WEst REGION
september 10, 2012 | Vol. 90, No. 17
Top Workers’ Comp Writers A Duty to Settle Too Far Hartwig on Dodd-Frank Provisions
ROCK-SOLID FINANCIAL STRENGTH SUPERIOR CLAIMS SERVICES UNRIVALED CUSTOMER SUPPORT INNOVATIVE RISK FINANCING UNDERWRITING ONE RISK AT A TIME
DO ONE THING. DO IT BETTER THAN ANYONE ELSE.
IT’S HOW WE MAINTAIN A CUSTOMER RETENTION RATE OF OVER 90 PERCENT. At Applied Underwriters,® workers’ compensation is all we do. This allows us to provide the deep resources and expertise to handle your claims with precision and speed. And rather than send you all over the globe for answers, we give you one number to call – your direct line to a dedicated team in Omaha that understands your company’s unique needs. Experience our way of doing things. Just one company, with one focus, and the hardest-working workers’ compensation insurance around.
Most classes. All states. Call (877) 234-4450 or visit www.auw.com for more information.
©2010 Applied Underwriters, Inc. A Berkshire Hathaway Company. EquityComp patent pending.
2 | INSURANCE JOURNAL-WEST REGION September 10, 2012
Applied Experience. Applied Intelligence. www.insurancejournal.com
“Is your agency
planted in good soil, supported wIth deep roots and
really growing?” Scan with smartphone to learn how ASNOA can help your business grow. http://asnoa.com/video/ mobile/index.html
• More control over your future with Increased Independence “ASNOA provided direct access to the markets we needed, providing us the ability to compete with national and regional agencies. The automation support saved us time and money, which enabled us to divert more resources to marketing and growing our business. The results on our bottom line have been amazing!”
• 80% total premium growth in 2011 • Increase your revenue faster than you ever thought possible • A Proven Network of Success • Secure Carrier Markets • A stellar support system for Independent Agents
www.insurancejournal.com
We are Insurance Professionals helping other Insurance Professionals realize their full business potential. See how the ASNOA Advantage can help your agency grow. Watch the video at: www.asnoa.com/video ®
John Garrett, CPCU, MBA, LUTCF, President-Chicago CPCU Chapter Principal, Coverall Insurance Services, Burr Ridge, IL www.asnoa.com September 10, 2012 INSURANCE JOURNAL-WEST REGION | 3
© Copyright 201
N12 On The Cover
WEST
Inside This Issue
Special Report: Tapping the High Net Worth Market
September 10, 2012 • Vol. 90, No. 17 • West Region
10
N11
12 16
8
NATIONAL COVERAGE
WEst COVERAGE
Idea exchange
N10 Spotlight: Contract Bonds
8 Calif. Sues Doctor Over Aggressive Billing Tactics
N11 Spotlight: Construction Firms Face Liability Increases: Marsh
8 49ers, NFL Sued by Fans Attacked During SF Game
16 Settlement Duties: A Duty (to Settle) Too Far N1 Minding Your Business: Oak & Schoeffler N26 Business Ideas to Challenge Our Thinking
N12 Special Report: Tapping the High Net Worth Market
8 Lawsuit Says Travel Agencies Conspired with Hotels
N16 Special Report: High-Value Home Flood Option N18 Closer Look: Top Workers’ Comp Writers
N24 Closing Quote: Hartwig on Dodd-Frank Provisions
N20 Lower Cat Losses Boost P/C Earnings N20 P/C Insurer Results Improve Mid-Year N22 AIG Off Hook for Claims by Madoff Clients Under Home Policies 4 | INSURANCE JOURNAL-WEST REGION September 10, 2012
DEPARTMENTS 6 10 12 12 N2
Opening Note People Declarations Figures MyNewMarkets
www.insurancejournal.com
Successful companies typically find 1 or 2 things and do them very well. We found 5.
Up to 30 rental units $1 million excess UM/UIM Combine personal and commercial policies LLCs, DBAs, estates and trusts Youthful and senior drivers
PersonalUmbrella.com. We do.
www.insurancejournal.com
Available nationally. Underwriting criteria September 10, 2012 INSURANCE JOURNAL-WEST REGION | varies 5 by state. Visit us online for guidelines. California Insurance License 0D08438
WeST COVERAGE
Opening Note
E D I TOR I A L
Workers Comp by a (Big) Nose
W
ith the last minute workers’ compensation reform bill for California racing to the end of legislative session then passing resoundingly, I felt it would be interesting to look back at what some people had to say in a poll on InsuranceJournal.com asking people their opinions on reform as efforts to push through the bill were ongoing. Several who took the poll — it ran from Aug. 21 to Aug. 29 — expressed increasing pessimism about the government’s ability to pass reform. They also had some interesting ideas on how to fix the system, a few of which I’ve edited for grammar, clarity and brevity and reprinted here. “We have to keep premiums down in this economy,” stated one polltaker. “If we don’t, it will drive more underground companies. We have to find a way to cut fraud. The cost of fraudulent claims could go to increase benefits to those actually injured.” Said another: “We need to get rid of medical provider networks, raise permanent disability, Dismantle the regulate insurance companies who are sucking state workers’ employers dry for greedy profit and then blamcomp system… ing injured workers for higher rates.” Some were in favor of getting rid of the system entirely. “Dismantle the state workers’ comp system … allow employers the option of risk evaluation ... to seek insurance coverage protections or not ... allow injured parties full access to the civil courts in seeking fair resolutions,” read one comment. Some commenters listed their solutions: “Control medical cost, eliminate doctors referring patients to their own physical therapy clinics, diagnostic clinics, etc.; 2) eliminate professional employer organizations, unfair competition, reduces premium for carriers; 3) stronger legislation to limit psych claims; 4) employers need stronger defense for post termination claims, remove the liberal construction language on labor code for post termination claims. Require employees to prove injury notice was provided to employer via medical records or establish a system that informs employees of reporting claims, to prevent disputes for post termination claims.” Another suggested incentivizing better medical treatment: “Provisions that would compensate physicians based on outcomes, ie. higher payments for faster return to full duty, lower litigation and less unnecessary treatment.” There were some who suggested certain parts of the system should be changed. “Remove attorneys and the inclusion of ‘multiple body part’ litigated claims used as a method of increasing the claim pay out and increasing legal fee payout,” wrote one. One commenter wrote a 450-word treatise that included suggestions on changing how applicant attorneys are compensated, and policing physicians “who have a history of keeping workers out of the work force,” as well as changing the way injured workers are tracked, along with suggestions for giving instructions to judges. “These are amongst the major changes I would make as a former professional from the industry,” the polltaker wrote. “I’ve since left that madness, much to my own peace of mind.” Don Jergler West Editor
6 | INSURANCE JOURNAL-WEST REGION September 10, 2012
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, Bill Schoeffler Contributing Writers John Graham, Steven J. Groeschen, Dave Harbeck, Robert Hartwig
S A LES
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 Classifieds, Jobs, Agencies Wanted/For Sale (800) 897-9965 x125 Ly Nguyen | lnguyen@insurancejournal.com
M A R K ET I N G / N E W ME D I A
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
D ES I G N / W EB
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
I J A C A D EM Y O F I N S U R A N C E
Director of Education Christopher J. Boggs | cboggs@ijacademy.com Online Training Coordinator Barbara Dooley | bdooley@ijacademy.com
A D M I N I STR A T I O N
Chairman Mark Wells Chief Executive Officer Mitch Dunford Accounting Manager Megan Sinclair | msinclair@insurancejournal.com
FOR QUESTIONS REGARDING SUBSCRIPTIONS: Call: 856-380-4176 or You may subscribe or change your address online at
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 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.
Since 1970
Whether you are a member of a band of professionals or playing it solo, we can be the back up you need to be a star. We give you access to the most highly rated insurance carriers and provide superior service, quality products and programs. If this is music to your ears, call us for the lowdown on how you can chill knowing we’re here for you.
Experience a World of Difference
www.wwfi.com
www.wwfi.com/rockyourworldwide
SPECIALTY MGA AND WHOLESALE BROKERAGE FACILITIES LOS ANGELES, CA (213) 236-4500 ATLANTA, GA (678) 736-6720 www.insurancejournal.com
IRVINE, CA (949) 450-1610
SAN FRANCISCO, CA (415) 625-1390
ST. LOUIS, MO (314) 436-3318
CHICAGO, IL (312) 893-5518
SEATTLE, WA (206) 749-9151
PHOENIX, AZ (602) 482-5639
NEW YORK, NY (212)10,231-7777 LIC. # 0414108 September 2012 INSURANCECA JOURNAL-WEST REGION | 7
weST COVERAGE
News & Markets Calif. Sues Doctor over Aggressive Billing Tactics
T
he California Attorney General’s office is suing a Los Angeles County doctor over her practice of refusing to accept lower insurance company reimbursements and instead billing patients for the full amount. The lawsuit against South Pasadena physician Jeannette Martello is the first of its kind in the state, the Los Angeles Times reported. Martello’s attorney Andrew Selesnick said the doctor has done nothing wrong and she is lawfully pursuing her right to be paid a fair amount for her services. A judge in May ordered Martello to stop her aggressive tactics, includ-
Ashland Gun Club Insurance Dispute with Lloyd’s
Lloyd’s of London says the liability insurance it provides for the Ashland Gun Club in Oregon covers bodily injury and property damage, but it won’t pay any damages related to lead contamination from ammunition. The Mail Tribune reported underwriters filed documents in federal court in Medford after three gun club neighbors sued the city and the club, which sits on city land. The neighbors say the gun club is contaminating soil and water. They want the club to pay fines, legal fees and damages. The gun club president declined to comment on the case.
@2012 Associated Press. All Rights Reserved.
ing lawsuits and liens on homes, to force patients to pay for emergency care when they were covered under managed-care health insurance plans. According to state law, that is illegal because emergency room patients have
little say in who treats them. Selesnick said that even though Martello was treating patients in the emergency room, the patients were in stable condition. Court records show Martello has filed more than 50 lawsuits in the past two years, mostly for breach of contract. In one case, she started the process to force the sale of a patient’s home to pay a $12,630 bill for emergency room treatment of a severed fingertip. The state Attorney General’s lawsuit seeks to stop Martello’s billing collection policies and to have her pay back the patients. @2012 Associated Press. All Rights Reserved.
49ers, NFL Sued by Fans Attacked During SF Game
T
wo San Francisco 49ers fans who were attacked during a preseason home game against the rival Oakland Raiders have sued the team, parking lot security firm and National Football League. Daniel Long and Gabriel Navarrette, both 26, claim the defendants failed to create a safe environment for fans attending the game on Aug. 20, 2011, at Candlestick Park. The previously unpublicized litiga-
tion was filed in San Francisco Superior Court in November, the Contra Costa Times reported in late August. A trial is scheduled to start Aug. 19, 2013. Navarrette was beaten unconscious by a group of men in the parking lot. Long was shot four times while attempting to help his friend. No suspects have been charged. The lawsuit, which seeks unspecified damages, says the incident has affected both men physically and economically.
The 49ers declined to comment on the lawsuit, but in a prepared statement said the team is “committed to providing a safe game day environment for all fans. That commitment has led to the highest security level rating given by the NFL.” The NFL’s attorney declined to comment, and an attorney representative for Landmark Security said the company’s lawyer would not be able to respond, according to the newspaper. @2012 Associated Press. All Rights Reserved.
