insurance journal west 2015-09-07

WEST EDITIONUber’s Employee Status Headache

Geico’s $6M Practices Settlement

Supreme Court Rules Against Hartford

ACTION-READY

With our unique blend of products and

a skilled multi-line underwriting team,

we are building value, enhancing

relationships, and responding to our

customers’ needs. And as a wholly

owned subsidiary of Nationwide® , with an

A.M. Best rating of A+ (Superior) FSC XV,

all the pieces are in place to make great

things happen.

The iron is hot. Now is the time to strike.

Scottsdale Insurance Company and design is a federally registered service mark of Scottsdale Insurance Company.

a Nationwide Insurance® company

A.M. Best Rating of A+ (Superior), FSC XV

www.scottsdaleins.com

SCOTT16754.indd 1 2/7/15 4:51 PM

®™

MVP.EarthquakeAuthority.com

CEAUT16337.indd 1 7/18/15 11:55 AM

Applied UnderwritersEquity Comp Construction Spread Ad

Bleed: 17” x 11.125”Trim: 16.75” x 10.875”Live: 16.25” x 10.375”

Applied Underwriters 2015_EC_Construction_IJ.indd

Contact: Sheila Gallagher P: 707-395-0645 Email: [email protected] Experience. Applied Intelligence.

©2015 Applied Underwriters, Inc., a Berkshire Hathaway company. Rated A+ (Superior) by A.M. Best. Insurance plans protected U.S. Patent No. 7,908,157.

IT PAYS TO GET A QUOTE FROM APPLIED®

Accepting large workers’ compensation risks. Most classes. All states, all areas,

including New York City, Boston, and Chicago. Few capacity and concentration restrictions.

Simplified financial structure covers all exposures.

EXPECT THE WINNING DEAL ON LARGE WORKERS’ COMPENSATION.

Call (877) 234-4450 or visit auw.com to get a quote.

APPLIED PROTECTS THE TITANS OF INDUSTRY.®

AUDIRECT16752.indd 1 8/21/15 6:37 AM

6 | INSURANCE JOURNAL-WEST September 7, 2015 www.insurancejournal.com

InsideThisIssue

WEST

September7,2015•Vol.93No.17•West

10 Auto Insurance Affordability Improves in Most States: IRC

10 Insurers Look to Cyber, M&A Coverage as Prices Decline: Marsh

14 MGAs Next to Feel Impact of Capital Markets: AmWINS’ DeCarlo

15 Cyber Risk Insurers Lag in Buying Cyber

24 Survey Examines Agents’ Views of Agency Aggregators

26 Special Report: Stamping Offices Report Moderate Growth in U.S. Surplus Lines Premium

28 Special Report: 10 Drivers of Surplus Lines Growth

32 Special Report: Lloyd’s & Its Syndicates 2015 – Adapting to Changing Times

37 Spotlight: Marketers Have Lost Control of Insurance Buying Process

NATIONAL COVERAGE

42 The Competitive Advantage: Chris Burand

48 The Hard Market That Wasn’t

54 Minding Your Business: Catherine Oak & Bill Schoeffler

58 Managers as Employee Engagement Ambassadors

62 Closing Quote: Making Strides for Gender Equality

IDEA EXCHANGE

DEPARTMENTSW4 People12 Declarations12 Figures18 Business Moves52 MyNewMarkets

W2 W10

W2 California Commissioner Applauds Supreme Court Decision Against Hartford

W2 Study: Ventura, Oxnard in California Could Be at Greater Tsunami Risk

W6 California WCIRB Proposes Premium 7.8% Below 2015 Average

W6 Geico Agrees to $6M Settlement over Business Practices in California

W8 Former California Probation Officer Nabbed for Fraud While on Probation

W10 Uber Headache if More Drivers Want Full-Time Status

WEST COVERAGE

3224

On The CoverSpecial Report:

10 Drivers of Surplus Lines Growth

IMPATIENCE IS A VIRTUE.

Clear your desk. Your mind, too.Quote and order standalone personal umbrellas online in 3 minutes100% direct billNo MVRsNo signed applicationsAdmitted, rated A+ XV by A.M. Best

Family-owned and operated. Proudly dog-friendly. Available nationally. Underwriting criteria varies by state. Visit us online for guidelines. California Insurance License 0D08438A.M. Best rating effective August 2015. For the latest rating, visit ambest.com.

PERSONALUMB16635.indd 1 8/21/15 6:48 AM

8 | INSURANCE JOURNAL-NATIONAL September 7, 2015 www.insurancejournal.com

NATIONAL COVERAGE

FOR QUESTIONS REGARDING SUBSCRIPTIONS: Call: 855-814-9547 or you may subscribe or change your address online at:

insurancejournal.com/subscribeInsurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media Group, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2014 Wells Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Media Group, Inc.

POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 708, Northbrook, IL 60065-0708

ARTICLE REPRINTS: For reprints of articles in this issue, contact: Ly Nguyen at 1-800-897-9965 ext. 125 or [email protected] Visit insurancejournal.com/reprints/ for more information.

Opening Note

Andrea WellsEditor-in-Chief

By offering more relaxed terms and conditions, the market could be repeating historical mistakes.

Repeating Mistakes

Lloyd’s international casualty reinsurance underwriters are running the risk of repeating the same mistakes that have placed the market in difficulty in

the past, according to a new poll of Lloyd’s reinsurance specialists. The survey conducted by the Lloyd’s Market Association (LMA), revealed that 68 percent of casualty treaty underwriters believe that by offering more relaxed terms and conditions, the market could be repeating historical mis-takes. Ninety-five percent of respondents said that they had seen softening of terms and conditions in the international casualty market and 39 percent believed that more than half of those changes were having a material impact on underwriters’ exposures. Worryingly for the market, 71 percent of those surveyed thought that differ-ential terms across a placement were becoming more prevalent at Lloyd’s, the LMA survey revealed. (Differential terms are when some following carriers on a reinsurance slip or on a different layer underwrite the risk on terms and con-ditions different to those agreed by the slip’s lead carrier.) In terms of market conditions, underwriters felt that rates were at the bottom of the cycle, or were approaching bottom. The vast majority felt that current prices were unsus-tainable. Considering these conditions, underwriters were surprised that clients were not buying more international casualty reinsurance protection. Two-thirds of underwriters said they had declined more renewal business in 2015 than the previous year. Broadening terms and conditions was the rea-son most commonly cited for their decision not to renew, followed by pricing considerations and poor loss experience.

“This is a fairly informal survey but its results point strongly towards a buyer’s market in which traditional under-writer discipline is under considerable pressure,” said Patrick Davison, the LMA’s senior executive – underwriting. “The growth in the prevalence of differential terms is particularly disturbing. These create headaches for the mar-ket’s back office and the efficiency with which claims in a subscription market can be managed. Differential terms might be one indicator that some reinsurers have concluded further amendments to coverage or retentions are unsustainable,” Davison said. “This view is supported by the clear perception in the market that the bottom of the cycle is approaching, as

highlighted by the increasing number of underwriters declining business.” The LMA’s survey of members of its international casualty treaty business panel took place during August 2015. Respondents represented three-quarters (by gross written premium) of the interna-tional casualty treaty market in Lloyd’s.

Publisher Mark Wells | [email protected]

EDITORIALChief Content OfficerAndrew Simpson | [email protected] Wells | [email protected] EditorYoung Ha | [email protected] EditorAmy O’Connor | [email protected] Central Editor/Midwest EditorStephanie K. Jones | [email protected] EditorDon Jergler | [email protected] EditorCharles E. Boyle | [email protected] EditorSusanne Sclafane | [email protected] EditorDenise Johnson | [email protected] Chris Burand, Catherine Oak, Bill Schoeffler Contributing Writers David Coons, Rudy Dimmling, Greg Hoeg, Betsy Myatt

SALESChief Marketing Officer Julie Tinney (800) 897-9965 x148 | [email protected] Manager Lauren Knapp (800) 897-9965 x161 | [email protected] Dena Kaplan (800) 897-9965 x115 | [email protected] Steinkamp (800) 897-9965 x172 | [email protected] Whalen (800) 897-9965 x180 | [email protected] Central Mindy Trammell (800) 897-9965 x149 | [email protected] (NY, PA and CT only) Dave Molchan (800) 897-9965 x145 | [email protected] & East (except for NY, PA and CT) Howard Simkin (800) 897-9965 x162 | [email protected] Markets Sales Manager Kristine Honey | [email protected], Jobs, Agencies Wanted/For SaleKelly De La Mora (800) 897-9965 x125 | [email protected]

MARKETING/NEW MEDIAMarketing Administrator Gayle Wells | [email protected] Coordinator Erin Burns (619) 584-1100 x120 | [email protected] Media ProducerBobbie Dodge | [email protected]

DESIGN/WEBChief Technology Officer/Chief Innovation OfficerJoshua Carlson | [email protected]. of Design Guy Boccia | [email protected] Development Elizabeth Duffy | [email protected] Director Derence Walk | [email protected] Developer Jeff Cardrant | [email protected] Developer Tim Layer | [email protected]

IJ ACADEMY OF INSURANCEV.P. of EducationChris Boggs | [email protected] ExecutiveRomeo Valdez | [email protected] Training CoordinatorBarbara Whiffen | [email protected]

ADMINISTRATION Chief Executive OfficerMitch Dunford | [email protected] Financial Officer Mark Wooster | [email protected]

PROFESSIONAL LIABILITY

Take your professional liability business to new heights.

At Burns & Wilcox, our expertise becomes your expertise. Whether it is cyber liability or medical malpractice, EPLI or fiduciary liability, we will ensure your clients avoid any gaps in coverage. Raise the level of your professional liability expertise with Burns & Wilcox.

800.521.1918 | burnsandwilcox.comCommercial | Professional | Personal | Brokerage | Binding | Risk Management Services

36175_Burns_Prof.Lia_Ad_InsJournal_Aug2015_APPROVED.indd 1 8/18/15 4:51 PMBURNWIL16628.indd 1 8/21/15 6:42 AM


NATIONAL COVERAGE

News & Marketspercentage of the average consumer’s budget and lower-to-moderate income consumer’s budget. It also has had unprecedented affordability improvements over time. The auto insurance expenditure-to-in-come ratio was calculated using insur-ance expenditure data from the National Association of Insurance Commissioners and the Bureau of Labor Statistics Consumer Expenditure Survey. Currently, about 1.5 percent to 1.6 percent of income is spent on auto insurance in the U.S. by the average consumer, which represents much lower figures than seen in previous decades, according to IRC. Low-to-moderate income consumers have also witnessed similar trends, the researchers said. “There is a lot of interest in the afford-ability of auto insurance .... This report adds to the discussion, showing that auto insurance is becoming more and more affordable,” said Elizabeth Sprinkel, senior vice president of the IRC.

Auto Insurance Affordability Improves in Most States: IRC

Personal auto insurance has become more affordable over time for all income

groups, including low-to-moderate income groups, and in most states, according to a report from the Insurance Research Council (IRC). The industry group says the study also shows that the degree of improvement in auto insurance affordabil-ity is not being witnessed in other industries. The study includes state estimates indi-cating that auto insurance affordability has also been improving in most states. All but five experienced improved affordability from the 1990s to the 2000s, and all but four have shown an improvement in affordability between the 2000s and the present. Affordability does vary across states, however. According to the report, auto insurance was least affordable in Louisiana (2.85 percent of income), Florida (2.45 per-

cent), New York (2.42 percent), Delaware (2.18 percent) and Michigan (2.10 percent). The most affordable states were found

to be North Dakota (1.03 percent of income), Iowa (1.05 percent),

New Hampshire (1.06 per-cent), Virginia (1.07 percent) and Wyoming (1.08 per-cent). The study, “Trends in Auto Insurance

Affordability,” used an auto insurance expenditure-to-income ratio to analyze auto insurance affordability. The report does not prescribe a specific thresh-old at which auto insurance may be consid-ered affordable. Instead, it examines trends in affordability. The report compares affordability trends for auto insurance to the affordability trends for other industries whose products or services are considered necessities. Auto insurance was found to represent a smaller

Insurers Look to Cyber, M&A Coverage as Prices Decline: MarshCommercial insurance rates continued

their global decline in the second quarter of 2015, a trend driven by an abun-dance of global capacity and a lack of large insured loss activity, Marsh said in its latest Global Insurance Market Quarterly Briefing. At the same time, property/casualty insurers are looking to specialty coverages including cyber and transactional risk insurance for mergers and acquisitions (M&A) as a way to grow, the report says. As of Q2, there have been nine consecu-tive quarters of overall rate declines. Globally, natural catastrophe losses are at historic lows, which is helping profitability but also reducing the drive for rate increas-es, according to Marsh.

Pricing Marsh said the Asia-Pacific region saw the largest overall rate decreases, followed by the U.K., Continental Europe, Latin America and then the U.S.

Commercial casualty rates dipped at a more moderate rate than property, ranging from flat to a 5 percent decline dependent on the market. Property insurance dipped more than 5 percent on average, Marsh said. The Asia-Pacific region saw renewal rate declines greater than 7.5 percent on average. In Continental Europe, the average declines ranged from 5 percent to 7.5 percent, with the U.K. coming in at slightly worse aver-ages. In Latin America and the Caribbean, rate declines varied on average from 2.5 percent to 5 percent. The U.S. saw the least declines, with renewal rates staying flat or dip-ping to 2.5 percent on average.

Specialized Coverages One exception to the price declines — specialized coverag-es — is led by a cyber insurance market that continues to firm up, Marsh reports.

Another bright spot: transactional risk insurance, particularly for M&A deals. Demand for the specialty coverage contin-ued to grow through the first six months of 2015, jumping by 15 percent overall com-pared to the same period last year in terms of limits placed by Marsh. “The demand for transactional risk insurance on M&A transactions continues to grow rapidly, as competition among acquirers continues to remain intense,” says Karen Beldy Torborg, global practice leader

for Marsh’s private equity and M&A sales practice. Dealmakers in the pri-vate equity and corporate space are “increasingly using insurance capital to get deals over the line, and we don’t see this trend subsiding anytime soon.” In Europe, real estate deals are driv-ing the demand for transactional insurance and U.S. and Asia-Pacific corporations involved in buying and

selling are buying it.

Chubb - 153026Project: Vegas Lady

Campaign: February

Creative: 153026_CHUBB_VegasLady_InsuranceJrnl_Feb28

AE: Dave Wood

Publication: Insurance Journal

IO #: None

Issue: February 28th 2015

Ad Type: single

bleed = 8.625” X 11.125”

trim = 8.375” X 10.875”

safety = 7.875” X 10.375”

Insurance Journal

3570 Camino del Rio North

Suite 200

San Diego, CA 92108

Attn: Production Dept

t: 800.897.9965 f: None

Ship Info:

Contact Ad Production with any questions regarding these materialsph: (973) 952-8273 email: [email protected]

TM

Chubb Group of Insurance Companies (“Chubb”) is the marketing name used to refer to the insurance subsidiaries of The Chubb Corporation.

For a list of subsidiaries, please visit our website at www.chubb.com. Actual coverage is subject to the language of the policies as issued.

Chubb, Box 1615, Warren, NJ 07061-1615. © 2015 Chubb & Son, a division of Federal Insurance Company.

PROPERTY / LIABILITY / EXECUTIVE PROTECTION / WORKERS COMPENSATION / MARINE

SURETY / HOMEOWNERS / AUTO / YACHT / JEWELRY / ANTIQUES / ACCIDENT & HEALTH

www.chubb.com

INSURANCE AGAINST REGRETTALK TO YOUR CLIENTS ABOUT CHUBB.

S:7.875”S:10.375”

T:8.375”T:10.875”

B:8.625”B:11.125”

153026_CHUBB_Vegaslady_InsuranceJrnl_Feb28.indd 1 1/29/15 11:45 AMCGMLV16502.indd 1 2/7/15 4:54 PM


NATIONAL COVERAGE

FIGURES DECLARATIONS

$8.9 Million

$2 Million 6 Years

$71 MillionThe amount in the latest round of fund-ing that the New Jersey Transit is getting

from the federal government to pay for rebuilding and replacing equipment dam-

aged by Superstorm Sandy. New Jersey’s Congressional delegation announced the

award Aug. 21. The money comes from the Federal Transit Administration and is part

of a $3.7 billion second round of funding for Superstorm Sandy relief.

The amount of a jury award favoring Michael Jordan in a civil trial focused on the

market value of the former Chicago Bulls basketball star’s identity. The now-defunct grocery store chain Dominick’s Finer Foods

has been ordered to pay Jordan for using his name in a steak ad without his permis-sion. Jordan has said the lawsuit was about

protecting the name he has worked hard for and not about the money. He plans to give

the award amount to charity.

The amount of damage caused by a fire that ripped through a 14th floor pool deck at

The Cosmopolitan hotel-casino on the Las Vegas Strip in late July, according to fire

officials, who say the cause of the fire is still unknown.

Crop Insurance“The lack of insurance for malt barley is pre-

venting farmers from planting this crucial crop.”

— U.S. Sen. Charles Schumer, D-N.Y., during his Aug. 20 speech at the Empire Farmstead Brewery in Madison County, N.Y. Schumer called on the

USDA to establish a new crop insurance program for Central New York farmers who grow malt

barley, a crop that is crucial to the growth of the area’s burgeoning craft beer industry.

Much Better and Much Worse

“You’re going to hear a lot of folks say things are so much better, the economy is so improved, and other people are going to say

it is so much worse.” — Allison Plyer, with the New Orleans-based think tank, The Data Center, comments on the

state of her city 10 years after it was devastated by Hurricane Katrina. Much of New Orleans has rebounded but many areas still struggle, partic-ularly African-American neighborhoods and the

chronically neglected Lower 9th Ward.

Biometric Identifier?“I support technological innovation.

Innovation, however, does not give compa-nies a license to mislead consumers about

issues affecting their safety.”— San Francisco District Attorney George Gas-con and another prosecutor filed a revised lawsuit in late August against Uber saying its background checks rely only on personal information, and the firm can’t ensure information is associated with

an applicant without a “unique biometric identifi-er” — fingerprints, in other words.

A Strong Relationship“We know, at least based on the spatial and temporal relationship between these earth-

quakes and brine disposal operations in Harper and Sumner counties, that these two are certainly linked. … There’s definitely a

strong relationship between the two.”— Kansas Geological Survey scientist Tandis Bidgoli, on the link between an uptick in the

number of earthquakes in two southern Kansas counties and the injection into wells of saltwater

used in oil and natural gas drilling.

Sinkhole Crisis“We’re completely reactionary. We don’t

have the resources to be proactive.” — Lou Akers, executive director of the Hunting-ton, W. Va., Water Quality Board, said in regards to a dramatic increase in sinkholes in the city. The

Huntington Water Quality Board is reportedly getting at least three sinkhole-related calls a week.

The amount of time a Florida man was sentenced to prison for after staging car

crashes. Guillermo de la Vega of Jacksonville pleaded guilty to two counts of participating

in an intentional motor vehicle crash and two counts of false insurance claims. The Florida Times Union reported the fraud-ulent personal injury protection claims

originated at a Jacksonville rehabilitation clinic that authorities say provided bogus treatment for nonexistent injuries. De la

Vega paid those who participated in the fake crashes after the clinic received the money.

The number of seasonally adjusted nonag-ricultural jobs added in Texas in July. The Texas Workforce Commission (TWC) says the state has added jobs in 57 of the last 58

months. The seasonally adjusted unemploy-ment rate remained at 4.2 percent in July,

the lowest monthly unemployment rate since July 2007. The state’s unemployment rate continues to trend well below the national

rate of 5.3 percent and is down from 5.0 per-cent a year ago.

31,400

© 2015 Vertafore, Inc. and its subsidiaries. All rights reserved. Trademarks contained herein are owned by Vertafore, Inc.

Rating, reference, and agency management in one

integrated solution. That’s the power of the Platform.

Learn more: www.vertafore.com/ChoosePlatform

“All the tools we use every day. On one screen. That’s powerful.”

Michelle MorganGeneral Manager Gene Morgan Insurance Agency

The Vertafore Agency Platform™

VFORP16725.indd 1 8/26/15 5:16 AM


NATIONAL COVERAGE

News & Markets

got disintermediated in that transaction?” he asked the audience, quickly answering his own question. “Frankly, MGAs — because if I can do it myself without going through that big frictional cost, we’re going to save everybody money,” he said.

