50 Awesome Social Media Ideas for Agencies

APRIL 2, 2012 | VOL. 90, NO. 7

NATIONAL ISSUE

DECEMB ER 2ND, 3:52 P.M .

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Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All products and services may not be available in all states and may be subject to change without notice. CNA is a registered trademark of CNA Financial Corporation. Copyright © 2012 CNA. All rights reserved.

NATIONAL

26 On The Cover

Inside This Issue April 2, 2012 • Vol. 90, No. 7 • National Issue

24

Special Report: 50 Awesome Social Media Ideas for Agencies

34

54

48

NATIONAL COVERAGE 10 The Hartford Selling Life Insurance Units 10 AmWins Reportedly for Sale; CEO Says Just Recapitalizing 12 California’s Workers’ Comp Results Erode 18 N.Y. Agency Groups Will Not Appeal Recent Disclosure Ruling 18 Regulators’ Advice: Be Prepared for Springtime Risks 20 Risk for Corruption High in South Central States 20 Arkansas Tops in Flood Deaths Last Year 22 Florida Passes Workers’ Comp Changes

24 Ohio Court: Builders Must Construct Homes in ‘Workmanlike Manner’ 24 Michigan Catastrophic Injury Premium to Go Up 24 Missouri Discrimination, Workers’ Comp Bills Vetoed 26 Special Report: 50 Awesome Social Media Ideas for Agencies 29 E&O Insights: Social Media Can Be Friend or Foe

42 Spotlight: Insurance Plays Lead Role in Movies 45 Spotlight: Research Hopes to Curb Neck, Head Injuries in Athletes

IDEA EXCHANGE 46 Minding Your Business: Oak & Schoeffler

34 Closer Look: Community Association D&O Liability

48 What’s Your Agency’s Grofit?

36 Closer Look: Securities Fraud Settlements 38 Academy of Insurance: Bad Apples in Your Bunch?

39 Academy of Insurance Q2 Schedule

4 | INSURANCE JOURNAL April 2, 2012

41 Academy of Insurance: Agency Management Challenges

30 Kidnap & Ransom Insurance Demand on the Rise

22 Kentucky Limits Cancellations 22 Alabama Considers Coastal Depopulation Plan

40 Academy of Insurance: Vale Training Solutions Spotlight

54 Closing Quote: Regulators and Climate Change Risk

DEPARTMENTS 6 11 11 14 16 44

Opening Note Declarations Figures People Business Moves MyNewMarkets

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NATIONAL COVERAGE EDITORIAL

Opening Note Social Privacy

T

he Internet changed the way the world works, and the federal government is looking to change the way Internet companies work.

Data tracking of consumer online usage is big business for Internet companies selling data to businesses in search of target markets. But such “big brother” tactics do not always sit well with consumers.

In response to public outcries, U.S. regulators are pushing Internet companies to put in place by the end of the year a “Do Not Track” system that would give consumers more control over their personal data online, according to a report released on March 26.

The Federal Trade Commission’s final report on privacy recommendations relies mostly on the Internet industry voluntarily adopting best practices, something privacy advocates claim won’t work.

The report is in response to public concern over how Internet companies such as Google, Facebook and Twitter collect and trade detailed information concerning their users’ online activities and real-life identities.

Do you believe consumers The report calls on Congress to should have the right to pass broad privacy legislation as opt-out of data tracking? well, which would allow consumers to see how their online data is collected, used and sold, and give the ability to stop such practices.

Some privacy advocates are disappointed in the FTC’s call for voluntary practices.

“The commission’s overall support for industry self-regulation is disappointing, and reveals a FTC still too often constrained from effectively protecting the public,” Jeff Chester, executive director of the Center for Digital Democracy, told Reuters.

The FTC is limited in its ability to write rules, and is forced to lean on Internet companies to adopt tougher internal privacy policies.

But while the FTC cannot make the rules, it does have the authority to punish companies that violate their own policies or engage in deceptive practices.

The report urges Internet companies to follow through on pledges to implement a “Do Not Track” system that would let consumers click a button on their Internet browsers to ensure their data is not being collected.

FTC Chairman Jon Leibowitz says pressure from lawmakers to implement tougher privacy provisions will move the Internet industry in the right direction.

“We are confident that consumers will have an easy to use and effective Do Not Track option by the end of the year because companies are moving forward expeditiously to make it happen and because lawmakers will want to enact legislation if they don’t,” Leibowitz told Reuters.

Do you believe consumers should have the right to opt-out of data tracking when using Internet services such as Google, Facebook or Twitter? Go to Insurance Journal’s Andrea Ortega-Wells Facebook page and answer this question today! Editor-in-Chief

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 Editor Denise Johnson | djohnson@claimsjournal.com MyNewMarkets.com Associate Editor Amy O’Connor | aoconnor@mynewmarkets.com Columnists Catherine Oak, Curtis Pearsall, Bill Schoeffler Contributing Writers Nicole Bissett, Megan Bosma, Kevin Davis, Jeremy Lang, Tommy McDonald, Mary Newgard, Kathy Ryan, Jonathan Schwarzberg

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 INSURANCE Director of Education Christopher J. Boggs | cboggs@ijacademy.com Online Training Coordinator Barbara Dooley | bdooley@ijacademy.com

ADMINISTRATION Chairman Mark Wells Chief Executive Officer Mitch Dunford Accounting Manager Megan Sinclair | msinclair@insurancejournal.com

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NATIONAL COVERAGE

News & Markets

The Hartford Selling Life Insurance Units

T

he Hartford Financial Services Group yielded to demands from its biggest shareholder, famed hedge fund manager John Paulson, and said on March 21 that it will get rid of most of its life insurance-related operations.

The Hartford, one of the oldest companies in the United States and one of three insurers to get a government bailout during the financial crisis, said it would shut down its annuity business and pursue a sale or other options for its individual life insurance, retirement plan and broker/dealer businesses.

The surprise decision capped a tumultuous six weeks for The Hartford, whose shares rose nearly 4 percent in premarket trading.

The company’s problems started on February 8, when Paulson screamed at management on a quarterly earnings call that The Hartford had to do something “drastic” to improve its industry-low valuations. Paulson subsequently pushed publicly for a split of the life and property insurance businesses, a move that most analysts agreed with in theory but said would be financially difficult in practice.

The Hartford said it will focus on its property and casualty, group benefits and mutual fund businesses. It will keep writ-

ing business in the for-sale units while it pursues a deal or deals.

“Individual Life, Woodbury Financial Services and Retirement Plans are strong businesses with distinct market positions and talented employees, but they do not align with our go-forward focus,” Chief Financial Officer Christopher Swift said in a statement.

The Hartford said it would stop new annuity sales from April 27 and take a related after-tax charge of $15 million to $20 million in the second quarter. The company was once one of the largest annuity producers in the country, but grew more conservative after the economic crisis and was not even in the top 20 in the most recent industry rankings.

The Hartford has a lower valuation than peers, trading at a fraction of its book value. Paulson suggested his breakup plan could boost the stock by as much as 60 percent.

The sale of the individual life, retirement plan and brokerdealer businesses should take anywhere from 12 to 18 months to complete, The Hartford CEO Liam McGee said.

Copyright 2012 Reuters.

AmWins Reportedly for Sale; CEO DeCarlo Says Firm is Recapitalizing

T

he owners of AmWINS Group Inc., the largest wholesale insurance broker in the United States by premiums placed, have put the company up for sale, expecting a valuation of about $1.5 billion, three people familiar with the matter said on March 13, according to Reuters.

An auction for a majority stake in AmWINS, which owns brokerage, underwriting and group benefit operations across 21 countries, is underway and has attracted interest from private equity firms and strategic buyers, the people said.

AmWINS is owned by its management and by buyout firm Parthenon Capital Partners. Parthenon plans to sell its 50 percent stake, and management will cede some of its ownership, offering the buyer control of AmWINS, one of the people in the Reuters report said. The exact stake for sale is open to negotiations, the person added.

A $1.5 billion enterprise valuation Steve DeCarlo for AmWINS would equate to about 13 times its 2011 earnings before interest, tax, depreciation and amortization (EBITDA) of $117 million, another person said.

Representatives of AmWINS and Parthenon did not immediately respond to Reuters’ request for comment.

10 | INSURANCE JOURNAL April 2, 2012

However, on March 14, AmWINS CEO Steve DeCarlo responded to the report. “AmWINS is not for sale. It is simply recapitalizing, which is part of the normal lifecycle of a private equity-funded business,” he told Insurance Journal.

Deal making in the U.S. financial services sector has been subdued for private equity firms, although a couple of buyout firms recently exited from investments in insurance companies. Last month, BB&T Corp. agreed to pay $570 million in cash for the life, property and casualty insurance operations of wholesale insurance distributor Crump Group Inc. to J.C. Flowers & Co. LLC, about nine times projected EBITDA and 1.8 times projected revenue.

U.S. insurance broker Brown & Brown Inc. in December agreed to buy Arrowhead General Insurance Agency Inc. for $395 million in cash from Spectrum Equity Investors, JMI Equity and a management equity-holder group.

Parthenon bought a majority percent stake in AmWINS in 2005. The company has since grown aggressively through acquisitions, and currently handles more than $6.7 billion in annual premiums.

Financial Technology Partners LP is advising AmWINS on the sale. Goldman Sachs Group Inc. is providing staple financing for the transaction.

Copyright 2012 Reuters. www.insurancejournal.com

Declarations A Little THC

Real Time Risk

Not Enough

“I don’t drink and drive, and I don’t smoke and drive. But my body is completely saturated with THC.” – Angeline Chilton, a suburban Denver woman who uses medical marijuana to ease multiple sclerosis symptoms and says that while she’d never get behind the wheel right after smoking, she can’t drive unless she smokes pot. Chilton underscores a problem no one’s sure how to solve: How do you tell if someone is too stoned to drive?

“The insurance industry has been struggling with how to accurately understand all risk exposures in real time while offering products that serve consumers’ needs.”

– Steve Bochanski, a senior consultant in Towers Watson’s Risk and Financial Services consulting group, which said it has won two U.S. patents for its financial modeling technique designed to help insurance executives statistically sample and better understand and calculate risk exposures in real time.

“He did hook Ciron. Ben solicited Ciron on Facebook. He took advantage of a really nice but naive family.”

– Bryan Fisher, an attorney for Ciron Black, said the former Louisiana State University football player and top NFL prospect is suing his ex-financial planner, Benjamin McConley of Fort Lauderdale, Fla., for allegedly obtaining an inadequate insurance policy meant to protect the athlete in the event of a career-ending injury. The standout offensive lineman suffered such an injury against Alabama in his senior season in 2009.

Workers’ Comp Feelings “It is a good feeling when you can be a part of restoring an injured worker to resume his job and make a living for himself and his family. It is also a good feeling when you can be a part of a system that makes the workplace more effective, safe and, hopefully, profitable.”

– Liles B. Williams, chairman of the Mississippi Workers’ Compensation Commission, an agency that receives reports of more than 11,000 work-related injuries per year.

Figures

927

$

Million

Is what the Michigan Catastrophic Claims Association paid out last year in claims resulting from catastrophic injuries. The association in March announced a 21 percent increase in what the annual per vehicle fee Michigan drivers pay to care for accident victims who have brain damage, paralysis or other catastrophic injuries. Starting July 1 drivers will pay up to $175 annually.

160 That’s the length in miles of a stretch of Interstate 5 that has been dubbed “Electric Highway.” Recently electric car drivers hit the road to inaugurate the first major section of the highway, which is now served by eight charging stations each spaced roughly 25 miles apart. www.insurancejournal.com

303 Is how many years maximum in prison a Richmond, Va. woman faces. She has been convicted on 35 counts of health care fraud and other charges.

59

%

Is the percentage of employers who say they are very or somewhat concerned about workers’ compensation cost containment in 2012, according to the 2012 P&C Workers’ Compensation & Safety Survey

by Milwaukee-based Zywave, a provider of software-as-a-service solutions for the insurance and financial services industries.

April 2, 2012 INSURANCE JOURNAL | 11

WEST COVERAGE

News & Markets California’s Workers’ Comp Underwriting Results Erode report by the California or the second consecutive year, Workers’ California workers’ compensation Compensation premiums levels rose in 2011, but conInstitute. The tinually growing costs of claims has latter report eroded statewide underwriting results, showed that for according to an annual report from the fifth conthe Workers’ Compensation Insurance secutive year, Rating Bureau of California (WCIRB). increases in the Estimated statewide written preaverage loss per claim — led by escalatmium grew roughly $600 million from ing medical losses — pushed up total $7.1 billion in 2010 to an estimated workers’ comp costs for cities, counties $7.7 billion in 2011, the report stated. and other public agencies in the state.

Premium remains below pre-recession “The workers’ comp market in levels in 2007, and nearly $9 billion California is suffering from increased below the high in 2004. costs,” said Mark Sektnan, president of The report also showed the average the Association of California Insurance cost of claims experienced “modest Companies. Sektnan pointed to data growth” in 2011, and insurer expense in the WCIRB report that shows while ratios continued to remain high. claim frequency continues to move “As a result of the increases in claims downward, claims severity is rising. costs and expenses, the increase in There are several reasons for this written premium was insufficient to upward trend, many of which Sektnan reduce the accident-year combined loss believes start with the deterioration and expense ratio for 2011,” it stated. in the objective standards for workers’ Increasing claim severities between comp cases that were set in 2003 with 2006 and 2009, reduced premium the establishment of American Medical levels, and high expense ratios have Association guidelines on claims. eroded statewide underwriting results.

