The CHART Exchange July 2019 by The CHART Exchange

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6 Glenn W. Clark, CPCU, Publisher CHART Exchange Earliest Adopter

CHART’s New Strategy An Unqualified Success!

The Six Hats Of The AML Officer - John Arvanitis

Lloyd’s Announces New Appointments For The EMEA Region

Special Report: Succession Strategies For Insurance Agencies

The Specific Goals You Seek To Achieve

Industry Heavyweights Form Advisory Committee For The Future At Lloyd’s

Claims Of Negligent Hiring, Supervision Or Retention Draw Hospitals Into Abuse Cases

The ROI On Giving Back PL Communications

How To Add Value To Your Existing Client Relationships

Opportunity “STEMS” From Education

Golf, Business And Profit - Cooper Wallach

Recruitment, Selection And Hiring: The Starting Point In Employment

ValueMomentum Joins The Mulesoft Partner Program

Industry Heavyweights Form Advisory Committee For The Future At Lloyd’s

Lloyd’s Confirms Targets For Electronic Placement Mandate

SPECIAL REPORT:

JULY 2019 VOLUME 4 - ISSUE 7

SUCCESSION STRATEGIES FOR INSURANCE AGENCIES

Publisher: CHART Exchange Glenn W. Clark, CPCU Membership Services Kate Boyle Advertising: Kate Boyle Managing Editor: Kate Boyle Contributing Editor: Frank Huver Layout, Design & Circulation: Ron Manera AdMax Corp., Inc.

CHART Exchange

info@chart-exchange.com 3001 Philadelphia Pike Claymont, Delaware 19703 www.chart-exchange.com 302-765-6001 Last Issue:

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ADVERTISING IN THE CHART EXCHANGE MAKES SENSE: CALL KATE: 302.765.6056

“WHEN YOU’RE FINISHED CHANGING,

YOU’RE FINISHED” - Benjamin Franklin

Benjamin Franklin: Scientist, philosopher, Founding Father … and business strategist? Mr. Franklin’s advice about adapting to thrive is especially appropriate in the highly ﬂuid insurance industry. The CHART Exchange began with a good idea back in 2015: become the catalyst for growth in the U.S./London marketplace by facilitating interaction between domestic wholesalers/agency specialists and Syndicate underwriters. Large-scale networking events were held annually in elegant venues. While this approach produced results, feedback from the meeting participants indicated we could do much more to achieve our goal. As a direct result of this feedback, CHART 2.0 adopted a more proactive operating model intended to provide advocacy-level support to U.S.-based agencies seeking to place business within the London market. The expertise of our various Vendor Partners — when combined with new brokerage placement capabilities — gives CHART 2.0 clients access to a broad array of services they need to be successful. Interested in learning more? Visit our website at www.chart-exchange.com. We are also available via e-mail (info@chart-exchange.com) or by phone at the number below.

www.chart-exchange.com

The CHART Exchange, 3001 Philadelphia Pike Claymont, DE 19703

Phone: (855) 716-3660

•

Fax: (302) 334-0325

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MESSAGE FROM THE EARLIEST ADOPTER

NEW CHART STRATEGY AN UNQUALIFED SUCCESS Glenn W. Clark, CPCU Publisher & Earliest Adopter

CHART operates under the motto of: “If the plan doesn’t work, change the plan… but NEVER the goal.”

s many of you are aware, the CHART Exchange was established in 2015 to serve as the catalyst for sustained, organic new business growth within the U.S./London marketplace. Our team had a plan in place to achieve this objective. CHART would become the forum through which all of the key “players” within this target niche - domestic wholesale/specialty insurance agents, London Syndicate underwriters, and vendors – could meet to learn, network, and further discussions regarding new business opportunities. The multi-day events were held in elegant venues. CHART partnered with several London brokers to assist agency attendees in ascertaining the most compatible

JULY 2019

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Risk Takers, setting up appointments, and shepherding them through the evaluation process. The meetings themselves were well attended; we were also able to launch over a dozen new binding authority agreements through our efforts. Unfortunately, the sheer size of these large CHART events left a number of the wholesale/specialty agent participants feeling under-served. Post-meeting feedback suggested that we needed to modify our approach to address these concerns. The CHART team understands how important it is to adapt to the ever-changing needs of our unique target audience. We operate under the motto of: “if the plan doesn’t work, change the plan…but NEVER the goal”. The most recent shift

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in strategy led us to the adoption of a different business model, one intended to deliver optimal benefit for those who join with us. In order to resolve the concerns over meeting size, we transitioned from a single annual event to several smaller, regional sessions held throughout the year. The meetings themselves are hosted at one of Wilson Elser’s 37 branch offices (CHART’s oldest and most valued partner is the premiere specialist in U.S. program business and the London markets). A couple of other fundamental changes: each event will only be for a single day; there will be no registration fee assessed for insurance agent attendees. Our inaugural regional meeting was held in Dallas TX in February. The smaller, more intimate setting was an unqualified success. Every agent attendee was given personal attention. Eight new program ideas were presented; three of them are already well on their way to launch. Just as importantly, our team remains in close contact with

www.chart-exchange.com

all of the participants - assisting in the improvement of unplaced business submissions, exploring new opportunities, identifying potential cross-sell channels, and more. We are certainly encouraged by the results of CHART’s new strategy. The next regional meeting has been scheduled for September 30, 2019 in New York, NY. Save the date! The business-driven agenda will be filled with a workshops, presentations, and networking opportunities for every agency attendee in a more focused atmosphere. Representatives from Lloyd’s US will be on hand to provide updates on the newest developments happening within the London market. Our new, informal meeting structure provides an environment for you to discuss your program ideas with partners driven to help you succeed. Come in the night before and enjoy a welcome reception with all of the presenters. A detailed agenda will be

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sent to every registered attendee. In order to give everyone the attention they deserve, participation will be limited to 50 agency attendees. Can’t make the September meeting or want to get the ball rolling on your new business idea right away? No problem! Complete the program questionnaire so we can begin working on your behalf. This form can be found on our website (www.chartexchange.com). By the way - CHART is planning one more event on the west coast before the end of the year. More details to follow. To reserve your spot, contact us for details. Feel free to write to us at info@chartexchange.com to reserve your spot for the New York meeting or to request more information. We look forward to seeing you in the Big Apple!

Glenn W. Clark , CPCU CHART’S Earliest Adopter

JULY 2019

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ANALYSIS - KROLL

THE SIX HATS OF THE AML OFFICER By John Arvanitis

on the institution to determine its enterprise AML risk and its risk appetite, and then to respond accordingly. The AML officer must be able to lead this effort across multiple lines of business, geographies, and customer bases, balancing the need to impose order on the risk assessment and management process with the recognition of the different ways that risk presents itself in various contexts.

With money laundering now a business risk, the AML leader needs – and must be ready for – a seat at the table.

ohn Arvanitis is a managing director in the Compliance Risk and Diligence practice of Kroll based in the Boston Office. John advises clients worldwide on anti-money laundering matters and other aspects of compliance programs, bringing impactful and valuable insight to their challenges via his extensive international and domestic financial investigative experience. He has significant experience across a broad range of compliancerelated programs, including anti-money laundering, know your customer, global AML processes, and program and policy formation.

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he increasing complexity and regulatory scrutiny of combating money laundering has put the spotlight not only on a financial institution’s AML program, but also on the person chosen to run it. Financial institution boards, CEOs, and AML officers thus need to ensure that the role’s job description is aligned with reality. While the core responsibility of the AML officer is to design, implement, and manage an effective AML program, that is only the beginning of his or her responsibilities in the current environment. At most institutions today, the ideal AML officer must be able to fulfill six distinct roles: •

RISK MANAGER While financial institutions are expected to have effective AML programs, what constitutes “effectiveness” is often left undefined. The onus is therefore TABLE OF CONTENTS

•

BUSINESS STRATEGIST The repercussions of an incident make money laundering not just a compliance risk but a business risk. Giving the AML officer a seat at the table for business strategy discussions allows factors that contribute to that risk to be examined from the start rather than addressed after decisions have already been made. Being part of those conversations requires the AML officer to be a strategic and business partner with the board, the CEO, and business unit heads. In today’s highly dynamic

See AML Officer Page 27 JULY 2019

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NEWS - LLOYD’S OF LONDON

LLOYD’S ANNOUNCES NEW APPOINTMENTS FOR THE EMEA REGION Lloyd’s, the world’s insurance and reinsurance market, announced today the appointment of Mark Cooper for the newly created role of Head of Market Development for the European market, and Amit Khilosia as the new Regional Head, Africa.

Director for the last Lloyd’s licenses and four years. In addition, access in Africa and Sonja Rottiers, Regional established Lloyd’s Director for EMEA and South Africa Ltd Lloyd’s Brussels CEO, where he served as will be joining the Board Managing Director. replacing Cameron Murray who will step In 2013 Amit took n this new role Mark will join the down as Chairman up the position of Lloyd’s Brussels executive committee in November. With Lloyd’s Regional and will be responsible for delivering Mark remaining on Manager for Lloyd’s commercial strategy in the Board and Sonja’s Africa where he Europe and managing the network of appointment later in the undertook market Mark Cooper, Head of Lloyd’s European branches. year, this will ensure that development and Market Development EU there is continued support access initiatives Mark has been with Lloyd’s since for, and focus on, Lloyd’s Middle East across the continent. Amit will join 2015, when he joined as General business. the Lloyd’s South Africa board and Representative for the Middle East. will continue to oversee Lloyd’s Based in the Dubai International In Africa, Amit Representatives in the region and have Financial Centre (DIFC), Khilosia has been overall responsibility for Lloyd’s licence Mark was responsible appointed as in South Africa, Lloyd’s largest market in for developing Regional Head, Africa. and implementing Africa. In this new Lloyd’s business and role Amit will be Sonja Rottiers, Lloyd’s Brussels CEO, market development responsible for said, “I am delighted to welcome Mark strategy across the delivering Lloyd’s to the team and to have Amit leading MENA markets as commercial strategy Lloyd’s work across Africa. Their strong well as managing and enhancing commercial acumen and experience in the operations of the Lloyd’s market market development, both within the Dubai platform. access and profile in Lloyd’s and company markets, will be Africa. an asset as we continue to grow our Amit Khilosia as the new Dean Wickens, Senior presence across the region”. Regional Head, Africa Manager, Stakeholder Amit has been Engagement in the Lloyd’s International with Lloyd’s since 1989 and held a Both Mark and Amit will take up their Regulatory Affairs team, will support variety of roles in Finance and Market position on 1 July 2019, reporting to the Dubai office during the transitional Development. During his time at Lloyd’s Sonja Rottiers, EMEA Regional period. Mark will remain on the Lloyd’s he has negotiated and developed Director and Lloyd’s Brussels. Dubai board where he has been a

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JULY 2019

SPECIAL REPORT - M&A SERVICES

SUCCESSION STRATEGIES FOR INSURANCE AGENCIES

uccession Strategies: Essential considerations for agency owners.

