High Hopes for High Tech by Insurance Journal

WEST REGION

OCTOBER 17, 2011 | VOL. 89, NO. 20

Calif. State Fund Layoffs Arizonaâ&#x20AC;&#x2122;s Bull Market Nationwide, Harleysville CEOs on Merger How Nevada Young Agents Grow

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On The Cover

Inside This Issue

Special Report: Technology High Hopes for High Tech

October 17, 2011 • Vol. 89, No. 20 • West Region

NATIONAL COVERAGE Special Report: Technology N6 High Hopes for High Tech Tech Talk with Applied Systems’ New CEO

WEST COVERAGE 8 Bill Would Lower Earthquake Reinsurance Cost 8 Quake Project Aimed to ID Future Hotspots

N7 Who Is Reid French? N9 How Agency Technology Drives Profitable Growth

10 Calif. State Fund Plans 1,800 Layoffs 12 Investigators Sue Idaho Insurance Dept.

Closer Look: Professional Liability N12 Real Estate Pros: Exposed and Unaware

18 Nationwide, Harleysville CEOs: Merger Is About Growth

N18 Controversy in Mortgage Brokers’ E&O

24 New MGA Targets Homebuilders

N25 Medical Liability: Years Before Market Hardens

IDEA EXCHANGE 34 Claims: Cheaper Isn’t Better 38 Entrepreneurism: Interview with Richard Kerr 42 Technology: Predictive Analytics to Manage Agencies N1 Growing Your Property/ Casualty Agency: Alan Shulman N4 E&O Spotlight: Commercial Property: Curtis Pearsall N22 Top Performing P/C Insurers: Premium Growth N32 Closing Quote: Elizabeth Myatt

26 Facebook Policies Tricky for Employers, Employees 28 Bull Market: Insurance Revives Arizona Event

N27 Auto Insurers’ Loss Ratios Rise 30 Nevada Young Agents Grow Old-Fashioned Way

4 | INSURANCE JOURNAL-WEST REGION October 17, 2011

N18

Volunteerism Feeds Need to Serve

DEPARTMENTS 6 9 9 10 16 N2 N32

Opening Note Declarations Figures People Business Moves MyNewMarkets Closing Quote www.insurancejournal.com

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Opening Note Curve Ahead

emember that “Seinfeld” episode where Kramer discovers his phone number is one digit off from Movie Phone’s? The wacky neighbor decides to start providing listings and show times himself using his daily newspaper as a reference. It was a bumbling effort to service his fellow humans. It’s a kooky, far-reaching analogy, but that’s sort of how I got into business journalism. I was a daily newspaper reporter working up in the high desert area north of Los Angeles spending my days and nights covering exploding crack houses, illegal street racing, gang-related shootings and an occasional double homicide. Then one day the paper’s business editor asked me to cover a Chamber of Commerce meeting. I knew nothing about business. While the meeting’s subject matter was dry, I stuck around after the meeting and found interesting stories out there in the local business community. Covering business is mostly what I’ve been I’ve covered just about doing ever since. I have every industry in just found business writing enjoyable, and I’ve covered about every way. just about every industry in just about every different way: hometown boy makes good (Salesperson Smith Named Vice President of Something-or-other); the trend story (Privatization of Space: Where No Schmo Has Gone Before); the tragedies (Bubbles, Bubbles Everywhere: The Internet, Housing); the mundane-butnecessary ($45 Million and Counting: The Intricacies of a Loan Workout on a Troubled Commercial Portfolio). Most of my business reporting has been for papers including the Long Beach Press-Telegram, where I covered residential and commercial real estate, travel and tourism, the economy, aerospace and the monthly Chamber of Commerce meetings. I got into trade reporting when I left the Press-Telegram to take a job as editor of Real Estate Southern California. I followed that with a stint as managing web editor for two animal-related trade websites. When the post for West region editor of Insurance Journal opened up, I saw it as an opportunity to reinvigorate my interest in business reporting while learning an industry that is new to me. Every day since I’ve been here, the lesson that keeps getting hammered into me is: I have a lot to learn. Despite the curve ahead for me, I hope to bring to this post almost unbridled enthusiasm and 14 years’ experience, adding a little fresh perspective to the mix on occasion. Please feel free to call or email me with thoughts, ideas and criticism. And for you hardcore “Seinfeld” fans who recall that episode: please don’t dial “1” on your keypad. Why don’t you just tell me the name of the movie you want to see?

Don Jergler West Editor

Publisher Mark Wells

Chief Executive Officer Mitch Dunford

EDITORIAL Editor-in-Chief Andrea Ortega-Wells | awells@insurancejournal V.P. Content Andrew Simpson | asimpson@insurancejournal.com East Editor Young Ha | yha@insurancejournal.com Southeast Editor Michael Adams | madams@insurancejournal.com South Central Editor/Midwest Editor Stephanie K. Jones | sjones@insurancejournal.com West Editor Don Jergler | djergler@insurancejournal.com International Editor Charles E. Boyle | cboyle@insurancejournal.com ClaimsJournal.com Associate editor Denise Johnson | djohnson@claimsjournal.com MyNewMarkets.com Associate Editor Amy O’Connor | aoconnor@mynewmarkets.com Columnists Curtis Pearsall, Alan Shulman Contributing Writers Elizabeth Myatt, Tom Rea, Douglas A. Powell, William Sheldon

SALES V.P. Sales & Marketing Julie Tinney (800) 897-9965 x148 jtinney@insurancejournal.com West Dena Kaplan (800) 897-9965 x115 dkaplan@insurancejournal.com South Central Mindy Trammell (800) 897-9965 x149 mtrammell@insurancejournal.com Midwest Lauren Knapp (800) 897-9965 x161 lknapp@insurancejournal.com Southeast Howard Simkin (800) 897-9965 x162 hsimkin@insurancejournal.com East Dave Molchan (800) 897-9965 x145 dmolchan@insurancejournal.com New Markets Sales Manager Kristine Honey | khoney@insurancejournal.com Classified Advertising (800) 897-9965 x125 classifieds@insurancejournal.com

MARKETING/NEW MEDIA Marketing Administrator Gayle Wells | gwells@insurancejournal.com Advertising Coordinator Erin Burns | eburns@insurancejournal.com (619) 584-1100 x120 New Media Producer Bobbie Dodge | bdodge@insurancejournal.com Videographer/Editor Matt Tolk | mtolk@insurancejournal.com

DESIGN/WEB Vice President/Design Guy Boccia | gboccia@insurancejournal.com Vice President/Technology Joshua Carlson | jcarlson@insurancejournal.com Design and Marketing Executive Derence Walk | dwalk@insurancejournal.com Art Director Jamie Bethell | jbethell@insurancejournal.com Web Developer Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Chris Thompson | cthompson@insurancejournal.com

IJ ACADEMY OF EDUCATION Director of Education Christopher J. Boggs | cboggs@ijacademy.com Online Training Coordinator Barbara Dooley | bdooley@ijacademy.com

ADMINISTRATION Accounting Manager Megan Sinclair | msinclair@insurancejournal.com

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insurancejournal.com/subscribe Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semimonthly by Wells Publishing, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2011 Wells Publishing, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Publishing, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 9049, Maple Shade, NJ 08052

6 | INSURANCE JOURNAL-WEST REGION October 17, 2011

ARTICLE REPRINTS: For reprints of articles in this issue, contact Rhonda Brown at 1-866-879-9144 ext. 194 or rhondab@fosterprinting.com. Visit insurancejournal. com/reprints for more information.

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News&Markets California Rep. Bill Would Lower Earthquake Insurance Costs

alifornia’s U.S. Rep. John Campbell (R) recently introduced legislation similar to a bill introduced by U.S. Sen. Dianne Feinstein (D) earlier this year that would strengthen the nation’s natural disaster recovery system through the Earthquake Insurance Affordability Act (EIAA). The California Earthquake Authority is a big supporter of the bills because it says the EIAA would make earthquake coverage more affordable. According to Glenn Pomeroy, CEO of the California Earthquake Authority, the non-profit CEA would be able to dramatically reduce its expenses— with the savings directly benefiting policyholders — under the EIAA. The CEA uses reinsurance to back up its insurance policies, but reinsur-

ance is expensive. With EIAA, the CEA would be able to replace some of its costly reinsurance with a limited amount of private-market debt backed by a federal guarantee. In California, less than 10 percent of all homes are covered for earthquake damage. Across the nation more than 75 million people live in earthquakeprone regions. CEA recently completed what it called a “first-of-its-kind-transaction,” taking reinsurance out of the equation and opening “a more direct path” to transfer financial risks posed by earthquakes, the authority said. Embarcadero Re, a Bermuda-based special purpose reinsurance vehicle, will provide Sacramento-based CEA with collateralized reinsurance protec-

tion against earthquake risk. In a deal led by Deutsche Bank Securities, Embarcadero sold $150 million in three-year catastrophe bonds to investors at a floating rate of 6.6 percentage points above one-year U.S. Treasury money-market funds, and investor demand for the catastrophe bonds significantly exceeded the $150 million issuance, the California authority said.

Quake Project Aimed to ID Future Hotspots

cientists have embarked on an ambitious experiment to better anticipate earthquakes by identifying the likeliest places where magnitude-4.9 quakes or stronger will occur in seismically active California over a five-year period. Half a dozen teams have developed sophisticated computer models, and submitted their best guesses. As part of the ground rules, they could not change their forecasts, which were checked against actual quakes that hit during the study period. The goal was to see whether there was a reliable way to flag a seismic hotspot before the ground shakes.

8 | INSURANCE JOURNAL-WEST REGION October 17, 2011

The exercise began in 2006 and wrapped up last December. Researchers were asked to pinpoint regions where quakes were more likely to occur based on past seismic history, activity on fault lines or other factors. During the test period, 31 quakes larger than magnitude-4.9 rattled the state, including the greater Los Angeles region, San Francisco Bay area and off the Northern California coast. The largest was the 2010 Easter earthquake centered in Baja California. So how did scientists do? “No single model takes home all the gold,” said seismologist John Vidale of the University of Washington who was not part of any team. But three groups that took into account all past quakes regardless if they were big or small fared better than the rest. Seismologist David Jackson of the

University of California, Los Angeles, likened the experiment to small children playing football. There are “no official winners or losers, but plenty of scorekeeping from the sidelines” to learn the strengths and weaknesses of various quake theories, Jackson said. While scientists cannot say with certainty exactly when and where the next quake will strike, they have an idea of how quakes behave. For example, a big quake will produce smaller aftershocks in the same area. There’s still a lot that’s unknown such as whether quakes too small to be felt play a role in increasing the chances of a bigger quake. Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. www.insurancejournal.com

WEST COVERAGE

Declarations COIN

Trued-Up

Safe Fisheries

“This effort is especially important in these difficult economic times.” — Statement from California Insurance Commissioner Dave Jones following Gov. Jerry Brown signing Assembly Bill 624, which keeps the California Organized Investment Network (COIN) program going until Jan. 1, 2015. It was set to expire at the end of the year. Under the program, investors can kick in a minimum of $50,000 in zero-interest loans with a Community Development Financial Institution for five years, and in exchange earn a 20 percent state tax credit.

“We’ve kind of trued up the system again.” — Mark Sektnan, president of Association of California Insurance Companies, speaking after a hearing in Sacramento in which Insurance Commissioner Dave Jones explained why the Workers Compensation Insurance Rating Bureau is restructuring how the state’s workers’ compensation pure premium rate is calculated, a move that was supported by the Association of California Insurance Companies.

“We fully believe that flood risk reduction and fisheries habitat protection are a good fit, and are certainly not mutually exclusive.” — Ken Murphy, FEMA regional administrator, on the National Wildlife Federation plans to sue the federal government, claiming the group has failed to ensure that the national flood insurance program hasn’t harmed endangered salmon, or the orca whales that feed on the fish, in Puget Sound.

Figures $ 23 Million

Home Drunks “One possibility is that people are drinking at home more and driving less after drinking.” — Dr. Thomas Frieden, director of the Centers for Disease Control and Prevention, on drunken driving incidents falling 30 percent in the last five years, reaching their lowest mark in nearly two decades, according to a federal report released earlier this month.

The total that California Insurance Commissioner Dave Jones announced in grant funding to battle automobile insurance fraud. The money goes to district attorneys’ offices around California.

1.9

What the Oregon Department of Consumer and Business Services announced would be the pure premium rate increase for workers’ compensation starting in 2012, the first rate hike in Oregon in more than 20 years.

The amount that Embarcadero Re, a Bermuda-based special purpose reinsurance vehicle, will provide Sacramentobased California Earthquake Authority with in collateralized reinsurance protection against earthquake risk. According to CEA, it’s the first earthquake-only catastrophe bond issued without involvement of traditional reinsurers, a deal that will be used as a benchmark for similar follow-on deals by the authority.

150

Million

70.6

The auto insurance industry loss ratio in the second quarter. It marked the industry’s second worst performance since 2001 and far outpaced the loss ratios of 58.1 percent and 56.2 percent for the 2010 and 2009 second quarters, respectively, according to SNL Insurance. The industry premium remained essentially flat, decreasing just 0.2 percent from the 2010 second quarter.

www.insurancejournal.com

October 17, 2011 INSURANCE JOURNAL-WEST REGION | 9

WEST COVERAGE

People Don Jergler

Mark Bradway

Gerrit VandeKemp

Wells Publishing Inc. has named Don Jergler as its new West editor for its flagship Insurance Journal online and print property/casualty insurance publications. Jergler, based in California, will cover the western states for Insurance Journal magazine and for the web site, InsuranceJournal.com, and its Daily Headlines e-mail newsletter. Jergler comes to Insurance Journal with a business journalism background that includes being a reporter or editor at three daily newspapers, three web sites and one magazine. His most recent position was as managing web editor of two trade websites based in Irvine, Calif. Before that he was the editor of the monthly business-to-business magazine Real Estate Southern California and West bureau chief of the company’s online component. He has worked at the Long Beach Press-Telegram, the San Gabriel Valley News Group and the Antelope Valley Press. Jergler is a graduate of Cal State University Dominguez Hills. Jergler can be reached at djergler@insurancejournal.com. He replaces Patti Tom. The states in Insurance Journal’s West region include California, Arizona, Oregon, Colorado, Washington, Idaho, Utah, Nevada, Hawaii, Montana, Alaska, New Mexico and Wyoming. Wells Publishing has also named a new East editor, Young Ha, based in New York, and a new advertising sales representative, Mindy Trammel, for its South Central/Texas territory. In addition to publishing Insurance Journal, Wells Publishing, based in San Diego, Calif., publishes ClaimsJournal.com and MyNewMarkets.com. The Insurance Journal Academy of Insurance is also part of the Wells Publishing network. Mark Bradway has been named business development manager of Encino, Calif.-based NAS Insurance Services.

10 | INSURANCE JOURNAL-WEST REGION October 17, 2011

Bradway will oversee business development in the Northeast region. Bradway has more than 13 years of insurance sales, marketing and distribution experience. Gerrit VandeKemp has joined Atlanta-based Swett & Crawford as an assistant vice president, and he will serve as a broker of professional services in the Denver office. Gerrit was recently as a senior underwriter with Allied World National Assurance Co. in Farmington, Conn. He also worked previously as a branch manager for Pennsylvania Life Insurance and director of marketing for Mortgage Investors Corp. in St. Petersburg, Fla. Damien Magnuson has been promoted to senior vice president of Executive Perils. He reports to Peter Taffae, managing director, and works in the Los Angeles office. In his new role, Magnuson will continue to broker the management and professional liability business, as well as work to expand the company’s presence in the wholesale marketplace. Magnuson started with the company in 2004 as an associate broker. Kyle Bridgwater has been named account manager/ administrator for San Diego-based risk management and insurance brokerage Cavignac & Associates. Bridgwater is responsible for daily policy maintenance and servicing, and assisting with client insurance policy renewals. Bridgwater most recently was an account executive for San Diego-based Blue Horizon Insurance Services. XL Insurance has appointed Marcia Blanco and Ursula Williams to its miscellaneous professional liability team in San Francisco. Blanco joins as the national practice leader for all MPL business and new product development. Williams joins as an assistant vice president. Blanco rejoins XL Insurance from Navigators Pro. Williams also rejoins continued on page 14

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News&Markets California’s State Fund to Lay Off Up to 1,800 Workers By Don Jergler

A Court Orders Takeover of Utah Man’s Businesses A U.S. bankruptcy court judge has ordered a forensic accountant to take control of businesses run by a Kaysville, Utah man suspected of taking $65 million from 700 investors. Dee Allan Randall’s companies include Horizon Mortgage & Investment, Horizon Financial & Insurance Group and Horizon Auto Funding. Randall filed for Chapter 11 bankruptcy in December. A hearing is set for Oct. 26. In court papers, the U.S. Trustee Office said it suspects Randall’s business schemes might be fraudulent. The office said Randall promised returns of up to 14 percent through investments in real estate, auto leases and insurance and continued to solicit funds from investors after filing for bankruptcy. Randall is also the subject of a Utah Department of Commerce investigation.

restructuring at California’s government-controlled State Compensation Insurance Fund to be implemented in 2012 will result in a reduction in force that will eliminate between 1,500 and 1,800 positions, according to an internal communication issued by the organization’s management. The restructuring is expected to save the State Fund $200 million a year. The layoffs, which equate to roughly 25 percent of the workforce, are expected to be effective in the second quarter of next year. “The positions being eliminated are in areas where business processes have changed significantly enough that work has been substantially reduced,” the communiqué stated. The decision apparently follows a detailed review of San Francisco-based State Fund’s business, including comparing State Fund to other state funds and specialty companies that write workers’ compensation in California. State Fund spends more operating the company than it does paying benefits to injured workers, according to the organization. While it’s not yet clear which employees will be laid off,

employees in the WCPA, or payroll auditor, classification and below will likely be most affected, according to State Fund. The job classifications where work has been reduced due to technological changes, or changes in business practices, are top considerations for elimination. State Fund has not had layoffs since the 1930s. State Fund has historically relied on attrition to manage staffing levels. “While general attrition has reduced staff size, it could never address changing business processes or prepare the company for the future,” a Q&A issued to State Fund employees states. “So, in addition to being overstaffed, we also have significant misalignment between the work at State Fund and our staffing. We must take action to lower our expense ratio and improve our efficiency. This layoff is a difficult but necessary next step.”