Analytics AmWINS had the ability to do this because they had analytics to share with Nephila, he added. “We had the analytics where they could see through our book of business, [which] we distribute through to 600 markets … “They got comfortable with that big data. That’s one of our core skills,” he said. Summing up, DeCarlo said, “The reality of the Nephila transaction is [this]: If I had 600 direct insurance companies before, now I have 601. It’s the MGA and the Lloyd’s platforms that potentially could be impact-ed,” he concluded.

MGAs Next to Feel Impact of Capital Markets: AmWINS’ DeCarlo

Now that traditional reinsurers are adjusting to the idea that third-party

capital providers have moved into their space, managing general agents (MGA) may be next to feel the negative impact of new capital, the leader of a specialty broker said. Speaking at the Standard & Poor’s 2015 Insurance Conference in June, Steven DeCarlo, the chief executive officer of AmWINS Group, provided details of a deal between AmWINS and Nephila, an invest-ment manager specializing in reinsurance risk, which is helping Nephila plow into new territory — the direct insurance mar-ketplace. It’s the MGAs that were disintermediat-ed in the deal, DeCarlo asserted during a session on trends in the specialty insurance market. DeCarlo made the remark after going over his rationale for accepting almost no commission under terms of a deal. Basically, he said the deal gives Nephila access to a vast retail distribution network without 10 points of commission going to an MGA to get there. (AmWINS has both MGA and wholesale brokerage operations.)

AmWINS and Nephila Deal The background and basics of the arrangement are these, according to DeCarlo: “Nephila is a well-known brand, and they obviously have been on the reinsurance side for years. [But] more and more as they had seen less opportunity to acquire rein-surance, it was not lost on a lot of us that they weren’t going to sit there — that they were going to figure out a way to distribute their capital directly into the [insurance] marketplace … “They did it originally through some facil-ities at Lloyd’s, through some MGAs in the U.S. And then we struck a relationship. “They wanted to get access to insureds. They cannot manage 20,000 retail brokers. There are just too many …So they’ve hired us to do that on their behalf.”

In addition, DeCarlo noted that AmWINS handles a large book of property insurance business — $2.5 billion overall, including a $1.6 billion program of shared and layered premium. Nephila wanted to participate on that shared and layered premium. The issue was how, he said. To solve the problem, “what Nephila did was give us the ability to put their capital out on these property placements country-wide” — small, medium and large. “They follow form, basically like Lloyd’s. They follow terms and conditions and pricing established by somebody else.” Another underwriter establishes the layer’s pricing, and they participate on that pricing. “What people have missed on this is typ-ically that looks like an MGA, and I would make an extra 10 points. [But] instead, I took a half a point. I took basically noth-ing,” DeCarlo said. “The reason I took it is because I want to sell exclusive product — because if I can get retailers to call me, I’m going to get more opportunities,” he explained. “I’m willing to distribute product that’s exclusive without the additional fric-tional cost.” “Nephila’s happy, less friction. We’re happy, exclusive product. That’s the distri-bution game that’s going on …We’re manag-ing retailers with less frictional cost to the capital markets. And it was a quick way for Nephila to participate on a very, very big book of excess property business,” DeCarlo said. “Will they do it in [workers] comp? Will they do it in GL? I don’t know their strate-gy. That’s their choice,” he added. DeCarlo also explained that Nephila needed a fronting company to get this done, revealing that Allianz is the risk transfer agent in this arrangement. The specialty broker executive also revealed that he took a lot of heat from car-rier executives “because it looks like we’re underwriting. We’re not. We’re distributing,” he stated. Carriers shouldn’t be upset, he said. “Who

‘We’re managing retailers with less frictional cost to

the capital markets.’

Steven DeCarlo AmWINS’ CEO

Marty HacalaFitness Enthusiast General Star President & CEO

“Rolling out of bed at 5am every morning to work out requires discipline. It’s my way of getting the very most out of my busy day.

“At General Star, we strive to get the very most out of our wholesale broker relationships. As a member of the Berkshire Hataway family of companies, our financial strength is unsurpassed. But it’s our disciplined approach to building and maintaining profitable partnerships with a select group of brokers that drives us.

“Discipline: Whether sticking with an early morning exercise regimen or standing firm with a limited number of valuable wholesale broker relationships, it remains the cornerstone of our success.”

To locate the General Star broker nearest you, visit our website at www.generalstar.com.

Beyond Security®

“It Takes Discipline”

© 2015 General Star National Insurance Company is licensed in the District of Columbia, Puerto Rico and all states. General Star National Insurance Company has its principal place of business in Stamford, CT and operates under NAIC Number 0031-11967. Insurance is placed with General Star National Insurance Company by licensed producers. General Star Indemnity Company is an eligible surplus lines insurer in all states, the District of Columbia, Puerto Rico, and the Virgin Islands. It has the status as an unlicensed insurer in California and operates

under NAIC Number 0031-37362. Insurance is placed with the General Star Indemnity Company by licensed producers and, for risk that qualify, by licensed surplus lines brokers.

Atlanta 404 239 6777 Chicago 312 267 8600 Los Angeles 213 630 1930 New York 212 859 3950 Stamford 203 328 5700

A.M. Best A++ XV S&P AA+ A Berkshire Hathaway Company

GENSTA16332.indd 1 8/26/15 5:15 AM

W2 | INSURANCE JOURNAL-WEST September 7, 2015 www.insurancejournal.com

WEST COVERAGE

News & Markets

Thefederalstatuteoflimitationsforfiresissixyears,comparedwiththestateofCalifornia’sthree. AnEdisonspokesmansaidtheutilitycompany’spolicyisnottocommentonpendinglitigation. Copyright2015AssociatedPress.

Federal Government Suing Southern California Edison over 2009 Fire

Justdaysbeforethefederalstatuteoflimitationswouldhaverunout,the

governmenthasfiledalawsuitagainstSouthernCaliforniaEdisoninconnectiontoa2009firethatprimarilyburnedtheSanBernardinoNationalForesteastofHemet. Accordingtothelawsuit,anequipmentmalfunctionsparkedthefirethatburnedalmost4squaremiles,about3ofwhichwerenationalforestland. ThefirestartedAug.27,2009andwascontainedfourdayslater. Itcostmorethan$2.65milliontosup-press.

California Commissioner Applauds Supreme Court Decision Against Hartford

CaliforniaInsuranceCommissionerDaveJonespraisedarecentunanimous

CaliforniaSupremeCourtdecisionthathesaidensurespolicyholdersareprotectedfrominsurersrefusingtocoverthird-partyliabilityclaimswhentheinsuredtransferstheinsurancebene-fitsaftertheeventstriggeringcoveragehaveoccurredbutbeforeclaimsarefullyresolved. TheCourtinitsdecisioninAugustinFluorv.SuperiorCourt(HartfordAccident&IndemnityCo.)reliedheavilyontheamicusbrieffieldbyJones,whicharguedthatonceaninsureracceptspremiumforariskandthecoveredeventsoccurduringthepolicyperiod,theinsurer’sobligationisfixedanditmustdefendtheinsuredagainstsubsequentthird-partyclaimseveniftheinsurancebenefitsaretransferredtoanotherentitybeforeclaimsarefullyresolved.

Thisiscodifiedininsurancecode,andisaquintessentialconsumerprotectionthatrequiresinsurancecompaniestodeliverontheirpromisetopayclaimsthatarisefromeventsthatoccurduringthepolicyperiod,

Jonessaid. “Thecourtmadetherightdecisioninfind-ingthatonceaninsureracceptspremiumtocovercertainrisks,andthoserisksactuallyoccur,theinsur-

er’sobligationsarefixedregardlessofanysubsequenttransferoftheinsurancebene-fits,”Jonessaidinastatement.“Thestatuteisclear.Insurersshouldnotbeabletoavoidtheirobligations.” IntheFluorv.SuperiorCourtcase,theissuewaswhetherHartfordcouldwalkawayfromcoverageobligationswhenFlourtransferredtheinsurancebenefittoanotherentity,aftertheeventstriggeringtheinsur-

Study: Ventura, Oxnard in California Could Be at Greater Tsunami Risk

AstudysaystwoCaliforniacoastalcitiesareatgreaterriskfromtsunamisthan

previouslythought. ThestudyreleasedinAugustbytheAmericanGeophysicalUnionexaminedthefloodingriskifearthquakefaultsintheSantaBarbaraChannelarearuptured. Coastalbuildingsdirectlyoppositethefaultswouldnaturallybeatrisk. Butacomputersimulationofamagni-tude-7.7quakesuggeststheresultingwavewouldsplit,turnandmovemuchfartherinlandthanpreviouslythought—perhapsmorethanamile. VenturaandOxnardcouldbehitwithawave23feethigh. Thestudy’sleadauthor,KennyRyanoftheUniversityofCalifornia,Riverside,saysthetsunamimightpenetratetwiceasfarasthelinestatedintheofficialstatetsunamiplan—whichmayneedtobeupdated. Copyright2015AssociatedPress.

ancecoveragehavealreadyoccurred. Inthiscase,Fluortransferreditsinsur-ancecoveragetoanothercompanyandaliabilityclaimwaslaterfiled.Thecourtupheldtheexistingconsumerprotectionslong-codifiedininsurancecodesection520andrequiredtheinsurertomeetitscover-ageobligationsregardlessofthetransfer.

Whoever heard of a $2,500 Earthquake Deductible? We have.

Our revolutionary Equity Protector Earthquake product makes people rethink how they buy earthquake insurance. Instead of buying a policy that covers the entire cost of rebuilding a home in the unlikely event of a total loss, why not buy the amount of coverage needed to repair the damage most likely to occur? Your customer can choose the amount of coverage desired (from $25,000 to $500,000) and the deductible is 10% of the amount selected. When your customer needs a more traditional earthquake product, we’ve got that covered, too. Our popular stand-alone Comprehensive Earthquake policy and Mini-Policy are also available on our exclusive on-line system, where coverage can be quoted and a policy issued in a snap.

Give us a call or visit our website to learn more about our suite of competitive products and apply to become a producer.

800.733.0880, ext. 2576 | www.cnico.com

HOMEOWNER’S EARTHQUAKE MOBILE HOME COMMERCIAL AUTO PERSONAL AUTO UMBRELLA

Our best earthquake protection is groundbreaking.

CNIQuakeAd4a.indd 1 7/15/14 6:18 PMCENNAT16804.indd 1 8/21/15 6:43 AM


WEST COVERAGE

PeoplewithDaVitaHealthCarePartnersInc. Cantlonisresponsiblefordevelopingnewbusinessrelationships,andretainingandservicingexistingclients. ShewasmostrecentlyaprivatebankerwithMutualofOmahaBankinReno. Reno,Nev.-basedLPspecializesinproperty/casualty,surety,workers’compensation,employeebenefits,medi-cal/professionalpractice,personalandriskmanagementservices.

King InsuranceinCaliforniahasnamedLaura Fondarellaasvicepresidentofmarketingandproductdevelopment. Fondarellahasbeeninvolvedinthedevelopmentandmerchandisingofvariouspersonallinesandcommercialnicheproductsservingthehomeowners,mobilehomeparkandprofessionalliabilityspecialties. Shewaspreviouslyafieldrepresentativeandmarketingmanager. Fondarellahasbeenwiththefirmfor18years. KingInsuranceisaspecialtyprogrammanagerhead-quarteredinSanJuanCapistrano.

NewportBeach,Calif.-basedAlliant Insurance ServiceshasnamedRobert BennetsentoleaditsAlliantAmericasdivisionasexecutivevicepresidentandseniormanagingdirector. BennetsenwillspearheadAlliant’sefforttoexpanditspresenceinthemiddlemarketthroughstrategicacquisi-tionsandorganicgrowth. Bennetsenhasexperienceonthecarrierandbrokeragesidesofthebusiness. HepreviouslyservedasexecutivevicepresidentandmanagingdirectorofAlliantEmployeeBenefits. Alliantisalargeinsurancebrokeragethatprovidesproperty/casualty,workers’compensation,employeebene-fits,surety,andfinancialproductsandservices.

Alfred W. BottalicohasjoinedLocke Lord LLP’sglobalregulatoryandtransactionalinsurancepracticegroupinLosAngeles,Calif.,asaninsurancespecialist. Bottalicoisaformerdeputycommissionerforthefinan-cialsurveillancebranchoftheCaliforniaDepartmentofInsurance. Bottalicohas38yearsofregulatoryexperienceinallaspectsoffinancialregulationandexaminationofinsur-ancecompanies,includingstatutoryaccounting,auditingandCaliforniaInsuranceCode Dallas,Texas-basedLockeLordisaninternationallawfirm.

TheIMA Financial Group Inc.hasnamedRobin HelleritschieftechnologyandoperatingofficerinDenver,Colo. Inthenewlycreatedrole,Hellerwilloverseestrategictechnologydevelopment. PriortoIMAHellerwaspresidentandCEOofTheLeadershipInvestment,aColoradononprofit. HerexperienceincludesleadingtechnologyteamsforAmericanExpress,FirstDataandWesternUnion. IMAisafinancialservicescompanyspecializinginriskmanagement,insurance,suretyandemployeebenefitssolutions.

Peggy DrewhasjoinedCrystal & Co.’s commercialproperty/casualtydepartmentasmanagingdirector. Drewwillalsoserveastheteamleaderforthefirm’sLosAngeles,Calif.,office. Herresponsibilitiesincludethedevelopment,admin-istrationandexecutionofaccountservicestrategiesforavarietyofindustriesincludingmanufacturinganddistribu-tion,restaurantsandnonprofitorganizations. Drewhasmorethan25yearsofexperienceintheinsur-anceindustry.PriortoCrystal&Co.,DrewwasaseniorvicepresidentwithWellsFargoInsuranceServices.ShebeganherinsurancecareerwithMarsh. NewYork-basedCrystal&Co.isariskandinsuranceadvisorandinsurancebrokerage.

Berkshire Hathaway Guard Insurance Cos.hasnamedMark Martinez seniorfieldrepresentative. MartinezwillhelppromotegrowthinSouthernCalifornia.Inthiscapacity,heisresponsibleforidentifyingprospectsforappointmentswhileprovidinginformationaboutavailableresourcesandnewdevelopmentstoexist-ingmembersofthedistributionnetwork. Healsofunctionsasagents’fieldliaisonwithBerkshireHathawayGuard’sunderwriting,losscontrolandclaimsstaff. Martinezhasmorethan25yearsofexperience,primari-lyrepresentingnationalcarriers. InOctober2012,GuardInsuranceGroupwasacquiredbyNationalIndemnityCo.,awhollyownedsubsidiaryofBerkshireHathaway.

LP Insurance Services Inc. hasnamedBridget BrundigeandAndrea CantlontoitsnorthernNevadasalesteam. Brundigeisresponsiblefordevelopingnewbusinessrelationshipsaswellasretainingandservicingexistingclients. Brundigewasmostrecentlyapatientaccountspecialist

Robin Heller

Peggy Drew

Mark Martinez

Bridget Brundige

Andrea Cantlon

You’ll Get the Royal Treatment

Watch our videos at MonarchExcess.com

La Crescenta 818-249-0100 • Simi Valley 805-577-6800 • San Diego 619-521-2170 • Rancho Mirage 760-779-5555Novato 415-883-1411 • Fresno 559-226-0200 • Arizona 877-406-8026 • Hawaii 818-425-9847 • License 0697233

At Monarch, Honor Is a Way of Life

One Who Serves

Derek BorisoffChief Executive [email protected]

Doth yonder standard market betray thee? Fear not. Monarch E&S shall write all thine risks! CEO Derek Borisoff pledges his honor and his knowledge to your business.

• Commercial Lines• Personal Lines• Special Risk• Professional Liability• Brokerage

Come hither and ye shall receive the Royal Treatment!

MONARCH16801.indd 1 5/4/15 3:35 PM


WEST COVERAGE

News & Markets

ancecompanies;includingtheirboardmanagementstructure,codeofconductand

risk-managementprocesses. Preservednationalsystemofstate-basedinsuranceregulationbyclarifyingtheroleofstateinsurancedepartmentsasgroup-widesuper-visorsovermulti-nationalinsurancegroups,aspartoftheInsuranceHoldingCompanySystemRegulatorAct. “Asthelargestinsurancemarketinthecountry,Californiaisagainleadingthewayinimprovingtheregulationofinsurancecompa-nies,”Jonessaidinastatement.“AB553includesanurgencyclausesoCaliforniacanhavethesenew

consumerprotectiontoolsinplaceassoonaspossible.I’dliketothankAssemblyMemberDalyforauthoringthisimportantbill.” AB553wasapprovedbytheAssemblyandSenateunanimously.Thebilltookeffectimmediatelyaftersigning.

California Insurance Company Oversight Law Signed

CaliforniaGov.JerryBrowninlateAugustsignedAssemblyBill553,

whichestablishesnewoversightaimedatreducingthenumberofinsurancecompanyinsolvencies. AB553wasauthoredbyAssemblymanTomDaly,D-Anaheim,andwasspon-soredbyInsuranceCommissionerDaveJonesandbyinsuranceindustrystakeholders. AB553improvesoversightofthecor-porategovernanceofinsurersbyaligningstatelawwithnewandimprovedstandardsdevelopedbytheNationalAssociationofInsuranceCommissionersintwokeyareas: Improvedoversightofthecorporategovernancepoliciesandpracticesofinsur-

California WCIRB Proposes Premium 7.8% Below 2015 Average

TheWorkers’CompensationInsuranceRatingBureauhassubmitteditsJan.

1,2016,purepremiumratefilingtotheCaliforniaDepartmentofInsurancepro-posingadvisorypurepremiumratesthataverage$2.45per$100ofpayroll. ThatWCIRBfigureis7.8percentlessthanthecorrespondingindustryaveragefiledpurepremiumrateof$2.66asofJuly1,2015,and0.8percentlessthantheaverageapprovedJuly1,2015advisorypurepremiumrateof$2.47. TheproposedfurtherreductionintheadvisorypurepremiumratelevelforJan.1,2016,followsa10.2percentreductionapprovedbytheCaliforniaInsuranceCommissionereffectiveJuly1,2015.Thepri-marydriversofthereductioninclude:

• Medicallossescontinuetodevelopfavor-ably;

• Recentseveritygrowthcontinuestoemergebelowprojections;

• IncreasesinprojectedwagegrowthinCaliforniaduetoeconomicexpansion.

However,thefilingcautionedthathis-toricallyhighlevelsoflossadjustmentexpenses,persistentlyhighratesofindem-nityclaimfrequency,anincreasingnumberofindependentmedicalreviewrequests,aspikeinlienfilingsinearly2015andper-sistentincreasesintemporarydisabilitydurationrequirecontinuedmonitoringastheymaydriveincreasedcostsinthefuture. TheDepartmentofInsurancewillsched-uleapublichearingtoconsiderthefiling.

Geico Agrees to $6M Settlement over Business Practices in California

Geicohasagreedtopay$6milliondollarsandimplementseveral

changestotheirbusinesspracticesaspartofasettlementwiththeCaliforniaDepartmentofInsurance,CDIannouncedlatelastmonth. Thesettlementstemsfromapeti-tioninwhichConsumerFederationofCaliforniaallegedGeico’sonlinepremiumquotingsystemwasdiscriminatoryandmisleadingtoconsumers. BasedoninformationobtainedthroughtestingoftheGeicowebsite,theconsum-ergroupdiscoveredtheinsurermisrepre-senteda$100,000/$300,000limitquoteasbeingalowest-limitsquote,whenitwasnot,accordingtoCDI. ConsumerFederationofCaliforniaallegedintheirpetitionthatthesehigherpolicylimitswereonlyquotedtocertainconsumers,basedontheireducationlevel,occupationandgender. Thoughinsurersmayalsoofferandsellpolicieswithhigherlimits,Californialawrequiresinsurerstoofferaminimumlimitspolicyof$15,000/$30,000.Geico’sonlinepremiumquotingsystemwasinaccuratelydescribingquotesforhigherlimitsasthelowestlimits,accordingtoCDI. InsuranceCommissionerDaveJonesissuedanorderapprovingthesettlementagreementandrequiringGeicotodiscon-tinueusingconsumers’educationleveloroccupationtoquotecoveragelimits,andtoofferaquotefora$15,000/$30,000policytocertainconsumersforthenextthreeyears.Theinsurerhasalsoagreedtosubmittotwice-yearlyauditsoftheirwebsiteforthenextthreeyears,toensuretheyarecomplyingwiththelaw.

