Insurance Journal West 2013-11-18

NOVEMBER 18, 2013 | VOL. 91, NO. 22

WEST

Alaska Implements SBS Colo. Lawmakers Eye Flood Response Nevada Mine Pollution Deal

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WEST

Inside This Issue

On The Cover

Special Report:

Construction’s Comeback

November 18, 2013 • Vol. 91 No. 22 • West

W1

W6

20

32

NATIONAL COVERAGE

WEST COVERAGE

IDEA EXCHANGE

8

Use of Predictive Models Widespread in P/C Insurance: Survey

W1 NAIC: Alaska Implements SBS

30 Growing Your Property Casualty

Agency: Alan Shulman

8

Insurers’ Asbestos, Environmental Losses Rose 12% in 2012: A.M. Best

10 Spotlight: 10 Things to Know

About LTC & Assisted Living 14 Insurance Kiosks the Wave of the

Future?

W1 California Insurance Broker

Sentenced For Scamming Tom

Hanks W1 Washington Driver Blames

‘Gorilla’ For Causing Crash

32 The Competitive Advantage: Chris

Burand 38 Closing Quote: Obamacare Woes

W3 Colorado Lawmakers Reviewing

Flood Response W6 Nevada Mine Pollution Deal

Brings Residents $19.5M

16 Special Report: State Specialist

P/C Insurers Revealed 20 Special Report: New Programs,

Flexibility Help Contractor

Segment 24 Special Report: Construction’s

Comeback 26 Special Report: Controlled

Insurance Programs

DEPARTMENTS 9 Declarations 9 Figures W4 People 12 Business Moves 34 MyNewMarkets

28 Special Report: Top 50 Personal

Lines Leaders

4 | INSURANCE JOURNAL-WEST November 18, 2013

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NATIONAL COVERAGE

Opening Note Old Catching Up with the Young

C

ellphone use and texting while driving are on the rise along with accessing the internet while driving — and it’s not just young people engaging in these dangerous activities behind the wheel.

In its annual research report on distracted driving, State Farm found a significant increase in the percentage of drivers who own smartphones, particularly among drivers age 30 and older. But more importantly, the percentage of drivers who access the internet on their phone while driving has nearly doubled over the past five years, going up from 13 percent in 2009 to 24 percent in 2013.

The use of hands-free cellphones while driving has increased, while the percentage of people talking on a hand-held cellphone or texting while driving has become stagnant over the past three years.

“Much attention is paid The percentage of drivers toward reducing texting who access the internet on while driving, but we must also be concerned about their phone while driving has addressing the growing nearly doubled over the past use of multiple mobile web five years. services while driving,” said Chris Mullen, director of Technology Research at State Farm While much of the distracted driving focus has been on young people, the data indicate that the percentage of motorists who own smartphones is increasing for all ages: • Ages 18-29: 78% in 2011 to 86% in 2013 • Ages 30-39: 60% in 2011 to 86% in 2013 • Ages 40-49: 47% in 2011 to 82% in 2013 • Ages 50-64: 44% in 2011 to 64% in 2013 • Ages 65+: 23% in 2011 to 39% in 2013 Here’s how drivers rate their own distractions: • Hand-held cell phone: very distracting – 34%, somewhat distracting – 46% • Hands-free cell phone: very distracting – 14%, somewhat distracting – 43% • Sending a text while driving: very distracting – 76%, somewhat distracting – 14% • Reading a text while driving: very distracting – 62%, somewhat distracting – 27% • Talking with a passenger: very distracting – 4%, some what distracting – 41% • Reaching for a non-moving object: very distracting – 22%, somewhat distracting – 62% • Attending to children in the back seat: very distracting – 41%, somewhat distracting – 29% • Pet in lap: very distracting – 53%, somewhat distracting – 20%.

Andrea Wells Editor-in-Chief 6 | INSURANCE JOURNAL-NATIONAL November 18, 2013

EDITORIAL Editor-in-Chief Andrea Wells | awells@insurancejournal.com 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 Senior Editor Susanne Sclafane | ssclafane@insurancejournal.com ClaimsJournal.com Editor Denise Johnson | djohnson@claimsjournal.com MyNewMarkets.com Associate Editor Amy O’Connor | aoconnor@mynewmarkets.com Columnists Chris Burand, Alan Shulman Contributing Writers Colleen Aegerter, Michael Consedine, Bob Johnson, Barry Koestler, Robert Redfearn Jr. SALES V.P. Sales & Marketing Julie Tinney (800) 897-9965 x148 | jtinney@insurancejournal.com West Dena Kaplan (800) 897-9965 x115 | dkaplan@insurancejournal.com South Central Mindy Trammell (800) 897-9965 x149 | mtrammell@insurancejournal.com Midwest Lauren Knapp (800) 897-9965 x161 | lknapp@insurancejournal.com Southeast Howard Simkin (800) 897-9965 x162 | hsimkin@insurancejournal.com East Dave Molchan (800) 897-9965 x145 | dmolchan@insurancejournal.com New Markets Sales Manager Kristine Honey | khoney@insurancejournal.com Classifieds, Jobs, Agencies Wanted/For Sale Ly Nguyen (800) 897-9965 x125 | lnguyen@insurancejournal.com MARKETING/NEW MEDIA Marketing Administrator Gayle Wells | gwells@insurancejournal.com Advertising Coordinator Erin Burns (619) 584-1100 x120 | eburns@insurancejournal.com New Media Producer Bobbie Dodge | bdodge@insurancejournal.com Videographer/Editor Matt Tolk | mtolk@insurancejournal.com DESIGN/WEB V.P. of Design Guy Boccia | gboccia@insurancejournal.com V.P of Technology Joshua Carlson | jcarlson@insurancejournal.com Design and Marketing Executive Derence Walk | dwalk@insurancejournal.com Web Developer Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Chris Thompson | cthompson@insurancejournal.com IJ ACADEMY OF INSURANCE Director of Education Christopher J. Boggs | cboggs@ijacademy.com Online Training Coordinator Barbara Whiffen | bwhiffen@ijacademy.com ADMINISTRATION Chairman Mark Wells Chief Executive Officer Mitch Dunford Accounting Manager Mark Wooster | mwooster@wellsmedia.com

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NATIONAL COVERAGE

News & Markets Use of Predictive Models Widespread in P/C Insurance: Survey

By Susanne Sclafane

A

survey of North American insurance professionals reveals widespread use of predictive analytics in the property/casualty insurance industry, with as many as 82 percent responding that they use predictive modeling in one or more lines.

Earnix, a provider of pricing and customer analytics to banks and insurers, and ISO, the Verisk property/casualty insurance rate and information service, released the results of a joint industry survey, Insurance Predictive Modeling Survey. The firms compiled responses collected online in September from 269 insurance professionals representing companies that sell personal and commercial coverage in Canada and the United States.

While only 18 percent of the professionals surveyed said their companies did not use predictive analytics in any line of business, the most common line for the remainder was personal auto (49 percent). Lines like commercial property and even workers’ compensation and general liability were also indicated by some survey respondents.

Professionals surveyed are mainly involved in actuarial, underwriting or prod-

uct development functions.

Based on the survey results, Earnix and ISO report that larger insurance companies are more likely to make use of predictive modeling than smaller ones. In fact, 100 percent of the respondents from companies that write more than $1 billion of gross premiums in personal insurance use predictive modeling, compared with 69 percent of the smaller personal lines writers.

The gap is narrower for commercial lines, where 75 percent of respondents for smaller companies (those writing less than $1 billion) and 88 percent of respondents from larger companies (those writing more than $1 billion) said they use predictive models.

The most common uses of predictive modeling are in pricing (loss cost modeling and tiering) and underwriting, while analytics are used to a lesser extent for marketing, claims (fraud investigation, claims forecasting and triaging) and reserving.

Benefits cited by survey respondents are: • Driving profitability, 85 percent • Reducing risk, 55 percent • Growing revenue, 52 percent

• Improving operational efficiency, 39 percent.

Top challenges mentioned by respondents include lack of sufficient data and limited numbers of skilled modelers.

The survey also revealed that companies spend considerable time on data preparation and deployment before and after actual modeling work. More than half of survey respondents (54 percent) spend more than three months on data extraction and preparation, and more than two-thirds of the respondents (69 percent) take more than three months to deploy new models.

Insurers’ Asbestos, Environmental Losses Rose 12% in 2012

W

hile generally not a material drag on the U.S. property/casualty industry’s earnings, industry losses from asbestos and environmental (A&E) claims resumed an upward climb in 2012, according to a new A.M. Best Co. report.

The report said annual incurred A&E losses rose 12 percent in 2012 after a 31 percent decline in 2011.

This comes amid a rising number of lung cancer lawsuits related to asbestos and evolving mass tort exposures on the environmental side.

8 | INSURANCE JOURNAL-NATIONAL November 18, 2013

A.M. Best said that as it continues to monitor issues related to asbestos, the current estimated ultimate industry asbestos exposure could very well increase in the medium term. In December 2012, the ratings agency had raised its estimate of net ultimate asbestos losses for the U.S. P/C industry to $85 billion from its previous 2011 estimate of $75 billion. The higher asbestos loss estimate reflected ongoing losses of roughly $2 billion per year with claim payments averaging $2.5 billion per year.

On asbestos litigation, the report noted that in addition to more traditional mesothelioma filings, the volume of lung cancer cases appears to be rising as more lawyers seek higher settlements in the face of more successful lawsuits relative to past settlements. The report pointed to industry participants’ observation that the number of such suits has begun to increase significantly.

The report said that as more tobacco lung cancer cases go to court and receive damage awards, it may be creating an incentive for asbestos plaintiffs’ attorneys to file suits alleging asbestos exposures as at least a contributor to the lung cancer. www.insurancejournal.com

WEST COVERAGE

News & Markets NAIC: Alaska Implements SBS

A

laska has implemented the State Based Systems, an electronic system owned by the National Association of Insurance Commissioners, it was announced in November.

The purpose of NAIC’s SBS initiative is to provide a comprehensive, internet-based application for state regulators in support of insurance regulatory functions.

“The functionality offered by SBS and its seamless integration with other NAIC initiatives will provide significant productivity gains to the Alaska Insurance Division, our consumers and insurance licensees,” Bret S. Kolb, director of the Alaska Division of Insurance, said in a statement.

In addition to Alaska, SBS is in place in Alabama, Arkansas, Delaware, the District of Columbia, Florida, Illinois, Iowa, Kansas, Maryland, Missouri, Montana, Nebraska, New Hampshire, New Jersey, North Carolina, North Dakota, Oklahoma, Oregon, Puerto Rico, Rhode Island, Tennessee, U.S. Virgin Islands and West Virginia. Limited SBS services are also licensed by South Carolina and Virginia.

Sutter to Pay $46M To Settle California Anesthesia Case

O

ne of California’s largest hospital chains has agreed to pay $46 million to settle allegations that its method for billing for anesthesia services was false and misleading.

Sutter Health’s decision to pay came as a trial was scheduled to start in November.

The agreement stems from a complaint originally filed in 2009.

In addition to paying the fine, Sutter has agreed to make changes to its billing procedures. Those changes include billing for anesthesia on a flat-fee basis rather than on time and more clearly disclosing its anesthesia charges and services to its patients, insurers and other payers.

Sutter officials insisted the chain had followed the appropriate billing regulations and protocols.

The Sacramento-based company operates more than 20 hospitals in Northern California.

Copyright 2013 Associated Press.

