Top 100 Retail Agencies; Homeowners & Condos; Autos by Insurance Journal

August 6, 2012 | Vol. 90, No. 15

WEst REGION Closer Look: Homeowners & Condos Risk, Returns, Regulation and More Regulation Up Next: Californiaâ&#x20AC;&#x2122;s Wildfire Season

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WEST

Inside This Issue

N18 On The Cover

Special Report: Top 100 P/C Agencies

August 6, 2012 • Vol. 90, No. 15 • West Region

N24

N15

NATIONAL COVERAGE

WEst COVERAGE

Idea exchange

N12 Closer Look: Homeowners & Condos

8 $31M Jury Award for Unsafe Calif. Highway

N1 Minding Your Business: 5 Ways to Stay Supercharged

N14 Spotlight: Collector Cars

14 A Decade Later: Is Sarbanes Oxley Working?

N2 Essentials: Should You Offer the Cheapest Coverage?

20 Conference: Risk, Returns, Regulation and More Regulation

N6 From Concept to Practice: Insurance Trust Account Management

28 Report: Calif. Head and Spine Injuries Cost $500M in 10 years

N24 Closing Quote: Soderberg on Niche Marketing

N18 Special Report: Top 100 Independent P/C Agencies N21 Special Report: Top 20 Banks in Insurance N22 Ernst & Young’s Anderson to Be Honored by City of Hope

24 Why Some Types of Multitasking Are More Dangerous Than Others 30 Up Next: California’s Wildfire Season

DEPARTMENTS 6 Opening Note 10 People 12 Declarations 12 Figures 16 Business Moves N16 MyNewMarkets N23 Classifieds

4 | INSURANCE JOURNAL-WEST REGION August 6, 2012

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Opening Note Looking Aft

hen Lloyd’s America Inc. Western Regional Director Anthony Joseph handed me a simple, glossy two-sided pamphlet that read “Titanic Centenary” I knew I was in deep. It was breakfast near the end of July and Joseph was sitting at a round table the St. Regis Monarch Beach in Dana Point, Calif., where several hundred insurance executives gathered for the four-day Western States Surplus Lines Conference 2012. For more coverage on the conference turn to Page 20, where you can read some thoughts and opinions on what will shape in the insurance industry this year and in the next few years. Topics like regulation, technology and risk played out like a “Greek tragedy,” according to one speaker. At the table where a small group were gathered to munch cut fruit and drink complimentary coffee, when Joseph smiled and handed me the pamphlet he wasn’t just bragging about Lloyd’s legacy, he was expressing his enthusiasm about the sort of knowledge and enlightenment ‘….the cover was for that looking backward, and for12 months on hull and ward, brings us. Among the myriad facts on machinery, valued at the pamphlet Joseph pointed to £1 million each for the were that within 30 days of the sinking Titanic ship owner White Titanic and its sister Star was paid in full, with Lloyd’s ship Olympic.’ picking up a large share of the hull claim. That was fast back then, but it would be “much, much faster” today, Joseph was quick to note. According to the pamphlet, the cover was for 12 months on hull and machinery, valued at £1 million each for the Titanic and its sister ship Olympic. “The premium amounted to £7,500 per ship, free from all average under £150,000 and insurers were to pay only on damage in excess of that sum,” the pamphlet states. A slip from the broker acting for the White Star Line opened on Jan. 9 and different underwriters took portions of the risk ranging from £200 to £7,500. By the end of the day over £580,000 had been placed. The slip was complete by Jan. 11, making both Olympic and Titanic fully insured. A British pound in 1912 is worth roughly 67 pounds today. I’ll let the more curious readers figure what this amounts to in U.S. dollars, but it’s a lot. Although some at the time felt that both the rate and the boat were too low. British Dominions Marine Insurance, which later became Eagle Star, declined to insure the ship because it sat too low in the water and the rate being offered was too cheap, according to the pamphlet.

Don Jergler West Editor

EDITORIAL

Editor-in-Chief Andrea Ortega-Wells | awells@insurancejournal V.P. Content Andrew Simpson | asimpson@insurancejournal.com East Editor Young Ha | yha@insurancejournal.com Southeast Editor Michael Adams | madams@insurancejournal.com South Central Editor/Midwest Editor Stephanie K. Jones | sjones@insurancejournal.com West Editor Don Jergler | djergler@insurancejournal.com International Editor Charles E. Boyle | cboyle@insurancejournal.com ClaimsJournal.com Editor Denise Johnson | djohnson@claimsjournal.com MyNewMarkets.com Associate Editor Amy O’Connor | aoconnor@mynewmarkets.com Columnists Catherine Oak, Steven Plitt, Marisa Strader Contributing Writers Emma Hart, Chris Marinescu, Kathryn Soderberg

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 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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insurancejournal.com/subscribe Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semimonthly by Wells Publishing, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2012 Wells Publishing, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Publishing, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 9049, Maple Shade, NJ 08052

6 | INSURANCE JOURNAL-WEST REGION August 6, 2012

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

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News & Markets $31M Jury Award for Unsafe Calif. Highway

Montana Agent Pleads Guilty to Stealing Premiums

urors say California’s transportation agency is partly responsible for a dangerous stretch of highway dubbed “Blood Alley” and a severely injured motorcyclist should get more than $31 million. The San Bernardino County jury decided late last month that the California Department of Transportation was partly responsible because the agency had been warned about the unsafe stretch of Highway138 in the Mojave Desert community of Pinon Hills. Los Angeles attorney David Evans suffered severe brain and spinal cord injuries in the April 2009 collision. The San Bernardino County Sun reported Evans, who needs 24-hour nursing care for the rest of his life, was riding his motorcycle when he was struck by a vehicle turning left on the highway. A voicemail message left for a Caltrans spokesman wasn’t immediately returned.

Feds to Take Over Hawaii Job-Safety Regulation

Jones Names New Public Advisor to Would Be Intervenors

he federal government will temporarily take control of parts of Hawaii’s authority to regulate workplace safety. In response to federal concern over staff reductions in the Hawaii Occupational Safety and Health Division, the state has agreed to let the Occupational Safety and Health Administration step in. The 2009 reductions led to the division not being able to conduct as many inspections. The agreement announced by the state Department of Labor and Industrial Relations will temporarily suspend the division’s enforcement authority in specific industries. OSHA will assume enforcement control until the state can improve. The division will resume control over industries as it rebuilds during a three-year period. The state says enforcement responsibilities will be clearly divided to prevent confusion over which agency is regulating an industry. 8 | INSURANCE JOURNAL-WEST REGION August 6, 2012

n insurance agent from Butte, Mont., who pleaded guilty to stealing more than $7,200 of his client’s premiums has been given a three-year deferred sentence and ordered to pay restitution. State Insurance Commissioner Monica Lindeen says Jeremy Hoscheid pleaded guilty in April to felony theft by insurance fraud. Under a plea agreement other charges, including forgery, were dismissed.Hoscheid was sentenced on July 12. Hoscheid worked at the Farm Bureau Financial Services office in Butte from 2009 until fall 2011, when Farm Bureau began an investigation after receiving a complaint from one of Hoscheid’s clients. It found Hoscheid was able to steal the premiums because payments were made with cashier’s checks, blank checks or cash.

alifornia Insurance Commissioner Dave Jones has named a new public advisor to assist members of the public and consumer groups with the Proposition 103 intervenor process, under which consumer groups can intervene in proceedings for insurance rate increases and decreases. Jones named enforcement attorney Ed Wu to the post. Jones has directed Wu to reach out to consumer groups to educate them about the rate application process. Dating back to the program’s launch in 2003 along with Prop. 103, Santa Monica, Calif.-based Consumer Watchdog has been the most commonly listed intervenor, according to CDI’s list of intervenors. That has caused some to question the program’s worth. In May, state Sen Juan Vargas, D-San Diego, became the latest person to question intervenor fees, calling on CDI to review the program. In February a website was launched attacking Consumer Watchdog and its use of intervenor fees. www.insurancejournal.com

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August 6, 2012 INSURANCE JOURNAL-WEST REGION | 9

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People Cary White

Alison Tanigawa

Cary W. White joined San Jose, Calif.-based Thoits Insurance as vice president. White is responsible for new business production, client retention and relationship management. White has more than 25 years of experience in the insurance industry, including more than 15 years specializing in both commercial and residential construction insurance. His experience includes controlled insurance programs, construction defect liability insurance and insurance certificate management. White also has experience in specialties including large deductible general liability insurance programs, workers’ compensation and insurance for commercial trucking. White has held senior positions at Aon and Heffernan Insurance Brokers. He has also worked with Gallagher Construction Services and ABD. Thoits Insurance is a regional California insurance brokerage, employee benefits and risk management consulting firm owned by its employees. Island Insurance Company Ltd. named Alison Tanigawa advertising and media director. In this newly created position, Tanigawa will be responsible for managing the company’s advertising and media activities. Tanigawa has nearly 15 years of advertising and marketing experience. Prior to Island, she was the marketing manager for DTRIC Insurance. She has also held various positions with Team Vision, Sansora International and Milici Valenti Ng Pack. Island Insurance holds a financial strength rating of “A” (Excellent) from A.M. Best Co. Benjamin J. McKay was named as executive director of the Surplus Line Association of California. McKay joins the SLA-CA after a career in both the private and public sector. He spent the last eight years with the Property Casualty Insurers Association of America (PCI) as

10 |ASTISH14873.indd INSURANCE JOURNAL-WEST REGION August 6, 2012 ASTISH15197.indd ASTISH5333.indd 11

senior vice president for federal government relations. Prior to PCI, McKay served as a chief of staff to a member of Congress. Other career highlights include eight years as staff to members of the Florida legislature, where he worked on insurance issues, and a tour as a regulator at the Florida Department of State, where he served as deputy secretary for international and legislative affairs and later as chief of staff for the department. Wells Fargo Insurance named Bob Volkel to lead its Bay Area operations. Volkel will lead the insurance brokerage and consulting sales and service teams that offer a array of products, services and consulting in the areas of employee benefits, and property/casualty insurance. He will manage the San Francisco, Santa Clara, San Carlos, Scotts Valley and Walnut Creek offices across the Bay Area. Volkel will be based in San Carlos and report to Rich Lane, regional managing director for Wells Fargo Insurance’s Northwest Region. Prior to his new role, Volkel was co-head of the national practice for Wells Fargo Insurance’s executive benefits and retirement plan services. Before joining Wells Fargo, he was executive vice president and leader of the employee benefits division of ABD Insurance and Financial Services. Wells Fargo Insurance is part of San Francisco-based Wells Fargo & Co., a national financial services company with $1.3 trillion in assets. Brandon Boynton and Ryan Murphy were named to the title of senior vice president of AH&T Insurance in the firm’s Seattle, Wash., office. Boynton will bolster AH&T’s employee benefits production team and, particularly for technology, life science, engineering and manufacturing companies.

continued on page 32

www.insurancejournal.com 1/27/11 9:42 AM 6/11/11 9/6/11 2:54 8:30 PM

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Declarations Lost Cattle

Weighty Questions

Solar Map

“Before we found our cattle we said at least we’ve got our homes and are all safe. In truth, we would have rather lost everything here except our cattle.” — Delores Kolka, who escaped the Ash Creek fire in Montana with her family. However, they lost an estimated 400 cows and calves in the 390-square-mile blaze.

“I would submit, we are the customer. We want to make this easy for people and less humiliating.” — State Sen. Betsy Johnson, D-Scappoose, commenting on wellness questionnaire for Oregon state workers that has a weight-related question, as well as an alternative to instead share their waist size.

“Today’s announcement is a roadmap for solar development for decades to come and will help create an enduring and sustainable energy future for America.” — Secretary of the Interior Ken Salazar the on Obama administration’s move to streamline the development of large-scale solar projects on public lands by approving 17 vast tracts across the West.

Ain’t it the Truth? “People’s perception about how well they’re doing doesn’t match up with how they actually perform.” — Zheng Wang, lead author of an Ohio State University study that shows people are overconfident about how well they can multitask.

Figures

$193,000 Is what a Hawaii company that provides home health care for seniors has been ordered to pay to a woman fired for her age. A federal judge in Honolulu ruled against Hawaii Healthcare Professionals, Inc., resolving a 2010 age discrimination lawsuit.

$500,000

Is what a jury awarded a 63-year-old Longview, Wash., man who acted as his own lawyer in a personal injury lawsuit involving a 2008 traffic collision.

12 | INSURANCE JOURNAL-WEST REGION August 6, 2012

5.5

Million

Is how much a Kern County, Calif. jury has awarded to a woman who sued the manufacturer of a type of surgical mesh, which is often used to treat urinary incontinence in women of post childbearing age, for pain and health problems she suffered after the device was implanted.

