The War Being Waged in Our Living Rooms

Never mind the thought of a war being lodged on American soil, how about what is happening in our living rooms? Our computers get richer in data by the day, and business life becomes more revolved around wherever we are at, versus a central office setting with greater protections. With this increased interconnectivity due to remote workforces comes heightened security gaps, such as software supply chain vulnerabilities and data leakage.

With so much in the “news” directed toward other themes, our greatest common vulnerability as a nation is government-backed cyber attacks by non-friendly countries. We still are not vigilant as a society is our cyber security and we need to wake up. This is everyone’s war . You are a part of it. Now.

Digest these most recent advisories from CISA/NSA and FBI from yesterday, January 11’th, 2022.

Joint FBI-DHS-CISA CSA Russian Foreign Intelligence Service (SVR) Cyber Operations: Trends and Best Practices for Network Defenders
Joint NSA-FBI-CISA CSA Russian GRU Conducting Global Brute Force Campaign to Compromise Enterprise and Cloud Environments
Joint FBI-CISA CSA Russian State-Sponsored Advanced Persistent Threat Actor Compromises U.S. Government Targets

Seems like a theme, no? NATO is worried about tanks on the Ukraine border, but the battle has already begun. While extensive, the below goes into great detail of the government-backed cyber security concerns as known today, and the best methods to prevent a breach.

It is dry, but lots of very interesting links that should scare you into loving preventions such as multi-factor authentication (“MFA”).


Actions Critical Infrastructure Organizations Should Implement to Immediately Strengthen Their Cyber Posture.
• Patch all systems. Prioritize patching known exploited vulnerabilities.

• Implement multi-factor authentication.
• Use antivirus software.
• Develop internal contact lists and surge support.

Alert (AA22-011A)

Understanding and Mitigating Russian State-Sponsored Cyber Threats to U.S. Critical Infrastructure

Original release date: January 11, 2022

Note: this advisory uses the MITRE Adversarial Tactics, Techniques, and Common Knowledge (ATT&CK®) framework, version 10. See the ATT&CK for Enterprise for all referenced threat actor tactics and techniques.

This joint Cybersecurity Advisory (CSA)—authored by the Cybersecurity and Infrastructure Security Agency (CISA), Federal Bureau of Investigation (FBI), and National Security Agency (NSA)—is part of our continuing cybersecurity mission to warn organizations of cyber threats and help the cybersecurity community reduce the risk presented by these threats. This CSA provides an overview of Russian state-sponsored cyber operations; commonly observed tactics, techniques, and procedures (TTPs); detection actions; incident response guidance; and mitigations. This overview is intended to help the cybersecurity community reduce the risk presented by these threats.

CISA, the FBI, and NSA encourage the cybersecurity community—especially critical infrastructure network defenders—to adopt a heightened state of awareness and to conduct proactive threat hunting, as outlined in the Detection section. Additionally, CISA, the FBI, and NSA strongly urge network defenders to implement the recommendations listed below and detailed in the Mitigations section. These mitigations will help organizations improve their functional resilience by reducing the risk of compromise or severe business degradation.

  1. Be prepared. Confirm reporting processes and minimize personnel gaps in IT/OT security coverage. Create, maintain, and exercise a cyber incident response plan, resilience plan, and continuity of operations plan so that critical functions and operations can be kept running if technology systems are disrupted or need to be taken offline.
  2. Enhance your organization’s cyber posture. Follow best practices for identity and access management, protective controls and architecture, and vulnerability and configuration management.
  3. Increase organizational vigilance. Stay current on reporting on this threat. Subscribe to CISA’s mailing list and feeds to receive notifications when CISA releases information about a security topic or threat.

CISA, the FBI, and NSA encourage critical infrastructure organization leaders to review CISA Insights: Preparing for and Mitigating Cyber Threats for information on reducing cyber threats to their organization.

Click here for a PDF version of this report.

Technical Details

Historically, Russian state-sponsored advanced persistent threat (APT) actors have used common but effective tactics—including spearphishing, brute force, and exploiting known vulnerabilities against accounts and networks with weak security—to gain initial access to target networks. Vulnerabilities known to be exploited by Russian state-sponsored APT actors for initial access include:

Russian state-sponsored APT actors have also demonstrated sophisticated tradecraft and cyber capabilities by compromising third-party infrastructure, compromising third-party software, or developing and deploying custom malware. The actors have also demonstrated the ability to maintain persistent, undetected, long-term access in compromised environments—including cloud environments—by using legitimate credentials.

