firms that make attacks far easier for attackers than they need to be.

To further assist private sector companies in strengthening their defenses, the Biden Administration issued a fact sheet with specific guidance on protective measures. Specific recommended actions for private sector organizations include:

  • Mandating the use of multifactor authentication on systems
  • Deploying modern security tools that continuously look for and mitigate threats
  • Working with cybersecurity professionals to ensure that organizational systems are patched and protected against all known vulnerabilities
  • Changing passwords across networks so previously stolen credentials are useless to malicious actors
  • Backing up data and creating offline backups
  • Having emergency plans in place and ensuring those plans are practiced regularly so the business can respond quickly following a cyberattack
  • Encrypting data
  • Educating employees on common cyberattack strategies and encouraging them to report suspicious activity (e.g., slow or poorly behaving laptops)
  • Establishing relationships with local FBI field offices or Cybersecurity and Infrastructure Security Agency (CISA) regional offices

Tips for Safe Spring Driving

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As flowers bloom, drivers often think the worst of their driving worries have melted away, but spring driving comes with its own unique set of risks. Heavy spring showers, potholes, increased wildlife activity and pedestrian traffic are just a few of the risks spring drivers need to watch out for. Knowing the following tips for safe spring driving can help prevent accidents.

  • Winter weather often creates large potholes that can be difficult to see. Keep a safe following distance in case the driver in front of you reacts. Try not to swerve to avoid potholes, but brake gently before and navigate them with caution.
  • Rain mixed with even a little bit of oil on the road can create dangerous conditions. Increase your following distance, turn your headlights on and drive slowly during heavy spring rains.
  • Animal activity increases during the spring. If you see an animal on the road, slow down or prepare to stop. Be on high alert at dusk and in rural areas where animals are most active.
  • Warm weather means more people will be out walking and biking. Slow down in your neighborhood and pay extra attention to crosswalks and other high-traffic areas.
  • Cold weather and harsh conditions can wear your tires and deflate them. Check the treads on your tires to ensure you have proper traction and check for proper inflation.
  • Months of snow, ice and salt can wear down your wipers, making it difficult to see in spring storms. Clean your wiper blades with wiper fluid and wash the windshield. If your wipers are still leaving patterns on the glass, it’s time to buy a new set.

Abiding by safe driving tips can help you and others stay safe on the road while driving during the spring months. For additional questions about safe driving during the spring months, contact Cleary Insurance, Inc.

5 Tools That Can Sharpen Your Memory

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Posted by AllWays Health Partners Blog Team on April 07, 2022

No matter what age you are, exercising your brain in a focused and deliberate way can provide numerous benefits, from better attention to faster learning, and keeping your memory sharp is a major part of this.

Having good recall is important—you’d never find your car keys or remember birthdays without it—but memory skills can go deeper than everyday function. For instance, a study in the journal Memory found that people with good memory tend to have a stronger sense of purpose overall, and that contributes to better mental and physical health.

Considering the ripple effect that comes with improved memory, that means keeping your memory in shape is crucial. Ready for your brain workout? Consider these five tools as a starting point:

1. Language learning app

Even if it’s been decades since you sat in a classroom, learning another language—or you never had those classes at all—you can still give your brain a major boost by studying a second language.

According to research in Frontiers in Neuroscience, just a few months of a language program can lead to functional changes in the brain, especially among older people. There are plenty of language-learning apps that are easy to use and many offer a free trial, with options like Duolingo, Babbel, Pimsleur, and Rosetta Stone. Apps like these have both reading and listening comprehension, which fires up different parts of the brain.

2. Music player

From digging out your retro cassette player to asking your smart speaker to fire up your favorite playlist, it doesn’t matter you get music delivered, it’s the tunes that provide benefits. Even better? Make sure the music is upbeat.

According to a study in the journal PLOS ONE, listening to music you describe as “happy” can prompt creativity, problem solving, and a positive mood, which all contribute to better memory function. For some people, even having music on in the background can help with memory capacity, especially if you’re listening while learning new information.