26,000 Cases of driving while under the influence were reported in Colorado, and that’s down 5,000. The number of cases in Colorado has been dropping in the past three years, and authorities credit increased penalties and enforcement for those declining numbers. www.insurancejournal.com

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News & Markets A Decade Later: Is Sarbanes-Oxley Working? By Kevin Drawbaugh & Dena Aubin

hen Peregrine Financial collapsed in July, a nagging question resurfaced. As in the implosion of Lehman Brothers, the fall of Bernard Madoff and other cases in recent years, many asked: Where were the accountants? That this question still arises could be seen as an indictment of the 2002 Sarbanes-Oxley law, enacted 10 years ago in July. The law was a response to accountants’ failures to sound the alarm about financial misconduct at Enron Corp., WorldCom and a host of other companies. But, lawyers and analysts say that for the most part Sarbanes-Oxley is working. It has strengthened auditing, made the accounting industry a better steward of financial standards, and fended off Enron-sized book-cooking disasters. Yes, it has fallen short in important ways, but these failures are on a more subtle level, the experts say. The law, signed by President George Bush on July 30, 2002, created a new auditor watchdog, the Public Company Accounting Oversight Board (PCAOB). The law strengthened internal controls over companies’ accounts and set stiff criminal penalties for executives who cook the books. One of its toughest provisions ‘You’re getting much required longer sentences now than corporate executives you ever saw before.’ to certify the accuracy of financial statements and imposed jail terms of up to 20 years for willful violations. While only a handful of people have faced criminal charges over false statement certification, the Securities and Exchange Commission has invoked 14 | INSURANCE JOURNAL-WEST REGION August 6, 2012

that part of Sarbanes-Oxley to bring more than 200 civil cases. One reason for the small number of criminal cases is that corporations have taken steps to insulate C-suite officers from culpability. Another reason is that prosecutors often choose to pursue tried-and-tested charges such as fraud when seeking to bring corporate wrongdoers to justice. Sarbanes-Oxley also increased criminal penalties for various kinds of financial fraud. Maximum prison terms for mail fraud, for example, jumped to 20 years from five years. These changes had a sharp deterrent effect and have helped create a mindset that “accounting shenanigans aren’t going to be tolerated anymore,” said Peter Henning, a law professor at Wayne State University. “You’re getting much longer sentences now than you ever saw before.” Trends in companies restating their financial reports also show the law’s impact. Initially, restatements rose as executives scrambled to correct past reports, peaking at 1,790 in 2006, according to research firm Audit Analytics. But after that house-cleaning

period, restatements dropped sharply, leveling off at around 790 for the past two years. Peregrine’s Troubles In the case of Peregrine Financial, asking where the accountants were seems at first glance to be a glaringly obvious question. But a closer look reveals a more complicated situation. In the years before the futures brokerage collapsed, Peregrine used a little-known accounting firm, VerajaSnelling Co., which reviewed its books and vouched annually for their validity. Veraja-Snelling, a tiny firm run out of a home in suburban Chicago, was not subject to audit inspections before 2010, when Wall Street reforms known as Dodd-Frank extended the PCAOB’s authority to the auditors of brokerdealers — too late for Peregrine. Even if the PCAOB had that authority earlier, it is not clear that it would have made a difference. Peregrine bilked $100 million from its customers over nearly 20 years partly by forging bank statements, and there are no signs that Veraja-Snelling did anything continued on page 18 www.insurancejournal.com

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Business Moves

Heffernan, VentureLoop Walnut Creek, Calif.-based Heffernan Insurance Brokers is partnering with VentureLoop to launch VentureLoop HR, a professional employer organization that provides payroll, benefits and human resources specifically for startups and venture-backed companies. The service is designed to assist the needs of technology companies that require flexibility and rapid response to their needs. Heffernan provides insurance and financial services products to businesses and individuals. Heffernan has additional offices in the California cities of San Francisco, Petaluma, Menlo Park, Los Angeles, and Orange County, as well as in Portland, Ore., St Louis, Mo. and New York, N.Y.

Bolton, Reaume Pasadena, Calif.-based Bolton & Company has joined forces with Reaume Financial Group, an independent insurance agency providing employee benefit services in Southern California.

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As part of the transaction, Reaume President Bradley G. Reaume will join Bolton & Company as executive vice president and will relocate to Bolton’s Pasadena office. Employee-owned Bolton & Company is a partner of Assurex Global. Whitfield, The Leavitt Group Everett, Wash.-based Whitfield United Insurance Agencies Inc. has joined The Leavitt Group. The agency will now do business as Whitfield-Leavitt Insurance Agency. Local agency leaders Ted Schlatter, Randy McDonald, Don Whitfield, Sean King, and Jeff Olsen share ownership in the agency with the Leavitt Group. Ted Schlatter will operate as the agency’s local managing co-owner. Schlatter joined Whitfield three years ago with experience as an insurance sales-manager and principal for another in Washington. McDonald, who has been with the Whitfield 10 years, will manage the personal

insurance department. Whitfield, having served as the company’s president and CEO, will focus on mergers and acquisitions. King and Olsen are commercial insurance advisors who will continue to operate in the Everett and Oak Harbor offices. The Leavitt Group is an organization of independent insurance agencies with 115 offices across the United States. RMIS Going National Fullerton, Calif.-based RMIS is taking the 34-year-old managing general agency national. Leading the endeavor will be Jay Mieloszyk based out of Illinois. Beginning with Illinois, RMIS has also added Iowa, Ohio and Indiana with expectations of being in 30 states by the end of 2014. Mieloszyk brings 19 years of industry experience mostly on the carrier side. He has held positions in such areas as auditing, underwriting, product development, marketing, operations and executive management. He has experience in both commercial and personal lines. Insurance Associates, F&W Insurance Boulder, Colo.-based Insurance Associates Inc. announced it opened a newly formed company, F&W Insurance. F&W Insurance was established to meet the insurance and risk management needs of Colorado’s emergency service organizations and public and water entities. F&W has also partnered with VFIS and Glatfelter Public Practice. Liberty Mutual Boston-headquartered insurance giant Liberty Mutual said it is realigning its strategic business units. The company reported $139 million profit for its 2012 second-quarter. The changes include: bringing together its regional company and commercial markets group; combining domestic personal lines business; and creating a global specialty unit combining Liberty International Underwriters, Liberty Mutual Reinsurance and Liberty Mutual Surety. Liberty Mutual emphasized, however, that this is not a consolidation or reorganization. www.insurancejournal.com

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News & Markets Sarbanes-Oxley, continued from page 14

wrong. Peregrine and Veraja-Snelling declined to comment. PricewaterhouseCoopers, the auditing powerhouse, did take a peek at Peregrine’s books in 2000, Commodity Futures Trading Commission Chairman Gary Gensler revealed in July. But PwC has said it was never Peregrine’s auditor. Rather, it said it was hired on a limited basis to carry out procedures laid out in a settlement between Peregrine and its regulators.

Auditors have become more independent of clients, but not entirely so. The law limited the types of consulting that accounting firms can do for their audit clients, but left them free to do lucrative tax work. It made lead audit partners rotate off accounts after five years, but let audit firms serve the same clients indefinitely. Supporters of Sarbanes-Oxley note that it was not designed to ensure that corporate accountants should be everywhere and know everything. And they say it is unfair to expect accountants to be front-line corpo‘Client Pays’ Conflict rate cops, standing ‘It’s like any legislation. with government In some ways, SarbanesIt only works if you’ve regulators in the Oxley has not done enough to change the accounting fight against fraud. got a regulator and a and audit industry, crit Michael Oxley, cop enforcing it.’ ics say. It did not resolve former chairman an inherent tension within the industry’s of the House of Representatives Financial “client pays” business model — that is, an Services Committee, said the law he coauditor’s basic conflict between serving the authored has stood the test of time. paying client and serving the greater good. “We’ve not had anything even approaching Nor has it brought increased competition an Enron or a WorldCom or any of the other to an industry that still is an oligopoly, now accounting scandals that we witnessed 11 dominated by the so-called Big Four firms: years or so ago,” he said in an interview. Ernst & Young, PricewaterhouseCoopers, Blaming the law for some of the recent KPMG and Deloitte. Former Enron auditor scandals is based on a misconception about Arthur Andersen is history. what it was supposed to do, said Oxley,

a Republican. “It really had nothing to do with Lehman Brothers, AIG and the other meltdowns in 2008. It didn’t really have anything to do with Bernie Madoff,” he said. Former Democratic Senator Paul Sarbanes has also been upbeat in recent remarks about the law. Sarbox Under Attack Approved over the resistance of much of the business community, Sarbanes-Oxley was under attack even before it took effect. Its requirement that companies pay for audits of their internal controls came in for particularly sharp criticism because of soaring costs and the provision was eventually scaled back. Another weakening of the law was included in the Jumpstart Our Business Startups, or JOBS, Act, signed into law by President Barack Obama in April. Meant to aid small companies in raising capital and going public, the act lets small, start-up businesses ignore Sarbanes-Oxley’s checks on internal controls for a few years. Obama has told the Justice Department and the SEC to keep an eye out to protect investors, but some are concerned the act opens the way for misconduct. Another challenge to Sarbanes-Oxley is still to come. Concerned about the performance of auditors in the credit crisis, the PCAOB is considering an array of tough reforms and encountering fierce opposition from business lobbyists. Congressional opponents of SarbanesOxley have additionally tried sometimes to limit its scope by holding back the budgets and staffing of regulatory agencies like the SEC. Lynn Turner, a former chief accountant at the SEC, one of the agencies that enforces Sarbanes-Oxley, said: “It’s like any legislation. It only works if you’ve got a regulator and a cop enforcing it.” Reporting by Kevin Drawbaugh in Washington and Dena Aubin in New York; Additional reporting by Sarah Lynch in Washington; Editing by Eddie Evans and Maureen Bavdek

1/12/11 12:46 PM

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News & Markets Conference: Risk, Returns, Regulation and More Regulation By Don Jergler

oming off a rough few years of recession, then a disaster prone 2011 — and then more global uncertainty in 2012 — the world and the insurance industry have a few things to look forward to in the next year. They also have some things to fear. And then there’s Europe. Those were the central themes echoed in late July by speakers at the Western States Surplus Lines Conference 2012 at the St. Regis Monarch Beach in Dana Point, Calif., where several hundred insurance executives gathered for the four-day event. “It was not a fun five years, but we’re much further along than Europe,” said Thomas Holzheu, Swiss Re’s chief economist for North America, who compared the message being delivered by economists and industry experts at the conference to a Greek tragedy. Holzheu outlined the key risks as he sees them that the global ‘It was not a fun faces five years, but we’re economy in the coming much further along year, namely: than Europe.’ Policy error in the U.S. or Europe; oil price shock; a hard landing in China. The former is among largest looming risks, he noted, adding that “governments have to step in” to keep economies balanced, but that in stepping in we “sometimes end up on the wrong side of the cliff.” Holzheu said he believes that governments will keep interest rates low, and inflation in check — in other words don’t expect a great year for investment returns. “We will be in a low yield environ20 | INSURANCE JOURNAL-WEST REGION August 6, 2012

ment,” he said. This follows a year in 2011 that saw $370 billion in economic losses worldwide, which Holzheu noted is “the biggest ever,” and $116 billion in insured losses, the second highest on record. “This is the highest privately insurance year of cat losses ever,” he said of that year, adding that insured losses were dominated by weather-related losses. The most notable catastrophe in 2011 was the Tohoku earthquake in Japan, costing an estimated $210 billion in economic losses, and $35 billion in insured losses, making it the second most expensive event in history for the insurance industry. The earthquake produced major supply chain problems around the world, which Holzheu noted has changed the way the industry looks at underwriting business interruption insurance. Another change in the way the industry looks at risk is exactly where that risk is placed. The floods in 2011 in Thailand, which yielded the largest in insured losses from a fresh water flood in history with losses of $12 billion, as well as the massive earthquake in Chile a year earlier, both occurred in emerging markets, he noted. “The globalization of production has shifted,” he said, adding that much of that production has gone to places the industry doesn’t have as much information about. “The underwriting becomes much more difficult,” he added. And then there’s the Eurozone crisis. “The system must always be on the brink of the abyss to keep the

reforms going,” he said, outlining a string of issues in that region of the world. “That’s why we will be dealing with the Euro crisis for many years.” Technology Graeme Newman, marketing director of CFC Underwriting, discussed technology, offering several predictions about how that will change the industry and the world. “I believe within the next five years we will witness our first-ever war carried out online,” he said. Newman, who spent his early career working for Deloitte on Internet security projects with the UK Ministry of Defence, was talking about the growing number of battles being carried out by entities too sophisticated to be other than large organized governments, such as Stuxnet. That virus, or worm, was developed by the U.S. and Israel to attack centrifuges in Iran that are believed to be enriching uranium for use in nuclear weapons. Other than that dire prediction and a talk about the proliferation of cybercrime, Newman, who said he believes we are in the “second dotcom boom,” gave a mostly upbeat outlook about the

continued on page 22

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News & Markets Conference, continued from page 20

impact of technology on insurance. Unlike the boom then bust at the turn of the millennium, he said, “this time it feels very, very different.” He noted that 2 billion people have Internet access, and that if Facebook were a country its reported 1 billion users would be considered the third largest country in the world. Some of the top trends for the future he spoke about included crowdsourcing, which uses human processing power to accomplish tasks and solve problems, and cloud computing, or outsourcing technology, and 3D printing. “Knowledge is no longer power,” he said. “The power is in being able to understand the data.”

must keep up with market modernization. “We can’t be the same old Lloyd’s,” he added.