In some cases, Russian state-sponsored cyber operations against critical infrastructure organizations have specifically targeted operational technology (OT)/industrial control systems (ICS) networks with destructive malware. See the following advisories and alerts for information on historical Russian state-sponsored cyber-intrusion campaigns and customized malware that have targeted ICS:

Russian state-sponsored APT actors have used sophisticated cyber capabilities to target a variety of U.S. and international critical infrastructure organizations, including those in the Defense Industrial Base as well as the Healthcare and Public Health, Energy, Telecommunications, and Government Facilities Sectors. High-profile cyber activity publicly attributed to Russian state-sponsored APT actors by U.S. government reporting and legal actions includes:

  • Russian state-sponsored APT actors targeting state, local, tribal, and territorial (SLTT) governments and aviation networks, September 2020, through at least December 2020. Russian state-sponsored APT actors targeted dozens of SLTT government and aviation networks. The actors successfully compromised networks and exfiltrated data from multiple victims.
  • Russian state-sponsored APT actors’ global Energy Sector intrusion campaign, 2011 to 2018. These Russian state-sponsored APT actors conducted a multi-stage intrusion campaign in which they gained remote access to U.S. and international Energy Sector networks, deployed ICS-focused malware, and collected and exfiltrated enterprise and ICS-related data.
  • Russian state-sponsored APT actors’ campaign against Ukrainian critical infrastructure, 2015 and 2016. Russian state-sponsored APT actors conducted a cyberattack against Ukrainian energy distribution companies, leading to multiple companies experiencing unplanned power outages in December 2015. The actors deployed BlackEnergy malware to steal user credentials and used its destructive malware component, KillDisk, to make infected computers inoperable. In 2016, these actors conducted a cyber-intrusion campaign against a Ukrainian electrical transmission company and deployed CrashOverride malware specifically designed to attack power grids.

For more information on recent and historical Russian state-sponsored malicious cyber activity, see the referenced products below or

Table 1 provides common, publicly known TTPs employed by Russian state-sponsored APT actors, which map to the MITRE ATT&CK for Enterprise framework, version 10. Note: these lists are not intended to be all inclusive. Russian state-sponsored actors have modified their TTPs before based on public reporting.[1] Therefore, CISA, the FBI, and NSA anticipate the Russian state-sponsored actors may modify their TTPs as they deem necessary to reduce their risk of detection. 

Table 1: Common Tactics and Techniques Employed by Russian State-Sponsored APT Actors

Reconnaissance [TA0043]Active Scanning: Vulnerability Scanning [T1595.002]
Russian state-sponsored APT actors have performed large-scale scans in an attempt to find vulnerable servers.
Phishing for Information [T1598]Russian state-sponsored APT actors have conducted spearphishing campaigns to gain credentials of target networks.
Resource Development [TA0042]Develop Capabilities: Malware [T1587.001]Russian state-sponsored APT actors have developed and deployed malware, including ICS-focused destructive malware.
Initial Access [TA0001]Exploit Public Facing Applications [T1190]Russian state-sponsored APT actors use publicly known vulnerabilities, as well as zero-days, in internet-facing systems to gain access to networks.
Supply Chain Compromise: Compromise Software Supply Chain [T1195.002]Russian state-sponsored APT actors have gained initial access to victim organizations by compromising trusted third-party software. Notable incidents include M.E.Doc accounting software and SolarWinds Orion.
Execution [TA0002]Command and Scripting Interpreter: PowerShell [T1059.003] and Windows Command Shell [T1059.003]Russian state-sponsored APT actors have used cmd.exe to execute commands on remote machines. They have also used PowerShell to create new tasks on remote machines, identify configuration settings, exfiltrate data, and to execute other commands.
Persistence [TA0003]Valid Accounts [T1078]Russian state-sponsored APT actors have used credentials of existing accounts to maintain persistent, long-term access to compromised networks.
Credential Access [TA0006]Brute Force: Password Guessing [T1110.001] and Password Spraying [T1110.003]Russian state-sponsored APT actors have conducted brute-force password guessing and password spraying campaigns.
OS Credential Dumping: NTDS [T1003.003]Russian state-sponsored APT actors have exfiltrated credentials and exported copies of the Active Directory database ntds.dit.
Steal or Forge Kerberos Tickets: Kerberoasting [T1558.003]Russian state-sponsored APT actors have performed “Kerberoasting,” whereby they obtained the Ticket Granting Service (TGS) Tickets for Active Directory Service Principal Names (SPN) for offline cracking.
Credentials from Password Stores [T1555]Russian state-sponsored APT actors have used previously compromised account credentials to attempt to access Group Managed Service Account (gMSA) passwords.
Exploitation for Credential Access [T1212]Russian state-sponsored APT actors have exploited Windows Netlogon vulnerability CVE-2020-1472 to obtain access to Windows Active Directory servers.
Unsecured Credentials: Private Keys [T1552.004]Russian state-sponsored APT actors have obtained private encryption keys from the Active Directory Federation Services (ADFS) container to decrypt corresponding SAML signing certificates.
Command and Control [TA0011]Proxy: Multi-hop Proxy [T1090.003]Russian state-sponsored APT actors have used virtual private servers (VPSs) to route traffic to targets. The actors often use VPSs with IP addresses in the home country of the victim to hide activity among legitimate user traffic.