Lawsuit Says Travel Agencies Conspired with Hotels
A
California lawsuit claims online travel agencies like Travelocity conspired with hotels to fix room prices nationwide. The suit filed in San Francisco federal court claims the Hilton Hotels, Sheraton Hotels & Resorts, Marriott International and others fixed prices with Expedia, Travelocity and other online sites.
8 | INSURANCE JOURNAL-WEST REGION September 10, 2012
Although travel websites say they buy blocks of unsold rooms to give consumers low hotel rates, the lawsuit claims hotels set a minimum room rate for online travel websites to offer to consumers. The Los Angeles Times said hotels agree to the fixed prices for fear of losing online travel business. The suit filed on behalf of travelers
Nakita Turik of Chicago and Eric Balk of Cedar Falls, Iowa, seeks an injunction to prevent further price fixing as well as unspecified damages. @2012 Associated Press. All Rights Reserved. www.insurancejournal.com
Personal Strength. That’s Stefanie. She’ll provide you with personal liability quotes, strong, stable companies and the poise to keep you coming back for more wonderful service. On time. With finesse. Let’s get personal: • Primary & Excess Umbrella Layers (Up to $30M) • Comprehensive Personal Liability • Premises Liability (Including COC) • Excess Auto Liability • Excess Premises Liability • Direct Bill Options Now Available Stefanie’s strength is to make you shine in front of your insureds. One Who Serves Stefanie McLeod - Sr. Underwriter La Crescenta Office x240 stefaniem@monarchexcess.com
You’ll Get the Royal Treatment
www.MonarchExcess.com La Crescenta 818-249-0100 • Simi Valley 805-577-6800 • San Diego 619-521-2170 • Rancho Mirage 760-779-5555 Novato 415-883-1411 • Fresno 559-226-0200 • Arizona 877-406-8026 • Hawaii 818-425-9847 • License 0697233 www.insurancejournal.com
September 10, 2012 INSURANCE JOURNAL-WEST REGION | 9
weST COVERAGE
People Don Woods
Antonio Derossi
Paul Fuegner
David Richter
Bryan Ware
Denver, Colo.-based Van Gilder Insurance Corp. named Don Woods its new president. Woods is co-founder and CEO of Community Bankshares Inc. and its subsidiaries. Under Woods, Community Bankshares Inc. grew to over $2 billion in assets and had 42 branches in Colorado and northern California. A privately held insurance brokerage firm, Van Gilder is in its fourth generation of leadership by the Van Gilder family.
and identity. He will be responsible for maintaining and protecting the company’s brand as well as developing and implementing strategies to further strengthen the brand. Fuegner comes from ViVa Beverages, where he served as chief marketing officer. He also held executive marketing roles with The Griffin Group, SKYY Spirits and Diageo. Throughout his career, Fuegner has managed a variety of global and startup brands across multiple distribution channels. Fireman’s Fund is a member of the Allianz Group.
California’s State Compensation Insurance Fund named Marjorie Hutchings its chief information officer. Hutchings, who was senior vice president for infrastructure engineering at State Fund, will transition to her new role as chief of the division that provides IT operations support to California’s largest provider of workers’ compensation insurance. As State Fund’s new CIO, Hutchings will lead the implementation of a comprehensive technology platform for the organization. She has more than 20 years of experience in the technology field. Prior to State Fund, Hutchings was vice president of internet operations with Esurance from 1999 to 2012. She began her information technology career in 1989 as a project manager with Electronic Data Systems (EDS). She has also worked with Dallas-based Sterling Software and NEON/Convoy in Emeryville, Calif.
San Francisco, Calif.-based Woodruff-Sawyer & Co. named David Richter vice president of executive benefits and succession planning. The firm also named Jeff Robinson an associate producer for its Southern California Practice. Richter will focus on high net-worth individuals and smallto medium-sized corporations and their executives. Richter has over 26 years of experience working as a broker, and he has focused on co-marketing with wealth managers and property-casualty brokers for the last 23 years. Before Woodruff-Sawyer, he was the owner and founder of Richter Insurance. Robinson will focus on business development, retention and client relationship management. He has a background in sales and marketing, and a long track record of sales, management, and marketing experience throughout the last decade. Prior to Woodruff-Sawyer, he was a sales representative a health insurance carrier. Woodruff-Sawyer has offices throughout California and in Portland, Oregon.
Novato, Calif.–based Fireman’s Fund Insurance Co. named Antonio Derossi its chief operations officer. The firm also named Paul Fuegner vice president of brand management. Derossi will be responsible for operations at Fireman’s Fund and will be based in Novato at the corporate headquarters. He most recently served as the COO of Allianz Central and Eastern Europe, Middle East and Africa (CEEMA) where he was responsible for IT, operations, claims, and strategic direction and management of project portfolios and budgets. Derossi joined Allianz in 2008 as the senior vice president of the Global Life Unit at Allianz SE and prior to that held consulting roles with Andersen Consulting and McKinsey & Co. Fuegner will be the steward of the Fireman’s Fund brand
10 ASTISH14873.indd | INSURANCE JOURNAL-WEST REGION September 10, 2012 ASTISH15197.indd ASTISH5333.indd 11
Terry Brandt was named Lockton San Francisco’s executive vice president and director of the Lockton Alliance for Ministry Protection (LAMP) practice. Brandt will lead LAMP, Lockton’s non-profit and religious organization practice, by providing risk management advice and consulting to large parachurch organizations, church denominations, educational institutions and faith-based businesses. Brandt will be based in Lockton’s San Francisco office, but will reside in Minneapolis. He will have a lead role in expandcontinued on page 14
www.insurancejournal.com 1/27/11 9:42 AM 6/11/11 9/6/11 2:54 8:30 PM
www.insurancejournal.com
September 10, 2012 INSURANCE JOURNAL-WEST REGION | 11
weST COVERAGE
Declarations Yes on Technology
No on Technology
Sex Ed
“Today is a big moment for automotive safety. This cutting-edge technology offers real promise for improving both the safety and efficiency of our roads. That is a winning combination for drivers across America.” — U.S. Transportation Secretary Ray LaHood, who joined elected officials and industry and community leaders on the University of Michigan campus to launch the second phase of the Safety Pilot, the largest road test to date of connected vehicle crash avoidance technology.
“While there are occasional discussions with certain insurers and vendors, the department has no imminent plans to initiate usage-based rating factors.” — Pat McConahay, a spokeswoman for the California Department of Insurance, which is opposed to expanding the technology that allows auto insurers to track their customers’ driving behavior and offer them lower premiums.
“The sex ed in Clovis high schools violates state law and gives inaccurate, biased information to students.” — Phyllida Burlingame, Reproductive Justice Policy Director at the ACLU of Northern California, commenting on a suit by the American Civil Liberties Union that alleges the students’ health is being put at risk by the school failing to provide students with information about condoms and contraception.
Rodents
“Rodents and mice are native to the park, but we are looking at the populations and working with our wildlife biologists to determine if the population is too high. There are rodents here, and we could never trap them all so that’s not going to mitigate it.” — Yosemite National Park spokesman Scott Gediman discussing an outbreak of hantavirus pulmonary syndrome at the park in August that killed at least two park visitors. Studies are being done to determine if the Yosemite rodent population is higher than normal after a record snowpack in 2011 provided ample water for the grass seeds mice favor.
Figures
77
$
Million
The size of the fund that organizers of the Reno National Championship Air Races have established to be distributed to those who suffered injuries or lost family members in last year’s mass-casualty crash in Nevada.
1,000
How many earthquakes rattled Arizona from 2006 to 2009, according to a new study published by Arizona State University researchers.
35 Million
$
18,691
In property losses each year result from an estimated 2,900 clothes dryer fires in residential buildings, according to a report by the U.S. Fire Administration.
The number of accepted disability claims in Oregon in calendar year 2011. That’s about half the 35,857 accepted in 1990, despite a 30 percent increase in Oregon’s workforce since that time. 12 | INSURANCE JOURNAL-WEST REGION September 10, 2012
www.insurancejournal.com
orst & I
N
S
U R
A N
ompass C
E
Workers’ Compensation We’ll guide you to the programs and quality markets you and your clients need. Give us a call for all your Worker’s Comp risks. ACCESS TO OVER 20 MARKETS PROGRAMS
• Artisan Trade
• Municipality Industries
• Carpentry
• Professional Services
• Electrical
• Retail/Mercantile
• Heating & Air
• Security Guards
• Janitorial Services • Landscaping • Masonry Work • Painters
• Small Preferred Accounts • Transportation/Delivery • USL&H
• Plumbing
HIGHLIGHTS
• And more
• No Prior OK
• Construction Classes
• New Ventures OK
• General Contractors
• Direct Bill
• Healthcare
• Broad Mix of Class Codes
• High MODs
• Low Minimum Premium
• Manufacturing
• Flexible Down-Payment Plans
V I S I O N • I N T E G R I T Y • T E A M W O R K • P E R F O R M A N C E
Personal Service, Professional Results... Since 1968
CONTACT P A U L L A U F E R , X 1 6 5 (800) 437-6616 E M A IL plaufer@gorstcompass.com CA INS LIC. #0359417 www.insurancejournal.com
September 10, 2012 www.g o rstco m pass. co m
CA INS LIC. #0443957 INSURANCE JOURNAL-WEST REGION | 13
weST COVERAGE
People People, continued from page 10
ing Lockton’s presence throughout the United States. For more than 30 years, Brandt has amassed risk management and captive experience in leadership roles at Aon Risk Solutions. Prior to Lockton he was a resident director at Aon in Minneapolis. Joe Costamagna
Reno, Nev.-based EMPLOYERS named Bryan Ware senior vice president and chief actuary. Ware will be responsible for EMPLOYERS’ reserving, pricing, and risk analysis and will work with executive management to develop and implement strategies and initiatives that support operational and strategic goals. He will be based out of EMPLOYERS’ corporate offices in Reno reporting to CEO Douglas Dirks. Ware has 30 years of experience in the insurance industry, with experience in workers’ compensation. Ware joins EMPLOYERS from KPMG, where he led an actuarial consulting team. Employers is a holding company with subsidiaries that are specialty providers of workers’ compensation insurance and services focused on select small businesses engaged in low-tomedium hazard industries.
Jessica Bentson
Sarah Ledbetter
Folsom, Calif.-based Edgewood Partners Insurance Center added Joe Costamagna as a principal in their Petaluma office. EPIC also added Jessica Bentson as a senior account manager in its Folsom office, and named Sarah Ledbetter as a property-casualty insurance account manager in its Fresno office. EPIC added Ryan Yoo and Ricky Choi its Los Angeles office. Costamagna has 10 years of experience in insurance and risk management, working with a range of businesses and specializing in the construction industry. Costamagna’s responsibilities include acquiring new clients, growing existing accounts and managing the insurance and risk management programs of current clients. Prior to EPIC, Costamagna spent more than three years as an account executive with Woodruff-Sawyer & Co., handling risk management strategies, client relations, loss control analysis, and claims management for clients in construction and related industries. Before joining Woodruff-Sawyer, he was a vice president and commercial lines producer for Willis HRH. Bentson’s responsibilities at EPIC will include providing clients with benefits planning and program design support. She
the Road to Independence with
continued on page 18
Pacific Interstate Insurance Brokers
As a PIIB Affiliate you receive:
• Direct Access to our markets - no central marketing to slow you down • 100% of the commission • 90% of the profit sharing - no minimum premium PIIB takes no ownership in our agencies or their books.