Regulation Speaking extensively of regulation was Benjamin McKay, the newly appointed executive director of the Surplus Line Association of California. McKay, who started at the post only days before the conference, spent the last eight years as the senior vice president of federal government relations for the Property Casualty Insurers Association of America. He noted that Congress’ attitude toward the insurance industry is evolving. Lloyd’s of London Much of that attitude change is due to the Hank Watkins, president of Lloyd’s financial collapse, and misplaced blame on America Inc., talked about the insurance the insurance industry, he added. giant’s goals and outlook for the rest of 2012 “They think the “I” in AIG stands for and into 2013. insurance,” he said. “The U.S. and Canada I believe will And as the government is currently opershrink as a percentage of the overall marating, he added, “They believe in socializing ket,” he said, adding that “the emerging marrisk.” These changes are putting the insurkets are a unique opportunity for us and the ance industry in a position in which it will entire insurance world.” be subject to more and more “bank-centric One of the big issues for Lloyd’s and the rules,” he said. rest of the market is the Solvency II direc McKay said the upcoming elections are tive that codifies European Union insurance key to how these things, including healthregulation, for which Lloyd’s is responsible care reform, are implemented. for 88 syndicates that must meet those stan “If we fall off the fiscal cliff it’s going to be dards. because of election-year politics,” he said. Such regulation, which Watkins described He noted that upcoming issues include as making Lloyd’s operating environment letting lapse Bush-era tax more difficult, but not impossible, is ‘None of us anticipated cuts, massive budget cuts, the new world that 10, even five years, ago fuel prices and natural disasters. insurance will be that the government For 2013 he predicted likely be operating would get so deep into “more federal involvement.” in from now on, he He added, “I think it’s just added. our pockets.’ inevitable.” “None of us Afterward McKay sat down with the anticipated 10, even five years, ago that the Insurance Journal to discuss his new role and government would get so deep into our how California and its surplus lines secpockets,” Watkins said. tor will weather these changes, including That regulation, along with changes in the Dodd-Frank Wall Street Reform and technology, is prompting a Darwinian evoluConsumer Protection Act, part of which tion of the industry, as well as at Lloyd’s, he is the Nonadmitted and Reinsurance said, adding that the world’s oldest insurer 22 | INSURANCE JOURNAL-WEST REGION August 6, 2012

Reform Act. One big change is how taxes are collected under NRRA. To provide a sharing mechanism two entities were formed: the Non-Admitted Insurance Multi-State Agreement (NIMA) and the Surplus Lines Insurance Multi-State Compliance Compact, or SLIMPACT. While NIMA is supported by the National Association of Insurance Commissioners, a competing agreement, the Surplus Lines Insurance MultiState Compliance Compact, or SLIMPACT, has been embraced by other states. Several states have recently left NIMA. However, it’s McKay’s belief that neither surplus lines tax clearinghouse, as things are currently shaping up, will be the solution chosen by most states. Considering so little is collected and then divided on premium taxes, increasingly more states may decide to keep 100 percent of the premium taxes in their state, McKay said. “It ends up being so little money for so much effort,” he said of the two entities. While state legislature is on break and few bills have been introduced to bring California into compliance with NRRA, McKay said he believes there are several pieces of previously introduced legislation with vague wording, or bills that have little chance of passing, also called “shell bills,” which can be stripped and replaced with language. It’s the shell bills in which California legislators will slip the language that will bring California into compliance with NRRA, he said, adding, “I think the cleanup of the NRRA language is probably going go into one of these shell bills.” He called this new era of regulation a “time of transition,” and a “test” for California. “California, I do believe, is up to the test,” he said. www.insurancejournal.com

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News & Markets Why Some Types of Multitasking Are More Dangerous Than Others

eople are better at juggling some types of multitasking than they are at others, according to a new study that has implications for distracted drivers. Trying to do two visual tasks at once hurt performance in both tasks significantly more than combining a visual and an audio task, the research found. Alarmingly, though, people who tried to do two visual tasks at the same time rated their performance as better than did those who combined a visual and an audio task – even though their actual performance was worse. “Many people have this overconfidence in how well they can multitask, and our study shows that this particularly is the case when they combine two visual tasks,” said Zheng Wang, lead author of the study and assistant professor of communication at Ohio State University. “People’s perception about how well they’re doing doesn’t match up with how they actually perform.” Eye-tracking technology used in the study showed that people’s gaze

24 | INSURANCE JOURNAL-WEST REGION August 6, 2012

moved around much more when they had two visual tasks compared to a visual and an audio task, and they spent much less time fixated on any one task. That suggests distracted visual attention, Wang said. People in the study who had two

‘People’s perception about how well they’re doing doesn’t match up with how they actually perform.’ visual tasks had to complete a patternmatching puzzle on a computer screen while giving walking directions to another person using instant messaging (IM) software. Those who combined a visual and an audio task tried to complete the same pattern-matching task on the screen while giving voice directions using audio chat. The two multitasking scenarios used in this study can be compared to those drivers may face, Wang said. People who try to text while they are driving are combining two mostly visual tasks, she said. People who talk on a phone while driving are combining a visual and an audio task. “They’re both dangerous, but as both our behavioral performance data and eye-tracking data suggest, texting is more dangerous to do while driving than talking on a phone, which is not a surprise,” Wang said. “But what is surprising is that our results also suggest that people may perceive that tex-

ting is not more dangerous – they may think they can do a good job at two visual tasks at one time.” The study appears in a recent issue of the journal Computers in Human Behavior. The study involved 32 college students who sat at computer screens. All of the students completed a matching task in which they saw two grids on the screen, each with nine cells containing random letters or numbers. They had to determine, as quickly as possible, whether the two grids were a “match” or “mismatch” by clicking a button on the screen. They were told to complete as many trials as possible within two minutes. After testing the participants on the matching task with no distractions, the researchers had the students repeat the matching task while giving walking directions to a fellow college student, “Jennifer,” who they were told needed to get to an important job interview. Participants had to help “Jennifer” get to her interview within six minutes. In fact, “Jennifer” was a trained confederate experimenter. She has been trained to interact with participants in a realistic but scripted way to ensure the direction task was kept as similar as possible across all participants. Half of the participants used instant messaging software (Google Chat) to type directions while the other half used voice chat (Google Talk with headphones and an attached microphone) to help “Jennifer” reach her destination. Results showed that multitasking, of any kind, seriously hurt performance. Participants who gave audio directions showed a 30 percent drop in visual pattern-matching performance. But those who used instant messaging continued on page 26 www.insurancejournal.com

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News & Markets

Mercury Reports Net Loss From Increased Severity

ercury General Corp. on July 30 reported a net loss for the second quarter driven partly by an increase in severity trends, sending the Los Angeles, Calif.based insurer’s shares down nearly 6 percent on that day. The company’s net reported loss for the second quarter was $5.3 million. That’s down from a net income of $57.3 million for the same period in 2011. However, premiums written rose 2.7 percent from the same period last year to $653.6 million, the highest since the growth cycle began in 2011. Mercury executives attributed some of that to an increase in auto customers in California. Additionally, the board of directors declared a quarterly dividend of 61 cents per share to be paid on Sept. 28 to shareholders of record on Sept. 14. On a conference call with investors Mercury President and CEO Gabriel Tirador attributed the net loss to net realized investment losses, severe weather and a “general increase in severity trends,” many of which came from bodily injuries in California.

He said the severity trends are developing “at a rate quite a bit higher than historical averages.” He noted that other carriers, including Progressive and Travelers, reported higher severity losses. “I think that other carriers, they’re seeing severity trends going up as well,” Tirador said. “I think this is an industry trend, not just a Mercury trend.” The company’s combined ratio (GAAP basis) was 104.5 percent in the second quarter of 2012 and 101.1 percent for the first six months of 2012 compared with 98 percent and 98.1 percent for the same periods in 2011, Mercury reported. “The Company experienced unfavorable development of approximately $23 million and $9 million on prior accident years’ losses and loss adjustment expenses reserves for the three months ended June 30, 2012 and 2011, respectively, and approximately $29 million and $10 million on prior accident

years’ losses and loss adjustment expenses reserves for the six months ended June 30, 2012 and 2011, respectively,” a Mercury release stated. Mercury said the unfavorable development was largely the result of “re-estimates of California bodily injury losses which have experienced higher average severities and more late reported claims (claim count development) than estimated at December 31, 2011.” The company also realized roughly $8 million of pre-tax losses in the second quarter of 2012 as a result of wind and hail storms in the Midwest region. Operating income was $10.2 million for the second quarter of 2012 compared with $41.8 million for the same period in 2011. Net investment income of $31.7 million in the second quarter fell by 12 percent compared with the same period in 2011. Tirador said he holds out hopes of a better Q3. “We hope to give you some better news next quarter,” Tirador said.

multitasking, Wang said. As expected, the results were worse for those who used IM than for those who used voice chat. Overall, the percentage of eye fixations on the matching-task grids declined from 76 percent when that was the participants’ only task to 33 percent during multitasking. Fixations on the grid task decreased by 53 percent for those using IM and a comparatively better 35 percent for those who used voice chat. “When people are using IM, their visual attention is split much more than when they use voice chat,” she said. These results suggest schools need to teach media and multitasking literacy to young people before they start driving, Wang said. “Our results suggest many people may believe they can effectively text and drive at the same time, and we need to make sure young people know that is not true.” In addition, the findings show that tech-

nology companies need to be aware of how people respond to multitasking when they are designing products. For example, these results suggest GPS voice guidance should be preferred over image guidance because people are more effective when they combine visual with aural tasks compared to two visual tasks. “We need to design media environments that emphasize processing efficiency and activity safety. We can take advantage of the fact that we do better when we can use visual and audio components rather than two visual components,” Wang said. The work was supported by a grant from the National Science Foundation. Co-authors of the study were Prabu David of Washington State University, Jatin Srivastava of Ohio University and Stacie Powers, Christine Brady, Jonathan D’Angelo and Jennifer Moreland, all of Ohio State. Sources: Newswise, Ohio State University

Multitasking, continued from page 24

did even worse – they had a 50 percent drop in pattern-matching performance. In addition, those who gave audio directions completed more steps in the directions task than did those who used IM. But when participants were asked to rate how well they did on their tasks, those who used IM gave themselves higher ratings than did those who used audio chat. “It may be that those using IM felt more in control because they could respond when they wanted without being hurried by a voice in their ears,” Wang said. “Also, processing several streams of information in the visual channel may give people the illusion of efficiency. They may perceive visual tasks as relatively effortless, which may explain the tendency to combine tasks like driving and texting.” Eye-tracking results from the study showed that people paid much less attention to the matching task when they were 26 | INSURANCE JOURNAL-WEST REGION August 6, 2012

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News & Markets Report: Calif. Head and Spine Injuries Cost $500M in 10 years By Don Jergler

ead and spinal injuries cost California’s workers’ compensation insurers more than $500 million over 10 years, according to the California Workers’ Compensation Institute’s “Injury Score Card.” The report reflects data on California work injury claims for head and spinal injuries without spinal cord involvement. Such cases represent only a small fraction of all workers’ comp cases, but a disproportionate share of the costs because they include catastrophic cases considered to be among the most expensive in the system, the report states. Several statistics stand out in the score card, which uses data from open and closed claims from accident years 2001 through the middle of 2011, including notable changes in injuries by industry sector, as well as workers’ comp payments by county. Also notable is the ever-increasing cost of workers’ comp in California. “Since the recession, the types of injuries by industry has changed,” said John Ireland, ‘Since the recession, an associthe types of injuries by ate research industry has changed.’ director at CWCI. “It says a lot about the state of economy, but also about the nature of types of injuries.” The construction sector went from 15 percent of all workers’ comp claims in California in the early part of decade to 8 percent last year. Manufacturing has also seen a sizable decrease, while the professional and clerical services sector rose the most, from 15.8 percent in the period from 2001 to 2007 to 21.8 28 | INSURANCE JOURNAL-WEST REGION August 6, 2012

percent in the period between 2008 and 2011, according to the report. Since 2008 construction and manufacturing also dropped percentage points for head and spine workers’ comp claims, while professional and clerical services rose for head and spine claims, the report shows. The latest score card also features a profile of head and spine injury by claimant county of residence. Los Angeles County topped the list with 23 percent of all the state’s head and spine payments from 2001 to 2010, and L.A.’s average of $67,002 per claim was second only to Kern County, which tops the list for average per paid claim at $67,714. Other than the possibility that a high number of agricultural operations yielded such a high average in Kern, Ireland was at a loss as to why that rural county’s average was so high. As for L.A.? “That’s the $67,000 question,” he said. “We really don’t’ know why it’s so high in L.A.,” he said. But he did have some thoughts on

the matter. It may also be why L.A.’s $17,087 average for all workers’ comp claims tops the list of counties. “We do know that there are higher attorney rates in Los Angeles,” he said. “The whole workers’ comp system in L.A. tends to be a little bit more contentious than it is in the rest of the state.” L.A.’s average per paid claim is nearly 40 percent above the state average of $47,746. According to the study, head and spinal injuries accounted for one out of 200 job injury claims in California. However, due to the high average cost of these claims, they consumed 1.7 percent of paid losses, the study shows. The study shows that strains, contusions and lacerations lead the “nature of injury” categories for head and spine injuries, comprising nearly half of the claims. A high proportion of head and spine claims involve fractures, concussions, multiple physical injuries and other continued on page 32 www.insurancejournal.com

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News & Markets Up Next: California’s Wildfire Season By Don Jergler

ith Colorado’s and New Mexico’s record wildfire seasons freshly in mind, some experts are starting to take note that California’s wildfire season is nearing, and with that there are two main points to be made: the state’s wildfire season may start early, and there is a lot of unburned fuel out there. There have been no major fires in California since 2007. That’s what Pete Moraga, a spokesman for the Insurance Information Network of California, first notes when he speaks about the state’s wildfire potential. “That’s a good five years now,”

30 | INSURANCE JOURNAL-WEST REGION August 6, 2012

chances for severe fire seasons for Moraga said. “We’re keeping a close many of the region’s states. watch on this. Experts are saying this “We’re looking at above average fire could be a very severe fire season.” potential for much of California’s the Great Basin,” said wildfire season is ‘We’re keeping a typically ushered in close watch on this. Heath Hockenberry, national fire weather on hot, dry winds Experts are saying program manager for known as Santa this could be a very NWS. Annas, which come in late September severe fire season.’ That means fire danger is currently and October with high in states like Nevada, Idaho, Utah sustained wind speeds of 40 mph or and Southeastern Oregon, which is more. connected to the Great Basin states in In 2007 the Santa Annas fanned the NWS outlook because of similar wildfires that burned 518,021 acres, topography and fuels. destroying 3,107 structures, including 2,180 homes, according to IINC. Insured Those states have been plagued with losses from the fires totaled $2.3 billion, myriad smaller fires, but public attention has been drawn to the Colorado according to the California Department wildfires. The state’s two largest wildof Insurance annual report. More than 38,000 fires this year, which were only recentclaims resulted from the ly 100 percent contained, wreaked a reported $450 million in insured losses fires, many were smoke from damages that include 600 homes claims. destroyed. Earlier in the summer New The state’s major Mexico experienced its largest recorded fire season before that wildfire, and Arizona has had its share was 2003, during which of wildfires. 739,597 acres were Starting as early as this month, burned, and 4,836 strucCalifornia is be the next state to be on tures were destroyed, alert, Hockenberry added. including 3,6041 homes. “In August, September, October, Insured losses totaled we’re looking at above average (fire) $2.37 billion, and 19,100 potential for areas like the Sierra claims were filed. Nevadas,” he said. “That’s a four-year That above normal potential area difference between major wildfires,” Moraga extends south to eastern San Diego, he added. said. “Now, we’re going “Lack of precipitation in the on five years.” winter is still straining the fuels,” Thanks to dry Hockenberry said. “It looks like above conditions and much normal potential for the rest of the seaof the West being catson.” egorized as being under Particularly high fire danger areas drought-like conditions, include Yosemite, Reno and Northern the National Weather California’s mountainous regions, Service is forecasting Hockenberry said, adding that while higher-than-normal www.insurancejournal.com

dry weather and higher-than-normal temperatures are driving factors for the high fire danger, California’s large amount of fuel is its biggest threat. This year “there are more dead and distressed fuels,” he said, crediting the handful of years the state has seen of average or below average wildfire seasons. “You get buildups of things that are ready to burn,” he added. With 29 states currently in drought conditions, it’s hard to image that sales people are having their way with underwriters who want to maintain strict discipline about writing insurance in fire-prone areas, said Dan Munson, founder of Boston, Mass.-based risk analysis firm RiskMeter Online. “People really start to pay attention to their underwriting rules,” he said.