Former Idaho Insurance Investigators Washington Insurance Agent Sue Department of Insurance, Others Who Sold Fake Policies Sentenced

lawsuit filed by former Idaho insurance investigators says they were forced out of the Idaho Department of Insurance for turning over information to the feds during an investigation into an eastern Idaho insurance company for fraud, the Idaho Statesman daily newspaper reported. The newspaper said the lawsuit was filed by Tom Arkoosh with Capitol Law Group on behalf of W. Robert Lemke, Jan Heinz, Carol Garrett and Felicia Kruck. They are suing the State Department of Insurance, Director William Deal, a former state legislator, former Deputy Director Shad Priest and others. The insurance company that was under investigation was not named in the suit. It was referred to only as “Company X” in the documents, according to the report in the Statesman.

12 | INSURANCE JOURNAL-WEST REGION October 17, 2011

Washington insurance agent who sold hundreds of thousands of dollars in fake business-insurance policies has been sentenced to more than two years in prison and ordered to pay back $532,659 in restitution. Brenda MacLaren-Beattie, 68, of Des Moines, Wash., was sentenced in King County Superior Court to 26 months in prison. An investigation found that from late 2001 through 2009, MacLaren-Beattie issued fake insurance to 25 oral surgeons in Washington and 16 in Oregon. During that time, she is believed to have collected more than $532,000 in premiums, often issuing counterfeit certificates of insurance to doctors and clinics. Her insurance license expired in 2009. In a few cases – a lost camera, some water damage – she paid out small insurance claims herself. One of her clients became suspicious after a claim check was issued by MacLaren-Beattie, rather than from an insurance company. The fictitious policies were for business owners’ general liability insurance. www.insurancejournal.com

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People People, continued from page 10

XL Insurance from Navigators, where she was responsible for miscellaneous professional liability business accounts. Encino, Calif.-based GNW-Evergreen Insurance Services LLC has appointed Teri Elliott as a client advisor in its nonprofit division. Elliott will serve the risk

management and insurance needs of nonprofits with 501c3 designation and related organizations. Elliott previously worked with independent insurance firms in Southern California. Encino, Calif.-based NAS Insurance has appointed Jerid Schmickle as senior vice

president of its newly launched entertainment and sports division. He will head the facility, and target risks within the entertainment, hospitality, media and sports industries. Schmickle comes from NAS from Allianz/Fireman’s Fund, where he was a director of underwriting. Heffernan Insurance Brokers has hired Eric Schroeder as senior vice president of its Orange, Calif. office. Schroeder will be responsible for producing new business in Southern California. He joins Heffernan after 11 years as senior vice president at another brokerage. Aon Risk Solutions has appointed Jason Caya account executive of the San Francisco office. Caya is responsible for supporting Aon’s expansion in the San Francisco real estate industry. Caya moved from the company’s headquarters in Chicago, where he served as an account executive for real estate clients. Mike Fitzgerald has joined Santa Ana, Calif.-based Devonshire as vice president of business development. His responsibilities include developing business initiatives and opportunities to help support and expand insurance and reinsurance business services. Fitzgerald previously was president and CEO of CNA’s Global Resource Managers. Poms & Associates Insurance Brokers Inc. has promoted Seth Ford Gilman to executive vice president, a position at which Gilman will oversee the property and casualty and personal lines divisions. Gilman was previously a senior vice president. Prior to Poms & Associates, he was senior vice president with Kessler Risk and Insurance Services. Willis North America has made Linde Hotchkiss managing partner of Willis’ San Diego. Hotchkiss’ responsibilities include implementing growth strategies. Hotchkiss previously served as finance partner of Willis’ Western Region. Also, Jack Yelverton has been named regional sales executive in San Diego, where he will serve Willis’ clients in the Western Region.

14 | INSURANCE JOURNAL-WEST REGION October 17, 2011

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Business Moves Allstate, Esurance, Answer Financial The Allstate Corp. said it has obtained all required regulatory approvals and closed its acquisition of Esurance and Answer Financial from White Mountains Insurance Group Ltd. The purchase price was approximately $1 billion. Esurance provides personal auto insurance direct to consumers online and through select agents, including sister company Answer Financial. Allstate announced the deal in May. Allstate’s announcement said that in the coming months, the Esurance management team “will work to enhance its operational and marketing effectiveness by leveraging Allstate’s brand, pricing expertise and claims capabilities.” Allstate said it will maintain the current headquarters of Esurance in San Francisco and Answer Financial in Los Angeles. These operations will be reported in the Allstate Protection reporting segment. Wright Group, Pells A pair of Colorado insurance firms have joined forces for an expansion in the area, as

well as nationally. Denver, Colo.-based Pells, which was established in 1929, joins The Wright Group at its headquarters in Denver. Both companies have mutual specializations, focusing on the insurance, risk management, benefits and retirement products. Wells Fargo, ISU Stetson-Beemer The insurance unit of Wells Fargo & Co. has purchased ISU Stetson-Beemer Insurance, an insurance brokerage and consulting firm in Reno, Nev. The purchase closed on Sept. 1. Terms were not disclosed. Stetson-Beemer, founded in 1923, provides employee benefits and commercial property/casualty insurance. President Richard Schield and a team of about 24 employees will join Wells Fargo Insurance Services’ Reno office. This is the second acquisition this year of a small firm announced by Chicagobased Wells Fargo Insurance Services USA Inc. In early January it acquired Prestige Professional Plans, a single office, employee benefits brokerage firm in Dayton, Ohio. MOC, San Francisco Insurance Center San Francisco Insurance Center has joined MOC Insurance Services, the two Northern California firms announced. Van Maroevich, president and CEO of San

Francisco-based MOC Insurance Services, and Fred S. Nagle, III, president of San Francisco Insurance Center, said the merger yields a combined entity of 65 employees servicing business and personal clients with annual premiums exceeding $100 million. The merger was effective Sept. 1. The company’s risk and claims management expertise focuses in the industries of real estate, entertainment, thoroughbred racing, agriculture and viticulture, marine and aviation. Align Financial, Excellere San Diego, Calif.-based Align Financial Group LLC has partnered with private equity firm Excellere Partners, of Denver, to form Personable Holdings Inc., an independent, non-standard auto insurance provider. Personable Holdings recently acquired the non-standard auto insurance operations of Align General Insurance Agency, which includes partnerships with multiple insurance carriers with independent agents in California and Texas. The company plans to expand its capabilities with acquisitions of additional non-standard auto assets and businesses in a number of key strategic states. “We are building a non-standard auto insurance company that will efficiently deliver a choice of competitive products to independent agents via a single point of access for policy sales and servicing,” Kieran Sweeney, chairman of Personable and CEO of Align, said in a statement. Align Financial Group LLC is a Delaware domiciled insurance holding company that owns Align General Insurance Agency Inc., Public Livery Insurance Services Inc. and E.L.M Insurance Brokers Inc., which act as a general agency, program underwriting manager and wholesale broker. Excellere Partners reportedly manages $730 million in committed capital. SNL Financial, Summit Business Media Summit Business Media has sold its insurance financial information unit. Another financial information firm, SNL Financial, said it has acquired the Summit Business Media insurance information services unit, Highline Data, which resells insurance company data from regulatory agencies.

16 | INSURANCE JOURNAL-WEST REGION October 17, 2011

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News&Markets Nationwide, Harleysville CEOs Say Merger All About Growth By Andrew G. Simpson & Young Ha

he merger of insurer Nationwide Mutual with regional carrier Harleysville Mutual is all about growth, not only for the companies but also for their independent agents, according to the CEOs of the two insurers. Harleysville is a “perfect match” for his company, said Steve Rasmussen, chief executive officer of Nationwide Mutual, which he said has been looking to expand into the Northeast, add to its independent agency distribution channel, and gain accounts in commercial lines — all three of which Harleysville brings to the table. For Harleysville, the merger is an opportunity to grow by expanding where Nationwide is strong, which is in the West and Midwest and in personal lines, and by giving its independent agency force access to a fuller menu of products, according to Michael Browne, president and chief executive officer of the Pennsylvaniabased regional carrier. Nationwide Mutual announced last month that it will acquire Harleysville Group for about $760 million. Nationwide Mutual will pay $60 a share in cash for Harleysville.

18 | INSURANCE JOURNAL-WEST REGION October 17, 2011

Harleysville Mutual policyholders “We have been looking for some will become policyholders and memtime to find an effective way to get bers of Nationwide Mutual. into the Northeast, which we do not The combined organization will have any presence in, to really give us have an estimated net surplus of more a national footprint,” the Nationwide than $13.5 billion and over $16 billion in CEO said. “We were looking for a annual direct written premiums. relationship that had commercial Harleysville will continue to operate expertise that Harleysville has. In the as an independent agency company end, Harleysville became the really under Nationwide, with Browne at perfect match for us, in terms of getHarleysville’s ting us that significant Nationwide Mutual helm, out of the Northeast footprint Harleysville, Penn. gets to expand into and also knowledge office. Nationwide the Northeast, grow and expertise in the Mutual’s headcommercial arena. its independent quarters is in Both of those help or agency channel, and objective of getting our Columbus, Ohio. gain commercial In an interview independent agency lines business. with Insurance brands, particularly Journal, both CEOs what I’ll call a retail stressed that they do not see major independent agency brand of Allied, cuts in either their agency forces or and now Harleysville, a national scope in the number of company personto put us out there.” nel. Rasmussen said the companies’ Rasmussen said Nationwide is footprints are so different that there often only looked at as a personal are only about 100 agencies for the two lines exclusive agency company and insurers that are in the same areas. is not typically recognized as an inde“Frankly, we want to continue with pendent agency company, or even as all of our agency partners. We’re not a multiple channel company, but in looking to cut back. Actually, we’re fact its independent agency division looking for more,” said Rasmussen. (including Allied, Scottsdale, Titan and “And I suspect that’ll be the case folNationwide Agribusiness) produces lowing this discussion, because each one-third of its business. organization, frankly, has relationships Nationwide has about 4,500 indewith larger agencies that they may be pendent agents, which is about the able to assist each other in building same number of exclusive agents that it relationships across the two. So, this is has, according to Rasmussen. Its indeall about adding and all about growth.” pendent agents are primarily with its Nationwide Mutual is known for Allied Insurance affiliate. its personal lines and Main Street Browne said this is a “great opporcommercial lines business in the West tunity” for Harleysville to grow, someand Midwest, whereas Harleysville is thing he said the insurer has not been known in the Northeast and Middle able to do very easily. Atlantic states, with about 75 percent “[I]f you look at our record over the continued on page 20 of its business in commercial lines. www.insurancejournal.com

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News&Markets Merger, continued from page 18

last, really since I’ve been CEO [2004], we’ve Browne is a former Pennsylvania insurhad a great run. Our operating return on ance commissioner and practicing attorney. equity has been double digits. But we’ve Rasmussen was elected CEO of had trouble growing,” Browne said. “Part Nationwide in 2009. Prior to that, he was of that is the recession, part of that is the president and chief operating officer of P/C commercial lines fell off market. But this is operations for Nationwide from 2003 to an opportunity for us to grow. I think it’s a 2009. He previously served as president and very exciting opportunity and I think that chief operating officer of Allied Insurance as our independent agents learn about this, and held the same positions with CalFarm they’re going to be very excited, Insurance, an affiliHarleysville will too.” ated company. continue to operate The merger appears to be a Rasmussen as an independent great opportunity for Browne, told Insurance too. Reuters reported that as of Journal that as indeagency company the company’s last proxy filing, pendent agencies under Nationwide. Browne owned 2.5 percent of themselves consoliHarleysville Group’s shares, worth about date and grow larger, they need a national $18.6 million, based on the stock’s one-day carrier to work with them. gain. The proxy said Browne also had vested “It becomes ever more important for all of but unexercised options on 443,005 shares us in dealing with our independent agency — potentially $12.2 million more if the partners who continue to consolidate. options had been exercised before the deal, Really, you need a national footprint to be according to Reuters. able to meet their needs more over time.

20 | INSURANCE JOURNAL-WEST REGION October 17, 2011

This national footprint, really gives us the horsepower to compete with anybody in the independent agency ranks,” Rasmussen said. Harleysville’s Browne said that even midsized agencies would benefit from the additional products including financial services and agribusiness coverages that they will have access to through the Nationwide. “We’re going to become more important to them because of everything we can provide to them,” Browne said. Multiple Distribution Rasmussen said Nationwide, while it is pigeonholed as an exclusive agency company, believes the future is in multiple distribution channels. “When you really think about where the product portfolios are headed today, there’s no question that personal lines is heading more towards direct and that’s just been a reality over the past five plus years,” he said continued on page 22

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News&Markets Merger, continued from page 20

“The other side of the coin is the indepenpresence,” he said. “The companies are capabilities of Nationwide behind the chandent agency ranks continues to secure their saying Harleysville would be combined nel,” he said. foothold in the commercial portfolios. We with what’s now the Allied portion of Rasmussen said the company would conactually want to be across all those product Nationwide, which is their independent tinue to operate its distribution channels as lines and so we really need to be in the locaagency business. Allied has more of a middle separate entities. It now keeps its indepentions where we can get the best in breed. of the country and West Coast geographic dent agency distribution separate from its “It’s not that our exclusive agents don’t spread. So you combine the East coast with financial services and exclusive agency divisell some commercial, but that’s not where the middle and West, and it will help geosions. they do their best work. We certainly have graphic diversification.” Also, while Allied and Harleysville will some good exclusive agents that do. But he added there is one negative But we also know that if we’re going aspect for Nationwide: Harleysville’s to be a national player in commercial catastrophe exposure. “The negative lines, we have to have strong relationis that it does add more overall risk ships with independent agencies. to the Nationwide organization. That was the reason the Allied organiHarleysville has a fair amount of zation was brought into play and the catastrophe exposure to Northeast same reason that we’re working with weather events. Nationwide would the Harleysville folks.” essentially be taking on more risk Independent agents are a part of with roughly the same amount of the Harleysville tradition and the capital to support it. But we think merger has some of those agents worit’s a modest negative. The acquisiried. What does a CEO of a traditional tion does make sense strategically,” independent agency company tell its Bauer said. Nationwide CEO Steve Rasmussen Harleysville CEO Michael Browne agents about joining with a company Bauer said Moody’s is keeping that is not known for its independent agenNationwide ratings at A1 with a stable outbe separate companies, they will borrow cy distribution? look. from each other. According to Browne, “You just tell them Another analyst noted that Nationwide is “Will we bring over products and capathe truth and the truth is very simple, paying a healthy premium for Harleysville bilities from Harleysville into Allied or vice which is that we’re going to continue to at $60 per share, which represents 2.1 times versa? Absolutely, we will. We want to keep remain inexorably committed to our indeGAAP book value and 1.8 times statutory those independent agency channels working pendent agents,” said Browne. “We’re not surplus. together and so it is all about bringing capadiluting our commitment in any way. We’re RBC Capital Markets analyst Mark Dwelle bilities together, not necessarily needing to partnering with Allied, which is a premier, said this price is representative of the types contract back and forth,” Rasmussen said. independent agency company, and we’re of deals reached near the top of the market The deal should not affect Nationwide’s creating one of the most formidable indein 2006-2007, when Liberty Mutual bought surplus lines operations or distribupendent agency companies in the United Safeco for 1.8 times book value and Ohio tion. Nationwide’s surplus lines carrier, States. So this is a great message.” Casualty for about 1.6 times book value. Scottsdale Insurance, has direct relationRasmussen, too, sought to reassure indeDwelle said the deal might encourage ships with some of the largest national retail pendent agents, pointing to the experience investors to take a look at insurers. brokers but Rasmussen said Scottsdale at independent agency insurer Allied, which “[I]f a buyer is willing to pay two times would continue working through wholesalNationwide bought in 1998. book for a slightly above average small cap ers on other surplus lines business. “They’re [Allied] totally committed and regional insurer, it should make investors The two would not say who approached that’s where they’re at is with their indepentake a fresh look at properties like Chubb, whom about a merger or how long talks dent agency partners. And that commitment Travelers and ACE, all of which are subhave been going on other than to say they and the financial resources of Nationwide stantially more profitable and in the case of have been going on ‘a while.’ have ended up in Allied, since 1998, growing Travelers and Chubb are trading well below The merger is getting mostly favorable by three and a half times what they were at book value, approximately 80 percent and 85 reviews from analysts. the time of the acquisition. They went from percent, respectively. The valuation tends to Moody’s Investors Service’s senior credit just under $1 billion in premiums to now highlight the exceptionally low valuations officer Paul Bauer told Insurance Journal that $3.5 plus billion in premiums. That was a which prevail across the group,” Dwelle Harleysville is a good fit for Nationwide. great outcome for the independent agency wrote. “Harleysville brings geographic footprint ranks to have the financial resources and for Nationwide, a much stronger Northeast 22 | INSURANCE JOURNAL-WEST REGION October 17, 2011

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News&Markets New MGA Targeting U.S. Homebuilders Formed in California

wo veterans in the London insurance marketplace have come together again to launch an underwriting agency with a focus on U.S.-based homebuilders. Paul Jansen and Kevin Hastings have launched Cove Programs Insurance Services,