Discover
the
916.941.0518 difference
PIIB has over 135 agencies in California and Nevada
www.piib.com
1 14 |PIIB15843.indd INSURANCE JOURNAL-WEST REGION September 10, 2012
4/6/12 9:28 AM www.insurancejournal.com
www.insurancejournal.com
September 10, 2012 INSURANCE JOURNAL-WEST REGION | 15
IDEA EXCHANGE
Settlement Duties A Duty (to Settle) Too Far
S
ometimes, courts should leave well enough alone – and this especially applies to the law that has been developed over decades as to a liability insurer’s duty to settle third-party claims. In the overwhelming majority of liability claims, the third party’s claim is resolved relatively quickly and usually within the policy limits. In those instances when an insurer rejects a By Larry Golub reasonable settlement offer, and the liability of the insured is reasonably clear, the insurer’s rejection of such an offer (and its exposing its insured to an excess of policy limits verdict) may be found to constitute a breach of the covenant of good faith and fair dealing, otherwise known as bad faith. The basic requirement to trigger such a duty to settle is a demand by the injured party.
A recent decision by the Ninth Circuit Court of Appeals seeks to change the rules. Not only has the above duty-to-settle tenet worked quite effectively for years, but the rule change envisioned by the Ninth Circuit would open the floodgates to higher insurance premiums not to mention more (and wholly unnecessary) bad faith litigation. Indeed, such a rule change would make settlement less likely, contrary to the accepted public policy in favor of settlement and protecting insureds from personal liability. In Du v. Allstate Insurance Company, 681 F.3d 1118 (9th Cir. June 11, 2012), a three-judge panel of the Ninth Circuit concluded that “under California law, an insurer has a duty to effectuate settlement where liability is reasonably clear, even in the absence of a settlement demand.” (Emphasis added.) No California decision has ever extended the duty to settle to cases where there is no
Bind Your Contractors’ Biz. Primary • Liability • Excess Liability
Artisan • General (Commercial & Residential G.C.) • Service • Wrap-Ups
M.J. Hall & Company, Inc. Now Serving AK, AZ, CA, HI, NV, TX
www.mjhallandcompany.com • (209) 870-2901 16 | INSURANCE JOURNAL-WEST REGION September 10, 2012
The Ninth Circuit’s pronouncement in Du that a liability insurer must ‘effectuate’ or initiate a settlement within policy limits after liability has become reasonably clear is bad law and makes no sense in the real world. demand presented by the injured party. Indeed, an array of California Supreme Court and Court of Appeal decisions over more than 50 years has established that “an insurer may be held liable for a judgment against the insured in excess of its policy limits where it has breached its implied covenant of good faith and fair dealing by unreasonably refusing to accept a settlement offer within the policy limits.” See, e.g., Commercial Union Assurance Companies. v. Safeway Stores, Inc., 26 Cal.3d 912, 916-17 (1980). Ironically, after announcing its new rule in Du, the Ninth Circuit went on to conclude that, in the context of that case, there was no evidence that the insurer “should or could have made an earlier settlement offer” to the injured party and therefore the trial court did not err in refusing a proposed jury instruction requiring the insurer to “effectuate” a settlement within policy limits after liability has become reasonably clear. As noted above, the system works well. Once a third party determines that his or her claim is one that he or she is willing to compromise for an amount within the policy limits, the demand is made to the insurer. At that point, the insurer must consider the demand, and, if liability is reasonably clear, either accept the demand or risk exposure to uncapping the policy limits. The present rule places the insurer on notice that making the conscious decision continued on page 20 www.insurancejournal.com
www.insurancejournal.com
September 10, 2012 INSURANCE JOURNAL-WEST REGION | 17
weST COVERAGE
People People, continued from page 14
Mike Sukle
Lance Daschle
Kyle Ramstetter
will also focus on developing employee benefit communication programs, and coordinating client service team resources. Bentson has eight years of experience in the healthcare and wellness insurance sector, including six years with Tevis Insurance Solutions as a senior account manager. Before that she was an account manager for Chandlee Insurance Agency. Ledbetter’s responsibilities as an account manager will include marketing, negotiations, client program management, and the supervision of account assistants. She will report to EPIC Principal Patrick McCaleb. Ledbetter brings extensive experience in customer service and the management of commercial insurance and risk management programs to EPIC.
Yoo and Choi are focused on growing EPIC’s presence in the Korean business community and they have a combined 40 years of industry experience. Yoo and Choi will be responsible for expanding EPIC’s footprint as well as leading client services. Additionally, they will design, place and manage insurance and risk management programs. Prior to EPIC, Yoo spent six years with a regional insurance brokerage where he was a senior vice president. Yoo also worked with Wells Fargo Insurance Services. Choi joined Yoo’s team after eight years with the same regional insurance brokerage where he served as director. EPIC is an employee benefits insurance brokerage and consulting firm operating from eight offices across California: Los Angeles, Irvine, Fresno,
Folsom, San Francisco, San Mateo, Petaluma and San Ramon. Concord, Calif.-based Jenkins Insurance Group named Michael Sukle as a vice president. Sukle’s primary focus will be personal and financial insurance and risk management solutions for high net worth clients. Sukle has a background in banking and insurance. Jenkins Insurance Group, as part of the Leavitt Group, has offices in Concord, Sacramento and San Jose. San Diego, Calif.-based Atlas General Insurance Services named Lance Daschle as senior network administrator. Daschle will oversee Atlas’ IT infrastructure. Prior to Atlas, he was the head system administrator for a large company datacenter. He also worked as a consultant, and worked as a network administrator for University of California San Diego’s administration and student affairs. Tustin, Calif.-based Yates & Associates named Lisa A. Foley to its team. Foley, a 16-year veteran of E&S broking, will be charged with expanding the footprint of Yates in the San Diego and surrounding areas. Dan Cullinan has joined Yates in their Roseville office. Having spent the last nine years at a national wholesale MGA/brokerage, Cullinan specializes in property and casualty. Foley most recently worked at another brokerage firm in the San Diego area, focusing mostly on heavy property and DIC/quake and flood risks. Kyle Ramstetter has joined Lockton as a producer based in the insurance broker’s Denver, Colo. office. Ramstetter will be responsible for client advocacy and new business development in property and casualty insurance for commercial clients. Most recently, Ramstetter worked as a commercial real estate broker at Cassidy TurleyFuller Real Estate. He also held positions at Vaco LLC and Clayton Fixed Income Services. as vice president and unit manager. Lockton is the world’s largest privately held insurance broker.
18 ABRAM16066.indd | INSURANCE JOURNAL-WEST REGION September 10, 2012 1
8/23/12 8:46 AM
www.insurancejournal.com
Calling All Pinheads! It’s time to strike up some fun in San Diego! Bring your company’s bowlers to the fifth annual Insurance Industry Charitable Foundation Bowling Competition! Earn your bragging rights as the best bowling team of the San Diego Insurance Industry while supporting great charities. The best bowling team will go home with the perennial trophy and great prizes! Prizes will also be given for best team spirit and lowest team score.
Lanes are going fast. Register today!
ICW Group 2011 Champions
October 4, 2012 2:00pm - 5:00pm • Kearny Mesa Bowl 7585 Clairemont Mesa Blvd. • San Diego, CA 92117
Register by September 28th Online at www.iicf.org/events or call 925-280-8009 $500 per team of four people (Includes food & drink) For inquiries, call Bryan Anderson at 619-686-2900.
Can’t bowl? Sponsorships are available for as little as $250. Contact Bryan Anderson at 619-686-2900 or go to www.iicf.com to register today! www.insurancejournal.com
September 10, 2012 INSURANCE JOURNAL-WEST REGION | 19
IDEA EXCHANGE
Settlement Duties Idea Exchange, continued from page 16
not to settle may have severe consequences. In contrast, without any demand by the third party, the insurer may have little, if anything, by which to base a demand. In fact, that was the case in Du, where the injured third party had failed to provide any medical documentation to the insurer so that it could assess the seriousness of the injury and determine whether this claim was one that required the payment of the policy
limits. Yet, despite the lack of cooperation from the injured party in Du, when a policy limits offer was made by the insurer, the third party rejected the offer as “too little too late.” The third party then proceeded to trial, obtained a huge excess of policy limits liability verdict and brought a bad faith claim against the insurer. Fortunately, as stated above, the Du paradigm did not fall within the rule announced by the appellate court.
The Ninth Circuit’s pronouncement in
Du that a liability insurer must “effectuate” or initiate a settlement within policy limits after liability has become reasonably clear is bad law and makes no sense in the real world. As a federal court decision seeking to apply California state law, but based on no actual state court authority, one would hope that the Du aberration is ignored by future courts. Better yet, when next confronted with a bad faith failure to settle case, perhaps the California Supreme Court or one the panels of the California Court of Appeal will relegate Du to the graveyard of appellate decisions dead on arrival. Larry M. Golub is a litigation partner in the Los Angeles office of Barger & Wolen LLP. His practice focuses on property-casualty and life & health insurers, including coverage litigation and class action litigation, regulatory work and an appellate practice.
Classifieds
Insurance Journal West • 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
JOBS
Profit Coach Energetic individual that can assist our growing franchises in the Central California. Responsible for management support and training. Salary negotiable. Medical, vacation, car allowance and bonuses. Contact: dsilke@fiestainsurance.com
20 | INSURANCE JOURNAL-WEST REGION September 10, 2012
Extra! Extra! Read all about it! Have a story to share, a job appointment to announce, or a new product to promote? Try Insurance Journal’s Newswire Press Release Service. A national, sponsored press release service, specifically targeting the insurance industry on a guaranteed date. One sponsored press release is published per day via the service, so it is an exclusive service, first come first served! Insurance Journal Newswire helps get your press release to insurance industry and media contacts via email, fax and on insurancejournal.com There are no word limits!
Email newswire@insurancejournal.com or call Ly Nguyen @ (800) 897-9965 x125 for further info
www.insurancejournal.com
IDEA EXCHANGE
Minding Your Business The Secret Behind ‘The Secret’
I
t has been said, “those that can see what they desire will have their dreams.” This is the power of intention. This idea has been catching hold because of a movie called “The Secret.” This movie and corresponding book focuses on the “Law of Attraction and Intention.” Several authors, such as Jack Canfield, discuss bringing into life things wanted, dreamed about and hoped for, and how to do that. Those who think positive thoughts, look for the good in others and keep in their forefront their desires, most likely will attain these things. What does any of this have to do with running a business, let alone business management? For anyone who has taken a business planning or goal setting class, it most likely has a reference to the now famous Harvard University study. The study found that only 3 percent of Harvard’s 1953 graduating class had clear written goals with plans to achieve them. Twenty years later, the same class was surveyed again, and the same 3 percent was worth more in financial terms than the other 97 percent combined! In addition, the researchers found that the 3 percent had better health, relationships and social skills. Was this “the power of intention” or just plain old goal setting? “The Secret” describes the benefits of visualizations. The movie includes several examples of people that have actual displayed pictures of their goals, or create visuals in their minds. This technique is a powerful “secret” that helped these people achieve their goals.
www.insurancejournal.com
Many years ago, a university study assessed the power of visualization’s affect on sports performance. There were three groups, and each was assigned the task of shooting a basketball into a hoop. Everyone’s ability was measured initially. The first group shot baskets on a regular schedule. The second group practiced shooting while visualizing each shot as successful and with as much detail as possible. The third group simply visualized a successful shot. The outcome was as follows: the second group improved the most — 24 percent better — when they combined actual shooting practice and visualization. The third group that just visualized shooting baskets followed up second, with a 23 percent improvement. The first group that just shot baskets, recorded no change. This study and “The Secret” reveal that our minds don’t differentiate what we do and see from what we imagine or visualize. The movie, and any good sales class, explain that one can manifest almost anything into life if that dream or goal is clearly visualized. “The Secret” also covers the power of affirmations and the power of positive thought. Many sales training classes recommend that a sales person repeat empowering affirmations everyday and before every sales call. Norman Vincent Peale fathered this idea in his 1952 book “The Power of Positive Thinking.” There is evidence that both of these “secrets,” visualization and positive affirmations, work extremely well. “The Secret” describes that people can even bring in “bad luck” by focusing on the negative.