3. Jigsaw puzzles

Whether it’s a 1,000-piece puzzle that takes over your dining room table or a simple 100-piece version you can snap together in an hour, jigsaw puzzles have been shown to use multiple types of cognitive function and can even protect your brain as you get older.

Not only are you challenging your memory and concentration, but doing a puzzle can also help reduce stress, according to commentary from Baylor University. That’s particularly true if you make it a social activity, another way to give your brain a break from being busy and overwhelmed.

4. Light dumbbells

Could a pair of 5-pound or 10-pound dumbbells really help your memory? There’s plenty of research that suggests strength training is a big-time brain booster. Although cardio exercise shows benefits as well, lifting weights seems especially protective for memory.

For example, a study published in the journal Acta Psychologica found that even one session of strength exercises can improve memory performance, even after short-term stress—which tends to reduce memory function. Regular training is even better: Research from The University of Sydney in Australia showed that lifting weights can slow and even halt age-related brain changes, especially the parts of the brain vulnerable to Alzheimer’s disease.

5. Mindfulness and sleep app

The connection between quality sleep and optimal memory function is well established. In fact, sleep affects all of your brain functions, including mood, judgment, perception, and learning. Research from Harvard University notes that sleep is when your memories get organized and stored, so skimping on your shuteye can have serious effects on both short-term and long-term memory.

If you struggle with sleep, consider trying an app that focuses on mindfulness, relaxation, and deep breathing exercises, such as Headspace, Calm, Smiling Mind, and 10% Happier.

No matter what tools you choose, one of the most important aspects of boosting memory function is consistency. Just like building your muscles through strength training, keeping your memory in shape is best done by getting into a regular habit that becomes part of your everyday mix.

Will I Have Enough Money to Retire?

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Presented by: Matthew A. Clayson

Will I have enough money to retire? It’s a common question and one that has increased in magnitude lately — especially for people in their 40s and 50s.

Indeed, the uncomfortable truth is that only about half of Americans believe they are on track to retire when they want to, according to a recent MassMutual Consumer Sentiment Survey. And more than half worry about running out of money in retirement.

That can generate a feeling of frustration. You’ve been working hard for over 20 years. You’ve been saving as much as you can. Then, the market crashes, and your savings disappear. It’s not too late to bounce back.

Even if you’re 55 years old and decide that today is the day to begin saving in earnest, you still have time to build up income for retirement.

On your mark, set your priorities, go

Determine what you want out of your retirement…what are your priorities? Sit down with a pen and paper and start a list. Empower yourself to make the important decisions today that will set tomorrow in motion:

  • When do you want to retire?
  • Where do you want to live?
  • What kind of lifestyle do you want to lead? How much will you want for spending each month?

These are just some of the questions you should be asking — and answering — yourself about retirement catch-up. So, take the first step and start making some decisions.

Save more, spend less

The most obvious advice still applies: save more, spend less. But there’s more to it than that.

Create a budget to help you stay on track — and actually stick to it every month. Decide where you can trim your expenses. What can you live without now so you can have more later?

If your budget isn’t working, you may want to consider downsizing to a smaller home or a less expensive location to help maintain your standard of living. This may be a difficult exercise, but remember you’re trying to catch up.

Speaking of catching up, if you will be age 50 or older at the end of the calendar year, you can take advantage of retirement catch-up contribution options to accelerate the growth of your retirement accounts. The IRS updates contribution limits periodically; checking for the most recent information can help ensure that you are making the most of the options available to you. The bottom line: make the maximum contributions possible to your employer’s retirement plan, including any available catch-up options.

Think outside the box

There are certain financial products and savings instruments that you may not be familiar with, but that may help you get more out of your money. Many people opt to consult a financial professional to help become aware of retirement catch-up options and lay out a plan.

In addition, there may be opportunities to earn extra income, either by working extra hours or turning hobbies into side businesses, that can be considered to help catch up on retirement savings.