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try. Cove Programs is also fully licensed in California as a surplus lines broker. Cove will offer primary and excess liability and property solutions for mid-to-large sized national and regional U.S. homebuilders, but Hastings says plans are in the works to offer programs in other market sectors down the road. Hastings told Insurance Journal that despite challenges in the construction sector, now is a perfect time to launch a new product in the homebuilder market. “There’s a huge opportunity at this point to provide a service-driven product with greater flexibility and alignment with what the builders currently need,” Hastings says. “We think it’s a perfect time to launch a new product with wording that really aligns the builder with the carrier.” Homebuilders have been through a lot of

change due to economic pressures, Hastings says. “There’s a lot that has changed and I think the insurance market has not fully appreciated the dynamics of builders, what they are building and the size of the projects they are building.” Both Jansen and Hastings are veterans in the homebuilding insurance program arena. Together, they founded Jansen & Hastings Intermediaries Ltd., a managing general agency specializing in construction and healthcare in 1996. Cove’s UK-based construction team will work closely with industry veterans George Dale and Mike Hopson in the U.S. Dale most recently was with Aon’s Construction Services Group. Hopson for the last 12 years was vice president of Zurich Insurance’s residential construction unit where he pioneered the Home Builders Protection Policy. www.insurancejournal.com

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n the age of instant tweets and impulsive Facebook posts, some companies are still trying to figure out how they can limit what their employees say about work online without running afoul of the law. Confusion about what workers can or can’t post has led to a surge of more than 100 complaints at the National Labor Relations Board — most within the past year — and created uncertainty for businesses about how far their social media policies can go. “Employers are struggling to figure out what the right policies are and what they should do when these cases arise,” said Michael Eastman, labor law policy director at the U.S. Chamber of Commerce. In one case, a Chicago-area car salesman was fired after going on Facebook to complain that his BMW dealership served overcooked hot dogs, stale buns and other cheap food instead of nicer fare at an event to roll out a posh new car model. The NLRB’s enforcement office found the comments were legally protected because the salesman was expressing concerns about the terms and conditions of his job, frustrations he had earlier shared in person with other employees. But the board’s attorneys reached the opposite conclusion in the case of a WalMart employee who went on Facebook to complain about management “tyranny” and used an off-color Spanish word to refer to a female assistant manager. The worker was suspended for one day and disqualified from seeking promotion for a year. The board said the postings were “an individual gripe” rather than an effort to discuss work conditions with co-workers and declined to take action against the retailer. The board’s acting general counsel, Lafe Solomon, said federal law permits employees to talk with co-workers about their jobs and working conditions without reprisal — whether that conversation takes place around the water cooler or on Facebook or Twitter. “Most of the social media policies that we’ve been presented are very, very

26 | INSURANCE JOURNAL-WEST REGION October 17, 2011

overbroad,” Solomon said in an interview. “They say you can’t disparage or criticize the company in any way on social media, and that is not true under the law.” The number of cases spiked last year after the board sided with a Connecticut woman fired from an ambulnce company after she went on Facebook to criticize her boss. That case settled, with the company agreeing to change its blogging and Internet policy that had banned workers from discussing the company over the Internet. Doreen Davis, a management-side labor lawyer based in Philadelphia, said many of her corporate clients are often “surprised and upset” when they learn they can’t simply terminate employees for talking about work online. “A lot of companies want their social media policies reviewed or they want to establish one for the first time,” Davis said. The NLRB’s Solomon warns workers that not everything they write on Facebook will be permissible just because it discusses their job. Only one case has actually led to a formal ruling. An administrative law judge found that a Buffalo, N.Y., nonprofit group illegally fired five workers after they posted Facebook comments complaining about workload and staffing issues. The Chamber of Commerce’s Eastman wants to see what happens in closer cases where an employee goes “over the top” with criticism of a supervisor of employer. “Where will the board draw the line between concerted activity and an employer’s legitimate non-disparagement policy?” Eastman said. Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. www.insurancejournal.com

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Bull Market: Insurance Revives Arizona’s Running Event organizers said they expected hundreds of participants. “We’ll get over 500 runners,” hil Immordino was literally looking for Immordino said. a bull market to bring back a controverImmordino took a break from the event sial event that will likely to draw hundreds in 2002 following a successful third event, of weekend daredevils to the tiny city of when insurance rates were on rise in the Cave Creek, Ariz. wake of the Sept. 11, 2011 terrorist attacks, In what could be considered by some making it tough to keep the event in the to be a liability nightmare, after a nearly black and even tougher to find property 10-year-long hiatus Immordino is takowners with big enough insurance policies ing advantage of good insurance rates to and in interest in playing host. conduct the 4th Running of the Bulls in “After 9/11, all liability insurance went America. through the ceiling,” he said. “And we Modeled on Spain’s famous running of couldn’t find a location.” the bulls in Pamplona, the event on Oct. Most of the property Immordino was 14 and 15 in Cave Creek looking at that could accommodate an promised thrill seekers event like his was on public property, ‘After 9/11, they will “experience an and “those guys all wanted me to have all liabiladrenaline rush of a life in insurance.” ity insurance $5 million time by running a quarter In fact, the Cave Creek City went through Council had originally asked mile in front of forty 1,500 the ceiling.’ Immordino to obtain $5 million worth lbs. raging bulls,” the event’s website states. of insurance, which put the event in The number of participants at past events jeopardy. But the city council, which had varied from 1,000 during the first event in originally issued a special events permit 1998 to 700 runners the last year the event directly to Immordino, canceled that and went off in 2002. issued it directly to the landowner to clear Based on responses so far, the event’s itself of liability. By Don Jergler

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EARTHQUAKE

Immordino dismissed the debate about how much insurance he should be required to have, arguing the policies covering the event, the property and the bulls themselves, as well as any damage done should the bulls escape, are more than adequate, considering participants sign seven-page long liability release waivers. “Runners sign waivers,” he said. “Technically runners can’t make an insurance claim anyways. They don’t have any rights whatsoever for an insurance claim. Even if they die, they don’t have claim.” Immordino purchased his insurance from Scottsdale, Ariz-based Hill Insurance with Scottsdale Insurance as the underwriter. He paid roughly $16,000 for the $1-million policy, a little over one-third of what the $5-million policy would have cost him. Brent Hill was the broker on the deal. He said he agreed to broker the deal because he knows Immordino. Scottsdale made some recommendations for safety, which were carried out, Hill said. According to Immordino a variety of safety precautions have been taken, namely the bulls may be a bit tamer than their fiery Spanish counterparts. “The ones you see in Pamplona are fighting bulls and these are regular rodeo bulls,” he said. “They’re not as aggressive.” About 200 to 300 people are injured during the event in Pamplona held in the first week of July each year, and 15 people have been killed since 1910. According to Immordino, no serious injuries have occurred during his event in past years. “We’ve never had a sniff of a claim,” he said. “Not even a sprained ankle. Just bumps and bruises.” www.insurancejournal.com

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News&Markets Nevada Young Agents Group Grows the Old-Fashioned Way recruiting more young he Nevada Young Agents agents, said Committee started out small with Kay Lockhart, a young insurance agent collecting and president and passing out a few cards around the CEO of Nevada state, and it’s now a rapidly growing Independent organization that has garnered a bit Insurance of national attention. The group isn’t Agents. stopping there. Its aim isn’t just to give Lockhart is also young agents a place to meet; it ideally Chance’s grandwants to bring more young people into mother. the business. The interest The committee’s membership base shown around Generations of Service: 24-year old Chance Lockhart (r) and his grandmother, of 50 people may not sound too impres- the state from Kay Lockhart (l). sive, but it is given that the group those in the started only two years ago, growing at industry was unexpected, the elder involved by sending new, young agents first slowly, to a membership of six last Lockhart said. their way. year. From there, it took a year to get “I was really surprised. It seemed The max age for joining is 40, but to its present number. like these kids were waiting around for the group welcomes people who are “We really started to revitalize it somebody to ask them,” she said. new to the insurance industry. about a year ago,” said 24-year-old Both Lockharts attribute part of the The group’s recruiting efforts Chance Lockhart, the group’s liaison. committee’s recruitment success to a have garnered national attention. In The reasons for their success? Social few areas where one would expect a September, the committee won the networking? Video chat conferences? group of young people to attain masOutstanding First Time Award at the Something new, cool and high-tech tery: its website, a series of 15-minuteannual Independent Insurance Agents few have yet heard of? long “coffee break” webinars and some & Brokers of America annual Fall Nope. They chalk social networkLeadership Conference in Minneapolis ‘The rock stars of the up their growth ing. for its recruitment efforts. industry are in the mostly to plain, oldBut according “They won overwhelmingly fashioned grassroots to the younger because of what they’ve done over the young agents. Older networking. last year,” said Jason Cass, national principals don’t under- Lockhart, the The commitbulk of their chairman of IIABA’s Young Agents stand we want mentors.’ tee was around in recruitment Committee. “There’re one or two states various forms in the past, but it never efforts, and success, can be credited to that are stepping up every year.” really gained much momentum. “It good, old-fashion “grassroots efforts.” There are roughly 35 states with had a presence, maybe 20 years ago, “We just try to get people to recruit Young Agents groups, said Cass, a but petered out,” Lockhart said. “We in their offices,” he said. 33-year-old with his own agency, JDC thought that perpetuation was imporThe group encourages its members Insurance Group in Centralia, Ill. The tant, so we started to rebuild the comto go to their firms with literature, Nevada Young Agents’ recruitment mittee. When we started out in 2009 or positive word of mouth, about the success becomes even more impressive it was just one guy collecting business committee and network within their considering the economy, which Cass cards.” own firms, explaining the benefits of said has put a damper on efforts to The group now has its own website, joining. recruit of agents into these committees. is becoming increasingly active in Additionally, the committee has “A lot of young agents come to netcontinued on page 32 lobbying, fundraising, and of course, been pushing to get agency principals By Don Jergler

30 | INSURANCE JOURNAL-WEST REGION October 17, 2011

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WEST COVERAGE

News&Markets Young agents, continued from page 30

people involved in the associworking groups based on backing and supations, attracting new people port of principals,” Cass said. “As agencies to a career in the insurance are scaling back, one of the areas they are industry, these are all things scaling back is how involved their young we are trying to do.” agents are. Principals believe the young And getting new people agent needs to be in the office more, and it’s into the industry in Nevada so counterproductive it’s unbelievable.” is the group’s next focus. He added: “The rock stars of the indus“I think that when young try are in the young agents. Older principeople hear insurance agent, pals don’t understand we want mentors. they think it’s a pretty boring Principals just don’t understand that we job where you sit around and don’t get that anymore.” fill out applications,” According ‘When young people he said. to IIABA, more hear insurance To help combat this notion, the than 60 percent of the insuragent, they think it’s committee is writing up a business ance industry’s a pretty boring job.’ plan to bring to Nevada the IIABA InVest program, which works with employees educators by providing curriculum to teach are over age 45, with the average age of an insurance and business skills to high school agency principal around 54. and college students around the nation. The “Perpetuation is our industry’s big issue,” program, which is celebrating 40 years since the younger Lockhart said. “Getting people its inception, is currently in more than 180 involved in the insurance industry, getting

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high schools and community colleges across the country, with an estimated 5,500 students participating, according to IIABA. “That’s something that we really want to get involved in this year,” Lockhart said. Pete Moraga, a spokesman for the Insurance Information Network of California, said the diversity and new ideas from young agents coming into the industry are invaluable. What groups like the Nevada Young Agents are doing “is admirable and is something that should continue,” Moraga said. “We need all perspectives in this business. Insurance affects people of all ages. It’s important that we have young people in the mix.” Not everyone’s dialed into the insurance business like Lockhart, who works on the for-profit side of the Nevada Independent Insurance Agents selling insurance products. He is a third-generation agent, following in the footsteps of his grandmother, Kay. His mother, Amy Lockhart, also works in the industry. “On our committee we have about 12 people who are legacies,” he said. “A lot are second- or third-generation insurance agents.” He believes insurance stays in the family because “people who have grown up in the industry are more inclined to see the value in working in the insurance business.” But the industry can’t count on legacies to keep its ranks afloat. “If we don’t grow a base of young people to replace the existing agency system, the industry itself is facing a big problem,” Lockhart said. “We could go the way of the travel industry.” www.insurancejournal.com

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IDEA EXCHANGE

Claims Cheaper Isn’t Better in Property Loss Cost Containment

H By Denise Johnson

ow carriers and adjusters respond to property losses can reduce the impact of the claims as well as the costs, according to Lynne Jurek Shannon and Doris T. Bobadilla, defense attorneys with the Galloway, Johnson, Tompkins, Burr & Smith law firm. Both said the strategies for cost containment on property damage claims remain the same across the country. “Adjusters no matter where in the country they are can work by the same rules and use the same types of tips in order to accurately and as inexpensively as possible handle their claims,” said Shannon. “The types of claims are the same and the objectives of cost containment are the same.”

Proactive contact with insureds and contractors helps control costs. The attorneys reported that nearly 73 cents of each premium property/casualty dollar goes to staffing, investigation, defense and resolution of claims. Evaluating expense costs alone won’t reduce this figure; rather, a careful examination of the claim will, the attorneys said. Cheaper Doesn’t Equal Better According to Shannon, in order to manage costs on a claim appropriately an adjuster must analyze the claim. Common misconceptions involve the retention of inexpensive experts. “Sometime we think we are containing costs 34 | INSURANCE JOURNAL-WEST REGION October 17, 2011

by avoiding an option that may appear to be a greater expense, but in the long run it actually saves costs and improves the time to settle a case.” The goal is to improve final performance through claims cost control while increasing customer satisfaction by promoting consistent, fast, and fair claims settlements, they said. While the hourly rate an expert charges is part of the overall retention decision, it’s important to confirm the expert is knowledgeable for the type of claim being presented. “They should hire the appropriate expert depending upon what type of situation they have. Whether they are engineers to go in and one, investigate the source of the problem and two, if it’s a growing and continuing issue to have them solve that and arrest the problem so that if it turns out to be a covered claim, based on the investigation, they have mitigated the ultimate exposure,” Bobadilla said. They recommend adjusters advise potentially liable third parties of their responsibility early in a claim and provide notice of their obligation to mitigate damages in the event that liability cannot be determined quickly. Controlling Losses Business interruption and

temporary location costs can be limited through early identification and remediation, according to Shannon and Bobadilla. Proactive contact with insureds and contractors on a regular basis helps to avoid costs incurred as a result of waiting for adjuster approval, they said. Adequately controlling losses involves a prompt response time and timely post loss repairs. As an example, when handling a water damage loss, they described three main categories of water damage an adjuster might see: • Clean – Water that originates from a source that doesn’t pose substantial harm. • Gray – Water that contains an elevated level of contamination and has potential to cause discomfort or sickness if consumed or exposed. • Black – Water that contains pathogenic agents and is continued on page 36 www.insurancejournal.com

IDEA EXCHANGE

Claims Cheaper Isn’t Better, continued from page 34

grossly unsanitary; this includes sewage and other contaminated water sources. According to Shannon and Bobadilla, the damage incurred isn’t determined by the color of the water, but rather by the source, the contents affected, time, history, and the characteristics of the water. An adjuster can manage costs by hiring a qualified expert to identify and mitigate the damage quickly. In addition, they described four classifications of evaporation/drying a retained mitigation company might use to classify a water damage claim: • Slow – Water loss that affects only part of a room or area or with wet, low permeability/porosity materials such as plywood, structural wood, VCT, or concrete. • Faster – Water loss that affects an entire room of carpet and cushion. The water has wicked up the wall less than

24 inches. • Very fast – Water loss that enters the structure from overhead, saturating the entire area, including ceiling, walls, insulation, carpet, cushion and subfloor. • Specialty – Water loss that involves wet material with very low permeability/ porosity. Knowing drying time classifications for a specific loss allows the handling adjuster to monitor mitigation costs. Another example, provided by the presenters, involves the handling of smoke damage claims. In order to cost-effectively process these types of claims adjusters must determine the type of smoke; whether wet, dry, or fuel oil. In addition, hidden areas where smoke might accumulate must be examined because this will affect the cost of the claim and the methods used to clean and restore the area. The attorneys empha-

sized a 72 hour window to remove smoke from fabric before it becomes saturated. With fire damage claims, both Shannon and Bobadilla recommend adjusters apply CPR. The acronym stands for control the loss, protect the assets and restore the property. Controlling the loss means hiring qualified experts to evaluate the origin and cause of a fire. Protecting the assets requires securing the perimeter of the fire and associated contents. Property restoration requires timely handling of notice to interested third parties and product manufacturers so that the scene investigation can be completed promptly. There are a number of ways adjusters can control costs, Shannon said. An adjuster can: • Use proper and certified experts • Negotiate with vendors • Assist the insured with relocation in first party claims • Maintain contact with all parties to a claim • Utilize resources • Apply common sense According to the presenters, the adjuster’s role in cost containment involves attaining a balance between company claims handling policies, existing vendor contracts, claimant and insured requests, cost containment practices, productivity, settlement timing, and equitable trade-offs between client satisfaction and safety. Johnson is editor of ClaimsJournal.com. She can be reached at djohnson@claimsjournal.com.