That goes against the logic that it has been five years since a major fire season for California, and that it’s a soft market. “Over time in soft markets people get short memories,” Munson said. “Salespeople tend to convince the underwriters that things are OK.” However, the Colorado wildfire season may be helping a bit, and past lessons seem to be longer-learned in the industry nowadays, Munson added. “Obviously in 2003 everyone got clobbered,” he said. Then when 2007’s wildfire season came to bare, Munson figured insurers would once again be caught off guard. “I was actually surprised,” he said. “The clients we worked with did pretty well. They didn’t fall back on their bad habits. In 2007

I was shocked when people said they kept their discipline. In California, I think people have been pretty firm with their rules.” Such discipline — not just among those in the insurance industry, but from homebuilders, homeowners and others — may be what experts are trying to convey by warning about the dangers of the 2012 fire season. Don’t pin too many hopes on any sparse summer rains. A little moisture won’t be enough, and any summer storms could even exacerbate the threat by bringing lighting, said IINC’s Moraga. Monsoonal moisture mountainous and wooded areas of the state get in August often bring rain in a short bursts that gets absorbed quickly. “It’s not the kind of rain that’s going to make the brush less likely to catch fire,” Moraga said.

Report: Insured Losses in Colorado Wildfires Nearly $450 Million By Don Jergler

he two most destructive wildfires in Colorado’s history will cost insurers roughly $450 million, according to a regional insurance association. The massive figure for insured losses comes from the total 600 homes destroyed and other damages, according to the Rocky Mountain Insurance Information Association. It’s likely the figure will reach or exceed the half-billion-dollar mark, as insured losses for such large fires tend to rise as the claims process continues, according to the group. There are several outstanding claims numbers for personal belongings, proof of loss and other documenting processes are still underway, and rebuilding numbers may also rise when that process begins, she said. “Those numbers will likely go up,” said Carole Walker, executive director of RMIIA. There are roughly 200 companies that www.insurancejournal.com

sell homeowners’ insurance in Colorado, and RMIIA complies estimates from adjusters from the top 10 to 15 companies — large carriers like State Farm, Farmers, Allstate, American Family, USAA — and uses a percentage for the smaller companies to come up with a number for insured losses. Most of the reported losses are from homes totaled by the fire, Walker said. Also contributing significantly to the loss figures are extra endorsements for coverage in homeowners’ policies, such as endorsements for building code upgrades, and endorsements for more expensive items in a home, such as jewelry, she said. Damage estimates also include smoke damage, additional living expenses, and vehicles totaled or damaged. Insured costs for commercial losses are not included in estimates for either fire. The estimated insured losses make the Waldo Canyon Fire in Colorado Springs the state’s most expensive wildfire, with insurance costs totaling more than $352.6 million from roughly 4,300 claims filed so far.

There were 346 homes destroyed in that fire, and at one point earlier this summer the fire forced the evacuation of more than 32,000 residents, with more than 20,000 residences and 160 commercial structures being threatened. The High Park Fire near Fort Collins burned 259 homes, with an 850 reported insurance claims filed so far. The insurance costs are estimated at $97.1 million for the High Park Fire. In terms of size the High Park Fire is the third largest in the state’s history. The 2002 Hayman fire, which consumed 137,760 acres, was the state’s largest. The High Park Fire surpassed the 2010 Fourmile Canyon wildfire in terms of destructive force, but not total losses. The two fires combined to surpass 2010 as the most costly wildfire season in state history. That year the Fourmile Canyon Fire, which claimed a large number of high-dollar value properties, resulted in $224 million in insured damage adjusted for inflation in today’s dollars. August 6, 2012 INSURANCE JOURNAL-WEST REGION | 31

weST COVERAGE

News & Markets Head and Spine, continued from page 28

cumulative injuries which are often expensive to treat and result in delayed return to work and high indemnity costs, the report shows. More than 9 percent of head and spine injuries are fractures, 7.4 percent are concussions and 5.8 percent are considered multiple physical injuries, the report shows. Unlike other types of injury claims, average paid losses payments on head and spine injury claims never declined following the 2004 workers’ compensation reforms, with the most recent data for accident years 2007 through 2009 showing that average paid losses on head and spine claims at one, two and three years are three- to four-times higher than the average for all California

“The cost of healthcare has been in an workers’ compensation claims, according to inflationary spiral for many, many years,” the report. Ireland said. For example, among 2007-2009 lost-time One driver of those costs may be prescripcases, average benefit payments at 36 months tion drugs. post injury for head ‘The cost of healthcare has Hydrocodone, and spine injury been in an inflationary spiral or Vicodin, was claims averaged No. 1 in percentage $96,980 — that’s for many, many years.’ of prescriptions adding an average written (12.4 percent) for head and spine $67,325 for medical plus $29,655 indemnity injuries in workers’ comp cases in California — compared with an average of $29,211, in 2010. Omeprazole, or Prilosec, followed at $15,646 medical plus $13,565 indemnity, for 6 percent, and Gabapentin (Neurontin) and all California workers’ compensation lost Naproxen (Naprosyn) were at 2.7 percent. time claims in 2001, the report states. “There definitely is an association with These numbers reflect the continued escalation in workers’ comp costs, particularly in the prescription of opioid analgesics and costs,” Ireland said. the cost of healthcare.

People, continued from page 10

Murphy will work to assist AH&T’s employee benefits production team, particularly for technology, life science, engineering and manufacturing companies. Leesburg, Va.-based AH&T is an insurance brokerage and consulting firm with practices in areas including technology, manufacturing, government contracting and nonprofits. Managing general agent ACES Commercial Insurance Services Inc. named Ken Meeker as director of product development. His goals are on market development and expansion into the Southern California and Arizona markets. At ACES, Meeker will continue placing general liability, property, professional liability and other lines of commercial insurance. Meeker’s background includes commercial insurance products within the excess & surplus lines market. He began his insurance career in New Mexico as a temp worker. Most recently he completed seven years of service as a senior underwriter for a large MGA in Southern California. Richmond, Calif.-based Aces provides general liability solutions to construction firms, general contractors and construction workers. 32 | INSURANCE JOURNAL-WEST REGION August 6, 2012

Woodland Hills, Calif.-based Poms & Associates Insurance Brokers Inc. named Peter Scott Jr. vice president of employee benefits and property/casualty in the firm’s Northern California office. Scott was previously with Sitzmann Morris & Lavis, where his focus was developing and expanding the firm’s employee benefits and life insurance practices. Scott was co-founder and CEO of Decision Maker Media in San Francisco, where he developed and maintained a vertical advertising network. Poms services include commercial insurance, employee benefits, corporate wellness, personal lines, and risk management and risk control. The firm has offices in California, Colorado, New Mexico and Washington. Barbara Gall joined Kansas City, Mo.based Lockton as senior vice president of its technology practice in the firm’s San Jose, Calif., office. Gall will have a lead role in expanding Lockton’s presence in the San Francisco Bay Area and throughout the western region. Gall was most recently a senior vice president and client manager at Marsh’s Technology Center of Excellence in San Jose. Gall also worked as assistant vice president and account manager at Johnson & Higgins’ Technology & Risk Management Practice.

Sacramento, Calif.-based insurance adjuster Sams & Associates Inc. named Marcia Gelon as the firm’s new general adjuster in Phoenix, Scottsdale and surrounding areas. Gelon joined Sams & Associates in 2012. She has more than 23 years’ experience. She has worked as a large loss general adjuster for Kemper Insurance. She has also handled numerous catastrophes across the country including events such as the San Bruno gas explosion, Northridge earthquake, and hurricanes Opal, Fran and Gustav. Sams & Associates serves California, Nevada, Arizona, Colorado, Oregon and Washington. San Jose, Calif.-based CK Specialty Insurance Associates Inc., a surplus lines broker and managing general agent, named Roger Karber its Southwest regional underwriting manager. Karber has more than 22 years of insurance experience ranging from retail to wholesale to company-level experience. Most recently, he served as a senior underwriter for Catlin Specialty Insurance Co. He was an underwriter with Colony Specialty Insurance Co., and has also worked at Western Heritage Insurance Co. In addition to Arizona and Texas, CK Specialty Insurance also offers products in California, Oregon, Washington, Colorado, Nevada, Idaho and Utah. www.insurancejournal.com

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Minding Your Businss 5 Ways to Keep Supercharged

unning a business is an enormous responsibility. It is also endlessly rewarding. Countless factors play a role in how successful the business will be. It is the job of a driven business owner to manage the workload and delegate the tasks effectively and efficiently. A lot to take on? It is, and stress can be part of the package. The successBy Catherine Oak ful business owner is the driving force of their success, so to keep the company prosperous, he needs to keep himself thriving. Here are five ways to keep you supercharged.

Acceptance of What Is A main stress-inducing factor in the career of an entrepreneur is the inability to predict the future. Seemingly insignificant extraneous factors can harbor the capacity to make or break a business. A trusted employee quits … an unhappy client … a bad investment, and even not paying attention to one’s health. Often, the most difficult thing to accept is that we are not in control of everything. But that is the first step toward a less stressful environment. & Marisa Strader

Don’t Fear Change Many of our fears (if not all) are manifested in our minds. Any form of change, no matter how small, can spark and ignite an endless void of fears that will fuel an inability to make crucial decisions that may be necessary for the company’s growth. It may even lead to procrastination and an inability to prioritize key tasks. It is time to accept that change is inevitable, and that successful business individuals are flexible and adaptive to any differences that may occur. Embrace the power of positive affirmations. A successful business owner is a positive and encouraging presence for the team, willing www.insurancejournal.com

and able to go with the flow and make it a beneficial experience. Mind Control Controlling the course of one’s thoughts can make a noticeable difference and essentially lead to a sharp-focused individual. Consciously making an effort to monitor one’s thoughts and how they have an effect on emotions will positively impact performance and overall drive. Create the path to living through intention. This is not a simple feat. It takes time and effort to master but the long-term effects will benefit both one’s personal and business life. As one learns to clear out the clutter and direct the course, the actions will be direct and intentional. Do not expend energy on trivial tasks and issues. One’s energy is valuable and limited. Instead, the focus should be on goals and the emotions behind them; attracting what is desired through intent, thus placing the responsibility of one’s actions and outcomes on oneself. Hypnotherapy and meditation can help one improve in this area. Power of Reflection & Projection Hindsight is always 20/20. It is also an effective and efficient way to enhance your approach to business ventures. An important tool in self-improvement is the ability to reflect. Journaling can be difficult to squeeze into daily life, but by allowing oneself time to look back on the day and note your actions and responses, you are opening the gateway to conscious thought and action. By taking note, you will have an opportunity to modify and condition the responses accordingly, therefore, improving overall performance and outcomes.

placed into the business. Take ownership of the successes achieved and continue to build and grow upon them. Avoid self-talk and saying things others like, “I’m only successful by luck.” Instead, be proud of strategic decisions that have led the agency to this point. This empowers one to take the necessary steps needed to market the business to take it to the next level. Luck is really the ability to see opportunities other do not. With the power of conscious effort and intentional action, one can be ready for absolutely anything that may come along the path. This not only supercharges the individual for growth and success, but the firm as well. Failure and success are both in the mind. By clearing out the clutter, you will make room for change that is necessary, thus allowing success to be a part of everyday life personally and at the firm. By making these conscious efforts to reflect, notice success, accept what is, let go of control and not fear change, the firm and the owners will be in a much better position to supercharge into the future. It sounds simple, because it is. Oak is a partner at the international consulting firm Oak & Associates. Strader is a part-time financial analyst with Oak & Associates. Email: catoak@gmail.com. Phone: 707-9356565. Website: www.oakandassociates.com.

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Essentials Do Insurance Brokers Have an Obligation to Offer the Cheapest Coverage Available?