EXIT PLANNING

The goal of this special report is to allow agency owners to see the different options that they have so they can make an informed decision about the future of the business that they have spent so much of their blood, sweat, and tears to build.”

There are very few certainties in life. Of course, there is the old adage “Nothing in life is certain but death and taxes.” While this is true, as an agency owner there is one other certainty. There will come a time when you will cede control of your agency either to your family, employees, or a third party. One of the most common mistakes that I’ve seen agency owners make year after year is failing to plan for this inevitability. Failure to develop an exit strategy can leave your agency in turmoil and ultimately lead to its downfall. Many agency owners believe they already have a succession plan in place, but fail to see that their plan may be unrealistic, unachievable, or not in the best interest of themselves, their family, or their business.

In this article, I will discuss the three most common types of perpetuity plans that agency owners use, and some of their advantages and disadvantages. The goal of this article is to allow agency owners to see the different options that they have so they can make an informed decision about the future of the business that they have spent so much of their blood, sweat, and tears to build. FAMILY SUCCESSION The first type of perpetuity plan that I will discuss is a family succession plan. Family succession is one of the most common succession plans that agency owners pursue. While a family succession plan may work for some agency owners with children or other family members who are in the business and are capable of running the agency without them, it does not work for See Succession Strategies Pg 48

r. Murgio serves as a manager for M&A International LTD, an affiliate of Merger & Acquisition Services. His responsibilities include financial analysis, research, client support, and project management. Prior to joining Merger & Acquisition Services, Mr. Murgio worked for Indemnity Insurance Company of DC as a Risk Manager. Mr. Murgio earned his B.A. Degree from Elon University. He holds the Series 7, 79, 63 and 24 licenses.

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www.chart-exchange.com

NEWS

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within the insurance industry by assisting firms with their corporate development and acquisition/divestiture objectives. M&A Services is

ANALYSIS - COST FINANCIAL

THE SPECIFIC GOALS YOU SEEK TO ACHIEVE Five Key Reasons To Own Your Premium Finance Company

s you know, having the proper resources in place can make all the difference in business. Adding a premium finance company to your existing business can provide you with increased profits, control over the policies you sell, better customer service, expanded market share, and enhanced agency value.

time shopping rates or begging for a better rate on a quote. When you own your own premium finance company, you are in control. You make these decisions, enabling you to leverage or improve your relationships with your clients. You have total control over the premium finance process without the headaches of day-to-day operation.

INCREASE PROFITS By owning your own premium finance company, you can increase your profits and expand your client services. As owner of a premium finance company, you will earn the interest, late fees, cancellation fees, etc. - adding substantial income from existing clients without the need for additional staffing, equipment, or overhead. Instead of giving away this revnue to outside sources, This increased revenue will help you grow your business. GAIN CONTROL OF THE FINANCE PROCESS When you place business with an outside premium finance company, that company makes the decisions on late fees and policy cancellations if the insured does not make payment on time. You are often forced to waste www.chart-exchange.com

The additional revenue that your premium finance company will generate becomes a key profit center for your business” IMPROVE CUSTOMER SERVICE If the premium finance company treats your clients poorly, often you take the blame. You can improve the customer service your customers receive when the finance company is your own. You will have complete control over the procedures and policies that COST utilizes to operate and manage your premium finance company. Rest assured that your customers will receive the same level of outstanding service from us that they do from you.

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REDUCE PAPERWORK AND EFFORT Setting up premium financing for your policyholders should not be difficult or time-consuming. COST uses a state-oftheart online system to enable you to produce premium finance quotes, print finance contracts, submit contracts electronically, view realtime account statuses, generate reports on-demand, and view all documents on any of your accounts digitally and paperless. Training takes minimal time and your employees will be up and running quickly and easily. ENHANCE MARKET AND AGENCY VALUE The additional revenue that your premium finance company will generate becomes a key profit center for your business. When you use outside financing, you are essentially “renting” their company. By forming your own facility, you are building a separate profit center that can be a valuable asset, providing you with the security you need in case you wish to sell the agency or take on some financing of your own for a capital project, business expansion, or other ventures. Contact David E. Gebhardt Chairman, C.E.O. COST Financial Group, Inc JULY 2019

NEWS - LLOYD’S OF LONDON

INDUSTRY HEAVYWEIGHTS FORM ADVISORY COMMITTEE FOR THE FUTURE AT LLOYDS

oday Lloyd’s announced the establishment of Global and London advisory committees to support its bold new strategy for the future. Members of the advisory committees are comprised of a number of prominent figures from across the global industry, including Amanda Blanc, Chair of the Association of British Insurers (ABI), Greg Case, CEO of Aon, Sian Fisher, CEO of the Chartered Insurance Institute (CII), Dan Glaser, President and CEO of Marsh & McLennan, Evan Greenberg, Chairman and Chief Executive Officer, Chubb, and John Haley, CEO of Willis Towers Watson. The advisory committees will be responsible for supporting the creation of the future at Lloyd’s, which is focused on offering better value for customers through cutting-edge risk management products and services, simplifying access to the market, reducing the cost of doing business, and building an inclusive, innovative culture that attracts the best talent. John Neal, Lloyd’s CEO, said, “This is an exciting time for us all as we drive forward the next stage in Lloyd’s evolution and I am delighted that

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we have the support of a number of global industry leaders, as well as the market associations representing some of our key stakeholders. Together with the feedback and insights we are gathering from our wide-ranging consultation, the advisory committees will play a critical role in providing guidance and advice as we develop and implement a blueprint for the future at Lloyd’s.”

Lloyd’s is accelerating its own evolution and charting a path forward for London to continue playing a significant role in the global insurance market. We’re pleased to contribute to this important discussion.” Greg Case, Aon CEO said, “Aon is committed to anticipating the needs of our clients and working with leading organizations around the world to innovate on their behalf. With this new strategy, Lloyd’s is accelerating its own evolution and charting a path forward for London

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to continue playing a significant role in the global insurance market. We’re pleased to contribute to this important discussion.” Amanda Blanc, Chair of the Association of British Insurers, and CEO, EMEA and Global Bank Distribution, Zurich Insurance, said: “Ensuring that Lloyd’s is best placed to meet future challenges and opportunities is vital so that the UK remains a world leading insurance market. I look forward to working with colleagues in the insurance industry in developing a strategy that helps Lloyd’s to deliver best value for customers through cutting edge technology, with an inclusive culture that attracts the best talents.” Sheila Cameron, Lloyd’s Market Association CEO, said, “I am looking forward to working in partnership with Lloyd's, and on behalf of our members, to ensure that the work we undertake now will define the future success of the market and deliver truly outstanding outcomes for its clients.”

See Industry Heavyweights Page 20 www.chart-exchange.com

NOW HERE’S A REAL SHOCK… The first firearm liability product that can be sold by independent insurance agents!

It is estimated that nearly 80 million Americans own at least one firearm. But what happens if a law-abiding citizen is actually forced to use that weapon to protect themselves, a loved one, or their personal property? Many homeowner policies specifically exclude firearm use — even in self defense — as a covered exposure, deeming it to be an intentional act. That leaves the gun owner personally liable for legal expenses, bail bond costs, and any judgments awarded through a civil action. As an insurance agent, you are in the best position to explain the significant personal liability exposure faced by your gun-owning clients. Unfortunately, you haven’t been able to help your clients by offering a product to address this need — until now. Rockwood Programs now offers a firearm liability policy designed to protect insureds against civil or criminal actions resulting from the use of a gun in self-defense. It is the only one available in the industry that can be sold through insurance agents. A wide variety of limit options are available, ranging from $50,000 to $5 million. Annual premiums start at just $135. Best of all, we make it easy for you to present the firearm liability product to your clients. An inventory of customizable sales aids is available, including marketing brochures, simplified self-rating applications, and more. Our team can even help provide product-specific content for your website!

Visit us at www.rockwoodinsurance.com to learn more We can also accommodate group accounts (police, security, gun clubs, etc.). E-mail: president@rockwoodinsurance.com

Rockwood Programs, Inc., 3001 Philadelphia Pike, Claymont, DE 19703 p: 800-558-8808 • f: 302-764-5477 • e: sales@rockwoodinsurance.com

Bringing U.S. Entrepreneurship to the London Market The CHART/Wilson Elser strategic partnership combines the innovative underwriting philosophy of the worldâ&#x20AC;&#x2122;s oldest insurance brand with the entrepreneurial mindset of U.S. agencies. For close to 40 years, Wilson Elser has helped organizations to better navigate challenging markets and realize improved combined ratios. We provide London- and Europe-based insurers with ready access to more than 60 discrete legal services delivered by nearly 800 attorneys in 34 strategic locations throughout the United States. Guided by a proprietary, systematic legal project management program, we help clients define strategies and achieve outcomes that align with agreed business requirements. We also implement dedicated Program Claim/Litigation Management services, creating value and driving efficiencies with respect to legal spend and indemnity. Wilson Elser is especially proud of its strategic partnership with CHART Exchange and our shared commitment to strengthening relationships between cover holders and risk takers on either side of the Atlantic.

