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Impacts of Armed Security Officers on Insurance Costs

In the past year, highly publicized mass shootings — especially the Sandy Hook Elementary School tragedy in December — have made the call for armed security officers commonplace. To many, it seems logical to fight fire with fire; that is, using armed officers to combat armed criminals and prevent tragedies from occurring.

 As CNNhas reported, schools are seeking novel security strategies in an effort to prevent shootings. In Arizona, a sheriff has stationed armed posses around schools; in Staten Island, residents demonstrated support for armed former police officers in schools.

The call for armed security officers has moved beyond classroom walls. After incidents such as the Aurora, Colo., movie theater shooting last summer, security officer companies often see increased interest in armed security officers. As tragedies unfold in the news media, a wide variety of businesses, even newspapers, consider hiring armed security officers.

Security executives and security officer firms, in turn, call their insurance companies to find out how armed officers will affect their insurance coverage. I received dozens of calls in the weeks following the Sandy Hook tragedy. What I shared was eye-opening to some clients: when insurers evaluate the use of armed officers, they quite often see risks outweigh the benefits for the average company or organization – risks that have a significant impact on both the availability and cost of insurance coverage.


What are the Chances?

Despite their dominance in the media, the chances of a mass shooting occurring in our country are thankfully slim. According to USA Today,children still have only a one in two million chance of dying at school. There is no actual upward trend in mass shootings in public places. In fact, mass killings are on the decline. Those looking to combat the problem face a series of challenges, not the least of which is the reality that mass shootings are unpredictable by their very nature.

For that reason and others, there is little evidence any organization can prevent mass shootings by hiring security officers who carry firearms. Though many parents feel their children would be safer in schools protected by armed security officers, the reality is a single armed officer in a school is unlikely to prevent an armed person with malicious intent from causing harm. In fact, the introduction of another firearm increases the chances someone will be seriously hurt or killed.

For insurers, this means the risks of armed officers are difficult to justify in most settings, and they charge higher rates for security officer firms that employ armed officers. There are certainly situations that warrant an armed officer (i.e. banks, federal buildings, etc.). Insurance companies understand this and are willing to offer insurance for this type of exposure.

Yet in many other situations, such as retail stores or fast food restaurants, insurers believe the show of force presented by an armed security officer is counterproductive. It increases the business’s hazards and the possibility of a claim. Insurers are not quick to expose themselves to that level of risk, and businesses and security firms should think twice as well.

From many perspectives, it is safer, less expensive and more effective to hire security officers who do not carry firearms. Instead, firms may want to look at hiring officers armed with non-deadly weapons. Tasers and Mace do not carry the serious risks associated with firearms, but they have both been proven successful in overtaking would-be criminals or intruders.

Video surveillance systems and access control systems are also important components in preventing and deterring criminal activity. When combined with a highly qualified and trained unarmed security officer, these systems provide a lower profile deterrent than an armed security officer.


Finding Coverage for Armed Security Officers

In general, if a security firm does provide armed security officers, they will have a more difficult time finding insurance coverage and will pay more for the coverage they find. This fact may become more pronounced in 2013 as we take into account the impact of insurance cycles.

When looking at these cycles, the past several years have been what is known as a “soft” insurance market. In a soft market, more insurance carriers are offering coverage in specific industries, such as security. This makes it relatively easy to secure coverage at competitive rates. However, the cycle is turning, and the insurance industry is currently shifting to a “hard” market. This means some carriers that are not committed to specific industries will begin to pull out. Fewer carriers writing insurance policies means there will be stricter eligibility standards and higher rates.

Another factor to consider is whether coverage is in the admitted or non-admitted market. In general, when firms that employ armed security officers do find coverage, it usually is not in the preferred, admitted markets. An admitted market is a company licensed on a state-by-state basis and differentiated from surplus lines insurers, or non-admitted markets. Rates for security officer firms that use armed officers can be double that of what is offered by admitted markets. In addition, coverage may not be as complete or offer the same dollar limits for losses.

Even so, some insurance companies that do not specialize in the security industry or non-admitted companies that do specialize in the security industry may still include firearms limitations in their policies. Such limitations may exclude claims resulting from the use of firearms or put restrictions on the use of firearms. For example, they may stipulate that they must be properly licensed and registered. It is not uncommon for a security officer to bring his or her personal firearm to the job site — without the security officer firm or the organization they protect knowing. If they have insurance coverage that does not cover firearms or puts limitations on the use of firearms, directors at security firms must instill in officers the knowledge that firearms are not permitted; otherwise, the firm must be properly insured for all firearms claims.


Best Practices for Arming Security Officers

As mentioned above, some situations necessitate an armed officer. For firms that work with government organizations, power plants and other high-risk organizations, there are best practices for hiring and training security officers who carry firearms. Insurers examine a number of factors, from the firm’s loss history to hiring procedures, pre-employment screenings, supervision, licensing and training. In a hard insurance market, differentiators such as training are even more important.

Insurers prefer armed security officers who are former law enforcement officers. These individuals typically have extensive firearms training and experience. In lieu of retired police officers, it is best to only arm highly trained professionals with a positive track record. An insurer will inquire about pre-employment screening and expect a firm to have a system for criminal background checks, personal interviews and references. Furthermore, savvy insurers may even call the state department that licenses security firms in order to find out about complaints or negative reports.

Quality training is a key risk management tool, which will also help keep insurance rates low and quality insurance available. Fundamental training is crucial for any security officer. However, armed officers require far more than the basic training provided to those in observe and report roles; they need situational training for the industry they serve, training in proper use of force and, of course, firearms training. Insurers will expect armed security officers to be provided with training above and beyond state standards. Our data shows security officers that undergo high-quality training have fewer accidents and handle incidents better.


Growing Safely       

The private security industry had been growing rapidly well before the Sandy Hook tragedy captured the attention of our country late last year. Since the beginning of the recession in 2007-08, local governments nationwide had been slashing budgets and shrinking police forces. As this trend continues, private security firms have been called on increasingly to fill the gap. Media attention after a mass shooting simply fuels this growth.

Both the chief security officers and the private security firms with which they contract should consider carefully the use of armed officers. Insurers and risk managers are constantly gathering data and evaluating risks, and they offer a perspective that should play an important role in these decisions. There are benefits, but also risks and costs when arming security officers.

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