For additional enterprise TTPs used by Russian state-sponsored APT actors, see the ATT&CK for Enterprise pages on APT29APT28, and the Sandworm Team, respectively. For information on ICS TTPs see the ATT&CK for ICS pages on the Sandworm TeamBlackEnergy 3 malware, CrashOveride malware, BlackEnergy’s KillDisk component, and NotPetya malware.


Given Russian state-sponsored APT actors demonstrated capability to maintain persistent, long-term access in compromised enterprise and cloud environments, CISA, the FBI, and NSA encourage all critical infrastructure organizations to:

  • Implement robust log collection and retention. Without a centralized log collection and monitoring capability, organizations have limited ability to investigate incidents or detect the threat actor behavior described in this advisory. Depending on the environment, examples include:
    • Native tools such as M365’s Sentinel. 
    • Third-party tools, such as Sparrow, Hawk, or CrowdStrike’s Azure Reporting Tool (CRT), to review Microsoft cloud environments and to detect unusual activity, service principals, and application activity. Note: for guidance on using these and other detection tools, refer to CISA Alert Detecting Post-Compromise Threat Activity in Microsoft Cloud Environments.
  • Look for behavioral evidence or network and host-based artifacts from known Russian state-sponsored TTPs. See table 1 for commonly observed TTPs. 
    • To detect password spray activity, review authentication logs for system and application login failures of valid accounts. Look for multiple, failed authentication attempts across multiple accounts.
    • To detect use of compromised credentials in combination with a VPS, follow the below steps:
      • Look for suspicious “impossible logins,” such as logins with changing username, user agent strings, and IP address combinations or logins where IP addresses do not align to the expected user’s geographic location.
      • Look for one IP used for multiple accounts, excluding expected logins.
      • Look for “impossible travel.” Impossible travel occurs when a user logs in from multiple IP addresses that are a significant geographic distance apart (i.e., a person could not realistically travel between the geographic locations of the two IP addresses during the time period between the logins). Note: implementing this detection opportunity can result in false positives if legitimate users apply VPN solutions before connecting into networks.
      • Look for processes and program execution command-line arguments that may indicate credential dumping, especially attempts to access or copy the ntds.dit file from a domain controller. 
      • Look for suspicious privileged account use after resetting passwords or applying user account mitigations. 
      • Look for unusual activity in typically dormant accounts.
      • Look for unusual user agent strings, such as strings not typically associated with normal user activity, which may indicate bot activity.
  • For organizations with OT/ICS systems: 
    • Take note of unexpected equipment behavior; for example, unexpected reboots of digital controllers and other OT hardware and software. 
    • Record delays or disruptions in communication with field equipment or other OT devices. Determine if system parts or components are lagging or unresponsive.

Incident Response

Organizations detecting potential APT activity in their IT or OT networks should:

  1. Immediately isolate affected systems. 
  2. Secure backups. Ensure your backup data is offline and secure. If possible, scan your backup data with an antivirus program to ensure it is free of malware.
  3. Collect and review relevant logs, data, and artifacts.
  4. Consider soliciting support from a third-party IT organization to provide subject matter expertise, ensure the actor is eradicated from the network, and avoid residual issues that could enable follow-on exploitation.
  5. Report incidents to CISA and/or the FBI via your local FBI field office or the FBI’s 24/7 CyWatch at (855) 292-3937 or

Note: for OT assets, organizations should have a resilience plan that addresses how to operate if you lose access to—or control of—the IT and/or OT environment. Refer to the Mitigations section for more information.