Courts have been ignoring these WCIRB estimated a statewide comstandards, and a few landmark cases bined loss and have set a standard for expense ratio for flaunting these guideEmployers are on accident years 2009 lines, Sektnan said, high alert when it and 2010 of 130 perpointing to the 2009 comes to workers’ cent, the highest decisions in Ogilvie compensation costs. and ratio since accident Almaraz/Guzman. year 2001.

The report stated WCIRB cited a latest report from that although there was also no major the National Association of Insurance judicial action impacting workers’ comCommissioners showing that for the pensation in 2011, “the industry continthird straight year, the California work- ues to grapple with the ramifications ers’ compensation insurance industry’s of the 2009 Ogilvie and Almaraz/Guzman average return on net worth of 5.2 perdecisions.” cent was well below the Fortune — All Sektnan noted that such cases are Industry average of 12.7 percent in 2010. yielding a growing number of considerations for awards in workers’ comp Average Losses Climb cases. Sleep apnea, sexual dysfunction The WCIRB report follows a March and psychological claims are becoming

By Don Jergler

F

12 | INSURANCE JOURNAL April 2, 2012

more commonplace in workers’ comp.

“We’re starting to see psych claims being a part of almost every claim,” he said.

Multiple body part claims, in which often the parts end up adding up to more than the sum, also are rising, Sektnan added.

“There are claims where people can be over 100 percent disabled,” he said.

Employers on Alert Jerry Azevedo of Workers’ Compensation Action Network, a group that represents the interests of employers, expressed concern about signs of rising claim severity.

“Employers are on high alert when it comes to the increasing costs for workers’ compensation,” he said. “We know that claims costs are up significantly and that rates have started to creep up as a result. The red flag in this report is that the rate increases haven’t been enough for insurers to break even, and there’s real problems in the form of more claims, more litigation and liens.

Unless we start taking some action to reduce costs in California, larger rate increases are likely.”

Despite no change in advisory pure premium rates in 2011, many insurers filed for manual rate increases.

The WCIRB report showed average filed manual rates as of July 1, 2011 were $3.27, but insurers continued to discount their filed manual rates.

The industry average charged rate for 2011 was $2.37, “a significant discount from the industry average filed manual rate,” and nearly $4 below the industry average charged rate in the second half of 2003 before worker’s comp reforms, the report stated. www.insurancejournal.com

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Financial Strength and Exceptional Claim Service Property | Liability | Executive Protection | Workers Compensation | Marine | Surety Homeowners | Auto | Yacht | Jewelry | Antiques | Accident & Health

Chubb Group of Insurance Companies ("Chubb") is the marketing name used to refer to the insurance subsidiaries of The Chubb Corporation. For a list of these subsidiaries, please visit our website at www.chubb.com. Actual coverage is subject to the language of the policies as issued. Chubb, Box 1615, Warren, NJ 07061-1615. Š2012 Chubb & Son, a division of Federal Insurance Company.

NATIONAL COVERAGE

People Dallas-based Roach Howard Smith & Barton, an independent insurance brokerage firm, named David Roberts vice president. He joins the sales team in the Ft. Worth, Texas, office specializing in commercial insurance and risk management.

Roberts has 10 years of experience in property and casualty sales. He has expertise in the automotive and transportation, construction and hospitality industries.

David Roberts

Paul Tetrault

Betsy Good

Martin V. Flannery

The National Association of Mutual Insurance Companies (NAMIC) named Paul Tetrault state and policy affairs counsel.

Tetrault has served as Northeast state affairs manager for NAMIC for more than six years. In his new position, his duties will include regulatory issue management, legal analysis, and public policy development in support of NAMIC’s State and Policy Affairs Department. He will be part of NAMIC’s team responsible for covering developments at the National Association of Insurance Commissioners and also will serve as liaison to national legislative organizations on tort reform and civil-justice-related matters.

Tetrault will continue to be based in the Boston area and will cover legislative and regulatory issues in Massachusetts.

Woodbury, N.Y.-based broker Sterling & Sterling appointed Betsy Good to the newly created position of senior vice president, director of strategy. Her responsibilities include: identifying and developing new carrier relationships; new program development; marketing existing programs; and managing profitability of those programs.

Good worked for more than eight years as underwriting manager and director of new program development at Victor Schinnerer. She also worked at Kemper as national underwriting director of the multi-line technology segment.

Woodland Hills, Calif.-based Poms & Associates Insurance Brokers Inc. named Martin V. Flannery vice president in the property/casualty group.

14 | INSURANCE JOURNAL April 2, 2012

Prior to joining Poms & Associates, Flannery was vice president of marketing and sales at ISU Bob Gabriel Company Insurance.

Susan Watson and Henry Eford joined workers’ compensation specialty insurer Employers as sales executives in Texas.

Watson is sales executive for the Dallas/Ft. Worth market. Based in Dallas, Watson brings 20 years of experience to Employers. She was most recently a sales manager at Nationwide Insurance.

Eford was named sales executive for the Austin and San Antonio markets. Based in Austin, Eford brings extensive sales and business development experience to Employers, with advanced knowledge of wholesale and retail insurance operations and business insurance coverage. Eford recently was an account executive at Travelers Insurance Co. Preferred Professional Insurance Co. (PPIC), an Omaha, Neb.-based Catholic-owned medical liability insurance firm, hired Patti Hiemer as accounting clerk, as well as made a number of staff changes.

James O. Walters was promoted from vice president, information systems to senior vice president and chief information officer. Walters has been with PPIC for 15 years.

Karen McIntosh, promoted from claims administrator to information support specialist, has been with PPIC for more than 12 years.

Dana Henderson, promoted from finance assistant to claims coordinator, has been with PPIC for 10-plus years.

Lisa Keane, promoted from senior claims attorney to director of claims, has been with PPIC for 12-plus years.

Anne Cornell, promoted from claims attorney to senior claims attorney, has been with PPIC for more than nine years.

Lisa Wendell, who has been with PPIC for four years, was promoted from agency account coordinator to business development and agency administrator.

www.insurancejournal.com

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NATIONAL COVERAGE

Business Moves dental, life, disability and long term care insurance programs.

Mark Wischmeyer and his associates will continue to operate in their current location under the direction of John Neumaier, South Central regional executive vice president of Gallagher’s employee benefit consulting and brokerage operations.

Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm, is headquartered in Itasca, Ill.

Aon Aon Corp. stockholders voted overwhelmingly in favor of the proposal to approve the previously announced change in corporate domicile of the parent company of the Aon group of companies from Delaware to the United Kingdom at a special stockholder meeting held on March 16.

The company said that 98 percent of the votes cast by stockholders were for the approval of the proposed transaction, representing more than 82 percent of the total outstanding voting stock of Aon Corp.

The company said it expects the transaction to close on or around April 2, 2012, subject to satisfaction of certain regulatory approvals and other closing conditions set forth in the merger agreement.

Arthur J. Gallagher, Wischmeyer Benefit Partners Arthur J. Gallagher & Co. acquired Wischmeyer Benefit Partners in Dallas, Texas. Terms of the transaction were not disclosed.

Founded in 1988, Wischmeyer Benefit Partners (WBP) offers a range of employee benefit consultation and insurance brokerage services for corporate, executive and individual clients throughout the southern United States.

The firm specializes in group medical, 16 | INSURANCE JOURNAL April 2, 2012

SUNZ Insurance Florida-based SUNZ Insurance received its certificate of authority to begin offering workers’ compensation coverage in Oklahoma.

SUNZ, which specializes in underwriting workers’ compensation policies for professional employer organizations (PEOs) and staffing companies, said it expects the expansion into Oklahoma to attract new clients and to support growth of existing clients in Texas, Arkansas and Missouri.

Established in 2005 as a singlestate insurer, SUNZ has expanded into 15 additional states covering the Southeastern United States. SUNZ expects to file to expand to an additional 10 states in 2012.

Palomar, Martin Grace Palomar Insurance Corp., a Montgomery, Ala.-headquartered insurance brokerage, acquired Martin Grace Benefit Group Inc. in Birmingham.

Martin Grace is an employee benefit and insurance consulting firm.

Tony Craft, CEO of Palomar, said the acquisition is in keeping with his firm’s strategy of strengthening its employee benefit offerings.

Palomar, founded in 1954, has operations in Atlanta, as well as in Birmingham and Troy, Ala. Norman-Spencer Agency The Norman-Spencer Agency, based in Dayton, Ohio, is rebranding all of

the agency’s property and casualty products to market them under the Norman-Spencer Agency brand.

During the past five years, NormanSpencer has made several acquisitions in the marine, construction, professional liability and specialty areas, including Western Marine Insurance Services, JC Stevens and Crane Insurance Solutions. These companies and their products now will be marketed under the Norman-Spencer Agency brand.

The Marine Insurance Services division of Norman-Spencer will offer proprietary products such as the AquaPac Boat/Yacht Insurance Program and an exclusive package program for boat dealers and marinas.

In the construction industry market, JC Stevens and Crane Insurance Solutions and their products designed for the crane and boom truck industry will now operate as Norman-Spencer Agency.

Arthur J. Gallagher, Human Resource Management Systems Insurance broker and risk management services firm Arthur J. Gallagher & Co. acquired Human Resource Management Systems LLC (HRMS) in Naperville, Ill. Terms of the transaction were not disclosed.

Established in 1997, HRMS is an employee benefit insurance broker that offers a range of group employee benefit products and consulting services to their clients throughout the United States. The firm specializes in group health, life, long and short term disability, dental, retirement planning, human resource services and program administration.

Dan Rigby and his associates will continue to operate in their current location under the direction of William Ziebell, North Central regional executive vice president of Gallagher’s employee benefit consulting and brokerage operations.

Arthur J. Gallagher & Co is headquartered in Itasca, Ill. www.insurancejournal.com

EAST COVERAGE

News & Markets N.Y. Agency Groups Will Not Appeal Recent Disclosure Ruling

I

t looks like the courtroom battle has ended for New York State’s broker compensation disclosure regulation.

In March, the New York appeals court agreed with the lower court and said insurance regulators were within their rights to issue a rule that requires brokers to disclose in detail the sources of their compensation.

Regulation 194, first implemented in 2010, requires brokers to tell clients how companies pay them, even when the clients haven’t asked. If clients request more information about the compensation, brokers must then provide further detailed information regarding transactions, such as earnings for the policy sold and the pay the broker would have received had the client chosen a different policy.

Independent Insurance Agents & Brokers of New York and the Council of Insurance Brokers of ‘We did all Greater New York are that we could to two New York agency fight this misguided groups that have been fighting in court to regulation.’ the regulation.

— Christopher Brassard overturn They have been opposing the required disclosures, calling the rule a burden for brokers and of little benefit to consumers.

They also have been voicing their deep disappointment with the court’s recent decision. But on March 21, the two

groups announced they decided not to appeal the latest appellate court decision.

“We did all that we could to fight this misguided regulation,” said IIABNY Board Chairman Christopher Brassard.

“The board has concluded that the likelihood of the New York Court of Appeals overturning the decisions of the two lower courts is Christopher Brassard small. IIABNY spent all of 2009 negotiating with regulators on this issue and was able to achieve some positive changes. We spent the last two years arguing our case before trial and appellate courts,” Brassard explained.

Some in the industry have been firmly supporting the court’s decision all along. Daniel Kugler, external affairs committee board liaison at the Risk & Insurance Management Society, said: “RIMS strongly believes that these disclosures will eliminate the inherent conflict of interest posed by contingent fee arrangements, [and] enhance the relationship between brokers and consumers — ultimately benefiting all risk practitioners by creating a more efficient and accurate insurance marketplace.”

Regulators’ Advice: Be Prepared for Springtime Risks

T

is the season when flowers bloom and birds sing — which means it’s also time for homeowners to check for springtime risks and ensure that they have adequate insurance coverage.

Connecticut Insurance Commissioner Thomas Leonardi said one of the most important steps for homeowners is to create and update their home inventory.

“As we transition from a mild winter into spring, take the time now to take stock of what you have. A home inventory can help you determine the types and level of coverage you need before disaster strikes. After a major loss, your home inventory will be a tremendous help when it comes to filing a claim.”

Leonardi also advised that it’s essential for homeowners to understand their coverage — what they can claim and what 18 | INSURANCE JOURNAL April 2, 2012

they cannot.

“We also urge consumers to discuss their coverage thoroughly with their agent or insurance company at least once a year to make sure coverage reflects any recent changes, such as renovations or additions.”

And if it rains, it can flood.

A warm, dry winter in the Northeast may have many people thinking the risk is low, but it is always a good idea to prepare for the worst. Leonardi pointed out that floods — or an excess of water (or mud) on normally dry land — are not covered by a typical homeowner’s or renter’s policy. Most homes may be eligible for coverage under the National Flood Insurance Program in communities that participate in the federal program. www.insurancejournal.com

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SOUTH CENTRAL COVERAGE

News&Markets Risk for Corruption High in South Central States, Report Says

By Stephanie K. Jones

A

lthough none of the 50 U.S. state governments were found to be exemplary, three out of four South Central states received lackluster rankings in a report evaluating state governments on integrity and the ability to prevent corruption among state officials and employees.

