PestWorld.org: Your Partner in Pest Prevention

As Bedbugs Multiply, New Insurance Plans Crop Up

Hartford Courant
Tuesday, July 19, 2011

Bedbugs are crawling the sheets in hotels, apartment buildings and college dormitories in surging numbers, which has spawned a new enterprise for insurance companies.

The tiny, reddish bugs, ranging to about 7 millimeters, or the size of Lincoln's head on a penny, hide in dark places like vampires during the day and suck human blood at night. Unlike those other blood-thirsty parasites, head lice, bedbugs are extremely hard to wipe out once they infest, and the cost can be very high.

Infestations of any kind - bugs, rats or cockroaches -typically are excluded from commercial property insurance policies. The cost of eradicating pests was a maintenance expense, meaning it was not covered by insurance, up until recently.

Insurers, like most of us, didn't want to get near the bugs.

But increasing pressure from lawmakers to require coverage, along with high demand from hoteliers and property owners to protect themselves from financial loss during an infestation, has created a new market.

Last month, bedbug insurance coverage was offered for the first time by two national brokerage firms, Aon Risk Solutions of Chicago and New York-based Willis North America; and also NSM Insurance Group of Conshohocken, Pa., an insurer.

"You've got legislators in the state of New York Assembly who are trying to make this mandatory that insurance companies do this," said John Lafakis, senior vice president at Willis North America and program manager for the bed bug recovery insurance. "So we figured, 'You know what, we're going to beat everyone to the punch.'"

The brokerage firms are leaping into an area that has exploded after years when bedbugs were rarely reported, seemingly a forgotten annoyance from another era.

"Ten years ago it was considered a minor pest issue," said Greg Gatti, a director at Aon Risk Solutions.

Bedbugs have grabbed headlines as more and more people report the telltale red welts after staying in hotels and living in apartment buildings.

Hotels could spend an average $600 to $800 per room to eradicate bedbugs, according to experts in Connecticut. That says nothing of lost income if an infestation becomes public knowledge - on websites such as bedbugregistry.com, or in the media.

Nutmeg State Plagued

The state office that fields questions from people asking about bedbugs, the Connecticut Agricultural Experiment Station in New Haven, had only two inquiries in 1996. Reports started coming in more regularly in 2003 in all major cities across the state, said Gale E. Ridge, an entomologist who specializes in bedbugs at the experiment station.

Ridge is also chairman of the Connecticut Coalition Against Bed Bugs, which brings together bug researchers, pest control services and other interested parties. She recorded more than 900 reports from people who suspected they had bedbugs in the fiscal year that ended June 30, 2010, and the numbers are double or triple that for the year that ended June 2011.

The insects are now in every corner of the state. "We have a very active population here," Ridge said.

Bedbugs aren't known to spread disease, but they can be an annoyance because of itchy welts from their bites and the loss of sleep they cause, according to the federal Centers for Disease Control and Prevention.

The Connecticut trend mirrors what is happening across the U.S. First, bedbug reports were coming out of larger urban areas. Now, they are more widespread, affecting every town in the state, Ridge said.

Occasionally, a person will mistake Eastern bat bugs (Cimex adjunctus) with bedbugs (Cimex lectularius), which are similar in the way they look and behave. Bat bugs typically signal that bats are living in the eaves or attic.

What's the difference?

Bedbugs are small, flat parasites, retreating by day to hiding places in bed frames, floorboard cracks and other dark corners.

"Actually, they'll hide anywhere. I've found them in electrical outlets and … in TV remotes," Ridge said. "They don't like to be on you, your person. You are the food source, and they want to get off of you as soon as they can and get back to their refuge."

The bedbug population is spreading, due in part to the fact that chemicals once used to kill them, such as DDT, are illegal because of the human harm and environmental damage associated with the chemical. DDT, for example, is a probable human carcinogen that damages the liver and reproductive system. It pushed bald eagles and peregrine falcons near to extinction decades ago before it was outlawed in the U.S. in 1972.

Modern-day bugs have mutated to become resistant to neurotoxins, helping the population to grow, though a pest control company can resolve an infestation if the colony of bugs is detected early.

Bedbugs also are spreading because more people are traveling internationally, unwittingly bringing back the nasty stowaways, Ridge said. Sometimes, people notice bites within a few hours, but, for others, it can take two weeks for the bites to show up, particularly the first time a person is bitten. That delay can exacerbate the spread.

Colonies of bedbugs are able to survive in condominium complexes and other multi-family housing arrangements because they travel from one home to another unless the entire building is treated.

Covering Bugs In The Covers

New lines of bedbug insurance announced last month by Willis and Aon, sold as separate lines of coverage, already have taken off, according to insurance brokers. Annual premiums for policies sold so far this range from $3,000 for a 100-room hotel in Oklahoma City to $150,000 for eight state colleges with 36,000 beds in New Jersey, said Lafakis, the Willis North America broker.

"People have been clamoring for this coverage for God knows how long," Lafakis said. "It really didn't exist."

Whether the coverage sells well to hotel owners will depend on how it's priced, but there is certainly a demand for bedbug insurance, said Joe McInerney, president of the American Hotel & Lodging Association. Bedbugs are a recent concern that hadn't been a problem for hotels in decades, and with every new arrival at a hotel comes the possibility of unwanted guests.

"We don't grow them in the basement and send them up for a midnight snack," McInerney said. "Somebody brings them in."

A greater chance of getting bedbugs and all the costs of casting them out may make insurance more attractive, he said.

The Willis coverage, for example, includes decontamination services, rehabilitating expenses, lost profit due to business interruption, crisis management - including a 24-hour/7-day-a-week hotline, coordination with regulatory authorities, risk control and prevention.

Willis North America is a broker for policies by Professional Liability Insurance Services Inc., of Largo Vista, Texas, and is joining with Orkin LLC of Atlanta for pest control services. Willis employs about 100 in Connecticut.

Aon Risk Solutions, which employs 641 people in Connecticut, is an insurance broker for Global Excess Partners policies, and both are teaming with Memphis-based Terminix for pest control.

"We had immediate reaction, not only from our current and prospective real estate customers, but also from our hotel and hospitality customers and have had a lot of interest from our higher-ed practice, which includes the universities and colleges, and to date, we have 15 indications out to major corporations around the country," said Gatti, the director at Aon Risk Solutions

Bedbugs have made hoteliers very anxious.

"Everybody freaks out," Lafakis said of a hotelier discovering a bedbug infestation. "You've really got a problem. The landlords, and the property owners and the hoteliers, they've got to run a business, and now they're freaking out that they don't know how many rooms are infested, 'What have we got to do, is this going to make the front page of the New York Times?'"

He added, "There's hysteria, but it's justified. People's lives are turned upside down by this."


PestWolrd For Kids Pest Quest National Pest Management Association Critter Crafts What is IPM