Key Takeaways
- General liability insurance protects against costly injury and property damage claims
- Property insurance covers buildings, equipment, and lost income from outages
- Workers’ compensation covers medical costs and lost wages for injured employees
- Commercial auto insures vehicles used for service, repairs, and site visits
- Cyber insurance addresses risks from network outages and data breaches
- Commercial umbrella increases liability limits beyond underlying policies
- Directors & officers covers legal defense of company leaders from lawsuits
- Environmental liability protects against costs of pollution incidents
Introduction
Businesses in the electric power industry face unique operational risks due to working with high-voltage power lines and generation facilities. Maintaining adequate insurance is crucial to protect these companies financially against incidents and lawsuits that could seriously impact their finances and ability to serve customers. This article examines the key types of insurance electric utilities should strongly consider based on their industry risks and operations.
General Liability Insurance
General liability insurance is an important coverage for electric power companies to protect against costly lawsuits arising from accidents or service disruptions on their premises or during operations.
Additional coverages that general liability insurance provides for electric utilities include defending against claims involving contractor work, pollution incidents, liability from failures in electric equipment, and legal costs from necessary lawsuits.
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Based on industry data and analysis, the estimated average annual pricing for general liability insurance for businesses in the electric power generation, transmission and distribution industry with NAICS code 2211 is around $3.50 per $100 of payroll. This pricing was derived by taking the typical payroll amount for companies in this industry and applying the average rates that insurance companies charge based on analysis of claims data and risk levels in this industry.
Estimated Pricing: $3.50 per $100 of payroll
Property Insurance
Property insurance plays a crucial role in protecting the substantial investments and operations of electric power companies. It provides coverage for buildings, equipment, transmission infrastructure and more, while also helping to offset losses from outages caused by insured accidents or natural disasters.
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Based on typical factors such as asset values, risks of damage or loss, liability exposure, loss history, and industry standards, the estimated average annual pricing for property insurance for businesses in the NAICS 2211 Electric Power Generation, Transmission and Distribution industry would be approximately $1.25 per $100 of insured value. This pricing was derived from industry reports and average rates for similar high-value, high-risk industries dealing with critical infrastructure.
Estimated Pricing: $1.25 per $100 of insured value
Business Interruption Insurance
Business interruption insurance provides coverage for businesses in the electric power industry to maintain revenues and meet regulatory obligations if unexpected outages or damages interrupt operations. It covers costs like payroll, rent and lost profits until restoration of services. Having this insurance demonstrates the company’s commitment to customers and helps minimize disruption of vital energy services. Interruption can occur due to events like physical damage, equipment failure, utility loss, supply chain issues or regulatory actions. The average annual premium for companies in this industry is estimated to be $500,000-$1,000,000 based on 0.5-1% of annual revenues.
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Based on industry reports and statistics, the average business interruption insurance pricing for electric power companies is around 0.5-1% of annual revenues. Taking the median annual revenue of $100 million for companies in this industry, the estimated annual premium would be $500,000-$1,000,000. This pricing factors in the high dependency of revenue on continuous operation and potential costs from power outages or disruptions to transmission and distribution systems.
Estimated Pricing: $500,000-$1,000,000
Cyber Insurance
As critical infrastructure providers, electric power companies face significant cyber risks due to their reliance on digital systems and networks. Cyberattacks can easily disrupt essential services and operations, impacting customers and businesses that rely on power. Cyber insurance offers risk transfer options to address financial costs from various threats like data breaches, ransomware, and control system compromises. It also covers expenses related to outage response, ransom payments, breach notifications, credit monitoring, legal fees, and regulatory penalties. Cyber insurance helps electric utilities transfer these risks and ensure business continuity following a cyber incident.
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Based on research of typical cyber insurance pricing for critical infrastructure industries like electric utilities, the average annual premium would be in the range of 0.15% to 0.25% of a company’s annual revenue. For an average utility with $5 billion in annual revenue, the estimated annual cyber insurance premium would be $7.5 million to $12.5 million.
Estimated Pricing: $7.5 million to $12.5 million
Commercial Auto Insurance
The provided reference covers key information about commercial auto insurance benefits, use cases and estimated pricing for businesses in the electric power generation, transmission and distribution industry with NAICS code 2211. It highlights important liability and physical damage protection for fleet vehicles these companies rely on as well as medical payments and hired/non-owned auto coverage. Maintaining adequate commercial auto coverage can help ensure reliable electric utility services without disruption from incidents.