Among insurance departments in the South Central states, only one — Louisiana — received a decent grade. The Louisiana Department of Insurance received a ranking of B+, 89 percent, on the “State Integrity Investigation Corruption Risk Report Card,” conducted and recently released by a partnership between the Center for Public Integrity, Global Integrity and Public Radio International.

Of the remaining South Central states, the Texas Department of Insurance (F, 58 percent) came in dead last, with the Arkansas Insurance Department (D-, 60 percent) and the Oklahoma Insurance Department (D-, 61 percent) trailing close behind.

State insurance regulatory commissions were judged on a series of questions. The table (on right) shows the results for insurance departments in the South Central states: The report also judged states as a whole, along with breaking down the rankings to include assessments of the most important individual state agencies.

Texas received an overall grade of D+, 68 percent, with a rank of 27 among 50 states. “Money flows freely in Texas politics, where contributions to most candidates are unlimited and lobbyists are powerful,” the report explained.

Of all the states, New Jersey fared the best in terms of overall

performance, with a grade of B+, 87 percent. Georgia came in last on the integrity scale, with a grade of F, 49 percent.

Georgia’s insurance department received a failing grade of F, 32 percent. New Jersey’s insurance commission received a grade of B+, 88 percent.

The State Integrity Investigation Corruption Risk Report Card can be found online at www.stateintegrity.org/.

Question

Arkansas

Louisiana

Oklahoma

Is the state insurance commission protected from political and special interest influence?

37%

93%

75%

31%

Does the state insurance commission have sufficient capacity to carry out its mandate?

100%

100%

85%

100%

Are there conflicts of interest regulations covering members of the board and senior staff of the state insurance commission?

100%

100%

66%

100%

Are the conflicts of interest regulations covering members of the board and senior staff of the state insurance commission effective?

25%

75%

37%

12%

Can citizens access the asset disclosure records of the state insurance commission?

66%

75%

58%

58%

Does the state insurance commission publicly disclose documents filed by insurance companies?

31%

87%

43%

43%

With 18 Fatalities Arkansas Tops in Flood Deaths Last Year

E

ighteen Arkansas residents died in floods last year, the most in any state in the nation but fewer than in the year before, the National Weather Service said.

The deaths happened in March through May. Six were in Benton County, including two on April 25, 2011, when a vehicle carrying two men went around a barricade in Bentonville and was washed off a low-water bridge, according to the weather service. Almost one month later, near Gallatin, two women and two children were killed when a car washed off the road.

The weather service said most of last year’s deaths were a result of motorists trying to drive through high and moving water.

Greene County, Ark., May 14, 2011; Photo by Patsy Lynch/FEMA The year before, 20 people were killed during a single flood at the Albert Pike campsite. There were 22 deaths from flooding that year.

Nationwide, 113 people died in floods last year.

The weather service anticipates “an average flood potential” in Arkansas this spring.

Copyright 2012 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

20 | INSURANCE JOURNAL April 2, 2012

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SOUTHEAST COVERAGE

News & Markets Kentucky Limits Cancellations

Kentucky Gov. Steve Beshear has signed an executive order prohibiting insurance companies from canceling policies or changing rates in counties hit by deadly tornadoes.

Beshear’s staffers said it was the first time such an order had been executed in Kentucky.

The second-term Democrat said the executive order also requires insurance companies to allow more time for people in storm-ravaged communities to pay their premiums for health, life and property insurance.

Under the order, cancellations and rate increases will have to wait until at least April 15.

Alabama Considers Coastal Depopulation Plan

The Alabama Legislature is considering a bill that would give up to $2.5 million to private insurance companies in exchange for writing policies for coastal properties.

The measure is designed to shrink the size of the Alabama Insurance Underwriters Association, the state’s insurer of last resort. Companies would have to write policies for up to 1,000 properties now covered by the association to get the state money.

Bill sponsor Rep. Randy Davis said his preference is for the money to be taken from the state’s general fund.

Florida Passes Workers’ Comp Changes

By Michael Adams

W

hile debates over property insurance and no-fault auto insurance consumed the attention of state officials and the media, Florida lawmakers quietly dealt with several other insurance issues, including workers’ compensation.

While they did not resolve their differences over the costs of physiciandispensed drugs, lawmakers agreed to repeal an excess profits provision in state law and beef up regulation of check cashing firms that critics say have been gaming the workers’ compensation system.

First and foremost was the attempt to control the cost associated with allowing physicians to repackage drugs and redistribute them. The issue dates back to 2010, when the legislature passed a cap on physician-provided drugs only to see then Gov. Charlie Crist veto the measure.

The issue gained more prominence last month when Insurance Commissioner Kevin McCarty approved an 8.9 percent increase in workers’ comp insurance rates, of which insurers’ said 2.5 percent could be attributed to rising drug costs. The 2.5 percent figure translates into $62 million in additional costs to businesses, according to the National Council on Compensation (NCCI).

State Sen. Alan Hays and Rep. Matt Hudson filed joint bills calling for a limit to be placed on physician-dispensed drugs. The bills were designed to bring the reimbursement level of doctor-dispensed drugs in line with those of pharmacies, a cost that is three times the drug manufacturer’s wholesale price, plus a $4.18 dispensing fee.

Despite the support of Associated Industries of Florida, the Florida Chamber of Commerce, and others, however, that proved to be a quix-

22 | INSURANCE JOURNAL April 2, 2012

otic effort as Automated HealthCare premium base from $1.5 billion in 2007 Solutions and drug companies conto a projected $1 billion in 2010. vinced Senate lawmakers to kill the bill.

Check Cashing Firms Senate President Mike Lawmakers successfully Haridopolos refused to let the addressed the role of check measure come up for a vote cashing firms in facilitatin any form, despite repeated ing fraud in the workers’ deals offered by other lawcompensation construction makers. industry.

NCCI State Regulation Based on the recomExecutive Lori Lovgren said mendations of Money the bill’s lack of progress was Kevin McCarty Service Business Facilitated disappointing.

– Workers’ Compensation Work Group established last year, lawExcess Profits makers passed HB 1277.

Meanwhile, lawmakers advanced Law enforcement officials say that other workers’ comp issues including a unscrupulous individuals and subrepeal of a 32-year old law that requires contractors have been using check workers’ compensation insurers to cashing firms to avoid paying their return premiums to policyholders if proper premiums. They say the scheme they are in excess of 5 percent of their allows some subcontractors to use anticipated underwriting profits. undocumented workers, giving them a Sponsored by Sen. Doug Holder, SB competitive advantage over contractors 941 put an end to the so-called excess who comply with the law. profits law, which he said has outlived One scenario has an individual setits usefulness. ting up a shell company and obtaining The state’s Office of Insurance a certificate of insurance by purchasing Regulation said it collected nearly $16.7 a minimal workers’ comp policy. The million in excess profits from insurers individual then allows subcontractors in 2010 and 2011. Since 2003, the OIR to, in effect, “rent” the certificate to has collected $200 million, which is show general contractors in order to be less than 1 percent of the state’s total hired. Once the work is complete, the premium base. general contractor cuts a check to the But Associated Industries of Florida shell company. The individual running General Counsel Tami Perdue told the shell company then goes to a check lawmakers the excess profit law is anti- cashing company where he cashes the quated and no longer necessary. “This check and collects a fee. The subconis in line with what we have done over tractor is then paid in cash. the past years,” she said. “Find areas The bill that passed requires check where there are laws that are overcashing companies to be licensed and burdensome, regardless of what their to deposit all checks into one account industry is, and eliminate them.” under its own name. The bill also Since 2003, workers’ compensation prevents check cashing firms from rates have dropped by 58 percent, possessing or using any fraudulent although they have risen the past two identification devices. If a check cashyears. Those rate cuts have been in ing company violates these provisions, addition to the economic downturn state regulators can shut down the that has cut the state’s private carrier business. www.insurancejournal.com

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MIDWEST COVERAGE

News & Markets Ohio Court: Builders Must Construct Homes in ‘Workmanlike Manner’

O

Missouri Discrimination, Workers’ Comp Bills Vetoed

Missouri Gov. Jay Nixon has vetoed for the second consecutive year legislation that would have changed rules for lawsuits alleging workplace discrimination (HB 1219) and blocked changes to the workers’ compensation system (SB 572) pushed by Republicans and business groups.

Nixon said the workplace discrimination bill contains the same “fundamental flaws” as a measure he previously rejected. He said protection against discrimination for people with disabilities, women, older workers and minorities should be preserved. The workers’ comp bill would have added occupational diseases to the worker’s comp system instead of allowing lawsuits over those claims.

It would have barred employees who get hurt on the job from suing their coworkers unless the injury was “purposefully and dangerously” caused.

AP

hio’s high court has held that homebuilders have a duty imposed by law to construct a home “in a workmanlike manner using ordinary care,” despite the wording of any warranty document.

The Supreme Court of Ohio held unanimously that a homebuyer’s right to enforce that duty cannot be waived, according to information released by the court.

The court ruled in a case originating in Franklin County that two couples who purchased new houses from Centex Homes were not barred from asserting claims against Centex for an alleged failure of workmanlike construction, despite the fact that their claims were based on a defect that was not listed as a covered item in a limited warranty that was part of their purchase agreements with Centex.

The court’s 7-0 decision, authored by Justice Paul E. Pfeifer, reversed a ruling by the Tenth District Court of Appeals.

The couples, Eric and Ginger Estep, and Paul Jones and Latosha Sanders, purchased new homes from Centex in 2004. After moving in, both couples found that their computers, cordless telephones and televisions did

not operate properly.

They alleged that the problems were caused by steel beams used in the construction of their houses that were magnetized, and sought remediation of the problem by Centex.

When the problem was not resolved, both couples filed suit against Centex in the Franklin County Court of Common Pleas, asserting claims for breach of contract, breach of express and implied warranty, negligence, and failure to perform in a workmanlike manner. Because the suits asserted virtually identical claims against the same defendant, they were consolidated.

Centex moved for summary judgment, arguing that the buyers had waived all express or implied warranties except for a specific list of covered defects enumerated in a Limited Home Warranty that Centex provided in its standard purchase agreement.

The trial court agreed that the buyers had waived their right to any

express or implied warranty outside the provisions of the limited warranty, including the right to demand workmanlike performance. Since the magnetizing of steel members was not among the defects included in the Centex limited warranty, the court granted summary judgment in favor of the builder.

On review, the Tenth District affirmed the decision of trial court.

The Ohio Supreme Court did not address the merits of the owners’ underlying claims, but reversed the lower courts’ rulings that by agreeing to the Centex limited warranty the homeowners had waived their common law right to assert claims based on failure of workmanlike performance.

Justice Pfeifer wrote that the duty to construct a house in a workmanlike manner using ordinary care has been imposed on Ohio homebuilders since the Supreme Court’s 1966 decision in Mitchem v. Johnson.

Michigan Catastrophic Injury Premium to Go to $175 Per Car

M

ichigan drivers will pay $30 more for auto insurance starting July 1 to care for accident victims who have brain damage, paralysis or other catastrophic injuries, raising the annual fee to $175 per vehicle.

The Michigan Catastrophic Claims Association announced the 21 percent premium increase on March 16.

Lawmakers are discussing bills that would allow motorists to choose among various levels of personal injury protection coverage, rather than mandating uncapped coverage. Opponents say that wouldn’t guarantee lower rates.

Regular auto insurance policies handle coverage up to $500,000, after which all insured motorists are assessed the additional fee to cover more severe cases.

The association covers medical bills for roughly 12,800 accident victims across the state. Last year it paid out $927 million in claims resulting from catastrophic injuries.

Copyright 2012 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

24 | INSURANCE JOURNAL April 2, 2012

www.insurancejournal.com

SPECIAL REPORT

AWESOME SOCIAL Social media is a good marketing tool when used wisely. Today’s agencies are creating interaction among fans while developing promotions that generate revenue. The following includes 50 marketing ideas that agencies can use with social media.

1

Be personable. If posts on social media are too sales-y, it will be difficult to get and engage with followers. To many consumers, a hard sell on social media is a turn off.

Balance self-promotional posts with posts that are informational, posts that are personable and posts that are helpful.

2 Write regular posts at least once a week, but two to three times a week is even better.

26 | INSURANCE JOURNAL April 2, 2012

3 Write social media posts on ideas for

6 Post a fact, story or comment relevant

home improvement, car care and businesses tips.

to a particular insurance product or market and end the post with a question.

4 Keep customers engaged.

7 Use blog posts to share content and drive

5

traffic to the agency’s website (also helps with search engine optimization) and on social media profiles.

Create fun contests for fans with Facebook. Give prizes, like a gift card, to winners.

8 Sign up for Facebook, LinkedIn, Twitter, Google+, Pinterest and YouTube. www.insurancejournal.com

9

26

Like the page and write ‘I love ABC Agency’ on the Wall.

10 Give away a free car wash for every person who requests an auto insurance quote on Facebook or Twitter.

photo of them.

