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HURRICANE CLAIM FORECAST Revisiting Coverage Issues
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WORKERS’ COMP TRUSTS What Agents Need to Know
VIOLATING PEOPLE’S TRUST Florida Slaps Rogue Insurer
Walter Curtis, Master Machinist. Known for his laser-like precision on the milling machine. Expects the same accuracy from his workers’ compensation provider.
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Inside This Issue April 6, 2009 • Vol. 87, No. 7 • Southeast Region
SOUTHEAST COVERAGE 8
| North Carolina Challenges 1.4% Auto Hike State Actuaries Question Reinsurance Costs Folded Into Rate
8
| Florida Denies State Farm Hearing on Withdrawal Plan Says Insurer Failed To Show How It Would Be Harmed By Plan
8 Back to the Beach
8
45 Cat 5 Litigation in Forecast? 2008 and Upcoming Hurricane Seasons Revive Katrina Coverage Issues
NATIONAL COVERAGE N1 | Study: Compensation Not Key Factor In Agency Satisfaction J.D. Power Says Satisfaction Linked To Business Sent To Insurers
| Auto Loan Delinquency Rate on the Rise Mississippi Among States With Highest Delinquency Rates
43 | Regulators: AIG Insurance Not Using Bailout Funds to Cheat on Prices But Say They’re Going To Continue To Monitor 44 | ‘Do Over’ For North Carolina Beach Plan Rates Ordered Court Rules Former Commissioner Long Erred 44 | Florida Catches Up With People’s Trust Insurer Must Stop Writing, Find Qualified Management 46 | What Agents Need to Know About Workers’ Compensation Trusts How They Vary From Traditional Insurers and The E&O Implications of Using Them
N2 | International Report Witch Hunt at AIG, While Lloyd’s Sees ‘Flight To Quality’ N4 | Closer Look: Special Events/Entertainment/ Sports What’s So Special About Special Event Insurance? N12 | SPECIAL REPORT: Top 100 Agency Profile Planning, People and Dedication Equal Success for Bollinger Insurance N20 | SPECIAL REPORT: Directors and Officers An Awakened Washington Promises More Stress for Directors and Officers N20 | SPECIAL REPORT: Directors and Officers D&O Market Expects the Unexpected
Court Orders North Carolina to Revisit Beach Plan Pricing
46 Workers’ Comp Trusts What Agents Need To Know About Trusts and E&O
IDEA EXCHANGE N16 | Growing Your Property Casualty Agency Don’t Let F.U.D. Extinguish Your Marketing Efforts 50 | Closing Quote: Scott Chang 6 Steps To Take Before The Soft Market Hardens
DEPARTMENTS 48 | 50 | N18 | 6 | 47 |
Business Moves Closing Quote MyNewMarkets Opening Note People
50 6 Steps To Take Before Prices Harden Prepare Now For When The Market Turns
N24 | SPECIAL REPORT: Directors and Officers Rising Risk of Bankruptcies N26 | SPECIAL REPORT: Directors and Officers D&O for Early-Stage Venture-Backed Firms
4 | INSURANCE JOURNAL-SOUTHEAST REGION April 6, 2009
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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
Idea Exchange Opening Note
Flunking Gramm’s Test R
emember the good old days when customers knew their bankers and property owners knew who held their mortgages and the economy did just fine? Remember the good old days when banks were in banking and insurance companies were in insurance and investment firms were in investments? Main Street insurance agents tried their best to keep those old days from passing, fighting as long as they could in courtrooms and legislative halls across the country against big banks and investment firms and the forces of “progress.” But the well-heeled Wall Street forces— and their political donations — were just too big for Main Street and the insurance agents lobby. The U.S. Senate voted 90-8 on Nov. 4, 1999 to approve S. 900, the Gramm-Leach-Bliley Act, which repealed the Depression-era barriers that separated banking, insurance and securities. Sen. Phil Gramm, R.- Texas, who was chairman of the Senate Committee on Banking, Housing and Urban Affairs, expressed great pride in passage of the bill bearing his name. “This is a deregulatory bill. I believe that is going to be the wave of the future,” he said. He was right about the wave, but even he could not foresee what that wave would bring. To his credit, Gramm set out a test for determining whether his deregulation bill was a success or failure: “The test that I believe we should use— the test I will use, the test I hope people looking at this bill years in the future will use— is, ‘Did it produce a greater diversity of products and services for American consumers? Were those products better? And did they sell at a lower price?’ I think if the answer to those three questions is yes, then this bill will have succeeded.” The answers are no, no, no, Senator Gramm. Your law has done wonders for those few at the top who created soulless global conglomerates too big to be regulated, too big to care and too big to fail. It has been harmful to just about everyone else. In 1999 a joyful Gramm continued: “Ultimately, the final judge of the bill is history. Ultimately, as you look at the bill, you have to ask yourself, ‘Will people in the future be trying to repeal it, as we are here today trying to repeal—and hopefully repealing—Glass-Steagall?’ I think the answer will be no. I think it will be no because we are doing something very different from Glass-Steagall. Glass-Steagall, in the midst of the Great Depression, thought Government was the answer. In this period of economic growth and prosperity, we believe freedom is the answer.” There is a new reality. Gramm Leach Bliley has helped bring about the biggest economic collapse since the Great Depression. While Government may not be the only answer, neither is unbridled freedom for giant corporations. Stop the forum shopping to find the least effective among weakened regulators. It’s time to revisit Gramm’s pride and joy.
Andrew Simpson Southeast/Midwest Editor asimpson@insurancejournal.com
Publisher Mark Wells Chief Executive Officer Mitch Dunford
EDITORIAL Editor-in-Chief Andrea Ortega-Wells | awells@insurancejournal V.P. Content/ and Interim Midwest/Southeast Editor Andrew Simpson | asimpson@insurancejournal.com East Editor Kenneth J. St. Onge | kstonge@insurancejournal.com South Central Editor Stephanie K. Jones | sjones@insurancejournal.com West Editor Patricia-Anne Tom | ptom@insurancejournal.com MyNewMarkets Associate Editor Chris Boggs | cboggs@insurancejournal.com International Editor Charles E. Boyle | cboyle@insurancejournal.com Columnists Alan Shulman Contributing Writers Robert Baker, Brigitt Whitescarver, Mike Schwander, Rachael Owens, Curtis M. Pearsall, Scott Change, Bill Wein
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 Eric Jeter (281) 655-0234 ejeter@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
MARKETING Marketing Administrator Gayle Wells | gwells@insurancejournal.com Advertising Coordinator Erin Burns | eburns@insurancejournal.com (619) 584-1100 x120 New Markets Sales Manager Kristine Honey | khoney@insurancejournal.com Classified and Ancillary Sales Manager Nicola Coghill | ncoghill@insurancejournal.com (619) 584-1100 x125 New Media Producer Chad Reese | creese@insurancejournal.com
DESIGN/WEB Vice President/Design Guy Boccia | gboccia@insurancejournal.com Vice President/Technology Joshua Carlson | jcarlson@insurancejournal.com Graphic Designer Jamie Bethell | jbethell@insurancejournal.com Web Developer Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Chris Thompson | cthompson@insurancejournal.com
A D M I N I ST R AT I O N Accounting Manager Megan Sinclair | msinclair@insurancejournal.com Admin./ Marketing Asst. Kristina Delavega | kdelavega@insurancejournal.com Cover designed by: Jamie Bethell
Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Publishing, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2009 Wells Publishing, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Publishing, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 9049, Maple Shade, NJ 08052
6 | INSURANCE JOURNAL-SOUTHEAST REGION April 6, 2009
FOR QUESTIONS REGARDING SUBSCRIPTIONS: please call 856-380-4176 or email subscribe@insurancejournal.com. You may subscribe or change your address online at insurancejournal.com/subscribe. ARTICLE REPRINTS: For reprints of articles in this issue, contact Rhonda Brown at 1-866-879-9144 ext. 194 or rbrown@fostereprints.com. Visit insurancejournal.com/reprints for more information.
Southeast Coverage Snapshot
North Carolina Challenges 1.4% Auto Hike
A
1.4 perent rate hike requested The 1.4 percent increase request by North Carolina auto insur- is based on the interim 9.4 percent ance companies is rate increase being being contested by charged by the industry state officials. during its appeal of a Insurance depart2008 auto rate order. The ment actuaries have filing also includes data concluded that the from the reinsurance increase is not warrantfacility that department ed in part because it experts believe shouldn’t incorporates certain be included because the Wayne Goodwin reinsurance costs. facility files separate rate Insurance Commissioner Wayne requests with its own data. State Goodwin called for a hearing on officials said its inclusion is essenAug. 3 to review the request that tially “double-dipping” to heighten was submitted on Jan. 30 by the the need for rate increases. North Carolina Rate Bureau on “This year’s request comes not behalf of insurers. long after the Rate Bureau’s deci-
Florida Denies State Farm Hearing on Homeowners Market Withdrawal Plan
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lorida Insurance Commissioner Kevin McCarty has denied State Farm Florida an administrative hearing on details of the insurer’s plan to withdraw from the state’s homeowners market. State Farm Florida has balked at requirements McCarty has attached to its withdrawal including one that it let its agents place homeowners policies with other insurance carriers. The company and McCarty have been at odds over how to handle the more than 1 million Florida property insurance policies State Farm Florida plans to stop writing. The company is not exiting the auto insurance business. Among other things, State Farm’s plan calls for it to be able
to transfer as many as 470,000 policies in the first year to Citizens, something McCarty wants to keep from happening. In its hearing petition and its withdrawal plan, State Farm Florida has argued that it must withdraw from the market to avoid insolvency by 2011. In denying the petition for a hearing, McCarty said State Farm Florida failed to explain how the withdrawal plan with the requirements he wants would harm it financially. He claimed that the requirements should actually help State Farm Florida because they accelerate the withdrawal more than the insurer’s original proposal. McCarty gave State Farm Florida until April 14 to file an amended request for a hearing on the withdrawal plan. IJ
sion to appeal the 2008 auto rate order,” said Sherri Hubbard, the Department’s lead rate attorney. “Last year, former Commissioner Jim Long ordered a 16.1 percent decrease, which the industry is currently appealing through the court system. We don’t think an increase is warranted at this time, and we have some serious questions once again about the data included in the filing.”
After the hearing, Goodwin will decide what rate change is warranted. If the industry wishes to appeal his decision, it can through the court system, and companies can raise rates while awaiting a decision from the courts. The difference in the ordered rate and the implemented rate must be held in escrow. If the industry loses, the escrowed money must be refunded to policyholders. IJ
Auto Loan Delinquency Rate on the Rise
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he percentage of auto loans past due 60 days or more rose 8.9 percent in the fourth quarter of 2008, compared with the prior-year period, according to credit reporting agency TransUnion. The numbers point to auto delinquencies shooting to their highest point in a decade by the end of the year. The rate rose to 0.86 percent for the three months ended Dec. 31, compared with 0.79 percent in the 2007 fourth quarter. Auto-loan delinquencies tend to be cyclical, with the fourth quarter typically showing the fewest problematic payments. But the recession appears to be changing those patterns. “Certainly the overall economy, the weak labor markets, disposable income, are all affecting
auto debts as well,’’ said Peter Turek, a vice president with TransUnion. Delinquencies were highest in Mississippi, at 1.62 percent, followed by California, at 1.46 percent, and Louisiana, at 1.37 percent. The states with the lowest rates were Alaska, North Dakota and Wyoming. In all, 10 states are above the national average and 30 are below it. Turek is forecasting the rate of auto delinquencies will rise to 1.13 percent nationally by the end of 2009, which would be the highest in 10 years. Since the recession began in December 2007, auto loan delinquencies have jumped 25 percent, compared with a 10 percent increase in the 2001 recession, Turek said. IJ
Source: TransUnion
8 | INSURANCE JOURNAL-SOUTHEAST REGION April 6, 2009
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It Figures
Declarations Federal Aid
$109 Million The amount Ernst & Young LLP has agreed to pay to HealthSouth Corp. shareholders who sued the firm for failing to detect an accounting fraud involving more than a dozen executives, according to papers filed in Birmingham federal court. The monies would create a fund for investors. The New York-based firm did not admit to any wrongdoing. Prosecutors said the $2.7 billion fraudulent scheme took place from 1996 to 2002. Fifteen former company officials pleaded guilty in the case.
$1 Million The amount approved by a federal judge in Charleston, South Carolina for payment by the tax preparation company for a former Charleston Southern University economist now in prison for fraud. The settlement says the firm of Legare & Bailey was not aware of Al Parish’s estimated $66 million fraud scheme but that information provided by Parish should have raised red flags. Most of the settlement is coming from an insurance policy. He is serving more than 24 years in prison.
36 The number of crashes Jonathan Christian Jones of Indiana has been involved between 2000 and 2007, according to North Carolina officials who recently arrested him. They charged him with allegedly filing some $10,000 in false claims.
$500 Million The amount in debt declared by the West Virginia luxury Greenbrier resort in filing for bankruptcy. CSX, the owner of the Greenbrier Hotel Corp., plans to sell what was once one of America’s highest-rated hotels to a unit of Marriott International Inc. for about $130 million.
4-3 The vote by the Georgia House Consumer Affairs Subcommittee rejecting a measure to require adults in pickup trucks to buckle their seat belts, despite testimony from physician’s groups, insurance executives and highway safety officials backing the change. Georgia is the last state to specifically exempt adults in pickups from buckling up. www.insurancejournal.com
“We need a more disciplined, structured plan for providing federal assistance following any major natural disaster.” — U.S. Sen. Bill Nelson, D.-Fla, in asking the U.S. Treasury to provide assurances to private market lenders that any loans they make in Florida would be repaid at fair market interest in the event of a catastrophe. Nelson has filed a bill that would allow the federal government to step in with loans to the state’s catastrophe fund, which has a hurricane catastrophe obligation of $28 billion but the capacity to pay only $10 billion in claims.
Liddy Appeal “I need all the help I can get.” — Edward Liddy, chairman and chief executive of American International Group Inc., who had the unenviable job of batting back questions from a House panel of members outraged at the company for paying $165 million in employee bonuses after getting up to $180 billion in government aid.
Financial Product Safety “This meltdown would not have occurred if this commission had been in place.” — Rep. William Delahunt, D.-Mass., who along with Rep. Brad Miller, D.-N.C., introduced legislation that would create a Financial Product Safety Commission to crack down on unsafe lending practices. The agency’s mission would include examining the safety of financial products before they hit the market, conduct studies and educate consumers. Miller, a member of the House Financial Services Committee, said the idea could be folded into financial regulation reforms that would include a systemic risk regulator.
Rate Warning “I hope that the legal and business communities will be able to strike an appropriate balance between the access to courts and the economic impact on Florida’s businesses while also still keeping workers’ compensation rates affordable for employers. Otherwise, failure to act will result in rate increases.’’ — Florida Insurance Commissioner Kevin McCarty as the state Legislature weighed legislation to reinstate a cap on attorneys’ fees in workers’ compensation cases that the Supreme Court struck down last year.
Officer Duty “An officer already has the authority to cite a driver whenever unsafe operation is caused by cell phone use, text messaging, applying cosmetics or any other activity that prevents the driver from operating the vehicle in a safe manner.’’ — Tennessee Attorney General Robert E. Cooper in an opinion holding that sending or reading texts while driving falls under a law prohibiting the unsafe operation of a motor vehicle. Rep. Vince Dean, an East Ridge Republican and chairman of the House Public Safety Subcommittee, requested the opinion after hearing proposed legislation that would fine a person $50 for such behavior while driving. April 6, 2009 INSURANCE JOURNAL-SOUTHEAST REGION | 9
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National Coverage News & Markets
Study: Agency Satisfaction Linked to Amount of Business Sent to Insurers By Andrea Ortega-Wells
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hen it comes to an agency’s satisfaction with its personal lines insurance companies, commissions do not rank as tops. Nor do commissions rank second. In fact, out of six satisfaction factors, compensation from an insurer ranks dead last, according to a new industry study. Kara Steslicki, senior research manager for J.D. Power and Associates, who helped conduct the study, said the fact that compensation ranked last as a factor that determines agency satisfaction was a bit surprising. “We thought that compensation would be a little more important especially given the independent agency channel,” Steslicki said. “We thought that compensation might be a way that carriers could entice agents to send business their way.” But Steslicki says the survey revealed that what agencies are most interested in is satisfying their policyholders, especially in today’s tough economic times. Customers are looking at how much money they want to spend on insurance, and their agents are trying to help them by adjusting
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their coverage in order to save money, she said. What the survey found is that what agents want most is a variety of policy offerings and continuous contact with their insurers, Steslicki said. The inaugural “Insurance Agency Satisfaction Study” measured the satisfaction of independent insurance agents and agency staff with the personal property/ casualty insurance companies they represent. Agent satisfaction was examined across six factors. In order of importance, they are: key carrier contacts (32 percent), policy offering (23 percent); claims (16 percent); technology (13 percent); price (10 percent); and compensation (5 percent). The study found that agent satisfaction typically increases the more often agents interact with the business contact from their insurance company. Agents prefer to receive business contacts via phone or email at least once or twice a month. However, satisfaction levels are particularly high when the business contact visits more than once per month. In 2009, fewer than 15 percent of agents report receiving such frequent visits.
