Alex & Al - Coast to Coast: "Smash and Grab" & "Flash Mob" Robberies and the Retail Impact

Intro (00:01):
This is Alex and Al coast to coast show dedicated to exploring insurance news topics and trends shaping the market. Today. Here are your host, Alex Littlejohn and Al Tobin.

Alex Littlejohn (00:14):
Welcome listeners to the Alex and Al show. This is a special edition featuring, Brett Borelli and Tom Franzoni from Alliant Specialty Property. We've got a series of questions to ask them on a very topical matter. So, I'm going to turn it over to my partner, Al.

Al Tobin (00:30):
Hey Alex, pleasure. This is truly a coast to coast because, Tom Franzoni from our loss control side is out in California and Brett Borelli, from the property broken side is here in New York. So, it's a pleasure to be on with our colleagues. You know I always like to say the insurance industry is a very retrospective industry. It's based on claims and losses. And our clients need to protect themselves. It goes back some 270 years ago when Ben Franklin first started the insurance industry in America. It was circled in on fire insurance. And today's special edition is based on flash mobs and its impact on the retail industry from a client perspective. And from a market perspective, you know, it's kind of unfortunate. We had a lot of conversations since last year, when we had the George Floyd and we had a considerable amount of rioting and strikes and vandalism and carriers were very concerned.

This was not insurable, was not fortuitous and reacted to it. And things have certainly calmed down in that area. We were very, optimistic that carers would loosen up on our retail customers and provide at least try and go back to providing similar coverages they used to. So, with that, we're going to jump into our guest. I'm going to start with Brett Borelli, Senior Vice President here in Alliant, New York. How are you seeing insurance companies today responding to these perils and the recent activity unfortunately at insureds like CVS and home Depot.

Brett Borelli (02:13):
Sure. Thanks Al. First, let me say, good morning. Good morning, Alex morning, Al. It is an honor to be here on your podcast today. I know you've been very successful. You've already had two big guests in with Mr. Chang and Mr. Ellis. So, it is an honor to be sitting here in the guest chair for, I guess, what is your first special report. So, before we talk about what we're witnessing with these smash and grabs on the market. Let's talk about why now that this is a big deal. So if you think about the holiday season right now, most retailers are out there inventory levels of the year, right? So, they have most physical inventory at this time of the year gearing up for the holiday season. So, you start off with that. And at the same time, unfortunately, there's a big black market for stolen goods, and there's a secondary market where people are trying to provide for their buyers.

So inevitably you have people going in and trying to look for inventory by stealing from other parties. And to a lesser degree, but still a big impact of why this is now happening. Aside from the holiday season, there's a lot of state governments are loosening restrictions on misdemeanors for petty theft. So, you put those three things together. And unfortunately, beginning in November, we saw a rash of these smash and grab crimes. Now what's the motivation for that? Really the motivation for this is pretty simple. It's the theft of high end merchandise for resale, in the black market for a profit. These guys would prefer to fly under the radar, grab their stuff and get out of there. That's really the simple motivation, just looking to grab some stuff for them to resell in a separate place. Now we don't want to confuse what's going on with the smash and grab with what Al was talking about in the introduction, which is a more significant event.

So these smash and grabs, yeah, they're scary. They're scary for the client's customers, their client's employees, the police departments that have to chase these guys through the streets. But don't confuse these smash and grabs with the much bigger issue, which is these lootings and organized riots, which we saw coming off the tail end of the George Floyd killing in 2020. So, smash and grabs, they're isolated, small, organized thefts, but when you get into looting and rioting, usually that winds up being something that's more politically motivated or socially motivated. So, these things now are not just happening at one store in one city. Now you're running into an event where this is multiple cities at multiple locations by multiple actors all occurring at one time. So, we're talking about physical loss amounts, which are much larger than they are with these smaller smash and grabs.

Okay. So smash and grabs is basically a theft of a small amount of inventory by the amount you could carry out in your arms, right. And looting a much bigger deal, because if you think about rioting and looting. The motivation for that, yeah, are people looking to steal some inventory certainly, but the real motivation is they're trying to make a splash visually. So, you wind up with physical damage to the building, broken glass, and inevitably, a fire. You could lose all your inventory. So, I'll stop there and just making that differentiating between the two elements. So, now what we've made that differentiating the point with smashing grabs is thankfully the loss levels are relatively small. I'll throw some quick numbers at you. And again, these numbers are available through multiple news sources says these figures are not proprietary to us.

If you go through some quick smash and grabs that occurred since November, Home Depot loss in Los Angeles was only about a thousand bucks. The apple store that was hit in Santa Rosa was about 20,000, the Nordstroms in Los Angeles about 25,000. So, most commercial property insurance deductibles are going to absorb most of that. I think if you go into the level of the Louis Vuitton, I believe that was over a hundred thousand, so yeah, that's a substantial number. But for the most part, what we're seeing is for smash and grabs, these losses wind up being not large enough that they're going to exceed most commercial property insurance deductibles. And what happens is our customers start looking this and they, they wind up self-insuring a lot of that.

Alex Littlejohn (06:30):
It's flying under the under deductible. Right. So, what can a client do? I mean, what is the preventative measure like San Francisco, as an example where this is just becoming a daily practice, what's a client to do in a scenario like that. I mean, obviously, the worst case scenario is they're leaving or they're shutting up their doors, but how do we respond as an industry to something like that? Maybe that's your insight and Tom from a loss control perspective. But I think sometimes the client's hands seem to be tied.