By Steven Plitt

he question of whether insurance brokers are required to obtain the lowest cost insurance that meets the insured’s needs was answered recently by the Missouri Supreme Court in Emerson Electric Co. v. Marsh & McLennan Cos., 362 S.W.3d 7 (Mo. 2012). In that case, the insured, Emerson Electric Co., utilized broker Marsh & McLennan to place particular types of insurance with insurers. According to the allegations asserted by Emerson, Marsh steered its business to a few insurers that agreed to pay Marsh extra commissions contingent upon the amount of business Marsh sent them. When Emerson learned of this relationship, it sued Marsh, in part, alleging that Marsh had breached its duty of loyalty by not purchasing the lowest cost insurance. Under Missouri law, insurance agents have a duty of loyalty to the insured that is inherent in the nature of the relationship. The Missouri Supreme Court found that while Marsh owed Emerson a duty of loyalty, it did not include

Brokers should be cautious in advertising the lowest cost insurance. a duty to obtain the lowest cost insurance that met the insured’s needs absent a specific agreement to do so. Emerson alleged that Marsh breached its fiduciary duty when it secretly agreed to accept additional contingent commissions from insurers to which it steered business. According to Emerson, this prevented Marsh from obtaining insurance meeting Emerson’s N4 | INSURANCE JOURNAL-NATIONAL REGION August 6, 2012

needs at the lowest possible cost. The Court in Emerson did not address this issue, however, because the Missouri Legislature had specifically authorized brokers to obtain commissions from insurers with which the broker placed insurance. Emerson argued that even if Missouri statute permitted a broker to earn contingent commissions, the broker’s duty of loyalty required it to inform the insured that it was receiving such contingent commissions. The Court rejected that argument as well. Although the Missouri Supreme Court refused to conclude that the duty of loyalty required the procurement of the lowest cost insurance for the insured, the Court explained that its holding did not mean brokers were free to obtain insurance that did not meet the insured’s needs or insurance that was unreasonably costly or imprudent. The broker still has a fiduciary duty to use reasonable care, skill and diligence in procuring insurance. A duty to obtain the lowest possible cost insurance can be assumed by brokers. A broker by contract or course of conduct can assume obligations beyond the normal duties of all brokers. The takeaway from Emerson is that insurance brokers should be cautious in advertising their abilities to obtain the lowest cost insurance for their insureds; doing so would expand the broker’s obligations. Oftentimes, brokers will

advise their clients that they have shopped insurance rates and selected the lowest cost insurance. The problem is that there are many parts to a standard insurance transaction in terms of coverages, i.e., auto liability, UM/UIM, collision, comp, towing, medical payments, etc. The premium for the policy is a composite of the subpremium charges for each of the component coverages. The better approach is for the broker to identify within the proposal the gross premiums charged for the amount of coverage represented with a disclaimer indicating that the proposal only compares the gross premium charge and not the pricing of subcomponents. Tbe broker should explain to the customer that the insurance policy being offered is “competitive,” focusing on the quality of the insurer and why the agent has selected that particular insurer. Representations that the agent got the “best price” for coverage may give rise to an expanded duty. Plitt is an expert in insurance law and has a national expert witness practice. Email: SP@ kunzlegal.com. www.insurancejournal.com

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Accounting

From Concept to Practice: Insurance Trust Account Management

he concept of trust account (TA) management has no meaning to many professionals, or they have no uniform understanding of it. There are no text books or college classes on insurance TA management, and insurance-based publications seldom organize discussions to debate TA management’s critical importance to the P/C insurance agency business. Most insurance agency owners interpret TA management as a simple process of receiving premium payments from insureds and writing checks to carriers or general agents. Agency commission income is not formally managed; most agencies transfer commission funds to the operating account based on what they need rather on what they “earn.” Return premiums are treated as “negative receivables,” and premium credit and refunds are managed outside the gen-

eral accounting system. Premium payments and company remittance are indeed critical to any insurance agency. But is this all trust account management is about? Insurance Code Mandates Insurance code requires agency owners to receive premiums in a “fiduciary” capacity, not as owners but “custodians” of funds. On this basis, insurance code requires agency owners to maintain separate “trust” bank accounts for premiums and return premiums so they can be separated from the agency’s business operating funds. A separate trust bank account protects premium funds from agency creditors. Any premium payment deposited in an

agency’s trust bank account becomes “fiduciary” fund subject to insurance code regulations. One is not permitted to take funds out of the trust bank account without proper documentation of the amount of commission “earned” and an audit trail. continued on page N8

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Accounting In current practice, the amount of net premium “due to the persons entitled thereto” cannot be reliably determined, especially when the “cash solvency” is investigated. Current “trust position” or “trust ratio” indicators are somehow helpful, but they are unreliable. They cannot characterize the TA “cash solvency,” and the accuracy of accounting records is highly questionable.

Accounting, continued from page N6

Premium and Commission Management TA management can be suitably defined as “premium and commission management.” Agencies receive premium payments, generally in small amounts, policy by policy, invoice by invoice. The invoice process and especially that of endorsements is tedious and frequently requires follow-up to avoid delinquencies. Mismanaging receivables is a major cause of TA insolvency. Receiving premiums on schedule and remitting them to carriers or general agents, net of commission, is an agency’s primary focus. No formal agency commission management procedure is provided by current agency management systems. Agencies lack the necessary financial tools to determine their “earned” commission, and most transfer commission funds based on what they need. The uncontrolled transfer of commission funds to the operating account has been a major cause of TA insolvency. Money Management The “premium and commission management” characterization overlooks the financial character of the TA operation. An insurance agency’s financial traffic in and out of the trust bank account can be significant, $5 million to $10 million a year in small agencies, and $50 million or more a year in large agencies. Tracking bank deposits and disbursements requires accurate account-

ing records and a reliable reporting system. Thus, it is only natural that TA management should be viewed as “money management.” Premium Financial Management TA management is, however, a lot more than money management. Premium funds are by law “earmarked” funds with a predetermined destination. They require tracking at the policy level. A $1,000 premium received by an agency for policy A underwritten by one carrier cannot be used to remit the premium of another policy B underwritten by a different carrier. Policy premium management requirements could be looked at as a comprehensive “financial management.” Accounting procedures and especially the premium reporting system must be detailed and reliable, as premiums are not simply money but “fiduciary” funds. Financial Solvency Management Insurance code requires the trust bank account balance to equal at least the amount of the net premium “due to the persons entitled thereto.” Failure to meet this requirement is essentially proof of financial insolvency. On this basis, TA management can be defined as “premium solvency management.” Financial solvency is the ultimate management goal of insurance TA “custodians.” Under the insurance code standard, licensed insurance brokers are personally responsible for insurance TA solvency.

N8 | INSURANCE JOURNAL-NATIONAL REGION August 6, 2012

Premium Liability Management The carrier-agent/broker agreement compels insurance retailers to remit transacted premiums to carriers, net of commission, whether or not they receive premium payments from insureds. To avoid earned premium liabilities in case of non-payment of premium, they are entitled to request the policy cancellation. By virtue of the carrier-broker agreement, a $10,000 premium transaction automatically creates a $9,000 premium liability for the broker (10 percent commission assumed). The agency’s concern should therefore be not only to realize a $1,000 commission but also to protect the broker against a $9,000 potential loss. Considering the book of business of most agencies is multi-million dollar in size, one could justifiably define TA management as “premium liability management.” To manage liability of this magnitude, insurance brokers need to set up a functional TA operation. Trust Account Management Concept A financially solvent insurance TA guarantees all transacted premiums and commissions, as well as transacted premium liabilities, are properly managed. TA financial solvency is not uniformly understood primarily because insurance professionals seem unaware of insurance code mandates, and regulatory agencies fail to consistently enforce them. In today’s hightech age, insurance brokers should be able to review simple premium financial solvency reports daily. They are too important to be left to just a casual examination. To comply with insurance code mandates, a reliable financial solvency reporting system continued on page N10 www.insurancejournal.com

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Accounting Accounting, continued from page N8

by processing the balance sheet data. They will show either a “premium surplus” or should assure insurance brokers: “premium deficit” for each policy, carrier, • Each policy is financially solvent; • Premiums owned by each carrier are finan- and agency. Solvency analysis reports will be available on a “cash basis” to demonstrate an cially solvent; and agency has sufficient cash and credit assets • An agency’s entire TA is financially solto meet “due and payable” liabilities. vent. A premium float statement is similar to These financial instruments are sufficient the P&L statement available in general ledto monitor and report TA financial solvency: ger accounting. By listing premium receipts • TA balance sheet; and disbursements, this report determines • Solvency analysis reports; the “premium float” at all three levels: policy, • Cash solvency report; carrier and agency. A policy or the whole TA • Cash and receivable solvency report; is solvent when the bank account cash bal• Premium float statement; and ance equals the premium float. • Statement of trust funds beneficiaries. A TA balance sheet will demonstrate trust The statement of trust funds beneficiaries is generated by processing the premium assets equal trust liabilities. This report is float statement data. This report will list the currently unavailable because general ledger “owners” (beneficiaries) of the TA cash balaccounting does not support it. The main ance. A TA cash balance has potentially five reason why this report cannot be produced beneficiaries: carriers (net premiums), genis the premium invoice format, which treats eral agents (net premiums), agency (earned commission liability as “income.” Westrope IJ-BB4_IJ-BB4 6/6/11 3:20 PM Page 1 commission), insureds (return premiums, Solvency analysis reports are produced

overpayments), and premium finance companies (return premiums). Trust Account Management Practice The practice of TA management is either scarce or entirely lacking mainly because TA operation is unusually complex. To manage it properly in accordance with insurance code mandates, insurance brokers need better accounting and a standardized financial solvency reporting system. The “trust ratio” or “trust position” indicators are of limited help. Better reporting is required to monitor and control the TA financial solvency. Automation and the Internet can now elevate the insurance TA management practice to the high standard of care insurance premium “custodians” need. Marinescu is president of Paulmar Group LLC. Hart is a director of insurance agency operations in Orange County, Calif. Email: chris@paulmargroup.com, emma@emmahart.

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Closer Look

Homeowners & Condos

Community Associations Grow by Number and Exposure By Andrea Wells

he number of community associations nationwide continues to grow each year. In 2011, more than 62 million people lived in residential homes governed by a community association, including homeowners associations, condominiums, cooperatives and other planned communities. According to the Community Associations Institute, more than 314,000 communities in America are considered to be part of this growing residential movement. The sheer number of individuals living in community association environments has led to an interesting insurance environment, says Wayne Dow, Esq., director of underwriting for Kevin Davis Insurance Services. While insurance coverages for community associations haven’t changed much in recent years, the exposures facing this class of business has, Dow says. Claims for this class have also been on the rise. “Both the fre-

quency and the severity of the claims are becoming greater,” he says. Dow says plaintiff attorneys also are finding more ways to involve community association directors and officers liability coverage, which associations must have to protect volunteers serving on the board of directors. “What we are seeing now is plaintiffs and the plaintiffs bar attacking the D&O coverage in ways that they had never contemplated previously. It’s almost like taking a shotgun approach to the coverage,” he says. “If you have a plaintiff that gets injured on a community association grounds they might go to an attorney and the attorney says, ‘OK, what do they have for insurance?’ Whereas it used to be if they tripped and fell around the pool area then it was considered probably a general liability loss.” Nowadays, claims put the property carrier, the GL carrier,

N12 | INSURANCE JOURNAL-NATIONAL REGION August 6, 2012

and the D&O carrier on notice, Dow says. Betsey Brewer, senior vice president and partner for The Rule Co. based in Pasadena, Calif., agrees. Plaintiff attorneys are getting more creative in every area of insurance, Brewer says. “It’s very interesting to see where they are adding complaints to get an insurance company involved even though they are suing for something that is really not insurable.” Attorneys today are crafting complaints so that they trigger coverage under the D&O where they hadn’t previously, Dow says. “Generally in D&O liability insurance the duty to defend is greater than the duty to indemnify. So although you might not have an obligation to provide for an indemnity judgment under a D&O policy you certainly have to defend the action,” Dow says. And it’s in defense costs where the majority of the monies are

spent by insurance carriers defending and settling claims. Trayvon Martin Case One area that could have significant impacts on the community association D&O marketplace involves whether or not a community establishes a board of directors sanctioned neighborhood watch committee, Dow says. At the center of this debate is whether the community association in a gated community could be liable if something goes wrong, as in the shooting and death of Trayvon Martin by George Zimmerman, a resident and member of a homeowners association’s neighborhood watch group in Florida. “The Trayvon Martin case, www.insurancejournal.com

that’s ground zero right now,” Dow says. “That’s such an interesting issue because in one instance if you have homeowners that say, ‘OK the board breached their fiduciary duty by not establishing a neighborhood watch — that could be a claim.’ Or you could have homeowners that say, ‘Guess what, you formulated a neighborhood watch but you didn’t vet the members of the neighborhood watch committee — that’s a breach of fiduciary duty.’” Dow says in a D&O liability policy a wrongful act is defined as any act, error, or omission or failure to act — a pretty broad term. That definition paints the picture of what insurers are up against, he says. “The whole issue is a powder cake right now,” he says. “If you do put together a neighborhood watch … and someone is armed … it just opens a Pandora’s box of issues that associations need to think about.” The problem in the Zimmerman/Trayvon Martin case is that the homeowners association’s board of directors never intended for a member of its neighborhood watch committee to shoot and kill somebody, says Brewer. “Because Florida has as a stand your ground law there was some protection. The commercial general liability and homeowners policies will defend but the judgment will determine the amount,” Brewer says. This leads to the association’s board being sued for having a neighborhood crime watch and selecting the people who populate it. “Possible claims under this scenario could be a claim for negligence on the part of the board for allowing certain hot heads to become members of the neighborhood watch, and not offering proper oversight from the board,” Brewer says. Or take the opposite scenario: “If you didn’t monitor what they (watch committee) were doing, monthly or weekly reports on what they were doing, you would have a negligence.” Brewer says it would be more likely an association’s board would be sued for negligence when it comes to neighborhood watch groups because it’s easier to prove than a breach of fiduciary duty. Setting up committees of the board — such as a neighborhood watch group —if done in accordance with the community association’s bylaws and with the consent of the majority of homeowners in that comwww.insurancejournal.com

munity, offers some liability protection for its directors and officers. However, neighborhood watch committees are not something Brewer recommends when it comes to community association risk management. “I would not encourage a board to have a board sanctioned neighborhood watch group. And if there was one formed, I would

do it under auspices of the local police department,” she says. “All carriers, especially the umbrella carriers, the general liability carriers, ask, do you have armed guards?” Dow says. “Armed guards have traditionally been problematic and in the wake of Trayvon Martin, it will become an even a bigger issue.”