ANALYSIS - WILSON ELSER

By Sean Maraynes

cases of sex abuse are handled in each state, the ability of physicians to continue to practice despite allegations of abuse, and the effects of such abuse on the victims.

ospitals are commonly named as defendants in medical malpractice lawsuits for claims arising from alleged injuries within their walls, but what is their exposure to liability for claims that arise from alleged sexual assaults by staff on their premises? In September 2016, the Atlanta Journal-Constitution released a five-part investigative series examining the alleged epidemic of physician sex abuse in all 50 states. The series examined the purported problem of sexual abuse by physicians, including how licensing bodies discipline physicians, how

Overall, the series suggests there is an epidemic of â&#x20AC;&#x153;physicians behaving badlyâ&#x20AC;? who take advantage of vulnerable patients and are shielded by a system designed to protect their own. Claims of sexual abuse, either substantiated or unsubstantiated, frequently involve a patient rendered unconscious by

See Claims of Negligent Hiring Page 44 Stock Photo

bout the author: Sean Maraynes is a litigator who defends physicians, businesses and nonprofit organizations in lawsuits involving medical malpractice, catastrophic personal injury and wrongful death. Over the course of his career, he has served as lead counsel on more than 20 trials to verdict in New York State Supreme Court and has successfully resolved thousands of civil and criminal cases. Sean has represented physicians in nearly every medical specialty, including obstetrics, cardiothoracic surgery, neurosurgery and internal medicine specialties. Additionally, Sean routinely represents hospitals and businesses in lawsuits stemming from criminal conduct on their premises or by their employees.

www.chart-exchange.com

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This image is licensed under Public Domain. This image is a work of the United States government.

CLAIMS OF NEGLIGENT HIRING, SUPERVISION OR RETENTION DRAW HOSPITALS INTO ABUSE CASES

NEWS - LLOYD’S OF LONDON Continued From Page 16

the market to help take these forward.”

INDUSTRY HEAVYWEIGHTS FORM ADVISORY COMMITTEE FOR THE FUTURE AT LLOYDS

The Future at Lloyd’s strategy was launched on 1 May 2019, which was followed by wide-ranging consultation involving Lloyd’s unique ecosystem of market participants, customers and other stakeholders, on the transformational initiatives outlined in the prospectus. Work will begin on building and delivering prototypes and full services from October 2019, with some operational in early 2020.

Christopher Croft, CEO of LIIBA, “The creation of this Board further fulfils Lloyd’s commitment to a collaborative, cross-market approach. Roy White and I are happy to be part of this important work for the future of our industry.” Dan Glaser, President and CEO of Marsh & McLennan, said, “The Future at Lloyd’s is a unique opportunity to transform the marketplace and cater to the growing and diverse needs of its customers. Lloyd’s is an important partner for Marsh & McLennan and our clients, and I’m thrilled to help position it for the future.” Andrew Horton, Beazley CEO and Chair of the London Market Group (LMG) said, “I strongly support the ideas contained in the Lloyd’s prospectus and am keen to continue working with colleagues across

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The six bold ideas outlined in the future at Lloyd’s illustrate how the market could transform the way it delivers value to its customers, and include: A platform for complex risk that makes doing business easier and enables efficient digital placement of the most difficult-to-cover risks.

WOULD YOU LIKE TO HAVE YOUR MESSAGE DELIVERED TO 100,000+ FOCUSED INSURANCE INDUSTRY EMAIL ADDRESSES EVERY MONTH?

Lloyd’s Risk Exchange through which less complex risks can be placed in minutes at a fraction of today’s costs. Flexible capital that can simply and effectively access a diverse set of insurance risks on the Lloyd’s platform. A Syndicate-in-a-Box, which offers a streamlined opportunity for innovators to bring new products and business into the market. A next generation claims service that improves customer experience and increases trust in the market by speeding up claims payments. An ecosystem of services that helps all market participants develop new business and provide outstanding service to their customers. TABLE OF CONTENTS

I’m Kate Boyle Managing Editor. I handle CHART Exchange Advertising. Call me at 302 765-6056 and let’s have a conversation.

www.chart-exchange.com

ANALYSIS - PL COMMUNICATIONS

THE ROI ON GIVING BACK

any insurance agents and carriers “give back” by supporting charities and nonprofits. Many are altruistic – no ulterior or business motive. The just want to do the right thing. Some support an organization because it has touched their lives whether it is an organization for cancer, hospice, helping youth, or a myriad of other worthy organizations. Others support community organizations because it puts them in good stead with their local or professional community. They donate to local causes, sponsor or exhibit at an event, or run ads in the event program for a charity. Some serve on boards. Whatever the reason, the end result is positive. If you are supporting a cause

because you believe in it or to score points with your target audience, the outcome is that it benefits the charity or nonprofit. For most giving back, it is hard to quantify the ROI in numbers. The principal benefit is that portrays your company in a positive light, which may help attract new customers. Over the years my insurance marketing firm PL Communications has provided services for many nonprofits – hospitals, schools, mental health agencies, foundations, art programs, and more. In addition, we have done quite a bit of pro bono work for nonprofits from publicizing events to producing videos. My first real marketing job was at a theatre and dance company for teenagers called Inner City Ensemble. I quickly became a marketing Jack of

bout the author: Paul Lavenhar’s firm PL Communications has provided marketing communications services for 25 years to such insurance clients Rockwood Programs, Capacity Coverage, MetLife, Selective, York Risk Services, and Admiral Insurance, among others. He has has written for 500+ companies in various industries. Paul also leads a band called GoodWorks that provides music and marketing services to help nonprofits raise money and awareness pro bono. Paul Lavenhar is the principal of the insurance marketing communications firm PL Communications.

All Trades producing print materials, seeking publicity, helping to write grants and more. I am a marketing guy by day and a professional drummer by night. A few years ago I started a band called GoodWorks. We are a nine-piece rock and soul band. We have helped over 50 nonprofits by playing at fundraisers, promoting events in the press and via social media, and producing music videos. One of the nonprofits we work for is called Bridgeway Rehabilitation Services based in Elizabeth, New Jersey. Volunteering our services at a fundraiser led to our producing a promotional video for Bridgeway - paid project. We did interviews with staff and clients. Their stories were so striking it led to me producing a song and a video pro bono based on their words – “A Bridge to a New Life.” Bridgeway not only promoted the video to help with its fundraising efforts it also adopted the song title as its new tag line. We work pro bono for a school for children who are deaf or hard of hearing called Summit Speech School. The school is a listening and spoken language program. They use cochlear implants and hearing aids to assist them to communicate. We have provided services to the school for several years See ROI on Giving Back Page 46

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ANALYSIS - SIAA

HOW TO ADD VALUE TO YOUR EXISTING CLIENT RELATIONSHIPS By Jeff Holmes - This article was originally featured in The Standard and it is reprinted with their permission.

ith independent agents facing competition from others who may be more advanced in sales processes, procedures and technology, it is no longer enough to sell clients only home and auto insurance policies. Independentagents need a strategy for cross-selling a broader range of coverages intended to address all the personal risks of their clients. When looking at today’s scattered insurance sales environment, where many people buy single policies to fill an immediate need, there’s an opportunity for independent agents to streamline their sales, slow down

In order to compete, independent agents have to provide value, establish trust and communicate with their clients regularly in the method their clients prefer. Building a dynamic profile for each client takes time, and helps the independent agent anticipate additional insurance needs as clients’ lives evolve.”

the review process and promote insurance bundling. For instance, a client buys a car and needs a binder today. She isn’t interested in anything else today because she wants to take a long drive in the country. Don’t miss an opportunity here. Congratulate the client on the new car, and let her know you will call in a week to discuss policies that can be bundled to save her money. It’s five to 25 times more expensive to acquire a new customer than it is to retain an existing one, according to Hubspot. When you do retain a customer, they’re more likely to spend more and purchase more frequently. “Existing customers are 50% more likely to try new products and spend 31% more when compared to new

s Senior Vice President and Chief Operating Officer for SIAA, Mr. Holmes is responsible for operational management of the largest alliance of independent insurance agencies in the United States, ensuring processes and procedures are sound in supporting 49 Master Agencies and thousands of Independent Insurance Agencies across the continental United States. As Senior Vice President of Agency Operations and Development for SAN Group, Mr. Holmes is responsible for the overall management and operations of SAN’s AccessPlus group and Agency Development Services, as well as agency development on a national scale with SIAA.

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www.chart-exchange.com

customers,” according to a report from Invespcro. The cross-selling opportunity for agents is clear, which is why it is so critical to have a consistent approach and a plan in place. Clients trust independent agents to offer products that protect them. Take the time to ask what other policies will benefit them and reduce their risk, and then cross-sell those policies to them. This tactic will strengthen an agent’s book of business and build loyalty with clients. FIRST, BUILD UP YOUR CLIENT PROFILES In order to compete, independent agents have to provide value, establish trust and communicate with their clients regularly in the method their clients prefer. Building a dynamic profile for each client takes time, and helps the independent agent anticipate additional insurance needs as clients’ lives evolve. Use an agency management system (AMS) to run your business efficiently, gather critical information and track client relations. Prepare relevant questions and a needs analysis to review with clients at every opportunity. The AMS should be the hub of your business, from which all spokes of opportunity branch out. Having a quality AMS helps to streamline an agency’s work and provide efficiency when cross-selling. The system will keep the independent agent active and organized, and along with a www.chart-exchange.com

customer relationship management database, help target new sales constantly.

sell them a quality policy and maybe bundle their auto and homeowners to save them money.

SELL VALUE VS. INSURANCE AS A COMMODITY

Recently, it seems interest in life insurance has been growing, which should be a good opportunity for independent agents. Independent agents held 51% of the U.S. life insurance sales market in 2017, according to Statista. With baby boomers falling short on retirement savings, agents can cross-sell annuities to provide financial stability while their clients are living and pair that with life insurance to have coverage in the event of an unexpected death.