GOLDBEA15088.indd 1 5/9/11 1:44 PM


WEST COVERAGE

News&Markets Palmerwasarrestedwhileservingfiveyears’probationfollowingacon-victionon14felonycountsofinsurancefraud,forgery,wirefraudandgrandtheftin2014forillegallycol-lectingdisabilitybenefitsfromAllstateInsurance. CaliforniaDepartmentofInsurancedetectiveswerecontactedbyAmericanFamilyLifeInsuranceCo.aftertheinsureridentifiedsus-pectedfraudbyPalmer.AninvestigationrevealedthatPalmerwasallegedlycollectingdisabilitybenefitstotal-ing$24,000fromAFLACwhilebeingprose-cutedforthefirstcrimeagainstAllstateandcontinuedtodosoafterherconvictionandwhileonprobation. Ifconvicted,Palmercouldbesentencedtofiveyearsinstateprison.

Former California Probation Officer Nabbed for Fraud While on Probation

AformerLosAngelesCountyprobationofficer,RobynPalmer,29,ofLong

Beach,Calif.,wasarrestedinlateAugustonsixfelonycountsofinsurancefraudfor

allegedlyforgingdocumentstoillegallycol-lectdisabilityinsurancebenefitswhileserv-ingprobationforanotherinsurancefraudconviction.

ABRAM16741.indd 1 8/26/15 11:53 AM

Calif. Man Hurt in Trolley Station Fall Gets $21.5M Insurance Settlment

AnImperialBeach,Calif.,manwhowasinjuredwhenhetrippedandfellon

trolleytracksisreceivinga$21.5millioninsurancesettlement. Fifty-seven-year-oldDavidLongwasinjuredinMay2013whenhesteppedoffthetrolleyandtrippedoverapieceoftrack.Hehithisheadandsufferedinjuriestohisneckandspinalcord,whichhislawyerssaylefthimquadriplegic.LongfiledalawsuitagainstHMSConstructionInc.,AsphaltandConcreteEnterprisesInc.,SanDiegoTransitCorp.,SanDiegoTrolleyInc.andotheragenciesinJanuary2014. Hislawyersaidsurveillancevideoshowedasmanyas10peopletrippingovertheexposedtrack. ThecasesettledinlateJuly. Copyright2015AssociatedPress.

Robyn Palmer, A former Los Angeles County probation officer, was arrested on six felony counts of insurance fraud for allegedly forging doc-uments to collect disabil-ity insurance benefits while on probation for another fraud conviction.

As one of the premiere managing general agents in the excess & surplus

arena of insurance products, we are committed to providing leading edge

products and services in today’s chaotic, global environment.

CALL ON US FOR YOUR:

Casualty • Garage • Homeowners • Professional Liability

Property • Transportation • Umbrella • Workers’ Compensation

Proprietary On Line Quoting Available

(800) 437- 6616

w w w . g o r s t c o m p a s s . c o mLic. #0359417/0443957

NO MATTER WHERE YOU ARE, WE ARE HERE FOR YOU...

15_11158_Gorst_Insurance_Journal_Ad_V3.indd 1 6/15/15 2:18 PMGCOMP16765.indd 1 6/22/15 1:49 PM


WEST COVERAGE

News & Markets

tor.TherulingorderedUbertoreimburseBerwick$3,878formileageandtollsplus

$274ininterest. Inasimilarmatter,theFloridaDepartmentofEconomicOpportunitydecidedinMaythatfor-merUberdriverDarrinMcGillishadbeenan

employee,whichentitledhimtounemploy-mentbenefits. Bothdecisionsapplyonlytotheindi-

Uber Headache if More Drivers Want Full-Time StatusBy Don Jergler

Thousandsofnewfull-timeworkerswouldspringintoexistenceifUberis

forcedtostoptreatingsomeofitsdriverslikecontractworkers,andthebenefitsthatcomewiththatemployeestatusmayenticepart-timeridesharedriverstobeefuptheirhoursofoperation. ArecentstudyfromtheconsumerfinancesiteNerdWalletshowsUberdriversinsixmajorU.S.citieswouldreceivepaidholidaysandhealthcarebenefitsworthan

averageof$5,500ayear,plusthousandsofdollarsmoreinmileagereimbursement,iftheSanFrancisco-basedfirmprovidedthemwiththesamebenefitsasitsfull-timeemployees. ThecatalystforthestudyisaCaliforniaLaborCommissioner’srulinginJunethatUberdriverBarbaraBerwickwasanemployeeofthecompanyandnotacontrac- continued on page W12

‘Eighty-seven percent of drivers say the main reason to use Uber is because they love being their own boss.’

SIAA.Helping independent

insurance agents soar to new heights.

2020celebrating years

[email protected] | www.siaa.net

ACCESS TO COMPANIES

LOCAL &NATIONAL

INCENTIVES

BUSINESSINSURANCE RESOURCES

AGENCYDEVELOPMENT

MARKETINGASSISTANCE

SIAAJL16316.indd 1 2/7/15 4:49 PM


WEST COVERAGE

News & Marketsleftoutothercostfactors,suchasworkers’compensationinsurance,whichwoulddependonUber’sbusinessmodelgoingfor-wardifsomeofitsdriverswereconsideredfull-time. Hethinksthefiguresinthestudyareenoughtoenticesomedriverstoconsideruppingtheirridesharedrivingeachweek.

“IfUberprovidedfull-timebenefits,thatwouldmotivatemoredriverstobecomefull-time,”Chusaid. Uberhasarguedthat

manyridesharedriversdon’twanttobefull-time,becausetheydrivetoaugmenttheirexistingincomeandtheydon’twanttogiveuptheirflexibilityandindepen-dence. AccordingtoapollbyUberofitsowndrivers:85percentofrespondentscitedmoreflexibilityintheirscheduleandbal-ancetheirworkwithlifeandfamilyasamajorreasontoworkwithUber;50per-centofU.S.Uberdriver-partnersdriveonaveragefewerthan10hoursperweek;and65percentofdriver-partnerschangedthenumberofhourstheyworkedbymorethan25percentfromoneweektothenext. Campbellbelievessomecompromiseintheemployeevs.contractorissuecouldbefoundthatbenefitsbothfull-timedriversandUber “Ithinkthere’salotofroomforcompro-miseormiddle-groundswhereUbercouldprovidemorebenefits,”hesaid. Hebelievesacompromiseinwhichcertainbenefitswereofferedtofull-timedriverswouldenableUbertoalsobenefitbyallowingitmorecontroloverthosedrivers,suchasenablingthefirmtoensurethatfeweraredriversarebunchedtogethertoofferridesfromthe9a.m.-to-5p.m.mid-weekslowtimeandthatmoredriverswereavailableduringtheprimetimeoperatinghours. “IthinkthatUberhasthemindsetthatthesituationisallornothing,”Campbellsaid.“Ithinkthat’sprettymisleading.” LindaT.Pierce,anattorneyandareaexecutivevicepresidentwithglobalbroker-

vidualsinvolved,anddonotsetlawsorregulationsthatUbermustfollowwiththerestofitsemployeesinthosestates.Uberisappealingthosedecisions. Initsappeal,UbernotedthatinCalifornia,apreviousrulingbythesamecommissionconcludedin2012thatadriverperformedservicesasanindependentcon-tractorandnotasabonafideemployee. Inacasethatcouldbeturnedintoaclass-actionsuitandcoverallofUber’sdrivers,threedriverstookUbertoafederalcourtinSanFrancisco,contendingtheyareemployeesandentitledtoreimbursementforexpenses,includinggasandvehiclemaintenance.ThecaseinU.S.DistrictCourt,NorthernDistrictofCaliforniaisDouglasO’Connoretalvs.UberTechnologiesInc. Uberprovidedastatementonthatsuit: “Eighty-sevenpercentofdriverssaythemainreasontouseUberisbecausetheylovebeingtheirownboss.Asemployees,driverswoulddrivesetshifts,earnafixedhourlywage,andlosetheabilitytodriveusingotherridesharingappsaswellasthepersonalflexibilitytheymostvalue.TherealityisthatdriversuseUberontheirownterms:theycontroltheiruseoftheapp.It’swhythere’snotypicaldriver—thekeyquestioninthiscase.Andwhynothreepeoplecaneverrepresenttheinterestsofsomanydifferentdriv-ers.” Asidefromthepossibilityofaclass-actionsuit,shouldtheexist-inglabordecisionsbeupheld,somebelievemoreridesharedriverscouldbemotivatedtoseekstatusasfull-timeemployees. Justhowmanyemployeesthisaffectsisn’tclear,butifallUberdriverswerecon-sideredfull-timeemployeesthefirmwouldrankamongthetop50U.S.employersbysize—somewhereaboveBoeingCo.andStarbucks,andbelowSafewayandBankofAmerica. UberinJanuaryreportedthatnearly

14percentofits160,000-and-countingU.S.driversworkedatleast35hoursaweek.Thefirmalsoreporteddriversearned$17.56onaverage. TherearenospecificfiguresforthenumbersofUberdriversineachstate,butHarryCampbell,whoblogsforForbesonthetopicofridesharing,believesCaliforniahasalargerpercentageofridesharedriverswhoarefull-time. Hisreasoningisthatthestateiswheretheridesharingcrazefirstexploded,andasignificantportionofCaliforniaisthinonmasstransitandheavilyautomobilereliant. Campbell,whooftenpollsridesharedriv-ersonhiswebsite,TheRideShareGuy.com,estimatesthatroughly30percentofUber

driversspend40hoursormoreperweekscouringthestreetsforridesandtakingpassengerstoandfro. “Idothinkthere’salotofdriversthatthiswouldaffect,”Campbellsaid. Askedtoputanumberonthetotalnumberoffull-timeUberdrivers,hepostulatedthatasmanyas15,000couldbeconsideredfull-timeemployees. TheNerdWalletstudyoutlinedthebenefitscostsforthoseemployeesinpaidholidays,healthinsurance,mile-agereimbursementandautoinsurance. BasedonUber’sstatedaveragehourlywageforfull-timedrivers,thechangeinemploymentstatusaddsupto$1,264.32forninepaidholidayseachyear.Healthinsurancecostsvarybyarea,butinLosAngelesit’s$2,859peryearandNewYorkit’s$3,585peryear,accordingtoNerdWallet.

Tocalculateestimatedmileagereim-bursementthestudyusesBerwick’sdrivingtotals,whichifextrapolatedtofullyearwouldaddupto38,808miles.Anemployeedrivingthosemileswouldget$22,315inreimbursement. Autoinsuranceratesalsovarybylocale,butinLosAngelesit’s$1,175.61andinNewYorkit’s$1,614.71,thestudyshows. JeffreyChu,theauthorofthestudy,saidhestucktoabarebonescomparisonand continued on page W14

continued from page W10

‘I do think there’s a lot of drivers that this would affect.’

www.mjhallandcompany.com

WORLDS OF EXPERIENCE

SURPLUS LINES BROKER GENERAL AGENT

Since our inception in 1973, M.J. Hall and Company, Inc. has earned aname for dependable surplus lines insurance. As one of California’s mostexperienced general agents, the M.J. Hall team of insurance professionalssets the standard for customer service, product knowledge and reliability.

(209) 948-8108

COMMERCIAL PROFESSIONAL BINDING BROKERAGE

LICENSE #04889001

MJHALLCO16800.indd 1 2/10/15 1:23 PM


WEST COVERAGE

News & Marketssuchasallowingemployeestoworkremotely,andreducingoverheadbycut-tingdownonneededofficespacewhileincreasingemployeeflexibility,Methenysaid. “Therulesaremakingitevenmorechal-lengingforemployerstomovewiththe

trends,”hesaid. Thereversalofthesetrends,possiblyforcingsomeemployerstobringworkersbackintotheofficeandinsistontightercontrolsandlessflexibility,couldmakeforsomeunhappyemployer-employeerela-tionships.

“We’regoingtoseelotsofwageandhoursuits,”hesaid. MethenycountsemploymentpracticesliabilityinsuranceasamongtheinsuranceimplicationsforUberiftheBerwickcaseisupheldandmoreemployeesseekfull-timestatus. Anexampleisanemployerthattreatsallofitsemployeesasindependentcontrac-tors,andthenthere’sanincidentinwhichoneindependentcontractorisaccusedofharassinganother. Becausetheemployerconsidersthemindependentcontractors,theytake“ahandsoff”approach. “Butiftheyfailtoinvestigatethecom-plaint,andtotryandremedythesituation,thatopensthemuptoexposuresthatwouldbepassedontotheinsurerinthetraditionalEPLIpolicy,”Methenysaid. Thisiswhathappenedtoanemployerherepresentedinacaseayearago.Theemployermisunderstoodtheindependentclassificationruleandtreatedhundredsofworkersasindependentcontractorsdespitemanyoftheputtingin50hoursaweek,hesaid. Afewemployeeswereallegedlyharassedbysomeonetheyconsideredtheirsupervi-sor,yetwhowasalsobeingtreatedasanindependentcontractor,andtheemployertoldtheworkerstohandleitbetweenthemselves,accordingtoMetheny. That“handsoff”policydidn’tworkoutsowell. “Itblewuponthem,”Methenysaid.

ageArthurJ.GallagherinGlendale,Calif.,viewsworkers’compasamajorconsider-ationforUbergoingforwardiftheBerwickdecisionisupheldandotherdriversseekthesamestatus. Piercebelievesworkers’compjudgesoverseeingdisputesinvolvingUberdriverscouldusetheLaborCommissioner’srulingasguidance. “Itwouldlikelybeatestawork-ers’compjudgewoulduse,”Piercesaid.“Ithinkthat’sarealpossibili-ty.” TheBerwickcasefitsanexistingmoldinwhichforyearspeoplehavebeenclassifiedasanindependentcontrac-torandhavebroughtacasetogetworker’scompbenefits,unemploymentbenefitsordisabilitybenefits. “There’sallsortsofdifferentagenciesthatarepitfallsforCaliforniaentitiesthatuseindependentcontractors,”Piercesaid. AssoonasenoughUberdriversarehurtonthejobandtheybeginseekingworkers’compbenefits,that’swhentroublemayarisebetweenUberanditsinsurer,sheadded. “Iftheygetclaimsputin,theyruntheriskofbeingauditedbytheircarrierandbeingassessedahugepremium,”Piercesaid,addingthatthere’salsodangerthecar-rierwouldjustrescindthepolicy. BobKing,anattorneyandfounderofLegallyNanny,aCalifornialawfirmthatspecializesinhouseholdemployment,seesthedecisionintheBerwickcaseasfar-reachingand“verydangerousforUber.” TheLaborCommissionermadethefind-ingsintheBerwickcasebasedonlevelofcontrolUberexercisesoveritsdrivers.Sounlessthedecisionisoverruled,therewillbeplentyofsavvyplaintiffs’lawyersarmedwiththisdecisionasanargumentwhowillgooutandfindotherUberdriverstomakethesameclaim,Kingsaid. “BasicallywhattheLaborCommissionerhasdoneissay‘Here’swhatyouhavetosayinyourcomplainttoprevail,’”hesaid.“They’vegivenemployeesaroadmapagainstUber.” Kingtypicallyrepresentsfirmsthat

providenannies,eldercaregiversandothersimilarservicesthatoftensendpeopleouttohomes,butthoseoperationssometimesmisclassifytheiremployeesasindependentcontractors,hesaid. HebelievestheLaborCommissioner’srulingcanbeusedasastandardotherin

otherindustriesoutsideofridesharingtoshowthatcaregiversareemployeesandnotcontractors. “Thisrulingisactuallyabigdealformyindustryaswell,”Kingsaid.“Thisrulingputsanothernailthecoffintoconfirmthatworkersareinfactemployees.WhatthisLaborCommissionerhasdoneisprovidethisroadmapforemployeestosaytherightthinginthehearingtowin.” Headded,“It’snotbindingprecedent,butitispersuasive.” BryanceMetheny,apartnerandchairofthelaborandemploymentpracticegroupatBurr&FormanBurr&FormaninBirmingham,Ala.,alsobelievessuchrulingsaren’tgoingtobelimitedtooneindustry. “Thefutureisgoingtorevealit’snotgoingtobelimitedtoridesharing,”Methenysaid. OvertimepaycouldincreasinglybeanotherconsiderationUberandotherswhooperatewithindependentcontractorswillhavetodealwithifnewrulesproposedbytheU.S.DepartmentofLaborareenacted,hesaid. TheDepartmentofLaborrecentlypro-posedupdatestotheFairLaborStandardsActthatwouldextendovertimepaytoanestimated4.6millionworkerswhoarecurrentlyexemptfromundercurrentregu-lations. Theserules,alongwithdecisionslikethoseintheBerwickmatter,goagainstongoingemploymenttrendsthatbothemployersandemployeesseemtofavor,

continued from page W12

We offer a wide variety of commercial auto, garage, property, packageand general liability products.

All backed by an A++ financial rating by AM Best.

27200 Tourney Rd Suite 360 Phone: (800) 354-4844 - Fax (661) 257-5988 Valencia, CA 91355 www.pgiainsurance.com - License #: 0C04869

PACIFIC GATEWAY INSURANCE AGENCY

NopePass

Sorry

Decline

Huh?

JOHNSO001.indd 1 1/15/14 11:33 AM

Strike up some fun in San Diego at the 8th Annual Insurance Industry Charitable Foundation Bowling Charity Event. It’s a great way to build team morale while supporting local charities. Register today!

Register by Oct 1 $550 per team of four people

(includes food, drink, and raffle) Additional sponsorships available

Thursday Oct 8, 2015 2-5pm • Kearny Mesa Bowl • 7585 Clairemont Mesa Blvd. San Diego, CA

Visit bit.ly/iicfsdbowling2015 or contact Bryan Anderson at 619.686.2900 for more info.

Untitled-3 1 7/16/15 4:43 PM

September 7, 2015 INSURANCE JOURNAL-NATIONAL | 15www.insurancejournal.com

NATIONAL COVERAGE

News & Marketsof competition” in the middle market. “Insurance carriers realize that they can make money as long as they have a diversi-fied portfolio of risk and that the insured meets minimum standards.” In larger, high-risk categories, some car-riers have pulled out from being primary, resulting in less competition. Kalinich reports that there is a greater focus on retention than on pricing among carriers, with retentions that were once $1 million rising to $5 million or $10 million. “Some of the exclusions have expanded and restrictions [have increased]. Unencrypted laptops — we’re not going to cover that,” carriers say. Or “we might cover business interruption for an entity, but we’re not going to cover business interruption if it’s a third party that is disrupted and now it affects your business interruption. Those are the types of coverage issues that are being introduced into the larger risks,” he said.

How Carriers Price Cyber Insurance Standard & Poor’s released a report at the conference applauding insurers for their restraint in offering cyber coverage — a positive from a credit ratings perspective. “Even insurers with a larger market share are guarded enough to use low limits and a whole slew of exclusions (such as excluding damages resulting from data handled by an external contractor), which we believe is sensible. The need for risk-averse under-writing is heightened considering the lack of actuarial data, potential systemic conse-quences, loss creep and clash risk,” rating agency analysts wrote in “Look Before They Leap: U.S. Insurers Dip Their Toes Into the Cyber Risk Pool.” The report highlights the fact that pro-viding cyber risk coverage presents “a huge area of opportunity” for insurers, with a $10 billion potential market size seen as a real possibility within the next five to 10 years. The challenges inherent in pricing a cov-erage for which reliable actuarial is not yet available and probabilistic models are sus-

Cyber Risk Insurers Lag in Buying Cyber CoverBy Susanne Sclafane

As recently as two years ago, only half of the top 10 carriers writing cyber insur-

ance had purchased cyber coverage them-selves, a broker specialist said recently. During an interview at the Standard & Poor’s 2015 Insurance Conference, Kevin Kalinich, global practice leader for cyber insurance at Aon, told Carrier Management that the number buying cyber insurance for their own companies is up to seven of the top 10 carriers, and that two more are in the process of purchasing insurance. (Kalinich defined the top carriers as the 10 that write the most premium volume in the cyber insurance market, noting that Aon is the broker for a number of the top carriers.) “It’s over a majority, but it’s still not unan-imous that they all buy cyber insurance, the same product they’re selling,” he said. Kalinich also reported that 67 insurance companies write some form of standalone

cyber insurance today. Among market par-ticipants, “the appetite has changed but not necessarily expanded,” he said when asked if a soft market for commercial insurance has broadened carrier appetites or prompt-ed price declines. “After the large data breaches, what has happened is that many of the insurance companies that jumped in with both feet suffered their first cyber losses and are reevaluating their commitment to cyber insurance. They have either contracted, or are reducing the limits that they’ll offer from a particular risk — from $20 mil-lion to $10 million or from $10 million to $5 million. Or they have moved from the large risks of retail, hospitality, financial institutions and healthcare into more mid-dle-market risks that they view as [having] a smaller probability of a catastrophic loss.” Kalinich separates larger, higher-risk classes from lower-risk, middle-market categories, noting that there’s ”quite a bit

continued on page 16


pect (mainly because of “the unpredictable behaviors associated with cyber attacks”). So how are insurers pricing coverage? Kalinich said insurers rely on a combina-tion of methods. “Initially, they were using a number of personal identifiable information records and then multiplying it by a number — between $175 and $225 per record.” But insurers realized “there was differentiation depending on the type of information. Social Security number and patient information in healthcare is worth more than credit card information from a retailer.” “As you increase the number of records, the cost per record goes down dramatically to be below $5 per record.”