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Autos Collector Cars Deserve Specialty Coverage

f you know any car collectors, then you know they give their cars special attention. They store their cars under protective coverings, keep them in garages and drive them By Rick Drewry on special occasions. So if a storm, intruder or accident causes any damage to their cars, they want to know that they are insured all the way down to the scratch. That’s why collector vehicles should be insured under a specialty insurance policy. Specialists don’t just endorse a collector car on a standard auto policy. They offer the collector a tailored plan — a plan delivered from someone who knows the collector’s lifestyle and speaks their language. And a specialty insurance policy can provide considerable savings for the col-

lector car owner, as well. These savings begin with an “agreed value policy.” Agreed Value Protection An agreed value policy means that a collector car is insured for a specific dollar amount agreed upon by the car owner and carrier. The value is based on the car’s number of original parts and the quality workmanship of modified parts. The owner is guaranteed to receive the agreed amount, regardless of market fluctuations. The agreed value policy is superior to a “stated value policy,” which often is used by standard auto carriers — but puts the insured at the mercy of market fluctuations. For instance, under a stated value policy a collector car may be insured at the cash value of $20,000. But, if the market value of the car drops, the car owner may only recoup $15,000 if the

car is totaled in an accident. To determine what the agreed value can be, the insurance agent will need to identify whether it’s a “professionally restored original” car, an “un-restored original” or a “driver” car. A professionally restored original has been restored to its original specifications yet still has the original engine and drive train. An un-restored original is a completely original car that has everything down to the original paint and Collector vehicles interior. A driver car, the should be insured most common col- under a specialty lector car, is still collectible but not policy. worth as much because of changes made to the engine, interior and paint. In addition, extremely modified collector cars with a custom paint job can warrant a higher value, but these types of cars are few and far between. Your specialty insurer can help you ask the right questions to determine whether or not modifications warrant an increase in value. Specialty Guidelines Insurance agents will want to ask questions to make sure the collector car owner is staying within the guidelines of the specialty underwriting rules. For example, insurance agents should ask

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how many miles the collector drives each year, whether the car is kept in a garage throughout the year when not in use, and whether the collector drives to and from work with the vehicle? Be advised: Collector car owners actually need to purchase a special endorsement to drive to and from work. Tailored Coverage Selecting a specialty insurer for collector vehicle clients can have other advantages as well. Some specialty insurers have claims people who speak the collector car language. The insured will know when he or she is talking to a fellow “car guy,” and when trying to resolve a claim, building a rapport can make all the difference. Usually the coverages provided by the policy are tailored to the collector car owner and his lifestyle. For instance, if the car breaks down, collector car owners are likely to want a flatbed tow to protect the vehicle against further damage. Many specialty policies will cover the additional cost. The “car guy” also can answer questions about what repair shops they have worked with and which are qualified to work on certain cars. As most collector car owners learn, the key to a good repair is to match a vehicle with a shop that has specific expertise with the make and model of the vehicle. Specialty insurers understand the collector’s car loyalty and passion — and they can tailor a policy that ensures the collector’s possessions are well-protected.

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Drewry is the senior claims specialist, Collector Vehicle & Motorcycle, at American Modern Insurance Group. He has been passionate about collector cars since he was a kid. He has owned and restored collector cars for 30 years. Email: rdrewry@amig.com. www.insurancejournal.com

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MyNewMarkets Hotel/Motel Program Market Detail: Specialty Insurance Agency (www. specialtyagency.com) has expanded its hotel/motel program to California. The program targets risks up to seven stories with $15 million property and $1 million/$2 million liability limits including liquor liability. A special hotel/motel endorsement includes coverages unique to this class, including mechanical breakdown. Available limits: Minimum $25,000, maximum $2 million Carrier: QBE States: Calif., N.Y., N.J., and Pa. Contact: Mel Watters at 732-701-8900 or email: bmoffett@ specialtyagency.com.

Hole-in-One and Prize Indemnification Market Detail: Advantage Hole In One (www. advantagehio.com) will help with the development of a promotional idea to attract people to an event or showroom. Purchase prize indemnity is available for anything with a cash value of up to $1 million. When a participant makes the shot, the company pays for the prize. Advantage Hole In One offers: hole-in-one contests, million dollar shots, putting contests, sports contests for football, basketball, baseball, hockey, etc., scratch off games, direct mail promotions, event signage, fundraising programs, and more. Available limits: As needed Carrier: Unable to disclose States: All states Contact: Kerrie Jones at 214-701-9152 or email: kjones@ advantagehio.com

Bringing Market Seekers and Market Providers Together • Find markets in our database • Promote your markets on our site • Join our community forums • Membership is free!

www.mynewmarkets.com Vehicular Excess Liability Coverage Market Detail: Gemini Transportation Underwriters (www. geminiunderwriters.com) can underwrite programs for fleets tailored to clients’ needs. Gemini specializes in providing excess automobile liability and umbrella liability insurance to businesses whose predominant liability exposure exists by way of vehicles traveling our nation’s roadways. Gemini works closely with the professionals at its sister company, Carolina Casualty Insurance Co., also a W.R. Berkley Corp. subsidiary. CCIC’s group of loss control professionals have specific vehicular and trucking expertise and can help identify and mitigate loss exposure, including assistance in CSA 2012 preparation. Policy claims are handled by claims professionals at CCIC. Available limits: Minimum $1 million, maximum $5 million Carrier: Gemini Insurance Co. States: All states Contact: Rocco Modafferi at 617-310-8202 or email: info@geminiunderwriters.com

Excess Motor Truck Cargo Market Detail: Houlder Insurance (www. houlder.co.uk) has a 100 percent Lloyd’s facility for excess motor truck cargo limits up to $7.9 million, excess limits up to $100,000. The minimum premium is $2,500. Houlder Insurance can follow Lloyds or any domestic carrier. Available limits: Minimum $100,000, maximum $7.9 million. Carrier: Lloyd’s of London States: All states Contact: Simon Eve at seve@houlder.co.uk 1 N16ALAN15278.indd | INSURANCE JOURNAL-NATIONAL REGION August 6, 2012

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SPecial Report

Top 100 Agencies

About This Report: A slow economic recovery didn’t stop the nation’s leading independent insurance agencies from writing more property/casualty premium in 2011. The vast majority (81 percent) of the privately owned agencies and brokerages on Insurance Journal’s Top 100 Property Casualty Independent Agencies list this year, sponsored exclusively by RLI, managed to increase total P/C premium in 2011 over 2010. A whopping 17 agencies saw their P/C premium increase by 20 percent or more. Notable mentions include Alliant Insurance Services Inc., United Valley Insurance Services Inc., Sterling & Sterling Inc., Bowen, Miclette & Britt Inc., Robertson Ryan & Associates Inc., TWFG Insurance Services, Brightway Insurance, North Florida Agents Network, SAN of Florida/ Comegys Insurance Agency, Agents Helping Agents, and Glenwood Insurance Agency/

Continental Insurance Agency Alliance, each of which posted increases in P/C premium of 30 percent or more. The number of Top 100 agencies that reported declines in total P/C premiums written improved in 2011 over 2010. Just 19 percent of the Top 100 agencies saw declines in total P/C premium in 2011, compared to 28 percent of agencies that saw declines in total P/C premium in 2010. This year’s list also saw 10 newcomers, including: AssuredPartners LLC; Risk Strategies Co.; Pacific Interstate Insurance Brokers; Vanguard Risk Managers Inc.; LMC Insurance & Risk Management Inc.; James G. Parker Insurance Associates; Glenwood Insurance Agency/Continental Insurance Agency Alliance; Northlake Insurance Group Ltd.; AH&T Insurance; and Wood Gutmann & Bogart Insurance Brokers. Insurance Journal wishes to thank all of

N18 | INSURANCE JOURNAL-NATIONAL REGION August 6, 2012

those agencies and brokerages that were willing to share their information for the Top 100 report. The result is a glimpse at some of the nation’s top privately held independent insurance agencies and brokerages whose business volume is primarily retail, not wholesale. All information in this report has been garnered from voluntary online submissions from agencies, brokerages and best estimates based on other public information sources. There may be agencies eligible for listing but for which no information was received or located. Also, submitted data was not independently verified. For more information, contact Andrea Wells at awells@insurancejournal.com. www.insurancejournal.com

Top 100 Privately Held Property/Casualty Agencies

Ranked by Total 2011 P/C Premium Written 2012 Rank

Agency Name

1 Lockton Cos. 2 HUB International Ltd. 3 USI Holdings Corp. Alliant Insurance Services 4 Inc. Keystone Insurers Group 5 Inc.* 6 ISU Agency Network* NEW 7 AssuredPartners LLC Leavitt Group Enterprises 8 Inc. 9 IMA Financial Group Inc. Insurance Office of 10 America Inc 11 Beecher Carlson 12 Hylant Group Inc. 13 J. Smith Lanier & Co. 14 Bollinger Inc. Combined Agents of 15 America LLC* Heffernan Insurance 16 Brokers NEW 17 Risk Strategies Co. Satellite Agency Network 18 Group Inc. (SAN Group)* Mesirow Insurance 19 Services Inc. INSURICA Insurance 20 Management Network* Confie Seguros Holding 21 Co. United Valley Insurance 22 Services Inc.* Capacity Coverage 23 Company of N.J. Inc. 24 Higginbotham 25 Woodruff-Sawyer & Co. 26 Barney & Barney LLC EPIC (Edgewood Partners 27 Insurance Center) 28 Frenkel & Co. 29 GreatFlorida Insurance* Houchens Insurance 30 Group* 31 Smart Choice* 32 Assurance M&T Insurance Agency 33 Inc. 34 RCM&D Inc.

2011 2012 2011 Total 2010 Total % Premium 2011 Total No. of Other than P/C Rank by Main Office Website P/C Premium P/C Premium Change P/C Revenue Employees Premium Revenue $9,543,637,740 $9,089,178,800 5.00% $8,049,945,280 $680,030,000 2 4,450 Kansas City, Mo. www.lockton.com $4,875,399,819 $4,777,000,000 2.06% $2,710,591,696 $738,013,000 1 5,703 Chicago, Ill. www.hubinternational.com $2,472,000,000 $2,786,000,000 -11.27% $6,732,000,000 $301,000,000 3 2,857 Briarcliff Manor, N.Y. www.usi.biz $2,428,240,000

$1,712,358,000

41.81%

$2,645,960,000

$296,199,600

1,456

Newport Beach, Calif. www.alliantinsurance.com

$1,784,918,649

$1,667,597,801

7.04%

$275,307,740

$214,190,237

2,320

Northumberland, Pa.

www.keystoneinsgrp.com

$1,619,000,000 $1,411,162,772

$1,280,000,000

26.48%

$266,000,000 $940,953,500

$214,950,000 $124,706,871

5 9

1,446 955

San Francisco, Calif. Lake Mary, Fla.

www.joinisu.com www.assuredptr.com

$1,112,285,000

$1,089,156,000

2.12%

$906,108,000

$141,000,000

1,410

Cedar City, Utah

www.leavitt.com

$799,000,000

$660,000,000

21.06%

$430,000,000

$72,054,938

456

Denver, Colo.

www.imacorp.com

$777,335,080

$701,260,850

10.85%

$90,667,653

$80,171,672

690

Longwood, Fla.

www.ioausa.com

$748,193,000 $615,000,000 $562,013,900 $525,000,000

$672,335,000 $615,036,000 $575,000,000 $550,000,000

11.28% -0.01% -2.26% -4.55%

$85,182,000 $555,000,000 $470,241,523 $635,000,000

$83,193,000 $69,978,000 $69,202,231 $69,570,000

10 13 16 14

420 591 550 524

Atlanta, Ga. Toledo, Ohio West Point, Ga. Short Hills, N.J.

www.beechercarlson.com www.hylant.com www.jsmithlanier.com www.bollingerinsurance.com

$511,193,620

$437,818,735

16.76%

$58,085,446

$67,084,631

646

Austin, Texas

www.combinedagents.com

$482,604,000

$468,902,000

2.92%

$478,250,000

$167,185,000

$63,598,000

420

Walnut Creek, Calif.

www.heffins.com

$269,555,000

$34,500,000

180

Boston, Mass.

www.risk-strategies.com

$465,185,241

$426,063,905

9.18%

$60,201,520

Hampton, N.H.

www.sangroup.com

$462,655,273

$420,000,000

10.16%

$944,860,833

$55,716,005

306

Chicago, Ill.

www.mesirowfinancial.com

$461,460,167

$454,607,166

1.51%

$117,455,623

$59,467,489

453

Oklahoma City, Okla. www.insurica.com

$450,000,000

$380,000,000

18.42%

$180,000,000

1,700

$441,786,241

$327,539,322

34.88%

$77,087,905

$69,279,709

Buena Park, Calif.

www.confieseguros.com

Fresno, Calif.

www.unitedvalley.com

$412,148,499

$354,093,740

16.40%

$98,376,824

$59,919,775

214

Mahwah, N.J.

www.capcoverage.com

$394,361,000 $394,025,978 $351,000,000

$347,930,000 $368,400,000 $360,000,000

13.34% 6.96% -2.50%

$755,249,000 $359,079,238 $1,152,000,000

$44,753,000 $50,492,358 $44,000,000

27 24 28

517 299 417

Fort Worth,Texas San Francisco, Calif. San Diego, Calif.

www.higginbotham.net www.wsandco.com www.barneyandbarney.com

$342,775,000

$275,337,000

24.49%

$370,606,000

$45,014,000

297

San Francisco, Calif.

www.edgewoodins.com

$334,758,174 $317,000,000

$315,122,595 $302,000,000

6.23% 4.97%

$310,153,000 $382,000

$38,301,212 $41,210,000

34 31

224 268

New York, N.Y. Stuart, Fla.

www.frenkel.com www.greatflorida.com

$312,400,000

$284,085,000

9.97%

$235,000,000

$31,750,498

199

Bowling Green, Ky.

www.houchensins.com

$308,617,862 $304,787,926

$297,362,671 $269,235,000

3.79% 13.21%

$1,581,696 $184,687,301

$38,850,886 $38,264,391

32 35

46 250

High Point, N.C. Chicago, Ill.

www.smartchoiceagents.com www.assuranceagency.com

$298,000,000

$295,000,000

1.02%

$140,000,000

$22,200,000

116

Buffalo, N.Y.

www.mandtbank.com

$295,297,276

$304,127,572

-2.90%

$72,047,128

$27,564,788

267

Baltimore, Md.