See the joint advisory from Australia, Canada, New Zealand, the United Kingdom, and the United States on Technical Approaches to Uncovering and Remediating Malicious Activity for guidance on hunting or investigating a network, and for common mistakes in incident handling. CISA, the FBI, and NSA encourage critical infrastructure owners and operators to see CISA’s Federal Government Cybersecurity Incident and Vulnerability Response Playbooks. Although tailored to federal civilian branch agencies, these playbooks provide operational procedures for planning and conducting cybersecurity incident and vulnerability response activities and detail each step for both incident and vulnerability response.  

Note: organizations should document incident response procedures in a cyber incident response plan, which organizations should create and exercise (as noted in the Mitigations section). 


CISA, the FBI, and NSA encourage all organizations to implement the following recommendations to increase their cyber resilience against this threat.

Be Prepared

Confirm Reporting Processes and Minimize Coverage Gaps

  • Develop internal contact lists. Assign main points of contact for a suspected incident as well as roles and responsibilities and ensure personnel know how and when to report an incident.
  • Minimize gaps in IT/OT security personnel availability by identifying surge support for responding to an incident. Malicious cyber actors are known to target organizations on weekends and holidays when there are gaps in organizational cybersecurity—critical infrastructure organizations should proactively protect themselves by minimizing gaps in coverage.
  • Ensure IT/OT security personnel monitor key internal security capabilities and can identify anomalous behavior. Flag any identified IOCs and TTPs for immediate response. (See table 1 for commonly observed TTPs).

Create, Maintain, and Exercise a Cyber Incident Response, Resilience Plan, and Continuity of Operations Plan

  • Create, maintain, and exercise a cyber incident response and continuity of operations plan.
  • Ensure personnel are familiar with the key steps they need to take during an incident and are positioned to act in a calm and unified manner. Key questions:
    • Do personnel have the access they need?
    • Do they know the processes?
  • For OT assets/networks,
    • Identify a resilience plan that addresses how to operate if you lose access to—or control of—the IT and/or OT environment.
      • Identify OT and IT network interdependencies and develop workarounds or manual controls to ensure ICS networks can be isolated if the connections create risk to the safe and reliable operation of OT processes. Regularly test contingency plans, such as manual controls, so that safety critical functions can be maintained during a cyber incident. Ensure that the OT network can operate at necessary capacity even if the IT network is compromised.
    • Regularly test manual controls so that critical functions can be kept running if ICS or OT networks need to be taken offline.
    • Implement data backup procedures on both the IT and OT networks. Backup procedures should be conducted on a frequent, regular basis. Regularly test backup procedures and ensure that backups are isolated from network connections that could enable the spread of malware.
    • In addition to backing up data, develop recovery documents that include configuration settings for common devices and critical OT equipment. This can enable more efficient recovery following an incident.

Enhance your Organization’s Cyber Posture

CISA, the FBI, and NSA recommend organizations apply the best practices below for identity and access management, protective controls and architecture, and vulnerability and configuration management.

Identity and Access Management

  • Require multi-factor authentication for all users, without exception.
  • Require accounts to have strong passwords and do not allow passwords to be used across multiple accounts or stored on a system to which an adversary may have access.
  • Secure credentials. Russian state-sponsored APT actors have demonstrated their ability to maintain persistence using compromised credentials.
    • Use virtualizing solutions on modern hardware and software to ensure credentials are securely stored.
    • Disable the storage of clear text passwords in LSASS memory.
    • Consider disabling or limiting New Technology Local Area Network Manager (NTLM) and WDigest Authentication.
    • Implement Credential Guard for Windows 10 and Server 2016 (Refer to Microsoft: Manage Windows Defender Credential Guard for more information). For Windows Server 2012R2, enable Protected Process Light for Local Security Authority (LSA).
    • Minimize the Active Directory attack surface to reduce malicious ticket-granting activity. Malicious activity such as “Kerberoasting” takes advantage of Kerberos’ TGS and can be used to obtain hashed credentials that attackers attempt to crack.
  • Set a strong password policy for service accounts.
  • Audit Domain Controllers to log successful Kerberos TGS requests and ensure the events are monitored for anomalous activity.  
    • Secure accounts.
    • Enforce the principle of least privilege. Administrator accounts should have the minimum permission they need to do their tasks.
    • Ensure there are unique and distinct administrative accounts for each set of administrative tasks.
    • Create non-privileged accounts for privileged users and ensure they use the non- privileged accounts for all non-privileged access (e.g., web browsing, email access).