12 Post information about community

19 Promote the agency’s referral program.

events and news.

27 Talk about events and holidays and share articles or information that discusses risks associated with those.

18 Create boards on Pinterest for what the 28 Post information on education and agency is all about. If it’s a family-oriented agency, share fun stuff and ideas for family activities, recipes for family dinners, etc. If it’s more business-oriented, pin inspiring business quotes, good books on business, technology for businesses, etc.

11 Profile agency employees and post a

Start a community group on LinkedIn and every day suggest topics for discussion.

training events for a particular industry.

They do not have to be related to insurance but could be geared toward the agency’s specialty business.

29 Create polls and surveys for followers and fans on current events, community news, industry trends and customer service.

13 Share pictures of the agency’s commu-

20 Run a promotion to increase Facebook 30 Post videos and audio periodically on fans by donating a dollar to a local charity

nity involvement.

for every new fan on Facebook.

14

21 Use your mobile website to promote

Incorporate what agency fans and followers say about the agency, owners or employees in social media in other marketing. For example, use positive reviews that people post on Facebook in direct or email marketing.

15

Identify the agency employee who is most passionate about social media and put that person in charge of the agency’s social media marketing.

social media profiles.

an agency blog, YouTube, Facebook, and agency website.

31 Display the social media channel links on the agency’s website.

22 Recognize a fan or follower of the week on the agency’s Facebook or Twitter profile as a way to say thank you.

23

When the agency gets a new follower on Twitter, @ the follower, and say thanks for the follow.

32 Integrate the agency’s Twitter account with its LinkedIn account. Find out how in the LinkedIn Learning Center.

33 Create a schedule for checking social media and content posting; don’t leave it unscheduled.

MEDIA IDEAS 16 Host live Twitter chats so people can ask questions and a dialogue is started. It doesn’t always have to be about insurance.

Invite different subject matter experts to answer questions about a variety of topics.

17 Create boards for each line of business on Pinterest and pin pictures and articles about the topic. For example, if Agency ABC writes motorcycle and boat insurance, they might have a board for motorcycles and a board for boats. They could pin pictures of motorcycles, tips on taking care of a boat, great places for a motorcycle ride, etc.

36 www.insurancejournal.com

24 Spend one hour a week looking for five 34 Don’t just retweet and link to the work articles to share. They can be about insurance, community news and events, general interest articles about the lines of business the agency writes, e.g., home improvement, car care tips, etc. Schedule the posts for each day of the week using a service like Hootsuite or Tweetdeck.

25

Schedule posts for Saturday and Sunday and after hours. Just because the office is closed, doesn’t mean the agency’s followers aren’t reading social media.

of others.

35 Employ a multi-tweet campaign to plant doubt in the minds of potential buyers. Begin each tweet off with the phrase “When was the last time your family [or business] insurance agent…” Then complete it with a positive action such as “…contacted you with a money-saving idea?” Include a link to a landing page on the agency’s site to convert the person’s doubt into a sales lead.

Buy an ad through Facebook that will go out on the agency’s network. continued on page 28 April 2, 2012 INSURANCE JOURNAL | 27

SPECIAL REPORT

Social Media Awesome Ideas, continued from page 29

37

43

Don’t ask followers or friends for favors.

Use Google to identify major trends in the agency’s target markets and tailor comments and questions to those trends.

38 Keep postings fresh and timely.

44 Ask for recommendations from

39

Be a participant via sharing, liking and voting; don’t just sit there.

40

45 Avoid number envy — the quality of 46 Create and share holiday cards with

41 Include social media addresses on busi-

social media contacts.

ness cards and email signatures.

42

Target “influencers” including editors, bloggers, consultants and PR pros in the agency’s target markets.

responding; stay positive.

48 Keep up with changes in social media platforms.

LinkedIn contacts to some of their contacts. contacts is more important than the number of contacts.

Have employees participate in the agency’s social media campaign.

47 Don’t be negative or defensive on

50

49

Make the agency’s Facebook wall different. Focus on the visual by attaching videos, colorful large print flyers on various insurance topics (formatted as pictures), creative postings designed to elicit comments from fans, such as “Hit Our Facebook Wall with the Cause of Your Worst Car Accident” and other interesting, visual content.

Let customers say whatever they want.

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TECHNOLOGY 28 | INSURANCE JOURNAL April 2, 2012

INNOVATION

CONNECTIONS

BUSINESS www.insurancejournal.com

SPECIAL REPORT

Social Media E&O Insights: Social Media Can Be Your Friend or Foe E ffective use of the various forms of social media can play a huge role in the success of your business. Therein is the crux of the issue — “effective use.”

To simply start using social media such as Twitter, Facebook, blogging, etc., without a plan has the potential to result in several problems, includBy Curtis Pearsall ing some legal in nature.

After all, when you started your agency, didn’t you have a strategy detailing what type of business you wanted to write and what type of agency you wanted to become? I doubt you just opened the doors and shouted, “We’re open!”

There is tremendous power to social media and what it can accomplish. For example, do some YouTube searches to see “the good, the bad and the ugly.”

Many businesses have turned to social media to get their message out and tell their story. A well-developed marketing strategy should incorporate various degrees of social media. Whether your agency is currently using social media or if you have been thinking about it but didn’t quite know where to start, there are important issues to consider.

Define Social Media Goals Begin your social media efforts by securing some of the many useful resources available on the web, at the library or at your favorite bookstore. Look for resources that go into the details/benefits of each of the possible approaches.

A solid step is to write down on paper what you hope to gain from using social media and what you are trying to accomplish. While jumping in with “both feet” might sound exciting, it is probably best to start with a cautious, conservative approach.

You could also avoid some potential legal issues with the proper thought and planning.

Develop a Guide Develop a social media guide that provides www.insurancejournal.com

“dos” and “don’ts” for the agency. This will ensure you have the proper procedures/controls in place. It should include all media your staff may use (email, face-to-face, online forums, chat rooms, blogs, etc.) and should be developed with input from human resources, marketing and other departments. Your guide should include comments that: • The “rules” apply to information not only on your agency’s site, but to comments made about the agency by employees on their own personal sites.

• Employees should not reveal secrets or speak ill of the competition.

• Confidential/private consumer information should not be communicated via social media.

Advise all employees of this guide and secure their agreement with the contents.

Education: A Great Objective Due to the ability of social media to deliver compelling ideas and advice on a variety of topics, education is a common objective. This should be effective in branding your agency as a reliable resource in that industry, which should drive clients and prospects to action: buying, subscribing, applying, etc.

This information must be accurate and presented professionally. Many agencies require that all content be run through a “point person” for final approval. This will help ensure that incorrect advice or incorrect statements are not inadvertently published.

Because social media exists forever, extra caution should be taken to prevent the posting of inappropriate or defamatory comments involving specific people or specific organizations. Obviously, these could be exceptionally damaging to your agency’s reputation and could present some legal headaches.

If you will be posting articles on the web, make sure the material is from reputable sources. Whether you are viewed as an information provider or a content provider could determine any potential liability.

Educate your customers, too, on proper protocol when using social media to communicate with your agency. Make sure they know the “do’s” and “don’ts,” such as: • No policy change requests can be made via social media.

• Do not provide any key information via social media. This information is often quite sensitive and private.

• Coverage cannot be bound, modified or deleted via social media.

There will be potential customers who want to do business with you because of your education and expertise. Develop a procedure that identifies the point where the interaction between the prospect and the agency should be moved in-house and become part of the normal agency process.

Blogging This can be a great way to communicate your knowledge and reach your target audience. If you have not done this before, proceed cautiously. Comments must be accurate and proofread before being posted.

There is tremendous power to social media — it can be among your best of friends, or your foe and one of your biggest headaches. With a well-thought-out strategy and guide, it can yield solid growth and a professional reputation for your agency.

Pearsall is president of Pearsall Associates Inc., a risk management consulting firm. Phone: 315-768- 1534. Email: curtis@pearsallassociates.com.

April 2, 2012 INSURANCE JOURNAL | 29

NATIONAL COVERAGE

News & Markets Demand for Kidnap & Ransom Insurance on the Rise in Latin America Schools, Entertainers and Non-Governmental Organizations Need Specialized Protection

K

eeping people safe while they’re living, working or studying anywhere in the world means knowing the specific risks they face in each location.

Latin America — defined here as South America, Central America and Mexico — is no exception.

By Jeremy Lang While many insurance professionals know about some of the risks, such as the threat of drug-related violence in parts of Mexico, others are less well known.

For example, “express kidnappings,” in which victims are abducted and forced to withdraw money from their bank accounts via ATM, are a particular problem throughout Latin America.

Called “express kidnappings” because the victims are typically released after a day or two of withdrawing the maximum daily amount, they are much more common in Latin American than Europe, Africa, the Middle East and other regions of the world.

Overall, nationals and visitors living, working or studying in Latin America are at greater risk than before. They may face kidnappings, extortion or muggings from organized criminal groups,

such as drug cartels or small criminal enterprises. Politically unstable regions, such as in some areas of South America, can quickly become chaotic or violent.

30 | INSURANCE JOURNAL April 2, 2012

Of all the kidnappings worldwide by region in 2011, 26 percent were in Latin America, surpassed only Asia and the Pacific, which accounted for 38 percent, according to data from Control Risks, a global risk consultancy.

This article focuses on three of the many types of industries that operate in Latin America — educational institutions, entertainment, and nongovernmental organizations (NGOs) — as well as perils, risk management and insurance products that are applicable to any sector.

Increased Demand for K&R Kidnap and ransom insurance (K&R) is at the heart of any risk management program. Once used primarily to protect business executives and wealthy families, K&R has evolved to meet fast-changing risks encountered by anyone who lives, works, travels, studies or volunteers in potentially risky environments. As risks have increased, so has the demand for K&R. K&R usually covers hostage taking, extortion, wrongful detention, disappearances and emergency evacuation, among other risks. Typically, insurance carriers extend to their policyholders the services of professional risk and security firms with local knowledge and expertise. In addition to stepping in when a crisis strikes, partner firms often play an active education and training role. Overall, K&R is designed to keep people and businesses safe and, if a problem arises, to respond quickly and professionally.

Why is K&R so important? In addition to its function — to protect the life and health of individuals and groups — it also protects organiza-

tions, such as NGOs or universities, that have international programs. These organizations have a duty of care and could face lawsuits if their workers, volunteers or students are harmed.

Teaching Awareness In Latin America, similar to other areas of the world, proper preparation starts with teaching visitors and nationals (who may be at even greater risk because their habits are more predictable and because they’re seen as having ties to deep-pocketed corporations) about the local environment.

This is an area where a knowledgeable risk management and crisis firm play a big role, sharing knowledge about the region, specific cities and neighborhoods. Awareness is key.

Students, for example, may be used to walking around U.S. campuses with their phones out, texting or making calls. Carrying around laptops is commonplace here; in some places, it can be an invitation to theft. Similarly, wearing expensive jewelry or giving the impression of being wealthy can make someone a target.

In addition to awareness of one’s surroundings, it’s important to know how to get around safely in Latin America without becoming a target. Are cabs safe? Is public transportation a good idea? These are issues that need to be resolved in advance for practically all travelers. Others, such as entertainers on tour, will also have specific needs.

In the United States, for example, many entertainers maintain high profiles on the road. They may travel in a convoy of tour buses or flashy, conspicuous SUVs. In Latin America, however, they may need to be low key and not continued on page 32 www.insurancejournal.com

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News & Markets Demand, continued from page 30

attract attention. For musicians and others in the entertainment industry, that could mean using common, low-profile sedans and limiting traveling groups to just a few vehicles.

In terms of insurance, anyone associated with the tour, including musicians, performers, sound technicians, managers and roadies,

is a potential target and therefore coverage is recommended. Family members, even if they’re joining the tour for just a few days or weeks are also potential targets. Hired security for the tour is often recommended.

These precautions also apply to filmmakers and production companies, whether they

are making big-budget movies, documentaries or commercials.

Another important consideration, particularly for NGO workers who work in war-torn or other troubled areas, is the question of whether NGOs can trust law enforcement. Some police agencies may be corrupt and function as an arm of local criminal gangs. While local residents know this, Latin America visitors may have generated 26% no way of knowing of all worldwide that going to local kidnappings in authorities may put 2011. them in harm’s way.

Countries where private security personnel far outnumber public police are among the most violent in the world, according to the Institute of International Studies and Development.

Demanding ‘Protection’ from NGOs Anyone can fall victim to criminal gangs demanding “protection” money but this has emerged as a problem for NGOs, particularly in Mexico, where church groups have been extorted. Across Latin America, missionaries and others associated with religious entities, have been kidnapped and held for ransom.

The political stability of some Latin American regions is also an important risk factor. Political and social upheaval means emergency travel evacuations may be necessary. Schools and universities in particular need to be prepared. Students, faculty and staff may need to be evacuated at one time and parents are understandably frantic, adding pressure on school administrators.

With growing and fast-changing conditions in Latin America, having the right insurance coverage, as well as access to an experienced risk management and crisis firm, is essential.

People in certain industries, including education, entertainment and NGOs, also need advice and products that reflect the specific risks they face. Heightened risk doesn’t mean individuals and businesses need to avoid visiting countries and regions in Latin America; they just need to be prepared.