“Agent satisfaction is very closely linked to the overall business growth of an insurer, as agents have tremendous influence over policyholders when it comes to switching providers,” said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. “In fact, 60 percent of consumers report that they would follow their agent recommendation to switch to a new insurance company.” As agent satisfaction increases, the likelihood of agents increasing their premium business with an insurance company also rises, the study found. In 2009, nearly 70 percent of agents with satisfaction scores averaging more than 800 points on a 1,000-point scale indicate they intend to increase business with the insurance company. In contrast, only 28 percent of agents with scores averaging 600 points or less indicate the same, the study reported. “Agents are obviously really interested in working with insurers that are supporting them and that was a common theme throughout the entire study,” Steslicki said. Offering a marketing or advertising budget also greatly impacts agent satisfaction, according to the study. In 2009, nearly 60 percent of agents report that they did not receive any budget for local marketing or advertising. However, among those agents who received and used all of the
funds provided by the insurer for advertising and marketing purposes, satisfaction scores average 808, compared with an average of 692 among those agents who were offered no funds for such endeavors. “The more agencies use those dollars to promote their agency the more satisfied they are,” Steslicki said. Steslicki also said while few agencies reported their insurers gave them business leads, those that did had higher satisfaction rates. “About 20 percent of the agencies studied said that they did receive leads from their insurers and obviously the more qualified that those leads were the more satisfied that they were,” she said. “But even providing leads at all definitely impacted satisfaction.” The study also found that satisfaction declines considerably as the amount of time it takes for insurance companies to notify agents of a customer-filed claim increases. “Whatever the insurer can do to support the agency is definitely recognized,” Steslicki said. “Those agencies that are more satisfied are more likely to send their business to those types of insurers.” While this was J.D. Power & Associates’ inaugural “Insurance Agency Satisfaction Study,” Steslicki says they hope to do another study next year and plan to replicate the study for commercial lines insurers writing business owner policies. The “2009 Insurance Agency Satisfaction Study” is based on responses from 1,589 insurance agents evaluating more than 10 insurers across the industry, including AIG, Allied, Chubb, Erie Insurance, Farmers/Foremost, Fireman’s Fund, The Hartford, Liberty Mutual, Progressive and Travelers. The study was fielded in November 2008. IJ
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International Coverage News & Markets
Witch Hunt at AIG; While Lloyd’s Sees ‘Flight to Quality’ would have been better off, if it had. Then it would have had to establish reserves and would have been subject to regulation. As a he witch hunt that has engulfed AIG result its wholehearted rush into risky investneeds to be toned down. If for no other ments might have been curtailed. reason than it’s making the problem worse, AIG, however, was a counterparty on innunot better. It also reduces the likelihood that merable risks. In very simple terms, it bought U.S. taxpayers will get back any of the money and sold contracts of one kind or another the government has put into it. (default swaps, CDO’s, notes) — it doesn’t matPeople from President Obama on down are ter. On the other side of those transactions perhaps properly outraged that a company, were the buyers and sellers — AIG’s counterwhich lost $58 billion in one quarter and has parties. been taken over by the government for $130 The simplest example is currency trading: billion, paid its executives, some of whom Bank A needs $1 million for some of its cuscaused the mess, $160 million in bonuses. However, the outrage over AIG paying off its tomers; Bank B needs an equivalent amount in Euros. They make a deal to provide the amounts on a certain date, thus becoming counterparties and undertaking to honor their contract. The financial instruments or contracts AIG entered into along with many banks is more complicated, but they remain essentially the same type of transaction. AIG Financial Products (AIGFP), its financial unit, bought and sold hundreds of thousands of financial instruments all over the world, using the parent company’s ‘AA’ rating to obtain better credit terms for the deals, which in turn A protestor holds up a sign resembling a check as he rallies outside the AIG building in Los made their cost subject to a ratings downgrade. Angeles March 19, 2009. REUTERS/Mario Anzuoni When the originators of those contracts couldn’t pay their obligations, it other obligations — notably to “foreign banks” created a domino effect. The sequential holdand Goldman Sachs — is a bit misplaced. As ers, like AIG, couldn’t honor their obligations. Chris Boggs, associate editor of The whole system began to collapse, threatenMyNewMarkets.com pointed out, credit default swaps worldwide total $58 trillion (See: ing the stability of the entire global financial system. www.insurancejournal.com /news/national/ Whether the financial counterparty is in 2009/03/25/99039.htm]. The government bailed Paris, Texas, or Paris, France, is immaterial. out AIG primarily so it could at least pay a Financial transactions — as the current crisis part of what it owed. proves in spades — are global. One only has to As a number of commentators have pointed look at the result of the failure to support out, AIG didn’t insure these contracts. It By Charles E. Boyle
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N2 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
Lehman Brothers to gauge what effect on world finances a similar failure to support AIG could have had. Lack of liquidity/lack of credit are now strangling the economies of every country in the world. Fear has replaced trust to the extent that the world’s banks and other financial institutions are afraid to do business, even with sound commercial risks. Their reluctance to enter into counterparty transactions has to be eradicated, if the world is ever to emerge from the current crisis. Supporting AIG and the banks is a necessary, if somewhat unpalatable, step towards global recovery. Lloyd’s made a lot less money in 2008, than in 2007; still $2.78 billion is not a negligible sum, even if it’s only about half that of the prior record year. Luke Savage, Lloyd’s of London’s finance director is relatively sanguine about the decline. In a telephone interview he acknowledged that we’re in for a “very tough 2009,” but that Lloyd’s 2008 results weren’t all that bad compared to the rest of the market. He pointed out that the “insurance market is going through a period of uncertainty, and policy holders are hesitant about placing all of their business with one carrier.” The result is what Savage termed “a flight to quality.” With around £2.6 billion ($3.8 billion) in its Central Fund (the facility that assures claims’ payments), Lloyd’s is well positioned to offer just that type of security. In fact, Lloyd’s structure is tailor-made to solve the problem. “We’re a subscription market,” Savage explained. “A risk is typically shared by more than one Syndicate.” A “lead Syndicate” places the initial coverage. It has standing agreements with a number of other syndicates to take on a certain percentage of the risk and on what terms they will do so. The policyholder thereby automatically spreads the risk of non-payment of a claim among a number of syndicates, who are in turn backed by a selected number of carriers - all of whom have met Lloyd’s rigid financial standards. In the rare instances when a syndicate can’t pay a claim, the policyholder has recourse to the Central Fund. IJ Boyle is international editor for Insurance Journal. E-mail: cboyle@insurancejournal.com. www.insurancejournal.com
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He takes protecting your client’s personal assets very personally. –Carl Pursiano, Senior Vice President LIU Management Liability
Yes, there’s a D&O insurer that’s as responsible as you are. Of all the reasons Liberty International Underwriters has become a leading specialty lines insurer, what truly sets us apart is our instinct to do the right thing. We meet your needs quickly, consistently, and responsibly. Together, we can provide the best products for your clients. We don’t just value our relationship with you. We work at it. For specific information about the types of risk we write, visit liu-usa.com/d&o. Liberty Mutual is rated A by A.M. Best.
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Closer Look Special Events/Entertainment/Sports
What’s So Special About Special Event Insurance?
By Robert Baker and Brigitt Whitescarver
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he pitfalls of not placing special-event coverage, when it’s truly needed and available, can result in catastrophic losses to your insured, and possibly even damage the credibility of your agency and errors and omissions coverage. You might think that an Insurance Services Office (ISO) commercial general liability (CGL) policy would do an excellent job of providing insurance protection to the sponsor or promoter of a private or public event. After all, a CGL policy comprehensively addresses the third-party
bodily injury, property damage and personal injury exposures of an event. Insurers who specifically write policies for events believe the CGL policy perhaps does the job all too well, and they’re unwilling to provide the CGL without additional limitations and definitions. Thus comes the impetus for special event insurance. What’s so special about it? It’s a special breed of CGL coverage, an insurance product that doesn’t come straight off the shelf. Agents and brokers who provide one-off event policies need to familiarize themselves with it,
learning what protection is and is not offered by the altered CGL. Agents should also learn where to find the broadest policy available, augment that coverage where needed, and be able to educate their clients about the exposures they must retain and need to manage. One further “special-ness” of special-event coverage stems from its very nature. The risks that occur at events involve varying numbers of people, often large, that participate in or watch activities such as sports, acts of daring, continued on page N6
SINCE 1992 WESTROPE HAS PLACED BILLIONS WITH MAJOR CARRIERS IN THE U . S . A N D G L O B A L M A R K E T S I N T H E B E L I E F T H AT T H E W O R L D N E E D S T H E B E S T W H O L E S A L E I N S U R A N C E S O LUTIONS. PROPERTY | CASUALTY | TRANSPORTATION | CONSTRUCTION | AGRIBUSINESS HEALTHCARE | EXECUTIVE & PROFESSIONAL LIABILITY | BINDING AUTHORITY WORKERS’ COMP | CLAIMS SERVICES | LIFE SCIENCES
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Closer Look Special Events/Entertainment/Sports Event Insurance, continued from page N4
all genres of musical performance and theater, amusements like rides and games, dancing, walking and rallies. Events challenge their organizers to work fast, often under pressures of schedule, weather and budget. They require complex orchestration of people, equipment and resources. Event holders have the responsibility of safety and security of guests, volunteers and employees. Event insurers analyze what they can risk or take on as part of the CGL. They review trends in loss and claims experience and decide what they need to charge for the insurance provided. With the intent that exposures are managed at an event, insurers take into account controls that should be in place. Contracts play a major role in the transfer of event risk; the contract that carries a great deal of consequence for the promoter and the insurer is the premises lease contract. More often than not, an event holder enters into a lease agreement with a facility, city, county or parks department that owns or controls the site where the event will take place. This contract
will have an indemnification clause which transfers to the lessee (the event holder) most of the liability for the premises and all event operations. This contractual responsibility is often triggered in a loss, and if brought into a suit the event holder doesn’t want to be “bare” of insurance protection nor take on the liability of another responsible party. Special Event Endorsements Many of the limiting endorsements attached to the special-event CGL address specific event operations that are a part of the overall event. Insurers exclude coverage for selected activities feeling that these operations would be better insured elsewhere and in addition priced accordingly. The event promoter will often hire independent service providers to perform operations and should be aware of the proper transfer of liability. Not all special event endorsements are included in each event insurer’s policy, and those discussed in this article are only a sample. Individual insurers may also have their own
manuscript form for a limiting endorsement, with language they feel best achieves their intended result. Besides endorsements that name the lessor as an additional insured, a few of the more common special event endorsements are discussed here. Exclusion - Collapse of Temporary Structure. This includes structures such as tents, stages, bleachers, barricades and temporary fencing. This exclusion is very common in event policies. The insured must be aware that insurance is not provided to them if they, their employees, contracted labor or volunteers erect a tent or other temporary structure and a loss occurs that causes bodily injury or property damage to a third-party. Tenting, staging and event rental companies can be hired to put up necessary structures, and in doing so, the event holder should verify that insurance is in place and that a proper risk avoidance and transfer has taken place. Exclusion - Seating, Fixtures and Glass. The ISO CGL provides third-party property continued on page N8
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Closer Look Special Events/Entertainment/Sports Event Insurance, continued from page N6
damage coverage to the property of the leased event premise if the lease period is seven days or less. This exclusion, however, if endorsed, removes coverage for those items shown. The seating, fixture and glass exclusion is often used for concerts and stems from facility property losses. This exposure is impossible to transfer to a subcontractor. If there’s a concern, it could be managed in the lease or through possible losscontrol methods. Exclusion - Liquor Liability Amendment. Liquor or dram shop liability is excluded in the ISO CGL if the insured is profiting in any way from the distribution or sale of alcohol. If an insured is “hosting” alcohol the CGL is silent and the activity is not excluded by the standard ISO form. This coverage is known as “host” liquor liability. When the amendment is attached to a policy, it will “strip” even the host coverage and create an absolute liquor exclusion. Thus, if liquor is hosted at the event and the insured were brought into a third-party bodily injury suit, the insured would have no defense or coverage.
To avoid alcohol-related exposure, the event holder can hire a third-party vendor to serve alcohol. The holder can also buy a separate liquor liability policy. Because of the severity of liquor-related claims, it’s also recommended that, in addition to the vendor showing evidence of liquor liability, the vendor also name the insured/event holder as an additional insured on their liquor policy. Exclusion - Events with Live Performances of Rap/Hip Hop. This exposure is excluded by most special-event policies but can be mitigated differently by a variety of forms. Certainly coverage is available for these types of performances, but only with additional underwriting and usually at higher premium costs. A history related to battery and weapon assaults has given this entire genre a bad reputation. Promoters now pay a premium to find coverage in a limited marketplace. Underwriting requirements have been heightened as well, such as requiring metal detectors and patdowns before entering the concert venue. Exclusions - Athletic or Sports
N8 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
Participants with Respect to the Insured Operations. Coverage will not apply to bodily injury to a person while practicing or participating in any sports or athletic contest or exhibition. This exclusion is present in all event policies unless a specific athletic event policy is purchased. There is little room for interpretation. Neither insurance coverage nor defense costs are provided if a suit is brought against the event holder by an injured athletic participant — think softball game. Activities such as dance performances or cheerleading are also often interpreted as athletic activities by an insurer. When in doubt, agents should clarify their carrier’s interpretation of this exclusion. Event insurers comfortable with athletic participant exposures will write a CGL policy without this exclusion, thus making the policy silent on this third-party class. Athletic participation also triggers additional underwriting. The insurer tailors premium pricing to the specific athletic exposure — the premiums to insure ski racers will be much higher than for continued on page N10
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Closer Look Special Events/Entertainment/Sports
Event Insurance, continued from page N8
marathon runners. Insurers will also usually require participant medical accident insurance to act as a buffer for possible litigation. Exclusions - Assault & Battery. This is another common exclusion. An assault and battery endorsement releases insurers from the duty to defend claims made by third parties for
this personal injury peril. Language varies among insurers. Producers should be familiar with how this endorsement may apply to their client’s operation. Event holders should reconsider using volunteers for “crowd control” and instead outsource this operation to a licensed and insured security company.