36 | INSURANCE JOURNAL-WEST REGION October 17, 2011

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IDEA EXCHANGE

Entrepreneurism The Entrepreneurial Spirit: Turning Ideas into Reality

hat is an entrepreneur? The exact characteristics that comprise an individual with the ability to bring new ideas to the marketplace and foster their success may be difficult to define. But it’s not much of a stretch to recognize that Richard Kerr, chairman and CEO of the electronic insurance exchange MarketScout, CEO of Bermuda-based Monster Insurance Co., co-founder and chairman of MarketScout Wholesale (MSW), and founder of the Entrepreneurial Insurance Symposium and the Entrepreneurial Insurance Alliance has significant expertise in turning ideas into reality. In short, he is an entrepreneur. In a podcast interview with Insurance Journal’s Stephanie Jones, Kerr shares his thoughts about innovation and entrepreneurship, as well as his vision of future trends in the distribution of property /casualty insurance products. Insurance Journal: What are some of the skill sets that are common among successful entrepreneurs? Richard Kerr: I think it’s a very difficult thing to identify, what is exactly the perfect skill set to become a successful entrepreneur, because they come in all different shapes and sizes, and from all different economic backgrounds. And we thought a lot Richard Kerr about that. Certainly, the folks that we had involved in the symposium, and that are involved in the Entrepreneurial Alliance would love to discover what that model is, because if we could, it would be even better than being able to identify who the best producers are going to be. These entrepreneurs have not only the eye of the tiger, but they have an intellectual capability that enables them to effectuate a plan. I’m not trying to avoid your question, but there really isn’t an identifiable skill set that you can say, well, they grew up strug-

gling and poor, or they grew up and went to an Ivy League school, because you just don’t ever know. I do think that a lot of the experiences that they go through in the early stages of their careers help build them into an entrepreneur. Now, one thing that we do know is that — to draw a football analogy — you have to have good fundamental blocking and tackling skills to become a successful entrepreneur. Just because you have a good idea doesn’t mean you can bring it to fruition. So if anything, we would say good fundamental technical skill sets enable someone who has the entrepreneurial passion to bring it forward and make it a reality. IJ: What strategies would help entrepreneurs navigate now, in a difficult economy? Kerr: In this particular economy, it actually creates more opportunity rather than less. Because when things change, it creates opportunities for entrepreneurs. People that are innovative or entrepreneurial just want the markets to be moving, for things to be happening. A stagnant economy or a stagnant marketplace is not good for an innovator. With things like they are today and with how they have been in our economic world over the past seven, eight, nine years, it has been a catalyst for new creative ideas. So this economy is good for entrepreneurs and it gives them an opportunity to move forward and capture new ideas and present new concepts, because tough times create entrepreneurs. IJ: What are some of the pitfalls entrepre-

38 | INSURANCE JOURNAL-WEST REGION October 17, 2011

neurs face and how can they be avoided? Kerr: I think some entrepreneurs become a legend in their own mind, and they drink too much of their own Kool Aid in the early going, and they’re not realistic about what they really need to do. We all have to realize that every idea is not the best idea. Some ideas can be too early, some can be too late, and some can just be bad. So to be successful, sometimes the best thing you can do is walk away from an idea that you have a lot of your own passion, time and energy in. Every idea is not going to be a good one. ... A good innovator or a good entrepreneur needs to realize that maybe two out of 10 of their ideas should be taken to market, and the other eight are either too early, too late, or just simply not a good idea. IJ: What about companies — how can they foster an entrepreneurial environment within their organizations? Kerr: That largely comes from the top down. And that’s one of the biggest challenges that traditionally we’ve had in the insurance sector. It’s getting better, but if you look back 10, 15, 20 years ago, the insurance agency was the last place to be entrepreneurial. We’ve done things the same way, and still continue to do the same things the same way largely in distribution. Technology has played a huge role in enabling insurance companies and intermediaries to process paper and secure applications, and get quotes out into the marketplace. But if you look at the distribution mechanism, the way that we distribute continued on page 40 www.insurancejournal.com

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IDEA EXCHANGE

Entrepreneurism Entrepreneurism, continued from page 38

and financial sides of the equation. ... insurance, it hasn’t changed very much in the The exchange becomes the go-to resource last 50 years. And in fact, if you look at the age-old institutions, such as Lloyd’s of London for retail agents to capture not only access to the market, but to resolve operational and and London companies, it’s pretty much the financial problems they have. same way today as it was 100 years ago. So everyone’s looking at these ideas, and IJ: What was the impetus they’re continuing to ‘Just because you have for creating the Entreprefoster and implement a good idea doesn’t neurial Insurance Alliance? new concepts, but it’s not that dynamic. It mean you can bring it Kerr: The Entrepreneurial Insurance Alliance, or is getting better, and I to fruition.’ the EIA as we call it, was believe we’ll see a lot formed predominantly because of the sucmore entrepreneurial and innovative ideas, cess of the Entrepreneurial Symposium. particularly in the distribution sector, over Over the course of the past five years, the the course of the next four or five years. symposium has continued to gain more and more attendees and more attention, and as a IJ: Insurance exchanges seem to play into that concept. What does the future looks like result, a lot of these entrepreneurs or these innovators have ideas they want to bring to for insurance exchanges like MarketScout? market but they don’t have a platform to get Kerr: We obviously believe that the their concept to market. For instance, they exchange concept is here to stay, and it is either don’t have the capital they need to the way of the future. So in order to grow, get to the next level, or they don’t have an insurance exchanges are going to have to underwriting partner, or a fronting carrier, come up with a lot more solutions for the or a software provider to assist them in getretail agent than they do today. ting where they need to go. In times past, the retail agent largely was So the EIA was formed to resolve those on their own ... for developing operating issues. And it’s more or less an incubator, procedures, accounting procedures, software where they help these folks incubate these implementation, a sales strategy, and then a ideas, and resolve the issues they need help market appointment. In the future, insurance with. As an example, they may need to raise exchanges such as MarketScout and others $250,000 to get their concept to market. Now, will resolve all those issues for the retail raising $250,000 is infinitely more difficult agent so they can do what they do best. And than raising $200 million, because nobody that is to sell insurance services to customers. wants to take the time and effort to deal with When they come to the exchange as a such a small venue. That’s what the EIA does. retailer, they will be able to have full access, The best way to look at the EIA is it’s an not only to specialty non-admitted markets incubator, and it’s populated by companies and programs and MGAs, but also to the with differing skill sets, strategically selectadmitted marketplace. As opposed to geted, that can provide a big brother incubating ting appointed with two or three very large approach to these upstart, fledgling entreadmitted companies to do their main street preneurial companies. Again, they may need business, and then using multiple wholesalunderwriting support for their product, they ers and MGAs, retail agents will appoint may need fronting support or reinsurance, with one exchange, and it will be that or a specific aid with software or back room exchange’s responsibility to resolve all of the technology. And the companies that are in market access needs that the agent has. the alliance can do that, because it ranges Furthermore, that exchange will also from folks such as AWAC [Allied World resolve their operating issues, their software Assurance Co.] and Ironshore, and Chartis issues, their accounting issues. If they need and Lexington, all the way to Microsoft, financing or help, or if they need expansion Vertifore and investment counselors such as planning, training of producers and a mulStoneRidge and Dowling Hales. ... titude of other things on both the operating 40 | INSURANCE JOURNAL-WEST REGION October 17, 2011

And I’m excited about it, because already we’re seeing the alliance support some of these new innovators and get their concepts to market, whereas before they just flamed out because they couldn’t find the right path. Maybe the person was an exceptional underwriter and was bringing a new MGA to market. But they just needed a little bit of money and a little guidance from operational and financial aspects to get them there. IJ: How does someone who has a great idea get support from the EIA? Do they apply? Kerr: They do apply. Simply, the URL is www.insuranceentrepreneurs.com. ... It will describe what the EIA does and there’s an application. It says “Apply for Support,” and then you profile what particular items that you need. And then it’s remitted to the voting members of the EIA. And those that have an interest respond. ... Maybe they come in and they say “I have a great new product, I just need some help developing a software online rating system.” Then those companies, maybe some such as Microsoft or Vertifore would respond. If they need an underwriting facility, perhaps Ironshore or Chartis would respond. IJ: What final advice would you give to someone who thinks they have a great idea for a new business venture? Kerr: The advice I would say is that while it is extremely difficult to organize yourself and get the capital together, to give it a try. This is the very environment in which you should move forward. It’s tough economic times. The market’s tough, we’re in a very prolonged soft market. However, we’re coming out of that soft market cycle, and sooner or later the economy is going to get better. Now is the time to move in and follow your dream to try and create something meaningful. And most times it will work for you and it will be successful. Even if it doesn’t, it’s going to make you a better person, and you’ll be a more valuable employee or partner to someone in the future. But my advice is, go for it, give it a shot. Note: Listen to the podcast with Richard Kerr at http://www.insurancejournal.tv/videos/5912/. www.insurancejournal.com

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IDEA EXCHANGE

Technology Predictive Analytics Being Used to Manage Agencies, Curb Fraud

arlier this year, experts at WallStreet & Technology (wallstreetandtech.com) identified predictive analytics and cloud computing as two of six hot technologies that will transform the insurance industry in 2011 and beyond. Predictive analytics is not only a key technology to manage better through challenging economic times but it is also a By William Sheldon key to improving customer experience, developing new products /markets and aligning resources for improved business performance. Furthermore, predictive analytics is helping insurers with premium and claims leakage root out fraud. Moreover, cloud-based predictive analytics is enabling companies to implement analytical solutions in record time. Although predictive analytics has been traditionally applied in catastrophe and fraud related assessment, it is now being used to support customer retention initiatives and broker /agent distribution channel strategies. Predictive analytics is also being tapped to mitigate losses through automated claims fraud abuse and detection. Customer Value - Renewal Management Given that customer acquisition typically costs 3X to 5X more than retaining an existing customer, retaining profitable customers is key to achieving healthy growth. In some cases, improving customer retention by as little as 5 percent can increase profitability by a much larger margin of 30 percent to 90 percent. A McKinsey study found that a customer churn of 10 percent focusing on unprofitable policies increased revenues by as much as 25 percent. For insurers using predictive analytics to supplement underwriting by forecasting future customer value, the likelihood of attrition and the cost to service customers can optimize the value of their existing book of businessâ&#x20AC;&#x201D;and free up the investment

needed for customer acquisition initiatives. Leading carriers are using customer retention strategies that combine segmentation, renewal scoring and upsell/cross sell strategies. Segmentation is used to gain a deeper understanding of clients and their profiles by subdividing customers into smaller groups with similar characteristics. Renewal scoring is used to automatically evaluate each policy 60 days prior to its expiration,

rank probability of churn, and recommend discounts or promotions to preserve the best policies. Upsell/cross sell strategies are employed to grow revenue and market share across existing clients. Revenue - Channel Sales Management Agents and brokers remain the primary sales channel for most carriers. Producers are employing different strategies to deal with the tense, yet essential, symbiotic relationship with carriers. According to a Deloitte survey, 42.8 percent of producers will be increasing the number of carriers they work with, while 36.9 percent expect to reduce the number they represent. With very little control and rampant third-party mobility, it can be challenging for carriers to effectively manage their producer relationships. Insurers can gain competitive advantage by understanding and predicting the weaknesses, strengths and growth potential of individual brokers and agents. The key is embedding predictive analytics into existing business processes to better inform business

42 | INSURANCE JOURNAL-WEST REGION October 17, 2011

decision makers and customer-facing personnel, and to suggest recommended actions. With enhanced segmentation and a deeper understanding of the current population of brokers/agents, carriers can take actions to ensure that the best ones are being supported. Predictive analytics can also be used to target prospective brokers/agents that share similar characteristics of a carrierâ&#x20AC;&#x2122;s best current channel partners. The carrier can then implement a cohesive, ongoing process so that the distribution network is optimized with the best mix of brokers/agents to retain and acquire clients. Claims Fraud and Deterrence Carriers often overlook growing revenue by optimizing claims efficiency and preventing fraud. Up to 20 percent of expenses are related to processing claims. By implementing systems to automatically review incoming claims against risk profiles, a carrier can significantly reduce its claim handling costs (by as much as 20 percent to 40 percent) and double its fraud detection rates. Carriers using real-time risk assessment are able to expedite claim handling, focus fraud investigators on high-risk claims and quickly settle low-risk claimsâ&#x20AC;&#x201D; resulting in improved customer experience and revenue preservation. Sales analytics supports customer retention and sales channel strategies. Predictive analytics also supports claims fraud abuse and detection initiatives for loss mitigation. These uses of Sales analytics predictive analytsupports customer ics are improving business perforretention and sales mance for market channel strategies. leading carriers. Sheldon is chief solutions officer, Angoss Software Corp.. Prior to joining Angoss, he held various senior management positions at Paradyz Analytics, CFM Partners and MarketBridge Corp. He can be contacted at bsheldon@ angoss.com or for more information visit www.angoss.com.

www.insurancejournal.com

IDEA EXCHANGE

Growing Your Property Casualty Agency Dramatize Your Agency’s Flood Insurance Promotions Use ‘Flooded Photos’ to Creatively Market Flood Policies

o matter what we mere humans do, nature does whatever she wants, whenever she wants. All we can do is pick up the pieces and rebuild from the devastation that she brings. The latest destructive forces in the United States, as of this writing, were the floods caused by Hurricane Irene. The storm’s heavy rains By Alan Shulman impacted a wide swath of communities from North Carolina deep into New England. Homes and businesses suffered from extensive water damage. To make matters worse, many were uninsured. It’s why property/casualty insurance professionals must continuously encourage consumers and businesses to acquire flood insurance. Personalize Images Be Flood Smart Grab the attention of selected prospects The National Flood Insurance Programs’s and insureds by sending them “flooded” FloodSmart Web site (www.floodsmart.gov) images of their home or commercial propnotes that “Floods are the No. 1 natural disaserty. It’s extremely easy to add a stunningly ter in the United States” and that “nearly 20 realistic illusion of floodwater to any digital percent of flood insurance claims come from photo [see before and after photos of Big moderate-to-low risk areas.” So virtually Ben]. Here’s how to generate this intentionevery property owner, renter, and business ally disturbing imagery. Purchase $99 Adobe can benefit from buying flood insurance. The PhotoShop Elements [www.adobe.com] and key to the sale is getting prospects to recogthe Flaming Pear’s $29 Flood filter plug-in nize their vulnerability. for PhotoShop [www.flamingpear.com/ To many of those unaffected, hurricaneflood.html]. Install both software tools on related tragedies are mere news stories. If your PC or Mac, and you are set to go. the damage didn’t happen to them, their In many cases, there is no need to take family, or a neighbor, then coverage isn’t a new pictures of the subject properties. priority. This not-me Check your records for attitude necessitates suitable file and inspecSend prospects and a more dramatic, tion photos of a resiinsured ‘flooded’ localized marketing dence or business. Also images of their home approach, one that explore the Web for or commercial property. legally useable images. alerts area homeowners and others to the Modify your digital phorisks of flood damage and the fact that it’s tograph with the above software (it’s very not covered by standard policies. The nation- easy to do, really) and save the resulting al flood insurance promotions can only do so photo under a new file name. Then include much. It’s up to individual agencies to do the it, with a well-worded message, as an e-mail rest. Create your own multi-channel camattachment, in a sales letter, on the front of paigns, with personal and local impact, and a self-printed postcard, etc. Let the photo time them to allow for the flood contract’s illustrate how the recipient’s property might 30-day waiting period. look after a major flood, while pointing out www.insurancejournal.com

that the imaginary image is merely a simulation, not a prediction. Localize Images In addition to this personalized approach, run a campaign to position your office as the flood insurance experts in your marketing territory. It’s a great door opener for selling further personal and commercial lines policies. Use the aforementioned software tools to “flood” photos of your city’s skyline, well-known local landmarks, etc. The makebelieve possibilities are endless. Distribute the modified photos by attaching them to your Facebook wall, via photo-enhanced tweets on Twitter, and on your Web site. Further employ the images in display ads, cable TV spots, direct mail, publication inserts, and more for maximum effect. Caution: Never let your creativity get the best of you. Make certain that you employ good taste in your photographs and accompanying messages. Remember that your goal is to enlighten people about flood insurance, not frighten them. Shulman, CPCU, is the publisher of Agency Ideas, a subscription-only sales and marketing newsletter. He is also the author of the many tools posted on the Agency Ideas Instant Download Store. Phone: 800-724-1435. Email: alan@ agencyideas.com. Website: www.agencyideas.com.

October 17, 2011 INSURANCE JOURNAL-NATIONAL REGION | N1

NATIONAL COVERAGE

MyNewMarkets Cyber Liability Market Detail: NAS Insurance Services Inc.’s (www.nasinsurance.com) TechGuard provides protection from class-action lawsuits resulting from E&O and a broad range of network-related exposures. Classes include: data management services, Web site design, software programming, software/ hardware resellers, network installation/

maintenance, systems design, IT project managers, outsourcing companies, ASPs, security consultants. Coverage is available for professional services, network damage, breach of privacy, libel, identity theft, slander, government investigation, data recovery costs, regulatory fines or penalties, and customer notification costs. Special features include: coverage for media perils and unau-

thorized access and virus liability. Copyright infringement coverage for code and content is also available. Available limits: Maximum $5 million Carrier: Lloyd’s States: All states except Ill. Contact: Michael Palotay at 818-808-4476 or e-mail: mpalotay@nasinsurance.com

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Market Detail: Gray-Stone & Co. (www. gray-stone.com) is a full service excess and surplus broker that specializes in professional liability including errors and omissions (E&O), agents E&O, directors and officers (D&O), employment practices liability (EPLI), law firms, property/DIC, commercial auto, package, general liability, workers’ compensation; and homeowners standard, preferred, high-value and hard-to-place. Available limits: As needed Carrier: Unable to disclose States: All states except Wyo., Alaska, and D.C. Contact: Customer service at 805 494-4440

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N2 | INSURANCE JOURNAL-NATIONAL REGION October 17, 2011

Market Detail: National E&S Insurance Brokers Inc. (www.nationaleands.com) has a new companion product designed for manufacturing, distribution, or chemical risks. Cover can be added to an existing admitted general liability package policy. Available limits: Minimum $1 million, maximum $25 million Carrier: Unable to disclose, non-admitted States: All states except N.D. and S.D. Contact: Customer service at 661-266-4444 www.insurancejournal.com

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IDEA EXCHANGE

Commercial Property E&O Spotlight: Insuring Commercial Properties? Important Issues to Watch For M

ost agencies write some degree of commercial insurance. There is a good chance that insuring the building is part of the overall program for these commercial exposures. Unfortunately, as demonstrated by the following claim, numerous issues can occur with this type of exposure. By Curtis M. Pearsall An agency secured coverage for a building owner who leased part of the premises to a customer. The rest of the building was vacant. A fire occurred when a vagrant, sleeping in the vacant area, knocked over a candle. The building sustained damage in the area of $1 million. Following the fire, the carrier denied coverage and started a rescission action claiming: 1) the application stated the building was fully occupied; 2) the square footage was twice as much as what was reported on the

application; and 3) the application stated the building was fully renovated when it was not. The carrier used an inspection company that did not report the above discrepancies. The agent apparently knew the square footage and vacancy responses on the application were incorrect. The client demanded $500,000, and the claim was settled for just over $400,000, with the errors and omissions (E&O) carrier and underlying insurance carrier splitting the setN4 | INSURANCE JOURNAL-NATIONAL REGION October 17, 2011

tlement amount. What could the agent have done better? Let’s take a look.