Today, consumers generally do their homework before they buy. But some skip the research and simply buy a policy based on the lowest price, often buying online. This means they may not be getting the coverage they need. It is vital that clients review coverage with an independent agent and know what’s covered and what’s not. For example, insureds may not realize the auto policy they purchased contains exclusions, finding out too late that they saved $50 a year on premiums, but the policy doesn’t cover them under specific circumstances. By alerting clients, independent agents can open the door to reviewing other policies and advise them on options with greater value that don’t skimp on coverage. Home insurance sales require more planning than auto insurance, as in most cases, home ownership is tied to a mortgage. With a typical mortgage, home insurance is often held in escrow and will be paid by the escrow agent, then billed to the homeowner. Ask clients with home mortgages when the renewal period is coming. Let clients know you will contact them 90 days ahead of that renewal to offer a competitive quote. Calling clients 90 days prior — rather than 60 days — will provide adequate time to TABLE OF CONTENTS

CROSS-SELL EXISTING CLIENTS Do you need more reason to cross-sell those people already within reach of you? Amazon credits up to 35% of its revenue to cross-selling, according to grow.com. Their effective cross-selling comes in the form of the “frequently bought together” and “customers who bought this item also bought” sections during a customer’s buying experience. Review client purchases and determine who has monoline versus multiline policies. Revisit needs analysis questions with clients regularly. When securing a renewal, ask clients how last year went for them. Did they have any major life events or additions to the family (including pets)? Did they make any changes in their career? Life events can trigger the need for additional See Adding Value To Clients Page 32

JULY 2019

ANALYSIS - VANTAGE AGORA

STEM STANDS FOR SCIENCE, TECHNOLOGY, ENGINEERING AND MATH

bout the author: Evelyn Wargo is a Technical Writer and Content Specialist at Vantage Agora. With an eye for detail, she develops and implements creative/technical content, compatible with company standards. Evelyn graduated from John Carroll University with a BSCS (Computer Science) degree with a focus in Healthcare IT.

with the ability to program and engineer solutions for problems faced today.

Recently, there has been an abundance of jobs created for employees equipped with STEM expertise due to rapid growth in the tech industry. STEM stands for science, technology, engineering and math. It’s a hands-on curriculum, focused on preparing the workforce of tomorrow

With our world shifting into high gear towards becoming completely digital, STEM careers are becoming prevalent in all facets and industries. At Vantage Agora, we take pride in providing STEM-based careers to help ensure our tech

uccess is not solely driven by what you know, but by how you can apply skills to real-world applications and problems. The problems facing us today deal heavily with technology, engineering and science… but as a society, we lack resources in these fields.

The demand for employees with this skill set continues to rise, which sounds great, right? There’s just one problem… the supply of qualified professionals is not equivalent to the high demand needed.

See STEMS Page 26

JULY 2019

TABLE OF CONTENTS

www.chart-exchange.com

vantage agora

LOWER COSTS www.vantageagora.com

IMPROVE PRODUCTIVITY Vantage Agora delivers solutions that accelerate your company’s growth. We’re your support staff that takes care of all the routine and time-consuming work, so your in-house staff can focus on sales and improving customer experience for your clients. We provide flexible staffing to address seasonal peak periods during the year. With OX Zion, Vantage Agora’s software solution, our team uses Automation and Robotics to drive down processing time and costs. OX Zion gives you the real-time visibility you need to analyze your daily production.

industry solutions

OX ZION business operating system

Insurance Finance Healthcare Manufacturing Education

Actionable Dashboards Customized Solutions Data Analytics Operational Intelligence Visibility and Control

www.chart-exchange.com

TABLE OF CONTENTS

Technology Helps Brokers Visualize a Bright Future in the London Market Click to Download Informational PDF

JULY 2019

ANALYSIS - VANTAGE AGORA Continued From Page 24

to gain exposure and spike interest from an early age.

OPPORTUNITY “STEMS” FROM EDUCATION

It is clear that moving forward we are transforming into a highlytechnical society, where STEM has the ability to prepare our future leaders to navigate, compute and solve the challenges that prevail.

solutions enable clients to achieve and maintain a clear path towards success.

IoT, AI, Blockchain and quantum computing are just a few of the many tech advancements prepared to take launch and create new, indemand jobs of the future. In fact, there’s a, “predicted 1 million tech jobs to open by 2020 and 2 million cybersecurity jobs open also by 2020.”

But, it’s not just tech providers searching for people to fill these positions. STEM has entangled itself into all industries – which is why it’s booming in the marketplace right now.

STEM education will have a long-term impact on our society, the jobs and overall growth of our economy. So, it’s of great importance to support and encourage children to enjoy and take interest in techrelated fields. They are the ones who will empower change and become the next generation of trend-setters.”

However, in recent times there have been difficulties finding qualified workers to fill the surplus of new jobs developing. US News reported that we are in a “STEM worker shortage”, which has reached a “crisis level”. The question then becomes, ‘How do we replenish our workforce with

JULY 2019

capable employees, suited for these positions?’ (Radu, Sintia, “STEM Worker Shortage at a Crisis, Survey Shows”). To bridge the gap between supply and demand in the future, schools across the nation are introducing a comprehensive STEM education into their everyday curriculum.

By exposing children to these concepts early on, the likelihood of them pursuing a degree/career path in a STEM-related field skyrockets. If we want children to follow a future in STEM, it’s important we foster critical thinking skills and tech literacy into the curriculum –

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STEM education will have a longterm impact on our society, the jobs and overall growth of our economy. So, it’s of great importance to support and encourage children to enjoy and take interest in techrelated fields. They are the ones who will empower change and become the next generation of trend-setters. SOURCES: Radu, Sintia. “STEM Worker Shortage at a Crisis, Survey Shows.” U.S. News & World Report, U.S. News & World Report, 23 Aug. 2018, www.usnews.com/news/ best-countries/articles/2018-08-23/ americans-think-they-havea-shortage-of-stem-workers.

www.chart-exchange.com

ANALYSIS - KROLL Continued From Page 9

THE SIX HATS OF THE AML OFFICER

environment, meeting with the board once a quarter is no longer sufficient. •

FUNCTIONAL ADVOCATE AML is on every decision maker’s agenda–but so are digital transformation, globalization, disintermediation, and a host of other forces. The AML officer must be able to effectively lobby against similarly compelling initiatives for the fiscal, technological, and human resources to fulfill the function’s requirements. Scrupulously submitted suspicious activity reports do little to mitigate risk without the resources to follow them up.

Figure 5: Our survey showed that while most firms are satisfied with the effectiveness of their AML programs, there is room for improvement, both among those who rate the components of their programs as less than effective and among those with effective programs who wish to evolve www.chart-exchange.com

Figure 5 further. In addition, 30 percent of respondents rated at least one of their AML program components as less than effective. •

GLOBAL THINKER AML efforts have always been multi-jurisdictional by definition. Today, however, financial networks are truly global and enforcement is becoming more so. The AML officer must have a thorough grasp of the changing positions of the players in this network–his or her institution, its clients or investors, and regulators and enforcement agencies at home and abroad.

•

particularly since AML efforts, like all security measures, act as speed bumps in the continuing drive for business to grow and increase in speed and efficiency. The AML officer needs to be able to ensure that the appropriate institutional culture is reinforced in the messaging and actions of firm leadership and in the incentives of employees and management.

CULTURAL STANDARD-SETTER When an AML breach occurs, it is usually because commitment has flagged somewhere in the organization. Indeed, that commitment cannot be assumed and can easily wane over time, TABLE OF CONTENTS

•

INNOVATOR The challenge of the AML officer is to prevail in an asymmetrical fight against people who don’t play by the rules. Doing so requires constantly expanding the toolkit: striving for continuous improvement; investigating new ways of using technology and data; and staying abreast of the insights

See AML Officer Page 32 JULY 2019

ANALYSIS - FORTEGRA

GOLF, BUSINESS AND PROFIT

By Cooper Wallach

olf and business share a lot of similarities. Both require planning, commitment and imagination—and both can end badly without proper execution.

IN BUSINESS, AS IN GOLF, SUCCESS BREEDS CONFIDENCE. Next up the long par 5, which runs parallel to the forest. When an incautious swing lands our ball in the trees, the bright morning turns gloomy. Fortunately the ball is

Lilrizz, Golfer swing, CC0 1.0

Here we are on the first tee, on a beautiful summer morning, planning to be successful. We line up the first shot and drive it straight down the middle of the fairway. It’s a great start! We have 148 yards to the back, left pin position, but it’s uphill and against the wind. We aim a little left, hit an extra club, and make a smooth swing. playable, and our next swing moves us out of the trees and into the fairway. Now with 219 yards to the hole, over a creek and a greenside bunker, we decide to go for it with a bold swing. We make solid contact and it looks like it has the distance… but with a “plop” the ball drops into the creek. Not even close.

What happens in business when we confidently move forward with risky decisions that don’t work out? The par 3 third hole is beautiful, but dangerous. With the green surrounded by bunkers and water, it’s hard to focus our attention.

See Golf, Business & Profit Page 36

bout the author: Cooper Wallach is Vice President of Specialty Products and Programs at Fortegra where he manages the promotion and execution of property and casualty programs with the company’s MGA partners. A graduate of the University of Texas with degrees in business management and business administration, Cooper calls upon more than 30 years of underwriting expertise to help Fortegra partners Experience More.

JULY 2019

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www.chart-exchange.com

YO U R PA RT N E R F O R A D M I T T E D M A R K E T C A PAC I T Y PROGRAM CARRIER WITH

1.1 BILLION

IN TOTAL SALES

A- RATING A.M. BEST

S P E C I A LT Y P RO G R A M S

PREMIUM FINANCE

ADMITTED

INSURANCE COMPANIES

CAPTIVES & RETRO COMMISSION STRUCTURES RISK PARTICIPANT SUPPORTING COVERHOLDERS, MGA S & MGU S

CREDIT P RO G R A M S

WA R R A N T Y P RO G R A M S

As a CHART vendor partner, Fortegra’s admitted paper helps coverholders and MGAs gain access to premier markets. Learn how Fortegra’s admitted program can help you Experience More at fortegra.com/programs, or via email at programs@fortegra.com. Fortegra® is the marketing name for the specialty underwriting operations of Fortegra Financial Corporation and its subsidiaries. Specialty underwriting program availability varies by jurisdiction. Where available, the programs are underwritten by admitted insurance companies.

CHART 2.0 — FASTER CONNECTIONS TO LONDON!