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Exclusions - Bodily Injury to Independent Contractors. This endorsement varies by carrier, but excludes bodily injuryrelated claims from hired 1099 labor and independent contractors and their employees. In a perfect world, bodily injury incurred by independent workers during an event should be covered by the independent contractor’s workers’ compensation insurance. But most hired labor or sub-contracted sole proprietors will not have workers’ comp in force. This exclusion removes all coverage and defense costs for their possible third-party suits. Event holders with this exclusion can try to protect themselves by requiring evidence of workers’ comp from all subcontractors, hiring labor from an agency that provides workers’ comp for their labor pool, or by making their 1099 labor at the event employees. A new insurance product targets this gap and sells workers’ comp to all event labor on a blanket basis if evidence is not shown. Without something like this, it’s best to remove this exclusion. Exclusions - Medical Payments. Although medical payment coverage is defined and shown in the ISO CGL, it is then excluded by this endorsement. Because events involve the gathering of a large number of people, many insurers don’t wish to be contractually bound to pay claims regardless of their insured’s fault. Trips and falls are the most common loss occurrences at events. Full policy limits are still available for bodily injury-related claims when negligence is the trigger and the occurrence is covered by the policy. There are a number of special event coverage specialists in the insurance industry that can help. Plus, a number of insurance products and programs allow you to augment an event CGL. Additional insurance coverages to consider include event cancellation, inland marine property, crime insurance, and first party volunteer accident insurance. All these options should be considered by the event holder and their agent in providing insurance protection for the myriad of hazards and exposures when putting on a “special” event. IJ Baker, CPCU, is vice president and agency principal of Gales Creek Insurance Services. Whitescarver is the national program manager for Gales Creek Insurance Service’s online event program, wholesaling to agents countrywide. E-mail: Brigitt@ galescreek.com. Web site: www.galescreek.com. www.insurancejournal.com
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Measurement
INSURANCE JOURNAL
TOP100 AGENCIES
Jack A. Windolf, chairman & CEO
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of Success Planning, People and Dedication Equal Success for Top 100 Agency Bollinger Insurance By Charles E. Boyle
W
hy do some independent insurance agencies stand out from others? As Insurance Journal’s “Top 100” series shows, good management, hard work, the right people, dedication and the satisfaction of performing valuable services well all seem to be part of the picture. Short Hills, N.J.-based Bollinger Insurance Inc. is an example of just how those precepts can build a successful agency.
their business further. They strip out the profits and show no incentive to grow.” He doesn’t really denigrate them; it’s just not his idea of how he wants his company to be run. “An ‘S’ corp.* is fine for some people, he continued; “if you set up a ‘C’ corp.*, you have to make sacrifices, but you have to make those sacrifices, if you are to achieve growth.” (*Taxation is the main difference between the two. A ‘C’ corp. is taxable at the corporate level, while an ‘S’ corp. can elect to “pass through” income to its shareholders.) Two Eras of Growth Windolf and his management team run Bollinger Charles W. Bollinger founded the agency in 1933 Top 100 Agency Profile along strict business lines — budgets, financial disin Newark. His brother James M. Bollinger joined Ranking No. 14 cipline, advance planning and, at the top of the list, him in 1942. Early on, the fledgling agency develAgency Name: “good employees.” This disciplined focus has prooped a specialist reputation with a focus on acciBollinger Insurance Inc. dent insurance for students and athletes. It has Headquarters: Short Hills, N.J. duced the desired result. In 1990, Bollinger’s annual premium volume was around $51 million. Premium since expanded across the country. Year Founded: 1933 John A. (Jack) Windolf, Jim Bollinger’s son-in-law, Additional Locations: Princeton, volume in 2008 was well over $800 million, with $1 billion in sight. The acquisition of other agencies joined the agency in 1963 after four years in the U.S. Moorestown, Vineland, N.J.; New accelerated. Prior to 1992, Bollinger had acquired Marine Corps and a stint at Wharton. Bollinger York City, N.Y.; Philadelphia, Pa.; just two — in 1976 and 1985. Since then it has then had seven employees and generated total comGreenwich, Conn. acquired 38 more — more than two a year, on avermission revenues of $200,000. Windolf eventually 2008 Premium Volume: age. In 2006, it acquired seven agencies and anothtook over Bollinger’s daily operations, and continues $830 million to serve as chairman and CEO. He and his wife, Property/Casualty: $470 million er four in 2007. “We made four more acquisitions in the fourth quarter of 2008,” said Windolf, and Muriel Bollinger Windolf, purchased full ownership Other than P/C: $360 million “we have others in the pipeline.” of Bollinger in 1969 and continued to build the % Commercial: 70% While Bollinger is very much a national agency agency, primarily through organic growth. Since %Personal: 30% for many of its lines, primarily commercial and 1963, Bollinger has on average doubled its top line 2007 Premium Volume: group coverage, it has kept geographical expanrevenues every five years. $840 million The pace of growth accelerated in 1992. “There Principals [management]: Jack sion pretty close to home. “Our key branch office locations are within a car ride from Short Hills,” are really two eras [in Bollinger’s growth],” said A. Windolf, president/CEO; Matt Windolf. Until 1992, “almost all of our growth had Gardner, managing director; Doug said Windolf. “Although we have customers all over the country [golf and country clubs, schools, been organic.” Commission revenues had risen to Cook, managing director; Lori employee benefits] our retail and personal lines $6.54 million (2009 estimated commission revenues Windolf Crispo, senior executive business is localized.” The majority of Bollinger’s are around $110 million). “We owned 100 percent of vice president. offices are in New Jersey, with branch offices in the stock and we decided to expand.” Principal Ownership: New York City, Connecticut and Philadelphia. The plan called for augmenting organic growth Jack A. Windolf, Evercore Capital The expansion, combined with an acknowlwith mergers and acquisitions. Windolf’s first step Partners edged reputation as a leader in certain areas of was to set up an employee stock option plan Number of employees: 435 coverage, has put Bollinger in the top 20 of U.S. (ESOP) to enable key employees to obtain a stake in independent agents. While it looks towards future growth, it hasn’t the business. This was a sea change. “It created an atmosphere that moved away from past successes. ‘we’re all in this together,’ and we’re all pulling in the same direction.” Many agencies have well educated, experienced leaders who someA Schools and Sports Legacy times give their employees a stake in the business. What sets Bollinger Specializing in “niche products” is a two-way street. An agency gains apart is the unqualified enthusiasm of its CEO. “It’s a great business,” a reputation, but may find it hard to break into new fields. Bollinger Windolf said, and it’s evident that he means it. has avoided this trap. Its early school and sports coverage has been a Windolf explained that many agency owners seem content to pull in $200,000 to $300,000 a year, and “aren’t really interested in building continued on page N14
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Bollinger, continued from page N13
shops on all kinds of topics, mainly to advise our sports clients on springboard for its success. how to ‘bullet proof’ themselves from liability.” “Our sports division goes back to the 1940s,” explained Lori She also indicated that the current economic situation may prompt Windolf Crispo, senior executive vice president - sports division. “We people to make more claims, “and they are more likely to see an attorwere first approached by the New Jersey State Interscholastic ney. It’s really important to minimize exposures.” Athletic Association about accident coverage for student athletes. These risk management services go beyond placing insurance covThere wasn’t much coverage in the ‘40s for this type of program.” As a erage. In the sports division, “it’s all done in house,” and “there’s no result, Bollinger developed the first catastrophic accident plan for charge for these services.” Bollinger helps sports clients set up their students in New Jersey with a cat limit of $10,000, and the firm has own safety committees and is constantly assessing the need for new remained a major player in the field. products to cover emerging risks. This hands-on approach has helped The program for educational institutions is also part of Bollinger’s the agency maintain and grow its leadership position in the field. group benefits division, which now writes coverage in 40 states. The sports program has expanded into other areas, as well, notably risk management. “Part of our ‘[Y]ou have to make sacrifices, but you have to make success comes from the fact that we don’t look at them [sports programs] as just another those sacrifices, if you are to achieve growth.’ property/casualty line,” said Crispo. “Our focus is on expertise, and to be as helpful as we can Primacy on Commercial Lines be for our clients.” While Bollinger’s sports sector is a niche business with deep roots, The coverage includes individuals, small groups and large groups commercial lines are the agency’s bread and butter, producing 70 per— “from the local Little League to the Olympics,” as Crispo put it. cent of top line revenues. The unit’s 165 employees “primarily operate She also explained that, while the types of accidents and liability covout of our seven main offices,” said Matt Gardner, managing director erage are fairly common to all sports and sporting venues, there are commercial lines. “We cover from the upper middle-market down to additional issues that have to be considered. small Main Street type businesses.” “We issue Safety Bulletins, and we have a whole library on risk Gardner spent 14 years at Aon before joining Bollinger and the management best practices they should adopt,” she explained. strategies are different. Bollinger develops “a relatively small team of Providing that kind of advice has become increasingly complex, as highly qualified professionals,” who cultivate unique access to their the potential liabilities related to sports have grown exponentially clients. “It’s sort of a boutique approach. Clients are serviced by the over the years. “We’re now giving guidance on how to prevent sex same team that sold them originally. We bring them best in class abuse, what can go wrong with golf carts at sports tournaments, or services and resources at all times,” Gardner said. how club treasurers should properly handle funds. We give workBollinger has positioned its commercial presence firmly in the “second tier” of large brokers. “We really don’t compete with Aon or Marsh or Willis; we’re interested in the mid-market, rather than huge multinationals,” he explained. This sector typically has both a need for coverage and for a good deal of risk management. However, “they [Bollinger’s mid-market clients] don’t usually have a risk management staff, so they’re looking for someone who can help them do the job,” Gardner added. Some of Bollinger’s risk management services are performed “in house,” but Bollinger’s commercial lines business is spread over most of the U.S., so it maintains “a network of risk management consultants all over the U.S. and in other parts of the world too,” Gardner said.
Bollinger Executive Committee Seated L to R: Doug Cook — managing director, benefits division, Lori Windolf Crispo — senior executive vice president, sports division, Jack Windolf — chairman & CEO Standing L to R: David Hatlem — senior executive vice president, club programs division, G. Alex Crispo — chief administrative officer and general counsel, Chris Wetzel — chief financial officer, Rhonda Linnett Graber — managing director, personal lines, Matthew Gardner — managing director, commercial lines N14 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
The Technical Revolution While technology has created an efficiency revolution in the agency business, often the cost has been the loss of personal contacts, which are a vital part of the insurance industry. Bollinger faced the problem head on, but with a major caveat. As Gardner put it: “All the technology in the world can’t replace personal relationships.” By contrast Bollinger employees work in a “paperless environment.” Everything that “comes in the front end is scanned immediately, which gives all of our employees electronic access to all of the policy information and claims files. This speeds our service delivery to our www.insurancejournal.com
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INSURANCE JOURNAL
TOP100 AGENCIES
clients,” he said. Using this technology has created a “quantum leap” in employee efficiency (measured by revenue per employee), but it has also given them more time to create value, both for their clients and for the 200 or so carriers with which Bollinger writes business. “The interaction with the carriers is unrecognizable to what it was five years ago,” Gardner said. “It has opened up the market and given us the possibility of doing business on a much wider scale.” It’s true, however, that in dealings with the carriers some of the “personal touch” has been lost. Bollinger has also resisted the trend to outsourcing. “We’ve looked at it for a range of non-client-facing functions, but we decided against it,” Gardner said. One consideration is the “politically charged” nature of the practice. But Bollinger is also concerned with the effect outsourcing could have on its highly valued employees. “We think the way we work should be protected, that’s how we retain customers. It cuts across the entire company, and I think it gives us a competitive advantage,” Gardner said. Basically, “we’ve got the ‘A’ team on call all the time.”
Craig Johnston, vice president — benefits division, Rhonda Linnett Graber — managing director, personal lines
The Benefits Boom That spirit carries over into another major sector for Bollinger — employee benefits. “Our division has about 20 percent of the employees,” said Doug Cook, managing director - benefits. “We also produce around 40 percent of the revenues and are responsible for about 50 percent of the
The Economy and a Bonus Payment A slowing U.S. economy has affected Bollinger’s commercial lines the most. Gardner explained that some client companies have gone out of business, while others were closing down operating sites, laying off employees and reducing operating expenses such as vehicle fleets. Crispo, meanwhile, said the economsituation may result in fewer ‘It’s sort of a boutique approach. Clients are serviced by the icsports teams, but she doesn’t think it same team that sold them originally. We bring them best in will be “as serious as it is on the commercial side.” The benefits business class services and resources at all times.’ is also less impacted. The slowdown seems only to have new business.” Group insurance plans are the main focus, with a reinforced Bollinger’s commitment to its core principles. As CEO and smaller life insurance operation, as well. Chairman Windolf indicated, “more acquisitions are in the pipeline.” “Our division is split between traditional group employee benefits For well capitalized agencies like Bollinger there may be some very and specialty group programs such as our K through 12 Student good opportunities. There are also a lot of highly qualified people Accident Insurance program and our College Student Health looking for new positions. Insurance program, both of which are national programs where we Any new employees should consider themselves lucky. At a time act as managing general underwriters,” Cook explained. “On the when “bonus” has become a dirty word, Bollinger’s bonus payment to employee benefits side we also act as general agents for group health its employees deserves special mention. Last year Evercore Capital insurance and as managing general underwriters for group dental and Partners, a private equity fund, bought 51 percent of Bollinger’s shares. stand alone prescription drug card plans. The remaining 49 percent are owned by the employees. Bollinger’s employee benefit brokers frequently work from referAs part of that transaction, “a deferred payment of $500,000 was to rals, often from the P/C side of the agency. The carriers, many of be made to Jack Windolf in 2009,” as noted in a private e-mail from the whom Bollinger has worked with for years, supply policy forms company. Windolf insisted that a clause be inserted in the agreement approved by state regulators. Bollinger issues the policy, pays claims that he could direct that payment to Bollinger employees. On March from funds set up by the carriers, and performs the other adminis17, he announced that the entire amount would be paid to them. trative functions inherent in managing any particular plan. The The reasons for that decision sum up his business philosophy: “1) structure of any given plan varies from state to state, making local It would be appreciated by the employees; 2) The employees would contacts a necessity. spend the money to help the economy; 3) Employees are in a lower This holds true for Bollinger’s student accident coverage as well. tax bracket than Jack, and 4) It is the right thing to do.” That ges“The farther away we get from our home base, the more we need local ture also pretty much sums up why Bollinger has achieved the sucbrokers,” Cook said. cess it has. IJ www.insurancejournal.com
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Idea Exchange Growing Your Property Casualty Agency
Don’t Let F.U.D. Extinguish Your Marketing Efforts Overcome Fear, Uncertainty and Doubt in Agency Offices Shulman
By Alan Shulman
I
n a recession, it’s an easy decision to stop promoting your agency until the economy kicks back into gear. But is it the right one for your business? Marketing hibernation eliminates the effort, expense and risk of an unsuccessful agency promotion while theoretically preserving cash for salaries and bonuses. However by avoiding new business solicitations, you risk the wrath of Newton’s first law of motion that states that an object in motion stays in motion and an object at rest stays at rest. In other words, if you smartly market your agency, you’ll survive this economy; if you sit back and try to live off of your renewals the odds aren’t as good. Sales Inertia Combating P/C sales inertia is essential, regardless of the economy. In boom times, one successful effort happily drives the next, while in times like these, suspending most new account solicitations has consequences beyond a stagnant book. As should be anticipated in a
recession, your most desirable insureds will shop for better deals. Some will take off, leaving you with an overall lesser quality book and next to no new accounts to offset their departure. This classic case of adverse selection deteriorates your agency’s long term profitability. Furthermore, minimal marketing puts managers, producers and staffers in a non-sales
with you — but are too embarrassed to come back. So, invite back selected dead files with open arms and good humor. Don’t simply accept that once an account is cancelled that it is irretrievable. More clients will return than Everybody’s Shopping you think and at a greater percentage and lessWhen jobs are at a premium and virtually er cost than soliciting a brand new prospect. every business has declining revenues, insurFinally, smartly invest in targeted new busiance shopping becomes the new national pasness efforts. Be creative, different and timely. time. This means that agencies are getting to Focus on leads where you have the best chance look at personal and business accounts that of success. Carefully identify the prospect previously weren’t interested in comparison groups that you wish to write and match them quotes. So essentially, bad times are a good time against your carriers’ strengths. to market, at least in the agency certain that there are business. After all, virtually If you smartly Make enough salable leads within every adult and business in the market your each to make specialized soliciUnited States still needs to buy their insurance from someone. agency, you’ll tations worthwhile. There’s extra potential if you already Try for your share, while watchsurvive this insure accounts within a group ing how you go about it. economy ... and can develop viable referrals. Additionally, agents who Look Three Ways market for new policies are rewarded with less Invest your marketing time and dollars in competition, in virtually every medium, because three major directions: retention, recovery and so many advertisers are cutting back today. For new business. While most agencies routinely in-stance, if you opt for print ads, you can negowork to keep their largest accounts from jumptiate a great rate in almost any publication. ing ship, they tend to neglect the many profitable insureds who file no claims and require Market or Else virtually no service. Pay some attention to these P/C agencies exist for only one real purpose. guys, especially in this economy. Let them And that’s to continuously sell insurance. If new know that you don’t take their business for agency-generated sales slow down to an intolergranted. Communicate via letter, e-mail, able level, additional agency-only carriers will newsletter, or a blog. Suggest thoughtful ways consider going direct, at least to some extent. that they can save on their premiums with you. Like certain insurers today, they’ll become your Common auto examples include increasing policy deductibles, taking defensive driver courses, rivals as well as your suppliers. Independents can minimize this scenario by using the state of changing classifications from drive to work to the economy as a marketing motivator instead pleasure use (if laid off) etc. The “let sleeping of an excuse to lay back. It’s really all up to dogs lie” approach doesn’t fly when people are you. IJ starting to panic. Desirable accounts may defect to other providers who give them more attention. Shulman, CPCU, is the publisher of Agency Ideas, a subscripNext, deal with the recently departed who tion-only sales and marketing newsletter. He is also the author left your office for a better deal. These greener of the Illustrative Insurance Sales Letter series and other P/C grass consumers and businesses may be sursales resources. Phone: 800-724-1435. E-mail: prised to discover that they were better off alan@agencyideas.com. Web site: www.agencyideas.com. mode which, according to Newton’s law, isn’t exactly going to turn on a dime when times get better.