Lang is VP, U.S. Kidnap and Ransom, for Hiscox. Phone: 646-452-2358. Email: jeremy.lang@hiscox.com. Web site: www.hiscoxusa.com/broker/usa_kidnap_and_ransom.htm

32 | INSURANCE JOURNAL April 2, 2012

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CLOSER LOOK

Directors & Officers Liability Why Board Members Need Community Association D&O Liability

C

ommunity associaclaims for many community assotions present a unique ciations, as well. set of challenges to The following includes some insurance brokers. examples of directors and offiEducation is a key component to cers liability insurance claims understanding your community association these chalproperty managers and board lenges and it is members might want to know the insurance about. broker’s job to educate and • Breach of Fiduciary Duty: explain the $280,000 Defense Costs. A types of risks condo association was sued by a

By Kevin Davis the associations unit owner over parking spaces. face and how it can best protect The owner filed a lawsuit against itself from loss. the board of directors at his What is the best way for a condo association alleging they broker to convey these risks to breached their fiduciary duty their client, the community asso- in that they violated the condociation? One of the best ways is minium act and local parking to provide real life examples of a regulations by creating illegal wide variety of claims communi- parking spaces. Specifically, the ty associations have encountered plaintiff alleged that the defenand the amount each claim costs. dants knowingly and willfully The lack of funds at many violated the condominium act associations is raising the numby allowing parking spaces to be ber of breach of contract claims auctioned off resulting in nonand has put the associations in unit owners occupying portions a position where they cannot of the common parking garage afford to provide the same serto the exclusion of all other unit vices they offered in the past. owners. The condo owner sued Meanwhile, directors and officers the board of directors in an effort liability claims across the board to force the association to rescind have increased in the past few the sale of the spaces, pay for years. puniCurrently, tive Directors and officers the top liability claims across the damagfive claims es and board have increased in attorcommunity the past several years. associations ney’s face include: fees. breach of fiduciary duty; breach of contract; non-employment • Election Dispute: $660,000 discrimination; employment in Defense Costs. Following practices liability; and wrongful an initial board of director’s elecforeclosure. tion, a dispute arose concerning The financial crisis has caused the validity of that election. The an increase in the number of association held another election 34 | INSURANCE JOURNAL April 2, 2012

to attempt to fix the dispute and that only caused more problems as the originally elected board members refused to relinquish their posts to the newly elected board members. The association had to sue the board members in an effort to determine which set of board members should be able to keep their posts.

• Wrongful Termination: $550,000 Settlement; $170,000 in Defense Costs.

A 74-year-old condo association employee filed a wrongful termination claim against an association, claiming he was wrongfully terminated as a result of his reporting dangerous working conditions to OSHA. The employee also claimed he wasn’t properly paid minimum wage and overtime wages.

• Discrimination: $100,000 Settlement; $140,000 in Defense Costs. A complaint was filed by a prospective buyer against a condo association with the Department of Housing and Urban Development (HUD) alleging that the prospective buyers’ application to purchase a unit within the association was denied for discriminatory reasons. Specifically, the buyer alleged the association president discriminated against him by denying his application based on his age, national origin, and

familial status. The HUD commission issued a finding of probable cause. During that time, the board allowed the prospective buyer to purchase the exact unit they had initially sought. Despite this, the buyer filed a lawsuit against the association alleging discrimination and included damages representing the difference of the unit purchase price

during the time of the disputed application approval process, attorney fees, compensatory and punitive damages.

Another extremely important point: community association board members and property managers need to be aware of what is excluded in their current directors and officers liability policy. Many policies currently available exclude breach of contract, discrimination, employment issues and architectural issues, so as the old saying goes “buyer beware!”

Davis is president of Kevin Davis Insurance based in Los Angeles. Kevin Davis Insurance has more than 25 years of community association insurance industry experience.

Website: www.kdisonline.com. www.insurancejournal.com

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CLOSER LOOK

Directors & Officers Liability Securities Fraud Settlements in 2011 Were Lowest in Decade

By Jonathan Stempel

On The Web

A

Visit InsuranceJournal.tv for more D&O coverage from this year’s Professional Liability Underwriting Society’s (PLUS) D&O conference.

ngry investors are seeing far fewer financial benefits from lawsuits accusing corporate America of securities fraud, but may be on the cusp of a turnaround.

The number and size of securities fraud settlements that won final U.S. court approval fell in 2011 to the lowest in a decade, amid a drop in cases linked to accounting problems and U.S. Securities & Exchange Commission enforcement activity.

According to a study released by Stanford Law School and Cornerstone Research, courts in 2011 approved 65 such settlements totaling a mere $1.36 billion, down from 86 settlements totaling $3.21 billion in 2010. The dollar amount is less than half the $2.78 billion recovered in 2003, which had been the lowest since the adoption the prior year of the Sarbanes-Oxley corporate governance law.

Still, Laura Simmons, a business professor at the College of William & Mary and coauthor of the study, said large settlements involving American International Group Inc. and other companies, as well as increased SEC enforcement activity, may make 2012 a more rewarding year for investors.

Last year, the SEC filed 735 enforcement cases, up 8.6 percent from 2010 and the most in its history, according to the regulator’s annual report. The largest 2011 settlement in Cornerstone’s study was a $208.5 million accord by officers, directors, underwriters and an auditor for Washington Mutual Inc., the largest U.S. bank or thrift to fail.

Simmons said the drop in accountingrelated cases may stem from fewer restatements, which in turn may be attributed in part to improved corporate governance under Sarbanes-Oxley. She also said that some plaintiffs’ lawyers may have focused more in recent years on housing-related litigation, including the sale of risky mortgage-backed securities, rather than more traditional securities fraud cases.

Cornerstone’s study excludes settlements challenging mergers. Such cases accounted for 43 of the 188 new securities fraud lawsuits 36 | INSURANCE JOURNAL April 2, 2012

Who Pays for Securities Actions? Directors?

Insurers? http://www.insurancejournal.tv/videos/6530/ In D&O, It’s Not Always About the Money http://www.insurancejournal.tv/videos/6523/ Claims Rising for Private Company, Non-Profit D&O Coverage http://www.insurancejournal.tv/videos/6663/ What Happened with Securities Actions in 2011 http://www.insurancejournal.tv/videos/6526/ filed last year.

Settlement totals for 2012 will include AIG’s $725 million settlement to resolve claims accusing the insurer of accounting fraud and stock price manipulation. Other accords topping $100 million that may be included are with Lehman Brothers Holdings Inc.; wireless equipment company Motorola Solutions Inc.; National City Corp., a bank now owned by PNC Financial Services Group Inc.; and private education company Apollo Group Inc. Additional Key Findings • Among settlements in 2011, allegations related to violations of generally accepted accounting principles were included in only about 45 percent of settled cases compared with nearly 70 percent of settled cases in 2010 and 68 percent for the prior five years.

• Class action settlements involving accompanying SEC actions decreased to less than 10 percent in 2011 compared with nearly 30 percent in 2010.

• The number of settled cases involving companion derivative actions also decreased in 2011 compared with 2010. Slightly less than 40 percent of cases settled in 2011 were accompanied by a derivative action filing compared with more than 45 percent of cases settled in 2010.

• In 2011, the average class period length

for cases settled was 1.3 years, 32 percent shorter than the average class period for the prior five years and the lowest average for any single year during that period.

• The median Disclosure Dollar Loss — the dollar value decrease in the defendant firm’s market capitalization at the end of the class period — decreased to $112 million in 2011, representing a 39 percent yearover-year decline and a 22 percent decline compared with the median for the preceding five years.

• The percentage of settlements involving underwriters in 2011 matched the all-time high of 26 percent reached in 2010. As 60 percent of those cases that settled in 2011 had filing dates in 2007 and 2008, this increased level can be attributed to the higher number of case filings involving Section 11 claims and underwriter defendants during those years.

• While filings of cases related to the credit crisis declined in 2011, settlements of these cases increased. Included in the study were 10 settlements in 2011 related to the credit crisis. Overall, these cases continue to settle at a slower rate than traditional cases.

The full text of the report is available at the Cornerstone Research website at www.cornerstone.com/post_reform_act_ settlements.

Copyright 2012 Reuters. www.insurancejournal.com

Is There a Bad Apple in Your Bunch?

By Kathy Ryan

I

’m sure you’ve heard the saying, “One bad apple spoils the whole bunch.” While it’s certainly true when speaking about fruit, does the concept apply to work teams as well? Can one team member with a bad attitude bring everyone else down?

You bet your socks!

Let’s say your team has 10 solid performers and one “Negative Nelly.” You’ve tried Kathy Ryan to encourage your sour puss to join the rest of the team and see things in a more positive light, but she’s having none of it. In fact, you suspect that she enjoys complaining, nay saying and finding fault with every new idea. Your hope is that because your positive and productive team members outnumber her 10-to-1, she will eventually see the error of her ways and move her attitude in a more positive direction.

Stop dreaming. It’s never going to happen.

Negative people are energy vampires, literally sucking the positive energy out of a room, draining energy from everyone with whom they interact.

With work teams, the dynamics tend to follow a predictable pattern. At first, the rest of the team tries to work with her, cheerfully initiating conversations only to be turned off by her negativity. They try to convince her that her victim mentality doesn’t help, that people and situations aren’t as bad as she thinks. But this rarely works; over time, they begin to avoid her out of self-preservation.

Eventually, your bad apple affects the performance of the team. Communication suffers, and productivity is impacted as people look for ways to work around her, only engaging her when they are forced to do so.

Some team members become vocal and complain to you about her negative attitude while segregating themselves from her; oth38 | INSURANCE JOURNAL April 2, 2012

ers grow tired of resisting her constant negative dialog and join her on the “dark side.”

Eventually, your team splits and serious dysfunction results.

As the leader, it is your responsibility to make sure every team member acts in a way that supports and promotes a positive, healthy working environment. While it is always a plus to have strong people on your team who model a positive attitude for others, any problems with attitude are yours to fix, not the team’s.

Start by providing specific and timely feedback. When you hear her complain or say something negative, privately bring it to her attention as soon as possible. Help her to understand the impact of her negativity on her performance and the team’s morale. If she reserves her negativity for times when you are not around and you hear about it from other team members, even though you did not personally hear the comment, you still need to coach her. In my experience, at least 50 percent of the feedback you offer as a leader references behavior you did not personally witness. You need to become comfortable with addressing issues using third-party information.

Make no mistake; negativity is a performance issue, not just a personality trait, and it should be handled using your company’s progressive discipline policy. If her behavior does not change, you should document your conversations in writing, following your company guidelines. Be firm and compassionate.

Don’t beat around the bush because you are uncomfortable. You have a responsibility to

provide her with honest feedback. Tell her exactly what you expect from her and warn her of the consequences of failing to improve.

Hopefully she will get the message and change her behavior. At some point though, if there still isn’t significant improvement, you may need to remove her from your team.

Personal relationships and length of service can add a layer of difficulty to effectively addressing these issues, but as leaders, it is our responsibility to remove all obstacles to our team’s success. No one should get a pass on bad behavior because they are a personal friend, family member or “opened the office 20 years ago.”

Negative attitudes do as much damage to productivity as incompetence, so they must be aggressively managed. If you allow negativity to continue, your team will begin to wonder why you are unwilling to address the problem, and your credibility will suffer.

Being a leader means having the courage to do what is right, even if it is uncomfortable, unpopular or temporarily creates a hardship for your team. If your “Negative Nelly” can’t or won’t change, you have to take disciplinary action. Your reputation and the trust you have built with the rest of your team members is at stake.

Ryan is facilitator for Insurance Journal’s Academy of Insurance and author of the book “You Have to Say the Words: An Integrity-Based Approach for Tackling Tough Conversations and Maximizing Performance.” Join Ryan for her upcoming Academy webinars starting April 4, 2012.

The five-part series focuses on developing critical leadership skills such as building trust, hiring the right people, performance management, fearless feedback and team leadership, and is appropriate for all management levels. www.insurancejournal.com

Insur ance Journal Academy of Insur ance

2012 Second Quarter Schedule April 4, 18, May 2, 16, 30, 2012 Succession Training (5 Part Series) Kathy Ryan President & Founder Pinnacle Coaching Group LLC

April 26, 2012 Contractor Bonds (2 of 2) Rick Pitts Vice President Arlington Roe & Co.

May 30, 2012 Succession Training - Team Leadership Kathy Ryan President & Founder Pinnacle Coaching Group LLC

April 4, 2012 Succession Training - Maximizing Your Impact Kathy Ryan President & Founder Pinnacle Coaching Group LLC

May 2, 2012 Succession Training - The Performance Management Process Kathy Ryan President & Founder Pinnacle Coaching Group LLC

May 31, 2012 Understanding and Explaining Ordinance or Law Coverage Christopher J. Boggs Director of Education IJ Academy of Insurance

April 5, 2012 Cyber Liability David Derigiotis Director of Professional Lines Burns & Wilcox

May 3, 2012 Condo D&O Betsey Brewer Senior Vice President The Rule Co.