People have the power to manifest the helpful, or not so helpful by thoughts and actions. So look for the good in people, things and events. To unlock “The Secret:” 1. Create written specific goals. 2. Develop visual representations of those goals that can be placed in a goal book or on the conference room walls for sales meetings. 3. Repeat daily empowering affirmations. 4. Take action. Do something to achieve the goal. This was the main piece left out of the movie! 5. Focus on the positive aspects of life and of other people. The key behind “The Secret” is to put out there what you want in life, and it will be achieved. The same is true of business planning and reaching corporate goals. Most people already know what they want and how to get there. They just need to focus on it and take action! Schoeffler and Oak are partners at the international consulting firm Oak & Associates. Email catoak@gmail.com. Phone: 707-9356565. Website: www.oakandassociates.com.
September 10, 2012 INSURANCE JOURNAL-NATIONAL REGION | N1
IDEA EXCHANGE
Agency Management 6 Business Ideas to Challenge Our Thinking
A
company president was excited about a popular cartoon depicting warriors fighting a battle with bows and arrows, along with a suited salesman carrying a machine gun and a briefcase. “Can’t you see I have no time to see a salesman?” says a beleaguered officer. “I’ve got a battle to fight.” Ironically, this is the same executive who nixed new opportunities for his company to grow its sales. Ideas challenging the status quo can face roadblocks in any company, whether in sales, marketing or, most importantly, the future. Yet, those ideas may let in more light so that effective change can take place. Here are six. Business owners can be wrong. Entrepreneurs have immense pride in their businesses and, ironically, a dogmatic belief in their own ideas may do damage. A president of a highly successful industrial business became so enamored with breaking new ground in his industry by selling equipment on the Internet that he made a substantial investment in an e-commerce website without taking the time to determine whether customers would purchase his company’s products online. The venture failed, just when the recession began taking its toll on the economy. What we think about our business can distort reality and interfere with meeting today’s challenges and tomorrow’s opportunities.
Everything is never on the table. It’s pure posturing, and anyone who puts it to the test gets hurt. Just ask GM’s recently fired N2 | INSURANCE JOURNAL-NATIONAL REGION September 10, 2012
marketing chief Joel Ewanick. He came up with the campaigns for Chevrolet, “Love it or return it” and “Chevy runs deep.” He also opted out of Super Bowl XII advertising and cancelled GM’s Facebook ads just prior to the social media giant going public. Most revealing, he also discovered that other things run deeper at GM: namely, “That ain’t the way we do it around here.” When someone says, “Everything is on the table,” don’t believe it. Putting them to the test can be dangerous. There are always ideas, practices and activities that are untouchable. It’s all about strategy. When the Boston Business Journal asked Mark B. Kerwin, deputy director and chief financial officer of Boston’s Museum of Fine Arts, about the biggest challenge he faces in his field, he said, “Staying strategic as opposed to tactical.” Steve Jobs couldn’t have said it better. He was a brilliant strategist. He was committed to building a company that built beautiful things that consumers admire and love to use in their daily lives. It’s no accident that M.G. Siegler of TechCrunch describes Mountain Lion, Apple’s latest operating system, as “the most polished and robust version of OS X yet.” Tactics are easier to understand and far more fun, but most of the time, they’re temporary and don’t advance us to the goal. Customers for life is deception. Why? Because it’s counterintuitive, naïve and dangerous. Yet these three words seem so ingrained in our thinking that
Googling them produces 1.4 million results. Even against such a mountain of evidence, it’s still an illusion. It should be obvious that customers are never for life: they die, find a better deal, move, change their lifestyles, retire or want something new. In B2B, some merge or sell, go out of business, or become obsolete. In spite of doing everything possible to keep customers satisfied, they still leave. Yet, blogIn business, gers, speakers and ideas make business writers a difference. implore us to embrace the belief that we can keep them forever. Businesses are best served by abandoning mythical thinking, such as “customers for life,” and embrace reality with a “nothing is forever” mentality. Downed by the demon of self-deception. More than just about anything else, selfdeception is continued on page N4
www.insurancejournal.com
A c c e s s i b l e
R e l i A b l e
A c c u R At e
H o n e s t
A f f o R d A b l e
ACCURATE Navigating the road to recovery. Avoiding the storm can be frustrating enough. So in the wake of a disaster, decisions need to be made quickly– and correctly. Accurate and thorough claims management are critical to avoid getting stuck on your road to recovery. With Pilot Catastrophe’s industryleading network of adjusters and efficient operations, you can be confident from the initial loss to the road to recovery with our solutions. We deliver the right people at the right time.
America’s Leading Catastrophe Adjusting Team
1.800.345.2287 pilotcat.com
IDEA EXCHANGE
Agency Management Business Ideas, continued from page N2
in business, watch employees’ faces when a president or sales manager holds forth on the company’s newest product launch, announces next year’s goals or the need to increase productivity. Then, you can see the clash of two quite different realities.
the biggest human stumbling block, and just about every business is plagued with this unrelenting problem. In a study of a group of college students, researchers discovered that cheating gives students false confidence in their abilities, Forget about ‘The Great Person.’ At according to a report in the Chronicle of women’s clothing retailer Talbot’s, there Higher Education. The upshot seemed to be has been a parade of CEOs, each with the that once we lie, it doesn’t take much for us answer to the company’s troubles, and each to convince ourselves that we’re not lying. taking it deeper into lower sales and debt. Ask the president of a highly successful The story is the same at Yahoo!, where hope consumer services company to describe his hangs on yet another CEO. primary business objective and he would It might be helpful if boards of directors undoubtedly say, “Putting our customers first.” In all sincerity, he would mean it. Yet, stopped wanting to believe that the next executive holds the key. The “Great (Man) this same president sent a letter to his cusPerson Theory” has had its day, although its tomers filled with dozens of references as to vestiges can be found everywhere, including why customers should do business with his business. company, but no rationale was given as to why it would benefit the customers to do so. The fallacy rests in believing that success It was if he was writing the letter to himself. will follow with the right person. But as Westrope IJ-BB4_IJ-BB4 6/6/11 3:20 PM Page 1 science writer Matt Ridley says (Wall Street To test how widespread self-deception is
Journal, May 22, 2010), innovation depends on exchange. He points to Uruk, in Southern Mesopotamia. It “was probably the first city the world has ever seen, housing more than 50,000 people within its six miles of walls. Uruk, its agriculture made prosperous by sophisticated irrigation canals, was home to the first class of middlemen, trade intermediaries.” It’s the same in America: Silicon Valley in technology, Boston in medical care, New York in finance and Las Vegas in casinos. As Ridley points out, “In the modern world, innovation is a collective enterprise that relies on exchange.” In business, as elsewhere, ideas, as much as action, make a difference. Companies that put action above ideas may find that they are doing a lot of things backward. Graham of GrahamComm is a marketing and sales consultant and business writer. Email: johnrg31@me.com. Phone: 617-774-9759. Website: johnrgraham.com.
SINCE 1992 WESTROPE HAS PLACED BILLIONS WITH MAJOR CARRIERS IN THE U . S . A N D G L O B A L M A R K E T S I N T H E B E L I E F T H AT T H E W O R L D N E E D S T H E B E S T W H O L E S A L E I N S U R ANCE SOLUTIONS. PROPERTY | CASUALTY | TRANSPORTATION | CONSTRUCTION | AGRIBUSINESS HEALTHCARE | EXECUTIVE & PROFESSIONAL LIABILITY | BINDING AUTHORITY WORKERS’ COMP | CLAIMS SERVICES | LIFE SCIENCES
WESTROPE.COM
ENSURING INSURANCE
BRAINS & BRAWN N4WESTRP15188.indd | INSURANCE JOURNAL-NATIONAL REGION September 10, 2012 1
www.insurancejournal.com 6/8/11 8:07 AM
IMAGINE REACHING NEW HEIGHTS.
WE’LL TAKE YOU THERE. Behind ever y great superhero is a faithful sidekick. ITC’s marketing, rating and management software and services will help you take your agency to a whole new level of agency efficiency and growth. INSURANCE WEBSITE BUILDER: Powerful online marketing drives profitable growth. AGENCYBUZZ: Email and social marketing to nurture prospects into long-term clients. TURBORATER*: Rating solution with unmatched speed, accuracy and quality. INSURANCEPRO: Management made easy.
Scan for E YOUR FRioEn
Be your own superhero. We’ll be your sidekick and help you run your agency more efficiently so you have more time to sell policies.
VISIT US ONLINE AT www.GetITC.com/NewHeights CALL US AT (800) 383-3482 TO SCHEDULE YOUR FREE AGENCY CONSULTATION *TurboRater is only available in select states.
consultat
NATIONAL COVERAGE
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 e-mail: bmoffett@specialtyagency.com.
Petrochemical Risks Market Detail: James River Insurance Co. (www.jamesriverins.com) covers manufacturers of chemicals, oils, soaps, lubricants, paints, coatings and other products; mix and blend operations, distributors - PLL and GL (including products pollution). Minimum premiums start at $5,000 with limits up to $5
million are available. Ineligible classes include: nuclear projects; underground storage tank compliance policies; geotechnical firms; trash and refuse haulers; and subcontracted abatement work. Available limits: Maximum $5 million Carrier: James River States: All states Contact: Customer service at 804-289-2700
Podiatric Medical Malpractice
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
Market Detail: Rockwood Programs Inc.’s (www.rockwoodinsurance.com) policy features: professional liability with full consent to settle, where allowed by law; first dollar defense in addition to policy limits; premises liability; personal injury liability; good Samaritan acts coverage; surgical and
non-surgical classifications; and premium discounts and credits including: new to practice (four years), claims free, part-time, risk management, and leave of absence. Available limits: As needed Carrier: Unable to disclose States: All states Contact: Kathy Hasted at 800-365-0816 or e-mail: kathy.hasted@rockwoodinsurance. com
Universal/Miscellaneous E&O
Event Cancellation Coverage Coverage Event Cancellation Insurance protects costs and expenses or revenues associated with an event, such as travel expenses, venue costs, ticket sales, advertising and sponsorship revenues and more. It often complements other forms of event insurance such as event liability. Coverage is available for the following perils: • • • •
Inclement Weather Power Failure Public Transport Failure Strike Risk
• • • •
Natural Catastrophe TV Transmission Failure Denial of Access Appearance Cancellation
Eligible Events • Sporting Events & Competitions • Trade Shows, Conferences & Lectures • Carnivals, Festivals & Fairs • Concerts & Tours • Corporate Functions & Community Events • Weddings, Bar Mitzvahs, Christenings, & Memorials • Dozens of Other Events!