N16 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
www.insurancejournal.com
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New Markets The following markets were selected from the MyNewMarkets database of 25,000 coverages and programs. To find additional markets, or to submit markets, go to www.MyNewMarkets.com. Child Welfare Organizations Market Detail: Markel Insurance Co. (www.markelcorp.com) offers agents access to a program for not-for-profit child welfare organizations such as boys and girls clubs, community programs, counseling services, family service agencies, group homes, residential care facilities, Head Start programs and shelters. Available coverage includes general liability, umbrella, sexual abuse/molestation, directors and officers, special events, professional liability, property, key employee replacement, auto, crime and business income. Minimum premiums and deductibles vary based on the risk. Available Limits: Based on risk. Carriers: Markel Insurance Co. “A” rated by A.M. Best. Admitted. States: All except Hawaii. Contact: Rhonda Sciortino at 804-339-0534 or e-mail rsciortino@markelcorp.com.
Roll Offs - Debris Removal Market Detail: Trinity Transportation Services LLC (www.trinitytransp.com) connects agents to a full line of auto coverages for this specialty niche - roll off operators. Auto liability, physical damage and property damage coverages are available. Minimum premiums begin at $150,000. Available Limits: $100,000 to $1 million. Carriers: QBE the Americas. “A” rated by A.M. Best. Admitted. States: Ala., Ariz., Ark., Calif., Colo., Conn., Del., Fla., Ga., Idaho, Ill., Ind., Iowa, Kan., Maine, Md., Minn., Miss., Mo., Mont., Nev., N.H., N.M., N.C., N.D., Ohio, Okla., Ore., Pa., R.I., S.C., S.D., Tenn., Texas, Utah, Vt., Va., Wis. and Wyo. Contact: Patricia Busche at 904-272-7797 or e-mail trish@trinitytransp.com.
Garage Clients Market Detail: USX/S (www.USXS.net) offers a competitive garage program encompassing many risk classes. Eligibility includes new or used car dealerships, repair shops, N18 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
impound yards, accessory dealers, farm equipment sales or repair, motorcycle sales or repair, valet operations (including on-street exposures), auctions, emergency vehicle sales or repair, RV sales or repair and many other classes. Available Limits: Not provided. Carriers: Unable to disclose. “A-” rated by A.M. Best. Non-admitted. States: All. Contact: Sandy Hupcej at 440-888-7300 or e-mail SandyH@USXS.net.
Watercraft Programs Market Detail: Burns & Wilcox (www.burns-wilcox.com) offers agents access to a watercraft insurance program that provides specialized coverage for a broad range of yachts and motorized boats that includes: houseboats, airboats, sailboats, outboards/inboards, jet skis/wave runners, etc. Coverage is available to “problem operators” and replacement cost can be provided for boats new to three years old. Available Limits: Not provided. Carriers: Unable to disclose. “A++” rated by A.M. Best. Admitted and non-admitted. States: All. Contact: Donna Dodd 770-650-7511 ext. 2236 or e-mail dldodd@burns-wilcox.com.
Nursing Homes/Assisted Living Market Detail: US Risk Brokers Inc.’s (www.usrisk.com) Houston office offers an exclusive in-house underwriting program designed specifically for nursing homes, assisted living facilities, independent living facilities and CCRC’s. US Risk also gives agents access to an exclusive miscellaneous medical malpractice program. Eligible classes include: home healthcare agencies, staffing agencies, and many more. Carriers: Underwriters at Lloyds. No rating provided. Non-admitted. States: All. Contact: Sheila Boatman at 281-249-4933 or e-mail sheilab@usrisk.com. IJ www.insurancejournal.com
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Special Report Directors & Officers
An Awakened Washington Promises More Stress for Directors & Officers Corporate Leaders Brace For Fallout From Heightened Regulation, Even Corrupt Foreign Practices By Andrew G. Simpson
C
orporations and their directors and officers are living in fear. Fear of the next financial scandal, the next stock market plunge, the next lawsuit. Fear of bankruptcy. Fear of angry policymakers inside Washington and angry citizens outside their homes. It’s no wonder that they’re asking about directors and officers liability insurance protection like never before. “The last year has been interesting because I think the entire business community, and maybe the world in general, has recognized how risk is so vital, and understanding risk is vital to our economy. And at the center of that are directors and officers. Now they’re looking at their coverage in a way that, perhaps, they never have before,” said Mike Smith, president of AIG Executive Liability, who knows a lot about D&O and about today’s headlines. “I think that in the past time, they relied on lawyers and brokers and maybe carriers to provide them a product, but today they’re asking more questions, to ensure that they have the coverage that’s going be there when they need it,” Smith said. “A lot of money has been lost and that leads to a heightened awareness of what’s going on,” according to Michael Price, vice president, Hartford Financial Products.
D&O clients and their advisors are, of course, asking a lot of questions about their protection against securities litigation. They are also asking about the D&O risks they could face if their business were to go belly-up. And, increasingly, they are asking what risks they face when the federal government starts snooping around business a lot more as it is widely expected to do. Washington Risk D&O experts at the recent Professional
Liability Underwriting Society (PLUS) D&O Symposium in New York said they don’t expect Congress to pass any major legislation to change the shareholder rights climate. “Congress has other priorities,” said John Coffey, partner, New York law firm Bernstein Litowitz Berger & Grossmann LLP, capturing the consensus. President Barack Obama could bring about a “subtle shift” in the shareholders’ rights climate with his appointments to federal courts, according to plaintiffs attorney Sherrie R. Savett of Berger &
D&O Market Expects the Unexpected
T
he litigation climate is affecting directors and officers liability markets and pricing, most notably the financial D&O market. “Our data show that the D&O insurance market is clearly hardening for financial services companies, which have been at the center of the economic crisis,” said Lauri Floresca, senior managing director and author of the latest Carpenter Moore D&O Benchmarking Report. In 2008, financial services companies paid an average premium of $147,187 for the first $5 million of coverage, up 24 percent from 2007, according to Carpenter Moore. Aon’s D&O Pricing Index showed that the average price for $1 million in coverage limits increased 3.15 percent in the fourth quarter last year over 2007. “In the short term, we expect to see D&O pricing for the financial sector continue to rise,” said Mike Rice, managing director of Aon’s Financial Services Group and an author of the Aon Quarterly D&O Pricing Index. Aon’s analysis found that rates for D&O liability insurance in non-financial sectors actually declined by 6.3 percent in Q4 2008 compared to Q4 2007. Experts see the financial sector’s D&O woes spilling over into other sectors. “If the emerging executive liability insurance pricing trends continue, we can expect D&O rates to rise for other industries, especially if we see a reduction in insurer capacity due to consolidation or insolvency,” said Floresca. “After several straight years of declining premiums, many companies may not be prepared for cost increases. In this environment, companies will need to take a much more active role in their insurance renewal to get the best outcomes.” “It is possible … that a tough underwriting environment could emerge for all public companies as the economy continues to negatively impact both financial results and stock prices,” said Aon’s Rice. Ann Longmore, D&O, employment practices and fiduciary leader for Willis HRH Executive Risks Practice, writing in a recent Willis Marketplace Realities 2009 report, con-
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Montague in Philadelphia. But observers don’t expect Obama to lead a revolution in the judiciary. The D&O risk from Washington is not so much legislative or judicial in nature as it is regulatory. The Securities Exchange Commission (SEC) and other federal regulators are expected to step up their game, as former Vice President Dick Cheney would say, “big time.” All signs point to a far more aggressive regulatory approach and with that, higher costs. “You can absolutely take to the bank that the SEC will increase its activity dramatically and quickly,” Randall Bodner, ‘You can partner, Ropes & Gray in Boston, absolutely told the PLUS take to the crowd during the bank that the “So, What’s Next? Emerging D&O SEC will Liability Trends” panel. increase Bodner thinks its activity there is “pent-up dramatically prosecutorial in and quickly.’ zeal” Washington after the Bush Administration. He doesn’t think it is as much “anti-business” as it is a desire to make up for missing the Madoff, Stanford and other scandals. “I agree that there is a huge risk of increased SEC enforcement actions, not to mention the Department of Justice bringing their own criminal suits,” Denise Amantea, a partner with the San Francisco insurance agency, Woodruff Sawyer Insurance, told Insurance Journal in an interview after the PLUS panel. “It’ll come in different areas. For example, the SEC is going through a rough time right now because it has missed the Ponzi schemes that we read about in the papers, like Madoff and Stanford,” Amantea said. “The new [SEC] commissioner is going to make sure that these Ponzi schemes and any other fraud or corruption that’s bubbling up get caught before it’s an embarrassing predicament for them.” The SEC acknowledges that it’s a new day in Washington. “The commission’s enforcement program is in a critical transiwww.insurancejournal.com
tion period. Our new chairman, Mary Schapiro, joined the agency in January and has been taking a series of steps to bolster our enforcement efforts and restore investor confidence to our markets,” SEC Commissioner Elisse B. Walter told the House Committee on Financial Services in early March. Insurers see it coming. “I believe there
will be significant changes in the way government will be involved in business,” said Fred Cooper, executive vice president, AXIS Financial Insurance Solutions in Berkeley Heights, N.J. Cooper and others are concerned that this enhanced public oversight will mean “significantly” higher costs for D&O insurers. continued on page N22
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Special Report Directors & Officers Awakened Washington, continued from page N21
D&O Market, continued from page N20
The cost concern could explain why Amantea thinks that could be the case, Bailey said he already sees a significant too. “There can be millions in attorney fees increase in primary carriers negotiating setpile up long before there is even a trigger tlements or “cutting deals early� in the of coverage,� she said. game to cut costs. “I would expect this to According to Bodner, SEC defense costs continue,� Bailey said. can be “onerous� and it is difficult for insurers to push back against the governCorrupt Foreign Practices ment to control them the way they might One particular area of increased SEC be able to do in other cases. activity could come under An issue worth watchthe Foreign Corrupt Practices ing will be whether regu‘In the short Act (FCPA), a 1977 law that latory penalties, payments prohibits bribes to foreign and fines will be an offset term, we expect officials to obtain business. for insurance payments, to see D&O The SEC has brought 38 according to Dan A. FCPA cases since January Bailey, an insurance attorpricing for the compared to just one a ney with Bailey Cavalieri financial sector 2006 year in the late 1990s. LLC in Columbus, Ohio. What concerns Cooper continue to rise.’ A few recent cases have been high profile. In is whether carriers have December, the SEC reached a landmark accounted for these higher costs. “Carriers $350 million settlement with Siemens AG, are generally willing to offer the coverage which it charged with a scheme involving but I don’t think they are pricing for it in excess coverage,� he said. continued on page N24
tended that prices stabilized for most D&O buyers outside the financial sector toward the end of 2008 but then competition on some accounts picked up as the carriers themselves began to face financial distress. “We do not, however, expect this to continue for long. The question for the D&O market in 2009 is a matter of when and not if competition will cease to be a stabilizing factor. We are in a period where the best advice may be to expect the unexpected,� Longmore wrote. There could be some unexpected developments in cases involving suits against firms that accept bailout monies, according to John Coffey, partner, New York law firm Bernstein Litowitz Berger & Grossmann LLP. He cautions that “the government won’t be happy to see bailout funds� going to shareholders or lawyers in settlements. Even the best insurance professionals can’t avoid every D&O problem or Madofflike scandal but it helps to be able to say no, according to Mike Smith, president of AIG Executive Liability. “[I]t’s like baseball. If you get a hit three out of 10 times, that’s a pretty good average. I’m not suggesting that’s a good average here. But you build your underwriting model, you use your judgment. Part of that judgment is when you’ve been in an underwriting meeting and you come away with a feeling that you’re not getting the full story. You have to pay attention to that feeling. So you want to have your process, be comfortable with your process, and also have the ability to say no,� Smith says. Longmore, in her report, ventures that today’s D&O turmoil could even alter D&O client relationships. “One change may well be that directors and officers themselves will want to be part of the D&O insurance decision-making process, rather than leave this in the hands of their inhouse insurance professionals, as is usually the case now. After all, many directors view D&O insurance as a kind of personal coverage. Transparency, the mantra in the field of corporate governance, may therefore come to the D&O insurance purchasing decision. This can be seen as good news for professional risk managers who continually strive to improve decision-making processes and procedures.� IJ
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Focusing on Solutions
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YOU DON’T NEED TO TRAVEL TO LEARN Get your questions answered instantly from your desk. Insurance Journal webcasts allow you to interact with the experts in real time. Live and On-Demand Webcasts on www.insurancejournal.com/webcasts
Check out the next webcast TransUnion presents: Protecting Your Portfolio Against Foreclosure and Vacancy-Related Claims Date: April 28, 2009 Time: 10:00AM PT / 1:00PM ET Astonish Results presents: How the Power of Email Marketing Can Grow Your Agency Date: April 29, 2009 Time: 10:00AM PT / 1:00PM ET Register at: www.insurancejournal.com/webcasts Are you interested in having your own webcast or
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Special Report Directors & Officers
Awakened Washington, continued from page N22
Rising Risk of Bankruptcies
A
enforcement action has resulted in bribes to government officials in Asia, increased sensitivity to FCPA concerns in Africa, Europe, the Middle East and the M&A transactions, as well as in common Americas, in violation of the FCPA. An commercial transactions and business relaFCPA deal involving Halliburton/KBR tionships,” says the report. made headlines in February. The SEC Bailey doesn’t think insurers have yet charged that a KBR subsidiary bribed Nigerian government officials over a 10-year been badly burned by FCPA cases in part because those caught bribing tend not to period in order to obtain construction conbe directors or officers. However, he does tracts. KBR and Halliburton agreed to pay worry about this exposure for any entity $177 million in disgorgement to settle the doing business internationally. SEC’s charges and $402 million to settle The Hartford’s parallel criminal Price suggested that charges brought by ‘We haven’t begun to see FCPA-related activithe U.S. Department ties could be anothof Justice. The sancthe bankruptcies yet.’ er catalyst for additions represented the tional class action suits. largest combined settlement ever paid by Amantea thinks the FCPA exposure U.S. companies since the FCPA’s inception. shouldn’t be ignored. She recommends that “They [SEC] are on a tear,” believes brokers obtain explicit D&O endorsements Amantea, referring to a “flurry of activity” that exempt FCPA activities from any proon FCPA cases over the past five years. hibition against SEC fines and penalties. “This could be a big exposure, and the FBI Interest exposure that worries me is not so much A new report by the law firm of the employees who are doing the bribing, Shearman & Sterling LLP (FCPA Digest of but the exposure to directors and officers, Cases and Review Releases Relating to who are not necessarily putting this as an Bribes to Foreign Officials Under the issue on their radar screen and supervising Foreign Corrupt Practices Act of 1977) it,” said Amantea. reports that the interest in FCPA cases “I would, if I were the broker, absolutely extends to the FBI and to non-U.S. enforcevet the policies to make sure there is that ment agencies as well. explicit coverage,” Amantea added. IJ “The increased risk of investigation or N24 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