Protective Controls and Architecture

  • Identify, detect, and investigate abnormal activity that may indicate lateral movement by a threat actor or malware. Use network monitoring tools and host-based logs and monitoring tools, such as an endpoint detection and response (EDR) tool. EDR tools are particularly useful for detecting lateral connections as they have insight into common and uncommon network connections for each host.
  • Enable strong spam filters.
    • Enable strong spam filters to prevent phishing emails from reaching end users.
    • Filter emails containing executable files to prevent them from reaching end users.
    • Implement a user training program to discourage users from visiting malicious websites or opening malicious attachments.

Note: CISA, the FBI, and NSA also recommend, as a longer-term effort, that critical infrastructure organizations implement network segmentation to separate network segments based on role and functionality. Network segmentation can help prevent lateral movement by controlling traffic flows between—and access to—various subnetworks.

  • Appropriately implement network segmentation between IT and OT networks. Network segmentation limits the ability of adversaries to pivot to the OT network even if the IT network is compromised. Define a demilitarized zone that eliminates unregulated communication between the IT and OT networks.
  • Organize OT assets into logical zones by taking into account criticality, consequence, and operational necessity. Define acceptable communication conduits between the zones and deploy security controls to filter network traffic and monitor communications between zones. Prohibit ICS protocols from traversing the IT network.

Vulnerability and Configuration Management

  • Update software, including operating systems, applications, and firmware on IT network assets, in a timely manner. Prioritize patching known exploited vulnerabilities, especially those CVEs identified in this CSA, and then critical and high vulnerabilities that allow for remote code execution or denial-of-service on internet-facing equipment.
    • Consider using a centralized patch management system. For OT networks, use a risk-based assessment strategy to determine the OT network assets and zones that should participate in the patch management program.  
    • Consider signing up for CISA’s cyber hygiene services, including vulnerability scanning, to help reduce exposure to threats. CISA’s vulnerability scanning service evaluates external network presence by executing continuous scans of public, static IP addresses for accessible services and vulnerabilities.
  • Use industry recommended antivirus programs.
    • Set antivirus/antimalware programs to conduct regular scans of IT network assets using up-to-date signatures.
    • Use a risk-based asset inventory strategy to determine how OT network assets are identified and evaluated for the presence of malware.
  • Implement rigorous configuration management programs. Ensure the programs can track and mitigate emerging threats. Review system configurations for misconfigurations and security weaknesses.
  • Disable all unnecessary ports and protocols
    • Review network security device logs and determine whether to shut off unnecessary ports and protocols. Monitor common ports and protocols for command and control  activity.
    • Turn off or disable any unnecessary services (e.g., PowerShell) or functionality within devices.
  • Ensure OT hardware is in read-only mode.

Increase Organizational Vigilance

  • Regularly review reporting on this threat. Consider signing up for CISA notifications to receive timely information on current security issues, vulnerabilities, and high-impact activity.


  • For more information on Russian state-sponsored malicious cyber activity, refer to
  • Refer to CISA Analysis Report Strengthening Security Configurations to Defend Against Attackers Targeting Cloud Services for steps for guidance on strengthening your organizations cloud security practices.
  • Leaders of small businesses and small and local government agencies should see CISA’s Cyber Essentials for guidance on developing an actionable understanding of implementing organizational cybersecurity practices.
  • Critical infrastructure owners and operators with OT/ICS networks, should review the following resources for additional information:
    • NSA and CISA joint CSA NSA and CISA Recommend Immediate Actions to Reduce Exposure Across Operational Technologies and Control Systems
    • CISA factsheet Rising Ransomware Threat to Operational Technology Assets for additional recommendations.