California Insurance Broker Sentenced For Scamming Tom Hanks

Washington Driver Blames ‘Gorilla’ For Causing Crash

A

Southern California insurance broker who overcharged Tom Hanks and his wife, Rita Wilson, hundreds of thousands of dollars has been sentenced to more than two years in federal prison.

City News Service says Jerry Goldman received a 27-month sentence earlier this month. He also was ordered to pay about $840,000 in restitution.

Prosecutors claimed that between 1998 and 2011, Goldman inflated premiums by as much as 600 percent and created phony invoices to hide the scam.

The original indictment claimed that Goldman also bilked others including Andy Summers, the former guitarist for The Police.

The 60-year-old Thousand Oaks man pleaded guilty in April to mail fraud involving Hanks and Wilson.

A

Copyright 2013 Associated Press.

Copyright 2013 Associated Press.

www.insurancejournal.com

Spokane, Wash., woman who wound up with a totaled car, a broken collarbone and a $550 ticket blames her post-Halloween crash on a person in a gorilla suit who she says jumped in front of her car.

Hailey Wulz said she plans to contest the negligent driving citation.

Wulz says she had just dropped off a friend early on Nov. 1 when she swerved to avoid the gorilla. It was reported she crashed into a parked car and the crash pushed both vehicles into a yard.

Police report that two witnesses claim the woman was speeding through the 25 mile-an-hour zone.

The driver says she did what she thought was right by swerving. And she says it would be nice if the gorilla came forward “so everything didn’t fall on me.”

November 18, 2013 INSURANCE JOURNAL-WEST | W1

WEST COVERAGE

News & Markets Arizona Legislator’s Close Call in I-10 Dust Storm Prompts Call for Action

A

n Arizona legislator had a narrow escape on Interstate 10 in November during a dust storm in Pinal County when chain-reaction collisions killed three people.

State Sen. Steve Farley was driving back to Tucson after a meeting in Phoenix when visibility on the freeway plummeted because of the dust storm.

Farley told the Arizona Capitol Times that he stopped just before the collisions

Colorado Lawmakers Reviewing Flood Response

started.

He said an SUV landed in the median about 50 feet away and that a tractor-trailer rig then narrowly missed his vehicle before it slammed into other vehicles.

Farley says he’s asking the state Department of Transportation what can be done about dust storms that slash visibility and create dangerous driving conditions on I-10.

C

Copyright 2013 Associated Press.

Copyright 2013 Associated Press.

olorado lawmakers are studying responses to September’s catastrophic floods.

A legislative panel held its first meeting in November to look at whether there’s a need for legislation to better react to such a disaster in the future.

They also want to ensure federal and nonprofit resources are being used efficiently.

Two lawmakers from Greeley were elected to lead the committee: Democrat Dave Young and Republican Scott Renfroe.

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People Dan Jones

Todd Hergesell

Poms & Associates Insurance Brokers Inc. named Dan Jones vice president in its West Los Angeles office as.

Jones has more than 25 years of experience. He specializes in healthcare reform, health risk management, global benefit solutions and wellness initiatives.

Prior to joining Poms, Jones was a sales executive at a national full service insurance provider, where he was responsible for new business development throughout Southern California.

Poms has offices in California, Colorado, New Mexico and Washington.

Todd Hergesell has joined Barney & Barney LLC in Aliso Viejo, Calif.

Hergesell will work with a team of professionals offering commercial property/casualty insurance, employee benefits, workers’ compensation, compensation consulting, executive liability, personal lines and surety.

Prior to Barney & Barney, Hergesell was a P/C consultant at Sullivan Curtis Monroe in Irvine. Before that, he was a commercial real estate broker with Voit Real Estate Services.

Barney & Barney’s Orange County operations specialize in working with life sciences, technology, apparel, food services, manufacturing and professional services firms, along with nonprofit organizations.

Barney & Barney is headquartered in San Diego, with offices in Orange County, San Francisco and Oakland.

Leavitt Central Coast Insurance Services named Omar Perez vice president of alternative risk and affinity programs.

Perez specializes in risk management and self-funded risk financing alternatives for commercial insurance clients.

He has more than 30 years’ experience in the industry,

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W4 | INSURANCE JOURNAL-WEST November 18, 2013

including experience in the development and implementation of insurance programs for associations, employer groups and other trade and nonprofit organizations.

Leavitt Central Coast is part of the Leavitt Group.

ISU Francis-Pinney Insurance Services Inc. named Tom Bone as a risk insurance advisor.

Bone will continue to work with his existing clients and develop new relationships with employers, and he will lead a team of specialists in various areas of insurance and risk management.

Bone has more than 30 years of experience. His primary focus is in the areas of workers’ compensation and in the integration and coordination of various insurance programs.

Bone has been a member of the ISU nationwide network as owner of ISU Countrywood Insurance in Danville, Calif. and ISU Insurance Services of San Francisco.

He moved to Sacramento in 2010 to be closer to family and to increase his client base, and has now joined ISU’s Roseville office.

ISU Insurance Services, based in Roseville, Calif., is a privately owned independent insurance firm and is part of the ISU network.

MJ Insurance named Lauren Gerig to its property/ casualty department in the Phoneix, Ariz. Office.

Gerig will work to service new and existing clients.

Gerig joins MJ Insurance from WebPT, a company that provides web-based physical therapy software, where she served as an account manager.

Previously, Gerig worked as a special education teacher in Scottsdale, Ariz. and Grove City, Ohio.

MJ Insurance is a property/casualty and employee benefits agency with offices in Indiana and Arizona.

1/27/11 9:42 AM 6/11/11 9/6/11 2:54 8:30 PM

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News & Markets Nevada Mine Pollution Deal Brings Residents $19.5M

By Scott Sonner

R

ural neighbors of an abandoned World War II-era copper mine that has leaked toxic chemicals in northern Nevada for decades have won up to a $19.5 million settlement from companies they accused of covering up the contamination.

Atlantic Richfield Co. and its parent BP America Inc. acknowledged no wrongdoing under the agreement, which also calls for them to pay $2.6 million in attorney fees to the legal team that represented about 700 past and present neighbors of the old Anaconda mine built in 1941 on the edge of Yerington about 65 miles southeast of Reno.

Residents said in a class-action suit filed in 2011 that the companies had “intentionally and negligently” concealed the extent of uranium, arsenic and other pollutants leaking into their drinking water wells from the mine covering 6 square miles.

“We are so pleased,” said Peggy Pauly, 64, whose 2-acre home borders the mine. She helped organize concerned families in 2004 after a U.S. government whistleblower start-

ed publicizing studies that had previously been kept secret documenting health and safety risks posed by a plume of radioactive contamination migrating off the site.

The companies agreed to pay $7 million in property damages and $900,000 to a medical monitoring fund.

The final damages will depend on the cost of extending city water supplies to about 200 residents, estimated between $6.5 million and $12.5 million.

BP America called the settlement “fair and reasonable.”

About a dozen families filed the lawsuit in U.S. District Court in Reno nearly a decade after they started pressing concerns with state regulators they said were too cozy with Nevada’s mining industry to effectively enforce a cleanup schedule at

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W6 | INSURANCE JOURNAL-WEST November 18, 2013

the site, which the U.S. Environmental Protection Agency since has assumed control of under its Superfund program.

In 2008, a U.S. Labor Department review panel upheld a whistleblower claim by ex-mine cleanup supervisor Earle Dixon, who said the U.S. Bureau of Land Management illegally fired him four years earlier for speaking out about the risks in defiance of local politicians who tried to muzzle him.

Fueled by demand after World War II, Anaconda produced 1.7 billion pounds of copper from 1952-78 at the mine in the Mason Valley, an irrigated agricultural oasis in the area’s otherwise largely barren high desert.

The EPA determined over the years that uranium was produced as a byproduct of processing the copper and that the radioactive waste was initially dumped into dirt-bottomed ponds that – unlike modern lined ponds – leaked into the groundwater.

BP and Atlantic Richfield, which purchased Anaconda Copper Co. in 1978, have provided bottled water for free to any residents who want it for several years. But they had said uranium naturally occurs in the region’s soil and that there was no proof that a half-century of processing metals there was responsible for the contamination.

Pauly and others started seeking outside legal help after a new wave of EPA testing found that 79 percent of the wells tested north of mine had dangerous levels of uranium or arsenic or both.

One a half mile away had uranium levels more than 10 times the legal drinking water standard. The EPA says long-term exposure to high levels of uranium in drinking water may cause cancer and damage kidneys.

Copyright 2013 Associated Press.

5/2/13 4:35 PM

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NATIONAL COVERAGE

Declarations Little Good

Oh Deer

Catalytic Cash

“Looking into earthquake insurance after your home or business has sustained damage resulting from an earthquake will do little good to help you recover.”

— Oklahoma Insurance Commissioner John D. Doak encouraged Oklahomans to purchase earthquake insurance after a report predicted continued seismic activity in the central part of the state. The U.S. Geological Survey (USGS) said central Oklahoma has experienced more than 200 magnitude 3.0 or greater earthquakes since January 2009.

“We might be heading home to relax at the end of our day, but deer are just beginning their busiest time around dusk.”

— Joe Rogerson, a biologist at the Delaware Department of Natural Resources and Environmental Control, urging motorists to watch out for deer crossing roadways, especially at dusk. For 2013 through September, Delaware police departments logged a statewide total of 591 deer-related crashes.

“The attraction is that these catalytic converters contain precious metals – palladium, platinum and rhodium. … The thief can meticulously scrape those out of there and get more cash.”

— Jason Weber, community liaison officer for Menasha, Wis., Police Department, told PostCrescent Media that catalytic converter thefts used to be something seen mostly in big cities, but his department began receiving more reports of them in October.

That Smell

State Fair Probe

“You’re asking for a very radical order on 24-hour notice.”

— Los Angeles Superior Court Judge Robert O’Brien said he wasn’t given enough time to consider whether to order an immediate halt to production of the popular hot sauce Sriracha at a Southern California factory that local residents say is stinking up their neighborhoods.

“There are still some unanswered questions we are trying to get to the bottom of.”

— Wake County (North Carolina) District Attorney Colon Willoughby on the investigation into a North Carolina State Fair ride accident in which five people were injured. Officials believe the ride had been intentionally tampered with.

Figures $100 Million The amount of Federal aid that has gone to victims of the historic September floods in Colorado.

$12 Million The amount at stake in an appeal by Dallas-based SCA Promotions to recover money it paid Lance Armstrong for winning the Tour de France. Armstrong has admitted he raced while secretly using performance-enhancing drugs and the company wants its money back. A Texas arbitration panel said on Oct. 30 it would consider SCA’s appeal of a 2006 settlement that allowed Armstrong to keep the cash. Armstrong’s attorneys have argued the settlement is irreversible. www.insurancejournal.com

51 The number of years UPS driver Tom Camp from Livonia, Mich., has driven his big, brown truck without an accident. That’s after an estimated 800,000 to 900,000 miles on the road in metro Detroit. Camp has been delivering packages in Detroit and western Wayne County since 1962.

1,215 The number of jobs United Services Automobile Association (USAA) says it will bring to Hillsborough County, Fla., by 2019 as its expands its presence there.