NATIONAL COVERAGE

News & Markets In addition to getting better at bifurcat-ing the risks related to PII, insurers are get-ting better at differentiating risks beyond PII exposures. “An entity that is dependent on manufacturing, transportation, logistics, they’re looking at those types of risks now compared to what losses they’ve seen, doing modeling based on what they want to get for their return on the capital and adjusting as they get more claims and adjusting as they see more entities,” he said. “The second thing they’re doing different is partnering with modeling companies and rating companies — not rating agencies like the S&P but the equivalent for cyber risks.” “These entities now can assess their

cyber exposures and give them ratings in various categories to determine both the fre-quency and severity of a potential loss. The insurance companies reward those compa-nies that embrace those assessments and make changes, and mitigate and remediate vulnerabilities,” Kalinich said. “Four or five years ago, the insured may have paid for an IT security assessment. Now, insurance companies are not only including some of those as part of their service offering, but they’re demanding that you take on this type of antivirus software or intrusion detection or the equivalent. They still let you do the equivalent.” “It’s actually a tremendous benefit, more so for the small and middle-market com-panies that might not have that expertise,” he said, distinguishing them from larger insureds who want to have direct relation-ships with third-party vendor partners instead of having those controlled by the insurance company. Kalinich said pricing differentials between carriers are decreasing as the use of these assessments are not becoming more widespread. “You would think that they would converge and come closer together based on their assessments. We have seen tremendous divergence in pricing and retention,” he said More typically, there are coverage vari-ations among carriers. “Cyber insurance is not a homogeneous product,” S&P analysts said in their report — a situation that is not bothersome to Kalinich. “It’s okay to have the nuances in the pol-icies to differentiate the coverages,” he said, when asked if a standardized offering might benefit insurers. “Where I think there needs to be more commonality is all carriers look-ing at some of the same type of factors that go into the risk,” he added, reasoning that “if they start taking into account the import-ant factors on a more macro level, that will improve risk management in totality.” “So you can’t have an organization use adverse selection to go to a carrier that doesn’t understand the [right] questions [to ask]. It actually would improve the whole risk management if they have a baseline of the factors that they consider,” he said.

continued from page 15

S&P: U.S. Insurers Cautious to Respond to Soaring Cyber Demand

Standard & Poor’s predicts a major jump in demand for cyber insurance

in the coming years, with interest initial-ly outstripping supply. U.S. insurers will respond gradually, however, entering the market with caution, allowing for breath-ing room to develop knowledge and experience about the fast-evolving risk, the rating entity found in a new report. Insurers remain hesitant to embrace cyber risk quickly because it is “fast mov-ing, impossible to predict, and difficult to understand and model, but change can be immense,” S&P noted. Another concern: aggregation risk and clash with other policies. S&P outlined these and other insur-ance-related cyber trends/concerns in its newly-released report: “Looking Before They Leap: U.S. Insurers Dip Their Toes In The Cyber-Risk Pool.” The report says cyber insurance demand will grow “as management teams utilize both offensive and defen-sive capabilities,” and perception of cyber risk and its financial costs grows due to increasing media coverage. Attacks will increase in both frequen-cy and sophistication as losses grow. Lloyd’s estimates that there are around

$400 billion in annual losses due to cyber hackings, only a small number are insured, S&P said. With that in mind, cyber insurance is gaining more promotion and regulators are encouraging companies to buy it to help manage their risks and minimize the cost of a breach. Cyber breaches can dam-age an organization’s reputation, and that could spur the growth of the cyber mar-ket. More regulations passed in response to hackings should also trigger interest in cyber coverage, according to the report. “Cyber insurance is a sellers’ market, unlike more developed/traditional busi-ness lines,” S&P said. However, insurers aren’t exactly jumping in “with both feet” for a number of reasons. “Due to the changing nature of tech-nology and hacking strategies, insurers don’t have an accurate loss history,” S&P noted. “Whereas traditional liability products may use revenue and industry as particularly important drivers of risk assessment, it is much more difficult to determine a company’s ability to defend itself from a very determined hacker.” S&P said it expects cyber insurance capacity to increase as experience in the sector grows.

SeeYourself

as a

CPCU

Why CPCU?With The Institutes’ Chartered Property Casualty Underwriter (CPCU®) designation you

transform learning opportunities into career success.

• 85% of CPCUs believe earning the designation accelerated their career.

• 90% of CPCU designees say their job opportunities increased.

• 74% of CPCUs say the designation helped them gain a promotion or salary increase.

• Join a network of 22,000 CPCU Society members dedicated to professionalism.

Commit to Your Success—Order Course Materials Today!

www.TheInstitutes.org/CPCU

© 2015, American Institute For Chartered Property Casualty UnderwritersCPCU is a registered trademark of The Institutes. All rights reserved.Statistics are based on a 2008 survey of CPCU program completers. www.TheInstitutes.org

INSTBRA16785.indd 1 7/22/15 6:43 AM


NATIONAL COVERAGE

Business Moveshealthcare organizations and pro-viders. Dan Nissi, DISNE’s president, will join Hub as president of Healthcare Solutions for Hub New England, a Hub International subsidiary, and report to Charles Brophy, CEO of Hub New England. In a separate deal, Hub also acquired the assets of Triangle Insurance Services Inc., an inde-pendent insurance agency based in Raleigh, N.C. Terms of the acquisition were not disclosed. Triangle Insurance specializes in providing property/casualty insurance services to clients in the Cary/Raleigh area. Cleve and Linda Folger, the founders

and owners of Triangle Insurance, are joining the Hub Carolinas division of Hub International Southeast. Hub International is an insurance broker-age that provides property/casualty, life and health, employee benefits, investment and risk management products and services.

Beneficial Insurance, PKA Beneficial Insurance Services, a subsid-iary of Beneficial Bank in Philadelphia, acquired Pye Karr Ambler & Co. Inc. (PKA), an independent insurance agency in Jenkintown, Pa. Terms of the transaction were not disclosed. Under the transaction, PKA President and CEO Lou Karr and the agency’s two staff members will join Beneficial Insurance. PKA’s Jenkintown office will continue to be used for the immediate future, Beneficial Insurance said. Beneficial Insurance is an insurance bro-kerage offering commercial, personal, and benefit products.

Union Insurance, McLaughlin Co. Union Insurance Group, a Chicago-based commercial insurance agency specializing in property/casualty and professional liabili-ty products for labor organizations, acquired The McLaughlin Co., an insurance agency in Rockville, Md. Terms of the transaction

Distinguished, Fulcrum Distinguished Programs Holdings LLC announced the pending acquisition of Bellevue, Wash.-based Fulcrum Insurance Programs. The businesses will be combined and rebranded as Distinguished Specialty. Fulcrum principals Dusty Rowland and Eric Arthur will be joining Distinguished Specialty as senior executives and Rowland will join Distinguished’s board of advisors when the deal is concluded. Brooks Chase will become president of Distinguished Specialty. The deal is expected to close at the end of October. New York-based Distinguished is a port-folio of businesses serving the insurance industry. Fulcrum is a program administrator focused on real estate and hospitality.

Hub International, DISNE, Triangle Insurance Hub International Limited acquired the assets of Doctors Insurance Services of New England (DISNE). Terms of the acquisition were not disclosed. Based in the Boston suburb of Holliston, Mass., DISNE specializes in providing per-sonal and professional liability, including medical malpractice insurance services, to

were not disclosed. Union Insurance Group provides com-mercial insurance including property/casu-alty and professional liability coverage to labor organizations of various sizes.

AAdvantage Insurance Group, Premier Insurance Associates AAdvantage Insurance Group in Glen Carbon, Ill., led by founder Dave Viox, recently announced a merger with Premier Insurance Associates located in Edwardsville, Ill. Vince and Deb Valesano, former owners of Premier Insurance Associates, will also join AAdvantage Insurance Group. AAdvantage specializes in farm, com-mercial, home, auto and life insurance and serves clients in the Metro-East/St. Louis area, as well as throughout Illinois and Missouri.

Meadowbrook Insurance, Mackinaw Administrators Meadowbrook Insurance Group Inc., based in Southfield, Mich., has acquired Mackinaw Administrators LLC (Mackinaw). Mackinaw is a Michigan-based program and claims administrator that provides tai-lored insurance and risk management pro-grams and other related services for both group and individual clients. Under the terms of the transaction, Mackinaw will operate as an independent subsidiary within Meadowbrook. Mackinaw will maintain its present headquarters in Brighton, Mich., and continue to be led by its current management team, including the company’s president, Stephen Flechsig.

Higginbotham, Commercial Global Insurance Higginbotham, based in Fort Worth, and Commercial Global Insurance (CGI), based in Deer Park, Texas, are merging their oper-ations in Friendswood, Texas. Higginbotham’s union with CGI is its second merger in the Friendswood area and brings its total number of employees to 660 in 22 offices. Higginbotham provides property, lia-


Fujitsu iX500 silhouette-printAgency contact: Jon Miwaphone: 926-642-3053email: [email protected]

Incredibly fast

Intuitively smart

One button simple

http://ez.com/insj

wireless desktop scanner

© 2015 Fujitsu Computer Products of America, Inc. All rights reserved. Fujitsu and the Fujitsu logo are registered trademarks of Fujitsu Ltd. All other trademarks are the property of their respective owners.

Own productivity

FUJITPFU16719.indd 1 7/15/15 1:35 PM


NATIONAL COVERAGE

Business Movesbility, life and health insurance, risk man-agement and employee benefit services to businesses and individuals. CGI is a boutique agency that provides commercial insurance and bonds to businesses and investors primarily in the industrial, environmental and construction industries. CGI founder Blake Barnes will serve as a managing director of the combined firm.

TIA-TCOR TCOR Management, based in New Braunfels, Texas, has formed a new insur-ance agency, TIA-TCOR LLC, dba Texas Insurance Agency. With Ben Reedy as principal, San Antonio-based TIA-TCOR provides insur-ance, risk management, surety and employ-ee benefits to organizations across Texas and the nation. The firm maintains a focus on the energy, construction, manufacturing, healthcare, life sciences, non-profit, real estate, retail and wholesale trade, and technology indus-tries.

Marsh & McLennan,Tequesta Insurance Advisors Marsh & McLennan Agency LLC (MMA), the middle market agency subsidiary of Marsh, has acquired Tequesta Insurance Advisors, a personal, commercial, and employee benefits insurance provider in Florida. Terms of the transaction were not disclosed. With approximately $10 million in annual revenues and 50 employees, Tequesta adds additional property/casualty capabilities and personal lines expertise to MMA’ s Florida region. All of Tequesta’s employees are joining MMA and will continue to oper-ate out of the agency’s Tequesta, Fla. office. According to Shannon Alfonso, president of MMA’s Florida region, MMA now has more than 220 colleagues in eight offices throughout Florida.

Marsh, Dovetail Insurance Marsh has signed a definitive agreement to acquire Dovetail Insurance, a provider of

insurance technology services tailored to the U.S. small commercial market. Terms of the transaction, which is expected to close in the third quarter, were not disclosed. Based in Columbia, S.C., Dovetail has developed a cloud-based technology plat-form that enables independent insurance agents, on behalf of their small business clients, to obtain online quotes from multi-ple insurance providers and bind insurance policies in real-time. Upon closing, Steve Francis, CEO of Dovetail, and the entire Dovetail team, will join Marsh. Dovetail will be part of Marsh’s Global Risk & Specialties segment.

Johnson & Johnson, John Handel & Associates Managing general agency Johnson & Johnson Inc. (J&J) has acquired John Handel & Associates Inc. (JHA), located in St. Petersburg, Fla. John Handel & Associates was estab-lished in 1983 as a full service multi-line E&S brokerage agency serving Florida. The company will continue to serve its agents and insureds from JHA’s office in St. Petersburg and from the current J&J office in Melbourne, Fla. The entire JHA team will join the organization. Based in Charleston, S.C., J&J is a full-service MGA offering E&S markets, standard markets, and premium financing to independent insurance agents.

Patriot National, RCA Patriot National Inc., a workers’ com-pensation outsourcing services firm based in Fort Lauderdale, Fla., acquired R.C.A. Insurance Group (RCA), a Clifton, N.J.-based property and liability program administrator to the hospitality industry. Terms of the transaction were not dis-closed. RCA provides preferred insurance pro-grams designed for restaurants, bars and taverns nationwide. RCA will become part of Trigen Insurance Solutions, Patriot National’s operating subsidiary focused on expansion into broader commercial insur-ance lines.


ENER

GYR

ISK

S

Global Special Risks, LLC is a subsidiary of RSG Underwriting Managers, LLC. RSG Underwriting Managers is a Delaware series limited liability company and a subsidiary of Ryan Specialty Group, LLC, specializing in underwriting manage-ment and other services for insurance products distributed through agents and brokers. In California: RSG Insurance Services, LLC License # 0E50879. PLEASE NOTE: Global Special Risks is not doing business in the State of California. © 2015 Ryan Specialty Group, LLC

Energy Risks Transformed

A chameleon can transform its skin color and adapt to its surroundings in seconds.

For over 30 years, Global Special Risks has been at the forefront of creating and transforming insurance products to address the changing needs of the oil and gas industry.

For More Information, Contact: Steve England (713) 260-1029

[email protected]

GSR002.indd 1 8/6/15 11:23 AM

National, Independent Wholesale Brokerage & Managing General Agency Since 1970.

www.wwfi.com

Ca. Lic. #0414108

Focus onthe Futurewith WWFIA National Wholesale Broker and Managing General

Agent with multiple regional offices across the country,

our reach doesn’t end there. Our key industry relationships

with virtually every specialty domestic and international insurer ensures you and your clients have access to the best resources, multiple in-house binding authorities, unparalleled product expertise and exceptional service.

WORADP16764.indd 1 8/13/15 11:51 AM


NATIONAL COVERAGE

News & Markets

“some” (38 percent) or “a lot” (50 percent) of added value. Just 11 percent say their aggre-gator provides either “not very much” (8 per-cent) or no added value at all (3 percent). It’s no surprise, then, that fully 88 per-cent of agents whose firms belong to an aggregator say they are unlikely to leave their organization in the next year, and 72 percent are “very unlikely.” Only 12 percent are “very likely” or “somewhat likely” to leave.

Unlikely to Join? Seventy-four percent of agents work at firms that do not belong to an aggregator. And very few (7 percent) of those agents say they are likely to join such an organization in the next year. Fully 94 percent of agents whose firms do not belong to an aggregator are unlikely to join one in the near future (45 percent “somewhat unlikely;” 49 percent “very unlikely”).

Thus, has the growth of aggregators peaked? The full Channel Harvest report looks at what services and products independent agents want for their businesses, including niche marketing help, communications, annual planning process, and various other support areas. Aggregators that can satisfy these wants still may be able to grow in the increasingly saturated marketplace.

For more information on obtaining the survey report as well as the raw data, contact John Campbell, principal of Channel Harvest, at [email protected].

Survey Examines Agents’ Views of Agency Aggregators

About a quarter of independent insur-ance agents say they work at a firm

that belongs to an aggregator cluster. But very few whose agencies don’t already belong to an aggregator want their firms to join one, a fact challenging the trend of the recent, rapid growth in overall aggregator membership. This is one of the findings of a recent national survey of independent insurance agents conducted by Channel Harvest Research. The study, “Key Success Factors in Agent/Carrier Relationships,” is the eighth in a series examining agents’ views on property/

casualty carriers and various marketplace issues. More than 2,200 agents responded to the survey, which was sponsored by Insurance Journal.

Aggregator Value Added for Agents Twenty-six percent of agents work for an agency that belongs to an aggregator or cluster. Those organizations range in size from having fewer than 10 agency members to having more than 100. Agents are impressed by what they get from their aggregator membership: Most respondents whose agencies belong to an aggregator think their group provides

Fully 94 percent of agents whose firms do not belong to an aggregator are unlikely to join one in the near future. Has the growth of aggregators peaked?

Risk can rattle your bones and freeze your business. Don’t let it. Instead, protect it with Tokio Marine Specialty’s powerful Excess & Surplus commercial insurance protection. With support from Philadelphia Insurance Companies specialized niche market expertise, and Tokio Marine Group, with its life/non-life insurance company group’s Top 20 ranking in the world, based on market capitalization, Tokio Marine Specialty provides truly powerful protection.

Learn more. Call 855.411.0797 or visit TMSIC.com

SOMETIMES, ONE LAYER OF PROTECTION DOESN’T PROVIDE ENOUGH COVERAGE.

Construction I Environmental I Hospitality I Manufacturing I Real Estate/Habitational I RetailTokio Marine Specialty Insurance Company, a member of the Tokio Marine Group, is an authorized Excess and Surplus lines insurance carrier in all states and D.C. Tokio Marine Specialty Insurance Company is not licensed or admitted in any jurisdiction except Delaware where it is a domestic insurer licensed to write surplus lines. Surplus lines companies do not participate in state guaranty funds in any jurisdiction, except New Jersey, and thus, surplus lines insureds are not protected by those funds. © 2015 Tokio Marine Specialty Insurance Company, All Rights Reserved.

A Member of the Tokio Marine Group

Excess and Surplus Lines InsuranceA.M.Best A++ Rating | S&P AA- Rating

SNL’s Top D&O Underwriter Nationwide

Unsupported and Supported

Follow Form Excess Policy

$25M in capacity

Lead Limits up to $10M

Admitted and Non-Admitted Paper

Occurrence and Claims Made Coverage

15PHLY_TMSIC InsurJournal_Layers.indd 1 8/17/2015 12:42:31 PMTOKIOM001.indd 1 8/17/15 2:21 PM


SPECIAL REPORT

Surplus Lines

Collectively, the 14 U.S. surplus lines stamping offices have reported moder-

ate growth in surplus line premiums during the first half of 2015. Approximately 60 percent of all surplus lines insurance is processed by stamping offices, according to the Surplus Lines Stamping Office of Texas (SLSOT), which bi-annually aggregates premium and filing statistics from the 14 U.S. stamping offices. SLSOT conducts the study to measure what may be occurring by state, region, and/or on a national basis to determine trends or changes in the marketplace. Collectively, the stamping offices pro-cessed in excess of $13 billion in surplus lines premium, reflecting 9.5 percent growth over the nearly $12 billion in premi-um processed during the first half of 2014. Furthermore, filings with these stamping

of these states was lower, with Florida just under 7 percent and Texas just over 2.5 per-cent growth. While New York has seen 14 percent growth, the premium reported was $1.8 billion. Smaller volume offices displayed a wide range of change from significant growth to small decreases in premium. Oregon, with $159 million premium reported, showed the largest percentage gain of all states at 22.7 percent. On the other end of the spectrum, Idaho posted a loss in premium of 2 per-cent; however, a better perspective will be reviewed by the end of the year. The aggregate data supports a continued modest growth from 2013 to present with some outliers by region. This may be due to varying legislative changes that account for specific growth as evidenced in the west and east coast regions.