Rewards for Justice Program

If you have information on state-sponsored Russian cyber operations targeting U.S. critical infrastructure, contact the Department of State’s Rewards for Justice Program. You may be eligible for a reward of up to $10 million, which DOS is offering for information leading to the identification or location of any person who, while acting under the direction or control of a foreign government, participates in malicious cyber activity against U.S. critical infrastructure in violation of the Computer Fraud and Abuse Act (CFAA). Contact +1-202-702-7843 on WhatsApp, Signal, or Telegram, or send information via the Rewards for Justice secure Tor-based tips line located on the Dark Web. For more details refer to


The information you have accessed or received is being provided “as is” for informational purposes only. CISA, the FBI, and NSA do not endorse any commercial product or service, including any subjects of analysis. Any reference to specific commercial products, processes, or services by service mark, trademark, manufacturer, or otherwise, does not constitute or imply endorsement, recommendation, or favoring by CISA, the FBI, or NSA.


[1] Joint NCSC-CISA UK Advisory: Further TTPs Associated with SVR Cyber Actors


January 11, 2022: Initial Version

Risk Transfer Acquired

The Arthur J. Gallagher agency has added PEO specialist general agency Risk Transfer to its portfolio. Founded in 2000, Risk Transfer specializes in the underwriting and brokerage of property and casualty insurance products to the PEO and staffing industries. Industry veterans Dino Fabrizio and Jennifer Robinson will drive the business going forward under the veil of Arthur J. Gallagher. The group has created multiple binding authority programs over the years as well as retains a retail unit. Terms of the deal were not disclosed.

While involved in PEO for many years, Gallagher bet further on PEO when it purchased Stonehenge Insurance Solutions in 2019. With that acquisition, Jeff Rendel, Troy Reynolds and Chris O’Connor brought Gallagher the foundation of a PEO “Center of Excellence:” While more focused on retail, Stonehenge brought a wide range of services to the able for its clientele.

Doubling down with the purchase of Risk Transfer, it is not unnoticed the commitment Gallagher has made to the PEO space. The pairing of the two groups puts them. in a position to work with over 200 PEO’s, or almost half of the PEO industry as counted by units.

We wish the combined team the best of luck in this newly formed alliance and look forward to what comes next for them, and Gallagher as a whole.

Major Companies Rush to Fix Log4j Software

Allows Open Access to Hackers

It should be noted that this is the new “big question” on cyber apps. Make sure your CIO or the like knows what this is and how they are protecting you from it.

From our friends at the Insurance Journal….

By Jack Gillum | December 13, 2021

Major global companies are facing pressure to fix what experts are calling one of the most serious software flaws in recent memory.

The flaw in the Log4j software could allow hackers unfettered access to computer systems and has prompted an urgent warning by the U.S. government’s cybersecurity agency.

Microsoft Corp. and Cisco Inc. have published advisories about the flaw, and software developers released a fix late last week. But a solution depends on thousands of companies putting the fix in place before it is exploited.

“This is probably the worst security vulnerability in at least the last 10 years — maybe longer,” said Charles Carmakal, the chief technology officer for cybersecurity firm Mandiant Inc. He said Mandiant received requests from several major companies in the last few days for help.

Alibaba Group’s cloud-security team recently discovered the flaw, according to the nonprofit Apache Software Foundation, which maintains Log4j.

The vulnerability effectively allows hackers to take control of a system. Because the faulty computer code is baked into software of all sorts, updating it is a painstaking process.

“To be clear, this vulnerability poses a severe risk,” Jen Easterly, director of the U.S. Cybersecurity and Infrastructure Security Agency, said in a statement Friday. Vendors “must immediately identify, mitigate, and patch the wide array of products using this software,” she said.

VMWare Inc., which makes computer-virtualization software, said Thursday that several of its products were likely affected by the Java-based Log4j.

Amit Yoran, the CEO of Tenable Inc., which makes widely used vulnerability-scanning software, said the Log4j flaw is so ubiquitous that, among customers running Tenable’s scanning products, at least three systems a second are reporting they’re affected.

“We are taking urgent action to drive mitigation of this vulnerability and detect any associated threat activity,” Easterly said, adding that CISA has cataloged the vulnerability — requiring U.S. federal civilian agencies to fix it promptly. As of Saturday, the agency hasn’t identified compromises in federal systems.

Photo: Photographer: Oliver Nicolaas Ponder/EyeEm via Getty Images

Containment of Cost for Whom?

48 Cents to Deliver 1 Dollar of Workers’ Compensation Benefits in California?

This seems like an obnoxious amount of money needed to process statutory benefits.

As I giddily get ready for the #wci360, the largest insurance gathering the country will see this year, it will not be with a lack of those that are part of the workers’ compensation cost containment community. There are so many in that community that do amazing things in helping our clients contain cost of individual claims. Unfortunately, there are also many that crush claims files with unnecessary expenses such as “network costs” and unnecessary case management hits.