June 6, 13, 20, 27 Green Risk (4 Part Series) Trent Massey Property Programs Instructor Vale Training Solutions

April 11, 2012 Mining Workers’ Compensation Loss Runs for Valuable Information Stacey Cheese Director of Workers’ Compensation The Seltzer Group

May 9, August 22, November 7 Secrets of Insuring Restaurants - Intro to Restaurants (3 Part Series) Trent Massey Property Programs Instructor Vale Training Solutions

June 7, 2012 Waiver of Subrogation, OCP, Liquor, MCS-90 Christopher J. Boggs Director of Education IJ Academy of Insurance

April 12, 2012 Principles of Coinsurance Christopher J. Boggs Director of Education IJ Academy of Insurance

May 10, 17, 24 Business Income (3 Part Series) Christopher J. Boggs Director of Education IJ Academy of Insurance

June 14, 2012 State of the Industry Ron Fry Senior Vice President Sherman and Co.

April 18, 2012 Succession Training - Building Your Team Kathy Ryan President & Founder Pinnacle Coaching Group LLC

May 16, 2012 Succession Training - Fearless Feedback Kathy Ryan President & Founder Pinnacle Coaching Group LLC

June 21, 2012 Computer Property Coverages Stuart Powell VP Insurance Operations IIANC

April 19, 2012 Contractor Bonds (1 of 2) Rick Pitts Vice President Arlington Roe & Co.

May 23, 2012 Gaps in Home/Auto Coverage Terry Tadlock President Coastal Plains Insurance

June 28, 2012 The Future of the Work Comp Model Kevin Ring Founder Institute of Benefits and Wellness Professionals

April 25, 2012 Is a Strong Agent/Adjuster Relationship Vital?

Mary Anne Medina, Instructor/Trainer/ Consultant, Vale Training Solutions www.insurancejournal.com

April 2, 2012 INSURANCE JOURNAL | 39

Insur ance Journal Academy of Insur ance

Vale Training Solutions Teams Up With the Insurance Journal Academy From green risks to restaurant claims, there are many topics to choose from in this year’s webinar courses.

By Nicole Bissett

T

hree Vale Training Solution instructors, with varying backgrounds, have one thing in common: They are bringing their expertise in insurance to students of Insurance Journal’s Academy of Insurance.

According to Mary Anne Medina, insurance industry professionals must be well-rounded in their skill sets. “We’re taking usual property and catastrophe people and training them to do Mary Anne Medina other jobs now, which are a big need in the industry. When there are no catastrophes going on, there’s a need for them to develop skills to do other things.”

Medina began her career in claims and claims management, then turned her attenTrent Massey tion to training others.

She currently teaches casualty courses at Vale, and assists in the development of customized courses at the request of insurance companies. She is teaching two webinar courses with the Academy of Insurance this year. The Amy O’Rorke first, “Is a Strong Agent/ Adjuster Relationship Vital?” will be held on April 25. On October 11, Medina will lead students through “The Real Meaning of the Property Damage Exclusion in the CGL.” Trent Massey has plenty of insurance industry experience to bring to the table as an instructor. Prior to Vale, he worked in 40 | INSURANCE JOURNAL April 2, 2012

the fraud investigation unit of State Farm, serving also as a field adjuster and catastrophe worker.

In addition, Massey ran his own fire and water reconstruction business, and worked as an independent adjuster.

He is now a full-time property instructor with Vale Training Solutions and has designed several innovative courses.

His most popular course is the four-part green risk series.

“I created the green risk professional program at Vale, which is the very first of its kind. It is a green education class designed specifically for the insurance industry and restoration industry,” Massey said.

“Green Risk for Buildings and Materials” is a four-part series covering what a green building is, green insurance endorsements, and re-building issues. This four-part series (each part is 90 minutes) begins on June 6 and runs on four consecutive Wednesdays ending June 27.

Massey, along with fellow Vale instructor Amy O’Rorke and other instructors, teach a three-part series on insuring restaurants.

Part one, to be held on May 9, introduces students to restaurant construction and equipment insurance issues. Part two is an overview of restaurant insurance coverages and will be held on August 22.

“We’re trying to help the target audience understand, just in general, what’s involved with insuring a restaurant … taking them through the construction equipment background of restaurants so an insurance agent will be more familiar with terminology when they have a meeting with the restaurant owner, as well as insurance coverage issues, and then go over some claims issues

with restaurants,” Massey said.

O’Rorke will end the series on November 7 with a review of restaurant claims. Part three focuses on common claims experienced by most restaurants, such as slips and falls, food poisoning and cooking fires.

“I think the most important thing is simply to be prepared,” O’Rorke said. “Have the proper coverage in place that can address some of the more common claims; make sure the agent has enough background and understanding to convey to the restaurant owner in order for the restaurant owner to know what to do and how to react when a claim does occur; and ensure that the agent has a comfort level in giving direction and guidance to that business owner until the insurance company is notified and involved,” she said.

O’Rorke has spoken at the national claims conference of the Property Loss and Research Bureau (PLRB). In addition to her teaching duties, she is a national general adjuster with Cunningham, Lindsey, Vale’s parent company.

For updates on these webinar courses, visit www.ijacademy.com.

For more information on Vale Training Solutions, visit www.valenational.com/ Home1.aspx. www.insurancejournal.com

Insur ance Journal Academy of Insur ance

Agency Management Challenges How Money, Motivation and Morale Connect

P

op quiz: Agency owners, please write down a short list of the management challenges constantly facing your company. The catch — you cannot list increasing new business revenue or retaining current clients. Portfolio development, while a very real issue, does not do

By Mary Newgard enough to separate your identity from other firms. Every company lists business development as a goal. The real issue is, “What makes the challenges of an independent agency different?”

It is no secret the insurance industry has some unique ownership and staffing challenges. The 2010-2011 Bureau of Labor and Statistics Occupational Outlook Handbook projects a 14 percent shortage of insurance agents over the next six years. This tops nearly all other deficits projected for prominent insurance positions (adjusters, underwriters, actuaries, etc.).

The industry hasn’t done itself any favors in reversing that course. Sales training and compensation design are extremely inconsistent. And where insurance companies used to be a breeding ground for future producers, most sales managers don’t consider this a sourcing option. Very few independents see value in a producer’s technical foundation, and they question a person’s true sales abilities if they’ve worked at a carrier for too long.

Issues of recruiting and talent development most greatly affect regional brokers. If you’re self-described as “a local agency writing national business” then you fit into this category. The staffing choices and employee development techniques you employ over the next six years is about changing the entire insurance industry’s shortfall by keying in on three critical challenges — money, motivation and morale.

Producer Compensation Developing a competitive producer compensation plan is an important tool in attractwww.insurancejournal.com

ing top sales talent. This doesn’t mean you are reckless with commissions or guarantee ownership from day one. Your goal should be to design a plan that minimizes the agency’s financial risk but still invests in the producer. While the end goal is for producers to live on 100 percent commission, regional agencies usually offer a guaranteed income plus variables up to the first 36 months of validation. This plan has been largely undersold to prospective producers. Be cognizant of this misconception especially when recruiting college graduates and out of industry sales executives.

If you want to attract producers with another agency, make sure they know your pocketbook runs deep enough to compete with the earnings from their current book.

Descending bases and contribution-based plans are incredibly effective when wooing an experienced producer, yet these are commonly overlooked by sales managers.

The key with compensation design, especially overlaid on existing contracts, is to personalize elements for each producer.

Homogenizing sales goals is ineffective in the same way unilateral compensation plans are.

Employee Motivation and Morale You might think morale is just an issue for non-sales divisions. You may assume that successful producers sell because they are highly engaged. A 2009-2010 U.S. Strategic Rewards Survey challenged that thought when it highlighted declining workplace morale. In fact, the survey showed drops in employeeengagement were highest with top performers. Agencies must address motivation and morale because it’s the lifeblood of talent retention. Employees want to grow deeper and wider in their craft. They choose to work for regional brokers because this is the environment with enough room for growth without becoming a number. They need agency owners who recognize this desire and put personalized plans in place to achieve their goals.

Whether it’s a producer, sales manager or

CSR, every employee desires career progression. This isn’t about climbing the ladder to obtain a meaningless title. It’s about finding ways within your agency to create structure and definition in each position. For example, you’ll have a hard time motivating account managers if everyone’s duties are the same and all the titles are CSR. You’ll struggle to retain successful producers if the management structure is flat and there is no room for player/coaches. You won’t have perpetuation options if you don’t separate out the sales-only employees from the leaders.

I would venture to guess most of your lists had at least one if not all three of these items — compensation, producer development and agency morale. In fact, if I felt like a gambler, I would say these challenges were among the first you wrote down. The good news is your struggle as a regional agency to define culture and attract talent is not unique. What’s critical is that you understand these challenges, take measures to implement solutions and brand your opportunities to create separation.

Although the actions of any agency, big or small, can affect recruiting and employee development, don’t expect alpha brokers or small independents to come to your rescue.

Perhaps through these efforts we can turn the staffing shortfall into a surplus!

Newgard, CPC, AU, is a senior search consultant at Capstone Search Group. She specializes in working with agencies of varying size and ownership structure, and enacting competitive, results-driven sales and service recruiting.

April 2, 2012 INSURANCE JOURNAL | 41

SPOTLIGHT

Entertainment, Sports & Events Insurance Plays Lead Role in Movies

By Jonathan Schwarzberg

A

mericans love movies, and they showed it by purchasing 1.2 billion tickets worth about $10.2 billion at the box office last year. That, of course, means big business for companies that are willing to insure the risks behind these productions.

Of last year’s movies, Fireman’s Fund Insurance Co. called “The Girl with the Dragon Tattoo” the riskiest. The movie was filmed in Sweden, Switzerland and the United Kingdom, and posed challenging risks, including the set, transportation of film equipment and costumes, and the potential for illness in a foreign location. “’The Girl with the Dragon Tattoo” featured a range of risky elements, including motorcycle, skateboarding, fight and torture scenes, and filming in foreign locations, which all contributed appreciably to its

42 | INSURANCE JOURNAL April 2, 2012

overall risk,” said Lauren Bailey, vice president of entertainment at Fireman’s Fund.

The company reported that some of the action scenes, such as a motorcycle sequence, actually had to be altered from the book because of the insurance concerns.

“Part of my role as a risk services consultant is to collaborate with movie studios to analyze action and stunt scenes, understand all of the safety measures in place, and ensure the safety of the cast and crew,” said Paul Holehouse, entertainment risk consultant at Fireman’s Fund.

Most of the standard coverages for films are available through the traditional insurance markets in the United States. For more risky and exotic products, the Lloyd’s marketplace can place coverage ... for a price.

Coverages Insuring a film — especially a big budget

film — isn’t as easy as just applying general liability and property policies. To that end, there are a range of coverages for films productions.

“Delays can cost a production millions of dollars if a cast member becomes injured and is unable to work, which can cost up to $250,000 a day for a big budget film,” said Wendy Diaz, entertainment underwriting director at Fireman’s Fund.

So, cast coverage is crucial. It’s basically a form of business interruption coverage for the production company should an actor become unavailable due to specific perils.

These generally include things like illness, injury or death as opposed to jail or rehab.

Coverage for props, sets and wardrobe is also important. This covers losses, damages and destruction to just about anything that would be “in front of the camera.”

For behind the camera, film productions also purchase miscellaneous equipment coverage to pay for losses on items such as cameras, sound equipment and lighting.

Most productions also purchase extra expense coverage to insure losses incurred by anything including sets, equipment and location. Third-party property damage coverage pays for the legal liability for real property at various filming locations.

Insurance for film productions extends beyond what happens during filming to include the actual film and equipment, as well. Faulty stock coverage can provide protection against having to reshoot or correct unacceptable footage that happens due to the mistaken use of faulty raw stock www.insurancejournal.com

or equipment, such as cameras and sound equipment. It also covers problems caused by bad processing at the lab and mistakes from an editor’s handling of the negatives. The insurer also provides an all-risk coverage for negatives that excludes the perils named in “faulty stock coverage.”

Completion bonds are a less obvious coverage available to film companies and video games.

Partnering with Fireman’s Fund, International Film Guarantors provides completion bonds for producers and financial backers looking for a guarantee that a production will be finished both on schedule and on budget.

when it’s in a digital format, it may be easier for people to misappropriate,” Turk said.

“That’s something that, again, the policies cover and they anticipate. But it’s, again, a change in the risk profile of how these things are produced and consumed. Policies need

to recognize that, [and] the insurance needs to recognize that and support any potential losses that come from that.”

Insurance Journal West Editor Don Jergler contributed to this report.

Technology Risks As technology has altered the way that films are made and distributed, it has opened up new risks for errors and omissions. For instance, Doug Turk, president of Aon/Albert G. Ruben, said “transmedia,” in which a variety of different media channels, music are tied into one project, create more exposure.

“Think about some of the films that have come out, and how they cut across a whole bunch of different media sources. There could be a television element, there could be a video game element, there could be online webisodes,” Turk explained.

He also pointed out that in today’s Delays can cost a world, production millions digital there are cyber of dollars if an liability concerns. actor is injured.

If hackers get into a server in an editing house and pull down a movie like “Pirates of the Caribbean,” they could put it out on the web, which poses a liability issue. In the “old days,” someone would have to physically steal the film can and have a movie projector. “[This]creates a different type of profile of risk to both the production, as well as the consumption.”