Delay retirement (The beach will wait for you)

People are working longer than ever before. Delaying your retirement by three years from age 62 to 65 can boost your assets significantly — thanks to the combination of making extra contributions to your employer-sponsored retirement plan, not taking withdrawals, and allowing your funds more time to grow.

In addition, if you anticipate receiving Social Security retirement benefits, it’s important to understand that monthly benefits differ substantially based on when you start receiving them and the filing option you choose. For every year you postpone collecting benefits beyond your full retirement age (typically 66 or 67), you can earn an annual delayed retirement credit of up to 8 percent. That’s a big bump in benefits every year up to age 70.

On the flip side, filing for benefits before your full retirement age can permanently reduce your monthly income. Benefits will decrease based on how early you retire. What’s worse, if you begin receiving Social Security benefits early, your surviving spouse may not be able to receive your full Social Security benefit if you pass away.

The bottom line is that there are real steps and strategies you can take today to help secure your future. It’s never too early or too late to evaluate your current retirement savings plan — or create a new one.

Feel free to reach out to us with any questions and if you would like to speak with our retirement planning specialist.

 

Matt Clayson is a registered representative of and offers securities and investments services through MML Investors Services, LLC. Member SIPC(www.sipc.org). Supervisory Address: 101 Federal Street, Suite 800, Boston, MA 02110. 617.439.4389. CRN202502-1735773

Personal Cyber Coverage Explained

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Today’s society has grown increasingly digital in nature, with many individuals leveraging smart devices within their daily lives. Although this technology can offer various benefits, it can also make individuals more susceptible to cybercrime. Such incidents have steadily become more common and costly. In fact, the FBI reported receiving more than 800,000 complaints regarding cybercrimes in the past year, totaling $4.2 billion in overall expenses.

These findings emphasize how critical it is for individuals to safeguard themselves and their families from cyber events. That’s where personal cyber insurance can help. Typically offered as an endorsement to a homeowners policy, this form of coverage can provide financial protection for losses resulting from a range of cyber incidents-including fraud, identity theft and data breaches. Keep reading to learn more about the growing need for this coverage and the key types of personal cyber insurance available.

The Growing Need for Personal Cyber Coverage

Technology has continued to advance in the past decade, playing a larger role in how individuals live, work, and entertain. A variety of online platforms have given individuals the ability to stream content, communicate with others, shop for goods and make electronic payments at the click of a button. Additionally, smart devices have allowed individuals to upgrade a number of household appliances (e.g., thermostats, fridges, doorbells, and security systems). Altogether, this technology has contributed to the growing adoption of the Internet of Things (IoT), which refers to any devices that connect or send information to the internet. Looking ahead, insurance experts anticipate that the average household will possess as many as 50 IoT-capable gadgets by 2023.

While these devices certainly offer several advantages, increased technology utilization also comes with greater cyber vulnerabilities. As technology advances, so do the tactics of cybercriminals-resulting in more frequent and severe cyber events. Individuals may think that they are ok shopping online as they may have installed what they believe to be the best vpn for firefox or they might have added extra security measures to their home network. However, cyber crimes can still occur even with these measures in place. Here are some of the most common cyber incident scenarios that individuals and their families may encounter:

  • Bank fraud-This form of fraud entails a cybercriminal gaining unauthorized access to an individual’s electronic bank credentials, allowing them to transfer and steal funds from the individual’s account. According to a recent report from NortonLifeLock, cybercriminals steal over $170 billion each year via bank fraud.
  • Identity theft-Such theft refers to a cybercriminal accessing an individual’s personal information (e.g., Social Security number or credit card number) and using it to commit fraud or other crimes under the individual’s name. The Federal Trade Commission confirmed that nearly 1.4 million complaints related to identity theft were filed last year, up 113% from the previous year.
  • Data loss-In the event that an individual’s device gets infected with a virus or other malicious software (also called malware), they face the risk of losing any valuable data stored on that device. Viruses and malware can come from numerous avenues, including harmful websites, dangerous email attachments or infected USB flash drives-thus making data loss a major threat.
  • Extortion-Ransomware incidents have contributed to a substantial rise in cyber extortion over the last few years. These incidents stem from a cybercriminal using malware to compromise an individual’s device (and any data stored on it) and demanding a ransom payment in exchange for restoration. In some cases, the cybercriminal may even threaten to publicly share the individual’s data if they don’t receive payment. According to cybersecurity experts, ransomware incidents have increased 500% since 2018, with the average ransom payment totaling over $300,000.
  • Cyberbullying-While social media platforms allow individuals to connect with others, these platforms can also, unfortunately, be used for negative purposes, such as cyberbullying. This type of bullying includes refers to harassment, threats or other intimidating language that occurs via electronic means. Although anyone can be a victim of cyberbullying, kids and teenagers are particularly vulnerable. The latest data from Pew Research revealed that 59% of teens have experienced cyberbullying.

Considering these risks, it’s clear that individuals can’t afford to ignore cybercrime. In addition to implementing effective cybersecurity practices (e.g., using trusted devices, browsing secure websites, conducting software updates, backing up data, creating unique passwords and knowing how to identify potential scams), having adequate insurance in place is crucial. By investing in personal cyber coverage, individuals can properly protect themselves and their families amid cyber-related losses.

Types of Personal Cyber Coverage

Personal cyber insurance varies between insurers. However, there are a number of key coverage offerings available:

  • Online fraud coverage-This coverage can offer reimbursement for financial losses that may result from the various types of online fraud, such as phishing scams, identity theft or unauthorized banking.
  • Online shopping coverage-Such coverage can help pay for the cost of any goods that were purchased online but arrived damaged upon delivery or didn’t get delivered whatsoever.
  • Identity recovery coverage-This coverage can provide reimbursement for the expenses associated with recovering from an identity theft incident (e.g., rectifying records with banks or other authorities, hiring a consultant to assist with credit restoration and taking unpaid time off from work to recover from the incident).
  • Data restoration coverage-Such coverage can help compensate the cost of having an IT specialist recover a device and restore any data stored on it if the device gets infected with a virus or malware.
  • Data breach coverage-This coverage can offer reimbursement for the necessary notification and recovery services in the event that private, nonbusiness data entrusted to the policyholder becomes lost, stolen or published.
  • Cyber extortion coverage-Such coverage can help pay for the expenses associated with responding to a ransomware event (e.g., consulting an IT specialist to mitigate the extortion attempt and restoring compromised devices or data).
  • Cyberbullying coverage-This coverage can provide reimbursement for the costs that come with recovering from a cyberbullying incident resulting in unlawful harassment or defamation of character. These costs may include psychological counseling services, legal advice, temporary relocation expenses and social media monitoring software. This coverage can also offer protection if an individual or their child faces engages in cyberbullying and faces subsequent legal action from the victim.

Because personal cyber insurance is still a relatively new type of coverage, it is usually only available as an add-on to an existing homeowners policy. Further, certain insurers only provide this coverage as an endorsement for high-value homeowners policies. Yet, some insurers may offer standalone personal cyber coverage. Moving forward, insurance experts expect the personal cyber coverage market to continue growing, allowing for more widely available policy options. In any case, individuals should consult trusted insurance professionals to discuss their specific coverage capabilities.

For further risk management resources and insurance solutions, contact us today.

 

Surprise Billing: Know Your Benefits

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Understand Your Rights Against Surprise Medical Bills

The No Surprises Act protects people covered under group and individual health plans from receiving surprise medical bills when they receive most emergency services, non-emergency services from out-of-network providers at in-network facilities and services from out-of-network air ambulance service providers. It also establishes an independent dispute resolution process for payment disputes between plans and providers, and provides new dispute resolution opportunities for uninsured and self-pay individuals when they receive a medical bill that is substantially greater than the good faith estimate they get from the provider.