Market Detail: Fox Point Programs (www. foxpointprg.com) specializes in errors and omissions (E&O) for more than 250 classes in the miscellaneous E&O market. Features an online two minute premium indication survey, as well as a 48 hour response, in most cases. Available limits: Maximum $1 million Carrier: Unable to disclose, nonadmitted States: All states Contact: Tom Foulds at 302-765-6010 or e-mail: Tom.Foulds@foxpointprg.com
Motor Vehicle Dealer Surety Bond Market Detail: Patriot Bonding LLC (www. patriotbonding.com) offers surety bonds in all states, whether you are looking to open a car dealership or to renew your license. Available limits: As needed Carrier: Unable to disclose States: All states Contact: Rob Netzel at 480-948-6174 or e-mail: rob@patriotbonding.com
For additional information, please contact: Phone: 800.800.4007 PropertyCasualty@midman.com • Submissions: Submit@midman.com midlandsmgt.com Member of Old Republic Companies
N6MIDRE16059.indd | INSURANCE JOURNAL-NATIONAL REGION September 10, 2012 1
8/23/12 8:14 AM
www.insurancejournal.com
NATIONAL COVERAGE
MyNewMarkets Personal Auto Market Detail: Arrowhead General Insurance Agency (www.ArrowheadGrp. com) offers a personal auto program ranging from clean drivers to drivers with accidents
and violations. Arrowhead provides online risk submission and producers’ tools. Noncredit scored competitive rates are available. Available limits: Limits vary by state Carrier: Unable to disclose, admitted
Nimble Handling. That’s Driven. Our team handles the details so you don’t have to!
Golf Clubs Bank or Lender Owned Market Detail: Fairway Underwriters Inc. (www.fairwayunderwriters.com) offers a full package and umbrella program for golf courses/country clubs that have experienced financial difficulty and have been taken by a bank or other lender. Risk must be in full operation, and current management must be experienced. Normal underwriting and loss control. All coverage and limits available. Available limits: As needed Carrier: Unable to disclose, admitted States: All states except Ala., Hawaii and Nev. Contact: Sue Dumais at 800-662-2141 or e-mail: fcoulter@fairwayunderwriters.com
Self-Insured WC Programs
Driven Solutions Insurance Towing Services provides our clients with end-to-end towing logistics management for Emergency Collision Assistance, Secondary Towing and Vehicle Release Management Services. Our solutions add value to your organization: • Complete Tow Network Coverage in US & Canada • Dedicated Specialists • Reduced Cycle-Time & Costs • Advanced Charges Payment Remediation • Guaranteed Lower Claims Cost in Tow, Storage & Rentals Fees
Reduce costs while improving policyholder satisfaction!
Let us customize a solution to fit your needs today! 1-866-688-2520 sales@driven-solutions.com driven-solutions.com
N8 DRIVENS15826.indd | INSURANCE JOURNAL-NATIONAL REGION September 10, 2012 1
States: Ariz., Calif., Mich., Nev., Ore., Texas and Wash. Contact: Todd Drake at tdrake@ arrowheadgrp.com
3/30/12 1:23 PM
Market Detail: Epic Intermediaries (www. epicintermediaries.com) offers coverage for: excess workers’ compensation; self-insurance bonds; SIR buy-downs; occupational accident insurance; loss portfolio transfers; buffer layer coverages; non-subscriber policies; cash flow only coverage; aggregate only coverage; and large deductible programs. Available limits: As needed Carrier: Unable to disclose, admitted States: All states Contact: Customer service at 856-380-0217
Storage Tank Liability Market Detail: ISM General Insurance Agency’s (www.ismga.com) storage tank pollution liability (STL) policy provides coverage for onsite and offsite cleanup costs, and for third-party bodily injury and property damage loss from scheduled underground and aboveground storage tank systems. Available limits: Minimum $30,000, maximum $150,000 Carrier: Unable to disclose, nonadmitted States: Ariz., Calif., Nev., N.Y., Okla., Ore., Texas, and Wash. Contact: John Farinacci at 714-544-6125 or e-mail: j.farinacci@ismflex.com www.insurancejournal.com
Get Ready to Move at the speed of life.
Applied Systems will revolutionize the business of insurance — again. Prepare to move faster and work smarter than ever before.
appliedsystems.com/jointherevolution
SPOTLIGHT
Contractors Help Contractors Prepare for the Rebound with Contract Bonds By Dave Harbeck
A
re you offering your commercial clients all the products and services they need? You may want to consider establishing a bond program for contractors. Bonds complement a commercial book because: •Bonds boost retention by strengthening client relationships; •Bond commissions provide another revenue stream; and •Bonds often are the livelihood of con-
struction contractors desiring work in the public sector. A surety bond offers a guarantee that within a three-party agreement between a principal (insured), obligee (owner) and the surety (insurance company), the principal will fulfill the terms of a contract or agreement between themselves and the obligee. If the principal fails to meet the terms and conditions of the agreement and bond, the
surety stands in the principal’s shoes to fulfill the obligation. A surety acts like a cosigner on a loan where the principal is the primary borrower. Contract or construction bonds provide financial security and construction assurance by guaranteeing that a contractor will perform the work per the construction contract and deliver the project lien-free by paying all subcontractors, laborers and material suppliers involved with the project. Of the most common contract bond types: •Bid bonds guarantee that a contractor will enter into a contract, if awarded, and furnish contract bonds as required by the contract. •Performance bonds guarantee faithful performance of the terms of a contract of construction or furnishing of supplies. •Payment bonds guarantee payment for labor and materials used in the work that the contractor is obligated to perform under the terms of a contract. •Maintenance bonds guarantee against loss because of defective workmanship or materials used in the construction project. Before a contract surety bond is issued, a surety company will evaluate your customer based on what is referred to as the three C’s of Credit — character, capacity and capital. Character refers to how a contractor has met obligations in the past and how he manages his business. Capacity is the firm’s ability to perform the work as contracted. Capital is the financial strength of the contractor. The economic downturn has affected the construction industry, and many contractors
N10 | INSURANCE JOURNAL-NATIONAL REGION September 10, 2012
Surety Industry Loss and Combined Ratios
Loss Ratio Combined Ratio 2001 82.5% 138.4% 2002 69.9% 127.4% 2003 48.1% 101.8% 2004 59.5% 113.6% 2005 39.8% 89.1% 2006 16.1% 69.2% 2007 18.8% 69.1% 2008 11.3% 62.6% 2009 18.7% 73.4% 2010 13.4% 67.8% 2011 13.9% 67.2% 2001-2011 31.9% 89.1% Source: Surety & Fidelity Association
have been forced to expand their geographic area of operations, bid on work at or below margins, or pursue work outside their experience. This has affected their financial condition and ability to attain surety credit. While the construction industry is predicted to face economic challenges into 2013, many contractors who are managing their operations well would have no problem obtaining surety credit in what has become a highly competitive surety market. Now is the time to get pre-qualified with a surety company for bid bond, performance bond, payment bond and/or maintenance bonds. As construction projects pick up, your customers will be prepared to bid on projects that will grow their businesses. Harbeck is an operations consultant for Nationwide Surety & Fidelity.
www.insurancejournal.com
SPOTLIGHT
Contractors U.S. Construction Firms Facing Double-Digit Increases for Liability Insurance: Marsh
T
he commercial general liability market for the U.S. construction industry continues to firm with underwriters seeking rate increases of up to 15 percent, according to a report published by Marsh. Construction firms with poor loss histories are experiencing even larger liability rate increases, and in some cases receiving nonrenewal notices from their underwriters. After nearly a decade of rate declines, insurers also are typically seeking to raise rates on umbrella and excess liability insurance of between 8 percent and 10 percent, according to Marsh’s August 2012 “Construction Market Update.” “U.S. construction firms are experiencing a much more challenging liability market as underwriters seek to raise rates and restrict coverage to make up for years of soft market conditions. This comes against the backdrop of medical cost inflation and changes to some state statutes ‘Construction that have extended firms are coverage beyond the experiencing a insurers’ originally much more intended scope,” said Michael Anderson, challenging Leader of Marsh’s U.S. liability Construction Practice. market.’ “However, the insurance industry’s capital position remains very strong. So while underwriters attempt to apply rate increases across the breadth of their contractor portfolios, the market remains competitive, especially for well-managed risks.” According to Marsh’s report, rates for project-specific general liability, general liability wraps, controlled insurance programs, builders’ risk, environmental insurance, and contractors professional insurance, have generally remained flat or up slightly in 2012. Although the workers’ compensation market has been relatively stable for good quality risks, rates have increased in many states as underwriters continue to grapple with deteriorating combined ratios and escalating medical costs, Marsh said. Forthcoming changes to the National Council on Compensation Insurance’s experience modification www.insurancejournal.com
calculations — which help to determine workers’ comp rates — could have a negative impact for the construction industry in 2013. “Those construction firms that proactively
distinguish their risk profiles from their peers are best positioned to secure more favorable terms, conditions and pricing from underwriters,” Anderson added.