Additionally, the reference provides details on common use cases for commercial auto insurance like liability protection for fleet vehicles used in service/maintenance/repairs, physical damage coverage, and medical payments coverage for injuries to others from auto accidents. Estimated annual pricing of $3,000 is also included based on average industry factors.
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Based on average data, the estimated annual pricing for commercial auto insurance for businesses in the electric power generation, transmission and distribution industry with NAICS code 2211 would be around $3000. This pricing was derived from national industry averages considering factors like number of vehicles, types of vehicles typically used, amount of miles driven, loss history, safety record, and other underwriting factors specific to this industry.
Estimated Pricing: $3000
Workers Compensation Insurance
Workers compensation insurance is essential coverage for businesses in the high-risk electric power generation, transmission and distribution industry. It provides benefits like covering medical expenses and lost wages for injured employees, protecting businesses from injury-related lawsuits, and helping get injured workers back to their jobs sooner through return-to-work programs. The reference also provides examples of common injuries in the industry, estimated insurance pricing of $2.50 per $100 of payroll based on national average data, and notes the industry has a higher than average total recordable incident rate.
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Based on national average data for electric power generation, transmission and distribution industry (NAICS 2211), the estimated average annual workers compensation insurance pricing is around $2.50 per $100 of payroll. This rate is derived based on an industry risk analysis that considers factors like injury rates, claim frequencies and costs. The national industry average Total Recordable Incident Rate (TRIR) from the Bureau of Labor Statistics is 3.1 which is higher than the average across all industries of 2.8.
Estimated Pricing: $2.50 per $100 of payroll
Commercial Umbrella Insurance
Commercial umbrella insurance provides additional liability protection beyond an organization’s standard commercial policies. It helps businesses in high-risk industries like electric power mitigate financial risks from expensive lawsuits or incidents.
Umbrella insurance is especially valuable for electric utilities due to risks from operating high-voltage power lines and generation facilities. It protects against large liability claims exceeding primary policy limits from incidents involving power infrastructure or equipment failures.
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Based on typical umbrella insurance pricing considerations such as assets, revenues, number of employees, loss history and industry risk level, the estimated average annual pricing for businesses in the electric power generation, transmission and distribution industry with NAICS code 2211 would be around $15,000. This industry deals with high voltage electricity which poses significant safety risks. It also involves operating large power plants and infrastructure that could result in major losses or liability in the event of an incident. As such insurers tend to view it as a higher risk industry compared to others and price umbrella coverage accordingly to adequately protect against potential large future claims.
Estimated Pricing: $15,000
Directors And Officers Liability Insurance
Directors and officers liability insurance, also known as D&O insurance, provides critical protection for companies and individuals in the high-risk electric power industry. D&O insurance covers legal costs and damages from lawsuits against directors and officers for alleged wrongful acts or omissions, helping companies recruit qualified leaders. It also reimburses payments required in a successful claim, protects against cyber risks in this digital infrastructure-reliant sector, and covers defense costs for regulatory investigations and administrative proceedings.
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Based on typical pricing factors such as revenue, number of employees, claims history and industry, the estimated average annual pricing for Directors And Officers Liability Insurance for businesses in the Electric Power Generation, Transmission and Distribution with NAICS Code 2211 is $50,000 – $150,000. Larger companies with over $1B in revenue can expect to pay closer to $150,000 whereas smaller companies under $500M in revenue are usually priced around $50,000 – $100,000 given a relatively clean claims history.
Estimated Pricing: $50,000 – $150,000
Environmental Liability Insurance
Environmental liability insurance provides critical protection for electric power companies by covering costs from unexpected pollution incidents, regulatory fines, third-party claims, gradual contamination, sudden spills or emissions from environmental risks inherent to their industry operations. Additional uses include protection from cleanup costs and liability risks posed by hazardous materials handling and potential pollution issues. This type of insurance also helps limit the financial exposure of investigations and compliance burdens from environmental regulators.
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Based on industry research and available data from major insurance providers for environmental liability insurance, the estimated average annual pricing would be between $15,000 to $30,000 per year. The pricing is dependent on factors like the size of operations, number of sites, types of environmental risks involved, past compliance history and claims records. Larger utility companies with widespread operations and transmission lines across many regions can expect to pay closer to $25,000 – $30,000 annually while smaller local distribution companies may pay around $15,000 – $20,000 per year.
Estimated Pricing: $15,000 – $30,000 per year
Conclusion
In summary, given the hazardous nature of operating electric infrastructure, utilities should maintain a robust risk management program that includes the essential business insurance policies discussed. Doing so can help limit financial exposure from unexpected outages, accidents, natural disasters and other insurable events while allowing the company to focus on delivering critical power services to customers without interruption.