November 18, 2013 INSURANCE JOURNAL-NATIONAL | 9

SPOTLIGHT

Long Term Care & Assisted Living 10 Things to Know About LTC and Assisted Living 91% of assisted living residents say they are safer living in an assisted living community than they would be living on their own. (Assisted Living Federation of America’s 2013 Survey of Assisted Living Residents)

The number of U.S. individuals between age 65 and 84 will rise by 38.8% from 2010 and 2020, and the population over age 85 will increase by 18.7%. (U.S. Census Bureau)

The number of people in the United States who need long-term care is expected to increase to 27 million in 2050. (Centers for Disease Control report: National Survey of Residential Care Facilities)

Roughly 7-in-10 people over age 65 will require some type of long-term care services. (U.S. Department of Health and Human Services)

In 2010, 17% of residential care communities reported that they used electronic health records. (Centers for Disease Control report: Use of Electronic Health Records in Residential Care Communities)

The 10 most common chronic conditions among residents were: high blood pressure (57%); Alzheimer’s disease or other dementias (42%); heart disease (34%); depression (28%); arthritis (27%); osteoporosis (21%); diabetes (17%); chronic obstructive pulmonary disease and allied conditions (15%); cancer (11%); and stroke (11%) (Centers for Disease Control report: Residents Living in Residential Care Facilities: United States, 2010)

As of 2010, there were 31,100 assisted living communities nationwide with the capacity of 971,900 individuals.

(Overview of Assisted Living from the American Association of Homes and Services)

10 | INSURANCE JOURNAL-NATIONAL November 18, 2013

Analysis of general liability and professional liability (GL/PL) claims data from long-term care providers on a national level shows long-term care liability loss rates are increasing by 4% annually. (Aon’s 2012 Long Term Care General Liability and Professional Liability Actuarial Analysis) The Affordable Care Act has provisions that are intended to encourage the coordination of care givers and to reduce costs, but that may give rise to new avenues of liability. (Aon’s 2012 Long Term Care General Liability and Professional Liability Actuarial Analysis)

Malpractice costs and the tort environment are often major considerations in the decision by long-term care services providers to locate and invest in long-term care beds and services in a specific state. (A market commentary from Dom Colaizzo, chairman of the National Health Care Practice at Aon Risk Solutions) www.insurancejournal.com

Who insures you doesn’t matter.

Until it does.

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

Chubb Group of Insurance Companies (“Chubb”) is the marketing name used to refer to the insurance subsidiaries of The Chubb Corporation. For a list of these subsidiaries, please visit our website at www.chubb.com. Actual coverage is subject to the language of the policies as issued. Chubb, Box 1615, Warren, NJ 07061-1615. ©2012 Chubb & Son, a division of Federal Insurance Company.

NATIONAL COVERAGE

Business Moves

R-T Specialty, Westrope Chicago-based national wholesale insurance broker R-T Specialty said it has agreed to merge with another wholesale broker Westrope, based in Kansas City, Mo. Terms of the transaction were not disclosed.

Westrope has a national presence with concentrations in the Midwest, Southeast and Southwest. Westrope generates premiums of more than $430 million, according to its website. In addition to its Kansas City headquarters, it operates offices in Overland Park, Atlanta, Dallas, Bedminster, N.J. and Jacksonville, Orlando and Brandon, Fla. R-T Specialty has offices in about 17 states, with multiple offices in California, New York and Texas.

In addition to offering property/casualty, Westrope has workers’ compensation, professional liability, transportation, agri-business and life science markets as well. Kevin Westrope, president and CEO who founded the brokerage in 1992, is the current president of the National Association of Surplus Lines Offices (NAPSLO).

AssuredPartners AssuredPartners Inc., through its subsidiary AssuredPartners of New Jersey, acquired Eastern Insurance Acquisition Agency (D/B/A Eastern Insurance Group) in 12 | INSURANCE JOURNAL-NATIONAL November 18, 2013

Pennsylvania. Eastern Insurance specializes in commercial insurance, personal insurance and life, health and employee benefit programs. The agency, with offices in Wilkes Barre and Hazleton, Penn., reports revenues of $4.3 million.

As part of the acquisition, more than 45 Eastern Insurance employees will join AssuredPartners of New Jersey.

AssuredPartners also recently completed its acquisition of the Preferred Advantage branch located in Hartford, Conn.

Preferred Advantage specializes in providing property/casualty insurance services to small and medium businesses, and is a division of Preferred Concepts LLC. The acquired business will operate as AP Advantage. AssuredPartners said 12 Preferred Advantage employees are joining the newly formed AP Advantage.

Confie Seguros Confie Seguros, a national group of personal lines insurance brokers, announced the acquisition of two additional insurance brokerages: DeFranco Insurance Agency of Niagara Falls, N.Y., and Insurance Group of American (d/b/a City Insurance) of Palm Springs, Fla. Confie has completed 23 acquisitions in the last 12 months.

DeFranco Insurance Agency specializes in the delivery and service of personal lines insurance products to the Niagara Falls, N.Y., region. City Insurance specializes in non-standard auto insurance for clients in Palm Springs and West Palm Beach, Fla. NSM, ELM NSM Insurance Group has acquired Executive Liability Managers Insurance Brokers in California.

ELM is a 25-year-old professional liability wholesale insurance brokerage with three offices in California.

The acquisition diversifies NSM’s national market for admitted and non-admitted business, according to a statement from NSM. NSM is a national commercial property/

casualty insurance program administrator specializing in the development and implementation of industry-specific insurance programs.

Frost Insurance, Kolkhorst Frost Insurance has acquired Kolkhorst Insurance Agency, an independent Houston-based insurance agency that offers a full range of property/casualty, personal lines and surety products.

Kolkhorst Insurance has been serving clients in the Houston area since 2009. The agency’s team of nine employees became part of Frost Insurance with the acquisition and will remain at the agency’s existing location on W. Sam Houston Parkway.

Frost Insurance, the insurance subsidiary of Frost, provides a full range of property and casualty, group employee benefits, estate planning and business succession, personal insurance, HR consulting and outsourcing needs throughout Texas.

Founded in 1868, Frost has helped clients with their financial needs during three centuries.

AutoTown, Fling AutoTown Insurance, an independent agency based in Norcross, Ga., acquired Fling Insurance Agency in Lagrange, Ga. AutoTown said the acquisition highlights the firm’s expansion plans outside of the metro Atlanta market.

Founded in 1970, AutoTown Insurance offers a wide range of personal and business insurance. It operates retail stores in Georgia and South Carolina under the AutoTown Insurance brand name.

Travelers, Dominion of Canada The Travelers Companies Inc. completed its previously announced acquisition of The Dominion of Canada General Insurance Company from E-L Financial Corporation Limited. The combined organization, which will be referred to as Travelers Canada, will remain headquartered in Toronto.

Travelers earlier announced it is paying approximately $1.1 billion for the acquisition. The Dominion is one of Canada’s largest auto, home and business insurers. www.insurancejournal.com

NATIONAL COVERAGE

News & Markets Insurance Kiosks the Wave of the Future?

By Amy O’Connor

M

ilk …check; eggs … check; bread … check; car insurance …what?

Most grocery lists don’t typically read this way, but Nashville, Tenn.-based Direct Auto Insurance Co. is now offering another way to purchase personal auto insurance that could change the way consumers shop.

The company, which writes business in 13 Southeastern states and targets underserved communities that typically are without bank accounts, has created insurance kiosks called “Direct on the Spot” (DOTS).

The “insurance stores in a box” give people the ability to quote, bind and print a personal car insurance policy in less than five minutes. Basic, low-limit life insurance policies, roadside assistance plans or emergency protection plans also are available.

To start, customers scan their driver’s license, and are given a quote and the option to continue with the purchase. The kiosks are self-service, but Marc DiGiacomo, Direct Auto’s vice president of product management, says there is a phone customers can use to contact a Direct Auto agent if they have issues with the quote and bind

14 | INSURANCE JOURNAL-NATIONAL November 18, 2013

process, or questions about the policy.

Customers also can send their policy information or auto insurance quote to their personal email to complete the purchase later.

They can also identify a local Direct Auto agent with whom to work.

“This is an extension of the network we already have. Being local is very important to us and our customer base, and the kiosk helps us expand that,” DiGiacomo says.

Coverage terms are six months, and policies can include all of Direct Auto’s typical offerings, including: bodily injury liability, property damage liability, collision auto, comprehensive auto, medical payments, personal injury, uninsured motorist auto coverage, rental reimbursement, towing and accidental death coverage.

Jack Campbell, chief operations officer, says the company was inspired by the trend of consumers using online, quick-pay retail services and kiosk technology that hadn’t yet been applied to insurance. The kiosks also allow the insurer to expand into new territories without opening a new store and staffing. “We saw a competitive advantage there and it saves money on costs,” he says.

But building an insurance kiosk was not an easy undertaking. The company had to find a kiosk provider, address payment handling, and implement the correct data exchanges. Direct Auto also had to re-engineer some of its pricing algorithms to make them kiosk-friendly. Insurance questions had to be simplified and personal information prefilled if a customer buys a policy, so the process moves quickly and efficiently.

“The customer experience was a big part of the complexity of this undertaking. You can’t put a web experience on a kiosk,” DiGiacomo says. “We searched for a kiosk vendor to help us with that and understand the customer experience in high-traffic areas.”

The company also took steps to ensure privacy is protected. No personal information is stored in the kiosk; personal information does not appear on the screen as it is typed in; and privacy wings are on both

sides so bystanders cannot see any details.

Direct Auto has deployed 18 kiosks to its local insurance stores in Tennessee as a test. So far, customers have been responding well, Campbell says.

Early next year, the company plans to move at least 16 of those kiosks into partner retail outlets, including grocery stores, car dealerships, malls and title loan companies.

Campbell says the company has been pleasantly surprised at how easy it has been to sign up partners. The company is strategically targeting certain geographic locations and national chain stores where they think there is a potential customer base for both Direct Auto and the retailer.

“The kiosks will also bring customers into their stores because they can come in to make payments every month, and the stores like the foot traffic,” DiGiacomo says.

Incentives, like a gift card for the store where the kiosk is located, will be offered to those who purchase their insurance, which is another benefit to the retailer.

“That is a critical part because we are sharing the retail space and partnering with a number of companies that are servicing our customer,” Campbell says. “Insurance isn’t typically something people jump up and down to get a quote for. We are looking for incentives so it is a win for the customer, the partner and potentially for us because the acquisition cost is less than broadcast media advertising.”

Josh Jarret, vice president of product management, says the company will use the kiosks to expand beyond the 13 states it is currently in. “The [kiosks] are an extension of marketing … as people see these, it will create a new DNA for us,” he says.

DiGiacomo says the company expects the kiosk model to become more popular in auto insurance. “Insurance is intangible, so it is well-suited for that approach. The time is right with consumer behaviors and the adoption of technology and self-service taking off,” he says. “It might not have worked six or seven years ago, but it seems the time is right now.” www.insurancejournal.com

SPECIAL REPORT

State Specialists 2013 State Specialist P/C Insurers Revealed

S

tate Specialists are often an independent agent’s most reliable and consistent market. These companies are focused on a specific geographic area, understand it and consistently strive to serve it.

The Demotech Company Classification System catBy Barry J. Koestler

egorizes insurers into one of 11 categories based on an analysis of data reported by the companies to the National Association of Insurance Commissioners (NAIC). The 11 categories that comprise the system are: Nationals, Near Nationals, Super Regionals, Regionals, State Specialists, Coverage Specialists, Strategic Subsidiaries, Risk Retention Groups, Surplus Lines Carriers, Reinsurers and Companies with less than $1 million in direct written premium.