we were the GEEKS
MARSHALL15853.indd 1 InsuranceJournal_outlined.indd 1
4/18/12 1:36 4/9/12 2:29 PM September 10, 2012 INSURANCE JOURNAL-NATIONAL REGION | N11
SPECIAL REPORT
High Net Worth
How Agents and Carriers Can Find Gold in Personal Lines
N12 | INSURANCE JOURNAL-NATIONAL REGION September 10, 2012
www.insurancejournal.com
By Andrea Wells
I
ndependent agents and their companies have over the years been beaten in the personal lines market by direct response carriers and captive agents. But being down so long means there is plenty of room for independent agents to go up in personal lines market share — and the high net worth (HNW) segment of the personal lines market might just be the best place for them to make inroads into personal lines, say experts. These experts see opportunity for independent agents where other agents may lack the products they need to do as good a job with this clientele as independent agents could do. Many independent agents have not yet tapped the sales potential in personal lines in general or in serving the personal lines needs of the wealthy in particular. Captive carriers dominate the overall personal lines market, writing 53.1 percent, or $125.5 billion in premium in 2010, according to the latest Property-Casualty Insurance Market report published in 2012 by the Independent Insurance Agents & Brokers of America and A.M. Best Co. Direct response carriers write 13.1 percent ($30.9 billion) of the personal lines market, while independent agency carriers — both national and regional carriers— represent 33.8 percent ($79 billion) of the market. Estimating market share in the HNW segment of the personal lines market is not as easy, the experts say. Bob Courtemanche, division president, ACE Private Risk Services, says that less than one-fourth of the HNW personal lines market is insured with independent agency carriers that have products and services tailored for the affluent. He bases his estimate on a Conning Research & Consulting study in 2008 that pegged the HNW personal insurance premium opportunity at about $30 billion. Isolating the personal lines premium written by the carriers that specialize in the HNW market and then dividing it by the $30 billion, produces a rough idea of market share. Jerry Hourihan, executive vice president, chief marketing officer, U.S. Personal Lines at Chartis, says his company defines the HNW market as clients whose main residence is worth at least $1 million or individuals who purchase as least $10,000 continued on page N14
www.insurancejournal.com
September 10, 2012 INSURANCE JOURNAL-NATIONAL REGION | N13
SPECIAL REPORT
High Net Worth to insure $500,000 homes — and a lot of High Net Worth, continued from page N13 them.” in total insurance premium. Under that definition, Hourihan estimates as much as 50 Chartis’ Hourihan agrees. Carriers that do not specialize in the high net percent of the new business he sees coming worth market do not have the to Chartis’ Private Client Group is in whole products, risk management or in part insured by non-high net worth services and loss prevention specialist companies, or captive or direct services that are critical insurers. to the wealthy, he says. Ruthie Kerns, a personal insurance pro“They fall way short. ducer for Lockton Cos. who used to be an The traditional insurance agent for Allstate, believes non-agency carpolicy is typically inferior,” riers such as State Farm, Allstate and Geico have captured the bulk of the HNW personal he says. Affluent policyholders who lines market share — as much as 80 percent are with non-specialty carriers in her estimation. are possibly underinsured for their personal But that’s exactly why she likes the marproperty and liability exposures and they ket now. With a large majority of the HNW may be overpaying for this inadequate coverpersonal lines market being served by direct age, these experts contend. and captive writers, Kerns says the oppor Kerns says she often sees direct and captunities for independent agents and carriers specializing in this class are huge. “It’s a great tive carriers charging too much for too little coverage in the HNW market. A month ago, market and what I have found is it is a very Kerns wrote an account for an insured who untapped market,” Kerns says. owned a multimillion dollar property in Colorado. The homeownToo Much, Too Little But how should agents go It is a great market ers’ policy had been placed with a large captive carrier about attracting this HNW business? and is also a very for many years at $4 million. One way independent “When we came in, we agents can gain new busiuntapped market. did an onsite appraisal and ness is by educating wealthy found out the property was customers who have tradinot worth $4 million, but was worth $8 miltionally been insured by captives or direct lion. They were underinsured,” she said. response carriers on how the specialty insur Through a high net worth carrier, Kerns ance market can do a much better job of was able to raise the limits on the home from meeting their needs than the standard offer$4 million to $8 million, replace actual cash ings of direct writers. value on the automobiles with agreed upon Captive and direct response carriers do replacement cost and increase the personal not have the specialty products and experexcess policy limits from $2 million to $8 tise high net worth personal lines customers million. need, she says. “All in total, we kept their premium the “The Allstates, State Farms, American same,” Kerns says. “Were they overpaying for Families … those are great companies,” being underinsured? Absolutely.” Kerns says. “But their risk models are more N14 | INSURANCE JOURNAL-NATIONAL REGION September 10, 2012
Christie Alderman, vice president and new products and services manager at Chubb Personal Insurance, says it’s not uncommon for her to see high net worth customers who are underinsured. That customer may have been underinsured for years, she says. “That’s true both from a property standpoint and also from a liability standpoint,” she says. “Very frequently, our appraisers go out and take a look at a house that was submitted to us at a real estate value for the coverage A, and we spend a lot of time explaining why we think it needs to be a different value, a replacement cost value.” Alderman sees contents within an affluent home, such as fine arts and jewelry, often underinsured: “Our appraisers often go into our customer’s home and sometimes will say, ‘Is there anything of terrific value that you might want to think about insuring in case there’s ever a loss that might financially impact you or emotionally impact you, so you’d want to replace that in the future?’ We’re always surprised at the frequency at which customers say, ‘Oh yes! I do have that Renoir upstairs.’” Courtemanche asks HNW individuals if they had a significant loss tomorrow, or if their home burned to the ground, would there be enough coverage to replace what they had accumulated over the years, at today’s replacement values? “That’s an important point,” says Courtemanche. “Are they properly scheduling items of particular value that they’ve collected over the years?” The concerns of the affluent often go beyond jewelry and art. “To wine (and) all those things that someone might be accumulating, but not thinking about how the value increases over time,” Courtemanche says. “People generally don’t have a good idea www.insurancejournal.com
about what it would cost to replace all that they’ve accumulated over the years … the general contents tend to be underinsured.” In Hourihan’s view HNW homes often times are not insured to the correct value because direct and captive writers lack the engineering expertise to price replacement cost on a custom made home. The property is not all that may be underinsured. ACE’s Courtemanche says that when his company picks up a new client from a captive or direct response carrier, there is a gap in the liability coverage. “From an umbrella standpoint, we see time and again when we write new business how much more umbrella liability the clients are taking when they have an agent that’s properly counseling them, and asking the right questions,” Courtemanche says. “Invariably, they wind up buying more umbrella insurance, which is a good thing to protect their net worth.” High-profile wealthy clients in particular are endangered by rising jury awards and they need liability limits that are current. “Gone are the days where the $1 million liability policy is adequate for most customers,” Chubb’s Alderman says. “When we’re looking at high net worth customers, there are a lot of contributing factors to evaluate. Are they online a frequent amount? Are they high profile? Do they have employees in the home? All of those questions should lead you to think about higher limits.” Chubb offers limits up to $50 million quite regularly, she says. Hourihan says not carrying enough liability insurance is the biggest problem he sees in HNW accounts. “From at-fault car accidents, slip and falls, to entertaining at their home and someone gets injured … not carrying enough liability www.insurancejournal.com
is probably the most prevalent underinsur “I have been using my commercial producance issue that we see,” Hourihan says. ers and we’ve been working together to get Lockton’s Kerns has also noticed that her some of the key executives that we have here wealthy clients are being targeted more in in Lockton,” Kerns says. “I have had wonderlawsuits. “When I came to Lockton two and ful success,” she says. a half years ago, we were probably seeing a Lockton’s commercial producers want to maximum of $11 million in make sure that their clients are propa liability claim. This past Not carrying erly insured on not just the comyear, we’ve been seeing mercial but on their personal side as $30 million to $45 milenough liability well, she says. lion,” she said. Bruce Humphrey, CEO of PCG Agencies Inc. in St. Paul, Minn., says is the biggest Real Opportunity working in the HNW market can be The HNW market presdifficult and takes expertise from issue. ents a real opportunity agents and carriers. for independent agencies because HNW con “It’s exceptionally important to work with sumers tend to also be high-level executives carriers that know how to adjust claims of and corporate business owners, says Robert that size and that have the ability to write Allan Paul, vice president of Entrepreneurial risk throughout the country. Many of our Advantage based in Minneapolis, Minn., an clients own homes in many states and these organization that works with carriers understand what the typical affluthe Consumer Agent Portal ent person owns, the kinds of possessions (CAP), a digital marketing they have, the unique construction of these and digital media prohomes,” he says. “These clients are best vider for independent served by those types of carriers.” agencies and carriers in Chubb’s Alderman says agents targeting the personal lines insurance the wealthy need to understand how the market. lives of the rich can be very different than The commercial lines market is those of a typical already majority owned by the indepenpersonal insurance account. dent agency channel, Paul says. “I would The risk profile can be much hypothesize that if independent agents and more complex. carriers could figure out how to convert High net worth those commercial lines clients into HNW specialty carriers personal lines clients, there is a huge opporcan address that tunity there,” he told Insurance Journal. complexity with But that doesn’t seem to happen very “bells and much, Paul says. “For some reason your comwhistles” that mercial client business owners don’t seem just are not to make that transition over to the personal available lines side of the house with the independent in the broker or agent. It’s not as common as you direct and think it would be.” captive market, However that strategy seems to be workLockton’s Kerns ing well for Kerns. says. September 10, 2012 INSURANCE JOURNAL-NATIONAL REGION | N15
SPECIAL REPORT
High Net Worth New PURE Program Provides Extra Flooding Services for High-Value Homeowners
A
policy. If you want to buy flood insurance, generally speaking you buy it from the NFIP. We see a service need there. While the NFIP serves a very important purpose, we think there’s an opportunity to improve the claims service proposition of flood insurance. This was really crystallized with Irene, a major storm in the Northeast that caused many of our members to suffer losses, some of them both wind related, trees falling on roofs, as well as flood related ... In resolving those claims, we would send our claims adjuster out to adjust the wind loss, and the NFIP would send its adjuster to resolve the flood loss; two separate visits, two separate phone numbers, no coordination, and, in some instances, leaving our member with not an ideal service experience. The idea behind PURE Flood Solutions was to tackle that issue. We will offer NFIP coverage on PURE paper. That means that we’ll be able to offer the same strong NFIP coverage at NFIP prices to our members. The IJ: Why was developing PURE’s Flood difference will [be] that we will be able to Solutions important? Hartley: Flood coverage is generally not a USA12043.qxd 1/4/08 2:26 PM Page 1appoint our own adjusters to adjust that loss. Maybe more importantly, in the event of peril that is insured under a homeowner’s new flood coverage suite from Privilege Underwriters Reciprocal Exchange, or PURE, is offering high-value homeowners an alternative flood insurance option. PURE Flood Solutions works as an extension of the National Flood Insurance Program’s (NFIP) Write Your Own Insurance program, in which PURE issues and services the flood insurance policies, but NFIP covers the losses. Coverage is available for jewelry, art, watercrafts, personal liability, as well as auto and homeowner’s insurance. Chief Operating Officer Martin Hartley said the company saw a need for a better flood insurance option for the high net worth segment after Hurricane Irene in 2011. Speaking with Insurance Journal, he explained how the coverage works, as well as how the company is working with agents and brokers to educate insureds on their flood insurance exposures.
N16 | INSURANCE JOURNAL-NATIONAL REGION September 10, 2012
a storm where you have damage caused by wind and also by flood, that member will experience better claims service with one adjuster visiting and adjusting the loss under both policies. One point of contact, one phone number and better service delivery. Think about it in two components. The first is that NFIP policy with our exceptional claims service. The second piece is a range of optional endorsements to our homeowner’s policy that both broaden the coverage provided by the NFIP and increase the amount of coverage available. Let me talk a little bit about that. While the NFIP does a solid job of providing coverage for flood losses, it certainly has some deficiencies in serving high net worth individuals. The most obvious is that the NFIP only provides $250,000 worth of coverage for the home itself, the buildings, and $100,000 worth of coverage for the contents. Our average home rebuilding cost is just over $2 million, so that is not nearly adequate to cover the exposure our clients have. One of the endorsements we provide under our homeowner’s policy is to provide what we call “excess flood” coverage with limits above the NFIP. We offer those limits at any coverage amount at the option of the member, up to the limit of the insurance they buy on their homeowner’s policy. The second obvious To listen to the full shortfall of the NFIP podcast interview, visit: policy is that it’s not very http://www.insurancebroad. For example, if journal.tv/videos/7516/ you’re insuring a second home with an NFIP policy, the policy only covers actual cash value on the home rather than replacement costs. The NFIP will look at what the extent of the loss is, and then apply depreciation www.insurancejournal.com
and make a settlement based on that lower figure. We provide an endorsement on our homeowner’s form that broadens that NFIP coverage to pick up the difference between what the NFIP pays and what the true replacement cost is, so the cost to repair or replace that damaged property without depreciation. There are many examples of shortfalls to the NFIP policy that we would pick up. IJ: What limits are available? Hartley: The limits on the NFIP are $250,000 for buildings, and $100,000 of coverage for content. Above that, we provide excess flood, the limits hopefully up to the insured value of the home. Up to the sort of $15 million or $20 million homes that we would insure, we would be happy to provide excess flood insurance. IJ: Who is eligible for this coverage? Hartley: We’re only offering this coverage to PURE members who buy a homeowner’s policy from us. To that extent, yes, there’s a limitation that we’re only offering it to our members. But within our membership, it’s available to all. IJ: The Federal Flood Insurance Program extension act will end premium subsidies for second and vacation homes. How will that affect your program? Hartley: It’s appropriate for the NFIP to look at ways to avoid subsidies within the book, within what they insure. It certainly doesn’t change our basic philosophy that the NFIP coverage is very valuable. It’s appropriate for people to buy it, and by buying it from us, if you also buy your homeowner’s from us, we can deliver a claims service experience that’s far better. That basic premise doesn’t change. But I think the notion that second homeowners may pay a little more for their flood insurance ... we understand that. www.insurancejournal.com
IJ: Have you had much of a response? Hartley: One of the things that our agents worry about is the claims response on an NFIP policy. We distinguish ourselves by delivering an exceptional claims experience to our members. The agents who are representing the interests of high net worth people really rely on us delivering on that promise.