Has your agency ever considered placing business with Lloyd’s of London — the oldest and most recognized insurance brand in the world? Then make plans to attend the upcoming CHART Exchange regional meeting. Our next event will be held in New York City on September 30, 2019. CHART was established in 2015 with one ambitious goal in mind: becoming the catalyst for sustained, organic new business growth within the U.S./London marketplace. Our organization has been instrumental in launching over a dozen new binding authority agreements to date, with more on the way! This success is attributable to the advocacy-level support we offer to domestic agencies seeking to place business within this exclusive market niche. The meeting will be ﬁlled with workshops, presentations, and networking opportunities for every agency attendee in a more focused atmosphere. There is no registration fee required to attend this unique one-day event. A detailed agenda will be sent to every registered attendee. Act quickly, as participation will be limited to 50 agency attendees. Interested in reserving your spot or learning more? Visit our website at www.chart-exchange.com. We are also available via e-mail (info@chart-exchange.com) or by phone at the number below.

www.chart-exchange.com

The CHART Exchange, 3001 Philadelphia Pike Claymont, DE 19703

Phone: (855) 716-3660

•

Fax: (302) 334-0325

ANALYSIS - LAURDAN ASSOCIATES

RECRUITMENT, SELECTION AND HIRING: THE STARTING POINT IN EMPLOYMENT

im Collins in his bestseller, Good to Great, noted that the purpose hiring system “should not be to get the right behaviors from the wrong people, but to get the right people on the bus in the first place and to keep them there.” The recruitment, selection, and hiring (RSH) process is then about the search for talent — talent that adds value, makes the organization more competitive, and helps the organization achieve its business

objectives. It is the first — and perhaps the most important — element in creating and maintaining the employer-employee relationship. RSH is also critical in managing and controlling Employment Practices Liability An organization’s RSH practices can affect revenue generation, productivity, customer relations, market share, profitability, risk exposure, and even long-term survival. The importance of the RSH process was noted in a

benchmarking study of human resource management professionals where they ranked recruitment, selection, and hiring as the most important human resource management activity affecting organizational competitiveness. Further, CEOs regularly rank “new hire quality” as their organizations’ most important HR measurement. The recruitment, selection, and hiring process is also fertile ground

See Recruitment Page 45

bout the author: Ronald Adler is the president-CEO of Laurdan Associates, Inc., a veteran owned, human resources management consulting. Ronald Adler is the president-CEO of Laurdan Associates, Inc., a veteran owned, human resources management consulting firm specializing in HR audits, employment practices liability risk management, HR metrics and benchmarking, strategic HR, and unemployment insurance cost management. Mr. Adler has more than 45 years of HR consulting experience working with U.S. and international firms, small businesses and non-profits, insurance companies and brokers, and employer organizations. Mr. Adler is the developer the Employment-Labor Law Audit™ (ELLA®), the nation’s leading HR auditing and employment practices liability risk assessment tool — now in the tenth edition. g firm specializing in HR audits, employment practices liability risk management, HR metrics and benchmarking, strategic HR, and unemployment insurance cost management. Mr. Adler has more than 45 years of HR consulting experience working with U.S. and international firms, small businesses and non-profits, insurance companies and brokers, and employer organizations.

www.chart-exchange.com

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JULY 2019

ANALYSIS - SIAA Continued From Page 23

ADDING VALUE TO YOUR EXISTING CLIENT RELATIONSHIPS policies, so agents should recognize and capitalize on this. For example, If a child turned 18, is he or she ready to purchase a separate auto insurance policy? What does that look like as far as current costs? Did a client get engaged? The couple may be able to save money on their auto insurance rates as statistics show married couples have fewer car accidents than single people. Did clients start a new home-based business? They may need business or life insurance to cover the business or an insurance review to see if they are properly covered. Did homeowner insureds adopt a dog? Have they added to their backyard with a trampoline or inground swimming pool? These are all basic changes that open clients up to new levels of risk. RETAIN CLIENTS LONGER Customer retention statistics reported by Smallbiztrends.com confirm that 65% of a company’s business comes from existing customers. The statistics

JULY 2019

showed that a “five percent increase in customer retention (the percentage of customers retained over a given period of time) can lead to an increase in profits of between 25% and 95%.” Are you compensating staff for behaviors that will drive the success of your agency? For instance, if a client service representative does a thorough review of policies with a client, ultimately selling more policies, are they financially rewarded for that, more so than if they sell one single policy? To change behavior across the board, agents need to reward staff because engaging in a thorough account review drives the agency in a proactive direction. When staff is rewarded, you will see a significant difference in how the agency operates, and you’ll likely see more multiline policy sales. If you are an agency owner, make it a priority to meet with all staff and review ways to cross-sell clients at your agency. If you can, offer a reward to cross-sell existing clients and explain how this will help retain the clients already doing business with you. This will extend the life of your business, solidify your client base and round out your accounts more than going after prospects you have yet to meet. If you have a steady business already, tapping into your existing client base and cross-selling new products goes a long way towards expanding relationships. This will establish you as a trusted advisor that clients will value and may result in referrals to their family and friends for years to come.

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Continued From Page 27

THE SIX HATS OF THE AML OFFICER of regulators, law enforcement, and peers at other institutions. The AML leader must then develop ways of integrating innovation into the AML program without disrupting its day-to-day operations. Observers of business trends will recognize that the expanding requirements of the AML role follow a well-established pattern. Over the last two decades, functional leadership has been redefined, not just in financial services but also across industries. The chief financial officer, the chief information officer, the chief human resources officer and others have seen their responsibilities grow with the increased complexity of their functions and, a greater awareness of their functions’ contribution to the success of the enterprise. The AML officer’s role must now undergo a similar evolution, with the support of the firm’s leadership and introspection among those who hold the position.

www.chart-exchange.com

2018 IN REVIEW $8.1 billion

$ $

total in-force premium

$690 million

9.3%

total in-force premium growth

growth in total in-force premium

465

independent strategic members signed

1 983

13%

4,487

signed of independent agents in U.S.

national strategic partner companies

2 0 19

new agencies created

strategic master agencies

The Total Solution for the Independent Agent The Proven Distribution System for Strategic Partner Companies

JULY 2019

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www.chart-exchange.com

NEWS - VALUEMOMENTUM

VALUEMOMENTUM JOINS THE MULESOFT PARTNER PROGRAM ValueMomentum to Leverage Anypoint Platform to Support Connecting Applications and Data in the Cloud and On-Premises

alueMomentum today announced its partnership with MuleSoft to provide consulting services for MuleSoft’s Anypoint Platform™. Anypoint Platform unlocks the power of API – led connectivity, enabling organizations to connect apps, data and devices more rapidly and efficiently. MuleSoft provides the leading platform for building application networks. ValueMomentum’s implementation expertise and industry knowledge, coupled with MuleSoft’s technology, gives clients the support and tools they need to harness the rapidly growing number of apps and data sources. With Anypoint Platform, organizations can unlock new revenue channels, improve customer experiences and drive innovation. ValueMomentum’s clients are undertaking initiatives to meet the expectations of their customers, partners and employees, while evolving www.chart-exchange.com

their business and operating models with digital, data & cloud technologies. ValueMomentum’s Digital & Cloud business is helping its clients embrace microservices architectures as a foundational capability in their digital journeys. “Our deep industry experience & technical expertise, coupled with our relentless focus on each client to ensure they achieve their business goals, enables us to have a unique perspective in insurance, banking & lending and healthcare enterprises in their digital journeys,” said Abhijeet Jhaveri, ValueMomentum’s Chief Marketing Officer. “We are pleased to join the MuleSoft partner network and look forward to helping our clients accelerate their digital journeys.” “With the explosion of disparate technologies today, connecting them all quickly and efficiently is the key to gaining a competitive edge. Through its partnership with MuleSoft, ValueMomentum is enabling its customers to create a dynamic application network to achieve their goals and accelerate their pace of business,” said Brent Hayward, senior vice president of global channels and alliances, MuleSoft. “We’re pleased to welcome ValueMomentum into MuleSoft’s partner ecosystem and look TABLE OF CONTENTS

forward to working together to deliver significant business impact to our mutual customers.” As a MuleSoft Partner, ValueMomentum helps clients address on-premises, cloud and hybrid integration use cases with scale and ease of use. ABOUT ANYPOINT PLATFORM MuleSoft’s Anypoint Platform™ is a leading application network platform. It allows organizations to create composite applications that connect apps, data, and devices through API -led connectivity to form a flexible application network. Anypoint Platform is a unified, single solution for iPaaS PaaS and full lifecycle API management, both on-premises and in the cloud. ABOUT VALUEMOMENTUM ValueMomentum provides IT services and software solutions to insurance, health care and financial services firms. Customers choose ValueMomentum due to the company’s track record of delivering value and driving the momentum of customers’ business initiatives. ValueMomentum accomplishes this by applying a timetested formula of combining strong technology expertise with deep industry experience. JULY 2019

ANALYSIS - FORTEGRA Continued From Page 28

•

Both golf and business require a realistic assessment of risk, requiring us to discern when to be bold and when to be cautious. • No matter how familiar a golf course or course of action might be, we can never become complacent. Even if we think we know the landscape, something can always radically shift the playing conditions. • As players and professionals, our skills can improve or decline. We must be willing to use Often in business we have a clear everything at our disposal—our objective but are distracted by the experience, wisdom, hazards. We must train After the humility, and even ourselves to recognize new technologies— and respect hazards, round to find continued but not focus on them. or following a success. We need long day at the to understand that On to the par 4 fourth hole—a short dogleg office, we remind our competitors will change as well. right. Some players ourselves that to • New challenges will might attempt to succeed in both spring up daily. We cut the corner with golf and business must be ready for a driver to reach the surprises and green in one. The risk we must focus both disappointments. But, is substantial—but on a small target, remember: we can’t so is the reward. If identify hazards, win if we don’t play. executed, we’ll have a

GOLF, BUSINESS AND PROFIT

putt for eagle.

and eliminate distractions.”

How often do we consider risks versus rewards in our business? Just as every hole isn’t the same, nor is every deal. Markets change and provide varying opportunities. If we don’t adjust our game, we won’t maximize our success.

While we’ve only played four holes today, there are lessons to be learned:

JULY 2019

After the round or following a long day at the office, we remind ourselves that to succeed in both golf and business we must focus on a small target, identify hazards, and eliminate distractions. We receive lots of opportunities on the course and in the corporate world, and with proper execution on every shot or every deal, we can come out on top.