total of 210 federal securities class actions were filed in 2008, a 19 percent increase over 2007, according to a report by the Stanford Law School Securities Class Action Clearinghouse and Cornerstone Research. This trend has been particularly vexing for directors and officers of financial firms. The study shows that nearly a third of all large financial firms were named as a defendant in a securities class action in 2008. The concern in D&O circles is not just that securities litigation is rising and could continue to rise over the next few years. (Plaintiffs with stock drop charges can wait two years to file so some of these cases dating back to 2007 could still be brought.) But the added worry is that class actions are bound to spread beyond the financial sector. A main driver will be the coming flood of corporate bankruptcies. In 2008, bankruptcy filings by businesses were up 50 percent and, in February, they were up 47 percent compared to a year ago, according to Automated Access to Court Electronic Records in Oklahoma City. In September, Lehman Brothers became the largest Chapter 11 filing of all-time. That was followed by Washington Mutual, the biggest bank failure in U.S. history. But bankruptcies have not been confined to financial firms. Other well-known filings have included Circuit City, Linens-n-Things, Frontier Airlines and Mrs. Fields Cookies. “We haven’t begun to see the bankruptcies yet,” Randall Bodner, partner, Ropes & Gray in Boston, told an audience at the recent Professional Liability Underwriting Society (PLUS) D&O Symposium in New York. In March, Moody’s released a list called The Bottom Rung, which identified more than 280 companies it believes are at risk of corporate bankruptcy. The companies include Krispy Kreme, Blockbuster, Dole Food, Eddie Bauer and Rite Aid. “As bankruptcies increase, class actions will rise,” Samuel H. Rudman, a law partner with New York’s Coughlin Stoia Rudman Robbins, told the same PLUS crowd listening to the “So, What’s Next ? Emerging D&O Liability Trends” panel. Rudman could be right, too. According to Advisen, more than three-quarters of large pubwww.insurancejournal.com
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lic companies that filed for bankruptcies were cited in class actions. “You’re certainly going to see bankruptcies because there are many troubled industries out there. The forefront would be the automotive industry, and the suppliers to it,” said Mike Smith, president of AIG Executive Liability. “But you’re going to see that there’s going to be a trickle down effect, and while it’s not nearly as difficult in those [D&O] markets as it is in financial institutions, it’s certainly difficult.” Fortunately for directors and officers, most companies today carry Side A D&O coverage which indemnifies them if the company can’t do it because it is bankrupt. But the worry over bankruptcies for directors and officers doesn’t necessarily end there. Denise Amantea, a partner with the San Francisco insurance agency, Woodruff Sawyer Insurance, points out that the trustee of a company in bankruptcy could refuse to pay for renewal of the Side A coverage. “So what do these directors and officers do? … Do they have to pay out of their own pocket? That’s going to be a big deal.” Amantea recommends that directors and officers seek legal counsel about how to protect themselves from the situation in which the bankruptcy trustee will not allow the purchase of their renewal. Amantea also advises individual board members to have their own counsel draw up a personalized indemnity agreement. It is not safe to rely on bylaws because the board can change those after a board member retires, she advises. “But if you have a written indemnity agreement, signed by the company, they can’t revoke that contract, and there are lots of bells and whistles that you can put into that indemnity agreement that makes it very favorable for the individual director or officer,” Amantea tells her clients. While bankruptcy typically is covered, brokers might want to make absolutely certain that the D&O policy under review clearly covers this risk. “Now is the time to make sure D&O policies are stress-tested for bankruptcy,” advises attorney Bodner. The concern, according to Bodner, is that the coverage might not be available later. IJ www.insurancejournal.com
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Special Report Directors & Officers
D&O Insurance for Early-Stage Venture-Backed Firms: Carriers Scrutinizing More, But Hungry for Business Schwander
Owens
By Mike Schwander and Rachael Owens
E
ven for established companies increased assets, but we are now seeing with proven track records, the rate increases in cases where the employee current directors and officers count has increased significantly or where (D&O) insurance market is chalthere have been claims against a company. lenging. For early-stage companies, present Even if firms are lucky enough to underwriting practices for D&O insurance receive a flat renewal, terms may resemble (rather like the opening line of be more restrictive. For examDickens’ “A Tale of Two Cities”) “the best ple, there may be of times and the worst of times.” bankruptcy exclusions, higher In one sense, it’s the “worst of times” for deductibles, these small venture-backed companies because underwriters are looking to reduce specific event exclusions, or their exposure to “risky” firms. Early-stage exclusions for companies often have minimal cash non-active reserves. Many are engaged in research and investors or owndevelopment that burns through cash without any hope of generating revenues in ers. But there’s the near term. also the “best of As recently as six months ago, carriers times” aspect of seemed willing to overlook these risks, the situation. and obtaining D&O insurance for entreThe good preneurial companies was as easy as subnews is that, mitting cursory information and waiting a while underfew days or hours for a quote. Not anywriters may be more. For the first time in years, earlyputting companies seeking D&O stage companies are being underwritten coverage under a microscope of with a sharper pencil. More documentascrutiny, these same carriers are probation is being sought, and the length of bly grappling with overcapacitime from submission to ty in today’s weak economy. approval can now be weeks For the first Most of them genuinely need rather than days. the business, which means Underwriters now want time in years, that D&O coverage is availto see more supporting early-stage able to even the riskiest of financial information such companies — as year-end and interim companies are entrepreneurial but only if they’re willing to financial statements, cash being undertake the time required to on hand, funding sources and submit detailed — even, in one recent case, written with a gather information to carriers. the company’s most current sharper pencil. bank statements. Scrutiny Plus Carriers’ The increased review has Overcapacity translated into some pricing impact. Given these conflicting trends — Several years ago, underwriters would not tighter scrutiny plus carrier overcapacity have been able to price for increased expo— we’re advising our clients to budget for sures, like higher employee counts and N26 | INSURANCE JOURNAL-NATIONAL REGION April 6, 2009
the worst — but work for the best. Smart CEOs and risk managers are learning that investing time to educate D&O underwriters about their company, its financial position and its future prospects will help minimize exclusions and rate increases at renewal. By far the most important consideration for underwriters is a company’s cash position. One company we know had only a three- to fourmonth cash reserve, versus the 12- to 18-month reserve that underwriters like to see. Carriers know that a company with such a weak cash position can be quite vulnerable to bankruptcy. And bankruptcies always mean claims and litigation — things underwriters understandably seek to avoid. In addition to its weak cash position, the aforementioned company also didn’t allow adequate time for its application to be processed in this new world of increased scrutiny. We scrambled to compile all the basic information, and then we added explanatory paragraphs related to the company’s cash reserves, its anticipated sources of new capital and other relevant financial information. In the end, the company obtained a renewal and the rate wasn’t too bad, but the terms were more restrictive than previously. Another consideration is that earlywww.insurancejournal.com
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ty
Schwander is executive vice president and Owens is senior vice president of Lockton Denver’s Financial Services practice. Both are national experts on D&O insurance, IPOs, bankruptcies, funding mechanisms, multiyear structures, mergers and acquisitions, and evergreen clauses. E-mail: mike.schwander@lockton.com; rachael.owens@lockton.com.
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or advisor ensures the best shot at a winning strategy. IJ
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Be Creative The current climate means that more creativity may be both in Even if firms are required, initial approachlucky enough to es to carriers and in how financial receive a flat information is renewal, terms packaged to make it easy for may be more potential underrestrictive. writers to gain a “feel” for a company. Some tips for navigating the current climate: • Don’t judge D&O insurance on price alone. Adequate and favorable coverage is the most important objective. • Begin the renewal process at least three months in advance of the renewal. This will allow time to prepare the detailed financial information that underwriters now require. • Foster a personal relationship with the underwriter. Make an effort to speak personally with underwriters to educate them about the company and its prospects. Choose the most passionate company spokespersons to participate in the call. • Take the time to prepare a professional, complete submission that answers every possible question an underwriter may have about the company. • Compare D&O insurance policies from a number of underwriters to ensure the company receives the most complete coverage. If building greater than $5 million in limits, include several carriers in the D&O insurance program. This provides flexibility and adds up to more coverage overall. How will this modern-day Tale of Two Cities end? We believe that — at least
through the end of 2009 — the abundance of carrier capacity will continue to offset the negatives that underwriters associate with D&O coverage for venture-backed companies. The process of creating, negotiating and acquiring D&O liability programs will remain time-consuming, confusing and frustrating. Teamwork between an experienced risk manager and a reputable broker
bs Clu alth He
stage companies can’t afford to be without insurance protecting their directors and officers in the event of lawsuits or other claims against the company. In the current climate, our best advice to clients is that they start this process early as well (at least 60 to 90 days in advance). Also, be prepared for the process to include some interaction between the insured parties and carriers, either in person or at least by phone.
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Welcome to Insurance Journal’s 2009 Employee Benefits Directory. We’ve assembled this directory as a resource for property/casualty independent agents who are looking for assistance in providing group benefits to their business clientele. This directory provides a listing of brokerages and/or insurance companies with benefit brokerage departments that are interested in working with P/C insurance agents to provide such products. The information published in this directory was submitted directly by the benefit providers and includes their contact information, coverages they offer, states they do business in as well as carriers they write coverage through. We hope you find IJ’s Employee Benefits Directory to be a useful tool when seeking group benefit providers. We will continue to expand this directory throughout the year and beyond. To comment on this directory, or any other IJ resource, e-mail: editorial@insurancejournal.com. ActivaRx Inc. 4040 E. Camelback Rd., Ste. 158 Phoenix, AZ 85018 Contact: Olinda Vargas Phone: 602-468-9500 E-mail: olvargas@activarx.com www.activarx.com States Available: All States Products Offered: Alternative Health Plans (chiropractic, alternative medicine, etc.) - Manage Standalone Rx Plans Affiliated Marketing Group 2925 Briarpark, Ste. 155 Houston, TX 77042 Contact: Dan Elliott; Larry Bartee Phone: 713-977-0611 E-mail: dan or larry @affiliatedmarketing.com www.affiliatedmarketing.com States Available: Texas Years Offering Products: 25 years Products Offered: National Group Health HMO or PPO; National Group Indemnity/Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: United HealthCare, PacifiCare, Blue Cross BlueShield of Texas, Reliance Standard, Delta Dental, Avesis American Brokerage Company Inc. 810 Dominican Dr. Nashville, TN 37228 Contact: Roy L. DePue Phone: 615-227-8292, ext. 302 E-mail: roy@abctn.com www.abctn.com States Available: All States including Wash. DC Years Offering Products: Many Products Offered: Group Life; Group Long Term Care Carriers: More than 24 different companies for life insurance, long term care & annuities
AmeriFlex 700 E Gate Dr., Ste. 510 Mount Laurel, NJ 08054 Contact: Scott Mardis Phone: 888-868-FLEX (3539), Ext. 110 E-mail: info@flex125.com www.flex125.com States Available: All States including Wash. DC Years Offering Products: 10 years Products Offered: Technology-based, consumer-driven benefits solutions supported by an integrated FSA/HRA/ HSA/CRA debit card platform. Arnoff and Associates Inc. 7205 Chagrin Rd., Ste. 3 Bainbridge, OH 44023 Contact: Robert Arnoff Phone: 440-247-4511 E-mail: arnoffassoc@stratos.net www.arnoffandassociates.com States Available: MI, OH Years Offering Products: Since 1981 Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: It varies per product line. Also it varies based on the clients demographics and needs Assurant Employee Benefits 2323 Grand Blvd. Kansas City, MO 64108 Contact: 35+ sales offices across the U.S. www.assurantemployeebenefits.com for more details States Available: All States including Wash. DC Products Offered: Group Dental; Group Disability; Group Life; Group Long and Short-term Disability; Term Life and AD&D; Dental Coverage on both employer-paid and employee-paid basis.
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BenCom 1175 Vickery Ln. Cordova, TN 38016 Contact: Sales Department Phone: 888-763-1285 E-mail: info@bencom.com www.bencomonline.com Years Offering Products: In business since 1998 Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Any. Benefit Solutions 3353 Barrow Hill Trail Tallahassee, FL 31312 Contact: Jody Hill Phone: 850-907-0044 E-mail: benefitsolutions@comcast.net States Available: AL, CA, FL, GA, TX Years Offering Products: 20 Years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Group Dental; Group Disability; Group Life; Group Vision Carriers: Colonial, Blue Cross Blue Shield, Unum, Assurant, Principal, Ameritas, CHP, United HealthCare, Vista Health Plan, Met Life, Ge Financial
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2009 Employee Benefits Directory Benefit Strategies Inc. 921 E 86th St., Ste. 100 Indianapolis, IN 46240 Contact: Joseph E. Guzman, Jr. Phone: 317-466-1336 or 888-588-1336 E-mail: jguzman@bsi-indiana.com www.bsi-indiana.com States Available: IL, IN, MI, MO, OH, PA Years Offering Products: 20 Years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Multiple and varying depending upon employer size, needs, demographics, etc. BenefitStrategies LLC 2776 Ridge Valley Rd., NW, Bldg 100, Ste. 150 Atlanta, GA 30327-1850 Contact: Carl C. Schuessler, Jr., DHP, DIA, GBDS Phone: 404-277-7852 E-mail: carl@benefitstrategiesllc.com States Available: AL, AR, AZ, CA, CO, CT, FL, GA, HI, IL, IN, KS, KY, MA, MD, MI, MN, MO, MS, MT, NC, NM, NY, OH, OR, PA, RI, SC, TN, TX, UT, VA, WI, WV Years Offering Products: 18 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Many BenefitsWorkshop P. O. Box 56828 Jacksonville, FL 32241 Contact: Larry Garrett Phone: 904-631-2629 E-mail: Larry.Garrett@BenefitsWorkshop.com www.benefitsworkshop.com States Available: All States Years Offering Products: 21 years Products Offered: Section 125 Plans, FSAs, HRAs, Cafeteria Plan, Commuter Benefits, COBRA administration and consulting BenefitVision Inc. 4522 RFD Long Grove, IL 60047 Contact: Virginia Eanes, VP - Marketing Phone: 800-810-2200 Ext. 1115 E-mail: veanes@benefitvision.com www.benefitvision.com Years Offering Products: 16 years Products Offered: Communication and enrollment for core benefits and manages data for large organizations with employees scattered coast to coast all year round. Tele-enrollment methodology gives full service, not self service, to every employee, without work disruption and regardless of location. Big Benefits Inc. 2063 N Main Centerville, UT 84014 Contact: Pete Peterson Phone: 801-292-0841 E-mail: pete@big-benefits.com www.big-benefits.com States Available: AZ, CO, ID, UT Years Offering Products: 20 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Group Dental; Group Disability; Group Life; Group Vision Carriers: Specialize in self-funded plans but write for all major carriers.
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Century Benefits Consulting Inc. 1592 Union St., Ste. 344 San Francisco, CA 94123 Contact: Michele Jones Phone: 415-647-8144 E-mail: mjones@benefits-shmenefits.com www.benefits-shmenefits.com States Available: California Years Offering Products: 7 years Products Offered: Regional Group Health HMO or PPO; Regional Group Indemnity/Major Medical; Alternative Health Plans (chiropractic, alternative medicine,etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Kaiser Permanente, Health Net, Blue Cross, Blue Shield, California Choice, KP Choice Solution, Aetna, PacifiCare, Genworth, Allianz Century Benefits Group Inc. 100 White Spruce Blvd., Ste. U304 Rochester, NY 14623 Contact: Michael King, CRSP Phone: 585-224-8138 E-mail: century100@frontiernet.net www.aboutcentury.com States Available: NJ, NY Years Offering Products: 20 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Aetna, Blue Cross, GHI, United Health Care Preferred Care, MVP, CDCHP, Oxford, CIGNA Chappelle Consulting and BenefitElect of Alabama 1747 Reese St., Ste. 215 Birmingham, AL 35209 Contact: Allan Chappelle Phone: 205-871-5900 E-mail: achappelle@chappellebenefits.com www.chappellebenefits.com States Available: AL, CA, FL, GA, IA, IL, IN, KS, LA, MA, MS, NC, OH, OK, SC, TN, TX, VA, WI Years Offering Products: 21 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: MetLife, United Healthcare, BlueCross BlueShield of Alabama, AFLAC, AllState, Humana, etc. Child & Elder Care Insights Inc. 18500 Lake Rd., Ste. 200 Cleveland, Ohio 44116 Contact: Elisabeth A. Bryenton Phone: 440-356-2900 E-mail: InfoHQ@CareReports.com www.carereports.com States Available: All States Years Offering Products: Since 1986 Products Offered: National work / life benefits to large and small companies. The latter includes employee info assistance with child care, elder care, legal and financial services. Cleveland Financial Group 28601 Chagrin Blvd., Ste. 300 Cleveland, Ohio 44122 Phone: 216-765-7418 E-mail: tfarro@LNC.com States Available: Ohio Years Offering Products: 30 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: All major & regional insurance carriers & TPAs.