With no perfect script to understand cost containment impact, ROI of cost containment continues to be speculative and not data-driven; an industry where people charge and pay without empirical acknowledgement of worth or value.

Logic tells us it should not cost $.25/$1 to only provide benefits ! countrywide for workers’ compensation; never mind $.48/$100 in California. Note this does not include commissions, taxes, assessments or other non-claims expenses.

Huh? Why? ————

Disability claims among workers’ compensation systems throughout the country. The 639 PD claims per 100,000 employees in California in 2021 — an improvement from 774 per 100,000 employees in 2015 — is more than double the (national) median of 256.

Average claim duration is also significantly higher in California than in other states. At 60 months post-injury, about 12% of indemnity claims are open in California compared to about 5% in the average state.

Average cost of $3,656 in the median state. At 36 months, the average benefit delivery cost in California of $10,473 is more than 50% higher than the median of $6,830.

Average ALAE costs in the Los Angeles area at the first report level —  about 18 months post-injury — are about 25% higher at $3,160 compared to $2,520 for the rest of California. At the 10th report level — about 120 months — average ALAE costs per indemnity claim in Los Angeles are about 29% higher, or $11,663 compared to $9,073 for the rest of the state.

Make sure that those that contain cost are properly to do that. There are no controls in place for them to show value.

From our friends at workcompcentral ………….

Frictional costs in California’s workers’ compensation system have come down a bit in recent years, but they’re still nearly twice as high as the median state in the latest analysis by the Workers’ Compensation Insurance Rating Bureau.

It costs 48 cents to deliver $1 of benefits in California. While that’s down from earlier assessments finding the cost of delivering $1 in benefits was more than 50 cents, it is still nearly double the 25 cents it costs to deliver the same benefits in the median workers’ compensation system, WCIRB Vice President and Actuary Tony Milano said during a webinar Wednesday.

Milano said the WCIRB has identified key drivers — dubbed “the frictional four” — that explain why California remains an outlier despite recent favorable trends that have moved the Golden State closer to the median.

“They’re the high volume of permanent disability claims, a higher proportion of cumulative trauma claims in California, we have a longer average claim duration and just within the state there are significant differences regionally,” he said.

California has, by far, the highest proportion of permanent disability claims among workers’ compensation systems throughout the country. The 639 PD claims per 100,000 employees in California in 2021 — an improvement from 774 per 100,000 employees in 2015 — is more than double the median of 256.

The proportion of PD claims in California outpaces even that of other states that use the same version of the American Medical Association’s Guides to the Evaluation of Permanent Impairment to determine permanent disability.

Permanent disability claims are more complex and involve more disputes, which drives up frictional costs and allocated loss adjustment expenses compared to claims that result only in temporary disability.

More than 80% of permanent partial disability claims involve so-called “non-trivial” amounts of ALAE, which the WCIRB defines as $1,000 or more in allocated loss adjustment expenses. Less than half of the TD-only claims involve non-trivial ALAE.

Cumulative trauma claims, which appear to be more prevalent in California than other jurisdictions, can also drive frictional costs. Cumulative trauma claims tend to involve disputes over issues such as compensability and, as a result, involve more frictional costs than other claims.

And Milano said recent growth in the proportion of cumulative trauma claims in California has been driven by claims with non-trivial ALAE costs.

At the same time, once a claim incurs more than $1,000 in allocated loss adjustment expenses, the average ALAE per claim is similar for both cumulative injuries and specific injuries.

Average claim duration is also significantly higher in California than in other states. At 60 months post-injury, about 12% of indemnity claims are open in California compared to about 5% in the average state.

As claims stay open longer, they incur more frictional costs, Milano said.

Average benefit delivery costs in California at 12 months post-injury of $4,269 are about 17% higher than the average cost of $3,656 in the median state. At 36 months, the average benefit delivery cost in California of $10,473 is more than 50% higher than the median of $6,830.

These differences are likely larger at later periods in the life of a claim.

Finally, ALAE costs tend to be higher in Southern California — and specifically the Los Angeles area — as compared to the rest of the state.

Average ALAE costs in the Los Angeles area at the first report level —  about 18 months post-injury — are about 25% higher at $3,160 compared to $2,520 for the rest of California. At the 10th report level — about 120 months — average ALAE costs per indemnity claim in Los Angeles are about 29% higher, or $11,663 compared to $9,073 for the rest of the state.