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CHART DEFENDER COVERHOLDER E&O AVAILABLE NOW!

Mark Lann Phone:

302-765-6070 Email: chart.eo@rockwoodinsurance.com

www.chart-exchange.com

NEWS - LLOYD’S OF LONDON

INDUSTRY HEAVYWEIGHTS FORM ADVISORY COMMITTEE FOR THE FUTURE AT LLOYD’S A group of Lloyd’s underwriters have launched The Product Innovation Facility – a new initiative with £53m of capacity designed to speed up (re)insurance product development for today’s new and emerging risks.

he market-led solution, led by senior underwriters from Tokio Marine Kiln, Beazley, MS Amlin, Talbot, Liberty Specialty Markets, Hiscox, Ascot, Chubb, Chaucer, Brit, Antares and Apollo will trial new types of insurance for complex and nonwww.chart-exchange.com

standard risks, including, but not limited to, intangible assets and supply chain risks, or mishaps caused by artificial intelligence. Lloyd’s has committed to nurturing a “safe space” for underwriters to experiment with new ideas in a controlled way, which balances the need for appropriate oversight with the risk of not innovating fast enough. The facility is aligned with The Future at Lloyd’s strategy, which is building a new Lloyd’s market that will thrive in the future by providing even greater value to its customers. John Neal, Lloyd’s Chief Executive Officer, said, “Lloyd’s has a deserved reputation as the home of insurance innovation and I am delighted to see this initiative taking shape, which harnesses Lloyd’s unrivalled entrepreneurial TABLE OF CONTENTS

spirit. In so doing The Product Innovation Facility aligns with our collective vision for the future of the world’s (re)insurance market. By incubating new product ideas and helping them to scale up over time, Lloyd’s will continue helping its customers to deal with rapidly evolving and emerging risks.” Trevor Maynard, Lloyd’s Head of Innovation, said, “The Product Innovation Facility formalises underwriting at the centre of the Lloyd’s innovation ecosystem. Working closely with Lloyd’s innovation team the group has put forward this new concept of product development by agreeing to support one another’s initiatives with £53m of capacity in the first instance. The facility is still open to other market participants to join.”

See Lloyd’s Advisory Committee Pg 42 JULY 2019

EVERYBODY KNOWS ONE Meet Mr. Inappropriate. He is the King of unfiltered commentary. There is no remark too crass or topic too sensitive for this guy. Worse still, he may be working for one of your clients. The recent Hollywood scandals and resulting rise of the “#MeToo” Movement has made people more sensitive to the prevalence of harassment and other wrongful acts in the workplace. There was a time when otherwise harmless comments from someone like Mr. Inappropriate would have either been brushed off or ignored. Now they may be interpreted to have a more nefarious meaning. This perception can quickly turn into legal action. The cost of defending against such a lawsuit – even a groundless one – could be financially devastating. Let Rockwood Programs help protect your clients. Our Employment Practices Liability Insurance (EPLI) product protects companies from allegations of discrimination, wrongful termination, harassment, and workplace bullying. Coverage can be further enhanced to protect your client against alleged violations of the Immigration Reform Control Act, Wage & Hour disputes, and Third Party Wrongful Acts.

Visit us at www.rockwoodinsurance.com to learn more

Rockwood Programs, Inc., 3001 Philadelphia Pike, Claymont, DE 19703 p: 800-558-8808 • f: 302-764-5477 • e: sales@rockwoodinsurance.com

JULY 2019

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www.chart-exchange.com

COMMENTARY - RON ADLER

COMMENTARY:

SEXUAL HARASSMENT PREVENTION: AN INDICATOR OF THE TONE AT THE TOP by Ronald Adler

exual harassment is no longer just an American workplace issue: it has become a global occurrence. Reportedly, sexual harassment affects all workplace, negatively impacts employee relations, can significantly harm individual employees, and, ultimately, impacts the bottom line. Increasingly, sexual harassment is an ongoing issue that employers in all industries—including insurance— must address. As recently reported, Lloyd’s of London insurance is currently facing sexual harassment claims. Like American companies, Lloyd’s must manage what happens next. More importantly, it must analyze how sexual harassment has happen it the past—there were always previous indicators—and control what happens in the future. However, just holding annual training sexual harassment programs— required in California, Connecticut, www.chart-exchange.com

Delaware, Maine, and New York—is no longer enough. Preventing sexual harassment must become a Key Performance Indicator (KPI). And to effectively manage the occurrence of sexual harassment and create an environment where it is less likely to occur, organizations must consider managing sexual harassment from a Tone at the Top perspective. That is, it must consider and manage sexual harassment from the business climate that has been established by its board of directors and senior management. The Tone at the Top is then a repeated commitment from the organization’s leadership to emphasize and ensure the importance of key compliance and ethical conduct issues. This will create organizational behavior that will help prevent—or at least minimize—sexual harassment and other improper human relations activities. It will also communicate to all employees that sexual harassment is unacceptable and that they play an important role in managing its impact. TABLE OF CONTENTS

WOULD YOU LIKE TO HAVE YOUR MESSAGE DELIVERED TO 100,000+ FOCUSED INSURANCE INDUSTRY EMAIL ADDRESSES EVERY MONTH?

I’m Kate Boyle Managing Editor. I handle CHART Exchange Advertising. Call me at 302 765-6056 and let’s have a conversation.

JULY 2019

FORESTRY WORLDWIDE FORESTRY (RE)INSURANCE FACILITY Pardus was established in 2013 by Keith Thompson, formally CEO of Advent capital Holdings Ltd and Darren Stockman Active Underwriter of Syndicate 780 and Director of Advent Underwriting Ltd. Pardus are an independent Managing General Underwriter, a Lloyd’s approved Coverholder, and an appointed representative of Capita Commercial Insurances Limited.

Cover

Maximum line of USD 8.5M any one risk, any one location. Capacity provided by Lloyd’s of London and “A-” rated company paper. Perils covered mainly Fire and Windstorm, but we can offer additional coverage for hail, ice, snow, frost. We cannot cover Pest and Disease, although we can offer cover under a small sublimit for Pest and Disease treatment costs. Sublimits available for fire-fighting costs, aerial photography, debris removal, claims preparation costs etc.

Frost

Hail

Snow & Ice Storm

Flood

PERILS COVERED Rainfall Deficiency

Fire

Malicious Damage

Windstorm

Business Interruption is offered when fruiting trees are destroyed by covered physical damage perils, leading to a loss of yield while the new trees develop •

We have specialist Pardus facilities in place to cover Public Liability (in Europe) and associated forestry Plant and Machinery risks

OUR TAILORED PRODUCTS

Full Value and Value at Risk

Full Value works in the traditional way with insurer retaining any salvageable value from the insured property. Value at Risk leaves an agreed salvage (based on salvage scales developed by Pardus using age and species data) in the ownership of the client. Pardus then only insure the non-salvage element meaning the final rate will be applied to a fraction of the TSI generating a lower overall cost to the client.

Target business: •

We are keen to see any enquiry for standing timber commercial planation forestry

• •

Information requirements for quote: •

Perils to be insured against

•

Schedule of forest locations by values, age, species

Forestry risks with accreditation from the Forestry Stewardship

Locational information needs to be provided in either

Council (or similar)

shape file format (.kmz) or the latitude/longitude

Forest Owners comprise:

coordinates of the centre point of each location

Individual investors

•

5-10-year ground-up loss experience by peril

Commercial Plantation Companies

•

Desired policy structure:

Individual Forest Owners

Timberland and Investment Management Organisations

(TIMO’s)

•

Additional features: -

Forest Management Organisations (FMO’s)

Real Estate Investment Trusts (REIT’s)

Banks loans made to forest owners or fruit tree owners

Forest Owner Associations

Deductibles, limit etc Firefighting costs, claims preparation, aerial photography, plantation infrastructure

To download our full forestry questionnaire, please visit our website https://pardusunderwriting.com/products/forestry/

Exclusions

Property

Buildings

Terrorism

Pest and Disease

Drought

Crop

Fruits, Nuts etc

Phil Cottle - Senior Agricultural Underwriter Direct +44 (0)203 735 1608 Mobile +44 (0)7769 895048 phil.cottle@pardusunderwriting.com Dan Longden Cert CII - Underwriting Assistant

Direct +44 (0)203 735 1610 Mobile +44 (0)7756 961500 daniel.longden@pardusunderwriting.com

Pardus Underwriting Ltd. 1st Floor, 3 Lloyd’s Avenue, London, EC3N 3DS www.pardusunderwriting.com

“We have access to a worldwide forestry binding authority covering the physical damage to commercial forestry. There is a maximum line of USD 8,500,000 any one risk, any one location and the covered perils can be found on this flyer. This is written 100% Lloyd’s/company market and Prospect are the Insurance broker”

NEWS - LLOYD’S OF LONDON Continued From Page 37

INDUSTRY HEAVYWEIGHTS FORM ADVISORY COMMITTEE FOR THE FUTURE AT LLOYDS Thomas Hoad, Head of Innovation at Tokio Marine Kiln, said, “We are fully supportive of the Product Innovation Facility and we invite risk managers, brokers and other interested parties to contact and collaborate with it. By accessing the best ideas and data from the Lloyd’s market, the group will bring forward new solutions for nascent risks, in direct answer to clients’ evolving needs.” Tina Kirby, Head of Innovation & Product Development at Beazley, said, “The Lloyd’s market has always been at the forefront of innovation and syndicates work on new solutions for their clients daily. This initiative is to promote and facilitate collaborative innovation where non-standard risks might require different thinking and expertise.”

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For more information visit: lloyds. com/productinnovationfacility To bring your idea to the attention of the Lloyd’s Product Innovation Facility fill in this form To get in touch with the group, contact innovation@lloyds.com

FOOD SUPPLY CHAIN OFFERS NEW BUSINESS FOR INSURERS, SAYS LLOYD’S REPORT

he increasingly global and complex food supply chain, worth more than $8 trillion of GDP, is exposed to a number of risks, which insurers could offer solutions for, according to a new report published by Lloyd’s today.

interruption, liability and product recall events. Due to the large number of suppliers that retailers use, their brand profile and their consumer exposure, their risk profiles are different to those of upstream businesses in the supply chain. Opportunities to develop new business opportunities include contingent business interruption, protection from class action and cyber insurance. The project also highlights the value of parametric insurance for agricultural producers. The report is available here.