Visit the Premises It is always advisable to visit the risks. This will help in the marketing of the account to the various markets. Doing a “walk through” with the customer present can help you identify any issues that could cause marketing challenges. It would also enable you to ask some key questions dealing with a multitude of issues, such as occupancy, the plans for the building, when the last time the wiring was updated, etc. Document the questions — and answers — not only in your file, but also in an e-mail/letter back to the customer. This will help address any misunderstandings in communication. In this case, it is possible the agent would have seen evidence of the vagrant occupying part of the structure. Be Honest With Carriers While this sounds like common sense, this unwritten rule is, unfortunately, not always followed. That is a shame because the basis of the relationship between the agency and the carrier is built heavily on trust and honesty. It appears in the claim example that the agent knew the information on the application was incorrect. Were they thinking, “if I tell the carrier the truth, they probably won’t write the risk”? Probably. But that is no excuse. Secure a Signature on the App It appears from the customer’s response that they were unaware of what the agent put on the application. A good approach to take that has significant potential in the defense of an agency is, after completing the application, requesting that the customer review it and, if everything

looks in order, having them sign it. In virtually all jurisdictions, a customer is responsible for the contents of a signed application. If the customer misled the agent in this case, the outcome of the claim would have been much different. Valuation With all due respect to the various approximator tools in the industry, it is almost a “garbage in, garbage out” scenario. The quality of the input definitely determines the quality of the output. Square footage is a key component in conducting a valuation. Through a personal visit, you should be able to pick up on a square footage discrepancy of this magnitude. Don’t Rely on Inspections Should the inspection company have picked up on some of the issues? Probably, but that might depend on what they were asked to look at. Bottom line, it is Don’t rely on the the agent’s inspection company responsito do your job. bility to understand the risk and present it accurately and honestly to the carrier. Since these risks can vary, using one of the various Exposure Analysis Checklists is a great starting point. You don’t have to do anything wrong to get sued, but taking preventive measures could help you reduce the likelihood of a claim like this happening to you. Pearsall, CPCU, ARM, is president of Pearsall Associates Inc., a risk management consulting firm specializing helping agents protect themselves. He is also a special consultant to the Utica National Agents E&O program. Phone: 315-768- 1534. E-mail: curtis@pearsallassociates.com www.insurancejournal.com

SPECIAL REPORT

Technology

High Hopes for High Tech Tech Talk with Reid French, Applied Systems’ New CEO By Andrew Simpson

nsurance agencies are under pressure to quickly adopt new technologies in order to keep up with competitors, according to a newcomer to the insurance industry who is now positioned to help agencies do just that. Reid French, the new CEO of the technology firm, Applied Systems, also believes agents should expect their applications to continue to make it easier for them to work with their carriers while also improving the experience of their customers.

French, whose appointment was announced a month ago, is a technology veteran but an insurance rookie. Yet he believes that there is a “huge opportunity” in the insurance industry around technology. “I think you’re going to see the marketplace adopt it at a more rapid pace than in the past,” he told Insurance Journal. “I think the reason for that is there have been changes that have occurred relative to the likes of Progressive, GEICO and some of the direct-to-consumer models that have really

N6 | INSURANCE JOURNAL-NATIONAL REGION October 17, 2011

embraced technology, advertising and things of that nature. I think that has put pressure on the independent agency market in order to respond.” In one of his first forays into the world of insurance technology, French recently attended the annual conference of Applied Systems Client Network (ASCnet), the user group for Applied Systems, where he was able to speak with agents one-on-one. The experience confirmed his belief in the significance of technology to this industry. www.insurancejournal.com

“When you talk to them [agents], it’s amazing. The ones who are the most forward thinking around technology and the most embracing of technology also tend to be the more profitable agencies. That’s probably not a huge surprise, but I think you’re going to see more and more folks really embrace it and take it on,” he said. The insurance agency applications market is fragmented with no single vendor dominating. Several rankings place Illinois-based Applied Systems as the second largest with just under 8 percent of the market and, according to one analyst, just over $100 million in revenues. Applied Systems says it has about 11,000 customers and 130, 000 users. (Vertafore, with revenues reported to top $130 million is ranked first with about 10 percent of the market. Vertafore claims more than 15,000 agency customers and 500,000 users.)

In 2006, Bain Capital acquired a majority stake in Applied Systems from Vista Equity Partners in a buyout that was reported to be worth $675 million. Long-time Applied Systems chief executive Jim Kellner retained a major stake in the company. Kellner had also remained as CEO until last month when French was handed the keys. Insurance Journal recently spoke with French about the future of Applied Systems and the future of agency technology. Just as insurance carriers and agencies face challenges growing in today’s economy, so, too, do vendors like Applied Systems. Typically, these vendors enjoy deep customer loyalty—it’s rare to lose an account unless a merger is involved. But it’s not easy to grow organically in a recession or in a mar-

ket where agencies and brokerages continue to consolidate. According to a 2010 report by the Independent Insurance Agents and Brokers of America and Future One, there are about 37,500 agencies in the U.S. now, compared to 44,000 in 1996—although the number has been stable since 2006 as a new agency is being formed for every one that goes the way of a merger. Expansion Plans Applied Systems has enjoyed modest growth in its customer base the past few years but would like to grow even more — by expanding into other geographic markets, selling additional business services to existing customers, upgrading customers to the latest applications, attracting more larger accounts and, of course, developing new insurance products. continued on page N8

Who Is Reid French and Why Is He Saying Nice Things About Insurance?

pplied Systems’ new CEO Reid French is no stranger to technology, having worked for several software makers over the past 15 years. One job was with a company called Six Solutions that sold software for professional service organizations. Most recently he was CEO of an $840 million company called Intergraph, whose visualization and mapping programs are used by emergency responders, utilities and governments. “Ultimately, Intergraph was a visualization software company. Really what that means is that all of its software really related to a picture,” said French. He thinks his experience dealing in markets outside the U.S. along with his experience serving large organizations – including the federal government-- should come in handy. Applied Systems is looking to expand its footprint geographically and within the large broker market with Epic. French said that while he lacks an insurance background, he thinks his experiences in other industries can be useful. “Certainly, there are experiences that I’ve had in other industries that I think I can see patterns in the insurance agency market, which hopefully will bring something to bear there,” he said. “However, I will say that one of the great things about Applied is that we have lots of deep domain experience around insurance. I think that’s part of the secret sauce of the company is that domain expertise. Our people know insurance very, very well. What I hope to add is a little bit of a fresh perspective around the development of software and where software companies can add value to their customers.” ‘Noble Thing’ French wants Applied Systems to stay true to its heritage of being insurance experts: “I think at times people consider insurance to be pedestrian, or maybe a stronger word, even boring at times. I think the reality is, one of the things I did get excited around Applied for, insurance is a noble thing. It is not a pedestrian thing. It ultimately helps to protect people and their dreams and their assets and their loved ones in their darkest day. “When you need that agent to help you with an insurance situation, it tends to be a pretty dark day. Something happened to your house, something happened to a loved one, something happened to a car. It’s not a great event. “And I think one of the things that we will try to communicate more to both the marketplace and our customer base is that we recognize that what they’re doing is noble. And we want to make sure that our technology is helping them to carry out that mission to the best of their abilities, to server that customer on that dark day. “I mentioned earlier that when I was at Intergraph, we did these public safety systems. One of the things I always used to say was that when something really happened the first call was to the loved ones and the second one was to 911. Well, guess what? In a lot of these instances, the third phone call is to the independent agent. We’ve got to always remember that. 90+ percent of the time, there’s never an issue, but that one time when there is, they really need their agent and their agent system to perform. We can never forget that as a company.” www.insurancejournal.com

October 17, 2011 INSURANCE JOURNAL-NATIONAL REGION | N7

SPECIAL REPORT

Technology High Tech, continued from page N7

French says Applied Systems is looking to each of these avenues for growth. Thanks in great measure to its newest offering, Epic, the company is “growing very nicely organically right now,” according to French, but he is open to growing through acquisition as Applied Systems did this past spring when it acquired Artizan, a provider of Web-based and outsourced customer service and claims technology for agencies wanting to offer 24 hours a day/7 day a week services. Today Applied Systems operates mostly in the U.S. and Canada but French sees that geographic profile changing. “I think our long-term vision is ultimately to operate in other countries, other Commonwealth countries like the UK, Australia, New Zealand and things of that nature,” he said. Applied Systems’ main customer base is small and midsized agencies with its The Agency Manager (TAM), DORIS and Vision systems. However the company believes that its Epic management system, released in 2008, is a market changer. Epic is an Internetbased – or cloud-- application that is scalable to agencies and brokerages of any size. It is helping Applied Systems make inroads with larger brokerage firms. Since its introduction in 2008, Epic has attracted 10,000 users including thousands from large brokers Willis and Arthur J. Gallagher. Applied would like to reach more in this market while also hanging into its core constituency of mid-sized agencies, according to French.

“The reality is that we have very dedicated users for all of those different products… I don’t think you’re going to see any major revolution in terms of us changing the lineup dramatically. I think what’s probably the more likely outcome is seeing us bring to market additional services for our customers that are software that are delivered as a service. We remain a software company, but I think you’ll see us bring some additional value to our customers. My hope is that they’ll embrace that.“ Additional services would go beyond the company’s own apps to hosting or data back-up services that all agencies need. “[W]hen you talk to an Applied Systems customer, many times it’s a long-lived relationship, going back a decade or more. It’s a trusted partnership. They view us as their technology vendor of choice. We can provide more than just the agency management system,” French said. French thinks acceptance of cloud technology is good for his company and its customers, although “ultimately they get to make that decision as to what they want to do.” More than 50 percent of Applied’s customers have already decided to hop on the cloud over the traditional LAN-based software. French thinks there is a strong case for the movement: “I think it is a good thing because I think it allows them to focus on what’s core to them. What in essence that does is that transfers the problem of hardware, of upgrading, of maintaining connectivity and bandwidth, to us, to us as a software vendor. We probably as a company are -- I don’t mean this as an insult to the agency at all — but that’s in our core. That’s what we do as a company. We’re responsible for making sure software works in an appropriate hardware environment. “Well, as an agency, if you’re using it on a LAN, you’ve got to maintain the hardware. You’ve got to make sure that you’ve got the right equipment. You’ve got to make sure

Cloud computing is a major part of the company’s and industry’s future.

New Services Epic and cloud computing are a major part of the company’s strategy. French does not see any major changes to the company’s existing agency management product line-up but the company will accommodate agencies as they gravitate toward web-based solutions and it will be offering additional, web-based business services to agencies as part of its own growth plan.

N8 | INSURANCE JOURNAL-NATIONAL REGION October 17, 2011

that your upgrades happen on time and things of that nature. I’m not going to say that some organizations make the decision that they want to bring in that the right expertise to do that. But I will tell you to take on a LAN system without the proper expertise is probably not the smart thing to do.” The insurance neophyte acknowledges that he is still learning about the issues of agencies’ real time access to insurers’ customer data and rating and how well that campaign is going. But he has no doubt about its importance. “Ultimately, as we all know, the greater connectivity that we can make across these multiple players in this ecosystem, from a technology and data perspective, the better off we are in terms of automation. That’s motherhood and apple pie. Who can disagree with that kind of a comment?” he said. Insurance Journal asked French about two particular trends and how he sees agency technology dealing with them: society’s increased mobility and the expectations customers have of agencies. Mobility Insurance Journal: More and more people work from home, on the road, using various portable devices. The workday is no longer 9 to 5 for agents, carriers, employees and their customers. Do you see innovation coming in agency systems to deal with this mobility trend? French: “I think that it’s a great trend. It’s one which I think you will see a lot of innovation from Applied over time. I think that certainly when you have a cloud deployment, it becomes more ubiquitous. Through any browser you can access the core underlying functionality that exists within the application. I think you will see absolutely greater push to tablet computers, to mobile phones, things of that nature, to allow people to get to their data because they’re on the move so much more than they used to be. It’s absolutely a trend that Applied is embracing. I think you’ll see some really interesting stuff from us on that front in the years to come. “Ultimately, this data, the big revolution really is that it’s unlocking the power of data within software systems. We have tremenwww.insurancejournal.com

dous data within our agency management systems. Historically, go back 5, 10 years. That was really the purview of the CSR. It was really that customer service rep was the person who really minded it, used it, did transactions with it, etc. “What you’ll see more and more from us is talking about how we can use this data for producers in a much more cogent way. Producers are more mobile, so how do you present it to them, give it to them in a new and exciting way that allows them to get the most out of their investment in the system? “ Customer Expectations Insurance Journal: Customers expect that agencies are going to transact and communicate with their carriers efficiently; they take that for granted. What do agencies need to do to improve how their technology meets the expectations and needs of their customers? French: “I think that’s a great point. This is part of the reason for the Artizan acquisition last year. Artizan really allows an independent agency to have much more touch point to their customers in an offline way. I think that is hugely important to independent agencies to embrace, so that they have that ability for their customers at midnight, when they need information, when they need to print off a certification of some kind, an ID. They have the ability to do that without having to remember to pick up the phone the next morning and call their agent. “Now with that, I will say that I think that most people recognize still that the agent is really there for the relationship and the advice. We, as a technology vendor, never want to step in between that. We don’t want to degrade that relationship in any way, but I don’t think anyone really picks an independent agent based on the transactions, per se. “The transactions can be automated, but the relationship needs to be based on personal touch, personal relationship, etc. I think sometimes people actually get a little confused on that and they start to say, ‘Well, wait a minute, am I being disintermediated with this technology with my customer?’ I think the real forward thinking agencies really realize that they’re not. They’re just giving their customer another avenue to get a transaction done faster.” www.insurancejournal.com

How Agency Technology Drives Profitable Growth

rofitability and growth continue to be the drivers of independent insurance agency valuations, and leading agencies around the country are using new ways to produce profitable growth. “You cannot have strong profits, and you cannot grow, unless you are using technology effectively,” said Shirley Lukens, principal, Reagan Consulting, Atlanta, one of the speakers at the TENCon, ASCnet’s annual Technology, Education & Networking Conference in Florida. ASCnet is the user group for Applied Systems customers. Lukens, who is project manager of the Best Practices study produced in conjunction with the Independent Insurance Agents and Brokers of America, noted that the first Best Practices study in 1993 found an average revenue per agency employee of $81,000, compared to $150,000 today. “Most of that increase in revenue per employee for Best Practices agencies has been driven by technology implementation,” she said. Citing data in the 2010 Best Practices study, Lukens said agencies also are using technology in marketing by embracing email and social networking tools to reach prospects and connect with clients. Three agency leaders gave insights into methods of agency management system utilization. Ryan Headley, principal and chief technology officer, Stratton Agency, San Carlos, Calif., which aims to exceed $210,000 revenue per employee, said that his agency must use social technologies to match its customer base. “We use the power of social media. We are using these ways of communicating that you didn’t have three years ago. We can publish something on our blog that is then sent out through Twitter and then to Facebook,” he said. Headley said that consumers younger than 40 are looking for knowledgeable, professional independent agents to protect their interests, but want to be connected via social networking tools. “We’re in the data revolution now. We had mainframes, then software, then the Internet. Now we have data and all the connections it can give us” as agents, he said. Donna Barr-LaGoy, president, Premier Insurance Consultants, Palm City, Fla., said she took her agency paperless after purchasing it two years ago. Experience was her teacher. Barr worked for a large broker with a home office in New York City’s World Trade Center, and encountered several hurricanes when she worked in its South Florida office later in the decade. “I knew what I wanted when I bought my agency,” she said. “I needed to be paperless, and I got rid of every single paper file.” Her current two-person agency also uses call center backup capabilities on a routine basis, which allow her flexibility to be in touch without having employees in the office. “Because of the technology we are able to spend more time being proactive with our clients, reaching out to them and actually spending time visiting them,” she said. Lisa Parry-Becker, vice president, William B. Parry & Son, Langhorne, Pa., said that Hurricane Irene and Tropical Storm Lee found her out of power but not out of business. She was able to stay in touch with clients via cell phone, email and social networking, despite not being able to physically cross the Delaware River from New Jersey to visit client sites in Pennsylvania. Technology is enabling growth opportunities, Parry-Becker said. Her agency used analysis tools in its agency management system to generate a list of clients with coverage gaps in medical benefits, then created an email and letter campaign to those clients. “In most cases we were able to upsell” by following up with a phone call, she said. October 17, 2011 INSURANCE JOURNAL-NATIONAL REGION | N9

SPOTLIGHT

Technology What’s New, And Not So New, in Technology? Cool Apps There are apps available on smartphones and tablet devices today that agents and brokers utilize for live streaming (Ustream), scanning documents (JotNot), conferencing (GoToMeeting and others), VoIP calls (Skype), and many more. Rick Morgan, senior vice president of Aartrijk, says where

he used to have many tech gadgets while traveling, today he only uses a smartphone and an iPad. “I even use my iPhone to create a Mi-Fi hot spot. I use Google Docs and Dropbox for online doc storage and collaboration. I use Evernote for taking notes, and Dragon and Vlingo for voice recognition. I use Spotify for music sharing. Of course I

use Pages, Keynote, and Numbers (Word, PowerPoint, Excel) apps as well.” Patricia Alexander, an insurance agency consultant, coach and mentor, says some agencies now have iPhone and Android apps for their clients to access information about the agency, obtain insurance quotes from the agency, and even to report a claim. Some apps help deliver information to agency clients when services such as a wrecker are needed, she adds. Cameras and Video Cameras and video devices on phones today are helping industry professionals in many ways, including property and/or auto inspections, accident scenes and other property losses such as fires and floods. Tablet Devices The iPad and other tablet devices are taking over at industry conferences. Professionals use these tools, which in many instances are replacing laptops, to take notes and manage their e-mails at events. Some independent agencies and brokerages are setting up iPads so the devices will log producers into the agency’s network. So even while producers are offsite, their iPad connections allow them to have access to everything they would have on a desktop or laptop, including access to email accounts, the agency management system, the client portal, etc. Mapping Tools Google images are nothing new but continue to prove effective when investigating an insured’s home or business building prior to insuring the property. Adjusters also use Google tools for comparing before and after images during a damage claim. And who could live without today’s navigation tools? Global positioning satellites, or GPS systems, help just about everyone in the industry.