CobraHelp 1620 High St. Denver, CO 80218 Phone: 800-398-2946 E-mail: marketing@mycobrahelp.com www.mycobrahelp.com States Available: All States Years Offering Products: 20+ years Carriers: National COBRA Administrators since 1986 Colonial Supplemental Insurance 26 Gretchen Ln. Sopchoppy, FL 32358 Contact: Ernie Vance Phone: 850-962-2600 E-mail: ernie.vance@coloniallife.com www.coloniallife.com/supplemental/default.asp States Available: AL, FL, GA Years Offering Products: 30 years Products Offered: Group Disability; Group Life Carriers: 1. State of Florida employees (State agencies) 2. Leon County Board of County Commissioners 3. Memorial Hospital and Manor (GA) 4. Coffee Health Group (Hospital in AL) CONCERN: EAP 1503 Grant Rd., Ste. 120 Mountain View, CA 94040 Contact: Paulette Hannah Phone: 888-533-6015 E-mail: info@concern-eap.com www.concern-eap.com States Available: All States Years Offering Products: 28 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; Alternative Health Plans (chiropractic, alternative medicine, etc.) Carriers: CONCERN Employee Assistance Program Coordinated Benefits Company 923 N Plum Grove Rd., Ste. C Schaumburg, IL 60173 Contact: Jim Patrician Phone: 847-605-8560 E-mail: jpatrician@cbcco.com www.cbcco.com States Available: CO, IA, IL, IN, MI, MO, WI Years Offering Products: 25 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Blue Cross/Blue Sheild, Aetna, UHC, Humana, UniCare, Standard, Ameritas, Guardian, Delta Dental, MetLife, Reliance Standard, Lincoln National, Hartford, Unum, Mutual of Omaha Cornerstone Insurance & Financial Services Inc. P.O. Box 381625 Birmingham, AL 35238 Contact: Rick Radford Phone: 205-980-7411 www.cornerstoneins.com States Available: AL, AR, AZ, CA, CO, CT, DE, FL, GA, IL, IN, KS, KY, LA, MD, MI, MN, MS, NE, NJ, NM, NY, PA, TN, TX, VA, VT Years Offering Products: Many years Products Offered: Group Disability; Group Life; Group Long Term Care Carriers: More than 25 different companies for life insurance, long term care and annuities.
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2009 Employee Benefits Directory Cornerstone Preferred Resources P.O. Box 680185 Houston, TX 77268-0185 Contact: Kathy Sturm Chomout Phone: 281-580-6865 E-mail: kathy@cprtpa.com www.cprtpa.com States Available: LA, OK, TX Years Offering Products: 15 years Products Offered: National Group Health HMO or PPO; National Group Indemnity/Major Medical; Alternative Health Plans (chiropractic, alternative medicine,etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision
GE Consumer Finance/Benefit Solutions 200 N Martingale Rd. Schaumburg, IL 60173 Phone: 888-788-9089 E-mail: Benefit.Solutions@GE.com www.benefitsolutionsbyge.com States Available: AK, AR, AZ, CA, CO, CT, DE, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, NC, ND, NE, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WA, WI, WV, WY Years Offering Products: 28 years Products Offered: Group Dental; Group Vision Carriers: Health Discount Solutions by GE Legal Solutions by GE Heritage Casualty Insurance Company
CorpCare Associates Inc. 7000 Peachtree Dunwoody Rd., Bldg 4, Ste. 300 Atlanta, GA 30328 Contact: George Martin Phone: 877-843-6036 E-mail: george@corpcareeap.com www.corpcareeap.com States Available: All States Years Offering Products: 18 years Products Offered: Employee Assistance Programs
Group Benefit Consultants Inc. 33 SE 7 St., Ste. A Boca Raton, FL 33432 Contact: Gary R Chapman Phone: 561-338-5936 E-mail: gbenefit@bellsouth.net www.groupbenefitconsultants.com States Available: Florida Years Offering Products: 18 Years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Medical-Blue Cross, United, Humana, Aetna, Vista, Neighborhood Health, Avalon Healthcare Life, Disability and Dental- Aetna, Blue Cross, Assurant, Genworth, Guardian, Hartford, Jefferson Pilot, Met, Principal, Reliance, UNUM
CPS - Reliable Financial Group 9116 E Sprague, Ste. B202 Spokane, WA 99206 Contact: Frank Skaw Phone: 800-364-3110 E-mail: frank@relfingrp.com www.relfingrp.com States Available: AZ, CA, CO, HI, ID, KS, MT, ND, NM, NV, OK, OR, SD, TX, UT, WA, WY Years Offering Products: 20 years Products Offered: Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision DR Administrative Services Inc. 88 Sunnyside Blvd., Ste. 203 Plainview, NY 11803 Contact: Robert Rosen Phone: 888-791-3737 E-mail: robr@dradmin.com www.drdpny.com Years Offering Products: 12 Years Products Offered: Group Dental; Group Vision - Plan is self-funded Direct Reimbursement Dental Plans Employee Benefit Specialists Inc. 5934 Gibraltar Dr., Ste. 206 Pleasanton, CA 94588 Contact: Larry Rhodes Phone: 925-469-5232 E-mail: Larry.Rhodes@ebsbenefits.com www.ebsbenefits.com States Available: AK, AL, AZ, CA, CT, FL, GA, IN, MN, NC, NJ, NV, NY, OK, SC, TN, TX, WA Years Offering Products: 22 years Products Offered: Voluntary Products Carriers: Allstate Workplace Division and ING Evolutions Healthcare Systems Inc. 7916 Evolutions Way New Port Richey, FL 34655 Contact: Sales Department Phone: 800-881-4474, Ext 2300 E-mail: sales@ehsppo.com www.ehsppo.com States Available: AL, CA, FL, GA, IN, KS, KY, LA, MO, NC, OH, SC, TN, TX Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO Carriers: Carrier Class Network in Florida, over 400,000 providers nationally.
Health Benefit Solutions LLC 43 Church Ave. Cookeville, TN 38501 Contact: Jon A. Johnson Phone: 931-528-7232 E-mail: jonhbs@charter.net www.healthbenefitsolutions.com States Available: KY, TN Years Offering Products: Since 1973 Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Aetna, Assurant, Blue Cross Blue Shield of Tennessee, Bluegrass Family Health, Humana, Principal, United Health Care, Guardian, Prudential, Met Life, and several third-party administrators. HSM Inc. 7805 Hudson Rd., Ste. 190 St. Paul, MN 55125 Contact: Jim Wieland Phone: 651-287-4732 E-mail: jwieland@hsminc.com www.hsminc.com States Available: All States including Wash. DC Years Offering Products: 20 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical Carriers: Several thousand contracted providers throughout the country
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Insurance Administrator of America Inc. The IAA Building, 1934 Olney Ave. Cherry Hill, NJ 08003 Contact: Paul Kelly Phone: 856-470-1200 Ext. 223 E-mail: paul@iaatpa.com www.iaatpa.com States Available: CA, DE, FL, IL, IN, KY, MA, MD, ME, MI, NJ, NY, OH, PA, RI, TX, VA, WA, WI, WV Years Offering Products: Since 1985 Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Vision; HRA; FSA; HSA (All with Debit Card options) Carriers: All the nationals and many regional Insurance Analysis & Planning P.O. Box 530795 Birmingham, AL 35253-0795 Contact: Henry W. Strong, CLU, RHU Phone: 205-879-0809 E-mail: insurance@bellsouth.net www.strongfinancialadvisors.com States Available: AL, GA, MS, OH, OR, TN, TX Years Offering Products: 30+ years Products Offered: National Group Health HMO or PPO; National Group Indemnity/Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Ameritas Life, Genworth Life Ins. Co., Guardian Insurance & Annuity, Hartford Life & Accident Ins. Co., Life Insurance Co. of The Southwest, Lincoln National Life Ins. Co., Metropolitan Life, National Life Ins. Co., National Union Fire Ins. Co. of Pittsburgh, Nationwide Life Ins. Co. of America, Principal Life Ins. Co., Protective Life Ins. Co., Provident Life & Accident, Prudential Ins. Co. of America, Reliance Standard Life Ins. Co., Reliastar Life, Standard Ins. Co., Sun Life & Health Ins. Co., Symetra Life Ins. Co., Unum Life Ins. Co. of America Jordan Benefit Services 4204 Gardendale, Ste. 100 San Antonio, TX 78229 Contact: Sara Jordan Phone: 210-421-8361 E-mail: sarajordan@peoplepc.com www.jordanbenefits.com States Available: Texas Years Offering Products: 23 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; Regional Group Indemnity/Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Vision Carriers: Aetna, Blue Cross, Humana, Pacificare, Principal Financial, United Healthcare, American National, Colonial, John Alden/Fortis, Pacific Life, Delta Dental, Dental Select, Reliance Standard, Humana Dental, United Healthcare, First Penn Life, Celtic, Fort Knowles Financial Advisors 3017 Ninth Ave. S Great Falls, MT 59405-3421 Contact: Randall Knowles, SPHR, CFP, ChFC Phone: 406-452-7250 E-mail: knowlesmt@bigfoot.com States Available: MT, ND, SD, WY Years Offering Products: 30 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Most
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2009 Employee Benefits Directory L.M.S. Associates P.O. Box 948094 Maitland, FL 32794-8094 Contact: Steven L. Beumer, RHU, REBC Phone: 407-629-4108 E-mail: LMSAssoc@aol.com States Available: AL, AR, CA, FL, GA, IL, IN, KY, LA, MA, MI, NH, NJ, NM, NY, NC, PA, SC, TN, TX, VA Years Offering Products: 25 + years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: AETNA, CIGNA, United HealthCare, Hartford, Sun Life, UniCare, EyeMed, AVESIS, American Spec. Health, Ameritas, Kaiser, among others. Louis Rich 1240 Keats St. Manhattan Beach, CA 90266 Contact: Louis Rich Phone: 310-318-1362 E-mail: Louis.Rich@gte.net www.louisrichinsurance.com States Available: California Years Offering Products: 18 years Products Offered: Regional Group Health HMO or PPO; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: All worksite carriers MAVUM Consulting 7160 Graham Rd. Indianapolis, IN 46250 Contact: Rod Reasen Phone: 317-913-3370 E-mail: rreasen@mavum.com www.mavum.com States Available: CO, FL, GA, IA, IL, IN, KY, MI, NC, NV, OH, SC, TX Years Offering Products: 15 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Anthem, Aetna, AIG, Central Reserve Life, MetLife, Principal, Companion, Guardian, United HealthCare, Humana, Cigna, Great West, Jefferson Pilot, Advantage Health, M-Plan, Medical Mutual, Star HRG, Aflac, Colonial, Blue Cross Blue Shield, Many Others Medical Link 301 Madison Ave. New York, NY 10017 Contact: Mickey Lyons Phone: 212-490-8777, Ext. 104 E-mail: mlyons@medicallink.com www.medicallink.com States Available: CA, CT, FL, NJ, NY, PA Years Offering Products: 18 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Aetna, United, Horizon, Empire, Oxford, Humana, American Medical, HIP, GHI, Guardian, Healthnet, AFLAC, Colonial, Met, Genworth, Hartford, First Reliance, and many more.
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Meritain Health 300 Corporate Parkway Buffalo, NY 14226 Phone: 800-242-6226 E-mail: sales@meritain.com www.meritain.com States Available: All States Years Offering Products: 30+ years Products Offered: Provider of services to self-funded health plans andconsumer-driven health plans. National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Midwest Business Group on Health 35 E Wacker Dr., Ste. 1500 Chicago, IL 60601 Contact: Larry Boress Phone: 312-372-9090, Ext. 101 E-mail: lboress@mbgh.org www.mbgh.org States Available: Illinois Years Offering Products: Since 1998 Products Offered: Chicago HMOs, PBM, Incentive Program, Diabetes/Cardio Value-based Health Mgmt Program, Wellness/Health Mgmt Suite of Services Carriers: Disease Mgmt Svcs: Health Dialog, LifeMasters, Matria/CorSolutions *Pharmacy Services: Walgreens Health Inititatives (WHI) *Health Promotion Services: HPN Worldwide. *Chicago HMOs: HMO Illinois, Blue Advantage, Humana, UniCare, AUDIT Midwest Insurance Brokerage Service 54 W Seegers Rd. Arlington Heights, IL 60005 Contact: Tony Camodeca Phone: 847-631-6661 E-mail: tony@midwestga.com www.mibsusa.com States Available: AL, AZ, CA, CO, FL, GA, IL, IN, KS, KY, LA, MI, MO, NC, NV, OH, OK, SC, TN, TX, UT, VA, WI, WV Years Offering Products: 20 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Group Dental; Group Disability; Group Life Carriers: Blue Cross Blue Shield of Illinois, AFLAC, Assurant, Ft. Dearborn Life, G.E. Financial Millennium Administrators Inc. 900 Ashbourne Way, Ste. B Schwenksville, PA 19473 Contact: Sara B. Picard Phone: 610-222-9400 E-mail: spicard@millennium-tpa.com www.millennium-tpa.com States Available: All States including Wash. DC Years Offering Products: 10 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Stand alone RX plan option from several different PBM’s. Carriers: Express Scripts, Health Trans, IPS, Benescripts, Wallgreens. myBenefitStatements 432 E Pearl St. Miamisburg, OH 45342 Contact: Larry Bissett Phone: 800-865-4485 E-mail: LarryB@myBenefitStatements.com www.mybenefitstatements.com States Available: All States Years Offering Products: 20 years Products Offered: Alternative Health Plans (chiropractic, alternative medicine, etc.) - Customized employee benefit statement services.