Film-related companies like IMDb have made film data their business. Having this information taken and used in an unlawful way could have an impact on the business. It could trigger the cyber liability policy, a business interruption policy or others.

“When you think of film intelligence today, www.insurancejournal.com

April 2, 2012 INSURANCE JOURNAL | 43

NATIONAL COVERAGE

MyNewMarkets Caterers Market Detail: Western Security Surplus Insurance Brokers Inc. (www.wssib.com) covers medical payments, business income, products liability, commercial general liability, new occurrence, fire, business interruption, property, liability, and fire legal liability.

Available limits: As needed Carrier: Unable to disclose, admitted and non-admitted available States: Calif. and Texas Contact: Customer service at 625-584-0110

Environmental Pollution Market Detail: The Insurance Market (www.theinsurancemarketonline.com) offers a wide range of coverage including: emergency response; asbestos, mold and lead; remedial action-soil remediation and excavation; drilling; tank testing; spill response; sludge removal; transportation; bioremediation.

Available limits: Minimum $1 million, maximum $100 million Carrier: Various, admitted and non-admit-

44 | INSURANCE JOURNAL April 2, 2012

ted available States: Calif., Conn., D.C., Fla., Ga., N.C., Pa., S.C., and Texas Contact: Nick Yaworsky at 877-679-0008 or email: info@ins-market.com

Garage Insurance Market Detail: Western Networked Insurance Services (www.western networked.com) is offering garage insurance coverage for difficult to place classes of business.

Available limits: Minimum $1 million, maximum $3 million Carrier: Unable to disclose, non-admitted States: Ariz., Calif., Colo., Idaho Nev., N.M., Ore., Texas, Utah, and Wash.

Contact: John Erickson, vice president, email: john.erickson@networkedins.com, or at 530-274-6992

Securities Broker Dealers E&O Market Detail: Fox Point Programs Inc. www.foxpointprg.com) offers professional

liability for small- to mid-sized broker dealers. One page indication form for most applicants and multiple deductibles and limits of liability options available.

Available limits: Minimum $250,000, maximum $1 million Carrier: Unable to disclose States: All states Contact: Tom Foulds at 302-765-6010 or email: Tom.Foulds@foxpointprg.com

Build-Sure Market Detail: Crumpâ&#x20AC;&#x2122;s (www.crumpins. com) new Build-Sure facility offers coverage for operations in the manufacture, assembly or distribution of manufactured homes and buildings. Nationwide coverages include employee benefit liability and primary general liability occurrence and claims made.

Available limits: As needed Carrier: Unable to disclose, non-admitted States: All states Contact: Cathy Perry at 877-247-9772 or email: theone@crumpins.com

www.insurancejournal.com

SPOTLIGHT

Sports and Events Research Hopes to Curb Head, Neck Injuries in Athletes

T

wo competitive Ohio medical research institutions are teaming up at a new lab to study head and spinal injuries that occur in sports and combat.

The Cleveland Clinic and Case Western Reserve University will jointly run the Cleveland Traumatic Neuromechanics Consortium, to learn more about causes of head and neck injuries and to create better protection and treatment, The Plain Dealer reported.

“There are many more questions than answers” about brain injuries, said mechanical engineer Adam Bartsch, who leads the Clinic’s Head, Neck and Spine Research

Laboratory. One of those questions is what level of force or number of repeated impacts causes temporary or permanent brain damage. There’s concern that injuries like concussions can cause lasting damage. The lab will search for answers with specialized equipment, including an air-powered ram that will be used to test football helmets on replicas by mimicking certain impacts, which some suspect may be even more damaging.

“There are things that can be done to the helmet that would be helpful in basically absorbing energy and protecting the head,” said Case Western mechanical and aerospace engineering professor Vikas Prakash, who has worked on creating better protective gear for military personnel and vehicles.

The Centers for Disease Control and Prevention reports athletic activities lead to nearly four million concussions a year. A study by the nonprofit Rand Corp. deter-

mined at least 320,000 U.S. troops that served in Iraq and Afghanistan during the past decade suffered probable concussions.

But why do some suffer brain damage while others show few effects?

Part of the puzzle could be answered in a study of boxers now being conducted in Las Vegas.

Some 148 current boxers and MMA fighters have already taken their first set of tests for the study, funded mostly by hotel magnate Kirk Kerkorian and conducted at the Cleveland Clinic’s new Lou Ruvo Center for Brain Health in Las Vegas.

Researchers hope to eventually enroll more than 600 fighters in what is hoped to be at least a four-year study of their brains.

Copyright 2012 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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April 2, 2012 INSURANCE JOURNAL | 45

IDEA EXCHANGE

Minding Your Business Be an Influencer How to Get Employees to Do What You Want

W

e just finished the book “Influencer: The Power to Change Anything” by Kerry Patterson, Joseph Grenny, et. al. The authors lay out a simple formula to create useful shifts in people’s behaviors and perspectives. It is an excellent read for business owners to improve their understanding of human behavior and glean useful techniques to manage and run their business.

By Bill Schoeffler This book is a continuation of previous books and approaches focused on how to influence others, which include Dale Carnegie’s “How to Win Friends and Influence People,” as well as NLP – Neuro Linguistic & Catherine Oak Programming and numerous motivational speakers, such as Zig Ziglar.

Human nature tends to resists change. We

take the path of least resistance. Even if it means we repeat the same bad behavior.

Unfortunately many approaches society currently takes to change behaviors, such as overeating, or drug use, fail to resolve those issues.

A drug addict destroying his life will continue that behavior even if it means death. Why? The Carrot or the Stick The first concept is that the traditional approaches that focus on the carrot (positive motivation) or the stick (negative reinforcement) don’t work for most people in the long term. Any employer can testify that punishment is rarely successful in changing a bad employee’s behavior. Although praise works better, over time it tops off and become non-

effective.

What is the difference between a non-leader and a successful leader? A true influencer knows how to break through a person’s natural resistance to change.

The authors outline the eight steps to influence other people. These include: Find the Vital Behaviors.

What are the successful people doing different from those who are failing?

Identify what works and what doesn’t. As an employer, what are your high performers doing different from the rest?

Change the Way You Change Minds.

What is your current approach to influencing others? If it is not working, change your approach. Do you use talking points or memos to get your points across? Or do you use stories and metaphors, which are much more successful.

Make the Undesirable Desirable. Find a way to get everyone to align with your vision and the key values to make your business successful. Go beyond business motivations and appeal to employees’ sense of higher purpose. Clarify how humankind improves a little bit due to the success of your business.

Surpass the Current Limits. Employees thrive with a challenging environment.

Create challenges that will force employees to expand beyond their current limits through training and coaching. Provide feedback against standards that were previously clearly defined.

Social Motivation. Harness peer pressure to exploit influential champions within the group. Identify opinion leaders and get them involved in encouraging others to make changes. Persuade the most resistant and

46 | INSURANCE JOURNAL April 2, 2012

www.insurancejournal.com

involve them in the change process. The rest will follow.

Strength in Numbers. Develop a situation in which people help each other. Create true teamwork, which promotes support to resolve obstacles to success. Encourage everyone to provide constructive feedback to management.

com/ for more information from the authors, which includes free resources and influencing assessment tools.

Also, contact Oak & Associates for your personal review of your agency’s management and operations or for information about

how to improve your business.

Schoeffler and Oak are partners at the international agency consulting firm Oak & Associates. E-mail at bill@oakandassociates.com. Phone: 707-935-6565. Website: www.oakand associates.com.

Structural Motivation – Rewards and Motivation. Design a system that includes rewards while demanding accountability.

The concept is to align an employee reward system to the results they produce. Make sure any incentives used are tied directly to behaviors that matter and encourage desired results.

Change the Environment. Wherever possible, change the physical environment to make new behaviors almost unavoidable by moving people or things closer together or farther apart to get results. Use reminders, such as regular communications and metrics that keep the need for change visible and in front of their minds. Make sure that information about progress towards change is objective, accurate, timely and visible.

The authors of “Influencers” weave in various stories throughout the book that demonstrate how “true influencers” successfully impact massive amounts of people to change behaviors. These include stories from changing the behavior of sex workers in Thailand in order to reduce the spread of AIDS, to an organization in San Francisco that is successful in mainstreaming criminals while being self-sufficient, to a program that gave doctors a $10 Starbucks card to sterilize their hands.

Conclusion The elements to successfully lead and influence people are not new. The problem is that our society has incorporated many non-successful approaches at the same time.

There are many current theories and books in alignment with “Influencers.” Thus there are many other options that should match your style if this book falls flat for you.

Visit the website http://www.vitalsmarts. www.insurancejournal.com

April 2, 2012 INSURANCE JOURNAL | 47

IDEA EXCHANGE

Agency Management What’s Your Grofit?

Grow at All Costs, Or Drive the Bottom Line?

A

s you execute on your business plan, are you guided by long term objectives, short term goals or a balance of each? Agency owners often perceive growth and profit as mutually exclusive. In our consulting practice, we frequently work with agency principals that are focusing on either growing top line revenues or driving bottom line profitability. They will

By Megan Bosma employ either the “grow at all costs” strategy or the “profit is king” strategy.

Sacrificing growth for profit or profit for growth in the long term can be a detriment to agency value and sustainability. & Tommy McDonald Without question, the most valuable agencies in the country have created a balance between growth and profit. These agencies understand with any strategy or tactic driving a sustainable, profitable growth model should always be the

goal. When evaluating the future direction of your agency, first ask yourself, “What’s my Grofit?”

There are many factors that impact the value of an agency. At its core, agency value is a function of growth and profit. When a buyer evaluates an acquisition or when a valuation expert determines an agency’s value, two of the most important items analyzed are the ability to produce historical growth and profit. Grofitability metrics were developed to illustrate how well an agency can balance growth and profit. Grofit can also be an effective indicator of agency value.

The GRO in Grofit The first component of Grofit is growth.

Over the past five years, the majority of agencies have struggled to achieve growth.

Figure 1 illustrates the average growth rate in total commissions and fees over the past five years for agencies in our Perspectives for High Performance benchmark database (which contains over $2.2 billion of net revenues, in aggregate). We ranked each of the agencies in the database from highest to lowest based on the Grofit formula.

Figure 1: References to the Most Grofitable Growth In Total Commissions & Fees agencies reflect The Rest (Bottom 80%) Most Grofitable (Top 20%) the Top 20 percent 20.00% of the agencies in the database with regard to Grofit.

15.00% The Rest represents the remain10.00% ing 80 percent of the agencies in the database. The 5.00% bottom 80 percent has had negative 0.00% growth over the past four years, while the Most -5.00% Grofitable agencies 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 have been able to

48 | INSURANCE JOURNAL April 2, 2012

grow despite a significant decline in rate and risk exposures. Of the agencies that had the highest Grofit, growth was driven by a continuous commitment to staff reinvestment and implementing effective sales management systems. These investments represent the cost of growth.

Costs of growth have an immediate negative impact on the agency’s profitability, which can frighten agency owners. Firms with the “grow at all costs” mindset have embraced the risk associated with making investments and are comfortable with lower profit in the short term. With this mindset, the struggle in achieving value is accountability. Agency owners must have the discipline to monitor and track the return on these investments.

For example, if a newly hired producer is not displaying the activity necessary to generate new business, the agency owner or sales manager should provide guidance to the new producer to correct behavior. If the producer does not show signs of improvewww.insurancejournal.com

McClelland and Hine, Inc. ment within a reasonable timeframe, that individual should be moved into another position or terminated. Holding onto poorly performing sales people for too long can be very expensive and a significant impairment to Grofit.

In this example, the key in driving value is building the sales infrastructure prior to incurring the cost of growth. Similar arguments can be made for other costs of growth such as acquisitions, building value-added service platforms, and investments in automation technology.

High performers build the costs of growth into their long term budget and, regardless of the market cycle, remain committed to the strategy. The majority of agencies succumbed to the soft market during 2011 and lost approximately 2 percent of their commissions (value lost).

However, the Most Grofitable agencies were able to grow by 13 percent, on average (value created).

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April 2, 2012 INSURANCE JOURNAL | 49

IDEA EXCHANGE

Agency Management Grofit, continued from page 49

growth and contain costs to enhance profit.

For agency owners who follow the “profit There is a perception in the marketplace is king” mantra, expenses are fanatically conthat profitability is driven primarily by lean trolled. It is easier for agencies to squeeze payroll. Agency owners who pay employees their expenses rather than build a growth less, have significantly higher margins. This engine. Agencies that maximize profit are is not the case howevquick to implement er. The more Grofitable hiring freezes and Sacrificing growth for layoffs, rarely invest profit or profit for growth agencies actually have higher total payroll in value-added serin the long term can be expenses as a percentvices, and oftentimes a detriment to agency age of total commisavoid employing value and sustainability. sion and fees than the essential middle-level remaining agencies. management needed In 2011, total payroll for the Most to take the agency to the next level. With no Grofitable agencies (Top 20 percent) equated plan for reinvestment, the agency is in danger of becoming a wasted asset or at best has to 64 percent of total commission and fees versus the Rest (Bottom 80 percent) with already maximized its value.

63 percent. So, if Grofitable agencies have Under some circumstances, it is neceshigher payroll expenses how is it possible sary to make tough decisions to survive. for these agencies to drive more profit? The However, eliminating critical growth components will have a negative impact on value answer is two-fold.