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The report analyses the risks and opportunities for insurers in the global food supply chain, and identifies current gaps in insurance cover that insurers could fill to generate new business. The study found that different parts of the food supply chain have different risk transfer needs, which insurers need to adapt to. For example, food retailers primarily look for insurance to cover their physical infrastructure, business TABLE OF CONTENTS

SUBSCRIBE NOW TO CONTINUE TO RECEIVE THE CHART EXCHANGE!

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NEWS - LLOYD’S OF LONDON

LLOYD’S CONFIRMS CHART TARGETS FOR ELECTRONIC DEFENDER PLACEMENT MANDATE

loyd’s has confirmed the targets for electronic placement for the remainder of 2019.

For Q3 2019 each syndicate will be required to have written no less than 60% of its risks using a recognised electronic placement system with the target increasing to 70% in Q4. Further detail on the updated electronic placement mandate is available here. The mandate is designed to accelerate digital transformation and has already driven impressive adoption across the Lloyd’s market. By the end of the Q1 2019, 45% of ‘in scope’ contracts were placed electronically in the Lloyd’s market. The target for this quarter was to have placed 40% of in scope risks through electronic placement. Eighty percent of syndicates met or exceeded the target

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and therefore qualified for a rebate on their annual subscriptions. Lloyd’s Chief Operating Officer, Jennifer Rigby, said, “Electronic placement allows Lloyd’s to simplify access and lower the costs of doing business, two objectives that are central to our strategy to build the future at Lloyd’s. We have exceeded our targets every quarter so far, which is excellent news and provides further evidence that we are already reshaping the market into a more future-focused platform.”

COVERHOLDER E&O AVAILABLE NOW!

Mark Lann Phone:

302-765-6070 Email: chart.eo@rockwoodinsurance.com

The mandate was first issued in the first quarter of 2018 following discussions with members of the Lloyd’s market, the Lloyd’s Market Association (LMA), the London & International Brokers’ Association (LIIBA) and the International Underwriting Association (IUA).

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ANALYSIS - WILSON ELSER Continued From Page 19

NEGLIGENT HIRING, SUPERVISION OR RETENTION DRAW HOSPITALS INTO ABUSE CASES anesthesia or a female patient alone with a male health care provider during an examination or procedure. Clearly, there are “bad apples” who commit indefensible acts against their patients; however, as defense counsel we must be cognizant that, sometimes, these salacious but unsubstantiated allegations can open the floodgates to the plaintiff’s bar and ruin the reputations of physicians before guilt is determined. In these cases, because the alleged criminal act is ultra vires (meaning it falls outside the scope of the employee’s duties), the doctrine of respondeat superior rarely

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applies and the hospital would not be held vicariously liable as the employer. In these types of claims, however, plaintiff’s attorneys often assert a claim for negligent hiring, supervision or retention to keep the deep-pocketed hospital as a attorneys defendant.

Another common allegation is that the hospital (employer) failed to promulgate appropriate policies to prevent sexual misconduct. For instance, a plaintiff may claim a hospital failed to have a proper In sum, chaperone although policy in place plaintiff’s for female face an uphill patients battle when asserting during the In New York, claims against a hospital performance a claim for of procedures arising from sexual negligent hiring, involving assault, a hospital may supervision an intimate leave itself open to a or retention area. Whether high-exposure claim, arises when an this type of employer places allegation is with shock value and an employee in a defensible negative publicity, position to cause may require an without well-documented foreseeable expert review background checks, harm − harm in the medical periodic evaluations and specialty to the injured party most likely a thoughtful chaperone support the would have been claim that a policy.” spared had the chaperone employer taken is not a customary or required reasonable care in supervising or medical practice. retaining the employee. Clearly, if an employee has a history of sexual misconduct the employer either knew about or with a reasonable background check could have learned about, there is potential exposure. Additionally, if the employment file does not contain well-documented periodic evaluations, a plaintiff’s attorney can argue the employee was not properly monitored for misconduct. TABLE OF CONTENTS

In sum, although plaintiff’s attorneys face an uphill battle when asserting claims against a hospital arising from sexual assault, a hospital may leave itself open to a high-exposure claim, with shock value and negative publicity, without well-documented background checks, periodic evaluations and a thoughtful chaperone policy.

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ANALYSIS - LAURDAN ASSOCIATES Continued From Page 31

RECRUITMENT, SELECTION, AND HIRING: THE STARTING POINT IN EMPLOYMENT PRACTICES LIABILITY for employment-related claims. Laws, court decisions, and agency enforcement have evolved to include virtually every facet of the RSH process. Every activity is now examined and scrutinized. Accordingly, your organization risks legal exposure and potential liabilities whenever any of its RSH practices eliminate or deny employment opportunities to individuals in protected categories; whenever selection decisions are based upon impermissible criteria; when affirmative action requirements are not met; or when the failure to use hiring due diligence results in claims of negligent hiring or workrelated claims. www.chart-exchange.com

There are many different methods, techniques, and technologies used to recruit, select, and hire employees. Some are design to increase RSH efficiency and lower processing costs, such as applicant tracking solutions. Others are highly complex, controversial, and can subject your organization to legal challenge. Aptitude testing, drug and alcohol testing, skill or performance testing, polygraph testing, and psychological tests along with subjective criterionbased methods, such as the applicant’s “professional image,” “fit,” or ability to work “well” with others, have resulted in numerous employment related lawsuits. Some, such as Teamability™ assessments, assess an individual’s ability to work effectively on teams. Many of these issues have become more prominent as the Internet and electronic technologies play an increasing role in the RSH process. Using these technologies organizations can advertise job openings nationally — increasingly internationally — with ease and at lower costs than they can using traditional methods. At the same time, job seekers can forward literally thousands of resumes and applications at virtually no cost. In this virtual world, previously settled issues, such as who is an applicant and when does an employer’s obligations begin, become less certain and require a new perspective on the RSH process. TABLE OF CONTENTS

Additionally, the work force is changing. First, millennials and members of Generation Z — individuals born in the late 1990s and early 2000s — are now applying for jobs. This activity often requires new hiring techniques and a new attention to hiring details. Second, LGBTQ (lesbian, gay, bisexual, transgender, and queer or questioning) applicants are increasingly more visible and often require greater attention to workplace and work force acceptance and understanding. Third, the increasing use of the Gig economy creates the requirement for a more thorough understanding of employment policies and practices and key hiring techniques. As a result, any errors in the organization’s RSH treatment of these individual creates potential employment practices liabilities. In the global economy, the recruitment, selection, and hiring process, which must address both the short-term and long-term needs of your organization, is influenced and shaped by economic, budgetary, technological, social, demographic, and legal-regulatory forces. In the current economy, it is critical that your organization review the various aspects of your RSH process to help you: 1) assess your process’s strengths and weaknesses; 2) increase the value of your human capital; 3) enhance hiring outcomes, and 4) reduce your exposure to human capital risks and employment related liabilities. JULY 2019

ANALYSIS -PL COMMUNICATIONS Continued From Page 21

THE ROI ON GIVING BACK from newsletters to its website. I have a personal attachment to the school since my wife Ellen works there as a pediatric audiologist.

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As a result of volunteering, working for, and providing services for nonprofits, here are a few things I have learned that may be helpful to you as you support whatever cause you choose. Have reasonable expectations – many nonprofits have limited resources especially for marketing. If you are running an ad in a program provide the artwork. Don’t expect them to create it if they do not offer that service. Respect the staff’s boundaries – some may feel

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a volunteer may be interfering rather than helping, or making work harder not easier. Nonprofits need expertise – If you are an expert in finance, marketing, HR, or risk management, many nonprofits appreciate having access to your expertise. They value advisors on their Boards of Directors who can guide them in decision making. Just as you might suggest to a client, be sure to have D&O coverage in place.

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“At the end of the day it’s not about what you have or even what you’ve accomplished… it’s about who you’ve lifted up, who you’ve made better. It’s about what you’ve given back.” - Denzel Washington Remember nonprofits operate differently than businesses: A mistake I have seen some Board members make is to expect a nonprofit to do the same things as a business. Sometimes business tactics do work and benefit nonprofits. But, the nonprofit many not have the staff or resources to execute it. Listen to staff members to determine what can and cannot be done. Many nonprofits are understaffed and overworked: Volunteers are a tremendous asset to nonprofits. As a volunteer it can be helpful and welcomed to make suggestions. But, at the same time follow the lead of the staff so you are truly helping instead of creating more work or conflict. You may have a good idea, but they may know from previous experience, inhouse politics, lack of staff, or financial constraints whether it is viable. Quid quo pro: Nonprofits expect a quid quo pro for business support. It is typically in the form of positive PR, good will, networking, and access to the nonprofit’s supporters. Be sure to promote your efforts on your website and social media. If you are a significant size sponsor of an event, ask if you can be cited in the organization’s press releases, social media, or program. If you decide to work with a nonprofit other than one that is a personally driven www.chart-exchange.com

choice such as a health organization that helped a loved one, select one that coincides with your business. For example, if you are seeking healthcare clients, nonprofit hospitals and medical organizations need help. So many great organizations need help it is likely you will find one that is a good match. Once you align yourself with the nonprofit, discuss with its staff how you can help and how your organization can benefit by being a supporter.

WOULD YOU LIKE TO HAVE YOUR MESSAGE DELIVERED TO 100,000+ FOCUSED INSURANCE INDUSTRY EMAIL ADDRESSES EVERY MONTH?

Is there an ROI in investing time and money to a good cause? Several national marketing studies have shown that a majority of consumers are more likely to buy from and recommend companies that are socially responsible. Insurers are struggling to find new employees. Studies have shown that companies whose values include being socially responsible have improved levels of employee retention, recruitment, and productivity – especially millennials. Many insurance companies have company-wide team-building volunteer efforts such as collecting food for local food banks, a fundraising effort, or rewarding employees for community service. Plus, there is something to be said for the value in giving back just because it is the right thing to do. TABLE OF CONTENTS

I’m Kate Boyle Managing Editor. I handle CHART Exchange Advertising. Call me at 302 765-6056 and let’s have a conversation.