N10 | INSURANCE JOURNAL-NATIONAL REGION October 17, 2011

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Professional Liability Real Estate Professionals: Exposed & Unaware By Tom Rea

s real estate professionals know well, most signs point to slow progress in real estate industry growth. Professionals are left to manage their costs, make cuts where possible, keep up-to-date on industry trends, fight for the best terms for clients and avoid stepping on any toes. However, nixing some expenses like professional liability insurance in the near term can mean debilitating financial hurdles in the future. Agents and brokers need to be aware of the risks their real estate clients are facing in order to help them be strategic about their use of resources in order to ensure longer term successes. Without the

right coverages, real estate clients may put their professional and personal financial future on the line. The Real (Estate) Risks Real estate agents, like insurance agents and brokers, are closely tied into their communities. As the economy has tumbled, they have taken initiatives to grow their practices however possible. While being flexible is helping many agents keep their practices solvent in a difficult economy, it can also lead to new risks. Insurance agents and brokers who understand the ways in which their clients are seeking growth can help them manage the exposures they’re potentially overlooking.

One way many real estate agents are trying to improve their financial outlook is by expanding geographic operations. They are accepting listings and representing clients in new neighborhoods or towns. Because real estate markets typically have significant local differences, agents can face major changes when they venture into new territory. From property values to neighborhood rules and regulations, agents need to be informed about the

areas where they’re expanding their practice. If they are not up to speed, they risk lawsuits, unhappy clients and potentially losing their practice. Real estate professionals are continued on page N14

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CLOSER LOOK Real Estate, continued from page N12

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also adapting to a tough economic environment by offering new or expanded services. While some are simply bringing back services they provided in the past, others are taking on responsibilities they’ve never tackled. For example, some agents are now operating as property managers, property preservationists, title or closing agents and appraisers. In any scenario, agents who are adding to their list of services may also be adding to their list of liabilities. Even agents who have experience offering additional services in the past may face new exposures. Agents adding to their repertoire are likely to be unfamiliar with current procedures, methods, issues or regulations. What’s more, many of these agents are hard pressed for time and may not, for example, have taken training classes. Insurance agents and brokers need to explain the professional and personal risk their real estate clients are taking — and the repercussions in the event they are the target of litigation related to their new services.

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Lending Backlash Closing the deal is arguably the most important step in a real estate transaction. When lending standards are raised, closing can also become one of the most challenging aspects of a real estate transaction. Agents can find themselves on the receiving end of lawsuits if any of the involved parties view them responsible for a sale falling through. Not only can this result in significant reputational damage, but the expense of paying for legal defense and fighting the suit can lead to serious financial stress for real estate professionals. Protecting the Practice Insurance agents and brokers play a key role in helping clients protect their businesses. Risk solutions can come in many forms, from product solutions to risk management resources and professional advisors. Agents and brokers need to consider all of the available risk management techniques and solutions when advising their clients about how best to protect their practices. Maintaining the right professional liability insurance products is important to help clients minimize potential exposures. In addition to ensuring clients have traditional E&O coverages, they should be aware of newer enhancements or more sophisticated continued on page N16

N14 | INSURANCE JOURNAL-NATIONAL REGION October 17, 2011

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Professional Liability Real Estate, continued from page N14

offerings that help protect against today’s emerging exposures. Some of these offerings include: • Network and Information Security Offense Coverage: Protects customers in the event of a network or information security breach, virus transmission or theft or loss of client

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• Failure to Advise: If a real estate client fails to advise a buyer about pollution, fungi or bacteria, they may be sued. With this coverage, clients are not subject to sub-limits or exclusions for neglecting to advise on those damages. Support Solutions Real estate professionals should also be educated about the resources available to them that help support risk management. These may run the gamut from experts to education, each offering unique guidance and help. By pointing to these resources, insurance agents and brokers can solidify their role as an advisor and solution provider for clients. • Professionals: Insurers and agents, lawyers, and accountants who manage risk for a living can help identify individual exposures and provide custom solutions to meet a client’s need. In addition, professional liability insurers offer access to risk Real estate profesmanagement sionals setting up new advisors initiatives to expand for their their practice leads to insureds at additional risks. no additional charge. • Outside Organizations: Many insurance providers, professional liability organizations and risk management associations can offer additional resources (pamphlets, Web sites, etc.) that can provide helpful tips. • Publications: Business magazines, risk management publications, regional magazines and real estate market outlets can put risks into a variety of contexts, each of which will provide value. Insurance agents and brokers understand that insurance is sometimes one of the first expenses that may be cut during tight economic times. However, producers also know that professional liability insurance coverage can often be the most detrimental corner to trim. Insurance agents and brokers can help by providing education, guidance and solutions to support their clients’ business. Rea is the real estate and miscellaneous professional liability product manager for Travelers bond and financial products, professional liability. www.insurancejournal.com

CLOSER LOOK

Professional Liability

More Optimism, but Plenty of Controversy Surrounds Mortgage Broker Errors and Omissions Market Segment signs of an upswing. “We are still seeing submissions and people are still buying nsurance agents serving the coverage,” says Cathy Milazzo, mortgage broker marketplace broker and underwriter for see some signs of improvement Sullivan Wholesale Insurance but they aren’t yet jumping for Inc.’s injoy. The ‘There are no standard house miscellaneous mortgage markets that I know E&O probrokers of that want to write gram with error and mortgage brokers E&O.’ Lloyd’s. omissions “There is a (E&O) market became severely strained lot of good business out there, and a lot of good accounts.” when the 2008 economic crisis hit. Capacity shrunk dramatical- Sullivan Wholesale is based in San Diego, Calif. ly, rates went up, and business from mortgage brokers dwindled New Entries as brokers consolidated or went Agents and brokers say they out of business completely. are also beginning to see new Insurance agents and brokers selling E&O for this industry are entrants getting into the real cautious but encouraged by some estate market and some of the

By Amy O’Connor

N18 | INSURANCE JOURNAL-NATIONAL REGION October 17, 2011

established players broadening their risk appetite again. “I do expect some more [insurance] companies to come into this field in the next few years,” says David J. Jackson, area vice president for Mortgage Insurance Agency, a division of Arthur J. Gallagher Risk Management Services Inc., in Crystal Lake, Ill. “There hasn’t been subprime or the other loans for the last two to three years and underwriting a mortgage has gotten a lot tougher, so new carriers are looking at this as a new area that might be worth getting into because claims might not be as bad as they were the last few years.” Mike Smith, president of Axis Insurance Agency in Franklin Lakes, N.J., agrees.

“I think the carriers are starting again to get back into the market,” he says. “They all did a mass exodus three years ago but slowly but surely we are seeing markets come back into play.” Milazzo says higher rates and tighter underwriting are just par for the course in the mortgage brokers market now. “Most of the markets have increased their rates for this class of business, especially in California, which is considered a high-risk state and certain counties are considered judicial hell holes, which impacts ratings and pricing,” says Milazzo. “But oddly enough there are markets that are saying, ‘we have learned our lesson, let’s move forward, let’s write business.’” continued on page N20 www.insurancejournal.com

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Professional Liability E&O Segment, continued from page N18

thing because of the history going on the last Agents just are not sure if this trend will five years,” says Schrum. continue. “If you are in with a market, your best bet They say they are keeping an eye on the is to give them something rather than move news for the latest developments such as from place to place, especially if you have AIG suing Bank of America, banks seeking had a claim,” she explains. “All policies are liability shields against future mortgages, claims-made and continuity means a lot.” and settlement talks against improper mortContinuity is also imporgage practices. tant when it comes to mort“Those of us in the ‘Right now for gage broker insurers lasting in market see it coming mortgage brokers this class, says Schrum. as a second wave [of to move coverage “Some [insurers] are claims] if you will,” from place to place flashes in the pan or are here says Smith. “We haven’t is not a good thing.’ for a while then out because seen much of an uptick they underwrite for a loss. in claims [so far] but You have to be smart if you want to be here we don’t know if those claims will stay at for a long time and you can’t underwrite for the top level or if they will make their way a loss,” she says. down to the mortgage broker level. We have “There needs to be a tradition or some all talked about it and wouldn’t be surprised period of time [in the business] for underto see an uptick in claims, but we haven’t writers to loosen up their belts because they seen them yet.” did take a blood bath. There are no standard markets that I know of that want to write In Limbo mortgage brokers E&O.” Sue Schrum, president of BIS Insurance Group in Lebanon, Tenn., concentrates on What’s Next for Mortgage Brokers? smaller mortgage brokerages. She says this Jackson says the future of the mortgage class is still very much in limbo. broker industry is as uncertain as the insur“I thought that there was a light at the ance industry’s attitude towards it. end of the tunnel there for a while and that Mortgage brokers face the possibility of mortgage business was going to pick up,” she says. “But it all depends on the economy. stricter banking regulations and laws directed at them and how they are paid. Jackson If it picks up and funding sources are there, expects more mortgage broker business will mortgage business will pick up.” be taken over by mortgage bankers, who She says the uncertain claims future work with warehouse lenders to get a waremakes continuity with an insurer essential house line of credit established, and then to mortgage brokers getting the coverage sell the loan off to an investor. they need at a better price. “Mortgage bankers are doing much bet“Right now for mortgage brokers to move ter. They are the way of the future for this coverage from place to place is not a good

N20 | INSURANCE JOURNAL-NATIONAL REGION October 17, 2011

industry,” he says. “The bulk of the claims activity for the mortgage industry was from mortgage brokers. A lot of have gone out of business — the mortgage broker field has been decimated.” Jackson says he doesn’t think that mortgage brokers will go away completely, but that mortgage bankers are now better capitalized and utilizing better technology, which will make them more attractive, especially to carriers looking at insuring this class. Mortgage Insurance Agency was acquired by Arthur J. Gallagher in June of this year and is now developing a fraud product through Lloyd’s of London that gives up to $100,000 in coverage. AJG and Mortgage Insurance Agency are also starting a mortgage division within Gallagher they expect to call Mortgage Banking Solutions. Jackson says they hope to have the division fully up and running within two years. Understand the Risks When it comes to working with the class right now, Smith says agents need to know the difference between mortgage brokers and bankers and what a repurchase agreement is, because that is not a covered E&O claim. Failing to do so just creates more problems for an already troubled segment. “Agents need to make sure that the insured understands the risks,” he says. “You see claims when they haven’t fully explained the coverage to the insured. If you get a class of business that carriers are running from, it is important to understand what the coverage is.”

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Top Performing P/C Insurers Top 25 P/C Insurersâ&#x20AC;&#x2122; Direct Premium Growth Increases 11%, June 30, 2011 Versus June 30, 2010 By Douglas A. Powell

roperty/casualty insurance companies continued to serve their clients despite the tough economic conditions that have

defined the better part of the past decade as well as an increased number of catastrophic events in the first half of 2011. In the United States, in the second quarter of 2011, there were more than 80 catastrophes

that resulted in billions of dollars of losses to insurers. This did not induce Mother Nature into taking a break from the storm activity, as additional losses are anticipated from the continued on page N24

Top 25 Property/Casualty Insurers Based Upon Dollar Amount of Direct Premium Written (DPW) Growth Six Months Ending June 30, 2011 versus June 30, 2010 DPW Growth Rank Company Name

DPW 6/30/2011

DPW 6/301/2010

DPW $ Change

DPW % Change

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

National Union Fire Insurance Co. of Pittsburgh 4,576,233,499 3,919,039,556 657,193,943 16.77% Liberty Mutual Insurance Co. 2,286,487,698 1,913,881,220 372,606,478 19.47% State Farm Mutual Auto Insurance Co. 15,260,030,311 14,973,967,978 286,062,333 1.91% Allstate Fire and Casualty Insurance Co. 1,961,708,088 1,705,153,802 256,554,286 15.05% GEICO General Insurance Co. 3,073,772,459 2,833,955,400 239,817,059 8.46% Travelers Home & Marine Insurance Co. 1,333,345,371 1,116,640,122 216,705,249 19.41% Westchester Fire Insurance Co. 213,937,910 -51,315 213,989,225 N/A Fidelity & Guaranty Insurance Underwriters 196,615,433 2,245,539 194,369,894 8655.82% Starr Indemnity & Liability Co. 368,472,634 200,931,403 167,541,231 83.38% American Agri Business Insurance Co. 552,152,411 385,415,582 166,736,829 43.26% Commerce & Industry Insurance Co. 595,013,771 429,143,003 165,870,768 38.65% GEICO Indemnity Co. 2,061,074,963 1,904,316,820 156,758,143 8.23% Travelers Property Casualty Co. 1,967,881,387 1,815,437,362 152,444,025 8.40% NAU Country Insurance Co. 409,977,289 280,231,624 129,745,665 46.30% 21st Century Centennial Insurance Co. 275,399,984 155,214,118 120,185,866 77.43% Garrison Property and Casualty Insurance Co. 341,918,669 231,224,604 110,694,065 47.87% Zurich American Insurance Co. of IL 131,718,638 25,393,920 106,324,718 418.70% Government Employees Insurance Co. 2,183,506,521 2,083,176,282 100,330,239 4.82% USAA General Indemnity Co. 500,876,551 401,259,991 99,616,560 24.83% Continental Casualty Co. 2,097,601,077 1,998,863,579 98,737,498 4.94% Producers Agriculture Insurance Co. 217,733,336 120,419,382 97,313,954 80.81% United Serv Automobile Association 2,954,026,958 2,857,864,629 96,162,329 3.36% Great American Insurance Co. 575,701,974 480,497,645 95,204,329 19.81% American Zurich Insurance Co. 502,792,615 410,051,759 92,740,856 22.62% Travelers Casualty Insurance Co. of America 391,757,649 299,419,031 92,338,618 30.84% Top 25 Companies Based on DPW Growth 45,029,737,196 40,543,693,036 4,486,044,160 11.06% All Other Companies 199,450,849,653 198,211,850,360 1,238,999,293 0.63% Total 244,480,586,849 238,755,543,396 5,725,043,453 2.40% Data Source: The National Association of Insurance Commissioners, Kansas City, Mo., by permission. Information derived from a Highline Data Product. The NAIC and Highline Data do not endorse any analysis or conclusion based on the use of its data.

N22 | INSURANCE JOURNAL-NATIONAL REGION October 17, 2011

www.insurancejournal.com

Wade Reece Chairman & CEO, BB&T Insurance Services

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IDEA EXCHANGE

Top Performing P/C Insurers Top 25, continued from page N22

catastrophes that occurred during the third quarter of 2011. Despite these catastrophic occurrences and the overall economic uncertainty, for the six months ending June 30, 2011, P/C companies comprising the Top 25 writers of P/C insurance in terms of direct premium growth leveraged their experience and increased their direct premium written

more than 11 percent over the six months ending June 30, 2011, an increase of approximately $4.5 billion in premium. This is an impressive display of growth, financial stability and leveraging of experience by the Top 25 carriers. The Top 25 wrote over 18 percent of the P/C insurance industryâ&#x20AC;&#x2122;s direct written premium in the first half of 2011. However, in previous quar-

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N24 | INSURANCE JOURNAL-NATIONAL REGION October 17, 2011

ters, the Top 25 have consistently written more than 20 percent of the industryâ&#x20AC;&#x2122;s direct premium written. In contrast, the more than 2,500 insurers that comprise the remainder of the industry did not fare as well, as their six month direct written premium increased a mere 0.6 percent, or $1.2 billion, over last year. In total, direct premium written for the P/C industry was up more than $5.7 billion. This should be seen as good news and could be a precursor of how 2011 will end. The last time the P/C industry increased direct premium written over the first half of the prior year was 2007. This was also the last year in which direct premium written increased year over year. It was noted during the first quarter that the growth in direct premium written period over period was not a result of rate increases due to disasters, since the disasters occurred after the financial results were reported. If companies increased their rates prior to these disasters, it was anticipated at that time that direct written premium would increase period over period for subsequent reporting periods as a result of further rate increases relating to the catastrophic weather events. Any rate increases resulting from these catastrophic events should take effect in the coming reporting periods and increase the period over period results for direct premium written. Moreover, as the June 30, 2011 results for direct premium written imply, the pricing cycle may have reached its bottom and firmer prices could become more evident in the following quarters. This might continue to assist all participants in the P/C insurance industry report period-to-period premium growth. Powell is a senior financial analyst with Demotech Inc. Founded in 1985, Demotech is a Columbus, Ohio-based financial analysis firm that provides services to regional insurance companies, title underwriters and specialty insurance markets. Demotech has been assigning Financial Stability RatingsÂŽ (FSRs) to these markets since 1992. FSRs of A or better are accepted by the secondary mortgage marketplace, as well as virtually all mortgage lenders, an increasing number of umbrella insurance markets and some writers of insurance agents errors and omissions insurance. Web site: www.demotech.com. www.insurancejournal.com

NATIONAL COVERAGE

News&Markets

Survey: A Few More Years Before Med Liability Market Hardens

ccording to a new annual rate survey by Medical Liability Monitor, base-rate premiums for medical professional liability insurance (MPLI) continued their downward trend for a sixth consecutive year. The current soft market condition is longer and deeper than any previous soft market, it found. The survey said it will likely be a few more years before the market hardens. This trend has been taking place while the MPLI industry posted one of its best financial years in 2010, challenging the traditional definition of a soft market, according to the survey. Majority of Rates Remained Flat “The MPLI market has steadily continued to grow softer, despite its continued profitability,” said Michael Matray, editor of the Medical Liability Monitor. “It’s fairly clear that the effects of the industry’s soft market have been disguised by companies releasing past reserves, artificially inflating the industry’s profits. Truth be told, this soft market has lasted twice as long and been twice as deep as any previous soft market.” This year’s rate survey depicts another year where the majority of rates remained flat (55 percent of all rates did not change). Where rates did move downward, a resounding majority (90 percent) decreased between 0.1 percent and 9.9 percent; 7 percent of downward rate changes fell in between 10 and 19.9 percent, and a small number of rates decreased by 20-or-more percent. So while overall rates did decrease, at face value, their fall was not as precipitous as in year’s past.

credits are figured into the mix, closer to the overall average decline seen in 2008 and 2009 when credits were not being offered quite as freely. In this year’s survey, 11 percent of surveyed companies introduced new credits during the past year; this is in addition to the nearly 20 percent of companies that added new credits the previous year. This suggests this particular strategy for attracting insureds may be coming to a natural end, as there are only so many classes of credits possible. Healthcare Groups Another trend found this year is a shared concern over the migration of independent physicians toward becoming employees of hospitals or large healthcare groups. More than half of all respondents said this

consolidation trend, where formerly independent physicians join larger healthcare delivery systems and receive MPL insurance through their employer, is the most worrisome threat to their market share. This trend will likely exacerbate as the Patient Protection & Affordable Care Act is implemented and the formation of accountable care organizations begins to flourish. Looking ahead, MPLI profitability will likely come under some pressure as past reserves eventually run their course. But like the U.S. job market and economy in general, it will likely take a few years before the MPL market hardens, the survey said. Fortunately, the industry is starting from a place of strength in terms of expertise and finances as it rouses itself to address these challenges, according to Medical Liability Monitor. Medical Liability Monitor is a publication that reports exclusively on medical professional liability insurance.