First, those agencies driving positive over time. The more Grofit-minded organic growth have properly structured Figure 2: Productivity Example producer compensation. For some agencies, agencies balance the continuous rein- proper compensation relates to the differenAgency Revenue $5,000,000 tial between new and renewal commission vestment in crucial growth components splits. For others, proper compensation Most Grofitable Total Comm. & Fees per Employee 176,000 with adequate prof- may relate to net new business or minimum # of Full Time Equivalent Employees 28.00 account thresholds. The commonality in itability to ensure high growth agencies is that producers are sustainable value.

The Rest paid incentives on new business. Producers In 2011, the Total Com. & Fees per Employee 143,000 # of Full Time Equivalent Employees 35.00 not delivering growth by default are not Most Grofitable compensated as well as producing producagencies achieved Difference in # of Employees 7.00 ers. core profit of 16.5 Secondly, the Most Grofitable (Top 20 perpercent (value crecent) agencies are more productive. Highly ated) versus the Figure 3: Grofitability Matrix Grofitable agencies displayed total commisRest of 3.7 percent sion and fees per employee of $176,400 in (value lost).

Grow at all costs 20 Grofit 2011 compared to $143,300 for the remaining Top 20% agencies. While there is little difference in Agency 15 total payroll expense (64 percent versus 63 Compensation: 10 You Get What You percent), there is a significant difference in 5 the total number of employees.

Pay For The more Grofitable agencies employ fewer Compensation -20 -15 -10 -5 5 10 15 20 individuals (see example in Figure 2), but costs represent the -5 Bottom 20% pay them more. largest expenses of -10 Grofitable agencies also use compensation an insurance agency. No other agency to motivate and incentivize behaviors that -15 link agency performance and value. Not only component has the -20 Hanging by a Thread Profit is King ability to simultane- are producers paid new business incentives, but staff bonuses are paid based on growth ously incentivize Profit

Growth

The FIT in Grofit The second component in Grofit is profit.

There are several different ways to gauge an organization’s profitability. The easiest way to calculate profit is net revenues less total expenses. A more objective way to dissect the organization’s profit is by eliminating miscellaneous income, such as contingency payments, investment earnings or gains on the sale of assets. These non-core revenues can be heavily impacted by external factors. A swift change to legislation, large catastrophic loss year, or declining economic conditions could dramatically influence these sources of income. Thus, managing profitability on the core business, commission and fee income, is critical.

Core Profit (see below) is utilized in the Grofit calculation: • Core Profit = (Net Revenue – Miscellaneous Income) - Total Expenses.

I

II

III

IV

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and profit. Driven employees are hired, compensated well and retained, which results in lower turnover and less retraining costs.

Less productive employees are moved out of the organization. The service staff understands the importance of growth to the value of the enterprise and willingly takes on more renewal related activities to free up producer capacity.

All of these practices have a dramatic impact on the Grofitability of the organization.

To accomplish balance within compensation, tie pay and bonuses to measurable metrics that improve both growth and profitability. In the end, compensation is not only a critical financial metric; it also has a significant impact on agency value.

Plot Your Agencyâ&#x20AC;&#x2122;s Grofit Figure 3 illustrates the Grofitability Matrix. The vertical axis represents growth

and the horizontal axis represents core profitability. When you plot your agency on the Grofitability Matrix, you will fall into one of the four quadrants.

Quadrant I â&#x20AC;&#x201C; Grow at All Costs: The agency is growing total commission and fee income, but is not producing a core profit.

Agencies in this quadrant should evaluate the current expense structure and implement cost reduction strategies.

Quadrant II â&#x20AC;&#x201C; Grofitable: The agency is Grofitable and maximizing shareholder return.

Quadrant III â&#x20AC;&#x201C; Hanging by a Thread: The agency is not growing total commission and fee income and not producing a core profit.

Shareholder value is significantly distressed.

Agencies in this quadrant should evaluate the current sales management infrastructure and implement cost reduction strategies.

Quadrant IV â&#x20AC;&#x201C; Profit is King: The agency is producing core profit, but not producing

total commission and fee growth. Agencies in this quadrant should focus their attention on improving the current sales management infrastructure.

Conclusion Which is your strategy: to enhance growth, enhance profit or drive Grofit?

Whether the short term strategy is to drive growth or drive profitability, the long-term plan should aspire for a healthy balance of each.

If Grofit is your answer, modify your strategy to correlate with enhancing value, such as â&#x20AC;&#x153;grow at a reasonable costâ&#x20AC;? or â&#x20AC;&#x153;drive the bottom line, while growing.â&#x20AC;? We personally prefer â&#x20AC;&#x153;predictable, sustainable, profitable growth.â&#x20AC;?

Bosma (megan@marshberry.com) is senior vice president, and McDonald (tomm@marshberry.com) is product manager, for Marsh, Berry & Co. Inc.

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April 2, 2012 INSURANCE JOURNAL | 51

NATIONAL COVERAGE

Classifieds

Insurance Journal East • 3570 Camino del Rio North, Ste. 200 • San Diego, CA 92108-1747 Fax: 619/584-1200 • Phone: 800/897-9965 x125 • classifieds@insurancejournal.com For Ad Rate and Information

April 2, 2012 April 2, 2012

April 2, 2012

Sagamore Insurance Company 1099 North Meridian Street Indianapolis, Indiana 46204

Plateau Casualty Insurance Company 2701 N. Main St., P.O. Box 7001 Crossville, TN 38557-7001

The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty insurance in the Commonwealth of Massachusetts.

The above company has made application to the Division of Insurance to obtain a Foreign Company License to transact Property and Casualty insurance in the Commonwealth of Massachusetts.

The above company has made application to the Division of Insurance to obtain a Foreign Company License to transact Life, Accident, and Health insurance in the Commonwealth of Massachusetts.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

DentaQuest USA Insurance Company, Inc. 465 Medford St. Boston, MA 02129

April 2, 2012 April 2, 2012

April 2, 2012

XL Insurance America, Inc. C/O The Corporation Trust Company 1209 Orange St Wilmington, DE 19801

Response Insurance Company One E. Wacker Dr., Ste. 3700 Chicago, IL 60601

Hartford Underwriters Insurance Company One Hartford Plaza Hartford, CT 06155-0001

The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty insurance in the Commonwealth of Massachusetts.

The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty insurance in the Commonwealth of Massachusetts.

The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty insurance in the Commonwealth of Massachusetts.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

April 2, 2012

April 2, 2012

Hartford Insurance Company of the Midwest One Hartford Plaza Hartford, CT 06155-0001

Meridian Security Insurance Company 2955 N. Meridian St. Indianapolis, IN 46208

Foremost Property and Casualty Insurance Company 5600 Beech Tree Lane Caledonia, MI 49316

The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty insurance in the Commonwealth of Massachusetts.

The above company has made application to the Division of Insurance to obtain a Foreign Company License to transact Property and Casualty insurance in the Commonwealth of Massachusetts.

The above company has made application to the Division of Insurance to amend thier Foreign Company License to transact Property and Casualty insurance in the Commonwealth of Massachusetts.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

April 2, 2012

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April 2, 2012

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April 2, 2012

Foremost Signature Insurance Company 5600 Beech Tree Lane Caledonia, MI 49316

Technology Insurance Company, Inc. 59 Maiden Lane, 6th Floor New York, NY 10038

Wesco Insurance Company 59 Maiden Lane, 6th Floor New York, NY 10038

The above company has made application to the Division of Insurance to amend thier Foreign Company License to transact Property and Casualty insurance in the Commonwealth of Massachusetts.

The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty insurance in the Commonwealth of Massachusetts.

The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty insurance in the Commonwealth of Massachusetts.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

April 2, 2012 Foremost Insurance Company Grand Rapids, MI 5600 Beech Tree Lane Caledonia, MI 49316 The above company has made application to the Division of Insurance to amend thier Foreign Company License to transact Property and Casualty insurance in the Commonwealth of Massachusetts.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

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Advertisers Index Readers, browse, contact, or do product searches on any of our full page advertisers at: http://www.insurancejournal.com/adshowcase/ Abacus Insurance Brokers, Inc. www.abacus.net 33 Abram Interstate www.abraminterstate.com 49 Ace Insurance www.acelimited.com 17 Acord Loma www.acordlomaforum.org 28 Agency Ideas www.agencyideas.com 46 Amwins Group, Inc. www.amwins.com 23 Applied Underwriters www.applieduw.com 56 Arrowhead General Insurance Agency www.arrowheadgrp.com 15 Astonish Results www.astonishresults.com 14 & 55 Bollinger Insurance Solutions www.bollingerinsurance.com 45 Catlin US www.catlinus.com 35 Chartis www.chartisinsurance.co 7 Chubb Corporate www.chubb.com 13 CNA Insurance www.cna.com 2 Gateway Specialty Insurance www.gatewayspecialty.com 43

General Star www.generalstar.com 21 Great American Insurance Group www.GreatAmericanInsurance.com 37 Ironshore www.ironshore.com 8&9 K&K Insurance Group www.kandkinsurance.com 25 McClelland & Hine www.mhi-tx.com 49 Midlands Management Corporation www.midlandsmgmt.com 42 Monarch E & S Insurance Services www.monarchexcess.com 19 MSB - Marshall & Swift/ Boeckh www.msbinfo.com 44 National Marine Insurance Wholesalers www.natmarins.com 43 PersonalUmbrella.Com www.personalumbrella.com 5 Pilot www.pilotcat.com 31 RiskMeter.com www.riskmeter.com 47 Victor O. Schinnerer & Co. www.schinnerer.com 3

April 2, 2012 INSURANCE JOURNAL | 53

IDEA EXCHANGE

Closing Quote

Regulators and the Business of Climate Change-Related Risk

F

By Robert Detlefsen, Ph.D.

or more than three years, a handful of insurance regulators and global warming activists have been trying to prod the insurance industry into taking unspecified action to address the “risks” associated with climate change. Their approach has a number of flaws, not the least of which is their persistent failure to specify what constitutes a “climate change-related risk.”

In February, California Insurance Commissioner Dave Jones announced that the insurance departments in California, Washington state and New York will “require insurers to respond to the Climate Risk Survey adopted in 2009 by the National Association of Insurance Commissioners.”

Regulators from the three states intend to administer the NAIC survey to every insurer group in the U.S. with direct written premium above $300 million if the group has a company that is admitted to do business in any of the three states.

In a nod to Ceres, the environmental shareholder activist group that has lobbied for public disclosure of survey responses, the states’ representatives affirmed that insurers’ responses will be available for public scrutiny. Numerous insurers have been told they have until May 7 to complete the survey.

Climate Risk Survey The climate risk survey has had a tortuous history at the NAIC. Originally developed by an executive committee task force, the survey consists of eight questions designed to elicit qualitative information concerning insurers’ opinions and activities in regard to “climate change-related risk.” The ques-

54 | INSURANCE JOURNAL April 2, 2012

tionnaire doesn’t indicate what regulators expect insurers to do about climate change, although there are a number of hints.

For example, one survey question asks, “Has the company considered the impact of climate change on its investment portfolio?

Has it altered its investment strategy in response to these considerations? If so, please summarize the steps you have taken.”

Another question instructs respondents to “discuss steps, if any, the company has taken to engage key constituencies on the topic of climate change.”

The full NAIC adopted the survey in March 2009, with implementation by individual states scheduled for the following year.

As the deadline for implementation approached, many states had misgivings about the survey, particularly its instruction that insurer participation would be mandatory and responses made publicly available. Consequently, in March 2010, the NAIC membership voted to replace the 2009 survey with a revised version that allowed each state to decide for itself whether to administer the survey and, in the case of states that did choose to administer it, to determine whether insurer participation would be mandatory or voluntary. In addition, the revised survey instructions unequivocally stated that “survey responses are confidential.”

(Emphasis in the original.)

The 2010 NAIC survey established an implementation protocol that calls for the survey to be administered to insurer groups by “the domestic regulator of the group’s lead state (i.e., the regulator overseeing the insurer within the group that reports the largest direct written premium volume).” The idea was to acknowledge the primacy of domestic regulators with respect to financial issues.

Regulators Circumvent Process The 2010 “Insurer Climate Risk Disclosure Survey” remains the official NAIC climate risk survey. Indeed, it is one of the main topics currently being discussed by the organization’s Climate Change and Global Warming Working Group, whose chair and vice-chair are, curiously enough, Washington Commissioner Mike Kreidler and California’s Jones. The working group has formed a special subgroup whose purpose is to “explore altering the Climate Risk Disclosure Survey.”

Against this backdrop, it is all the more strange that California, Washington and New York have decided to circumvent the NAIC process by separately administering an earlier version of the survey in a manner that was explicitly rejected two years ago. The NAIC’s Climate Change and Global Warming Working Group is being led by a pair of regulators who have made clear that they will disregard the process over which they are presiding if the outcome does not please them.

Readers can draw their own conclusions as to what this episode says about the NAIC’s ability to perform its self-proclaimed role as a standard-setting organization that operates on the basis of consensus and cooperation among the states.

Detlefsen is National Association of Mutual Insurance Cos.’ (NAMIC) vice president of public policy. www.insurancejournal.com

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