Stamping Offices Report Moderate Growth in U.S. Premium

offices totaled more than 1.8 million, reflect-ing an increase of 5.3 percent over the 1.7 million filings recorded in the first half of 2014. From a regional perspective, stamping offices in the South recorded the highest premium at $5.7 billion while the western states followed closely with premium levels at $4 billion, as evidenced with the regional depiction. Within those regions, the stamping offic-es in the four largest surplus lines markets — Texas, California, Florida, and New York — showed varying levels of growth in the first half of 2015. California showed the strongest growth and the highest premium volume at $2.9 billion. Florida and Texas followed closely behind in premium report-ed, with $2.8 and $2.6 billion, respectively. By comparison, premium growth in each

XL Catlin is the global brand used by XL Group plc’s (re)insurance subsidiaries. , XL Catlin and MAKE YOUR WORLD GO are trademarks of XL Group plc’s companies. Coverages may not be available in all jurisdictions.

XLCatlin_InsJournal_Sept2015_fullRHP_Napslo issue.indd 1 8/25/2015 2:05:27 PMCATLINUS16782.indd 1 8/26/15 10:53 AM


SPECIAL REPORT

influx of new capital and all of the positives and negatives that come along with that,” he said. The continued growth of surplus lines insurers doesn’t appear to be hurting their stability either. A.M. Best reports that for the 11th year in a row, the surplus lines industry reported no financially impaired companies. That’s in contrast to the admitted property/casualty

By Andrea Wells

Times are good for surplus lines profes-sionals.

The surplus lines industry reached new heights in 2014, growing direct premium written (DPW) in 2014 to $40.2 billion — the highest point in history, reports A.M. Best’s “2014 Special Report U.S. Surplus Lines – Segment Review.” Surplus lines insurers grew DPW by 6.7

percent in 2014, exceeding the industry’s previous peak in direct written premium in 2006. And the first half of 2015 appears to be on track to mark another record-breaking year for surplus lines. According to the Surplus Lines Stamping Office of Texas more than $13 billion in premium was collected by sur-plus lines professionals during the first half of 2015 in the 14 states with U.S. stamping offices. That growth reflects a 9.5 percent uptick over the nearly $12 billion in premi-um processed during the first half of 2014. Even more impressive, according to Benjamin J. McKay, executive director of the Surplus Line Association of California, is the growth of the industry during the past four years. McKay said the industry has seen a 27 percent increase between 2010 and 2014 and his state of California saw about a 40 percent increase in DPW during that time. “The sector has grown dramatically for the past four years and that has driven the

State of the Market

10 Drivers of Growth1. More Capital2. Continued Innovation3. Improved Economy4. Technology5. Catastrophe Risk Lessons6. Regulation7. Specialization/Customization8. Combination of Exposures9. Pricing Support10. Merger & Acquisition Activity


industry’s 12 known financial impairments in 2014, the rating agency said. The combined ratio average for surplus lines specialists held strong at 91.4 for 2014 compared to 97.2 for total P/C industry in 2014, A.M. Best reported. In general, the market position of surplus lines insurers continues to be described in favorable terms such as profitable, stable, well-capitalized and consistent performers, and A.M. Best’s outlook on the surplus lines insurance market remains stable. The year 2014 continued the pattern of growth and favorable results, according to Henry Witmer, assistant vice president at A.M. Best Co. “2014 was a continuation of 2013 results after a couple of more difficult years,” Witmer told Insurance Journal. “In 2012 we had Superstorm Sandy and other issues, but 2014 looks good and in line with 2013.” According to the report, results were driven by a combination of product diversi-fication, underwriting discipline and advantageous market conditions. It all adds up to an enviable streak: “As a result, surplus lines companies continue to outperform the overall property/casualty industry and recorded a second straight year of underwriting profitability following three years of underwriting losses,” A.M. Best says. A.M. Best also noted that over the 21-year history of the report, the surplus lines mar-ket has more than doubled from 3.3 percent of total property/casualty direct premiums written in 1994 to approximately 7.1 percent by the end of 2014. When looking at just commercial lines DPW, the growth as a per-centage has jumped from 6.1 percent in 1994 to 13.9 percent in 2014. “The A.M. best study presents some very positive news about the state of the market, A.M. Best’s outlook on the industry and the growth in 2013 and 2014 in terms of direct written premium,” said Brady Kelley, execu-tive director of the National Association of Surplus Lines Offices (NAPSLO). “Surplus lines premium reached its all-time high in 2014 and that’s pretty noteworthy. The mar-ket hasn’t been that high since 2006 and all signs indicate that it’s continuing to grow. That’s a positive trend.”

What’s Driving Growth? Surplus lines premiums are up despite rates holding relatively steady. “Overall it’s a fairly competitive market,” said A.M. Best’s Witmer. “If there are any rate increases it would be fairly small or minimal to address inflationary trends. No dramatic changes up or down,” he said. Denis Brady, president of Burns & Wilcox Brokerage, says rates aren’t the reason pre-miums have increased. “A lot of the growth is driven by expo-sures as opposed to rate,” Brady said. “Casualty is flat at best. Property is pretty soft right now especially in catastrophe and DIC (difference-in-condition) areas. There hasn’t been a major catastrophe in a num-ber of years and there’s a lot of capital out there.” Standard E&S business is flat while on the general liability side rates are flat at best, maybe down, Brady said. Plus many standard market insurers are coming into traditional E&S lines to “play,” he added. “Premiums are stable or up some, but it’s not due to rate.” In Texas — the third largest state in sur-plus lines premium — pricing support has helped spur growth, according to Gil Hine, incoming president of NAPSLO and presi-

dent of McClelland and Hine Inc., a manag-ing general agent and E&S broker based in San Antonio. “We have seen support for pricing from underwriters and we haven’t seen a lot of discounting going on in our area of the industry,” Hines said. “The industry mirrors to some extent the economy overall and I think the positive economy and the things we are seeing there reflect what we are see-ing in the market.” More capital entering the market is driv-ing growth and innovation, argues McKay. “Perhaps coverages that no one had dreamed of before are now being developed with all this additional capital,” he said, cit-ing several new industries that are getting attention from surplus lines underwriters. “I’m thinking of all the transportation network companies like Uber and Lyft. These companies up until last year weren’t insured. That’s a brand new product,” he said. “We are seeing new products being developed for e-cigarettes, marijuana and drones — all of these new and innovative products are being insured in the surplus lines market.” McKay said increases in commercial lend-ing and asset values have also helped drive

2005 491,429 2.0% 33,301 0.8%2006 503,894 2.5% 38,698 16.3%2007 506,180 0.5% 36,637 -3.5%2008 492,881 -2.6% 34,365 -6.2%2009 481,410 -2.3% 32,952 -4.1%2010 481,120 -0.1% 31,716 -3.8%2011 501,555 4.2% 31,140 -1.8%2012 523,360 4.3% 34,808 11.8%2013 545,760 4.3% 37,719 8.4%2014 570,187 4.5% 40,234 6.7%

Source: Best’s Statement File - P/C, US, A.M. Best data and research

U.S. Surplus Lines – Direct Premiums Written (DPW) by Segment (2005-2014)(USD millions)

Total P/C Industry Total Surplus Lines Year DPW Annual % Chg DPW Annual % Chg



SPECIAL REPORT

State of the Marketgrowth in the surplus lines market. But he thinks two of the most interesting drivers of growth are from catastrophe risk lessons learned and government regulation. “In the wake of Superstorm Sandy the industry gained a better understanding of natural catastrophe risks, which I think actually started to develop with Katrina,” McKay said. “As we began to understand these risks better, we saw the admitted market being a lot more careful in how they wrote that type of business — that’s leaving a significant portion for surplus lines.” Then there are regulatory actions that have helped drive growth. One example has been cyber liability. “Cyber coverage is the fastest growing

surplus lines business in history and it was caused by a regulation, not by some other market factor,” McKay said. “It’s a $1 billion line right now.” Robert Sargent, president & CEO Tennant Risk Services, is seeing excellent growth in his wholesale brokerage, which specializes in professional liability and cyber liability. But selling cyber policies isn’t easy. “I don’t know if it’s the fastest growing or the best thing since sliced bread but we’re seeing a lot of interest,” Sargent said. That interest doesn’t always translate to sales. “It’s still hard to get people to bind but it’s a fascinating and difficult area to insure … underwriters are still figuring this (market)

out. The policies vary a fair amount and exposures vary between insureds.” In McKay’s view, regulations can, and do, create surplus lines markets, but so far nothing has come close to what’s developed into the cyber insurance market. “For exam-ple — transportation network companies — that’s an emerging market, partially the result of a regulation but mostly the result of innovation, but it doesn’t approach the size and velocity of cyber.” Another driver of growth: an increase in merger and acquisition activity led to a 15 percent jump in demand for transaction risk insurance during the first six months of 2015, according to Marsh’s latest Global Insurance Market Quarterly Briefing.

Combo Exposures Sargent says increased specialization and customization can also be credited with encouraging growth in surplus lines. “The surplus lines market provides a great outlet when there is a more complex exposure or coverage requirement,” he said. That could be solving a coverage gap as sim-ple as a physician offering consulting ser-vices that aren’t covered under a standard medical malpractice policy. Or the doctor could be providing independent medical reviews, or doing side work in a medi-spa, both of which are often in surplus lines. “We are seeing combinations of exposures that can’t fit on the standard side,” Sargent said. It’s not just in the medical liability world either. Sargent said many combina-tions of exposures in professional liability involve professional services exposures plus a technology exposure. “We just had an outsourcing service oper-ation that was providing the professional service and the technology platform. We’ve seen that in financial services, compliance, and on the medical side,” Sargent said. “This is the kind of thing where the surplus lines business can be very innovative in trying to put coverage together for these multiple exposures.” “What drives the value of wholesalers is expertise,” Sargent said. “We can go to underwriters and customize coverage for clients,” he said.

1 Lloyd’s 8,157,000 20.3 2 American International Group 4,679,470 11.6 3 Nationwide Group 1,780,987 4.4 4 W.R. Berkley Group 1,485,813 3.7 5 Zurich Financial Svcs NA Group 1,204,753 3.0 6 Markel Corporation Group 1,191,418 3.0 7 ACE INA Group 1,032,388 2.6 8 Ironshore Insurance Group 894,986 2.2 9 Berkshire Hathaway 835,316 2.1 10 Fairfax Financial (USA) Group 793,974 2.0 11 Alleghany Insurance Holdings 780,702 1.9 12 CNA Insurance Companies 745,886 1.9 13 XL America Group 726,916 1.8 14 AXIS Insurance Group 591,135 1.5 15 Chubb Group of Insurance Companies 574,425 1.4 16 Arch Insurance Group 548,931 1.4 17 Argo Group 526,338 1.3 18 QBE Americas Group 522,550 1.3 19 Allied World Group 517,559 1.3 20 Great American P&C Group 472,564 1.2 21 Catlin U.S. Pool 443,724 1.1 22 State National Group 434,505 1.1 23 Aspen US Insurance Group 425,002 1.1 24 Starr International Group 396,987 1.0 25 Swiss Reinsurance Group 378,134 0.9 Subtotal of Top 25 $30,141,463 74.9 Total U.S. Surplus Lines Market $40,233,826 100.0Source: A.M. Best data and research

U.S. Surplus Lines – Top 25 Groups (2014) Ranked by direct premiums written (USD Thousands) Total Surplus Surplus Lines Lines Market Rank Group Name DPW Share (%)


765 results for "workers comp"

Need a market? FIND IT. FAST!FIND IT. FAST!

MYNEWM16218.indd 3 4/21/14 4:14 PM


geographically. And slowly, but surely, they are making greater use of modern technolo-gy.

Reinsurance Although reinsurance is in somewhat of a crisis, the sector has the potential for significant growth. A year ago Nelson estimated that the current addressable rein-surance market for Lloyd’s is around $600 billion; however, he expects that to rise to $2 trillion within the next 15 years. “As a result we are going to need more capital,” he said. “While at the moment that capital has arrived a bit early,” he expressed confidence that as an insurance and reinsurance mar-ket Lloyd’s is in a good position “to harness that capital.” Doing so will require changes in the way Lloyd’s syndicates do business and where they do it, whether in geographical terms or by line of business. Lloyd’s began in a coffee house where paleo-brokers or ship owners met paleo-underwriters, who represented wealthy individuals that were willing to

take a risk by insuring the success of a voyage that could often take more than two years to complete. The need for

capital to underwrite the risks is now more important than ever. “Maintaining the attractiveness of Lloyd’s to a range of capital providers will underpin the market’s future success,” said the strategic priorities report. Lloyd’s has been there before. In 21 years it has gone from reliance on individ-ual “Names” to fund its syndicates to being increasingly reliant on large and generally publicly owned re/insurance corporations — probably the most important change in its 300-plus years.

SPECIAL REPORT

Lloyd’snature of the reinsurance industry Nelson also singled out the need to expand the Lloyd’s market globally. At the very begin-ning of his tenure as chairman he put for-ward a plan to deal with it — Vision 2025 — which he said, “is now in the execution phase, where we’ve made extremely good progress.” (http://www.insurancejournal.com/news/international/2014/04/21/326847.htm) Changes happen fast in this technology driven age, so Nelson’s comments are some-what prophetic. Lloyd’s released an interim progress report on Vision 2025, which set forth the “strategic priorities” for 2015-2017, separated into eight sections. Syndicates, as Nelson pointed out, play a central role in bringing the changes of Vision 2025 to fruition. Their role has been crucial in recognizing new risks, such as cyber and terrorism. Reinsurance syndi-cates at Lloyd’s have helped make insurance linked securities (ILS) part of the process. They have taken advantage of Lloyd’s many worldwide licenses to expand the market

Lloyd’s & Its Syndicates 2015 – Adapting to Changing Times

By Charles E. Boyle

If one word could describe Lloyd’s of London, it would be “change.” There are

very few business enterprises that have stayed in business as long as Lloyd’s — 327 years. It has survived wars, plagues and famines. It has seen the age of sail become the age of steam, rail transport, the auto-mobile, aviation and finally the age of space exploration. It’s seen communications devel-op from a postal system into telephones, radio, television, and now the internet and smart phones. Lloyd’s ability to react and adapt to new situations has been an integral part of its culture since its founding. It’s still doing so — now more than ever. Lloyd’s Chairman John Nelson gave an overall view of his vision for the future of the Lloyd’s market in an interview at last year’s Reinsurance Rendezvous in Monte Carlo. (www.insurancejournal.com/news/internation-al/2014/09/29/341824.htm) In addition to handling the changing


‘Maintaining the attractiveness of Lloyd’s to a range of capital provid-ers will under-pin the market’s future success.’

Whether you need claims adjusted in Portland, Oregon, or Portland Maine — or anywhere in between — you’ll get the same high-level Engle Martin service. Trained to be the best at what they do, our claims professionals are setting new standards for the industry and across the nation, one claim at a time.

Visit us at www.englemartin.comto learn more.

Personal Service. National Reach. That’s the Engle Martin Way.

Who can adjust a claim from Portland, Oregon

to Portland, Maine? Engle Martin can.

EMA_InsuranceJournal_Ad_8-15.indd 1 8/14/15 2:56 PMEMAI16760.indd 1 8/26/15 5:13 AM


SPECIAL REPORT

Lloyd’s Lloyd’s acceptance of corporate capital to back its syndicates ushered in the modern era. The change to corporate capital provid-ers has also coincided with changing regu-lations. Lloyd’s ceased to be a self-regulating body under the Lloyd’s Act in 2001, when it became subject to the supervision of the U.K.’s Financial Services Authority (FSA), which has since morphed into the Financial Conduct Authority (FCA). New, more stringent rules were applied to the UK’s insurance industry, which is also subject to the often delayed insurance regulatory pro-visions of the European Union’s Solvency II. The fact that public corporations are required to file financial reports, which are heavily scrutinized by lawyers and accoun-tants, is perhaps even more important than the official regulations, as misstatements can result in costly lawsuits, especially in the U.S. Nonetheless, if Lloyd’s hadn’t made the change, there probably wouldn’t be a Lloyd’s today. Lloyd’s also completely overhauled its governing systems and procedures. It replaced its former struc-ture with a Franchise Board in 2002, whose principle mandate is to oversee the Syndicate’s business plans. Under Director of Performance Management Tom Bolt it has been instru-mental in helping Lloyd’s through the financial crisis, and achieving the best results in its long history. Lloyd’s annual report for 2014 states that as of Dec. 31 its 94 syndicates, managed by 59 managing agents, had posted a collec-tive net profit of £3.2 billion [$5.05 billion], a combined ratio of 88.1 percent and a return on capital of 14.7 percent. Over 300 syndicates were once active at Lloyd’s, but they were mostly small in com-parison to the ones operating today. That is in keeping with the ongoing trend in many industries, especially in the financial sector, towards forming ever larger enterprises. It’s also the result of the requirements for man-aging corporate capital, and most recently

by regulatory initiatives, which require more risk management, and in most cases additional capital. Lloyd’s Vision 2025 is attuned to having to increase capital and to diversify its sourc-

es. The strategic priorities report notes that “Lloyd’s will retain its unrivalled diversity of capital, through growth in all types of capi-tal participating at Lloyd’s (private, trade, institutional and other). The geographic diversity of the Lloyd’s cap-ital base will significantly increase, subject to this capital bringing new busi-ness and people.” This enlarged focus on capital and its management

has produced consequences for Lloyd’s syn-dicates, and has led to further consolidation in the re/insurance industry through merg-ers and acquisitions (M&A). It is gradually reshaping the Lloyd’s market as the larger syndicates continue to grow, and new play-ers are attracted to the market. The biggest consolidation so far this year has been XL’s taking over the Catlin Group. In terms of gross written premiums in 2014 Catlin’s Lloyd’s Syndicate 2003 was the largest at Lloyd’s with GWP of £1.975 billion

[$3.1075 billion].The group also managed several smaller syndicates. Combined with XL’s Syndicate 1209 – 2014 GWP £302 mil-lion [$475.3 million] – the potential capacity is over $3.5 billion. Tokio Marine acquired a significant stake in Lloyd’s Syndicate 510, managed by RJ Kiln & Co. in September of 2014, and in November combined Kiln with its other operations. The Syndicates GWP for 2014 was £1.097 billion [$1.727 billion], which, when combined with other syndicates managed by Tokio Marine Kiln Syndicates Ltd. brings the total potential capacity to close to £1.291 billion [app. $ 2.02 billion]. Both ACE Limited and Chubb Corp. operate Lloyd’s Syndicates. Their merger potentially combines ACE’s Syndicate 2488 (2014 GWP £375 million [$590 million] and Chubb’s Syndicate 1882 (2014 GWP £88 mil-lion [$138 million]. By acquiring Montpelier Re, Endurance is also acquiring its Lloyd’s Syndicate 5151 (2014 GWP £172 million [$270 million]. Fairfax Financial acquired Brit’s Lloyd’s Syndicate 2987 (2014 GWP £1.303 billion [$2.045 billion], making Prem Watsa’s com-pany among the five largest operators of a Lloyd’s syndicate. Hamilton Insurance Group added Sportscover’s Syndicate 3334 [2014 GWP £56 million [$88 million] to its operations. Will the trend continue? Two of Lloyd’s biggest syndicate managers, Amlin, which manages Syndicate 2001 (2014 GWP £1.538 billion [$2.415 billion]) and Hiscox, which manages Syndicates 0033, 3624 and 6104 (combined GWP in 2014 £1.205 billion [$1.892 billion]) have said they aren’t inter-ested in being bought out. At the end of August Amlin’s CEO Charles Philipps reit-erated a previous statement that the compa-ny is not looking for a buyer. All businesses have to change and adapt if they are going to survive, from the largest — see Kodak — to the smallest. Lloyd’s, as a specialty insurance and reinsurance market, has originated a significant number of the coverages that are now standard. It has maintained its position in the industry and has survived by doing so. It looks set to continue down that road.


Chairman John Nelson

This enlarged focus on capital and its management has produced conse-quences for Lloyd’s syndicates, and has led to further con-solidation in the re/insurance industry.

Since 1983GROW with us®

Ever wonder what makes a company hum?

IT’S ABOUT THE PEOPLE.That’s Arrowhead.

CA License #0699809

Get to Know Arrowhead

ArrowheadGrp.com/Know

We’re a national insurance program manager with more than $1 billion in written premium and 20 plus

commercial and personal products. But as we list our products and carriers, online tools and services, we

keep coming back to what those differentiators all have in common: the people. The people who make

Arrowhead the success that it is today are ultimately the driving force that is helping us grow into the

future. From the carriers and producers to the policyholders and our staff, the proof is in the people.