Using Schedule Credit One trend is that MPL insurers’ use of schedule credits may have masked the full decline in MPLI rates. Because credits work to lower the actual charged rates beyond the manual rates filed with the states, a reported 0.2-percent overall average reduction in manual rates could, in fact, be a 2- to 4 percent actual reduction when schedule www.insurancejournal.com

October 17, 2011 INSURANCE JOURNAL-NATIONAL REGION | N25

NATIONAL COVERAGE

News&Markets Medical Liability Insurers in Good Financial Health, Report Says

edical professional liability insurance (MPLI) carriers are in a strong financial position overall and the insurers are exhibiting rate discipline in soft market conditions, according to a report by A.M. Best. The past year showed balance sheet equity positions and operating leverage measures improving to very favorable conditions and capitalization ratios rising to levels not seen in nearly a decade, the report said. While the underwriting profitability contracted last year, as had been anticipated, operating results were strong despite a decline in premium volume An Emerging Competitor According to the report, MPLI writers showed strong operating earnings amid flat claim frequency rates and only modest increases in average claim severity. And in the past year, MPLI carriers have been spending time and effort in formalizing

sound enterprise risk management processes and cycle-management techniques. The report examines MPLI sector conditions in 2010 and the early part of 2011. According to the report, in 2010: • The MPLI market continued to outperform the total U.S. property/casualty industry composite in key financial indicators including combined ratio, operating ratio, net investment income and policyholder dividends. • Carriers in a number of states indicated an emerging competitor for MPLI business is the phenomenon of hospital organizations acquiring entire physician practices and incorporating those exposures into the hospital’s own captive insurer or other insurance program. • Despite progressive declines in premium revenues, the MPLI calendar-year pure loss and loss-adjustment expense (LAE) ratio has remained essentially flat the past three years

N26 | INSURANCE JOURNAL-NATIONAL REGION October 17, 2011

at around 60 percent. • The policyholder dividend ratio reached its highest level in five years at 5.3 percent. Decline in Frequency Rates The report also commented on possible reasons for the decline in frequency rates. It said most industry participants agree that part of the explanation is the result of a focus on education; application of best practices and standards of patient care; and a wide dissemination of risk-management programs to practicing health care providers. How the MPLI environment will change in coming months depends on several factors, according to the report. They include: the implementation of new health care mandates, the effectiveness of mechanisms for managing health care costs, and the effects that inflation will have on the delivery of health care services and products.

www.insurancejournal.com

Auto Insurers’ Loss Ratios Rise in Q2 2011 T

ornadoes and thunderstorms in the South and Midwest made the 2011 second quarter tumultuous for U.S. property writers. The industry loss ratio, before consideration of reinsurance, climbed to 70.6 percent, marking the industry’s second worst performance since 2001 and far outpacing the loss ratios of 58.1 percent and 56.2 percent for the 2010 and 2009 second quarters, respectively, according to SNL Insurance, a division of SNL. The industry premium remained essentially flat, decreasing just 0.2 percent from the 2010 second quarter. Auto insurance companies also took a big hit thanks to major catastrophes. State Farm Mutual Automobile Insurance Co., the largest U.S. auto writer, took a major blow to its profitability in the quarter. State Farm experienced a direct loss ratio of 86.3 percent for auto physical damage, approximately 2,000 basis points higher than

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the loss ratios reported for the previous two second quarters. State Farm writes almost a quarter of all auto physical damage premium in the tornadoaffected states of Alabama, Mississippi, Missouri and Oklahoma, more than the next three largest writers combined. The rest of the top five overall writers — Allstate Corp., Berkshire Hathaway Inc. — including GEICO Corp., Progressive Corp. and Zurich Financial Services Ltd. — including 21st Century and Farmers Group Inc. — all saw their loss ratios increase compared to the second quarter of 2010, though these increases were smaller than that experienced by State Farm. Travelers Cos. Inc., Erie Indemnity Co., Southern Farm Bureau Casualty Insurance Group and State Auto Financial Corp. also

saw sizable hits to their loss ratios. Southern Farm Bureau is a regional insurer that wrote 26 percent of its private auto business in Mississippi in 2010, producing considerable exposure to the April 27 tornadoes in Smithville and Greensburg, Miss., as well as other damaging storms in the Southeastern U.S. Less Exposure Not all of the top auto carriers were exposed to the tornadoes. Mercury General Corp., Fundacion MAPFRE, Auto Club Insurance Association Group, Hanover Insurance Group Inc. and New Jersey Manufacturers Insurance Co. are all regional writers whose auto business experienced minimal or no impact from the tornadoes that affected most of the industry.

October 17, 2011 INSURANCE JOURNAL-NATIONAL REGION | N27

nsurance Journal is pleased to publish its 2011 Law Firm Directory. This is a snapshot of the many law firms providing legal services to the insurance industry, throughout the United States. Companies are listed by the services they provide. Donâ&#x20AC;&#x2122;t forget to visit our interactive online YellowPages Directory, where you can search for companies by category, location, name or keyword. www.insurancejournal.com/yellowpages. To be included in the online directory or future Law Firm Directories, please contact Kristine at khoney@insurancejournal.com or 1-800-897-9965 ext 132.

Arbitration Andrew Barile Consulting Corp, Inc. Baldwin & Associates, LLC Beirne, Maynard & Parsons, LLP Breazeale, Sachse & Wilson, LLP Cunningham Meyer & Vedrine, PC Law Offices Douglas R. Soderland Morris, Manning & Martin, LLP Selskiadr (Mediation & Arbitration Svcs) Simpson Thacher & Bartlett, LLP Tarshis, Catania, Liberth, Mahon & Milligram Tighe & Cottrell, PA The Hunt Law Group, LLC Volpe, Bajalia, Wickes, Rogerson & Wachs, PA

Defense Lawyers Aaronson Rappaport Feinstein & Deutsch, LLP Baker Davis & McQueen, PLLC Barnum & Clinton, PLLC Bull and Associates, PA Cheadle Law Craig, Terrill, Hale & Grantham, LLP Cunningham Meyer & Vedrine, PC DKG & Assoc, PLLC - Law Office of Daylen K. Gallman Fowler Rodriquez Valdes-Fauli Gardner, Willis, Sweat & Handelman, LLP Gray Duffy, LLP Harris, Karstaedt, Jamison & Powers, PC Jeffrey Samel & Partners Joley, Nussbaumer, Oliver, Dickerson & Beasley, PC Kirkpatrick & Startzel, PS Kovarik, Ellison & Mathis, PC Lambert Coffin Latsha Davis & McKenna, PC Law Offices of David L. Brault Law Offices Douglas R. Soderland

Martin & Martin, PA Morris, Manning & Martin, LLP My Texas Pi Nelsen, Thompson, Pegue & Thornton, APC

Peterson Bernard Pietragallo Gordon Alfano Bosick & Raspanti, LLP Provosty & Gankendorff, LLC Randolph M. Even & Associates, a PLC Sanchez Daniels & Hoffman, LLP Scott, Sullivan, Streetman & Fox, PC Tarshis, Catania, Liberth, Mahon & Milligram Templeton Group, PC The Hunt Law Group, LLC The Rietz Law Firm, LLC Tighe & Cottrell, PA White Fleischner & Fino, LLP Ungarino & Exckert, LLC Yaron & Associates

Expert Witness Andrew Barile Consulting Corp, Inc. Atlanta Engineering Services, Inc. Baker Davis & McQueen, PLLC Baldwin & Associates, LLC Laughlin Engineering Firm, LLC Safety & Risk Control Services, Inc. Second Nature Research, Inc. WeatherMark, LLC Weather Surveys

Legal Reinsurance Beirne, Maynard & Parsons, LLP Morris, Manning & Martin, LLP Simpson Thacher & Bartlett, LLP Volpe, Bajalia, Wickes, Rogerson & Wachs, PA

N28 | INSURANCE JOURNAL-NATIONAL REGION October 17, 2011

Legal Services Aaronson Rappaport Feinstein & Deutsch, LLP Andrew Barile Consulting Corp, Inc. Baker Davis & McQueen, PLLC Barnum & Clinton, PLLC Beirne, Maynard & Parsons, LLP Breazeale, Sachse & Wilson, LLP Boyd & Jenerette, PA Bull and Associates, PA Cheadle Law DKG & Assoc, PLLC - Law Office of Daylen K. Gallman Fowler Rodriquez Valdes-Fauli Gardner, Willis, Sweat & Handelman, LLP Harris, Karstaedt, Jamison & Powers, PC Hennessy & Walker, PC Jeffrey Samel & Partners Kirkpatrick & Startzel, PS Kovarik, Ellison & Mathis, PC Lambert Coffin Latsha Davis & McKenna, PC Law Offices of David C. Knieriem Law Offices of David L. Brault Martin & Martin, PA Morris, Manning & Martin, LLP My Texas Pi Nursing Home & Elder Abuse Law Center

Peterson Bernard Pietragallo Gordon Alfano Bosick & Raspanti, LLP Provosty & Gankendorff, LLC Sanchez Daniels & Hoffman, LLP Scott, Sullivan, Streetman & Fox, PC Simpson Thacher & Bartlett, LLP Tarshis, Catania, Liberth, Mahon & Milligram Templeton Group, PC The American Legal Group The Hunt Law Group, LLC The Rietz Law Firm, LLC www.insurancejournal.com

Alphabetical Listing of Companies Tighe & Cottrell, PA Volpe, Bajalia, Wickes, Rogerson & Wachs, PA WeatherMark, LLC Weather Surveys White Fleischner & Fino, LLP Yaron & Associates

Mediation Baldwin & Associates, LLC Breazeale, Sachse & Wilson, LLP Bull and Associates, PA Cunningham Meyer & Vedrine, PC Kirkpatrick & Startzel, PS Morris, Manning & Martin, LLP Nelsen, Thompson, Pegue & Thornton, APC Nursing Home & Elder Abuse Law Center Pietragallo Gordon Alfano Bosick & Raspanti, LLP Randolph M. Even & Associates, a PLC Scott, Sullivan, Streetman & Fox, PC Selskiadr (Mediation & Arbitration Svcs)

Prepaid Legal Barnum & Clinton, PLLC

Process Service My Texas Pi The American Legal Group

Subrogation Services Cheadle Law Hennessy & Walker, PC Kovarik, Ellison & Mathis, PC Lambert Coffin Law Offices of David C. Knieriem Martin & Martin, PA Nelsen, Thompson, Pegue & Thornton, APC Provosty & Gankendorff, LLC Templeton Group, PC White Fleischner & Fino, LLP

Other Atlanta Engineering Services, Inc. - Forensic Engineer DKG & Associates, PLLC - Commercial Litigation Gardner, Willis, Sweat & Handelman - Workers’ Comp ITW Interpreting Svcs - Telephone Interpreting Nursing Home & Elder Abuse - Elder Abuse Attorneys Second Nature Research, Inc. - Private Investigator WeatherMark, LLC - Past Weather Yaron & Associates - Insurance Coverage

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Aaronson Rappaport Feinstein & Deutsch, LLP

Cunningham Meyer & Vedrine, PC

600 Third Ave., New York, NY 10016 Phone: (212) 593-6700, Fax: (212) 593-6970 E-mail: mbfeinstein@arfd.com Website: www.arfd.com

Warrenville, IL - Phone: (630) 260-8600 E-mail: wcunningham@cmvlaw.com Chicago, IL - Phone: (312) 578-0049 E-mail: mslovis@cmvlaw.com Website: www.cmvlaw.com

Andrew Barile Consulting Corp, Inc. 2424B Badajoz Pl., Carlsbad, CA 92009 Phone: (619) 507-0354, (561) 625-8007 E-mail: abarile@abarileconsult.com Website: www.abarileconsult.com

DKG & Associates, PLLC Law Office of Daylen K. Gallman 4514 Travis St., Ste. 204, Dallas, TX 75205 Phone: (214) 521-1093, Fax: (214) 219-8776 E-mail: daylen@dkglaw.net Website: www.dkglaw.net

Atlanta Engineering Services, Inc. 185 Thompson St., Alpharetta, GA 30009 Phone: (678) 297-2565, Fax: (678) 297-2560 E-mail: jmckinnon@atlantaeng.com Website: www.atlantaeng.com

Fowler Rodriquez Valdes-Fauli 400 Poydras St., 30th Fl, New Orleans, LA 70130 Phone: (504) 523-2600, Fax: (504) 523-2705 E-mail: fow@frvf-law.com

Baker Davis & McQueen, PLLC 320 Ninth St., Ste. 200, Huntington, W. Virginia 25701 Phone: (304) 522-6906, Fax: (304) 522-6910 E-mail: jmcqueen@bdmlawoﬃces.com Website: www.bdmlawoﬃces.com

Gardner, Willis, Sweat & Handelman, LLP 2408 Westgate Dr., Albany, GA 31707 Phone: (229) 883-2441, Fax: (229) 888-8148 E-mail: gwsh@gwsh-law.com Website: www.gwsh-law.com

Baldwin & Associates, LLC 1429 Davenport Dr., Trinity, FL 34655 Phone: (727) 375-0565, Fax: (727) 230-7535 E-mail: danbaldwin@baldwinandassociates.com Website: www.baldwinandassociates.com

Gray Duffy, LLP

Barnum & Clinton, PLLC

Harris, Karstaedt, Jamison & Powers, PC

1011 24th Ave. NW, Norman, OK 73069 Phone: (405) 579-7300, Fax: (405) 579-0140 E-mail: cbarnum@coxinet.net

10333 E. Dry Creek Rd., Ste. 300, Englewood, CO 80112 Phone: (720) 875-9140, Fax: (720) 875-9141 E-mail: hkjp@hkjp.com Website: www.hkjp.com

15760 Ventura Blvd, 16th Fl, Encino, CA 91436 Phone: (818) 907-4000 Website: www.grayduffylaw.com

Beirne, Maynard & Parsons, LLP 1300 Post Oak Blvd., Ste. 2500, Houston, TX 77056 Phone: (713) 623-0887, Fax: (713) 960-1527 E-mail: info@bmpllp.com Website: www.bmpllp.com

Hennessy & Walker, PC 217 Washington St., Toms River, NJ 08753 Phone: (732)-505-4800, Fax: (732) 505-4813 E-mail: rallen@subrogation.net Website: www.subrogation.net

Boyd & Jenerette, PA 201 N. Hogan St., Ste. 400, Jacksonville, FL 32202 Phone: (904) 353-6241, Fax: (904) 353-2863 E-mail: firm@boyd-jenerette.com Website: www.boyd-jenerette.com

ITW Interpreting Services 118 W. Olive Ave., Monrovia, CA 91016 Phone: (877) 489-7378, Fax: (626) 359-8053 E-mail: gordon@itwservices.com Website: www.itwservices.com

Breazeale, Sachse & Wilson, LLP Jeffrey Samel & Partners

P.O. Box 3197, Baton Rouge, LA 70821-3197 Phone: (225) 387-4000, Fax: (225) 387-5397 E-mail: info@bswllp.com Website: www.bswllp.com

150 Broadway, 20th Fl, New York, NY 10038 Phone: (212) 587-9690, Fax: (212) 587-9673 E-mail: js@jeffreysamel.com Website: www.jeffreysamel.com

Bull and Associates, PA Joley, Nussbaumer, Oliver, Dickerson & Beasley, PC

111 N. Orange Ave., Ste. 875, Orlando, FL 32801 Phone: (407) 843-5291, Fax: (407) 843-4920 E-mail: smbull@bull-law.com Website: www.bull-law.com