To be categorized as a State Specialist, a carrier must be an individual, active company reporting data to the NAIC using the property/casualty annual statement format at Dec. 31, 2012. It must report at least $1 million in direct written premium at Dec. 31, 2012, with 90 percent or more in one state. Further, it cannot be a surplus lines company, risk retention group or reinsurance company. continued on page 18

2013 State Specialist Property/Casualty Insurers Company Name

Texas Mutual Insurance Co. State Compensation Insurance Fund Medical Liability Mutual Insurance Co. Pinnacol Assurance PEMCO Mutual Insurance Co. Wawanesa General Insurance Co. St. Johns Insurance Co. Inc. American Coastal Insurance Co. Farm Bureau Mutual Insurance Co. of Arkansas Inc. Security First Insurance Co. Hospitals Insurance Co. Inc. Homeowners Choice Property & Casualty Insurance Co. Inc. Nuclear Electric Insurance Ltd. Pioneer State Mutual Insurance Co. Queen City Assurance Inc. Louisiana Workers’ Compensation Corp.

Indiana Farmers Mutual Insurance Co. Alliance United Insurance Co. Rural Mutual Insurance Co. Louisiana Farm Bureau Mutual Insurance Co. American Integrity Insurance Co. of Florida Country-Wide Insurance Co. American Transit Insurance Co. Missouri Employers Mutual Insurance Co. Kentucky Employers’ Mutual Insurance Authority Federated National Insurance Co. Mutual Insurance Co. of Arizona Michigan Millers Mutual Insurance Co. Windhaven Insurance Co. American Steamship Owners Mutual Protection and Indemnity Association Inc. Southern Oak Insurance Co. Ark Royal Insurance Co. Bear River Mutual Insurance Co. Olympus Insurance Co. COPIC Insurance Co. New York Schools Insurance Reciprocal Auto Club South Insurance Co. Underwriters at Lloyd’s, London (KY) Wisconsin Mutual Insurance Co. People’s Trust Insurance Co. Lighthouse Property Insurance Corp.

Erie and Niagara Insurance Association Colorado Farm Bureau Mutual Insurance Co. Citizens United Reciprocal Exchange MDAdvantage Insurance Co. of New Jersey Underwriters at Lloyd’s, London (IL) Louisiana Medical Mutual Insurance Co. Homeowners of America Insurance Co. Sterling Insurance Co. Kingstone Insurance Co. Fiduciary Insurance Co. of America Inc. Farmers Union Mutual Insurance Dryden Mutual Insurance Co. RAM Mutual Insurance Co. IFA Insurance Co. New York Municipal Insurance Reciprocal Germantown Mutual Insurance Co. Lawyers’ Mutual Insurance Co. Security Mutual Insurance Co. Alabama Municipal Insurance Corp.

Hawaii Employers’ Mutual Insurance Co. Inc. Ascendant Commercial Insurance Inc. Wellington Insurance Co. Farmers Mutual Fire Insurance Co. of Salem County Southern Fidelity Property & Casualty Inc. Madison Mutual Insurance Co. Sawgrass Mutual Insurance Co. Prepared Insurance Co. Crusader Insurance Co. Florida Doctors Insurance Co.

16 | INSURANCE JOURNAL-NATIONAL November 18, 2013

State of Specialty TX CA NY CO WA CA FL FL AR FL NY FL DE MI VT LA IN CA WI LA FL NY NY MO KY FL AZ MI FL NY FL FL UT FL CO NY FL KY WI FL LA NY CO NJ NJ IL LA TX NY NY NY ND NY MN NJ NY WI CA NY AL HI FL TX NJ FL IL FL FL CA FL

2012 TOTAL DPW 906,405 903,787 562,214 414,982 330,161 316,738 275,607 262,041 240,804 226,696 224,078 208,378 193,582 187,786 170,009 167,296 165,435 158,942 155,226 144,734 140,226 139,601 137,009 136,517 125,813 121,471 120,055 114,450 107,726 103,985 100,103 97,412 95,745 95,367 94,108 83,928 75,574 71,140 66,351 63,817 62,747 56,829 56,767 56,493 53,594 53,258 53,147 51,298 50,939 49,252 48,598 48,154 48,134 46,061 44,836 44,648 42,219 40,164 38,902 38,292 36,995 36,762 36,297 36,082 34,779 34,137 33,664 33,089 32,572 31,515

Company Name

German Mutual Insurance Co. Farmers Insurance Co. of Flemington West Virginia Mutual Insurance Co. CIFG Assurance North America Inc. Discovery Insurance Co. Care West Insurance Co. Housing and Redevelopment Insurance Exchange Kansas Medical Mutual Insurance Co. Peachtree Casualty Insurance Co. Center Mutual Insurance Co. Bremen Farmers Mutual Insurance Co. Sterling Casualty Insurance Co. League of Wisconsin Municipalities Mutual Insurance Texas Lawyers’ Insurance Exchange Star & Shield Insurance Exchange Granada Insurance Co. Marysville Mutual Insurance Co. Carolina Mutual Insurance Inc. American Risk Insurance Co. Inc. Idaho Counties Risk Management Program Conventus Inter-Insurance Exchange National Automotive Insurance Co. Citadel Insurance Co. N.C. Grange Mutual Insurance Co. Eveready Insurance Co. Mt. Morris Mutual Insurance Co. Park Insurance Co. Upland Mutual Insurance Inc. Seven Seas Insurance Co. Inc. Americas Insurance Co. Responsive Auto Insurance Co. Maya Assurance Co. Farmers Union Mutual Insurance Co. Illinois State Bar Association Mutual Insurance Co. Otsego Mutual Fire Insurance Co. Northern Mutual Insurance Co. Southern Mutual Insurance Co. Harbor Insurance Co. US Lloyds Insurance Co. Farm Credit System Association Captive Insurance Co. Missouri Professionals Mutual Insurance Co. Michigan Professional Insurance Exchange Professional Casualty Association Manufacturing Technology Mutual Insurance Co. Nations Insurance Co. New Jersey Physicians United Reciprocal Exchange Midstate Mutual Insurance Co. Capitol Insurance Co. American Alliance Casualty Co. Fairmont Farmers Mutual Insurance Co. Allegany Co-op Insurance Co. Normandy Harbor Insurance Co. Inc. Interstate Bankers Casualty Co. Mennonite Mutual Insurance Co. Farmers Fire Insurance Co. Wayne Cooperative Insurance Co. West Virginia Insurance Co. Access Home Insurance Co. Direct Auto Insurance Co. USPlate Glass Insurance Co. Florida Lawyers Mutual Insurance Co. Mutual of Wausau Insurance Corp.

Farmers Mutual Fire Insurance Co. of Marble, Pennsylvania Medical Alliance Insurance Co. Avatar Property & Casualty Insurance Co. Capacity Insurance Co. Cities and Villages Mutual Insurance Co. USA Insurance Co. German American Farm Mutual American Millennium Insurance Co.

State of Specialty OH NJ WV NY NC CA PA KS FL ND KS CA WI TX FL FL KS NC TX ID NJ LA LA NC NY WI NY KS FL LA FL NY MT IL NY MI GA OK TX CO MO MI PA MI CA NJ NY PA IL MN NY FL IL OH PA NY WV LA IL FL FL WI PA IL FL FL WI MS TX NJ

2012 TOTAL DPW 30,999 29,247 28,691 27,676 27,354 26,627 25,563 25,433 24,483 23,907 23,772 22,084 22,052 21,991 21,911 21,745 21,486 21,255 20,288 19,974 19,746 19,427 19,223 19,051 18,974 18,823 18,589 18,346 18,333 18,193 18,073 18,029 17,377 17,302 17,034 16,914 16,762 16,650 16,438 15,558 15,528 15,041 14,538 14,521 14,339 14,238 14,125 13,961 13,845 13,781 13,526 13,526 13,404 12,880 12,815 12,792 11,946 11,906 11,898 11,823 11,741 11,501 11,249 11,188 11,081 10,956 10,934 10,839 10,185 10,176

www.insurancejournal.com

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SPECIAL REPORT

State Specialists continued from page 16 In total, 766 companies were categorized as State Specialists for 2013. This is more than 28 percent of the 2,716 companies that were classified based on Dec. 31, 2012, data.

State Specialists wrote more than $72 billion of direct written premium, which was 14 percent of the industry’s direct written premium in 2012.

When examining the state of specialty of the 2013 State Specialists, Texas had the most companies, with 99. Florida was next Company Name

American Colonial Insurance Co. Inc. Finger Lakes Fire and Casualty Co. Union Mutual Insurance Co. Nevada Mutual Insurance Co., Inc. McMillan Warner Mutual Insurance Co. First Benefits Insurance Mutual, Inc. Delta Lloyds Insurance Co. of Houston Texas Farmers Mutual Fire Insurance Co. Oklahoma Attorneys Mutual Insurance Co. Kensington Insurance Co. Bell United Insurance Co. Paramount Insurance Co. Positive Physicians Insurance Exchange Casualty Corporation of America Inc. Farmers Mutual of Tennessee OHA Insurance Solutions Inc. Kansas Mutual Insurance Co. Chautauqua Patrons Insurance Co. Dealers Choice Mutual Insurance Inc. North Country Insurance Co. Insurance Placement Facility of Pennsylvania Texas Hospital Insurance Exchange MedMal Direct Insurance Co. Leatherstocking Cooperative Insurance Co. Halifax Mutual Insurance Co. CEM Insurance Co. Reamstown Mutual Insurance Co. Building Industry Insurance Association Inc. Pennsylvania Physicians’ Reciprocal Insurers Victory Insurance Co. Inc. Mid-Hudson Co-Operative Insurance Co. Nazareth Mutual Insurance Co. Lawyers Mutual Insurance Co. of Kentucky Georgia Mutual Insurance, A Stock Company ARECA Insurance Exchange Associated Mutual Insurance Cooperative Physicians’ Insurance Program Exchange Ohio Bar Liability Insurance Co. Healthcare Underwriters Group of Florida Pacific Pioneer Insurance Co. Broome Co-operative Insurance Co. Georgia Dealers Insurance Co. Oswego County Mutual Insurance Co. Callicoon Co-operative Insurance Co. Districts Mutual Insurance Agents Mutual Insurance Co. Fulmont Mutual Insurance Co. Healthcare Underwriters Group Mutual of Ohio CompTrust AGC Mutual Captive Insurance Co. Physicians Professional Indemnity Association Farmers Mutual Insurance Co. Preferred Auto Insurance Co. Inc. Maple Valley Mutual Insurance Co. Hartland Mutual Insurance Co. Transit General Insurance Co. Central Co-operative Insurance Co. Health Care Mutual Captive Insurance Co. Alaska Timber Insurance Exchange CBIA Comp. Services Inc. U.S. Insurance Co. of America Juniata Mutual Insurance Co. SteadPoint Insurance Co. Bedford Grange Mutual Insurance Co. Health Care Insurance Reciprocal Arrow Mutual Liability Insurance Co. Farmers Mutual Fire Insurance Co. of McCandless Township First Mutual Insurance Co. Business Alliance Insurance Co. Wisconsin Lawyers Mutual Insurance Co. Retailers Mutual Insurance Co. Genesee Patrons Cooperative Insurance Co. Freedom Advantage Insurance Co. Pennsylvania Professional Liability Joint Underwriting Association Laundry Owners Mutual Liability Insurance Association Healthcare Underwriters Group of Kentucky Farmers Union Mutual Insurance Co. Missouri Doctors Mutual Insurance Co. Synergy Comp Insurance Co.

18 | INSURANCE JOURNAL-NATIONAL November 18, 2013

with 82, followed by New York with 72, California with 55 and New Jersey with 50.

When looking at the line of business mix, 46 percent of the State Specialists’ 2012 direct written premium was private passenger auto. More than 24 percent was homeowners multiple peril and nearly 9 percent of was workers’ compensation.