The effects are more pronounced for some components of the so-called “frictional four” compared to others, with claim duration being the biggest driver.

If average claim duration in California were more in line with the typical state, average ALAE would be about 37% lower than it currently is.

If the proportion of permanent disability claims were similar in California to other jurisdictions, average ALAE would be about 14% lower. Average ALAE would also be about 14% lower if claims from Los Angeles are excluded.

Finally, if the proportion of cumulative trauma claims in California were similar to other states, average ALAE in the Golden State would be about 3% lower.

The WCIRB will post a recording of the webinar to its website in a couple of days. WCIRB webinars are here.

A link to the WCIRB report on frictional costs is here.

No Comments

Annual WCI Conference

We at Libertate-Assured Partners would like to thank the National Workers’ Compensation Institute, and specifically Co-Chairmen Steve Rissman and Jim McConnaughay, for their resolute support of the PEO industry. During the celebration of the 75’th year of this event in Orlando, PEO industry stakeholders will once again be given the floor to discuss:
  • Carriers and PEO: Hot Topics Impacting Coverage for PEOs
  • Claims Management: Building PEO Best Practices
  • NAPEO Updates: Legal and Legislative Changes Impacting PEOs
  • NAPEO Updates: Legal and Legislative Changes Impacting PEOs
  • Best Practices for Risk Managers
  • Active Threats and the PEO Response
As always, the conference is laden with topics of interest and the full schedule for the event can be found here

It should be noted that the PEO breakout is 9 – 3:15 on Tuesday, December 14’th. We look forward to seeing you there!
Event: WCI Annual Conference
Dates: 12/12/21- 12/15/21
Location: Orlando World Center Marriott

Employment Practices Liability Insurance Claims and Premiums Surge

Pre-Vaccine frequency and severity only to intensify with first vaccine mandate suits filed in September.

“It’s common knowledge that the employee practices liability insurance arena nationwide has been unfriendly to buyers. Earlier this year, a survey of 20 EPLI carriers showed 15 reported rate increases for the line ranging from 5% to 35% (nationwide)….It costs about 260% more to resolve a claim in California than it does outside of the state, and according to a recent report from Kaufman Borgeest & Ryan, 21% of reported settlements in excess of $2 million were brought in California, as were four out of the top 10 settlements. [1]

There are 3,962 claims involving CoVid according to #FisherPhillips and their extremely cool litigation tracker available at —

Due to the lack of data either available or being provided by those “in the know” in EPLI, this type of reporting is money to better understand jurisdictions, cause of loss and client company size that are showing greatest frequency of events. While perfect world would be accompanying $ amounts by claim type diced, “frequency breeds severity”, and therefore this is extremely helpful in a data-limited enronment.

Budget increases in premiums and retentions. Understand credit risk under retention layers and fund layers for probable future claims. Look hard at California, and price accordingly. Think double.


Florida Passes Legislation Banning Vaccine Mandate unless certain Exemptions are Provided

The State of Florida legislature passed a new law banning private employers from mandating COVID-19 vaccines unless several exemptions are offered to employees. The ban does not prevent private employers from requiring vaccines, however employers must certain exemptions for workers not to be vaccinated.

The exemptions are:

Medical Reasons

Religious Reason

Proof of Covid-19 “Immunity”

Use of Personal Protective Equipment (PPE)

Agreed Periodic Testing

The forms to use use for these exemptions can be found on the link below

A great summary of the new legislation and an excellent breakdown of new law can be found at Fisher Philllips LLP. A link to their analysis can be found below.

Commissioner Approves 5.3% Rate Cut in New Jersey

Just a few days after Florida dropped workers’ compensation rates for 1/1/22 by 4.9%, the New Jersey Commissioner of Banking and Insurance approved a 5.3% decrease.

Coincidentally enough, the New Jersey Compensation Rating and Inspection Bureau recommended a 4.9% rate cut, but the commissioner revised the filing.

Average rate changes will vary by industry group. The “miscellaneous” category will see the largest average decrease at 7.1%, while manufacturing will see the smallest at 2.6%, according to information provided by the Compensation Rating and Inspection Bureau.

The bureau also announced that the commissioner approved changes to the Workers Compensation and Employers Liability Insurance Manual.

A summary of manual changes is available here.