When it comes to NFIP coverage, there has been no company that has focused that same dedication on claims service, specifically focused to owners of high value homes. Our agents are excited, from what we hear, to be able to provide a solution to their clients that is far better than what’s been available previously.
Quoting and Binding Just got Easier...
Get all of the Natural Hazard Data You Need while Eliminating Keystrokes! Featuring Over 30 Natural Hazard Reports EQECAT Modeling AAL & PML Metrics More than 160 Million Parcels Aerial Photos And Much More!
With RiskMeter’s Web Services, it’s possible to automatically transfer our natural hazard data into your in-house or 3rd party quoting and underwriting applications, to enforce underwriting guidelines and eliminate redundant data entry. For more information contact Daniel Munson at 617.737.4444 or dmunson@cdsys.com
For More Information Scan
CDS16063.indd 1
September 10, 2012 INSURANCE JOURNAL-NATIONAL REGION N17 8/23/12 8:40|AM
4.75x7.5 -IJ ad - 8-21-2012-STRAIGHT THROUGH-color ad rickmeter-paul.indd 1
8/21/12 10:01 AM
Closer Look
Top Workers’ Comp Writers Top 25 Workers’ Compensation Insurers Grow Premium 29.8% Based on June 30, 2012 Results Versus June 30, 2011
D
emotech’s review of second quarter 2012 data, as reported by insurers to the National Association of Insurance Commissioners, shows that industry workers’ compensation direct written premiums continued to grow. The question remains, however, whether those increases are enough to improve profitBy Steven J. ability given adverse loss Groeschen
cost trends and low investment returns. Workers’ compensation insurers reported a 9.1 percent increase in direct premiums written during the first six months of 2012 versus the same period in 2011. Coupled with the 9.6 percent increase observed last year, premium writings are significantly higher than in 2010, yet have recovered only half of the decline from their peak in 2006. The top 25 workers’ compensation insurers, ranked by the highest direct premium growth, reported a 29.8 percent increase dur-
ing the first six months of 2012 versus the same period in 2011. As noted in an article published in the June 8 issue of Insurance Journal, premium growth for Texas Mutual Insurance Co. was driven by the financially strong Texas economy. AmTrust Financial Group’s acquisition of workers’ compensation business that had formerly been written by Majestic Insurance Co. resulted in premium growth for Technology Insurance Co., Wesco Insurance Co. and Security National Insurance Co.
Top 25 Workers’ Compensation Insurers Ranked by Direct Written Premium Growth Rank Company Name Group Name
Year to Date 6/30/2012
Year to Date 6/30/2011
Growth
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Travelers Group N/A Liberty Mutual Group AmTrust Financial Services Group AmTrust Financial Services Group Berkshire Hathaway Group Employers Insurance Group Chubb & Son Inc. Group Zurich Insurance Group Markel Corp. Group ICW Group BCBS of Michigan Group QBE Insurance Group Liberty Mutual Group Travelers Group Ace Ltd. Group WR Berkley Corp. Group Hartford Fire & Casualty Group Chubb & Son Inc. Group Fairfax Financial Group American International Group BCBS of South Carolina Group Berkshire Hathaway Group Travelers Group AmTrust Financial Services Group
$623,480,079 $442,536,227 $247,212,259 $218,381,034 $77,811,615 $139,666,166 $178,061,957 $282,518,955 $414,560,881 $73,810,453 $131,540,372 $76,596,240 $51,456,569 $240,085,748 $163,155,230 $302,091,359 $94,419,315 $290,999,251 $137,233,248 $251,620,493 $388,448,860 $193,398,341 $65,910,918 $198,596,665 $67,402,505
$503,360,005 $349,569,833 $173,242,766 $150,564,013 $14,990,115 $84,996,866 $127,628,898 $233,982,708 $366,534,437 $26,417,002 $86,154,357 $32,129,016 $7,747,911 $196,803,588 $124,156,575 $263,137,319 $55,531,884 $254,208,811 $100,712,529 $216,593,947 $354,721,828 $160,964,608 $33,856,255 $167,169,862 $36,736,981
$120,120,074 $92,966,394 $73,969,493 $67,817,021 $62,821,500 $54,669,300 $50,433,059 $48,536,247 $48,026,444 $47,393,451 $45,386,015 $44,467,224 $43,708,658 $43,282,160 $38,998,655 $38,954,040 $38,887,431 $36,790,440 $36,520,719 $35,026,546 $33,727,032 $32,433,733 $32,054,663 $31,426,803 $30,665,524
Top 25 All others Total
$5,350,994,740 $4,121,912,114 $1,229,082,626 29.8% $17,317,938,902 $16,652,513,466 $665,425,436 4.0% $22,668,933,642 $20,774,425,580 $1,894,508,062 9.1%
Travelers Property Casualty Co. of America Texas Mutual Insurance Co. LM Insurance Corp. Technology Insurance Co. Wesco Insurance Co. Cypress Insurance Co. Employers Compensation Insurance Co. Federal Insurance Co. American Zurich Insurance Co. Markel Insurance Co. Insurance Co. of the West Accident Fund General Insurance Co. QBE Insurance Corp. Liberty Mutual Fire Insurance Co. Phoenix Insurance Co. ACE American Insurance Co. Riverport Insurance Co. Hartford Underwriters Insurance Co. Chubb Indemnity Insurance Co. Zenith Insurance Co. Commerce and Industry Insurance Co. Companion P&C Insurance Co. Berkshire Hathaway Homestate Insurance Co. Travelers Indemnity Co. Security National Insurance Co.
% Change 23.9% 26.6% 42.7% 45.0% 419.1% 64.3% 39.5% 20.7% 13.1% 179.4% 52.7% 138.4% 564.1% 22.0% 31.4% 14.8% 70.0% 14.5% 36.3% 16.2% 9.5% 20.1% 94.7% 18.8% 83.5%
Data Source: The National Association of Insurance Commissioners (NAIC), Kansas City, Mo., by permission. Information derived from an SNL Financial product. The NAIC and SNL Financial do not endorse any analysis or conclusion based upon the use of this data. This exhibit is based upon the initial reporting of second quarter 2012 data, estimated to be in excess of 95 percent of the market. N18 | INSURANCE JOURNAL-NATIONAL REGION September 10, 2012
www.insurancejournal.com
Industry Historical Workers’ Compensation Direct Premium Written (DPW) Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
DPW Through 6/30 $20,733,173,799 $22,269,120,294 $23,860,086,821 $25,214,881,058 $24,687,236,743 $22,394,863,537 $19,887,833,327 $18,956,981,545 $20,774,425,580 $22,668,933,642
Growth (Loss) $2,310,466,101 $1,535,946,495 $1,590,966,527 $1,354,794,237 ($527,644,315) ($2,292,373,206) ($2,507,030,210) ($930,851,782) $1,817,444,035 $1,894,508,062
% Change DPW Through 12/31 Growth (Loss) 12.5% $39,163,619,129 $3,302,484,629 7.4% $42,315,807,562 $3,152,188,433 7.1% $45,762,359,867 $3,446,552,305 5.7% $47,071,457,362 $1,309,097,495 -2.1% $46,243,683,923 ($827,773,439) -9.3% $41,601,440,772 ($4,642,243,151) -11.2% $37,354,843,425 ($4,246,597,347) -4.7% $36,599,729,899 ($755,113,526) 9.6% $40,145,468,639 $3,545,738,740 9.1%
% Change 9.2% 8.0% 8.1% 2.9% -1.8% -10.0% -10.2% -2.0% 9.7%
Data Source: The National Association of Insurance Commissioners (NAIC), Kansas City, Mo., by permission. Information derived from an SNL Financial product. The NAIC and SNL Financial do not endorse any analysis or conclusion based upon the use of this data.This exhibit is based upon the initial reporting of second quarter 2012 data, estimated to be in excess of 95 percent of the market. Several of the top 25 companies — Travelers Property Casualty Co. of America, Cypress Insurance Co., Employers Compensation Insurance Co., Markel Insurance Co., Insurance Co. of the West, and Zenith Insurance Co. — wrote the majority of their premium in California, where these companies and their competitors filed for significant rate increases in the past year, in line with bureau loss cost increases. However, the recently passed reform bill creates additional uncertainty about future claim costs and bureau recommendations in California. Most of the other top 25 companies are National or Near National companies that benefited from the rate increases filed in a majority of states in the past year. The weak economic recovery, less favorable claim frequency trends, increases in medical and pharmaceutical costs, and price reductions to retain renewal business will continue to pressure workers’ compensation financial results. Lower interest rates will result in less investment income to offset these unfavorable loss cost trends.
= at 12/31 = at 6/30
Groeschen is chief consulting actuary and risk analyst with Demotech Inc. Founded in 1985, Demotech is a Columbus, Ohio-based financial analysis firm that provides services to regional insurance companies, title underwriters and specialty insurance markets. Demotech has been assigning Financial Stability Ratings® (FSRs) in these markets since 1989. The FSR is an indicator of future financial stability and is accepted by mortgage lenders as well as underwriters of umbrella insurance and agents’ errors and omissions insurance. Website: www.demotech.com. www.insurancejournal.com
ALAN15278.indd 1
7/21/11 9:34 |AM September 10, 2012 INSURANCE JOURNAL-NATIONAL REGION N19
NATIONAL COVERAGE
News & Markets Lower Catastrophe Losses Boost P/C Insurers’ Earnings in Q2: Moody’s
U
.S. property/casualty insurers reported significantly higher net income in the second quarter of 2012 relative to 2011, driven by lower catastrophe losses and increased growth in earned premiums, said Moody’s Investors Service. Yet operating income — excluding the positive impact of lower cat
losses and favorable reserve development — declined by about 11 percent over Q2 of 2011 for Moody’s-rated insurers. Many companies are reporting rising rates across all business lines with an upward trend from Q1 of 2012. Thus, Moody’s expects improvement in margins in the second half of 2012, as rates are recognized in earnings. “Investment income remains stable and reserve releases, while higher this quarter, are expected to continue their moderating trend through the second half of the year, prompting companies to turn up the dial on rate increases to meet their return targets,” said Moody’s Brandan Holmes.
Severe weather and wildfires led to Q2 catastrophe losses above the 10-year average, although losses were lower than those in Q2 of 2011. Diversification allowed many large underwriters to absorb losses. The Midwest drought is likely to drag on earnings in Q3 and Q4 of 2012 for companies writing crop insurance, Moody’s said. P/C insurers’ equity capital remains solid and increased on average 4 percent, driven by profits and unrealized capital gains, although trailing net written premium growth of 6 percent. Companies continue to pursue active share buyback programs. To the extent insurance markets and economic conditions continue to improve, companies are expected to retain a greater proportion of capital to support growth, Moody’s said.