Brett Borelli (07:00):
Yeah. I mean, short of going back to the market and working on smaller deductibles for theft, you know, that's certainly an option, but you're just going to wind up trading dollars with the insurance community. I would say, yeah, I would defer to Tom on this and really it's about law lost control and lost prevention and, and bringing in our experts like Tom, on how to harden those targets.

Tom Franzoni (07:24):
So, you're basically differentiating from those large events last year where underwriters came back and we're restricting coverage to these smash and grabs that are generally, you know, lower events or lower cost events, basically saying that this is covered. And that we anticipate that this will be covered going forward, just may become a deductible issue. Am I right in that statement?

Brett Borelli (07:48):
Yeah, you've got that. So, listen, no two property policies are ever the same as we all know, but I would tell you generally speaking that these smash and grabs they're considered theft, right. And that should be covered on a majority of property policies. It just winds up being a deductible issue for sure.

Al Tobin (08:06):
With that. Why don't we jump over to over to Tom Franzoni and say, Tom, from a loss control side, what are we recommending to customers? What's a good practice going into this holiday season that we keep talking about.

Tom Franzoni (08:19):
I guess, maybe I digress a little bit, the smash and grab phenomenon that's happening today is really listed as an organized crime issue. We're talking about numerous perpetrators. They are coordinating via social media platforms. They hit a target quickly. The average, I think time inside of an establishment is somewhere less than a minute, they're in and out as quickly as they can. So, some of the things I think that can be done, one is we can teach our Salesforce to observe a little better on the actions of our customers. Every one of these smash and grabs have been cased out. So, they're sending people in to look where are the easy targets, where are the escape route, obviously they don't want to be caught. They hide their identity today with COVID, it's easy to legitimately put a face covering over your face.

But sometimes if they're walking into a store, especially at nighttime, or even during the day they're wearing sunglasses, we need to train our employees a little better. Some of the things we can do to harden our establishment, we can make sure that our valuable merchandise is spread around the store. And not necessarily in one location, we may be able to put some type of controlled on our expense merchandise or the higher price ticket items that could mean cabling, chaining, securing somehow clothing items, expensive jackets and things like that to the rack to make it more difficult, maybe dummy boxes or dummy product, having the real product someplace more secure that has to be let out. Bollards in front of storefront to prevent cars from driving through to access. This has been used in several smash and grab opportunities where they drive a vehicle through the front of the building to gain quick access.

Putting up bollards in front, could help to limit that type of an action double doors. What we call are dead man area, where you have an exterior door into a small lobby and then a second door into that. That helps to slow down again, going back to the time they spend in these buildings, it's very short. Anything that can be done to slow down that process, to make it more difficult, to make them choose a softer target is what retailers can do. A simple thing, like a plastic film, when I worked in Afghanistan, we used to put it over the windows of our buildings called blast film, and basically a thin plastic film. You can see through it, but it helps to prevent the window or the glass from being shattered or broken very easy. This can be a rather inexpensive technique that can be used to make it more difficult to break the glass on a door or a display window to gain access. Security cameras can be beefed up both interior and exterior of the store, not having all your merchandise out. I know this is difficult sometimes for the retailer because they want to sell but sometimes limiting the amount of stock you actually have on the floor. Again, making you not a prime target as the bad guy wants to see.

Al Tobin (11:55):
Thanks, Tom. That's very insightful. I think it can be very helpful. And I guess our activity level from customers is increased in this regard. Do you see an increase in customers on the retail side, hiring more security? Is that one of the big answers?

Tom Franzoni (12:12):
Yeah, the only thing I'm seeing so far with the security, especially in places like California, where companies have security and they're being told, don't get involved, but the criminal who's conducting these activities, they know they know what the game is. They know that there's less police on the street. The security guards are not going to chase them down. We've seen it on the news reports and social media where San Francisco, the people ride a bicycle into a CVS load up a plastic bag while a security guard is standing there and they just ride right on out the door. But it's not to say that extra security. It can't be helpful. Again, another deterrent, but it doesn't seem to have been necessarily the right tool at this particular time.

Alex Littlejohn (13:04):
I love the idea of loss prevention that, that clients can be thinking about, especially in areas of those like broken glass. And I think that's all really good for stuff and think we have to look toward loss prevention because once it happens once it's organized and once they make the attack, it's already too late.

Al Tobin (13:23):
Is there something that's worth talking about from an employee standpoint? We keep thinking about how much the cost is, if they steal, five watches or 5,000 shampoos. Is there an employee side to this that we can recommend from a safety standpoint?

Tom Franzoni (13:39):
Well, I guess from the employee standpoint is, and I would hope that businesses are teaching this, is not to get involved. It's kind of split 50/50. Some of them are happening at nighttime when the businesses are closed, some of them are happening during day light hours, but again, it seems like they're picking their times where there's not a lot of people in the stores. Again, they want to be able to get in and out as quickly as possible without confrontation, but from an employee standpoint, I think is to make sure they don't get involved, not to be the hero. Good advice, almost any law enforce will tell you is when they want your watch, give it to them, you know, let them take it.

Al Tobin (14:21):
Well, I think that's a good example of, of risk management there, Tom, from our customers and advice to them to continue the employee training, and I’ll steal your words, to not be the hero.

Alex Littlejohn (14:31):
Yeah. I couldn't agree more. You could find yourself in a very difficult situation. We want to make sure that people are protected there. Well, thank you very much. This was excellent information. I know our listeners will appreciate some of the sound advice that we've mentioned here. If you have questions or need more information, you can reach us at www.Alliant.com. Thank you and have a great holiday season.

Outro (14:53):
Thank you for listening to this episode of Alex and Al Coast to Coast. For more information, visit us at www.Alliant.com.