Space limitations precluded an enumeration of each of the 766 State Specialists. The accompanying list includes the 296 State State of Specialty FL NY OK NV WI NC TX OK OK NY NV MD PA OK TN OH KS NY NC NY PA TX FL NY NC TX PA VA PA MT NY PA KY GA AK NY PA OH FL CA NY GA NY NY WI AR NY OH GA MO WV TN WI ND IL NY GA AK CT IL PA TN PA MN MA PA NC CA WI MI NY PA PA PA KY AR MO PA

2012 TOTAL DPW 10,131 10,130 9,898 9,875 9,614 9,569 9,554 9,525 9,399 9,367 9,323 9,208 9,093 9,084 8,590 8,578 8,546 8,516 8,392 8,364 8,222 8,150 8,121 8,012 8,000 7,875 7,859 7,810 7,621 7,354 7,249 7,192 7,187 6,965 6,853 6,849 6,633 6,473 6,375 6,353 6,329 6,179 6,112 6,046 6,042 5,924 5,905 5,869 5,865 5,826 5,820 5,788 5,742 5,696 5,559 5,546 5,477 5,388 5,172 5,075 5,014 5,008 5,002 4,994 4,908 4,861 4,861 4,846 4,797 4,793 4,731 4,719 4,716 4,702 4,659 4,560 4,505 4,474

Specialists that were not affiliated with a group at Dec. 31, 2012. A full list is available by contacting bkoestler@demotech.com.

Koestler is the chief ratings officer of Demotech Inc. Demotech is a financial analysis firm specializing in evaluating the financial stability of regional and specialty insurers. Since 1985, Demotech has assigned Financial Stability Ratings® (FSRs) for property/casualty insurers and title underwriters.

Website: www.demotech.com.

Company Name

Ontario Insurance Co. Merced Property & Casualty Co. Waco Fire & Casualty Insurance Co. Missouri Valley Mutual Insurance Co. Midrox Insurance Co. Great Lakes Mutual Insurance Co. Wisconsin Municipal Mutual Insurance Co. Briar Creek Mutual Insurance Co. Trans City Casualty Insurance Co. Specialty Risk of America Sunderland Marine Mutual Insurance Co. Ltd. - US Branch Gem State Insurance Co. Seaview Insurance Co. Farmers and Merchants Mutual Fire Insurance Co. Mount Carroll Mutual Insurance Co. Madison Mutual Insurance Co. Little Black Mutual Insurance Co. Mound Prairie Mutual Insurance Co. Road Contractors Mutual Insurance Co. Tank Owner Members Insurance Co. Whitecap Surety Co. Great Falls Insurance Co. Carolina Farmers Mutual Insurance Co. Petroleum Marketers Management Insurance Co. PrimeOne Insurance Co. Hay Creek Mutual Insurance Co. Doctors Direct Insurance, Inc. Bloomfield Mutual Insurance Co. United Business Insurance Co. (A Mutual Captive) Ethio-American Insurance Co. Inc. Community Mutual Insurance Co. National Direct Insurance Co. Safe Insurance Co. Friends Cove Mutual Insurance Co. United Casualty and Surety Insurance Co. Wilmington Insurance Co. Transit Mutual Insurance Corp. of Wisconsin Heartland Mutual Insurance Co. Vasa-Spring Garden Mutual Insurance Co. California Mutual Insurance Co. United Frontier Mutual Insurance Co. Ellington Mutual Insurance Co. Farmers Mutual Insurance Co. Integra Insurance Inc. Western Mutual Fire Insurance Co. Pan Handle Farmers Mutual Insurance Co. of West Virginia Alamance Farmers’ Mutual Insurance Co. Washington County Co-op Insurance Co. Century Mutual Insurance Co. National Heritage Insurance Co. Arkansas Mutual Insurance Co. British American Insurance Co. Piedmont Mutual Insurance Co. Centre County Mutual Fire Insurance Co. Utah Business Insurance Co. Inc. Mutual Insurance Co. of Lehigh County Spartan Insurance Co. AGIC Inc. Conemaugh Valley Mutual Insurance Co. Mower County Farmers Mutual Insurance Co. Farmington Mutual Insurance Co. Hannahstown Mutual Insurance Co. Otsego County Patrons Co-Operative Fire Relief Association Professional Insurance Exchange New Mexico Property and Casualty Co. Benefit Security Insurance Co. Wall Rose Mutual Insurance Co. Workers Compensation Exchange Keystone Mutual Insurance Co. Club Insurance Co. Farmers & Mechanics Mutual Insurance Association of Cecil County Inc. Farmers Mutual Fire Insurance Co. of Branch County Yel Co. Insurance Indiana Old National Insurance Co. Clearfield County Grange Mutual Fire Insurance Co. Grange Mutual Fire Insurance Co. Ecole Insurance Co. Lincoln Mutual Insurance Co.

State of Specialty NY CA GA SD NY MI WI PA AZ IL AK ID CA MI IL NY WI MN TN TX MN ME NC IA MI MN IL MN GA GA NY NV WV PA MA DE WI MN MN CA NY WI KS MN MN WV NC NY NC IL AR TX NC PA UT PA TX FL PA MN WI PA NY UT NM IL PA ID MO OH MD MI FL IN PA PA AZ NC

2012 TOTAL DPW 4,417 4,380 4,353 4,257 4,252 4,250 4,241 4,212 4,195 4,163 4,085 4,010 3,993 3,902 3,836 3,816 3,692 3,664 3,606 3,530 3,507 3,506 3,474 3,453 3,428 3,418 3,368 3,350 3,344 3,286 3,267 3,251 3,230 3,197 3,017 3,016 2,994 2,972 2,971 2,935 2,883 2,772 2,701 2,699 2,696 2,630 2,616 2,603 2,526 2,521 2,500 2,441 2,330 2,271 2,269 2,171 1,969 1,908 1,761 1,663 1,653 1,650 1,624 1,608 1,558 1,510 1,483 1,454 1,415 1,356 1,256 1,244 1,198 1,191 1,173 1,110 1,110 1,020

www.insurancejournal.com

www.insurancejournal.com

November 18, 2013 INSURANCE JOURNAL-NATIONAL | 19

SPECIAL REPORT

Contractors & Builders

New Programs, Flexibility Help Contractor Segment Rebuild

By Amy O’Connor

T

hose that specialize in the contractors and builders segment say a lot has changed in this class since 2007. The recession forced the insurance industry to be flexible and creative when it came to insuring this class, just as it forced contractors and builders to take on different and smaller jobs, as well as find more appropriate and cost-effective insurance programs.

As contractor and builder insureds shifted their focus to renovations and remodeling, green building or government projects, the insurance industry had to adjust policy forms and coverage options while still writing profitable business.

20 | INSURANCE JOURNAL-NATIONAL November 18, 2013

“The industry has traditionally taken a binary approach to insuring construction operations with either a builders risk or installation form,” says Alex McGinley from XL. “But with the change in the economy contractors are doing a lot of things they weren’t doing before… we looked at the construction forms and saw that no one product covered it all.”

Construction insurance specialists like XL have had to refocus policies and find more flexible coverage options for this class.

One such product was the Builders Risk and Installation Coverage Solutions (BRICS) that the carrier launched last year.

The policy covers more types of property, including landscaping, sings and temporary

structures; property at more locations; and business personal property that supports the buyer’s operation. The policy also covers different types of projects like new construction, renovation, rehabilitation, alteration or additions to installation, repairs, improvements, erection, rigging or millwright.

“This kind of product is nimble enough to insure any type of work a contractor or owner is performing,” says McGinley.

‘Pay as You Go’ Insureds have also been understandably concerned about costs. Not as much building meant not as much money coming in, continued on page 23 www.insurancejournal.com

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SPECIAL REPORT

Contractors & Builders continued from page 20

and made paying for necessities like insurance very difficult.

Coventry Risk Specialty, a managing general agency that focuses on the construction industry, launched a “pay as you go” product for residential and commercial contractors with Prosight Specialty Insurance in June to address that issue. The new Builders Reporting Policy (BRP) provides additional cash flow for contractors and builders with a low deposit premium and the option to defer payment for completed operations coverage and structural defect warranty coverage until the time of sale. The coverage is also available for builder’s risk.

The program targets residential and light commercial general contractors and developers for designated projects and wrap-ups. Builders have the option to only pay the premise operation premium at policy inception and then upon the sale of the scheduled home or unit, the builder can use the funds from the sale available to pay for the completed operations coverage, which is provided on a per structure basis.

Coventry Risk Specialty President Randy Roppelt says they launched the coverage to help insureds deal with the financial burden imposed upon them as a result of the recession.

“Cash flow has become paramount,” says Roppelt. “The bottom line to the builder is that his outflow of personal funds is minimized and the majority of the CGL policy cost will come from funds received by the builder from the sale.”

ProSight Specialty utilizes Lloyd’s paper for this program and distributes it exclusively through Coventry Risk.

Mary Hughes, niche president who oversees ProSight’s construction programs, says even though construction projects have started up again, contractors and builders are still watching the bottom line closely.

“Contractors are always very aware of their cash flow needs, that piece is always there,” she said.

Flexible Payment Options Other industry specialists agree that despite improvements, the construction www.insurancejournal.com

the shift they saw occurring in the contracsegment isn’t out of the woods, and just tors market. as their insurance needs of this class have “We studied the market and we saw a changed, so have its buying habits. lot of start-up companies that came from “We have seen an increase in request for the ashes of the bad economy. All of these flexible payment plans, or insureds asking entrepreneurs had left the big [building] for installments instead of paying the precompanies and needed programs that had mium up front and we have been willing to lower minimum premiums than a traditionwork with them on that,” says Annemarie al program,” he says. “Because of where we Elder, chief underwriting officer for XL’s were in the economic cycle, a big homeInland Marine division. builder was going to do 100 units instead of George Dale, president of Cove Programs 1,000. Traditional programs left people out.” in Los Angeles, says they have presidents XL is also focused on other ways to help of contracting companies involved in the contractors get back on their feet while still insurance purchasing process — scrutiprotecting the insurer’s bottom line. Elder nizing every coverage and consulting with says many contractors have put equipment insurance experts to squeeze out every maintenance on the back burner to save penny — a rare occurrence before 2007. money, so expensive equipment hasn’t been “While the volume has increased, the properly serviced for years and may need buying habits of insureds — for homerepairs. The carrier is looking to address building especially — are still as if it is the this through coverage and onsite inspecrecession. Contractors are doing pretty well tions. right now and have Construction insurance “Maintenance had a couple really is expensive and good years, but they specialists have refocused are still counting policies to find more flexible contractors have cut down on their mainevery penny,” he coverage options. tenance budget. For says. some of the larger equipment loss control is That’s why a big aspect of Cove Programs’ going to be critical, so we are going out and product expansion last year included offerlooking at the condition equipment is in,” ing a flexible policy structure for smaller she says. builders. It offers general liability and Cove is also focused on how to help prebuilder’s risk insurance on an annual, mulpare clients for the construction increase, tiple year or project basis for single-family says Dale. They most recently wrote a book detached, attached housing and apartment for clients called “Ramping Up Without projects. The form was designed specifiMessing Up” to help this segment focus on cally for residential operations including quality and prevent losses. Dale says conconstruction defect exposures. Dale says tractors and builders are now looking for they experimented with different payment insurers that aren’t going to tell them how structures, but ultimately found that indito run their business. “Everyone says the vidualizing a program for specific accounts market is getting better, but the builders was a better option. still need customized approaches,” “We asked ‘how long will it take you he says. build 100 homes and sell them?,’ looked at their projects in the pipeline and built insurance around their business plan, rather than trying to squeeze their business plan into a one or two year policy period,” he says. “That flexibility is needed in a dynamic economy.”