JULY 2019

SPECIAL REPORT - M&A SERVICES Continued From Page 12

For those agency owners who are lucky enough to have family able to continue their legacy there are still considerations of how the transition should be achieved. Many agency owners believe that once they pass away that their estate will pass ownership of the agency to the family member they have chosen to succeed them. However, this transition is more complex than one would think.â&#x20AC;?

SUCCESSION STRATAGIES FOR INSURANCE AGENCIES other family members do not work in the business, are too young, lack experience, or just have no interest in pursuing insurance as a career. For those agency owners who are lucky enough to have family able to continue their legacy there are still considerations of how the transition should be achieved. Many agency owners believe that once they pass away that their estate will pass ownership of the agency to the family member they have chosen to succeed them. However, this transition is more complex than one would think. If family perpetuation is possible there are a few strategies that can be achieved that will limit the tax liability involved. One of the easiest ways to pass ownership to a family member, is gifting the stock of the agency to them. There is, however, limitations on tax exempt gifts that you can make in any given year; under the new, Tax Cuts and Jobs Act (TCJA),

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2018 tax code the current maximum yearly tax-free gift is $15,000. This strategy works best when planned well in advance and executed over a number of years with ownership transferring slowly over that time. In cases where the death of the owner occurs, there is a higher estate tax exemption which allows for tax exempt gifting of the agency to family members. Under the new, Tax Cuts and Jobs Act (TCJA), 2018 tax code, estate tax exemption amounts have been increased to $11,200,000 for individuals and $22,400,000 for married couples. These exemption amounts are scheduled to increase with inflation each year until 2025. On January 1, 2026, the exemption amounts are scheduled to revert to the 2017 levels, adjusted for inflation. While, this exemption should be sufficient for many agencies, if the value of your agency exceeds this exemption the assets would be subject to the current estate tax rate of 40%. The second option to pass ownership to a family member, is setting up a trust which allows you to pass the assets of your agency on to your children with limited gift or estate tax liability. When setting up a trust, the agency owner places the assets and /or property in the hands of a third party or trustee for the beneficiary(s). Trusts are established with a term during which the owner of the agency is paid a yearly annuity by the trust while they continue to run the business. Taxes are paid at the time www.chart-exchange.com

Agency owners often turn to their key employees who have helped them build their agency as a succession plan. Staff succession can offer some key advantages to agency owners. In many cases, key staff members have been with the agency for a number of years and have helped shape the agency’s corporate culture. Key employees are often already instrumental in the day to day operations of the business and have shared much of the businesses’ history with the agency’s owner.”

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the trust is established and when the term of the trust is completed the beneficiary(s) can receive the assets tax free. There are however risks involved with setting up a trust, mainly if the terms of the trust outlive the agency owner, the assets of the trust pass to their estate and become taxable as part of their estate. For example, there exists a type of trust known as a GRAT (Grantor retained annuity trust). This trust has special gift tax benefits allowing the beneficiaries to capitalize on a lower tax burden. Under this trust, the donor (the agency owner) makes a donation to the trust in which the donor receives annuity payments in return. The trust makes the annuity payments for only a fixed amount of time. At the end of the GRAT term, designated beneficiaries (often close family members) receive the initial value of the donation. DISADVANTAGES OF FAMILY SUCCESSION Now that I have discussed a few ways in which family succession can be achieved, I want to talk about some of the disadvantages that family successions can present. Many agency owners have multiple children; some of who may work in the agency and others who may not. By passing ownership to only the children who work in the agency there exists the potential to cause strife within the family and also amongst employees of the company. Children who do not work TABLE OF CONTENTS

in the agency may feel left out, or resentment towards others who received that agency either as a gift or part of a trust. Current employees may also be resentful towards the child who they possibly may feel did not earn their stripes as they did thru dedicated years of service to the company. Establishing a trust in which the stock of an agency passes to all children and can be purchased by children working and key employees of the business for the same price is one way this pitfall can be mitigated. Another disadvantage of family succession is that owners are not always able to monetize what is often times their largest asset. Agency owners may wish to recapitalize the investment that they have made in their agency to start another business, purchase retirement property, or place that capital in other investments. In these cases, often times the best way to achieve these goals are sales to key employees or to a third party. STAFF SUCCESSION In cases where family perpetuity planning is not possible or desired, agency owners often turn to their key employees who have helped them build their agency as a succession plan. Staff succession can offer some key advantages to agency owners. In many cases, key staff members have been with the agency for a number of years and See Succession Strategies Pg 50 JULY 2019

SPECIAL REPORT - M&A SERVICES Continued From Page 49

SUCCESSION STRATAGIES FOR INSURANCE AGENCIES

have helped shape the agency’s corporate culture. Key employees are often already instrumental in the day to day operations of the business and have shared much of the businesses’ history with the agency’s owner. Internal/staff perpetuity can be achieved in several different ways; a few of the common methods are mentioned below. 1.) Buy-Out- A “Buy-Out” is when a key employee or employees buy the agency from the owner. This is probably the simplest way to achieve an internal transition of ownership. Many times buy-outs are structured similarly to third party transactions with a cash component at closing, along with an agreed upon earn-out payment structured over a number of years. 2.) Stock Options- Giving key

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to retain key employees and to enact an internal perpetuity strategy. Stock options are typically given to key employee(s), which grants them the right to purchase a portion of the agency’s stock at a fixed price at a set time.

employee(s) “Stock Options” is another common way for an owner plans is the lack of financial ability of the employee(s). Many times, the employee(s) simply do not have the financial means or borrowing power to buy out an agency owner at a market value multiple. This usually 3.) Deferred Compensation Plans- means that the agency owner must Another way for internal perpetuity sell at a lower price than they would is through “Deferred Compensation to an external third party and often Plans,” in which have to carry some Third party a portion of or all of the debt sales are an employee’s themselves. Other often the best salary is deferred common pitfalls of and used to option for agency staff succession can purchase equity include the age and/ owners looking in the agency. or experience of the to monetize the Sometimes sweat staff. Often times, investment that have equity or the key personnel may service of the be of similar age as put into building employee over their agency. Third the owner, and also the years can be be looking to retire, party sales offer factored into this rather than take over financial freedom the agency—this equation as well. Other times this presents a risk for for retirement, can be made in estate planning, and such agency owners. the form of “Stock In other cases, the minimizes potential Bonuses” in which agency staff may not family strife.” an employee is have the necessary granted stock as experience to take part of his or her bonus. over the agency and continue to successfully run its operations. DISADVANTAGES OF STAFF SUCCESSION SALE TO A THIRD PARTY Now that we have looked at a few approaches and benefits to structuring a staff succession plan lets look at some of their disadvantages. One of the most common problems agency owners encounter with internal succession

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Many agency owners who have evaluated different succession plans often find that most are not possible or even desirable. Ultimately, they decide to sell to an external third party. It is possible for an agency owner to think of selling their business to a third party as a failure, www.chart-exchange.com

but it is true that it is often the most beneficial choice for the owner financially. It is also common to find that agency owners do not know the best way to proceed in the sale of their agency but decide to try it on their own anyways. Doing so— without professional assistance— will likely lead to a less than market value multiple and potential unfavorable terms for the agency owner. Using a professional banker to market and sell an agency is often the best way for an agency owner to achieve the highest valuation, the most beneficial terms, as well as mitigating common pitfalls in the sale of their agency. The goal of any agency owner pursuing a third-party sale is to receive the highest return on investment with the most favorable terms. By using a professional banker, agency owners will maximize the value of their agency through comprehensive analysis and review of their agency’s financials and operational metrics. By producing pro-forma financial statements a professional banker is able to showcase the true earning power of the agency, and often increase the valuation to potential acquirers. Once the valuation is completed the banker will produce two documents for marketing purposes; the blind profile (or “teaser”) and a Confidential Information Memorandum (or “CIM”). The blind profile describes the agency’s www.chart-exchange.com

revenues and earnings, expense structure, client base, carrier mix and the corporate structure without revealing the name or location of the agency. The blind profile is used to solicit interest in your agency from qualified buyers. Once interested buyers request to know more about the agency they will sign a Non-Disclosure Agreement (“NDA”) and receive a copy of the Confidential Information Memorandum. The CIM is an indepth and comprehensive overview of your agency. A CIM, will include a complete description of the business, financials, corporate structure, history, and a description of all aspects of the business, including the name and location of the agency. Once the banker has distributed CIMs to potential buyers, a Controlled Auction is then conducted. The controlled auction is designed to elicit the best price and terms from a variety of buyers. A controlled auction is a process where a business is marketed to specific buyers to create an environment where there are multiple bidders for the agency. Each buyer knows that there are other buyers bidding, but are not privy to the terms or price of the other bids. This process is the most effective method as it incentivizes buyers to offer the best price and terms for the agency as they must submit a competitive bid in order to be selected by the seller.

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CONCLUSION In this article, we have looked at three of the most common ways agency owners develop and execute succession plans. Proper planning is essential for any exit strategy. While many agency owners believe that family or employee perpetuity plans will meet their needs, they often find that is not the reality. Third party sales are the best option for agency owners looking to monetize the investment that have put into building their agency. Third party sales offer financial freedom for retirement, estate planning, and minimizes potential family strife. Using a professional banker to assist in third party sales limits the potential issues many agency owners face when trying to complete the sale of their agency independently. Selling their agency in not an easy decision for any agency owner to make, but it is a reality that all agency owners will face. It is never too early to start planning your exit strategy, and objectively considering if your current plans will meet you and your family’s needs. If you have any questions regarding succession planning, agency valuations, the M&A process as a whole, or if you are considering divesting your agency please feel free to contact me at any time. All inquiries are strictly confidential. Trevor Murgio (212) 750-0630 X42 Merger & Acquisition Services tmurgio@maservices.com http://www.maservices.com JULY 2019

LLOYDâ&#x20AC;&#x2122;S OF LONDON

phogel from germany [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)] JULY 2019

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Credit: Loco Steve Attribution-ShareAlike 2.0 Generic (CC BY-SA