ww.rcmd.com

35 Insurors Group LLC

$278,065,943

$260,000,000

6.95%

$130,301,827

$42,447,192

235

College Station, Texas www.insurorsgroup.com

36 Propel Insurance Marshall & Sterling Enterprises Inc. 38 Sterling & Sterling Inc. InterWest Insurance 39 Services Inc. Bowen, Miclette & Britt 40 Inc. MHBT Inc. (formerly 41 McQueary Henry Bowles Troy LLP) 42 SullivanCurtisMonroe Robertson Ryan & 43 Associates Inc. 44 The Horton Group 45 Ascension Insurance Inc. Pacific Interstate NEW 46 Insurance Brokers* 47 Moreton & Co. 48 The Mahoney Group Advanced Insurance 49 Underwriters LLC 50 Acrisure LLC* 51 TWFG Insurance Services

$275,000,000

$270,000,000

1.85%

$180,000,000

$33,500,000

236

Tacoma, Wash.

www.propelinsurance.com

$272,948,355

$260,957,492

4.59%

$117,171,254

$42,546,739

351

Popughkeepsie, N.Y.

www.marshallsterling.com

$266,000,000

$198,000,000

34.34%

$136,000,000

$32,179,000

194

Woodbury, N.Y.

www.sterlingrisk.com

$264,461,000

$222,383,404

18.92%

$93,214,900

$32,421,000

254

Sacramento, Calif.

www.iwins.com

$264,448,000

$178,891,000

47.83%

$143,531,000

$30,512,000

240

Houston, Texas

www.bmbinc.com

$262,250,000

$256,500,000

2.24%

$250,000,000

$28,025,000

216

Dallas, Texas

www.mhbt.com

$258,232,000

$249,272,000

3.59%

$162,534,000

$19,785,000

180

Irvine, Calif.

www.sullivancurtismonroe.com

$257,000,000

$192,000,000

33.85%

$55,000,000

$24,000,000

195

Milwaukee, Wis.

www.robertosnryan.com

$241,256,552 $238,733,000

$245,862,166 $189,067,017

-1.87% 26.27%

$271,738,321 $402,119,000

$29,630,064 $33,711,000

47 38

295 431

Orland Park, Ill. Kansas City, Mo.

www.thehortongroup.com www.ascensionins.com

$38,364,867

$231,110,000 $214,000,000

$250,000,000 $198,236,818

-7.56% 7.95%

$444,435,000 $83,000,000

$23,902,319 $31,382,455

58 43

175 192

$214,000,000

$189,000,000

13.23%

$5,000,000

$21,425,000

$209,917,523 $208,751,093

$193,273,344 $159,000,000

8.61% 31.29%

$133,874,018 $4,758,803

$22,880,980 $31,312,664

60 44

$232,087,444

El Dorado Hills, Calif. www.piib.com Salt Lake City, Utah Mesa, Ariz.

www.moreton.com www.mahoneygroup.com

155

Hollywood, Fla.

www.advancedins.com

270 72

Caledonia, Mich. www.acrisure.com The Woodlands, Texas www.twfg.com

* Indentified as having an affiliation with an independent network or cluster group. Employee count for these groups does not necessarily include all affiliates responsible for total premium written.

www.insurancejournal.com

August 6, 2012 INSURANCE JOURNAL-NATIONAL REGION | N19

SPecial Report

Top 100 Agencies 2012 Rank 52 NEW 53 54 55 56 57

Agency Name Starkweather & Shepley Insurance Brokerage Inc. Vanguard Risk Managers Inc.* Parker Smith and Feek Inc. Brightway Insurance Lawley Insurance Turner Surety and Insurance Brokerage Inc.

58 United Agencies Inc.* 59 60 61 62 NEW 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 NEW 79 80 NEW 81 NEW 82 83

85 87 88 89 90 NEW 91 92 93 94 95 96 97 98 99 NEW 100

$204,000,000

Millennium Corporate Solutions SilverStone Group Inc. M3 Insurance Solutions Inc TIS Insurance Services Inc. Oklahoma Agents Alliance* The Daniel and Henry Co. AH&T Insurance SIA of the Great Lakes* John M. Glover Agency Insgroup Inc. Cook, Hall & Hyde Inc. Harden Celedinas Insurance Group Brower Insurance Agency Eustis Insurance & Benefits Wood Gutmann & Bogart Insurance Brokers

$193,000,000

5.70%

$201,429,000

Main Office

Website

$147,000,000

$28,600,000

165

East Providence, R.I.

www.starshep.com

$175,000,000

$26,000,000

Marcellus, N.Y.

www.vanguardriskmanagers.net

$199,774,940

$199,003,764

0.39%

$129,325,363

$24,293,816

168

Bellevue, Wash.

www.psfinc.com

$199,500,000 $199,235,262

$150,000,000 $183,528,647

33.00% 8.56%

$1,500,000 $402,087,714

$25,735,500 $30,014,093

53 46

503 300

Jacksonville, Fla. Buffalo, N.Y.

www.brightway.com www.lawleyinsurance.com

$198,179,000

$205,422,000

-3.53%

Woodcliff Lake , N.J.

www.tsibinc.com

$197,000,000

$192,000,000

2.60%

$45,000,000

275

Pasadena, Calif.

www.unitedagencies.com

Professional Insurance $197,000,000 Associates Inc. The Graham Co. $196,522,416 The Insurance Alliance of $196,471,985 Central Pa. Inc.* Bainswest Inc. $195,497,882 LMC Insurance & Risk $194,265,528 Management Inc. SIA Group* $184,431,230 Cobbs, Allen & Hall $178,788,936 Gowrie Group $173,100,000 North Florida Agents $168,089,851 Network* Haylor, Freyer & Coon $166,000,000 Inc. Bouchard Insurance $160,097,737 Sihle Insurance Group $156,493,000 Inc. TWIW Insurance Services $153,286,387 LLC SAN of Florida / Comegys $149,038,259 Insurance Agency* Risk Transfer Holdings $145,705,776 Inc. Lovitt-Touche Inc. $140,602,254 HNI $140,000,000 Agents Helping Agents* $138,927,509 PacWest Alliance $136,803,885 Insurance Services Inc.* Assure Alliance* $135,000,000 James G. Parker Insurance $134,496,173 Associates Momentous Insurance $133,000,000 Brokerage Glenwood Insurance Agency/Continental In$132,796,431 surance Agency Alliance* Northlake Insurance $127,501,000 Group Ltd.* TrueNorth Cos. $127,469,885

84 Scirocco Group

2011 2012 2011 Total 2010 Total % Premium 2011 Total No. of Other than P/C Rank by P/C Premium P/C Premium Change P/C Revenue Employees Premium Revenue

$185,000,000

6.49%

$27,500,000

San Carlos, Calif.

www.piainc.com

$213,903,454

-8.13%

$33,274,448

$33,775,611

150

Philadelphia, Pa.

www.grahamco.com

$192,210,985

2.22%

$24,131,346

197

Camp Hill, Pa.

www.tiacp.com

$180,311,628

8.42%

$102,940,802

$21,585,397

218

Tulsa, Okla.

www.bainswest.com

$120,443,203

$19,889,621

173

West Des Moines, Iowa www.lmcins.com

$176,811,530 $154,954,238 $162,646,539

4.31% 15.38% 6.43%

$19,311,646 $37,455,712 $40,000,000

$22,975,309 $18,863,510 $16,988,000

59 71 77

98 135 124

Jacksonville, N.C. Birmingham, Ala. Westbrook, Conn.

www.siagroup.net www.cahins.com www.gowrie.com

$115,652,117

45.34%

$12,164,198

101

Tallahassee, Fla.

www.nfanflorida.com

$163,000,000

1.84%

$90,000,000

$24,700,000

200

Syracuse, N.Y.

www.haylor.com

$170,000,000

-5.82%

$147,670,947

$19,099,660

191

www.bouchardinsurance.com

$151,000,000

3.64%

$10,000,000

$17,500,000

153

Clearwater, Fla. Altamonte Springs, Fla.

$146,429,617

4.68%

$77,467,920

$20,920,010

159

Ventura, Calif.

www.twiw.com

$108,387,156

37.51%

$178,780

$16,305,181

St. Petersburg, Fla.

www.sanflorida.com

www.sihle.com

$149,105,578

-2.28%

$13,736,530

Orlando, Fla.

www.risktransferinc.com

$166,212,607 $144,000,000 $94,000,000

-15.41% -2.78% 47.80%

$149,884,486 $25,000,000 $17,455,000

$12,725,403 $11,000,000 $19,339,125

97 110 68

220 85 23

Tempe, Ariz. New Berlin, Wis. Louisville, Ky.

www.lovitt-touche.com www.hni.com www.ahainsurancenetwork.com

$160,368,522

-14.69%

$20,870,052

$16,826,878

Fresno, Calif.

www.pacwestalliance.com

$120,000,000

12.50%

$7,500,000

$6,000,000

125

Spartanburg, S.C.

www.assurealliance.com

$55,575,830

$17,629,919

180

Fresno, Calif.

www.jgparker.com

$133,000,000

0.00%

$45,000,000

$20,500,000

129

Van Nuys, Calif.

www.momentousins.com

$90,320,344

47.03%

$11,335,158

$4,470,606

127

Glenwood Springs, Colo.

www.glenwoodinsurance.com

$37,550,000

$14,380,000

149

Baton Rouge, La.

www.northlakeins.net

$150,619,766

-15.37%

$128,044,660

$17,789,478

160

www.truenorthcompanies.com

$126,000,000

$117,000,000

7.69%

$44,500,000

$19,112,000

131

Cedar Rapids, Iowa Hasbrouck Heights, N.J.

$125,000,000

0.00%

$25,000,000

$11,500,000

108

Irvine, Calif.

$124,404,000

$118,839,000

4.68%

$1,143,828,000

$13,392,000

198

Omaha, Neb.

www.silverstonegroup.com

$121,500,000

$112,200,000

8.29%

$599,200,000

$13,100,000

186

Madison, Wis.

www.m3ins.com

$119,856,770

$106,290,317

12.76%

$92,616,336

$16,641,049

133

Knoxville, Tenn.

www.tisins.com

$119,088,156

$111,446,855

6.86%

$16,392,772

$116,700,000

$116,832,000

-0.11%

$84,095,000

$16,494,000

155

St. Louis, Mo.

www.danielandhenry.com

$116,538,925 $115,438,703 $114,984,620 $112,000,000 $111,000,000 $108,410,433

$92,274,300 $100,249,516 $104,259,000 $112,500,000 $95,150,000 $99,846,686

26.30% 15.15% 10.29% -0.44% 16.66% 8.58%

$117,358,575 $1,300,000 $9,000,000 $14,000,000 $94,000,000 $237,647,328

$14,953,135 $17,600,000 $15,945,800 $13,000,000 $17,000,000 $10,681,870

84 74 83 96 76 112

122 32 150 70 115 117

www.ahtins.com www.siagl.com www.johnmglover.com www.insgroup.net www.chhins.com www.hardeninsight.com

$106,549,370

$95,818,392

11.20%

$3,189,972

$14,869,950

115

$105,155,500

$104,000,000

1.11%

$172,235,000

$13,981,900

165

Leesburg, Va. Green Bay, Wis. Norwalk, Conn. Houston, Texas Melville, N.Y. Jacksonville, Fla. Palm Beach Gardens, Fla. Dayton, Ohio

www.browerinsurance.com

$104,762,592

$107,705,812

-2.73%

$27,299,822

$13,218,351

114

Metairie, La.

www.eustis.com

$104,210,060

$81,271,145

28.23%

$18,208,889

$13,499,682

Tustin, Calif.

www.wgbib.com

www.sciroccogroup.com www.mcsins.com

Oklahoma City, Okla. www.oaaonline.net

www.celedinas.com

* Indentified as having an affiliation with an independent network or cluster group. Employee count for these groups does not necessarily include all affiliates responsible for total premium written.

N20 | INSURANCE JOURNAL-NATIONAL REGION August 6, 2012

www.insurancejournal.com

Top 20 Banks in Insurance Brokerage Fee Income

(2011/Nationally) Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

2011 Insurance Brokerage Fee Income $933,070,000 $805,000,000 $139,489,000 $133,884,000 $100,377,000 $87,326,000 $65,692,000 $56,446,000 $53,268,000 $44,182,000 $42,132,000 $41,000,000 $36,402,000 $35,581,000 $34,094,000 $30,005,000 $27,691,000 $26,272,000 $24,976,000 $20,021,000

Bank Name Branch Banking and Trust Co. Citibank, N.A. Discover Bank FIA Card Services Bank of America, N.A. BancorpSouth Bank First Niagara Bank, N.A. Eastern Bank TD Bank, N.A. Associated Bank, N.A. Compass Bank Wells Fargo Bank, N.A. Manufacturers and Traders Trust Co. The Frost National Bank Towne Bank Bank of the West Trustmark National Bank PNC Bank, N.A. Barclays Bank Delaware Fifth Third Bank

City, State Winston Salem, N.C. Las Vegas, Nev. Greenwood, Del. Wilmington, Del. Charlotte, N.C. Tupelo, Miss. Buffalo, N.Y. Boston, Mass. Wilmington, Del. Green Bay, Wis. Birmingham, Ala. Sioux Falls, S.D. Buffalo, N.Y. San Antonio, Texas Portsmouth, Va. San Francisco, Calif. Jackson, Miss. Pittsburgh, Pa. Wilmington, Del. Cincinnati, Ohio

Website www.bbt.com www.citibank.com www.discovercard.com www.bankofamerica.com www.bankofamerica.com www.bancorpsouth.com www.fnfg.com www.easternbank.com www.tdbanknorth.com www.associatedbank.com www.compassbank.com www.wellsfargo.com www.mtb.com www.frostbank.com www.townebank.com www.bankofthewest.com www.trustmark.com www.pnc.com www.barclaycardus.com http://www.53.com