Dale says they formed Cove Programs back in 2011 to respond to

SPECIAL REPORT

Contractors & Builders

By Andrea Wells

T

here’s a new norm in the construction market — a new normal when it comes to measuring growth and opportunity.

Construction has made a comeback in certain market segments, said Cam Dickinson, senior vice president of San Francisco, Calif.-based Woodruff-Sawyer’s construction group. But it’s not going to comeback like it was in the good-old days.

“It’s like the new norm,” Dickinson said.

“The majority of contractors have readjusted and there’s cautious optimism, but there’s a new normal in construction.”

However, not every contractor made it through the tough days of the recession. But those that survived have made adjustments and appear to be in a better position today than before, Dickinson said.

McGraw Hill Construction 2014 Dodge Construction Outlook predicts that total U.S. construction starts for 2014 will rise 9 percent to $555.3 billion, higher than the 5 percent increase to $508 billion estimated for 2013.

The construction industry has definitely made a comeback, said William Blanchard, managing director, construction and bonds for Texas-based Higginbotham & Associates. “Those that made it through the hard times are in better shape,” Blanchard said. “Some of those contractors that failed have only created a healthy market for those that survived.”

While 2013’s construction market was “mixed” but “positive,” Brian Schofield, senior managing director and construction 24 | INSURANCE JOURNAL-NATIONAL November 18, 2013

practice leader for Crystal & Co., a national risk management and insurance brokerage headquartered in New York, believes in many parts of the country the construction industry has made a roaring comeback.

“Anyone you talk to would say that they are surprised that residential construction — high rise and midrise — has made such a roaring comeback after the 2008 financial struggles,” Schofield said. “Right now Miami is going like gangbusters.”

New York City is also incredibly hot, according to Schofield, despite challenges in that area with ongoing litigation involving Labor Law 240.

“We had a project (in New York City) that literally the penthouse went for the full value of the gut renovation and that left the other 17 floors as a profit,” he said.

In his view, East Coast urban centers are hot for construction as well as the entire Florida market. He also sees Houston as an up-and-coming construction center going into 2014.

In Arizona, things have just begun to rebound for construction, said Dennis Tsonis, vice president, Lovitt & Touché Inc., which has offices in Phoenix, Tucson and Las Vegas, Nev. “It’s starting to rebound but it’s a mixed bag,” Tsonis said. “It depends on the type of construction. We are seeing that most of our clients are projecting increased payroll and sales but it’s modest for the most part.”

Tsonis says that in his region residential is starting to heat up again. “At the peak (of the construction boom), Arizona had about 60,000 new home starts a year; that dropped to the 8,000-home range but it’s

starting to climb.”

Habitational is kicking up for the apartment sector as well, Tsonis added. “That’s been doing quite well for the last couple of years and seems to be going strong.”

One area that doesn’t seem to be making much headway in Arizona is commercial.

“We are still very overbuilt when it comes to commercial space and offices,” he said.

For the Northeast, in particular the New England area, construction’s comeback hasn’t been as optimistic.

Dave Byrne, bond manager and vice president at Starkweather & Shepley based in East Providence, R.I., said the rebound in construction has yet to hit his part of the country.

In 2013, there was a slight rebound in construction in New England, but construction insurance sales have still been disappointing, Byrne said. “It’s nowhere near where it was before the recession, and the industry hasn’t rebounded as well as we would like to have seen.”

There are some bright spots, particularly the downtown areas of Boston and Cambridge, he said. However, the farther away from downtown, the less new construction is seen, he said.

Growth Opportunities For agents and brokers writing business in construction the biggest growth opportunities will come from private sector projects, said Bret Lawrence, vice president of construction for Woodruff Sawyer.

That includes the life sciences industries and the healthcare sector, private user developers, high-density residential projects www.insurancejournal.com

and private schools, Lawrence said.

“The residential private side is going gangbusters in the Bay Area and downtown San Francisco,” Lawrence said. “The metropolitan areas and urban high-density populations are experiencing significant growth and will continue to in 2014.”

Of course, Lawrence added, the growth trends are nothing compared to the hay-day of the pre-recession construction boom. “It’s nothing like it was, but from a percentage standpoint there is growth from 2008, 2009, and 2010, but it’s all comparative to what you had in the pre-recession days.”

“Generally speaking the construction market is healthy,” said Mary Ann Kartheim, senior vice president and unit manager at Lockton Cos. in Kansas City, Mo. Kartheim says she expects that the construction industry will continue to see investments in the healthcare and education sectors.

“I think we’ll still see improvements in those areas for the next couple of years,” she said. “Education and healthcare will steadily improve.”

Crystal & Co.’s Schofield sees four sectors that are “on fire” in the construction business and expects continued growth in these areas in 2014.

One hot area is colleges and universities, but anything in the healthcare arena will be hot next year as well, he said.

“Whether it’s hospitals, biotech, or pharmaceuticals … all of that,” Schofield said, but also the “oil patch” or anyting related to oil and gas industries.

“That never saw any stop in 2008. That industry just continued to see investments,” he said.

Lastly, Schofield predicts continued growth in the vertical condominium arena for metropolitan areas.

Insurance Market Aside from workers’ compensation, most lines of coverage in the construction insurance market remain stable, the experts said.

“Across the board insurers have been looking to improve their position through requests for rate increase, but not in the www.insurancejournal.com

double digits,” said Lockton’s Kartheim.

Rate increases on most construction accounts she works with range from a mere 3 percent to 5 percent. “For the most part increases are slow and steady,” she said.

In workers’ comp, which has traditionally been the loss leader in construction, there has been some rate strengthening, she said.

In California, Woodruff Sawyer’s Lawrence says contractors have experienced a definite hardening in the workers’ comp market.

“Some carriers, particularly Travelers, have been at the forefront to push rate,” Lawrence said. “But now we are starting to see them flattening a little bit with their pricing with respects to package policies.”

On the property side, Lawrence sees a lot of capacity in the market, however it depends on the risk. “But in general it’s still a pretty fluid market. Not seeing significant increases there at all, usually flat.”

Those construction firms that remain well managed with good loss history and good safety policies still have options when it comes to insurance, Dickinson said.

For those accounts, carriers are a lot more receptive to keep premiums as flat as possible, he said.

In Texas, Blanchard sees carriers are positioning

themselves for slight increases in construction premiums. “However those insureds that do a good job with loss control, contract review, and risk management service are in good shape.

“I personally haven’t seen more than about a 5 percent increase on any of my construction accounts and expect that to remain the case going into 2014,” Blanchard said. Of course, poor loss history supersedes all else.

Starkweather & Shepley’s Byrne says the contractors that successfully survived the recession are wiser today than they were five years ago. “In fact the contractors that are still in business are truly better business risks.”

November 18, 2013 INSURANCE JOURNAL-NATIONAL | 25

SPECIAL REPORT

Contractors & Builders Streamline Coverage through a Controlled Insurance Program

C

onstruction sites can be a flurry of activity. In addition to focusing on quality construction and completing projects on time, site owners must be sure risk management measures are sufficient. A Controlled Insurance Program (CIP) can be tailored to meet the complex needs of a site, ensuring adequate coverage is provided for all involved

By Colleen Aegerter parties.

Traditionally, owners and contractors depended on contractual risk transfer to pass risk to appropriate contractors or subcontractors. However, contractual risk transfer is growing less reliable. Some state statutes limit the transfer of liability from one party to another. There are more than 400 different additional insured endorsements used by various carriers that can limit coverage provided. These factors make it difficult to determine if a contractor or subcontractor has adequate coverage.

Some subcontractors may think their blanket additional insured endorsement automatically provides the additional insured wording required in their contract for both premises and completed operations coverage for all upstream parties.

Their certificate of insurance may indicate the subcontractor meets the requirements in the contract, but the policy may not provide coverage. The additional insured endorsement may only provide ongoing operations coverage for the immediate upper-tiered subcontractor who holds their contract. Upstream owners and contractors and completed operations coverage may not be provided.

The Insurance Services Office Inc. (ISO) updated the commercial general liability policy form and endorsements effective April 2013. The updates are meant to clarify the original intent of policy language as a result of courts misconstruing the intent regarding additional insureds as well as

26 | INSURANCE JOURNAL-NATIONAL November 18, 2013

policy terms, conditions and limits subject to a third-party contract. Some carriers are adopting the new ISO additional insured endorsements, while others continue to use older versions or their own manuscripted additional insured endorsements. To further complicate matters, some of the new ISO wording creates new challenges.

Clearly, insuring a construction project site is very complex. How can a general contractor or owner be sure they are protected from potential pitfalls?

A Controlled Insurance Program (CIP), also known as Contractor-Controlled Insurance Program (CCIP), OwnerControlled Insurance Program (OCIP) or Wrap-Up, assures adequate coverage is being provided for a construction site. The sponsor of the CIP can be the construction manager, general contractor or owner.

Under a CIP, all enrolled contractors or subcontractors at the project site receive general liability, excess and, in many cases, workers’ compensation coverage. These coverages can be tailored to meet the needs of a specific site or project. A CIP can cover a single site, typically a large project or multiple sites. Alternatively, a rolling CIP is based on a projection of expected work to be completed over a period of time, typically three years with an extension to complete projects started during those three years. A minimum project size for enrollment into a rolling CIP is required by carriers, usually between $10 million and $25 million. The total of all projects must exceed $100 million.

Some of the many advantages of using a CIP are: • The sponsor and all enrolled contractors/subcontractors are named insureds, not additional insureds.

• Extended completed operations coverage is provided for 10 years or through the state’s statute of repose, whichever is less.

• The policy limits for a project, including all enrolled contrac-

tors/subcontractors, are determined by the sponsor, ensuring all tiers have adequate coverage.

• When subcontractors bring their own insurance to the project site, their limits may be impaired by losses at other project sites. The CIP provides unimpaired limits for each project site.

• There are no subcontractor hidden policy exclusions that may not appear on a subcontractor’s certificate of insurance.

• The sponsor controls contract language that requires direct contracts to pass down to all tiers of subcontractors.

• The sponsor controls the implemented safety program for the entire project.

• All enrolled contractor/subcontractor claims are paid by one carrier. This avoids disputes between carriers that could damage relationships with a subcontractor and/or slow the timeline.

• Cross litigation is reduced by having all claims paid by the same carrier.

• When the workers’ compensation coverage is provided in the CIP, action over claims are reduced.

With the current challenges of contractual risk transfer, CIPs are a practical way to ensure all subcontractors have the proper coverage to protect a worksite.

Aegerter is a vice president, CIP account executive for Lockton Cos.

www.insurancejournal.com

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SPECIAL REPORT

Top 50 Personal Lines Leaders

Personal

About the Personal Lines Leaders: The 2013 Personal Lines Leaders in this special feature are taken from Insurance Journal’s Top 100 Property/Casualty Independent Agencies as reported in August. This list utilizes only the 2012 personal lines numbers of the privately owned agencies and brokerages that submitted data to the Top 100 agencies report. For more information on Insurance Journal’s Top 100 Property/Casualty Independent Agencies list, contact awells@insurancejournal.com.