MUSICAL

COMPETITIVE

ACTIVE

MOTIVATED

CRAZY

CHARITABLE

ARROW16794.indd 1 8/21/15 6:39 AM

‘

Everything he has worked for is at risk. When a lawsuit puts your client’s name in the headlines, you need to know the carrier you recommended can provide the coverage he needs. To handle claims skillfully, it takes the expertise of specialists who know how to turn grim to great. At Great American, we’re able to see management liability risks, write coverages, and handle claims in a way that gives your clients – and you – greater peace of mind. Our strength of specialization gives us that rare ability. Don’t settle for less. Turn grim to great with Great American.

When it’s grim, you need Great®

Coverage is summarized. Refer to the actual policy for a full description of applicable terms, conditions, limits and exclusions. Coverage is underwritten by Great American Insurance Company, a licensed insurer in 50 states and the

District of Columbia. ©2015 Great American Insurance Company. All rights reserved. 301 E Fourth Street, Cincinnati, OH 45202 2608-CO (08/15)

GreatAmericanELD.com

GREATCO16599.indd 1 8/14/15 1:47 PM


MarketingSPOTLIGHT

resents an attempt to win over consumers by providing information that is more help and less hype. Before offering advice on content mar-keting itself, Brandt served up some search engine history as a way to explain how marketers lost control and why content marketing is the prescription they need.

How It Happened As it is with so many things having to do with modern marketing, search engine giant Google is largely responsible for the switch from brand-centric to customer-cen-tric content, from content that advertisers push onto customers to content that cus-tomers search, find and pull from the inter-net to meet their needs, according to the Trusted Choice executive. In 2013, Google change its search algo-rithm that ranked highly any content that used the right keywords. The new algo-rithm, called Hummingbird, looks beyond just keywords to the quality of the content and what it actually says. “Prior to the release of Hummingbird, your online content was really all about page mechanics. Your web pages came down to linking structure. It came down to keyword placement and keyword density. You could use keyword stuffing and link farms to pretty much fool the indexers,” Brandt told the IMCA crowd. “You could have pages upon pages of

Marketers Have Lost Control of Insurance Buying ProcessBy Andrew Simpson

After careers spent crafting and con-trolling their companies’ messaging to

customers, insurance marketing and adver-tising professionals have lost control. Customers and prospects have taken over. Increasingly, today’s insureds and prospects care more about what other parties have to say than they do about what an insurer or agency has to say about its products and services. “Today’s consumer will leverage pretty much everything except brand-centric con-tent including social influence, ratings and reviews. They’re going to look at the wealth of information that’s out there, available on the Internet, that is published by someone other than the brand,” according to brand-ing expert Kevin Brandt, director of opera-tions for Trusted Choice, the brand for the nation’s independent insurance agents. Consumers may obtain information from other people like themselves, friends and relatives, experts, fellow customers, con-sumer advocates, regulators and other third parties. “They’re going to find what they want and need when they want it. They’re going to choose when to engage. And so, your content absolutely needs to provide relevance and a payoff for those consum-ers,” Brandt told marketers at the annual meeting of the Insurance Marketing and

Communications Association (IMCA) in Nashville. The typical consumer will visit, on aver-age, 10 places online before contacting an insurer or agency, according to Brandt. “When they make first contact with the seller, their decision to purchase has already been made,” he said. In their effort to regain relevance in the buying process, marketers in many indus-tries, including insurance, are turning to content marketing, also know as native advertising or sponsored content. This rep-

Rapid-fire quotes and zero deductibles. Who does that? We do. Colony Specialty’s Casualty division launched a “zero deductible” program for smaller accounts, is perfecting the art of the same-day quote turnaround, and secured $25 million in excess capacity to better serve high-excess clients.

Technology and service focused on your success.

ADS-1506-97 Insurance Journal_Strip Ads.FINAL.indd 1 8/24/15 4:05 PMARGO216774.indd 1 8/26/15 4:22 PM


“We’re Different” is a bold claim. We back it up every day.

For more information contact us at (213) 626-1000 or www.gjs.com

G.J. Sullivan Co. Insurance Services, Sullivan & Associates of Oregon, Sullivan Brokers Wholesale Insurance Solutions, G.J. Sullivan Co. Reinsurance, and Kevin Davis Insurance Services are members of the Sullivan Group.

InsuranceLicense

#0582676

We’re Different.

There is something to be said about longevity...Sullivan has it.• We manage the longest, continually running D&O Program around.

• Sullivan has been a trading partner with Lloyd’s for over 50 years.• Many of our client relationships date back to the 1960’s.

• Our staff turnover is among the lowest in the industry...

Sullivan...staying the course.

TSG16784.indd 1 8/21/15 6:50 AM


Cutting-EDGE platform and products. This year, Colony Specialty’s Contract division rolled out PDF 2 EDGE and other major enhancements to its robust insurance platform to respond to our clients’ feedback and make it simpler for them to submit business. We also have new offerings in Property that add to our already comprehensive product line.



MarketingSPOTLIGHT

junk content that was meaningless to the consumer but it still ranked well with the search engines because the search engine indexers were stupid, for lack of a better word. They didn’t know how to put groups of words and phrases together to derive real page meaning.” But since Hummingbird, the quality of content matters to search engines, he said. “The search engines, if you think about it, are in the business of delivering mean-ingful results to their users. If you go to Google and you type in a search phrase and it comes back with a bunch of junk, you’re going to move on to a different search engine. Google has a vested interest in making sure that they deliver meaningful content to you. Their indexing engines had to evolve to be able to meet that need,” he said. Page mechanics still matter to search engines but today’s search has everything to do with the usefulness of content and whether it’s going to solve a problem for customers, according to Brandt.

Trust in Media Beyond Google, there’s another reason the quality of the content about a company or product matters more than it used to. It’s the lack of trust in businesses and tradition-al media. “You need to trust that what you’re buy-ing as a buyer is the right thing at the right price,” Brandt said. “Corporate trust and trust in traditional media are really on a rapid decline. The world is becoming very media skeptical.

As a matter of fact, less than 50 percent of consumers find radio, television or newspaper ads credible.” He said that years ago, peo-ple believed what advertising told them. Thus a brand could reasonably correlate sales volume to the frequency with which consumers saw their advertising. “That’s not the case today. People don’t trust brand. In particular, Millennials don’t trust brand. Their experience with their brand really needs to meet their interests on their time. That’s where content starts to come in,” according to Brandt. He said traditional marketing and adver-tising content, which is brand-centered and broadcast-based, is no longer working. He said the average consumer receives more than 5,000 marketing messages per day and consumers don’t open 90 percent of the corporate marketing emails they receive. Eighty-six percent of people skip over television commercials thanks to DVRs and TiVo. Forty-four percent of direct mail gets thrown away without being opened. “They prefer to find content themselves. We’re switching from this push environ-ment to a pull environment. It’s inbound marketing instead of outbound marketing. Consumers really don’t want something shoved in their face,” Brandt said.

Age of Content Marketing According to Brandt, all of this explains

why marketing and advertising depart-ments have turned to what is known as content marketing, or sponsored content, and why 70 percent of marketers plan to spend more on content marketing in the year ahead. He shared Forrester Research’s definition of content marketing: “A marketing strategy where brands create interest, relevance, and relationships with customers by producing, curating, and sharing content that address-es specific customer needs and delivers visible value.” The goal of content marketing, like pub-lishing, is to produce relevant content that creates longer-tail visibility. In Brandt’s words, content marketing “needs to be focused on long-term engagement and it needs to build relationships.” He said magazines provide a good model because they have a loyal readership and subscribed readership. “The readership is familiar with the content pillars of that publisher. They’re willing to engage with

http://www.insurancejournal.tv/videos/12592/

Watch: How Google Changed Marketing




LOOKING FOR PEACE OF MIND?

FIND IT NOW.Midlands is a managing general agent specializing in commercial P&C programs. Our agents have access to a team of expert, professional and experienced underwriters. Midlands agents enjoy exceptional and swift customer service. Place your next P&C policy with Midlands and find out why we’re a leader in the

industry!

PRIVATE FLOOD · PROFESSIONAL LIABILITY · OCCUPATIONAL ACCIDENT COMMERCIAL AUTO · OIL & GAS · FARM & RANCH · GENERAL LIABILITY

CONTRACTORS · HOSPITALITY · PUBLIC ENTITY · MANY MORE!

QUESTIONS? GET ANSWERS:800.800.4007

[email protected] midlandsmgt.com

MIDRE16812.indd 1 8/21/15 6:45 AM

MarketingSPOTLIGHT

the brand. These are people who are sub-scribed to the brand,” he said. “That is really where you want to get. You want to have people that are willing to come back to you, pull information from you because it’s useful, because there’s a pay-off for them.” He said content marketing is comple-mentary to other marketing channels and not a replacement for them. There remains a need for content that’s “produced simply to be in the game,” enough information to let people know about the company and products and information that will drive quick traffic to a web site. “Content marketing is not a replacement for paid media. It will reduce your depen-dence on paid media, but it will never replace it. There’s always going to be a place for paid advertising,” he said.

Red Bull The Trusted Choice executive touted

Red Bull, maker of the energy drink, as an example of a brand that is clearly doing content marketing the right way, so much so that the company has become known as much for its content production as for its drink. He said Red Bull has built an “extremely subscribed audience through some extreme sport and adrenaline focused content that’s designed to bring their target customer to consume their content in a way that still builds brand engagement, but is not an overt advertisement.” The Red Bull videos feature downhill mountain bikers, big wave riders, and people jumping out of airplanes and space-ships. Brandt described a video with a man in a kayak who is about to go over a waterfall. The kayak and the helmet have the Red Bull logos on them, and that’s the only advertising involved. “They don’t need to be more ‘in-your-

face’ about it. It’s a subtle integration of the brand there. The reason why the consumer is there is because they want to watch this video. These are the adrenaline junkies that are the same people who buy the energy drink,” he said. The company’s home page has nothing but this content. “You’d be hard-pressed on their website to find anything about the energy drink,” he said. At the very top is a link for the company and its products. The strategy has been so successful for Red Bull that it has a completely separate web property for monetizing the content that it produces and the revenue received from licensing the extreme sports videos is approaching that of the revenue that it receives from selling energy drinks, accord-ing to Brandt. One likely reason Red Bull sells its mar-keting content is that content like this is expensive to produce. “You really have to have a solid strategy, goals, and objectives and ways that you can measure your return on investment,” he told the IMCA audience.

Content for Marketing Brandt shared his recipe for producing content marketing. First, content marketing requires research. Marketers need to identify what their customers’ needs are, and what they’re searching for online, in order to develop the content that meets those needs. “You need to be able to research what your target customer is looking for and develop content to help solve that problem for them. You need to remember that we’re living in the age of the consumer. The only way that they’re going to know about you and your products and services is if they pull the content, and the only way that they’re going to pull the content is if it’s relevant to them, and meaningful and solve their problem for them, so you really need to build your strategy around what your tar-get customer wants and needs,” Brandt said. Second, content marketing reflects authority. “Please be an expert. Your brand has abso-lutely had to have earned the right to talk about what you’re talking about. If it’s not



CAT property specialists who also specialize in excellent service. Our Specialty Property division can write monoline property coverage on an excess/layered and shared basis as well as on a primary basis for California earthquakes. Plus, we lowered our minimum TIV threshold to $25 million (previously $50 million) to help our clients capture profitable “middle market” business.



relevant to who you are, it’s not a relevant part of your content marketing strategy,” he said. “You need to ask yourself, what is your brand authority? What does your brand allow you to talk about? If you’re in the business of selling insurance your brand probably doesn’t allow you to talk about certain things, maybe lipstick.” He cited the Red Bull example and how extreme adren-aline sports are “naturally aligned” with Red Bull’s target customer, people who want to consume energy drinks. “Red Bull isn’t talking about tranquil beaches or soothing music. They’re not producing a list of the top 10 ways to lower your heart rate.” He advised the IMCA professionals to learn what it is their company is good at. “Find what that is, be an expert at it, and develop your content around that, but with one caveat: take the boring out.” Third, the goal of content marketing is to build a subscribed audience, that is to attract consumers who are willing to return to the company’s site again and again because the content is of value to them, because it “had a payoff, either as entertain-ment or knowledge.” Subscribed consumers are the “best form of earned recognition” but they’re not going to come back because they like a company’s logo or television commercial. “They’re only going to come back if there’s a payoff

for them. Your end result, your endgame in your content marketing strategy is building a subscribed audience. Absolutely needs to happen. It’s critical,” he stressed.Getting Started Brandt urged the communications pro-fessionals to first determine what it is they want to accomplish with content market-

ing. It could be to increase sales volume, establish thought lead-ership, or develop lead generation. Next, he advised them to identify any content that is already available that could

serve the purpose because developing new content is expensive. “You don’t want to have to redo it. You really need to go through and look at your entire organization and see where content exists,” he said. This should include looking outside of what the marketing department has for materials to what other department in the company have as well. He said it is also possible to curate and borrow content through partnerships and relationships with other brands. But there are limits on using others’ content. “When it comes down to who you are as a brand and what differentiates you from your competitors, create that content. No one else can speak to your expertise like you better than you can,” he said. Regarding distribution, he said it is important for a company to know who on the web is also influencing its customers

and find ways to reach those influencers. “You want to identify who the loud-mouths are. Who are your mavens out there in the social space that are influencing the audience that’s related to your brand,” he said. “You’re going to have friends and you’re going to have foes. You want to make sure you keep your friends close and your ene-mies closer. The foes can be influenced. If you influence your foes, you’ll find often-times that those loudmouths will become your biggest brand advocates.” He told the marketers not to expect to establish a perfect content marketing strategy overnight. They should, however, expect to spend some money. “You cannot publish content without having a good editor, please. Make sure you have quality assurance in place,” he said. He told the communicators to start by picking topics or what he called “topic pil-lars” that are important for their company and in which they can exhibit expertise.Next they should develop editorial guide-lines that describe their brand’s voice—is it serious? funny? Define it and stick to it, he advised. Then, identify magazines and other media that address those topic areas. Finally, they should develop key perfor-mance indicators (KPIs), metrics they can track to see what results they are getting and if they justify the investment in content marketing. “It’s going to take time, but you absolutely need to kick it up a notch, and you need to start somewhere,” he said.

‘People don’t trust brand. In particular, Millennials don’t trust brand. Their experience with their brand really needs to meet their interests on their time.’


I recently listened to an insurance com-pany executive give a discombobulated,

“woe is me” speech to a room of agents who were largely ignorant of carriers’ financial

success.

To summarize his presentation:Insurance company investment income is down to 2 percent so companies have to make an underwriting profit.

Underwriting profit was good last year, but the economy is slow, and growth is slow, so insurance companies have to watch expenses and maintain higher prices. I have heard this same speech, sometimes it is a lecture and sometimes it is a market-ing rep simply repeating what he/she has been told, so many times that I can give it. The presentation is almost always the same regardless of market conditions or carrier variance. And companies get away with their sorrow tales because agents are almost as ignorant of insurance company financial success as low-level company people. Some carrier CEOs do not understand their own financials. This is a potent statement but readers with key experience know its truth. Given the recent Wall Street Journal articles on an insurance compa-ny whose financials are clearly suspect, one has to wonder whether all insurance department analysts understand insurance company financials adequately, too. Here are some absolute facts based on simple math and A.M. Best and Insurance Information Institute data.

Investment Income As taught in the first 15 minutes of Finance 101, investment income = invest-ment portfolio x yield. I don’t think I have ever heard or read of an insurance company describe investment income as a function of anything but yield. It is as if the size of their investment portfolio never changes. It is as if they think or want to portray every

IDEA EXCHANGE

The Competitive Advantage

insurance company as having the same size of portfolio (relative to net premiums writ-ten). That is absolutely not the case because investment portfolios relative to NPW vary from one company to another by 100 per-cent-plus. Here’s how it works: If the investment portfolio is $100 million and yield is 3 percent, then: $100 million x 3 percent = $3 million in investment income. If the investment portfolio grows, which is the case for the industry (the industry has record surplus so it stands to reason investment portfolios are growing), then investment income still increases if the yield does not decrease too much: $110 mil-lion x 2.9 percent = $3.19 million in invest-ment income. The carrier’s investment income increased 6.3 percent although the yield decreased 3.3 percent. In these situations, I typically hear insurance companies announce that the yield decreased by 3.3 percent, another sad year for investment income. That is just plain baloney! Yield decreasing then is really only an issue for undercapitalized and/or inadequately prof-itable carriers (often but not always prob-

What to Know About Insurance Company Financial Statuslems that go hand in hand). For well-capitalized companies espe-cially, marginally lower yield is just a nuisance. For example, if yield is 2 percent per the speaker’s presen-tation (that par-ticular company’s yield is more than 3 percent, which is 50 percent better than stated — not a small increase so even here compa-nies are hedging the true value of their investment income), they are making more

money each year because their underwrit-ing profits are so high and they are leaving their money in the company thereby invest-ing their profits and growing their invest-ment portfolio and investment income. The best companies are making so much money on their investments and their prof-itability is so large that investment income is huge. Consider that in 2014, many strong companies achieved combined ratios of less than 90 percent. Companies are profitable, at the industry average combined ratio of 103 percent (20-year average). Do not ever believe a story that companies are not profitable at a 103 percent or even a 104 percent, because if companies don’t make a good profit at a 103 percent over the past 20 years, the industry would be broke rather than having record surplus. If underwriting profit is at least 13 per-centage points better than normal (which it was in 2014), some companies made absolutely huge underwriting profits. Even more, some companies made as much in investment income as underwriting profits.


By Chris Burand

Don’t just go with the f low.

Your risks are unique.

For more than 40 years, our specialty underwriters have beenproviding customized solutions for your unique business risks.

Find out more about our expertstaff, personal solutions and global presence.

Visit: www.navg.com/unique

MARINE

CASUALTY

ENVIRONMENTAL

LIFE SCIENCES

MANAGEMENT/PROFESSIONAL

LIABILITY

ENERGY

PROPERTY

NAVMCI16677.indd 1 8/20/15 7:43 AM


National Association of Professional Surplus Lines Offices

www.napslo.org

NAPSLO members are specialistswho create innovative solutionsfor nonstandard insurance risk.Count on them to deliver custom,cost- effective solutions that areexpertly tailored to meet yourspecific insurance needs. NAPSLOmembers... where complex riskmeets innovative solutions.

Some games shouldn’t be played without a safety net.

> FIND ANAPSLOMEMBER

NAPSLO_IJ_halfv_print1.qxp_Layout 1 3/4/15 1:33 PM Page 1

NAPSLO16110.indd 1 3/10/15 7:53 AM

IDEA EXCHANGE

The Competitive AdvantageI don’t feel sorry for them that yields are low. If the company executive’s presentation was accurate, these results would not be possible. This combination of great under-writing results, strong investment income,

and outside capital coming in is why sur-plus is at a record.

Haves and Have Nots These are all facts. What is missing is the distinction between the haves and have

nots. According to an A.M. Best special report (March 30, 2015), 30 percent of all carriers, by their own admission, have 0 percent excess surplus. For some companies I am not convinced their reported capital adequacy is quite as strong as their scores suggest. For example, a major source of capital for one carrier, per A.M. Best, is the capital contribution every new policyholder makes. But I have done E&O audits for agents repre-senting this carrier and any notification the insureds get regarding this capital contri-bution is so buried that agents selling the product don’t often understand it, much less the insureds. So if a capital call occurs, what happens versus a company that has cash in the bank with which to pay for a catastrophe? I am sure the regulators and rating companies have insights I do not have on these kinds of situations, including those where com-panies reinsure themselves. Somehow this makes sense but on the surface, it makes me wonder. I find inadequately capitalized companies (relative to their competitors — not neces-sarily solvency standards) want agents and employees to believe their profitability/sur-plus issues are shared by all carriers. That is clearly not the case by any intelligent mea-sure. This means that they don’t have capac-ity to cut rates in a soft market as much as their competition. They may not have capacity to increase writings. They may not provide the support agents need. They are at a significant competitive disadvantage and obviously, no executive wants outsiders or even most insiders to understand the disadvantage exists. That is one aspect. However, some top executives have been drinking the Kool-Aid so long they have lost track of their true financial position. I have had conversations with company executives



The best companies are making so much money on their investments and their profitability is so large that investment income is huge.