North Star Resouce Group 2701 University Ave. SE Minneapolis, MN 55414 Contact: Cheryl L. Marks, RHU REBC Phone: 612-617-6163 E-mail: cheryl.marks@northstarfinancial.com www.northstarfinancial.com States Available: AZ, IA, MN, ND, NM, OR, TX, WI Years Offering Products: 20 Years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Blue Cross, Medica, Humana, United HealthCare, Assurant, Guardian, Principal, Hartford, Standard, Delta Dental, UNUM, MetLife, Health Partners,Preferred One, Great West, Reliance Standard Pet Protect P.O. Box 11447 Naples, FL 34101 Contact: Rhona Sutter Phone: 239-403-4100 E-mail: petprotect@pethealthinsure.com www.pethealthinsure.com States Available: AL, AK, AZ, CA, CO, CT, DE, FL, GA, IA, ID, IL, IN, KS, KY, MA, MD, ME, MI, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, SD, TN, TX, VA, VT, WI, WV, WY Years Offering Products: Since 1997 Products Offered: Pet Healthcare Ins. for Dogs & Cats Carriers: Insurance Corporation of Hannover Petersen International Underwriters 23929 Valencia Blvd., Ste. 215 Valencia, CA 91355 Contact: Mark Petersen Phone: 800-345-8816 E-mail: Mark@piu.org www.piu.org States Available: All States Years Offering Products: 30 years Products Offered: Group Disability Carriers: Lloyd’s of London PPO Dental Plus P.O. Box 953279 Lake Mary, FL 32795 Contact: Mark Gebhardt Phone: 407-324-3921 E-mail: mgebhardt@aigilis.com www.aigilis.com States Available: All States including Wash. DC Years Offering Products: 25 years Products Offered: Group Dental Carriers: Security Life and Symetra Preferred Vision Care P.O. Box 26025 Overland Park, KS 66225-6025 Contact: Evan J. Disser Phone: 913-451-1672, Ext. 404 E-mail: sales@preferredvisioncare.com www.preferredvisioncare.com States Available: All States including Wash. DC Years Offering Products: 35 Years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Vision
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2009 Employee Benefits Directory Pritchard & Jerden Inc. 3565 Piedmont Rd., Bldg 3, Ste. 700 Atlanta, GA 30305 Contact: Jodie Braner Phone: 404-949-1059 E-mail: jbraner@pritchardjerden.com www.pritchardjerden.com States Available: AL, FL, GA, KS, NC, PA, SC, TN Years Offering Products: 15 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/Major Medical; Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Aetna Life Ins Co, American United Life Ins, BCBS, Coventry, United HealthCare, Banner Life, Employers Health, Eyemed, Greater GA Life, General American, Guardian, Hartford, Humana, Jefferson Pilot, Lincoln National, Met Life, EyeMed, Principal, Guardian, Reliance Standard, Standard, Genworth, Kaiser, United Concordia, Cigna, Compbenefits, Sunlife, Symetra Resource Brokerage LLC 1501 E Woodfield Rd., Ste. 110E Schaumburg, IL 60173 Contact: Jane Kopecky or Blair Farwell Phone: 800-605-7566 E-mail: info@resourcebrokerage.com www.resourcebrokerage.com States Available: IL, IN, MI, MO, WI Years Offering Products: The firm has been in group benefits for more than 27 years! Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; Group Dental; Group Disability; Group Life; Group Vision Carriers: BlueCross BlueShield of Illinois, Humana, UniCare, IAC, Starmark, Time, AIG, Fort Dearbon Life Roster Financial 1000 Voorhees Dr. Voorhees, NJ 08043 Contact: Patricia A Kilgore Phone: 800-933-6632, Ext. 1159 E-mail: patriciakilgore@rosterfinancial.com www.rosterfinancial.com States Available: All States Years Offering Products: 25 years Products Offered: Annuity; Life; Group Life; Group Long Term Care; Individual Long Term Care, Disability and Final Expense Carriers: Allianz, Allianz NY, Assurity, Mass Mutual, Met Life, John Hancock, Prudential, Penn Treaty, Med America Source One LLC 1970 Swarthmore Ave., Ste. 6 Lakewood, NJ 08701 Phone: 888-661-7297 www.abcpayroll.com States Available: New Jersey Years Offering Products: 20+ years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: Many
Superior Benefit Plans 5775 Lower York Rd., Lahaska, PA 18931 P.O. Box 599, New Hope, PA 18938 Contact: Marybeth Snyder, CEBS, CLU Phone: 610-722-9900 E-mail: msnyder@superiorbenefitplans.com States Available: DE, NJ, PA Years Offering Products: 26 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Vision; Individual Health; Voluntary Benefits Carriers: Aetna, Blue Cross/Blue Shield, 20 Regional and Ancillary Line Carriers, All Major Life and Disability Insurers, Self-funding TPAs. Supportive Solutions Inc. P.O. Box 52 Murrysville, PA 15668 Contact: Tonya Slawinksi Phone: 724-515-7354 E-mail: tonya.slawinski@supportive-solutions.com www.supportive-solutions.com States Available: All States Years Offering Products: 4 years Products Offered: Specializing in crisis management, response and consultation. Carriers: Corporate companies and TPAs The Washington Insurance Group Inc. 1101 30th St., NW Washintgon, DC 20007 Contact: Martin G Meadows Phone: 202-728-1092 E-mail: mgmeadows@washingtoninsurance.com www.washingtoninsurance.com States Available: All States including Wash. DC, Outside USA/Canada Years Offering Products: 25 + years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision Carriers: 25+ insurance & reinsurance carriers, TPAs & wholesale distributors including: Aetna, Anthem co’s, regional Blues, national Kaiser Permanente plans, Guardian Life, Prudential, Transamerica and United Healthcare co’s.
Way2SaveRX P.O. Box 953279 Lake Mary, FL 32795 Contact: Mark Gebhardt Phone: 407-324-3921 E-mail: mgebhardt@aigilis.com www.Way2SaveRX.com States Available: All States including Wash. DC Years Offering Products: 25 years Products Offered: National Prescription Drug Discount program. No cost to participants. For affinity & corporate groups, Associations and individuals enroll online. Westland Financial Services Inc 1717 Kettner Blvd., Ste. 200 San Diego, CA 92101 Contact: Gene A. Pastula, CFP Phone: 800-238-8144 E-mail: genep@westlandinc.com www.westlandinc.com States Available: All States including Wash. DC Years Offering Products: 20+ years Products Offered: Group Long Term Care Carriers: Prudential Life, Metropolitan Life, John Hancock Life, Genworth Life, Allianz Woodruff - Sawyer & Co. 220 Bush St., 7th Fl San Francisco, CA 94104 Contact: Jennifer Walsh Phone: 415-399-6444 E-mail: jwalsh@wsandco.com www.wsandco.com States Available: All States Years Offering Products: 31 years Products Offered: National Group Health HMO or PPO; Regional Group Health HMO or PPO; National Group Indemnity/Major Medical; Regional Group Indemnity/ Major Medical; Alternative Health Plans (chiropractic, alternative medicine, etc.); Group Dental; Group Disability; Group Life; Group Long Term Care; Group Vision
Transamerica Worksite Marketing 1400 Centerview Dr. Little Rock, AR 72211 Contact: Chuck McArthur Phone: 501-227-1260 www.transamericaworksite.com States Available: All States Years Offering Products: 40 years Products Offered: Group Dental; Group Disability; Group Life; Group Vision Carriers: Transamerica Worksite Marketing (administrative office), Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, Transamerica Occidental Life Insurance Company, Vision:Spectera, Inc. (administrative office), United HealthCare
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Southeast Coverage News & Markets
Regulators: AIG Not Using Bailout Funds to Under-Price Insurance By Andrew G. Simpson
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espite some complaints by competitors, American International Group (AIG) does not appear to be using federal bailout funds to lower its insurance prices to keep and attract business, state and federal officials told a House subcommittee recently. Representatives for the Government Accountability Office (GAO), which was asked by Congress to investigate the allegations of unfair pricing, and the National Association of Insurance Commissioners (NAIC), told lawmakers that they have not found enough evidence to conclude that the bailout funds triggered by troubles with AIG’s financial products unit have been of any direct benefit to the insurance operations. However, Orice M. Williams, director of Financial Markets and Community Investment for GAO, and Pennsylvania Insurance Commissioner Joel Ario, representing the NAIC, indicated that their monitoring is ongoing and their results are preliminary. Williams did suggest the property/casualty and life insurance operations of AIG may have received some indirect benefit “to the extent that the property/casualty insurers would have been adversely affected by a credit downgrade or failure of the AIG parent.” She said that some of AIG’s competitors claim that AIG’s commercial insurance pricing is out of line with its risks but other insurance industry participants and observers disagree. This, she said, her agency has not drawn any final conclusion. Ario suggested that the allegations of unfair advantage stem from the fact that AIG insurance operations continue to perform well, despite the troubles of the parent company and the financial products unit. “The allegations are most prominent in the highly competitive commercial property and casualty markets, where some of the www.insurancejournal.com
price insurance at a cost adequate to cover the nation’s largest insurers routinely bid against risk involved.” each other on multi-million dollar accounts for The insurers also suggested that buyers are the privilege of insuring the nation’s largest busichoosing to stay with AIG because they believe nesses,” Ario said. the company is backed by the government. Ario said that the latest allegations maintain AIG executives told GAO that they are chargthat specific accounts have been deliberately ing prices adequate for the risk and that their under-priced in a manner that would present a commercial insurance rates have solvency risk if done sysbeen mirroring the overall trends tematically. Regulators, he in the current soft market. That said, must monitor such sit- Brokers said AIG is, AIG’s rates have been declining uations because “there is a Commercial at an increasingly slower pace point at which low prices Insurance did for policyholders can not appear to be since the fourth quarter of 2008, and in some cases have increased. threaten long term stabililow-balling to AIG executives also noted that ty.” any surprising AIG has actually been losing marArio said his department degree. ket share “because the financial could not conclude that there is widespread under-pricing by AIG going situation of the parent company had impacted the reputation of the AIG commercial insurance on. “With the caveat that these issues are very complex, we have not seen any clear evidence of companies.” In addition, AIG told federal officials its comunder-pricing to date, though we continue to petitors are using the AIG parent company’s look both at individual cases and at aggregate numbers on both renewals and new business at financial problems as a way to discourage customers from buying from AIG. AIG provided AIG,” Ario concluded. GAO with recent contracts lost to competitor Williams reported on federal officials’ interviews with insurer, brokers and buyers in inves- bids that were below their own. GAO also spoke with insurance brokers, who tigating pricing and the allegations against AIG. From competing insurers they heard that while stressed that commercial markets are very competitive, especially where large coverage current market conditions would dictate price amounts are involved, but that AIG Commercial increases, this was not happening with AIG. Insurance did not appear to be low-balling to They cited examples where AIG Commercial any surprising degree. Some brokers told GAO Insurance’s prices had decreased significantly that AIG Commercial Insurance has “historicalfrom the prior year’s price, when circumstances ly priced aggressively in some lines, and that appeared to indicate that higher prices were while in some instances in the past several warranted. months AIG Commercial Insurance may have According to Williams, the insur- priced more aggressively in order to retain certain customers, it did not appear to be a wideers added that spread practice and was viewed as an expected when such pricing response given the reputational hit the compaactivity is comny has taken.” bined with AIG Some brokers interviewed by GAO cited Commercial instances where AIG Commercial Insurance has Insurance’s market lost business because other insurers’ prices were power, AIG lower than theirs. The brokers also said that Commercial Insurance “can pre- they would recognize, and be concerned about, an insurer charging suspiciously low rates for vent prices from the coverage because it would create a risk that increasing and the insurer would be unable to pay the policythus hurt other holder’s claim. IJ insurers’ ability to April 6, 2009 INSURANCE JOURNAL-SOUTHEAST REGION | 43
Southeast Coverage News & Markets
Judge Orders State To Rework North Carolina Beach Plan Hikes
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Wake County judge has ordered North Carolina Insurance Commissioner Wayne Goodwin to reconsider deductible and surcharge increases for coastal homeowners in the state insurance pool called the Beach Plan. Wake County Superior Judge William Pittman ruled that Goodwin’s predecessor, former Insurance Commissioner Jim Long, did not follow procedures before approving the increases in November. Pittman ordered the Insurance Department, now headed by Goodwin, to redo the process. The judge’s ruling blocks surcharges the Beach Plan can charge for wind protection beyond insur-
ance companies’ rates from rising from 15 percent to a maximum 25 percent. The surcharges took effect with new policies written since Feb. 1. Also frozen is a planned rise in the deductible level to 2 percent of a home’s insured value per occurrence. The ruling doesn’t effect higher coastal premiums scheduled to begin in May as part of a deal Long struck allowing a statewide rate increase that averaged out to about 4 percent. That settlement cut premiums for homeowners in central and western counties, but hiked rates on coastal homes by up to 30 percent in five southeast coastal counties.
Coastal governments and trade groups have also challenged the rate increases in court. Meanwhile, legislators are debating a bill that would freeze the surcharge, deductible and premium increases until next year. Goodwin said the legislation risks making policies less available and more costly for everyone. Lawmakers are also considering reducing the Beach Plan’s maximum coverage to relieve its potential liability, as well as capping how much insurance companies would have to pay should the Beach Plan not have enough money to meet all of its claims. A 100-year storm could rack up more than $3 billion in insured
losses if it struck North Carolina, according to industry data. Beach Plan administrators have said it could pay $2.4 billion but only if it assessed insurers hundreds of millions of dollars. The Beach Plan began in 1969 and was considered to be the insurer of last resort when traditional insurers wouldn’t agree to take on potential liabilities on North Carolina’s barrier islands. The Beach Plan has since expanded to 18 coastal counties and began providing homeowners’ coverage and not just protection for wind damage. The program now includes 170,000 coastal properties valued at $72 billion, up from $3.6 billion in 1995. IJ
Florida Finds People Can’t Trust People’s Trust Insurance
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ne of Florida’s new startup property insurance companies that was expected to help pick up the slack when State Farm Florida exits the market has been barred from selling any new policies. The company was found to be violating numerous insurance laws and regulations including operating with insufficient reinsurance, using unfiled rates, writing homes without inspecting them, not verifying mitigation discounts, distributing misleading marketing information, and even using unlicensed agents. It was also the object of complaints over claims submission, investigation and payment. The company, which received its license in March 2008 with an initial capitalization of $10 million, was also found to be exceeding its permitted writings as set forth in the state-filed business plan by $5 million. “The plan they submitted was for slow growth and careful underwriting,’’ said Edward Domansky, spokesman for the Florida Office of Insurance Regulation. “They were not doing those things.’’ The state went onsite to investigate in February after allegations from agents and the Florida Association of Independent
Agents about the company using unlicensed agents. That FOIR intervention uncovered other concerns and resulted in a March 17 consent order that bars the firm from writing new business until the state says it can. The order also gives the insurer 75 days to purchase more reinsurance to meet state requirements. The state has questioned the insurance experience of the management team. The company, now being run by its founder, Michael Gold, has been told it must “immediately employ persons with significant insurance industry experience” to be president, vice president, chief financial officer and underwriting manager. The insurer has been fined $150,000 and instructed to place $500,000 with the state’s Bureau of Collateral Management —bringing its account with this agency to $800,000. Domansky said FOIR does not believe the company is in financial trouble, especially now that the state has stopped it from writing new business. The company has prided itself on being able to offer low-priced policies because it doesn’t pay “high-commissioned” sales agents. But competitors say it offers lower
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prices by selling slimmed down-policies without certain coverages homeowners expect. Domansky, acknowledging that the violations are “significant,” said the penalties were “appropriate” and not influenced by FOIR’s hope that domestic insurers like People’s Trust will write more property insurance business. He said the regulatory action proves FOIR is watching carriers closely. Gold told The Associated Press that his company is committed to satisfying the remaining requirements quickly. “Achieving full compliance will ultimately make us a stronger organization and we look forward to again providing Floridians cost-effective insurance coverage,’’ he said. IJ
Southeast Coverage News & Markets
Cat 5 Litigation in the Forecast? As 2008 Hurricane Claims Enter Court and New Season Approaches, Katrina Issues Linger By Bill Wein
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he 2008 hurricane season was the sixth most active tropical storm season recorded since data collection began in 1851. Six storms made U.S. landfall in 2008. They were hurricanes Dolly, Gustav and Ike and tropical storms Edouard, Fay and Hanna. Ike, which made landfall at Galveston, and Gustav, which made landfall in Louisiana, caused the greatest destruction. Current estimates project that Ike will be the fourth costliest Atlantic storm to make U.S. landfall, behind Katrina, Andrew and Wilma, while Gustav is projected to come in anywhere from number 12 to 20. A number of key coverage issues emerged in the aftermath of 2005’s Katrina and the subsequent insurance claims litigation. Many of these issues are still ongoing. They include the question of flood exclusions from homeowners’ policies; issues of wind damage versus water damage; and the question of potential agent liability in situations where property owners felt their coverage wasn’t adequate. Some of these issues will continue to come into play in insurance cases arising from Ike, Gustav, and the other storms of the 2008 season, while others are not likely to be as significant. I spoke with hurricane insurance litigators to learn more about how insurance claims from the 2008 season are likely to play out. One difference that can be anticipated with the 2008 season fallout is that there won’t be the same frontal challenges to flood exclusions that occurred after Katrina, when plaintiffs argued that storm surge wasn’t flood. In light of these challenges, some carriers changed the language of their flood exclusions, specifically listing storm surge as a water exclusion. However, this change is not likely to have much impact, because for the most part, the www.insurancejournal.com