P/C Insurers Show Improved Results Mid-Year: Fitch
U
.S. property/casualty insurers’ operating performance improved significantly in the first half of 2012, according to Fitch Ratings. The aggregate combined ratio of 47 publicly traded property/casualty (re)insurers improved to 96.2 percent through mid-year 2012 from 107.9 percent the prior year. This improvement was driven largely by sharp reductions in catastrophe-related losses, which declined to approximately 4 percent of the group’s earned premium from 16 percent in the first half of 2011. Core loss ratio improvements from recent premium rate increases and other underwriting actions was a more modest factor in the year-to-year change in underwriting results, Fitch said. A large number of insurers and reinsurers returned to generating underwriting profits in the first half of 2012. Underwriting results improved for all but six companies in Fitch’s universe of
N20 | INSURANCE JOURNAL-NATIONAL REGION September 10, 2012
(re)insurers in the first half of 2012. Reinsurance specialists experienced the sharpest turnaround in performance, as there have been no large cat loss events in 2012 of the magnitude of 2011’s earthquakes and floods. Regional underwriters continue to post underwriting losses and weaker earnings due to several inland-storm related losses and inadequate pricing, according to Fitch. The aggregate group reported an operating profit of $22.4 billion through mid-year 2012 versus a $10.2 billion operating gain in 2011’s first half. The operating return on average equity (ROAE), which excludes realized investment gains and losses from earnings, grew to 8.5 percent in the first half of 2012 from 4.1 percent in 2011. Seventeen companies reported operating ROAE above 10 percent thus far versus only three companies a year ago. The group’s shareholders’ equity
grew by 5 percent since year-end 2011, as earnings growth was coupled with higher unrealized gains. Share repurchase activity declined modestly relative to the first-half of 2011. Commercial line pricing improvements are likely to continue into early 2013, Fitch said. In the longer term, competitive forces will promote a shift back toward stabilizing rates. A return to the broad hard market and mid-2000s’ operating performance is unlikely, Fitch said. www.insurancejournal.com
ris Ch by
Insurance Journal’s Academy of Insurance Presents:
s gg Bo
Business Income Insurance Demystified
Boggs has done an excellent job of taking a complex subject and explaining it in a conversational way that even someone new to the subject can easily understand.” -Bill Wilson, CPCU, ARM, AIM, AAM
• Learn the Four Key Business Income Concepts • Understand the Business Income Worksheet • Master Business Income’s “Period of Restoration” • Become an Expert in Calculating Coinsurance • ...and much more!
About the Author Christopher J. Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS is the Director of Education with Insurance Journal’s Academy of Insurance. With more than 21 years insurance and risk management experience, Boggs’ background includes loss control, insurance production, consulting, and teaching.
For more information, please visit
www.ijacademy.com/books
NATIONAL COVERAGE
News & Markets AIG Off the Hook for Claims by Madoff Clients Under Home Policies By Jessica Dye
A
merican International Group Inc. (AIG) does not have to cover insurance claims from two former Bernard Madoff clients who sought compensation for their losses under their homeowner’s policy, a federal appeals court ruled in August 2012. The 2nd U.S. Circuit Court of Appeals rejected an appeal from Robert and Harlene Horowitz, who had sought up to $30,000 in coverage under a fraud safeguard provision in their homeowner’s policy with AIG. The two California residents had sought to make their lawsuit a class action on behalf of other AIG policyholders.
The Horowitzes said they lost $8.5 million from their Madoff account when the money manager’s Ponzi scheme was uncovered in 2008, reflecting the amount on their final account statement. AIG denied they suffered any direct loss under the terms of their insurance policy. The Horowitzes had deposited $4.3 million in their Madoff account over nearly 10 years and had withdrawn about $4.5 million over the same period, leaving them with $226,000 more than they invested, according to the Court of Appeals ruling. The $8.5 million claim was the indirect loss of potential returns on their initial investment, a scenario that was explicitly excluded from coverage under their policy, AIG argued.
In September 2010, U.S. District Judge Paul Crotty in Manhattan, N.Y., agreed with AIG and dismissed the lawsuit. The plaintiffs appealed to the 2nd Circuit, which backed Judge Crotty’s ruling. “The policy expressly excludes coverage for indirect losses — a term that includes the inability to realize income from the money, securities or other property that would have been realized but for the fraud,” the Appeals Court wrote. AIG could not immediately be reached for comment. A lawyer for the plaintiffs was also not immediately available. Madoff is serving a 150-year prison sentence after admitting to running what prosecutors called a $65 billion Ponzi scheme. Copyright 2012 Reuters
Advertisers Index Readers, browse, contact, or do product searches on any of our full page advertisers at: http://www.insurancejournal.com/adshowcase/ Abram Interstate www.abraminterstate.com W18 Agency Ideas www.agencyideas.com N19 Agent Support Network of America www.asnoa.com W3; M3 American Agents Alliance www.agentsalliance.com W17 Applied Systems www.appliedsystems.com N9 Applied Underwriters www.applieduw.com W2, W46; SC2, SC40; SE2, SE46; E2,E38; M2, M40 Astonish Results www.astonishresults.com W10; SC10; SE10; E10; M12 Atlass Insurance Group www.atlassinsurance.com SE15 Builders & Tradesmen’s Insurance www.btisinc.com W11; SC9; M9 Catlin US www.catlinus.com N7 City of Hope www.cityofhope.org N23
Driven Solutions www.driven-solutions.com N8 FUBA Workers’ Comp www.fubaworkerscomp.com SE17 Gorst & Compass Insurance www.gorstcompass.com W13 IICF www.iicf.org W19 Insurance Technologies Corp. www.insurancewebsitebuilder.com N5 JM Wilson www.jmwilson.com SE9; M13 K&K Insurance Group www.kandkinsurance.com W15; SC3; SE3; E3; M11 The Loya Insurance Group www.fredloya.com SE19; M15 M.J. Hall & Company, Inc. www.mjhallandcompany.com W16 McClelland & Hine www.mhi-tx.com SC12 Midlands Management Corporation www.midlandsmgmt.com N6 MJ Kelly Company www.mjkelly.com SE13
N22 | INSURANCE JOURNAL-NATIONAL REGION September 10, 2012
Monarch E & S Insurance Services www.monarchexcess.com W9 MSB - Marshall & Swift/ Boeckh www.msbinfo.com N11 Pacific Interstate Insurance Brokers www.piib.com W14 PersonalUmbrella.Com www.personalumbrella.com W5; SC5; SE5; E5; M5 Pilot www.pilotcat.com N3 RiskMeter.com www.riskmeter.com N17 Texas Mutual Insurance Company www.texasmutual.com SC11 United Contractors Insurance Agency www.ucisg.com N10 Universal Service Agency, Inc. www.universalbonds.com N16 Westrope www.westrope.com N4 Worldwide Facilities, Inc. www.wwfi.com W7; SC7; SE7; E7; M7 Zurich Insurance Company www.zurichna.com W45; SC39; SE35; E37; M39
www.insurancejournal.com
of
City of Hope’s Spirit of Life Award Dinner Saturday, October 27, 2012 The Beverly Hilton - Beverly Hills, CA
Register at www.CityofHope.org
For more information, contact Ken Birkett at 800-272-2310 or kenbirkett@coh.org
IDEA EXCHANGE
Closing Quote
Dodd-Frank Provisions Still Hold Concern for Insurers
T
By Robert Hartwig
he Dodd-Frank Act of 2010 brought the most significant changes to financial regulation in the United States since the regulatory reform that followed the Great Depression. It represented a significant change in the American financial regulatory environment affecting all federal financial regulatory agencies and almost every aspect of the nation’s financial services industry, including insurance. The essential nature of insurance has given rise to a large and dynamic industry in the United States with more than $1 trillion in annual premium income, $4.5 trillion in assets and more than 2 million employees. The industry necessarily maintains assets must be large enough to pay claims in times when asset values fluctuate as underlying market conditions shift due to developments in the financial markets and/or the broader economy. The good news is that the insurance industry’s capital resources are at, or near, all-time record-highs and are growing. The strength of the industry is without parallel within the financial services segment. P/C and virtually all life insurers were able to operate normally throughout the financial crisis and have continued to do so. Consequently, financial industry regulations must avoid imposing bank-centric regulations on the insurance industry, whose operating record and business model are distinct from that of the banking sector. Institutional Investor The insurance industry’s need to maintain large holdings of assets to back claims and satisfy regulators and ratings
N24 | INSURANCE JOURNAL-NATIONAL REGION September 10, 2012
agency requirements implies that the industry is one of the largest institutional investors in the world. Indeed, the industry is usually ranked among the top three institutional investors across a range of asset categories. Insurers are necessarily conservative investors, and as such concentrate their investments in relatively low risk, highly liquid securities, especially bonds. P/C insurers hold two-thirds of their invested assets in bonds. Life/annuity insurers hold threequarters of their portfolio in fixed income securities. The sheer size of the industry’s investment portfolio suggests that its role as an institutional investor is important on many levels. Forty-four percent of the P/C insurance industry’s bond portfolio is invested in municipal securities (munis) issued by all 50 states and thousands of counties, cities and towns nationwide. In other words, P/C insurers alone in 2011 held bonds that served to finance some $331 billion in projects such as schools, roads, bridges, mass transit initiatives and health care facilities. Life and annuity insurers held approximately 11 percent of their portfolio in such investments last year, translating into a $123 billion stake in state and local government financing. Hence collectively, the insurance industry has investments in state and local projects and initiatives that now exceed $450 billion. The insurance industry is an important U.S. employer, providing work for 2.3 million people, with a total payroll approaching $200 billion. These figures include not only employ- Never lose sight of the ees of insurance carriers, but fact that insurers are also agents/brokers, third-party fundamentally different administrators and others.
from banks.
Fundamentally Different In the current era of ongoing financial market uncertainty and tsunami of federal regulations, it is important to never lose sight of the fact that insurers are fundamentally different from banks. Congress acknowledged this fact by largely leaving intact the existing system of state-based regulation under Dodd-Frank. Yet that recognition is not complete. Several provisions could reduce insurers’ ability to mitigate risk on their own books or adversely impact the capital available for underwriting risk. The business of insurance was not the cause of the U.S. financial crisis that began in 2008. Consequently, insurance was not the focus of the Dodd-Frank Act, and insurers were exempted from much of the regulation to which banks and other financial institutions were subjected. However, the danger is not over. Congress must recognize that a number of Dodd-Frank provisions, including the Volcker Rule and provisions related to resolution of Systemically Important Financial Institutions (SIFIs) when fully implemented or because of potential misinterpretations of the Act’s intent, could reduce the ability of insurers to accumulate capital or mitigate risk — which could negatively impact the economy overall. Hartwig is an economist and president of the Insurance Information Institute. www.insurancejournal.com
www.insurancejournal.com
September 10, 2012 INSURANCE JOURNAL-WEST REGION | 45
WE’RE IN CALIFORNIA IN A BIG WAY.
Expect big things in workers’ 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/ca.
©2012 Applied Underwriters, Inc. A Berkshire Hathaway company. Rated A by A.M. Best.
47 | INSURANCE JOURNAL-WEST REGION September 10, 2012
www.insurancejournal.com