SPECIALIZING IN GIVING YOU MORE.

A broader range of markets means the best coverage at the most competitive pricing for your clients. That’s the advantage you get with AmWINS Access. More than 20 offices across the nation are at your service, each with underwriters and brokers who understand the challenges you face locally. To learn more about the capabilities and products of AmWINS Access, visit access.amwins.com.

GIVING YOU ACCESS TO MORE

MARKETSAND CHANGING HOW SMALL BUSINESS GETS DONE.

AmWINS_81946_2015 Access Retailer Print Ad_4C_8.375”w x 10.875”h, Full Bleed_Insurance Journal

AMW_81946_AccessAd_InsuranceJournal.indd 1 5/4/15 10:39 AMAMWRAY16746.indd 1 5/5/15 7:11 PM

46 | INSURANCE JOURNAL-NATIONAL September 7, 2015 www.insurancejournal.comNBISGA16657.indd 1 8/24/15 10:32 AM

IDEA EXCHANGE

The Competitive Advantagewhere I have had to cite their own filings because they have been so out of touch. Already moderately capitalized or inade-quately capitalized (from a competitive per-spective), they have another potential prob-lem: when interest rates increase, the value

of their investment portfolio may decrease thereby cutting their surplus and ability to write business. Many relatively new companies that might have had reinsurance issues now rein-sure themselves. Frequently some affiliated

reinsurer provides 100 percent or nearly 100 percent of the primary insurer’s reinsurance but the affiliated reinsurer is dependent on the primary company for cash flow, which then provides the capital for the reinsur-ance policy. I have never understood how reinsuring yourself is true reinsurance espe-cially if the reinsurer needs the insured’s profits with which to reinsure. Beyond the capital double counting issue, there does not seem to be much spread of risk. There’s only one insured so it seems concentration of risk is as high as possible. I am not seeing agents and others making a distinction between this scenario and an insurance company purchasing reinsurance from A+ rated, completely separate reinsur-ance carriers either. Instead, I hear people say, “They’re (We’re) reinsured so nothing to worry about!” Being that their affiliated companies are often on islands, the phrase, “Don’t worry, be happy” comes to mind.

Reinsurance Is Not Generic Reinsurance, much less the specific trea-ties, is not generic. An obvious statement clearly not understood by some important people. Maybe a large hurricane will teach this lesson but I worry about the insureds who may pay the price. If this happens, the entire industry will suffer. The call for fed-eral regulation will escalate possibly past the tipping point. The industry has been lucky that no major hurricane has hit an insured area in 10 years, the longest period in modern history. This industry, by companies’ own admis-sions and by simple review, is an industry of haves and have nots. Understanding which is which, understanding just how profitable the haves are and how margin-ally profitable/capitalized the have nots are creates a true competitive advantage. Knowledge truly is power and knowledge in this case involves looking far past the simple letter grades. And at the next “woe is me” carrier presentation, listen between the lines.

Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-485-3868. Email: [email protected].


Look to American Reliable Insurance Company for A Perfect Fit for all of your specialty insurance product needs.

Contact us today!For more information, call 800-535-1333 or visit us online at americanreliable.com.

American Reliable Insurance Company, a member of Global Indemnity, is rated “A” by A.M. Best and has the programs and experience to be your insurance company of choice.

• Manufactured Home• Dwelling• Homeowners• Motorcycle • ATV

• Agriculture• Personal Watercraft • Watercraft• and more

A Perfect FitA

AD 8

102

0315

IJ

A AD 8102 0315-IJ.ARIC.2015.indd 1 5/4/2015 4:14:45 PMAMRELIABLE16324.indd 1 5/5/15 10:00 AM


For the U.S., property/casualty industry recent events have mimicked the box-

ing idiom one, two punch. P/C industry professionals haven’t seen a combination of an underwriting cycle and an investment environment quite like this within recent memory. The typical prolonged soft under-writing cycle followed by a much shorter, but very strong hard market has failed to materialize. In fact, the last three soft markets have averaged nine years in length while the last three

hard markets have averaged only three years. And, thanks to the Fed’s prolonged stance of low interest rates, the soft cycle has now combined with anemic investment returns adding further strains on operating performance. Questions of “How long will both last?” and “Is this the ‘new normal’?” are just the tip of the iceberg of growing concerns. No one can guaranty how the P/C mar-ket will perform, leaving carriers to grapple with key issues about how to prepare for the future. Should they cut costs to survive, ride it out, invest in new initiatives to cap-ture market share or look to other options? Do they even know where they stand rel-ative to the industry, competitors or even their own past perfor-mance? Unfortunately, tra-ditional performance measures and metrics

By Rudy Dimmling &

IDEA EXCHANGE

Market Cycle

carriers were expecting rates to harden as the economy improved. Historically, as economic activity returns to normal and the economy expands, insurers benefit from high demand and hardening prices. But while rates did firm to a degree, the hard market stalled relatively quickly resulting in renewed rate compression in an already low interest rate environment. As the graph below shows, commercial lines rates have begun to trend downward. The typical P/C underwriting cycle is composed of a “hard” market lasting from two to three years with increasing rates. As shown in the graph below, it is not

available to insurers, which have always had many weaknesses, are especially not useful at times like this. Most insurance executives have become frustrated with traditional performance measures because they are either purely internally oriented or they do not sufficiently differentiate carrier per-formance from competitors to be useful in understanding their company’s performance and position in the market. Efficient Frontier Analysis (EFA) helps answer these questions and may be the best tool to do so in such unusual times.

Current Hard Market/Soft Market Coming out of the Great Recession, many

Greg Hoeg


The Hard Market That Wasn’tAre Your Carriers Positioned For What Comes Next?

Sharing the Vision for Our Bold New Future

Western World is actively involved in thefollowing industry organizations:

Western World Insurance Group

Western World is embarking on a bold new future combining its experience and established leadership position in the surplus lines industry with the resources, expertise and capital of the Validus Group.

We are expanding our operations and enhancing our products to offer our agents and brokers new opportunities to build upon our strong, long-term business relationships in each of the three underwriting divisions: Contract, Brokerage and Programs.

We will continue to be a premier business partner with ease-of-use technology, service excellence and our commitment to supporting wholesale distribution.

• GENERAL LIABILITY

• PRODUCTS LIABILITY

• COMMERCIAL PROPERTY

• PROFESSIONAL LIABILITY westernworld.com • 201.847.8600

WESWOR16210.indd 1 8/27/15 4:26 PM


IDEA EXCHANGE

Market Cycleunusual for rate increases to range from 15 percent to 30 percent on a year-over-year basis. Hard markets are typically attributed to significant declines of surplus in the industry and/or significant increases in demand for insurance. Both can be tied to a robust expanding economy where capital is being deployed to growing industries driving overall growth and the associated need to insure the new risks created by innovation and the growth (properties, employees, businesses, goods, homes, cars, etc.). Combine this with a significant cata-strophic event such as a hurricane or mas-sive earthquake and the formula of supply (capital) and demand for the P/C industry is primed for major price increases. Soft market cycles typi-cally result after the hard market has pushed rates beyond long-term sustain-able levels and the high profitability of the industry has attracted more capital seeking superior returns, thus increasing competition. Unfortunately, soft markets tend to last much longer than hard mar-kets, but with less dramatic year-over-year rate changes. Rate declines of 5 percent to 15 percent year-over-year are not uncommon in a soft market. What is unusual this time around is that despite a prolonged and significant soft market, the hard market failed to fully materialize and be sustainable. Price increases never reached a level sufficient to be considered a truly hard market. In addi-tion, the “firming” market was relatively short lived. One of the drivers that prevented a sustainable hard market from developing was the extended weak economy that fol-lowed the last recession. Most recoveries from recessions in the U.S. are much more rigorous and definitive than what we have seen recently. The dubious nature of any real trending improvements in the econo-my dampened confidence in the recovery’s sustainability and interest in investing in it on the part of investors and the public.

Simultaneously, insurers retained high capital levels (see U.S. Policyholder Surplus graph), particularly in the reinsurance seg-ment. The hope for many insurers had been to quickly capture hard market opportunities through the ability to immediately deploy capital to new opportu-nities.

A New Approach for Moving Forward The unusual twist now is that even as the economy continues its slow and unsteady recovery, the P/C market is turn-ing soft. The weight of the industry’s capital is too much for the paltry new demand experienced thus far from the recovery. So at a time of potential threat to the industry, most carriers’ financial strength will look good by most existing measures. Standard ratio analysis will show all companies being negatively impacted by soft market pricing, without much differentiation. Insurance executives, investors, buyers, vendors and regulators will need more accurate mea-sures of carrier performance that pinpoint insurance company operational efficiency and effectiveness. In literal terms, how much “bang for the buck” each carrier gets from its investment in operations. In the past, over reliance on financial strength measures as the gage of success has led to surprise liquidations and impairments of

carriers at the time of cycle swings. Carriers have three clear alternatives for navigating the current industry landscape. These are:• Do Nothing (Ride the Wave)• Hunker Down (Reduce Costs)• Manage Through the Challenge (Create/Identify Opportunities) • New Offerings • New Customer Segments • New Value Proposition • New Uses for Capital Winning in today’s P/C environment requires doing something. Any of these alternatives or combinations of them can be successfully used by carriers to out-perform competitors during the next stage of this unusual cycle depending on the carrier’s current situation and capabilities. Not all insurers are equal in terms of its capital, mix of business, scope of operations, dis-tribution structure, etc. Management must know the strengths and weaknesses of the organization, and how they scale within the organization, before decisions about the best strategic approach for responding to this stage of the cycle can be determined. It isn’t enough for management to know that business segment “A” performs better than business segment “B.” Rather they must know how these businesses perform against specific competitors and the overall industry, including the degree to which they lead or lag. If a company’s top per-forming line of business is lagging behind the industry’s best carriers, maintaining


What is unusual this time around is that despite a prolonged and significant soft market, the hard market failed to fully materialize and be sustainable.


As complex risks become increasingly difficult to place, the demands placed on you continue to rise. Burns & Wilcox Brokerage meets these challenges head-on with expertise, experience and seamless access to global market centers.

BurnsAndWilcoxBrokerage.com

RISING TO MEET THE DEMANDSOF COMPLEXBROKERAGE.

Atlanta • Dallas • New York • San Francisco • Scottsdale • St. Louis • Tampa

37797 Burns Brokerage ad.indd 1 5/29/15 11:38 AMBURNBRO16781.indd 1 8/13/15 11:47 AM


NATIONAL COVERAGE

MyNewMarketsNightclubs Market Detail: RMS Hospitality Group’s (www.rmshg.com) coverage for nightclubs is able to quote 100 percent liquor sales with excess coverage available. Program includes general liability; assault & battery; and liquor liability. Available limits: General aggregate limit $2 million; products-completed operations aggregate $2 million; personal & advertising injury $1 million; each occurrence limit $1 million; liquor liability limit $1 million; fire damage limit (any one fire) $100,000; medical expense limit excluded; assault & battery available up to $1 million; excess limits available up to $5 million; hired/non owned auto liability limit $1 mil-lion.Available limits: As neededCarrier: Unable to disclose, non-admittedStates: All states except Alaska, Vt., and W. Va. Contact: Mark Derrenberger at 516-742-8585 or e-mail: [email protected]

Commercial Auto Market Detail: Gladius Insurance Services LLC’s (www.gladiusins.com) commercial auto program is available nationwide. A15 admitted carrier (contact Gladius for carrier name); direct bill available. Eligible classes include: commercial auto, trucks, trailers, private pas-senger vehicles, contractors, retail, wholesale, etc. Ineligible classes include: trucking risks, taxis, limos, for-hire trucking, and concrete-in-transit. Available limits: Minimum $300,000, maximum $4 million Carrier: Unable to disclose, admitted States: All states except Alaska, Hawaii, Md., and Ohio Contact: John Baccarella at 877-587-4999 or e-mail: [email protected]

E&O Insurance for P/C Agents Market Detail: EOforLess.com (www.eoforless.com/products) offers coverage in all states (except N.Y.). Policy highlights: preferred risk rates; group rates sponsored by the National Ethics Association; instant proof of insurance; administered by Mercer US Consumer. Limits: $1 million each claim/$1 million annual Available limits: As needed Carrier: Everest States: All states except N.Y.Contact: Customer service at 866-795-2041

General Liabilty Market Detail: Northern Underwriting Managers Inc. (www.northernum.com) offers gen-eral liability and primary liability coverage with a broad appetite. Available in all 50-states; policies issued within 15 days; minimum premium $7,500 with no maximum. Target Appetite: construction (all types), stand-alone products & completed op’s; manufacturing and more. Submission requirements: full Acord apps and three to five years loss history, emailed to underwriter. Available limits: Minimum $1 million; maximum $2 million Carrier: Unable to disclose, admitted and non-admitted available States: All states Contact: Customer service at 855-825-9353

the status quo might not be the best option. Reinventing a weaker business in a segment without exceptionally strong competition could be a better choice. Ultimately, management should think of their situation and the options available to them along two basic parameters, efficiency and effectiveness. Knowing exactly where the company is positioned, internally and competitively, pro-vides a foundation for evaluating the impact of a continuing soft cycle. Further, knowing the degree to which the company is strong or weak in various business lines provides a gauge of how significant a market challenge it can withstand better informing when to change course, amongst other decisions.

Efficient Frontier Analysis Efficient Frontier Analytics (EFA) are an excellent tool for identifying where a carrier stands in the industry and relative to its competitors, as well as, which components of its internal operations (lines of business, resource categories, functions, etc.) are con-tributing to or detracting from the compa-ny’s success. When properly applied, EFA can identify with a high degree of precision where a carrier is and is not operationally efficient and effective, including the degree to which it is or isn’t, in dollars. With such measures, management can have greater confidence in selecting strategies and tactics to address cycle changes. Knowing the value to be gained by implementing changes designed to outperforming competitors, puts the costs of doing so in context. The answer for P/C carriers is to incor-porate EFA tools into their planning and monitoring to better measure operational performance thereby having the flexibility to act/react when markets change.

Dimmling ([email protected]) is senior director and Hoeg ([email protected]) is senior director at Alvarez & Marsal, a global professional services firm, based in New York, N.Y. A&M delivers performance improvement, turn-around management and business advisory services. Phone: 212-328-8541.

IDEA EXCHANGE

Market Cyclecontinued from page 50

A.M. Best A+XV Rated Carrier

Products and services described above are provided through various surplus lines insurance company subsidiaries of W. R. Berkley Corporation and offered through licensed surplus lines brokers. Not all products and services may be available in all jurisdictions, and the coverage provided by any insurer is subject to the actual terms and conditions of the policies issued. Surplus lines insurance carriers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.800.842.8972 | nautilusagents.com | m.nautilusagents.com

By remodeling our

rates and strengthening

our coverage offering,

Nautilus Insurance Group

equips you with the right

tools to profitably grow

your business.

Building the perfect coverage for

CONTRACTORSCelebrating 30 years of underwriting excellence.

NAUTIL16663.indd 1 8/20/15 7:40 AM

IDEA EXCHANGE

Minding Your Businessucts, services, processes and people that generate profits in the most efficient man-ner. Each buyer will have their own unique approach however there are only a few main components of the book of business on which they focus. Here are four of the most common components.

A ‘Good’ Book of Business There are no absolutes in how to define a “good” book of business. It is a relative term depending on the buyer. Some buyers focus on profitability, some focus on the composi-tion and some, maybe something else. Generally, larger commercial accounts tend to be more profitable, especially when they are rounded out with multiple polic-es and lines of business. These types of accounts also attract the large, well-funded buyers. But, they are difficult to obtain and maintain for smaller agencies. An efficiently run personal lines book or small commercial accounts can be very profitable and easier to write for smaller agencies. Buyers for these types of agencies

Dressing Up for the Wedding: Book of Business, Part 2

You can’t take it with you. Every busi-ness owner will eventually “sell” his or

her business. It can either be on terms the owner defines, or it can be based on what-

ever happens at the end. So, if an owner desires to have an orderly sale at a fair price (and that can include options like gifting it to the next generation), then some preparation work needs to be done before the big event. In part one of this two-part article, (see Insurance Journal mag-azine, July 20 issue, page 34, for part one) we introduced the concept of “running

your business like you are ready to sell your business.” That column covered tips on opti-mizing the agency’s operations for the even-tual sale of the business in order to attract qualified buyers and a high value. This month’s column will focus on the agency’s book of business and related topics. The two things most buyers focus on are the agency’s profits and the book of business. Typically, the latter drives the former. A bunch of small accounts, or labor-intensive large accounts usually do not help make the firm profitable. That is why it makes sense to deliberately choose the types of accounts that the agency will focus on for new growth. When deciding which direction to grow the business, one approach is to model the business after future potential buyers. Typically, those buyers have a successful business model, so that alone is a good rea-son to mimic their approach. Another reason to model after potential buyers is that it will make the business more valuable, since the buyer will have an easier transition due to the similarity. In general, buyers are looking for prod-

tend to be local peers, or at most regional agencies. The downside with these types of buyers is that they usually cannot pay top dollar and have less favorable terms com-pared to large regional or national brokers.

A Strong Platform for Growth One of the most important attributes of a good agency is a stable of properly managed non-owner producers. This is an indication of a sales-oriented business. Also, if the owners are retiring, then it is important that there are producers in place to perpetuate the owners’ accounts. If not, then producers of the buyer need to be able to handle them. Buyers want to make sure that the owners and producers’ books are retained — the more producers the better the chances of this occurring. Keep in mind that often an earn-out is put in place any-way, especially if the buyer is worried that the accounts have not been properly transi-tioned.

Sales Management in Place Many agencies have some problems with sales management. The agency owners

are usually the drivers for new sales and the other producers are

not properly managed. These firms are not sales organizations and must tout themselves as good retainers of business and service oriented. They should also get rid of

the poor performing producers and not make this the buy-er’s problem. There are even some basic sales management tools in place that

will set the firm apart from those

that don’t have any at all. As a minimum, continued on page 56

By Catherine Oak &

Bill Schoeffler


Be first off the starting line to win new business. V3 Insurance Partners gives you the competitive advantage with professional insurance solutions that protect your clients’ businesses and help them run more efficiently. We stay ahead of business trends through data analysis and market intelligence, allowing us to provide specialized programs that outpace the changing world of small to mid-sized organizations.

WE OFFER HARD-TO-FIND COVERAGES IN FOUR SPECIALTY LINES:

TRANSPORTATION | WORKERS’ COMPENSATION | PROFESSIONAL LINES | PROPERTY & LIABILITY

We are dedicated to supporting our broker partners: - Team of experienced senior level industry veterans - Accessible underwriters - Strong distribution relationships & exceptional personal service - Quality products delivered via customized policy forms & coverage extensions - Unsurpassedefficiencythroughinnovativetechnology,processingandmetrics - Highly rated insurers

Become a V3 Broker and accelerate your new business development.Call 877-430-0085, email [email protected] or visit v3ins.com.