Lines Leaders Top 50 Personal Lines Agencies Ranked by Total 2012 Personal Lines Revenue

2013 Rank Agency Name

2012 Personal Lines P/C Revenue

2012 Total P/C Revenue

2012 Total Other than P/C Revenue

2012 Total P/C Premiums Written

2012 Other than P/C Premium

No. of Employees

1 HUB International Ltd. 2 Confie Seguros Holding Co. 3 USI Insurance Services 4 AssuredPartners Inc. 5 TWFG Insurance Services 6 Crystal & Co. 7 Leavitt Group 8 PayneWest Insurance 9 Momentous Insurance Brokerage 10 Celedinas Insurance Group 11 Marshall & Sterling Enterprises Inc. 12 TWG Insurance 13 J. Smith Lanier & Co. 14 Starkweather & Shepley Insurance Brokerage Inc. 15 John M. Glover 16 Lawley Insurance 17 Rogers & Gray Insurance Agency 18 Cook Maran & Associates Inc. 19 Professional Insurance Associates Inc. 20 Mesirow Insurance Services 21 INSURICA Insurance Management Network 22 Higginbotham 23 The Horton Group Inc. 24 Gowrie Group 25 Otterstedt Insurance Agency 26 Bainswest Inc. 27 Ascension Insurance Inc. 28 Sihle Insurance Group 29 Risk Strategies Co. 30 Haylor, Freyer & Coon Inc. 31 Robertson Ryan & Associates Inc. 32 GNW-Evergreen Insurance Services LLC 33 SouthGroup Insurance 34 Eagan Insurance Agency 35 Frenkel & Co. 36 Alliant Insurance Services Inc. 37 Bouchard Insurance 38 Advanced Insurance Underwriters LLC 39 Dean & Draper Insurance Agency LP 40 Charles L. Crane Agency 41 Hylant 42 Propel Insurance 43 Shepherd Insurance LLC 44 Scirocco Financial Group Inc. 45 Insurance Office of America 46 Heffernan Insurance Brokers 47 Bowen, Miclette & Britt Insurance Agency LLC 48 The IMA Financial Group 49 The Daniel and Henry Co. 50 LMC Insurance & Risk Management Inc.

$210,107,314 $200,000,000 $61,101,874 $34,652,800 $25,086,409 $22,537,580 $22,325,071 $14,395,000 $13,809,605 $12,013,228 $11,890,777 $10,381,000 $8,783,000 $8,000,000 $7,500,000 $7,088,701 $7,052,700 $7,000,000 $7,000,000 $6,867,177 $6,831,240 $5,990,000 $5,838,940 $5,359,596 $5,229,143 $5,115,127 $5,055,000 $4,970,288 $4,900,000 $4,900,000 $4,808,291 $4,692,000 $4,266,210 $4,264,282 $4,230,131 $4,194,100 $4,181,689 $4,122,000 $4,010,091 $4,000,000 $3,914,160 $3,450,000 $3,200,000 $3,183,035 $3,137,252 $3,062,954 $2,980,791 $2,746,483 $2,737,000 $2,691,684

$749,731,437 $205,000,000 $334,907,369 $173,264,000 $34,286,905 $45,428,260 $119,859,378 $65,667,300 $23,087,548 $13,662,398 $44,821,461 $10,786,000 $80,460,000 $30,000,000 $16,750,069 $28,159,229 $11,553,900 $29,000,000 $29,000,000 $60,129,731 $59,656,368 $49,291,000 $30,103,935 $16,911,537 $11,910,698 $29,675,190 $33,086,000 $18,602,500 $37,250,000 $23,500,000 $29,574,246 $13,215,000 $13,189,590 $10,731,091 $40,233,765 $331,170,100 $21,488,075 $23,650,000 $11,926,933 $30,000,000 $66,464,177 $34,500,000 $9,450,000 $18,251,116 $87,425,201 $71,558,734 $33,284,111 $83,171,487 $14,289,000 $23,534,527

$153,461,485 $3,000,000 $377,638,888 $66,171,000 $1,371,476 $50,632,383 $65,938,315 $21,153,900 $3,797,108 $433,162 $7,226,068 $0 $32,068,000 $0 $550,000 $16,050,964 $1,975,000 $8,000,000 $0 $26,953,851 $14,955,463 $42,814,000 $16,687,697 $1,142,373 $947,275 $9,033,251 $44,664,000 $1,732,483 $7,900,000 $3,500,000 $3,063,670 $2,454,000 $1,837,317 $1,274,017 $20,559,941 $175,022,000 $7,112,941 $0 $3,169,675 $0 $26,729,112 $11,900,000 $3,750,000 $2,183,383 $9,487,676 $13,048,592 $9,534,163 $18,363,428 $5,102,000 $8,766,655

$5,554,900,760 $530,000,000 $3,068,345,869 $1,750,114,141 $267,000,000 $380,595,943 $1,089,630,718 $682,456,200 $139,816,167 $122,146,217 $276,080,369 $60,226,000 $1,150,000,000 $261,000,000 $120,000,000 $211,292,858 $79,518,000 $177,000,000 $225,000,000 $479,437,312 $450,439,083 $429,370,130 $252,698,607 $179,575,000 $89,605,322 $222,987,050 $236,703,000 $176,982,059 $498,500,000 $174,000,000 $230,000,000 $102,380,000 $138,768,888 $84,712,797 $332,002,359 $4,076,090,380 $199,517,875 $215,000,000 $98,016,401 $182,000,000 $709,986,000 $280,000,000 $70,000,000 $128,700,000 $891,935,779 $559,323,490 $351,922,073 $865,000,000 $111,374,000 $228,704,090

$2,792,156,816 $0 $6,446,262,214 $832,000,000 $5,340,000 $731,895,675 $939,288,340 $236,512,000 $45,252,970 $9,176,453 $176,992,678 $0 $665,000,000 $0 $1,000,000 $544,233,598 $33,032,000 $107,000,000 $0 $973,403,026 $144,582,863 $835,963,000 $271,866,100 $38,079,100 $846,242 $116,233,269 $423,697,000 $10,630,000 $280,650,000 $89,000,000 $48,000,000 $46,261,000 $14,891,894 $10,250,000 $304,676,739 $2,728,697,800 $129,091,487 $3,500,000 $53,734,027 $4,000,000 $726,205,000 $187,000,000 $122,000,000 $48,519,623 $148,115,108 $164,477,903 $127,199,645 $525,000,000 $72,793,000 $149,355,223

6,148 2,126 3,316 1,326 75 450 1,463 645 145 116 365 100 554 186 150 311 115 150 50 315 410 543 255 130 100 272 433 162 190 198 210 93 175 78 233 1,508 200 157 108 240 618 212 121 130 655 425 218 482 171 174

28 | INSURANCE JOURNAL-NATIONAL November 18, 2013

Main Office

Web site

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www.hubinternational.com www.confieseguros.com www.usi.biz www.assuredptr.com www.twfg.com www.crystalco.com www.leavitt.com www.paynewest.com www.momentousins.com www.celedinas.com www.marshallsterling.com www.twginsurance.com www.jsmithlanier.com www.starshep.com www.johnmglover.com www.lawleyinsurance.com www.rogersgray.com www.cookmaran.com www.piainc.com www.mesirowfinancial.com www.insurica.com www.higginbotham.net www.thehortongroup.com www.gowrie.com www.otterstedt.com www.bainswest.com www.ascensionins.com www.sihle.com www.risk-strategies.com www.haylor.com www.robertsonryan.com www.gnw-eg.com www.southgroup.net www.eaganins.com www.frenkel.com www.alliant.com www.bouchardinsurance.com www.advancedins.com www.deandraper.com www.craneagency.com www.hylant.com www.propelinsurance.com www.shepherdins.com www.sciroccogroup.com www.ioausa.com www.heffins.com www.bmbinc.com www.imacorp.com www.danielandhenry.com www.lmcins.com

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Since 2006, charges of employment discrimination filed

Claims are up.

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Go to www.privatecompanyinsurance.com.

And learn more about the coverage your customers want, with flexibility they need.

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*Information accurate as of September 2013.

The Hartford® is The Hartford Financial Services Group, Inc. and its subsidiaries including issuing companies Hartford Life Insurance Company and Hartford Life and Accident Insurance Company. Home office is Hartford, CT. Insurance is provided by the property and casualty insurance companies of The Hartford Financial Services Group, Inc. © 2013 The Hartford Financial Services Group, Inc. All Rights Reserved.

IDEA EXCHANGE

Growing Your Property Casualty Agency Direct Interested Sales Leads to the Right Agency Employee

S

ales leads arrive at today’s property/ casualty agencies from a variety of digital and traditional sources. The former includes social media, websites, blogs, emails, etc. The latter features direct mail, telemarketing, print advertising and more.

Leads also arrive from client and company referrals, walk-ins, and as a result of just being in business. These opportunities are essential, but what’s even more

By Alan Shulman important than their birth method is how they are distributed and employed.

Call-to-Action Everything starts with the call-to-action featured in your outbound marketing. If you use your firm’s Twitter account to encourage followers to contact “the agency” by phone or Web visit, then this is the action you seek. Ditto with all other agency promotions, regardless of whether you employ digital or traditional media. The optimal result is a steady flow of leads arriving at “the agency,” some of which employees convert into sales. This seems reasonable, but in practice, if all incoming sales leads go to “the agency” (as in the Twitter example) instead of to pre-selected staff, problems can occur.

Avoid Lead Leakage Never be casual when it

comes to the management and distribution it. Here’s a starter set of six ideas. of active leads. Too often these vital tasks Create the position of “lead czar.” A veteran are left to the discretion of the receptionist staffer or dedicated marketer gets all undior another low-level staffer because interrected incoming leads. The czar promptly ested shoppers who contact assigns each prospect to the Never be casual “the agency” have no one speright agent or rep, and follows cific to ask for. This default when it comes to up to make certain they are the management acted upon. approach results in lead allocation based on whoever and distribution of By promo. Don’t simply is around, or worse, favorinvite prospects to contact active leads. itism, instead of directing “the agency” for a quote. each policy inquiry to the pro most capable Instead, prominently feature the name of converting it into a sale. It’s a dangerous and contact data of an individual proomission in top-level planning that results ducer in your promotion’s call-to-action, in missed opportunities. The resulting as in Contact Ernest Agent … This way, damage is more than lost revenue; your leads resulting from specific campaigns go office appears to be disinterested in writing straight to the agent. new business (or worse). Such perceptions By source. It’s widely believed that young adversely impact your firm’s image and can producers and digital media are joined at generate unfavorable online comments. the hip. So be hip and direct some or all online leads to your youngest qualified Lead Distribution System agents. Ditto with leads from traditional media; let mature producers develop them.

To properly develop incoming leads, By key characteristics. Personal lines examestablish an internal system that quickly ples: Drive motorcycle leads to staffers triages and assigns new business prospects who ride, float watercraft leads to boaters, upon their arrival. There are many ways to send high-value personal lines leads to your strucbest-suited agent, etc. In commercial lines, ture assign leads to the producer whose expertise best matches with the prospect’s industry, group, or other identifying attribute.

Referrals. When a current client refers a new prospect, direct that individual or business to the referrer’s own CSR or producer. When an insurer, another agent or a sponsoring group refers a lead, send that party to staffers pre-assigned to the source.

Existing insureds. Direct all current client sales inquiries to their present producer or CSR. For house accounts where no one is assigned, pilot the person to the most qualified rep or agent.

Shulman is the publisher of Agency Ideas, a subscription-only sales and marketing newsletter.

He is also the author of the many tools posted on the Agency Ideas Instant Download Store. Phone: 800-724-1435. Email: alan@agencyideas.com. Website: www.agencyideas.com.