house is gone. That’s the courts have already determined that storm proof. But some carriers surge does equal flood. In the words of one litiWein have pushed back, arguing gator, “The argument that storm surge doesn’t that once they’ve proved constitute flood is dead.” conditions were right for flooding to occur, The question of wind damage versus water damage, however, is still very much in play. For then the burden of proof shifts back to the plaintiff. Cases in Louisiana have gone both one thing, after Katrina some insurers refined ways on this. In Mississippi, the Supreme the anti-concurrent clause conditions in their Court has agreed to address the wind versus policies, defining exclusions with even more water issue in the pedning Corban v. USAA. precision. Anti-concurrent clauses state, “We Because the wind versus water issue is still can exclude the following perils, alone or in so unsettled, there’s potential development on sequence.” They’ve been the basis of the rejecthe question of damage causation. Teams of caution of wind-damage claims in the Katrina sation experts will continue to be needed. aftermath. The anti-concurrent clauses at issue These teams traditionally consist of meteorospecify that if a property is damaged by an logical experts who perform forensic meteorolexcluded event, such as flood or earthquake, ogy and weather reconstruction to opine on then it doesn’t matter that the property was storm conditions at a precise location and also damaged by a covered issue, such as wind. moment in time, and structural engineers, who In such cases, insurers argue, there is no coverdetermine the effects of those conditions on age at all. existing structures. State Farm and Nationwide have argued in Finally, even when the damage is entirely the Fifth Circuit Court that if storm surge caused by water, disputes will arise over the destroyed the house, then wind damage didn’t cost of repairs. This is normal, of course, and matter. The court’s response has been mixed. not unique to hurricane claims. What is particIn some cases it found that when there was ular to hurricane insurance litigation is the damage caused by wind, then even if storm question of when the loss is valsurge later swept the house ued. Since traditionally prices away, the insurer still owed something. In other cases, The question of spike in affected areas during the aftermath of a hurricane, the anti-concurrent clause conwind damage timing of the valuation has a big ditions have been upheld by versus water impact. This question will only the Fifth Circuit Court. It damage is still be exacerbated by the current will be interesting to see very much in state of the economy. how the Texas courts hanplay. “There are many more condle the anti-concurrent protractors willing to work for visions for Ike claims. lower fees than there were a year ago,” the litiAnother aspect of the wind versus water gator with one of the top 100 law firms in issue is the burden of proof. In situations America acknowledges. “However, in insurance where the courts are allowing coverage for valuation, you value for what the cost will be wind damage, how is it determined which for the next few months. You would never say, damage was caused by what? “During Katrina, people fled for their lives. When they returned, ‘it’s down now, but it’s going back up, so that’s sometimes there was nothing but a slab,” a hur- how we’ll value it.’” IJ ricane litigator recalls. “This became the plaintiff’s argument: the house was knocked down Wein is president of IMS ExpertServices, the expert witness by the wind.” and litigation consultant search firm based in Pensacola, The difficulties of proof are substantial in Florida and with offices in Denver and Atlanta. He can this situation, raising the question: where does reached at 1 877-838-8464. This article was originally published the burden of proof lie? Plaintiffs argue: my in BullsEye, a newsletter distributed by IMS ExpertServices. April 6, 2009 INSURANCE JOURNAL-SOUTHEAST REGION | 45
Southeast Coverage Workers’ Compensation Trusts
Workers’ Compensation Group Trusts: E&O Friend or Foe? Agents Advised to Know How Workers’ Comp Trusts Differ From Typical Insurance Companies goal of the administrator is to manage these trusts like an insurance company. They collect the premiums, issue the policies and pay o start off, what exactly is a workers’ claims. They produce financial statements compensation group trust? Per the New York State Insurance Department Web site, it on an ongoing basis. While they may look like an insurance is: company, there are many differences that are [A] group of employers who perform related activities in an industry who agree to important to note and these differences can create certain pitfalls to placing workers’ be jointly and severally liable for the paycompensation coverage with a trust. ment of workers’ compensation benefits to As hard as many insurance departments the employees of the employer members by try, they oftentimes find themselves unable contributing to a trust, the assets of which may exceed the liabilities, out of which ben- to truly evaluate the quality and financial well-being of these efits are paid. The group trusts. deposits with the Chair of The financials of workthe Workers’ Compensation ers’ compensation trusts Board a minimal deposit of securities or a surety bond f you are the agent for a business are somewhat different than those of a typical in an amount set by the that has or is considering placcompany financial. Chair of WC Board. ing an account with a workers’ While carriers and trusts compensation trust, here are a Workers compensation both carry a line item for number of items to consider: trusts have been in exissurplus (essentially tence for many years and assets minus liabilities), • How long has the trust been have been providing this with workers’ compensaaround? coverage to businesses in tion trusts, it is not • Does the administrator have a many states. Although I do uncommon to find this solid track record with managing not have a count on the line item at $0 or an these trusts? number of trusts in exisactual deficit. tence, it is fair to say that it • Has the trust ever assessed its Are they paying today’s members? is substantial. claims out of today’s preAgents dealing with cus- • What do the current financials mium? This is a very look like? Just because the trust tomers on their workers’ legitimate question. compensation coverage, have was solvent at one point, it does When workers’ compennot mean that it is in solid finanthe option of placing their sation trusts encounter cial condition today. coverage in a variety of financial difficulty, they ways, among them the tradi- • What type of loss control is in have the option of assessplace? tional insurance company mechanism, another dealing • Does the state insurance depart- ing each trust member ment have any knowledge of issues an amount necessary to with these trusts. improve the bottom line. involving the trust? It is critical that agents • Does the insured truly underAdministrator Role stand what its responsibilities are who have placed An administrator whose accounts with a trust duties include, among other by placing its workers’ compensatruly understand that tion coverage in a trust? There is things, underwriting, loss this potential exists. control and claims typically an agreement that the insured It appears that at this needs to sign – be certain they manages these trusts. It is period in the marketcommon for the administra- totally understand it. place, there are many tor to handle multiple workers’ compensation trusts and, essentially, the C.P. By Curtis M. Pearsall
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Trust But Verify
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46 | INSURANCE JOURNAL-SOUTHEAST REGION April 6, 2009
trusts that are in significant financial difficulty. It is important to understand that like insurance companies, trusts have been declared insolvent from time to time. Another difference is that there is no state guarPearsall anty fund protection accounts placed in trusts so if one is declared insolvent; there is no state mechanism to bail them out. The recourse is that the members of the trust are assessed. ‘Joint and Several’ The phrase “joint and several” is included in the definition of trusts. This is a legal obligation that the members assume where they may be liable for the payment of the total judgment (and costs) even if they are only partially responsible for losses inflicted. I am personally aware of a trust that has been declared insolvent in the amount of $36 million and the insured has received an interim assessment of $529,000! The possibility for future assessments still exists. Most agents’ Most agents’ errors and missions policies exclude the E&O policies insolvency of workers’ compensation exclude the trusts so it is important to understand insolvency of that this is a responsibility for which an trusts. agency could be assuming. There are many well-run trusts. Taking the necessary steps to identify whether the trust that you are considering is among them is the key. IJ A former independent agent, Pearsall is vice president with Utica National Insurance Group, where he is director of Special Programs and director of the Utica Errors & Omissions operation. This is reprinted with permission from Utica’s E&O Communiqué. www.insurancejournal.com
Southeast Coverage People
Charlie Crist
Kevin McCarty
Florida Governor Charlie Crist has named Marjorie Renee Hill of Tallahassee as Judge of Compensation Claims. Hill, 47, has served as the director of the First District Court of Appeal’s Workers’ Compensation Unit since July 2008. Previously she has served as a judicial staff attorney for the First District Court of Appeal beginning in February 2003. Hill was a senior attorney for the Department of Children and Families from 2002 to 2003. She also served as a judicial staff attorney for the First District Court of Appeal from 1998 to 2002. Hill earned a bachelor’s degree from Florida State University in 1995 and graduated from the Florida State University College of Law in 1998. Hill will fill the vacancy created by the retirement of Judge John P. Thurman.
Swett & Crawford appointed Robert Peterson as program manager for a new product, the Swett & Crawford Program for Contractors Auto, to be marketed with its carrier partner, Travelers Companies Inc. Before joining Swett & Crawford, Peterson worked with Crum & Forster as special accounts underwriting manager, where he managed a $17 million book of large account workers’ compensation business. IJ
Florida Insurance Commissioner Kevin McCarty has been selected as the 2008 Regulator of the Year by the LexisNexis Elizabeth Demaret Insurance Law Center’s Advisory Board. According to the ILC, nearly 50 nominations were received for its four award categories: Regulator of the Year, Policyholder Attorney of the Year, Insurer Attorney of the Year and Insurance Jurist of the Year. McCarty has served as Florida’s insurance commissioner since 2003. He has degrees in law and political science, both from the University of Florida. Elizabeth Demaret, managing director of Arthur J. Gallagher, has been appointed chairwoman of the World Federation of Insurance Intermediaries (WFII), an international association representing intermediaries from around the world. Demaret is one of six WFII World Council members from North America and a member of The Council of Insurance Agents & Brokers. Demaret will serve a one-year term as chairwoman, and another year as outgoing chair. Demaret follows David Harari, director of IFEBO in France, as chair of the WFII. New York-based specialty insurance firm Valiant Insurance Group has named Kevin J. Cawley as senior vice president and chief actuary. Cawley, who will be based in New York, most recently served as chief actuary for Liberty International Underwriters - North America. www.insurancejournal.com
April 6, 2009 INSURANCE JOURNAL-SOUTHEAST REGION | 47
Southeast Coverage Business Moves
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AIG American International Group (AIG) has taken down the most prominent sign at its downtown Manhattan offices. According to a Reuters report, the company replaced the large AIG sign — outside the entrance to its property/casualty offices — as part of its plan to change that operation’s name to AIU Holdings Ltd. and re-brand the global insurance operations The move is designed to “distinguish these well-capitalized businesses from AIG,” said a second spokesman. The sign is outside the company’s Water Street offices, which is around the corner from AIG’s 70 Pine Street headquarters, which has long only been marked by an understated brass plaque inscribed “American International Building.” In addition AIG has said it may sell the headquarter building, as part of its drive to raise funds to repay its debt to the government. The AIG name, once the proud moniker of the world’s largest insurer, has become tainted since large losses on mortgage bets necessitated a government bailout of $85 billion last September. Twice since more aid has been given to AIG, with the rescue now costing U.S. taxpayers up to $180 billion. The AIG name has become even more tarnished after a scandal erupted over bonuses to executives of a controversial financial products unit that caused much of the $100 billion in losses over the past year. Allied American Underwriters National program insurance manager Allied American Underwriters-AAU, headquartered in Tampa, Fla. has introduced a new national division specializing in personal lines on both an admitted and non-admitted basis. Vacant home and high valued homeowners policies are now available on a national basis. Other coverages on a regional basis include; condominimiums, dwellings, seasonal homes, rentals, historical homes, fine arts, antique cars, jewelry, flood/excess flood, personal umbrella, builders risk, auto/motorcycle, ATVs, boats, as well as weddings/family reunions. According to Lindsey Stoltz, the firm will be launching a online and phone quoting system in the coming months at www.aauins.com. AAU is affiliated with USG Insurance.
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Firemans’ Fund of Georgia Fireman’s Fund Insurance Company of Georgia, in Alpharetta, has merged with its parent company American Insurance Co. (AIC), a member of the Firemans Fund Insurance Companies in Novato, Calif. As part of the merger, AIC assumed all liabilities and obligations under and according to the terms of the policies issued by FFICGA. As a result, policyholders of FFICGA will now be insured by AIC. Zurich North America Zurich North America Commercial’s Energy Casualty group has opened offices in Cleveland, Ohio and Atlanta, Georgia. The Cleveland office will be the base of operations for an expanded mining practice, while the Atlanta office will serve accounts in the southeast U.S. CCC-Mitchell The U.S. District Court for the District of Columbia has granted the Federal Trade Commission’s request for a preliminary injunction enjoining CCC Information Services Inc.’s merger with Mitchell International Inc. Following the court decision, the two claims services firms called off their merger. On Nov. 25, 2008, the FTC filed suit to block the merger, charging that the transaction would hinder competition in the market for electronic systems used to estimate the cost of collision repairs, known as “estimatics,” and the market for software systems used to value passenger vehicles that have been totaled, known as total loss valuation systems. Arch Arch Insurance Co. (Europe) Limited, a subsidiary of Bermuda-based Arch Capital Group Ltd., received approval from Lloyd’s to establish a new syndicate. Syndicate 2012 (AAL) will be managed by a newly created managing agent, Arch Underwriting at Lloyd’s Ltd. It initially plans to write marine, personal accident, property and professional lines. William Beveridge of Arch Insurance Europe has been appointed active underwriter. James Weatherstone, president and CEO of Arch Insurance Europe, will serve as the CEO of the managing agent, and David Hipkin, chief underwriting officer of Arch Insurance Europe, will also assume responsibility as director of Underwriting of the managing agent. IJ www.insurancejournal.com
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April 6, 2009 INSURANCE JOURNAL-SOUTHEAST REGION | 49
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Idea Exchange Closing Quote
6 Steps to Take Before the Soft Market Hardens By Scott Chang
Chang
M
ost insurance professionals detest a soft market due to the increase in competition, unreasonably low pricing and increased market vulnerability. Some, however, may appreciate a softening precisely because of the change in underwriting and pricing philosophies. No soft market (or hard one) lasts forever. I’m no economist or fortune teller but I’m confident the hard market will arrive. Just like the “real estate bubble” had to end, carriers cannot sustain both underwriting and investment losses. What does this mean to retail agents and brokers? Agencies with a majority of their book placed with preferred carriers may spend additional, unanticipated time trying to re-market those accounts because of the crises being faced by these carriers. Carriers know that if they continue to entertain risks as they have during the soft market, they could wind up insolvent. This commentary is not intended to scare; just to remind agents to prepare for the return of the hard market. When the market does turn, the burden once again will be on agents to adapt to the new market — to which some may not be accustomed or even ever experienced. Underwriting complacency and pricing latitude will disappear in the next hard market, as in all hard markets. Additionally, clients accustomed to the current market conditions are going to complain, asking why their renewal offers are so much higher, or why the incumbent carrier is not renewing the policy despite a clean claims history. Being able to satisfactorily answer these questions and successfully retain clients will soon be the mission of every agent.
Don’t Be Left Behind How do agents avoid being left behind when the shift happens? I’m an underwriter and this is not about soliciting business. It’s about the reality of the coming marketplace and the need to be prepared. I offer a few suggestions: 1. Just as a grocery store operator regularly checks, agents should do the same to make sure current markets are not significantly changing guidelines or increasing rates. If they are, this could mean they are planning to cut a few agencies as soon as they feel that their executives can no longer spend $1.2 million to renovate their offices (I won’t say who). Agents who 50 | INSURANCE JOURNAL-SOUTHEAST REGION April 6, 2009
have other preferred carriers should approach them before the market changes. They shouldn’t wait until the last minute. 2. Agencies should gather individual loss runs and agency loss data as quickly as possible. This is important because if/when markets become insolvent, it is very difficult, if not impossible, to obtain loss runs or analytical reports. Agents shouldn’t assume that the insurance departments, guarantee associations or any other governmental agencies can or will assist in securing this data. They will most likely disregard such requests since they work for consumers, not the industry. 3. Agents should renew and/or rebuild their relationships with their excess and surplus lines markets. Surplus lines brokers, wholesalers or MGAs make markets available to retail agents who lack the necessary “preferred” markets or need a market for risks normally declined by preferred carriers. 4. Agents should not be afraid to ask questions or reach out to past or current contacts. Many insurance practitioners rely on knowledge gained from on-the-job experience, selfClients are going education or acquaintances rather than company trainto ask why their ing programs. Unlike standard carrier underwriters, many excess and surplus renewal offers lines underwriters have knowledge and direct expeare so much rience at both the carrier and retail levels. MGA higher. underwriters cannot only advise on current market conditions, but they can also help agents by obtaining rates and coverages not normally available. 5. Agencies must automate. More people buy insurance via the Internet. Agencies need to communicate with customers more through technology. 6. Participate and invest in industry seminars and conventions. Agents who are well informed understand the deeper aspects of the industry and the market. The industry will be facing great challenges in the near future. I believe preparation is the best option. IJ Chang is an underwriter with RIC Insurance General Agency Inc, a managing general agent in California. Chang has been in insurance for 18 years on both retail and wholesale side. At RIC, he specializes in program business including restaurants and garage. http://www.ric-ins.com/ www.insurancejournal.com