�

RUN AT THESPEED OF V3

LEARN MORE ABOUT US ATWWW.V3INS.COM

V3INSP001.indd 1 8/28/15 10:46 AM


LegaL Notice

If you paid or reimbursed others for the purchase of certain Aftermarket Automotive Sheet Metal Products between January 1, 2003 and September 7, 2015, you may

be entitled to a cash payment from partial class action settlements.Settlements have been reached with Tong Yang Industry Co., Ltd., as successor-in-interest to Taiwan Kai Yih Industrial Co., Ltd., TYG Products, L.P., and Gordon Auto Body Parts Co., Ltd. (collectively “Settling Defendants”) in a class action lawsuit about whether they, together with Jui Li Enterprise Co., Ltd., Auto Parts Industrial, Ltd., and Cornerstone Auto Parts, LLC (“Non-Settling Defendants”), violated state and federal antitrust laws and other state laws by agreeing to fix prices and limit the supply of Aftermarket Automotive Sheet Metal (“AMSM”) Products. AMSM Products include any and all aftermarket automotive parts made of any kind of sheet metal including, but not limited to, hoods, doors, bumpers, fenders, bonnets, floor panels, trunk assemblies, trunk lids, tailgates, roof panels, and reinforcement parts. Defendants deny each and all of the claims, as well as all charges of wrongdoing or liability. The Court has not decided who is right.Who is included? The Settlements include all third-party payors who indirectly paid or reimbursed others for the purchase of AMSM Products for end use and not sale or resale, purchased anywhere in the United States between January 1, 2003 and September 7, 2015 (“Settlement Class members”).What can you get? Tong Yang Defendants have agreed to pay USD $6.7 million and Gordon Defendant have agreed to pay USD $2.5 million in settlement of the claims against them. Due to a requirement of Taiwan law that applies to the fund because it will originate from a Taiwan bank account, twenty percent will be withheld as taxes, resulting in a total deposit in the amount of USD$7.36 million (“Settlement Fund”) in an escrow account in the United States. Each Settlement Class member that submits a valid Claim Form will receive a pro rata share of the Net Settlement Fund based on their volume of qualifying AMSM Product purchases as compared to the total volume of all Settlement Class members’ qualifying AMSM Product purchases.How do I get a payment? To qualify for a payment from these Settlements and any future settlements or judgments in this litigation, you must complete and submit a Claim Form by February 26, 2016. Claim Forms are available at www.AftermarketSheetmetalIndirectPurchaserSettlement.com, by calling 1-866-858-6088 or by writing to AMSM Indirect Settlement Claims Administrator at P.O. Box 43376, Providence, RI 02940-3376. Claim Forms may be submitted online or sent to the Claims Administrator via U.S. Mail. What are my other options? If you do not want to be legally bound by these Settlements or the continued litigation, you must exclude yourself by December 15, 2015. Unless you exclude yourself, you will not be able to sue any Defendant for any claim that was or could have been asserted in this lawsuit or is released by the Settlement Agreements. If you do not exclude yourself from these Settlements and continued litigation, you may object and notify the Court that you or your lawyer intends to appear at the Court’s final approval hearings. Objections are due December 15, 2015. For more information, including the Long Form Notice and Settlement Agreements, and the ability to register your name and address to receive future notices in the mail as there might be future settlements or judgments in this litigation, go to www.AftermarketSheetmetalIndirectPurchaserSettlement.com.The fairness hearings. The Court will hold Final Approval Hearings in these cases (Fireman’s Fund Insurance Co. v. Jui Li Enterprise Co., Ltd. et al., 2:13-cv-00987, and National Trucking Financial Reclamation Services, LLC v. Jui Li Enterprise Co., Ltd. et al., 2:14-cv-01061, which were consolidated with the lead case Fond du Lac Bumper Exchange Inc. v. Jui Li Enterprise Co. Ltd., et al., 2:09-cv-00852) on January 14, 2016, at 11:00 a.m. CST, at the United States District Court for the Eastern District of Wisconsin. At these hearings, the Court will listen to any objections, and consider whether to approve: the Settlements; attorneys’ fees in the amount of $3,066,667 (i.e., one-third of the USD $9.2 million Settlement Fund); reasonable costs and expenses; $20,000 payments to each Representative Plaintiff (Fireman’s Fund Insurance Company and National Trucking Financial Reclamation Services, LLC); and the plan of allocation.

1-866-858-6088 www.AftermarketSheetmetalIndirectPurchaserSettlement.comKCCLLC001.indd 1 8/20/15 7:46 AM

IDEA EXCHANGE

Minding Your Businessbiweekly or monthly sales meetings should be established. Goals should be set annu-ally and monitored with individual sales coaching. Buyers look for firms with a good sales culture in place. It is also important for account managers to participate in sales and be rewarded for account rounding in all departments and across departments.

Doing the Work The largest expense category for agencies is compensation. So, the key to increasing profits is to pay people for the work that they do. This philosophy comes into play with personal lines and small commercial accounts especially. The agency will often not make any money on these accounts if they are paying both a producer and CSR. Often, the CSR is doing all the work, so the producer is getting paid for doing nothing. Resentment often occurs. It is OK to have small accounts, however they should be handled much differently

than medium to large accounts. Producers can generate the business, but then the service staff should handle all the work from there on. This means producers can get paid commission on the new accounts, but they should not get renewal commissions on these small accounts. This approach applies to both PL and CL small accounts. How is a “small account” defined? It usu-ally depends on where the agency is locat-ed. In a rural area, a small account might be anything under $250 to $500 in commission. For a medium size agency in an urban area that limit might be $2,500 in commission or more. Some producers will be quite upset if

they are told they will lose the commissions on these accounts. It is best to have manage-ment have a report done by producer based on size of account, so they can indeed see at varying levels the amount of commission they might lose out on if changes are made and if it really is significant or not. If significant, management can also ween the producers off these commissions over



something like a two-year period, with the new plan applying to only new accounts until then, giving pro-ducers a little time to grow their book. If the producer is upset and can’t get over the change, that is a clear indication they are not sales oriented and might not be a good “fit” for the future

direction of the agency. Producers need to focus on new sales and maintaining medi-um to large accounts. The agency cannot pay a producer and a CSR to handle a com-mercial account that brings in only $500 in commissions, for example.

Niches or Specialties Agencies with niches or specialties tend

to be more profitable and are in a position to have faster growth. This is because program business allows the agency to be more efficient since they can often deal with only one product and one carrier. Producers and service staff get very familiar with the issues and don’t have to reinvent the wheel each time. Buyers could be attracted to either the specific type of pro-gram business the seller has or the profits they generate, or both. Agencies often don’t realize they have specialties; so it is a good idea to generate a report of the book of business by SIC code. It is also a good idea when hiring new pro-ducers to find out what niches they may already have. Once the niches are estab-lished, the agency resources can be spent on the producers’ niches to get them leads, marketing, conventions and establishing networking groups. Producers can better succeed in agencies that provide them these resources.

Organized by

* Use discount code IJ100 to receive an additional $100 off

Insurance Marketing & Distribution Summit USA 2015

Insurance IoT USA 2015

Miami, December 1-2 The Ritz-Carlton, Coconut Grove

Chicago, November 18 – 19 Hilton Magnificent Miles

Achieve sustained customer acquisition and retention

•Re-thinkyourmarketing&distributionstrategies

•Embracethechannelevolution

•Adoptthecustomer-centricapproach

•Gainabiggershareofthemarket

www.fc-bi.com/insurance-marketing&distribution/register

Prepare for the next iteration of insurance

•MobilizeIoTdata

•Drivecustomersatisfaction

•Unlocknewsourcesofrevenue

•Developnewproductsandservices

•Delivermoreaccurateriskassessment

•Reducetheseverityandfrequencyofclaims

www.fc-bi.com/iotinsuranceusa/register

Expert Speakers from:

FCBUIS001.indd 1 8/28/15 1:45 PM

Marketing assistance is also a plus to producers. It is amazing today how many agencies hire and then just show new pro-ducers the desk, and they are expected to be on their own to produce!

Summary The best way to plan an exit strategy is to create an agency that others will want to buy. This means that the agency operations and book of business need to be attractive, efficient and well-managed. This is not only the best way to attract buyers, but it is the best way to run the business.

Oak is the founder of the consulting firm, Oak & Associates, based in Northern California. Schoeffler is an associate of the firm. Oak & Associates specializes in financial and management consulting for independent insurance agencies, including val-uations, mergers acquisitions, sales and marketing planning as well as perpetuation planning. Phone: 707-936-6565. Email: [email protected].


IDEA EXCHANGE

Faced with an aging workforce, a short-age of incoming talent and an unem-

ployment rate hovering around 2 percent, the insurance industry is encountering an

increasingly challeng-ing recruiting climate. In light of this tight-ening labor market, employee engagement is proving an import-ant factor in ensuring organizational success. Unfortunately for

many companies, disengagement among employees is extremely high. According to a Gallup survey, nearly 52 percent of professionals in the U.S. are not engaged at work, while an additional 18 percent are actively disengaged. This means that only 30 percent of the U.S. workforce are actual-ly happy with their jobs. Employees are a vital part of any orga-nization. As a result, many companies are rethinking how they can combat the grow-ing disengagement of their staffs. However, they may be overlooking the integral role

By David E. Coons

Human Resourcesthat management can play in cultivating an engaged workforce. The competition for talent is fierce. Insurance organizations who wish to come out ahead in the war for talent need to rethink their current engagement strategies and get their managers on board. What can organizations do to keep their employees engaged? What role can managers play in cultivating a happy workforce?

Articulate a Clear Vision Organizations with a clearly defined, over-arching goal are more likely to have an engaged workforce than those without a shared vision. Today’s employees want to understand how their roles benefit the overall organization. They want to see how their work fits within the larger scope of the entire organization and how their con-tributions are impacting the overall success of the organization. In fact, 98 percent of engaged professionals attribute their on-the-job happiness to the knowledge that they are valued as an individual within the larger organization.

Managers as Employee Engagement Ambassadors

The key is to determine a single, com-panywide goal that employees can rally behind. Not only does this ensure a shared vision throughout the organization, but it also encourages employees to better under-stand the value of their contributions. In order to ensure that the goal is not too “high-level” and distant, managers should establish milestone objectives that can be achieved throughout the year. Make sure to celebrate the “little victories” that are achieved along the path toward reaching the final goal. Seeing how their jobs inter-twine with the overall company mission enables employees to feel better connected and thus more engaged. Managers must take the lead in ensuring that their employ-ees make the connections and have a deep understanding of how their individual suc-cesses impact the greater goal.

Foster Relationships No one wants to feel like a faceless num-ber. Managers need to take time to ensure that their employees feel like they are more than just a cog in the corporate machine. When managers take a personal interest in their employees, they are not only helping build morale, but are cultivating a spirit of comradery and respect. This is particular-ly important for organizations looking to

TWO SALES BOOKS TO GROW ON

by Alan Shulman, CPCU

Help your commercial producers and personal lines CSRs to prospect and sell

with these brief, handy PDF books.

Read on a PC or mobile device or print.

Visit www.agencyideas.com/books for a full list of contents of both and to

order and download instantly.

Agency Ideas®

SALES & MARKETING IDEAS FOR P&C PROFESSIONALS

Details at... www.agencyideas.com/books

Practical Sales Ideas for Producers and CSRs

ALAN16590.indd 1 4/20/15 1:04 PM


IICF16774.indd 1 7/30/15 11:41 AM


IDEA EXCHANGE

Human Resourcesbeyond work-related conversations. It is important for managers to relate to their employees on a personal, human level. Managers need to develop trust and respect beyond the day-to-day workings of the

increase engagement. Currently, 98 percent of engaged employees indicate that their positive relationships with their managers is a key reason behind their engagement. Building this relationship should expand

office. Managers should encourage employees to share other aspects of what defines them outside of the office. What are their interests? Do they volunteer anywhere? What makes them tick? Open and honest communication should be encouraged and welcomed. A positive person-to-person relationship between man-agers and their employees allows leaders to better under-stand their team members’ individual strengths, person-alities, desires and life goals. It also fosters a sense of support and relatability.

Clear Goals and Objectives Organizations may be surprised to learn that employees place a greater value on knowing what is expected of them than personal develop-ment, praise or even positive workplace relationships. In fact, 99 percent of engaged employees pinpoint their knowledge of what is expected of them as the most important workplace requirement. Professionals are looking for guidance and leadership. They want and need direction on their tasks and projects. It is important for them to understand how they are being measured and what they are being measured against in order for them to plot their own successes. Managers should make sure to establish personal objectives for their individual employees and take time to discuss prog-ress toward these goals. Building positive relationships, align-ing projects with a common goal, and providing guidance strengthens employee commitment and happiness. Undertaking this engagement strategy will go a long way toward increasing retention and improving organizational performance and success.

Coons is senior vice president of The Jacobson Group, a provider of talent to the industry. Phone: 800-466-1578. Email: [email protected].

Advertisers IndexReaders, browse, contact, or do product searches on any of our full page advertisers at: www.insurancejournal.com/adshowcase/

Abram Interstate www.abraminterstate.com W8Agency Ideas www.agencyideas.com 58American Reliable www.assurantspecialtyproperty.com 47Amwins Group, Inc. www.amwins.com 45Applied Underwriters www.auw.com 4, 5, 64ARGO www.argoprous.com 37, 39, 40Arrowhead General Insurance Agency www.arrowheadgrp.com 35Brecht & Associates www.brechtassoc.com SC4Burnett & Company www.bcoinc.com SC7Burns & Wilcox Brokerage www.burnsandwilcoxbrokerage.com 51Burns & Wilcox Ltd. www.burnsandwilcox.com 9California Earthquake Authority www.earthquakeauthority.com/mvp 3Century National www.cnico.com W3Chubb Corporate www.chubb.com 11Engle, Martin, & Associates, Inc. www.englemartin.com 33FC Business Intelligence www.fc-bi.com 57FSLSO www.fslso.com SE10Fujitsu www.fcpa.fujitsu.com 19General Star www.generalstar.com W1; SE1; E1; M1Global Special Risks www.globalspecialrisks.com 20Golden Bear Insurance Company www.goldenbear.com W7Gorst & Compass Insurance www.gorstcompass.com W9Great American Insurance Group www.GreatAmericanELD.com 36IICF www.iicf.org 59; W11JM Wilson www.jmwilson.com SE5; M3KCC LLC www.kccllc.com 56Lexington www.lexingtoninsurance.com 1Liberty International Underwriters www.liu-usa.com 63Louisiana Commerce & Trade Association www.lctacomp.com SC9

M.J. Hall & Company www.mjhallandcompany.com W13McClelland & Hine www.mhi-tx.com SC8; SE4Midlands Management Corporation www.midlandsmgmt.com 40Monarch E&S Insurance Services www.monarchexcess.com W5NAPSLO www.napslo.org 44Nautilus Insurance Company www.nautilusinsgroup.com 53Navigators Management Company, Inc. www.navg.com 43NBIS www.nbis.com 46Pacific Gateway Insurance Services www.pgiainsurance.com W15PersonalUmbrella.Com www.personalumbrella.com 7Quirk & Company www.quirkco.com SC6Regency Insurance Brokerage Services www.regencyinsurancebrokerage.com SE3; E3Scottsdale Insurance Company www.scottsdaleins.com 2SIAA www.siaa.net 3; W11South & Western www.southandwestern.com SC1Specialty Insurance Managers www.simtexas.com SC3St. James Insurance Group www.stjamesinsurance.com SE9Texas Mutual www.texasmutual.com SC5The Institutes www.theinstitutes.org 17The Sullivan Group www.gjs.com 38Tokio Marine www.tmsic.com 25TWFG - The Woodlands Financial Group www.twfg.com 22, 23United Fire Group www.ufgsolutions.com M5V3 Insurance Partners www.v3ins.com 55Vertafore, Inc. www.vertafore.com 13Western World Insurance Group www.westernworld.com 49Worldwide Facilities www.wwfi.com 21XL Specialty Insurance Company www.xlgroup.com 27


An investment in knowledge pays the best interest.

Benjamin Franklin

Hundreds of hours of high-quality training webinars. Flexible purchasing options.

You’ve hired the top talent. Let us help you train them. Call 800.897.9965 x179

IJACAD16640.indd 1 8/28/15 9:52 AM


IDEA EXCHANGE

By Betsy Myatt

Businesses in the industry are seeing

the value that comes from a diverse

leadership group.

Making Strides for Gender Equality

During IICF’s 3rd Annual Women in Insurance Conference in New York, more than 650 insurance

professionals gathered for insight and discussions regard-ing gender diversity in the industry. The themes and lessons shared throughout the conference focused on lead-ership topics as well as best practices for organizations to unlock the full potential of their workforce by champion-ing and achieving better gender diversity. Besides serving as a learning and networking oppor-tunity for industry representatives from more than 30 states and nine countries, the conference served another purpose — as a barometer for progress on issues of gender diversity. Three hundred women — nearly half of the con-ference’s participants — took part in an onsite survey held on the second day of the event in mid-June. The survey’s goal was simple — to evaluate how much progress, if any, has been made in the championing of women’s leadership development in the industry. With all the talk and effort being put forth to enable gender diver-sity in the industry, what do the results look like? The results are encouraging. The survey revealed that 72 percent of women in insurance believe their industry is making progress in gender equality. For the second year in a row, more than two-thirds (68 percent) of women said their company is working to promote gender diversity. It’s a positive trend to see, and one that many compa-

nies are working tirelessly to continue. “There are some incredibly talented women in the insurance industry, but too often they feel isolated in their businesses,” said Deborah Aldredge, chief adminis-trative officer at Farmers Insurance and an IICF Inclusion Champion Award winner. “Establishing a women’s net-work and making sure that men are included is a positive step. Putting leadership programs in place to support emerging talent from diverse backgrounds is another. Looking at policies, practices and work environment in the company to make sure that they are meeting the needs of all leaders and that they support the workforce of the future so that talent is retained is also important.” Other areas for improvement were also noted. When asked what is the greatest challenge women face in ascending to leadership, 39 percent cited limited opportu-nities for upward mobility within their company. Another 30 percent of respondents stated that the greatest chal-lenge is women not promoting themselves effectively. While most conference speakers and attendees agreed that more work needs to be done, changes are already being noticed. Thirty-seven percent of respondents believe that the industry’s biggest improvement toward gender diversity is seen via shifts in corporate culture. The ben-efit of networking opportunities were seen as well, with 24 percent naming this the most important step toward gender diversity (up from just 9 percent last year). External barriers still exist for women who seek leader-ship positions in their company. However, the percentage of women who named “biases in advancement” and “lack of opportunities for professional advance-ment” as the chief barriers fell to 68 percent, from 76 percent in 2014. This suggests that businesses in the industry are seeing the value that can come from a diverse leadership group. Companies are clearly recognizing the need for a more gender inclusive workplace. At the same time, women themselves are realizing new opportunities to affect change for themselves and their colleagues. There is an observable trend of individuals launching their own women’s networks and mentorship programs to foster the advancement of women in their organizations — and these result in measureable engagement and change.

Myatt is executive director, Northeast Division, at Insurance Industry Charitable Foundation (IICF), a nonprofit organization funded by the insurance industry.

Closing Quote

THERE ARE SOME RISKS ONLY A SPECIALIST CAN HANDLE.We’re LIU, the global specialty lines division of Liberty Mutual Insurance. To meet our underwriters and learn more about how they can help you and your clients handle unique risks, visit www.LIU-USA.com.

Boston | New York | Chicago | Atlanta | Dallas | Houston | Denver | Los Angeles | San Francisco | Miami | Baltimore | London | Europe | Asia | Australia | Canada | Latin America | Middle EastCertain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.© 2012 Liberty Mutual Insurance.

Clie

nt: L

IBER

TY

Job

Nam

e: L

IU_1

2135

8_RE

VKID

_P4D

CO

DY A

rtis

t: jh

L: 7

.875

x10.

375

T: 8

.375

x10.

875

B: 8

.625

x11.

125

Gutt

er in

Spr

ead:

NA

Job

Colo

rs: 4

Font

s: A

riel R

eg/A

riel N

arro

w R

egCD

ADCW

AEPR

OOF

PROD

80 7

0 70

100

10.2

7.4

7.4

100

100

100

100

100

6010

0 10

070

70

30 3

010

0 10

0 60

100

100

100

100

70 7

030

30

100

100

6070

70

4070

70

30 3

010

0 40

100

4040

100

10 4

0 40

20 7

0 70

3.1

2.2

2.2

70 4

0 40

75 6

6 66

50 4

0 40

25 1

9 19

B0

0 0

0

100

7030

100

1025

5075

9010

010

0 60

100

7030

100

6040

70

4070

3010

0 40

40 1

0040

100

40 7

0 40

70 4

0 40

340

70

4070

40

4010

0 60

A

3%IS

O 1

2647

-7 D

igita

l Con

trol

Str

ip 2

009

LIU_121358_REVKID_P4D.indd 1 10/23/12 4:17 PM

LIBCR16219.indd 1 10/24/12 6:09 PM

Applied UnderwritersInsurance Journal Back Page Ad

Live 8.125” x 10.625”Trim 8.375” x 10.875”Bleed 8.625”x 11.125”

AU N Harvest IJ C4

Contact: Sheila Gallagher P: 707-395-0645 Email: [email protected]

Applied Underwriters

Expect big things in workers’ compensation. Expect to save a third of your clients 30% or more. Most classes approved, nationwide.

For information call (877) 234-4450 or visit auw.com/us.

©2015 Applied Underwriters, Inc., a Berkshire Hathaway company. Rated A+ (Superior) by A.M. Best. Insurance plans protected U.S. Patent No. 7,908,157.

AUDIRECT16751.indd 1 8/21/15 6:36 AM

insurance journal west 2015-09-07

Documents