30 | INSURANCE JOURNAL-NATIONAL November 18, 2013

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IDEA EXCHANGE

The Competitive Advantage Carrier Disintermediation of Agencies

A

companies are not stupid. They multitude of forces are causing many understand the consumer very carriers to think of ways to disinterwell and if the agents are not mediate agencies. Healthcare reform is one. going to fill this need, the smart Some benefits carriers companies will take over. have cut commissions Another fact driving carriers to 0 percent and agents to disintermediate agencies is are still writing with the profit compressions some them. This fact must have carriers (not all by any means) caught the attention of are experiencing. The sufferers at least a handful of P/C

By Chris Burand are examining every tenth of carriers. They have to be a percent because the “hard” studying whether they can find a way to market is not turning out to be cause agents to sell policies for free, too. that hard. In fact, by most defi Affordable Care Act (ACA) advertising is nitions, the market is not even causing another branding change. One of hard as a whole, just average. their tag lines that is getting much press The result is the suffering companies are and attention is, “When insurance compaconsidering alternatives to paying 12 pernies compete, you get a better deal.” How cent to 16 percent commission rates. does this work? By creating an electronic For other carriers, their thoughts of exchange. disintermediation are driven by fear. They A study first published approximately 15 truly fear losing control of their books. years ago, way before the internet had any They fear agents can get to all market segeffect on the selling of insurance policies, ments, which is true. They fear too much proved that consumers wanted and valued agency business will be the opportunity to controlled by brokers buy insurance through For carriers that want a true legacy of success, and aggregators and agents that represented multiple carriers. squeezing out the middle banks. For others, they fear agents are too When surveyed if man is not the solution. truly easily swayed by other independent agencies companies promising low rates and great could do this, less than 50 percent of the benefits. The difference in rates in specific independent agents’ own customers knew geographies and lines between some carrithey could! Now a generation of consumers ers, especially some newer carriers and time is being taught that the only way to choose tested carriers, is significant today. The between carriers is through an electronic older carriers’ fears are reasonable. exchange. I have news for independent agencies. Insurance companies do not need Carrier Investments agencies to run an electronic exchange.

Regardless of the driver, companies want Independent agencies had a great much greater control of their books. They advantage they blew by not adequately have invested too much money to see their branding and advertising a key competitive investment wasted and control lost. So their advantage. Simply giving everyone a choice goals and fears should be taken quite seriof carriers/quotes would have distributed ously. To most agents, the carriers’ substanthe message more effectively. Many carritial investment is invisible so where exactly ers understand this today and are taking have they invested money? advantage of the void created. Pricing flex Developing an agency force. This is a large ibility is one takeoff of this. Showing other and primary investment. companies quotes when using a single com Service centers. Companies have not pany’s website is another example. These 32 | INSURANCE JOURNAL-NATIONAL November 18, 2013

created service centers as charities. Have you ever tried to move a large book from a service center when the service center, not the agency, is truly doing the work? If you have, you know most agencies will not have the staff to move the business easily. This control gives the carrier several advantages.

Retention should increase. The ability to make rate increases stick should improve too. In fact, some companies may discover it worthwhile to raise rates even higher than normal because with more persistence, they may achieve more revenue with less account loss.

Buying agencies. A number of insurance companies are buying agencies quietly to control their books. In some cases the purchase is an outright purchase of all or part of the agency. In other cases, they find a friendly agency to do the purchases for them with their money.

Direct writing facilities. If I am not mistaken, every large national carrier except maybe one has some kind of direct writing facility today. Some are small and some are huge.

Whether these efforts work for companies in the long run is immaterial to agents today. Agents must protect themselves today rather than waste more good opportunities.

First, make sure your brand and your advertising shouts that you are the www.insurancejournal.com

exchange. You are the marketplace. Explain what that means to consumers.

Second, then follow your brand. I meet agencies all the time who advertise multiple markets but only give quotes/proposals for one company. Others do not proactively work renewals. The fact you represent multiple companies is a moot point if you do not use them. Keep in mind, this does not mean blocking the market or quoting every company. That is the opposite end of bad management. Every study and every experienced person knows that only two or three markets are appropriate for any given risk.

Just work with those markets.

Third, do something a computer cannot do. A computer can provide a quote faster and more accurately than a person. A person is completely unnecessary today for quotes of most personal lines and many commercial accounts. A computer does not have vacation days, bad days, crying days, or interoffice politics and it does not need raises. Anything a computer can do will be moved to computers as fast as the companies can move these duties. However, computers do not listen and educate and understand the nuances of clients’ needs.

Understanding clients’ needs on a personal level is a crucial advantage unique to agencies. Build on your unique abilities rather than trying to compete with computers for fast quotes. That is a losing battle.

Squeezing Agents Carriers might consider whether it is worth the expense and control savings by squeezing agents’ commissions. I am not sure this is the best solution or even a good solution. When a company grabs for control of a book of business it is because they do not have enough to offer the consumer.

They are trying to chain the customer to them rather than offering the quality that generates customer and agency loyalty.

Ultimately customers are going to leave an unspectacular carrier anyway so buying customers is, at best, a temporary solution.

I do not see many companies using this strategy that understand this point. There are approximately 1,000 P/C carriers doing business in the U.S. With 999 competitors, trying to chain customers to a carrier rather www.insurancejournal.com

(global distribution systems). These are the computerized ticketing/reservation systems you know by cute names. It is one thing for a huge airline to negotiate with Ma & Pa travel agent. It is totally different negotiating with a billion-dollar company that controls one of these systems.

than providing great products, service, and rate is a losing strategy.

If the companies are trying to squeeze out the middle man, the agent, to save money, they might review the results of airlines and travel agents. The airlines squeezed out travel agents to save money, but what replaced them? Behemoth GDS

continued on page 35

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www.insurancejournal.com

continued from page 33 I work with agents and brokers of all sizes. The travel agent comparison is valid.

Companies have much more flexibility and control over small agents than they have and will have with a few huge brokers/ aggregators.

For carriers that want a true legacy of success, squeezing out the middle man is not the solution. Innovations that more accurately price the product and address the clients’ needs are the keys. Insurance is obviously based on the law of large numbers, which inherently means policyholders with losses are subsidized by those without losses in any given year. What really happens is that the best accounts continually subsidize the worst.

Pricing correctly and being the first to do so causes the best risks to migrate and yet their rates still do not have to be set at the bottom. The rates only have to decrease enough for them to move.

Typically this is 10 percent. The carrier that moves first gains market share for the best drivers while still making more money.

Simultaneously, the competition suffers adverse selection. At its best execution, it is conceivable a smart company could eliminate competition this way — without buying anyone or cutting commissions.

Connecting with quality agents reduces cost rather than increasing expenses.

Contingencies, regardless of how companies budget contingencies, are always cheaper than commissions.

Product innovation is an option too.

People think poorly of insurance, but why not give them something positive before a loss for their premium dollars?

Carrier disintermediation then is not just about companies disintermediating agencies, but they themselves being eliminated.

The industry is changing quickly. Grasping for straws by sticking to the old ways is not a good option unless you plan to retire soon. On the other hand, the opportunities are the best ever for those proactive people willing to actually give the consumer what they have been saying they want for decades.

Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719485-3868. E-mail: chris@burand-associates.com.

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Advertisers Index Readers, browse, contact, or do product searches on any of our full page advertisers at: www.insurancejournal.com/adshowcase/ ACE Insurance www.acelimited.com 17 Agent Support Network of America www.asnoa.com 3 American Reliable www.assurantspecialtyproperty.com 22 Applied Underwriters www.applieduw.com 2, 40 Ashley General Agency www.ashleyga.com SC1 Astonish Results www.astonishresults.com

W4; SC2; SE2; E2; M2 Catlin US www.catlinus.com 21 Century National www.cnico.com W7 Chubb www.chubb.com 11 City of Hope www.cityofhope.org 36 FEMA www.agents.floodsmart.gov/ij 19 First American Specialty Insurance Company www.firstam.com W5 IICF www.iicf.org W2; SC4; SE3; E3; M3

Insurbanc www.insurbanc.com 33 ISU Group www.joinisu.com 31 M.J. Hall & Company, Inc. www.mjhallandcompany.com W6 Midlands Management Corporation www.midlandsmgmt.com 35 Monarch E & S Insurance Services www.monarchexcess.com W3 NBIS - NationsBuilders Insurance Services, Inc. www.nbis.com 34 PersonalUmbrella.Com www.personalumbrella.com 5 QBE www.qbededicated.com 7 SIAA www.siaa.net 27 The Hartford www.privatecompanyinsurance.com 29 Zurich Insurance Group www.zurich.com/internationalprograms

13, 15

November 18, 2013 INSURANCE JOURNAL-NATIONAL | 35

greg case

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Closing Quote 1. Testing is critical.

It’s clear at this point that one of the principal causes of the FFM’s launch issues was that there was inadequate testing done and that HHS representatives pushed forward with the FFM’s Oct. 1 “go live” date even though they knew that major problems existed. Any PR benefits from meeting the Oct. 1 deadline were wiped away by the frustration experienced by millions of Americans when they attempted to use the non-functioning website.

Recently the IAIS has rolled out its own plan for field testing elements of ComFrame. However, there are suggestions that field testing should be abbreviated and pre-conceived notions on what outcomes are likely. Those are mistakes. We must allow for sufficient “beta testing” in real-world operational and regulatory environments and be prepared to make extensive changes if necessary.

Obamacare Woes: Lessons for IAIS

G

By Michael F. Consedine

lobal insurance regulators are hopefully paying attention to the fizzling noise coming out of Washington, D.C. It’s the sound of the centerpiece of the President’s signature healthcare law failing to properly launch.

As with any failure though, there are lessons to be learned for the regulatory “engineers” currently toiling away on another ambitious project, the International Association of Insurance Supervisors’ (“IAIS”) Common Framework for the Supervision of Internationally Active Insurance Groups (“ComFrame”). While they differ in their ultimate objectives and sector focus, both the Affordable Care Act (“ACA”) and ComFrame are centered on a common political design of driving enhanced government regulation through centralized and uniform regulatory structures.

The ACA and ComFrame share laudable and ambitious objectives, but concerns exist on whether their design and implementation will truly advance those goals. What occurred with the Federally Facilitated Marketplace’s launch this October carries with it a multitude of political and technical lessons learned for state, national and international insurance regulators looking to implement new global solvency regimes. Here are just three simple, practical takeaways:

38 | INSURANCE JOURNAL-NATIONAL November 18, 2013

2. Keep it simple.

According to recent articles, the 500 million lines of computer code written for the Obamacare software are about five times longer than the average major bank’s operating code. That complexity is turning out to be another fatal flaw for the FFM. Consumers are being turned off by the layers of log-in, account creation, account verification, and eligibility hoops they must jump through.

The FFM cannot be all things to all people. Likewise, ComFrame should not try to be all things to global insurance regulation. The recent slimming down of the ComFrame document and discussion of focusing on basic capital requirements are encouraging signs.

3. Flexibility is crucial.

While the federal FFM has been a debacle, state versions of health insurance marketplaces, where they were plausibly created and tested, have had more success although in all cases concerns continue to exist about the affordability of the products being offered.

The reason states achieved greater lift-off was that they had experts at the local level who had the flexibility to design their sites in ways tailored to the unique demographic and legal environments in that state.

The IAIS has said that ComFrame will also employ an outcomes-based approach that takes into account local legal and cultural variances. True flexibility will be critical. As the FFM has clearly demonstrated, a one-sizefits-all, centralized system is prone to mission failure in a diverse global environment.

Consedine is insurance commissioner of Pennsylvania and a member of reinsurance subcommittee at International Association of Insurance Supervisors.

www.insurancejournal.com

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