Note about this report: These rankings include only commercial banks and FDIC-supervised savings banks which are required by the FDIC to report line item income like insurance brokerage. They do not include savings associations (SAs) regulated by the Office of Thrift Supervision (OTS), because SAs are not so required. Source: Michael White-Prudential Bank Insurance Fee Income Report - 2012 Edition

Top 20 Bank Holding Companies in Insurance Brokerage Fee Income (2011/Nationally) 2011 Insurance Rank Brokerage Fee Income Bank Holding Company Name City, State Website 1 $2,141,000,000 Citigroup Inc. New York, N.Y. www.citigroup.com 2 $1,617,000,000 Wells Fargo & Co. San Francisco, Calif. www.wellsfargo.com 3 $936,072,000 BB&T Corp. Winston-Salem, N.C. www.bbt.com 4 $378,954,000 Bank of America Corp. Charlotte, N.C. www.bankofamerica.com 5 $344,000,000 Morgan Stanley New York, N.Y. www.morganstanley.com 6 $210,000,000 American Express Co. New York, N.Y. www.americanexpress.com 7 $139,489,000 Discover Financial Services Riverwoods, Ill. www.discovercard.com 8 $132,000,000 Goldman Sachs Group Inc., The New York, N.Y. www2.goldmansachs.com 9 $105,216,000 Regions Financial Corp. Birmingham, Ala. www.regions.com 10 $92,000,000 Ally Financial Inc. Detroit, Mich. www.ally.com 11 $87,351,000 BancorpSouth Inc. Tupelo, Miss. www.bancorpsouthonline.com 12 $66,709,000 Huntington Bancshares Inc. Columbus, Ohio www.huntington.com 13 $65,692,000 First Niagara Financial Group Inc. Buffalo, N.Y. www.fnfg.com 14 $61,000,000 JPMorgan Chase & Co. New York, N.Y. www.jpmorganchase.com 15 $56,446,000 Eastern Bank Corp. Boston, Mass. www.easternbank.com 16 $53,268,000 TD Bank US Holding Co. Portland, Maine www.tdbanknorth.com 17 $47,665,000 Stifel Financial Corp. St. Louis, Mo. www.stifelbank.com 18 $44,745,000 Associated Banc-Corp. Green Bay, Wis. www.associatedbank.com 19 $40,793,000 HSBC North America Holdings Inc. McClean, Va. www.us.hsbc.com 20 $39,000,000 U.S. Bancorp Minneapolis, Minn. www.usbank.com Note about this report: With few exceptions, the Federal Reserve Board requires only what it defines as â&#x20AC;&#x153;largeâ&#x20AC;? bank holding companies (i.e., BHCs with consolidated assets in excess of $500 million) to file line item fee income like insurance brokerage. Ranking excludes MetLife Inc., which is a traditional life insurer that does not engage in significant banking activities. Source: Michael White-Prudential Bank Insurance Fee Income Report - 2012 Edition

www.insurancejournal.com

August 6, 2012 INSURANCE JOURNAL-NATIONAL REGION | N21

NATIONAL COVERAGE

News & Markets Ernst & Young’s Tony Anderson to Be Honored By City Of Hope

ity of Hope’s National Insurance Industry Council will honor Anthony “Tony” Anderson, retired vice chairman and Midwest managing partner of Ernst & Young LLP, with its 2012 Spirit of Life Award. The Spirit of Life Award is City of Hope’s most prestigious philanthropic honor, presented annually to an insurTony Anderson ance industry leader who has demonstrated professional and philanthropic leadership. Anderson will receive the award on October 27 at The Beverly Hilton Hotel in Beverly Hills, Calif.

“I’m a big believer in the critical role business leaders play in the community,” Anderson said. “A city will never reach its full potential without the active, hands-on support of the business community. That’s why I’ve made it my personal mission to give back in a meaningful way. City of Hope’s commitment to medical research and philanthropy impacts communities around the world.” While based in Chicago, Anderson managed a practice of more than 4,000 assurance, tax, advisory and transaction professionals serving clients across a 12-state region. During his 35-year career, Anderson also served as Ernst & Young’s Pacific Southwest managing partner from 2000 until 2006 and was

based in Los Angeles. His background includes leading the firm’s Pacific Southwest insurance practice from 1996 to 2000. Anderson began his career at Ernst & Young in 1977 as an audit staffer in Chicago. He was admitted to the partnership in 1989. The National Insurance Industry Council was founded in 1978 by a group of insurance industry executives and is composed of property/ casualty companies, law firms, brokers, accounting firms, reinsurers, executive placement firms and actuaries in the insurance industry. To date, the NIIC has raised $19 million for City of Hope, a research, treatment and education center for cancer, diabetes and other life-threatening diseases.

IICF Week of Giving October 13 – 20, 2012

VOLUNTEER. GIVE. MAKE AN IMPACT.

IICF Week of Giving taps the talent and energy of insurance employees and employers to stimulate volunteerism and philanthropy in local communities. Week of Giving builds on the tradition of Volunteer Week, the annual event to rally industry volunteers across the United States. Support your community — sign up your volunteer team at IICF.org/volunteer. New for 2012: A giving campaign supporting recognized nonprofit organizations. Text INSURANCE to 50555 to donate $5 or donate at IICF.org. The Insurance Industry Charitable Foundation is a registered not-for-profit organization under section 501(c)(3) of the IRS code. Federal Tax ID #20-1240972.

N22IICF15992.indd | INSURANCE 1JOURNAL-NATIONAL REGION August 6, 2012

www.insurancejournal.com 7/19/12 7:13 AM

National COVERAGE

Classifieds

Insurance Journal National • 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

REQUEST FOR PROPOSALS BY THE INSURANCE COMMISSIONER OF THE STATE OF CALIFORNIA IN HIS STATUTORY CAPACITY AS CONSERVATOR (“CONSERVATOR”) OF MAJESTIC INSURANCE COMPANY IN CONSERVATION

Looking to take your career to the

next level?

FOR THE PURCHASE OF THE MAJESTIC INSURANCE COMPANY, A CALIFORNIA DOMICILED PROPERTY & CASUALTY INSURANCE COMPANY, TOGETHER WITH CERTAIN RESIDUAL ASSETS AND LICENSES, TO BE SOLD AS A CLEAN “SHELL” FREE AND CLEAR OF PRE-ACQUISTION LIABILTIES.

We are looking for insurance professionals with backgrounds in agency automation, consulting, and training. Join more than 1000 employees who are advancing the business of insurance every single day.

PROPOSAL SUBMISSION DEADLINE: AUGUST 31, 2012, AT 4:00 P.M. PDT Notice is hereby given that proposals to acquire Majestic Insurance Company (“Majestic”) must be received by the Conservator, at the address stated below by 4:00 p.m., PDT, Friday, August 31, 2012. To be considered, proposals must be prepared and submitted in accordance with the requirements set forth herein and/or as any additional requirements as may be determined by the Conservator of Majestic or by the San Francisco Superior Court overseeing Majestic’s conservation. Please carefully read and follow the instructions set forth herein. A copy of the full RFP can be obtained from the Conservation and Liquidation Office website at www.caclo.org. Proposals must comply with the instructions set forth herein, be submitted with the payment required, and be received at:

We’re hiring! Apply online!

www.appliedsystems.com

Majestic Insurance Company in Conservation Attention: Joe Holloway, Conservation Manager 425 Market Street, 23rd Floor San Francisco, California 94105

Advertisers Index Readers, browse, contact, or do product searches on any of our full page advertisers at: http://www.insurancejournal.com/adshowcase/ GeoVera Insurance Company

Abram Interstate www.abraminterstate.com

W16

SC16, SE16

The Gorst Company

Agency Ideas www.agencyideas.com

N22

Agent Support Network of America www.asnoa.com

W3, M3

American Agents Alliance www.agentsalliance.com

W33

www.aiicfl.com

FL19

www.gorst.com

W19

www.applieduw.com

W13, W60; SC7, SC48; SE7, SE44; E7; E40; M7, M44

RiskMater.com

www.greatamericaninsurancegroup.com

www.riskmeter.com

RLI

W29; SC9; SE13; E13; M11

IICF

ISU Group K&B Underwriters www.kbunderwriters.com

California Earthquake Authority

Leavitt Group Enterprises, Inc.

www.cnico.com

W15

www.centerforinsurancestudies.com

W34

Demotech www.demotech.com

N9 W17

www.monarchexcess.com

www.uihna.com W11, W25

Westrope

www.personalumbrella.com5

W27; SC13; SE15

Webcetera www.webcetera.com

PersonalUmbrella.Com

SC15

Universal North America

www.scic.com

www.gatewayspecialty.com W18; SC22; SE14; E12; M14

SC3

Texas Mutual Insurance Company

National Alliance for Insurance Education & Research

Gateway Specialty Insurance

www.insurancejournal.com

SC18

N15

www.westrope.com N2, N3

FL20, SC19

Tejas American General Agency

www.texasmutual.com

www.mhi-tx.com

www.pnigroup.com

M13

St. Johns Insurance Company

www.taga1.com W2; SC2 ; SE2; E2; M2

Patriot National Insurance Group

First American Specialty Insurance Company www.firstam.com

www.leavitt.com

Monarch E & S Insurance Services

CSUF Center for Insurance Studies

W23; SC11; SE3; E3; M17

Specialty Insurance Managers

www.stjohnsinsurance.com N14

McClelland & Hine

Century National

N17

SIAA

www.simtexas.com W21; SC19; SE17; E14; M15

www.astonishresults.com N5, W10, SC14, SE12, E1, M12 W7

N13

www.siaa.net N7

Astonish Results

www.calquake.com

N11

www.rlicorp.com N22

Insurbanc

www.joinisu.com

W9; SC17; SE11; E11; M9

www.pilotcat.com

Great American Insurance Group

www.insurbanc.com

Applied Underwriters

www.phly.com Pilot

www.iicf.org

American Integrity Insurance Group

Philadelphia Insurance

www.geovera.com

N10

Zurich Insurance Company www.zurichna.com

W59; SC47; SE43; E39; M43

W5; SC5; SE5; E5; M5

August 6, 2012 INSURANCE JOURNAL-NATIONAL REGION | N23

IDEA EXCHANGE

Closing Quote

How Niche Marketing Worked

S By Kathryn Soderberg

mall business is alive and well, despite the gloomy, reports we read about the weak national economy. To be more specific, small businesses started by ethnic minorities is booming. The niche where we have first-hand experience with this phenomenon is the Hispanic marketplace. But this phenomenon is apparent with almost any ethnic group. Despite the negativity that many business owners are expressing, first-generation immigrants still believe in the American Dream. They believe with hard work and a little luck, they can start a company with limited resources and grow their company into something extraordinary. Opportunities sometimes define strategy, and independent insurance agencies need to be open to opportunities. Speculative activities are also sometimes needed in any business. When we decided to pursue the Hispanic market, we were not sure if this was a prudent decision. Often, ethnic minorities live in and set up business in “stressed” areas, sometimes more susceptible to crime and other perils than the more homogeneous bedroom communities where our agency traditionally sought new business. Agencies like ours sometimes have to think ahead. We must ask ourselves, “What will the market demand of us in the future?” We made a business decision several years back to target the fastest growing community in America to grow our business within this community and establish ourselves as leaders in the Hispanic marketplace. There are six practices you can do right now to enhance your presence in the ethnic marketplace.

N24 | INSURANCE JOURNAL-NATIONAL REGION August 6, 2012

1. Decide which niche you want to develop. For us, it was not an obvious decision. Founder Douglas Soderberg had a strong life insurance background and was the youngest general agent appointed at the time for Aetna Life & Casualty. When he founded Soderberg Insurance in 1968, the logical business development strategy was to target small manufacturing businesses, and our reputation as an authority in a particular market had not yet been established. It was many years later that we started to realize how we needed to focus on a particular market. 2. Do your homework. Follow trade magazines to see what trends are developing in the marketplace. Follow the local news. As we have always been told, listen to your customers. They are the greatest source of information and ideas. If you listen, you will learn from them the path that business is taking. 3. Examine behaviors of those agencies that have not just grown their business, but have followed a strategy for getting there. What did they do that worked? 4. Train staff on the agency mission. Train staff so that they, too, are experts in the market that you want to develop. Our staff, both Spanish-speaking as well as non-Spanish-speaking, always come up with suggestions on how to do things better. Exceeding customer expectations is easier when the staff is on board and recognizes the greater mission of the agency. We can more effectively sell and service the modern diverse consumer in the language and custom that he or she wants to be serviced. 5. Recruit CSRs and producers that bring the “right attitude” with them, as well as diversity. Exceeding client expectations is always easier with the right attitude. Good service creates great referrals. Our Hispanic clients regularly refer us like no other customers. Every insurance agent is told, “ask for the referral.” Also, a diversified leadership can help. In our case, Soderberg Insurance has non-traditional leadership. We are a woman-led business. When agencies have women in leadership roles, it brings different perspectives and innovative solutions. Diversified leadership leads to enhanced financial performance. 6. Market, market, market … the Agencies have old fashioned way. Benjamin Franklin think ahead. once said, “Without continual growth and progress, such words as improvement, achievement and success have no meaning.” Establish yourself as an expert in a marketplace. Keep track of your results. Be sure to promote yourself on your Website and in your marketing materials as an expert in your particular area of expertise. Gradually, your reputation will speak for itself. We are asked to speak regularly at business seminars, first-time home buyer seminars, radio programs and on public television. What strategy is your agency following to ensure continual growth and progress? Today, stagnation is not an option: you need to grow. Soderberg is president of Soderberg Insurance Services of Lynnfield, Mass. She is a frequent speaker at business seminars on many topics, including niche marketing and how to grow one’s business in the Hispanic community. www.insurancejournal.com

Expect big things in workersâ&#x20AC;&#x2122; compensation. Expect to save a third of your clients 30% or more. Expect broad acceptance and few class limitations nationwide. Expect competitive commissions. For information call (877) 234-4450 or visit auw.com/us.

ÂŠ2012 Applied Underwriters, Inc. A Berkshire Hathaway company. Rated A by A.M. Best.