Starting in 2022, there are new protections that prevent surprise medical bills. If you have private health insurance, these new protections ban the most common types of surprise bills. If you’re uninsured or you decide not to use your health insurance for a service, under these protections, you can often get a good faith estimate of the cost of your care up front before your visit. If you disagree with your bill, you may be able to dispute the charges. Here’s what you need to know about your new rights.

What Are Surprise Medical Bills?

Before the No Surprises Act, if you had health insurance and received care from an out-of-network provider or an out-of-network facility, even unknowingly, your health plan may not have covered the entire out-of-network cost. This could have left you with higher costs than if you got care from an in-network provider or facility. In addition to any out-of-network cost-sharing you might have owed, the out-of-network provider or facility could bill you for the difference between the billed charge and the amount your health plan paid, unless banned by state law. This is called “balance billing.” An unexpected balance bill from an out-of-network provider is also called a surprise medical bill.

People with Medicare and Medicaid already enjoy these protections and are not at risk for surprise billing.

What Are the New Protections if I Have Health Insurance?

If you get health coverage through your employer, a Health Insurance Marketplace or an individual health insurance plan you purchase directly from an insurance company, these new rules will:

  • Ban surprise bills for most emergency services, even if you get them out-of-network and without approval beforehand (prior authorization).
  • Ban out-of-network cost-sharing (such as out-of-network coinsurance or copayments) for most emergency and some non-emergency services. You can’t be charged more than in-network cost-sharing for these services.
  • Ban out-of-network charges and balance bills for certain additional services (such as anesthesiology or radiology) furnished by out-of-network providers as part of a patient’s visit to an in-network facility.
  • Require that health care providers and facilities give you an easy-to-understand notice explaining the applicable billing protections, who to contact if you have concerns that a provider or facility has violated the protections and that patient consent is required to waive billing protections (i.e., you must receive notice of and consent to being balance billed by an out-of-network provider).

What if I Don’t Have Health Insurance or Choose to Pay for Care on My Own Without Using My Health Insurance (Also Known as “Self-Paying”)?

If you don’t have insurance or you self-pay for care, in most cases, these new rules make sure you can get a good faith estimate of how much your care will cost before you receive it.

What if I’m Charged More Than My Good Faith Estimate?

For services provided in 2022, you can dispute a medical bill if your final charges are at least $400 higher than your good faith estimate and you file your dispute claim within 120 days of the date on your bill.

What if I Don’t Have Insurance From an Employer, a Marketplace or an Individual Plan? Do These New Protections Apply to Me?

Some health insurance coverage programs already have protections against surprise medical bills. If you have coverage through Medicare, Medicaid or TRICARE, or receive care through the Indian Health Services or Veterans Health Administration, you don’t need to worry because you’re already protected against surprise medical bills from providers and facilities that participate in these programs.

What if My State Has a Surprise Billing Law?

The No Surprises Act supplements state surprise billing laws; it does not supplant them. The No Surprises Act instead creates a “floor” for consumer protections against surprise bills from out-of-network providers and related higher cost-sharing responsibility for patients. So as a general matter, as long as a state’s surprise billing law provides at least the same level of consumer protections against surprise bills and higher cost-sharing as does the No Surprises Act and its implementing regulations, the state law generally will apply.

For example, if your state operates its own patient-provider dispute resolution process that determines appropriate payment rates for self-pay consumers, and Health and Human Services (HHS) has determined that the state’s process meets or exceeds the minimum requirements under the federal patient-provider dispute resolution process, then HHS will defer to the state process and would not accept such disputes into the federal process.

As another example, if your state has an All-Payer Model Agreement or another state law that determines payment amounts to out-of-network providers and facilities for a service, the All-Payer Model Agreement or other state law will generally determine your cost-sharing amount and the out-of-network payment rate.

Where Can I Learn More?

Still have questions? Visit CMS.gov/nosurprises or reach out to human resources.

 

Source: Centers for Medicare and Medicaid Services