8 E. Washington St., Belleville, IL 62220 Phone: (618) 235-2020, Fax: (618) 235-9632 E-mail: firm@ilmoattorneys.com Website: www.joleylaw.com

Cheadle Law 2404 Crestmoor Rd., Nashville, TN 37215 Phone: (615) 254-1009, Fax: (615) 254-9298 E-mail: gdodd@cheadlelaw.com Website: www.cheadlelaw.com

Kirkpatrick & Startzel, PS

Craig, Terrill, Hale & Grantham, LLP 9816 Slide Rd., Ste. 201, Lubbock, TX 79424 Phone: (806) 744-3232, Fax: (806) 744-2211 E-mail: jamien@cthglawfirm.com Website: www.cthglawfirm.com

1717 S. Rustle Rd., Ste. 102, Spokane, WA 99224 Phone: (509) 455-3647, Fax: (509) 624-2081 E-mail: firm@ks-lawyers.com Website: www.ks-lawyers.com

Kovarik, Ellison & Mathis, PC 1715 11th St., P.O. Box 340, Gering, NE 69341 Phone: (308) 436-5297, Fax: (308) 436-2297 E-mail: jellison@neblawyer.com Website: www.neblawyer.com October 17, 2011 INSURANCE JOURNAL-NATIONAL REGION | N29

Alphabetical Listing of Companies Lambert Coffin

Templeton Group, PC

477 Congress St., Portland, ME 04101 Phone: (207) 874-4000, Fax: (207) 874-4040 E-mail: info@lambertcoﬃn.com Website: www.lambertcoﬃn.com

400 Union Hill Dr., Ste 210, Birmingham, AL 35209 Phone: (205) 870-4346 E-mail: jerry@ttgpc.com Website: www.ttgpc.com

Latsha Davis & McKenna, PC 1700 Bent Creek Blvd, Ste. 140, Mechanicsburg, PA 17050 Phone: (717) 620-2424, Fax: (717) 620-2444 E-mail: info@ldylaw.com Website: www.ldylaw.com

Laughlin Engineering Firm, LLC 840 Threadneedle, Ste. 185, Houston, TX 77079 Phone: (281) 741-9226 E-mail: expert@laughlinfirm.com Website: www.laughlinfirm.com

Law Offices of David C. Knieriem 7711 Bonhomme, Ste. 850, Clayton, MO 63105 Phone: (314) 862-5110, Fax: (314) 862-5943 E-mail: attorneydavek@cs.com Website: www.attorneydavek.com

Law Offices of David L. Brault 6B Liberty, Ste. 240, Aliso Viejo, CA 92656 Phone: (949) 458-3560, Fax: (949) 458-3588 E-mail: dlbrault@dlblaw.net

Peterson Bernard 1550 Southern Blvd., Ste. 300, W. Palm Beach, FL 33406 Phone: (561) 686-5005, Fax: (561) 471-5603 E-mail: dennisvandenberg@wpb-law.com Website: www.petersonbernard.com An insurance coverage and defense firm handling matters throughout Florida for over 30 years with excellent results at reasonable cost. Offices in Stuart, West Palm Beach and Fort Lauderdale, FL

Pietragallo Gordon Alfano Bosick & Raspanti, LLP One Oxford Centre, 38th Fl, Pittsburgh, PA 15219 Phone: (412) 263-2000, Fax: (412) 263-2001 E-mail: info@pietragallo.com Website: www.pietragallo.com

The American Legal Group 3383 Alpine St. NE, Canton, OH 44721 Phone: (330) 493-8682, Fax: (330) 493-8682 E-mail: talg@neo.rr.com Website: www.theamericanlegalgroup.com

The Hilt Firm, LLC 675 Int’l Tower, 229 Peachtree St. NE, Atlanta, GA 30303 Phone: (404) 739-4950, Fax: (404) 739-4951 E-mail: mhilt@hiltfirm.com Website: www.hiltfirm.com

The Hunt Law Group, LLC 20 N. Wacker Dr., Ste. 1711, Chicago, IL 60606 Phone: (312) 384-2300, Fax: (312) 443-9391 E-mail: bhunt@hunt-lawgroup.com

Provosty & Gankendorff, LLC 650 Poydras St., Ste. 2700, New Orleans, LA 70130 Phone: (504) 410-2795, Fax: (504) 410-2796 E-mail: attorneys@provostylaw.com Website: www.provostylaw.com

The Rietz Law Firm, LLC 114 Village Pl., Ste. 301, Dillon, CO 80435 Phone: (970) 468-0210, Fax: (970) 468-0371 E-mail: peter@rietzlawfirm.com Website: www.rietzlawfirm.com

Randolph M. Even & Associates, a PLC Law Offices Douglas R. Soderland 901 Fifth Ave., Ste. 3003, Seattle, WA 98164 Phone: (206) 269-4438, Fax: (206) 682-1551 E-mail: drs@soderlandlaw.com Website: www.soderlandlaw.com

Martin & Martin, PA 1415 Augusta St., Greenville, SC 29605 Phone: (864) 271-1822, Fax: (864) 271-1814 E-mail: info@martinslawfirm.com Website: www.martinslawfirm.com

Mateer, Goff & Honzel 401 W. State St., Ste. 400, Rockford, IL 61101 Phone: (815) 965-7745, Fax: (815) 965-7749 dhonzel, wgoff or hhoekstra @mateerlawfirm.com Website: www.mateerlawfirm.com

Morris, Manning & Martin, LLP 3343 Peachtree Rd. NE, Atlanta, GA 30326 Phone: (404) 233-7000, Fax: (404) 362-9532 E-mail: info@mmmlaw.com Website: www.mmmlaw.com

My Texas Pi 2002 NW Military Hwy, Ste. 5, San Antonio, TX 78213 Phone: (210) 568-9866, Fax: (210) 745-0113 E-mail: mytexaspi.sa@gmail.com Website: www.mytexaspi.com

Nelsen, Thompson, Pegue & Thornton, APC 12100 Wilshire Blvd., Ste. 500, Los Angeles, CA 90025 Phone: (310) 315-1001, Fax: (424) 442-2779 E-mail: pthompson@ntptlaw.com Website: www.ntptlaw.com

Nursing Home & Elder Abuse Law Center 1600 S. Main St., Ste. 185, Walnut Creek, CA 94596 Phone: (925) 270-1900, Fax: (925) 955-1601 E-mail: info@noelderabuse.com Website: www.noelderabuse.com

5550 Topanga Canyon, #280, Woodland Hills, CA 91367 Phone: (818) 226-5444, Fax: (818) 226-5455 E-mail: rme@rme-law.com

Safety & Risk Control Services, Inc. 395 Main St., Ste. 4, Metuchen, NJ 08840 Phone: (732) 906-2244 x100, Fax: (732) 906-2045 E-mail: info@safetyrisk.com Website: www.safetyrisk.com

Sanchez Daniels & Hoffman, LLP 333 Wacker Dr., Chicago, IL 60606 Phone: (312) 214-3034 E-mail: jsullivan@sanchezdh.com Website: www.sanchezdh.com

Scott, Sullivan, Streetman & Fox, PC 2450 Valleydale Rd., Birmingham, AL 35244 Phone: (205) 968-3156, Fax: (205) 967-7563 E-mail: wscott@sssandf.com Website: www.sssf-law.com

Second Nature Research, Inc. P. O. Box 7993, Houston, TX 77270 Phone: (713) 865-0102, Fax: (713) 893-4876 E-mail: daniel@secondnatureresearch.com Website: www.secondnatureresearch.com

Selskiadr (Mediation & Arbitration Svcs) 24832 Elena Dr., Laguna Hills, CA 92653 Phone: (714) 404-3104, Fax: (949) 831-3985 E-mail: berlselski@aol.com Website: linkedin.com/in/selskiadr:

Simpson Thacher & Bartlett, LLP 425 Lexington Ave., New York, NY 10017 Phone: (212) 455-2000, Fax: (212) 455-2505 E-mail: businessdevelopment@stblaw.com Website: www.simpsonthacher.com

Tarshis, Catania, Liberth, Mahon & Milligram One Corwin Ct., Newburgh, NY 12550 Phone: (845) 565-1100, Fax: (845) 565-1999 E-mail: tclmm@tclmm.com Website: www.tclmm.com

N30 | INSURANCE JOURNAL-NATIONAL REGION October 17, 2011

Tighe & Cottrell, PA 704 N. King St., Ste. 500, Wilmington, DE 19899 Phone: (302) 658-6400, Fax: (302) 658-9836 E-mail: j.callaway@tighecottrell.com Website: www.tighecottrell.com

Volpe, Bajalia, Wickes, Rogerson & Wachs, PA 501 Riverside Ave., 7th Fl, Jacksonville, FL 32202 Phone: (904) 355-1700, Fax: (904) 355-1797 E-mail: tvolpe@vbwr.com Website: www.vbwr.com

WeatherMark, LLC 23 Salem Dr., Scarsdale, NY 10583 Phone:(914) 777-1729, Fax: (914) 698-5594 E-mail: mkramer@weathermarkpro.com Website: www.weathermarkpro.com

Weather Surveys 23 Salem Dr., Scarsdale, NY 10583 Phone:(914) 777-1729, Fax: (914) 698-5594 E-mail: mkramer@weathersurveys.com Website: www.weathersurveys.com

White Fleischner & Fino LLP 61 Broadway, 18th Fl, New York, NY 10006 Phone: (212) 487-9700 E-mail: info@wff-law.com Website: www.wff-law.com

Ungarino & Exckert, LLC 3850 N. Causeway Blvd., Ste. 1280, Metairie, LA 70002 Phone: (504) 836-7555, Fax: (504) 836-7566 E-mail: mungarino@ungarino-eckert.com Website: www.ungarino-eckert.com

Yaron & Associates 601 California St., Ste. 2100, San Francisco, CA 94108 Phone: (415) 658-2929, Fax: (415) 658-2930 E-mail: gyaron@yaronlaw.com Website: www.yaronlaw.com

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Advertisers Index E: East, M: Midwest, N: National, SC: South Central, SE: Southest, W: West Abram Interstate www.abraminterstate.com W36 ACE Insurance www.acelimited.com W21, SC21, SE21, E21, M21 Amwins Group, Inc. www.amwins.com W3, SC3, SE3, E3, M3 Anderson & Murison, Inc. www.andersonmurison.com W32 Arrowhead General Insurance Agency www.arrowheadgrp.com W31 Astonish Results www.astonishresults.com N11, W10, SC12, SE10, E10, M10 Builders & Tradesmenâ&#x20AC;&#x2122;s Insurance www.btisinc.com W35, SC25 Burns & Wilcox Ltd www.burnsandwilcox.com W15, SC15, SE15, E15, M15 Century National www.cnico.com W28 Chartis www.chartisinsurance.com W7, SC7, SE7, E7, M7 Chubb Corporate www.chubb.com W17, SC17, SE17, E17, M17 Compass Insurance Group of Agencies www.compasseands.com W27 Foremost Insurance Group www.foremoststar.com W29, SC23 Fujitsu PFU www.fcpa.fujitsu.com N21 Gateway Specialty Insurance www.gatewayspecialty.com W16, SC16, SE18, E16, M16 Great American www.hsd.gaic.com W76, SC60, SE56, E56, M56

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IICF www.iicf.org W41 Insurance Technologies Corp. www.insurancewebsitebuilder.com N20 Insurbanc www.insurbanc.com N2 King Support Systems Insurance Services www.kinginsuranceca.com W26 LexisNexis www.lexisnexis.com N23 M.J. Hall & Company, Inc. www.mjhallandcompany.com W14 Midlands Management Corporation www.midlandsmgmt.com N25 Minico www.minicoinsurance.com N22 Monarch E & S Insurance Services www.monarchexcess.com W25 MSB - Marshall & Swift/ Boeckh www.msbinfo.com N17 NAS Insurance Services, Inc. www.nasinsurance.com N24 Nautilus Insurance Company www.nautilusinsgroup.com N5 Pacific Gateway Insurance Services www.pgiainsurance.com W23 Partners Specialty Group www.psgins.com N14 PersonalUmbrella.Com www.personalumbrella.com W5, SC5, SE5, E5, M5 PULIC - Professional Underwriters Liability Insurance Company www.pulic.com 14 R. E. Chaix www.rechaix.com W24

Riskmeter.com www.riskmeter.com N16 Russell Bond www.RussellBond.com E16 Ryan Specialty Group www.ryansg.com W13, SC13, SE13, E13, M13 Scottsdale Insurance Company www.scottsdaleins.com W2, SC2, SE2, E2 , M2 State Compensation Fund www.statefundca.com W33 The Sullivan Group www.gjs.com N15 Travelers www.travelers.com N19, W19, SC19, SE19, E19, M19 Vertafore, Inc. www.vertafore.com N10 Western Heritage Insurance Company www.westernheritageins.com N13 Western Security Surplus www.wssib.com W20, SC20, SE14 Western World Insurance Company www.westernworld.com N3 Westrope www.westrope.com N12 Worldwide Facilities, Inc. www.wwfi.com W37, SE22 XL Specialty Insurance Company www.xlgroup.com W11, SC13, SE11, E11, M11 Zurich Insurance Company www.zurichna.com W75, SC59, SE55, E55, M55

October 17, 2011 INSURANCE JOURNAL-NATIONAL REGION | N31

IDEA EXCHANGE

Closing Quote

Volunteers serving food at The Interfaith Nutrition Network.

Volunteerism Feeds Employees’ Need to Serve “It was like I gave her a million dollars.”

By Elizabeth Myatt

hat’s how Sean Ramalho of Travelers described the reaction from a woman to whom he gave a blanket on a bitterly cold winter day while he was volunteering at The Interfaith Nutrition Network (INN), a charity based in Long Island, N.Y. That type of one-on-one contact with a fellow human being in need is occurring more frequently in local communities, due to three factors that came together in fall 2010: • Insurance industry employees’ strong desire to give back to their local communities; • Companies’ increasing levels of support for employee volunteer efforts; and • The leadership of the Insurance Industry Charitable Foundation (IICF) in facilitating a Volunteer Week initiative. Travelers’ efforts in serving the INN started when Lisa Tepper, Travelers regional president with 1,600 employees in the New York area, tasked all of the Travelers leaders in her territory to reach out to employees, invite them to get involved in Volunteer Week, and support their efforts. A board member with IICF’s New York/Northeast region, Tepper spotted opportunity when the region started organizing Volunteer Week in 2010. Tepper knew many employees have a deep-seated desire to give back, but realized they needed opportunity, leadership and logistical support to make it happen. Ramalho, second vice president of Travelers metro under-

N32 | INSURANCE JOURNAL-NATIONAL REGION October 17, 2011

writing center in Jericho, N.Y., and a colleague got in touch with the INN to ask if the nonprofit organization could accept a donation if Travelers ran a clothing drive. “The contact person at the INN called back and said: ‘How about I come out and meet with you guys? I’ll meet with your entire office!’ Some 50 Travelers employees showed up for an initial informational session. “Twenty five of them were in tears,” Ramalho recalled, when they heard about the needs of people in their community and the INN’s efforts to help them. Employees flocked to volunteer with the INN, which serves 300-400 meals each day and houses homeless families and individuals at locations in Nassau and Suffolk counties on Long Island. “We had 12 or 13 people volunteering each day during Volunteer Week,” Ramalho explained. With more volunteers than could contribute that first week, leaders organized a second week. They then decided to make a commitment to provide volunteers for the second Tuesday of each month. Nearly a year later, volunteers still work together in teams of 10 at the INN’s soup kitchen. Many employees find that volunteering is both exhausting and energizing. “I am tired physically, but pumped mentally, when I leave there after a volunteer shift,” Ramalho reported, noting others report the same experience. Other insurance firms also blazed a volunteer trail during Volunteer Week 2010: • ACE aligned its annual global day of service with Volunteer Week. More than 2,000 employees across the country pitched in on the company’s 25th anniversary of its service day. • Brokers The Sullivan Group and Heffernan Insurance Brokers had teams — along with several independent agencies. • Chubb organized several hundred volunteers in several projects, including one with The Doe Fund that later led to a grant from IICF. • Insurer Tower Group had numerous employees volunteer. • Swiss Re workers helped build a playground in New York City. More than 4,200 insurance employees logged time during Volunteer Week in just two divisions (Western and NY-Northeast), an initiative begun by IICF on the West Coast in 1998. Volunteers from a broad spectrum of industry employers — reinsurers, carriers, agencies, brokerage firms, consulting firms, law firms, trade associations and other industry-related companies — all pitched in. The 2011 Volunteer Week (Oct. 15-22) is already underway. “So many people in our industry want to — or already do — volunteer locally for needs they care about,” explained David Brinkman, chair of the IICF New York/Northeast division board and executive managing director of Aon Benfield. “Not only is volunteering a productive thing to do to help the community, it’s good for business because it develops leadership, teamwork and morale.” Myatt is executive director of the Insurance Industry Charitable Foundation (www. IICF.org) New York/Northeast region. www.insurancejournal.com

”Zurich brought us the local and global insurance expertise that enabled us to proudly contribute to Miami’s first underwater tunnel.” Henri Lebossé, Bouygues Construction, Head of Risk and Insurance Department

Global insurance solutions for wherever you expand next. For the construction of Miami’s ﬁrst underwater tunnel, Zurich helped Bouygues Construction by providing risk expertise and a global team of specialists already familiar with the company. Zurich solved the complex, local insurance requirements of the lenders, the State of Florida and the company’s management. It’s an example of how Zurich HelpPoint delivers the help businesses need when it matters most. To learn more about this case, visit www.zurichna.com/stories1

In the United States, coverages are underwritten by member companies of Zurich in North America, including Zurich American Insurance Company. Certain coverages not available in all states. Some coverages may be written on a non-admitted basis through licensed surplus lines brokers. Risk engineering services are provided by Zurich Services Corporation. Zurich Services Corporation does not guarantee any particular outcome and there may be conditions on your premises or within your organization, which may not be apparent to us.