Insurance Journal West 2014.05.19

WEST Calif.’s New High Net Worth Carrier Immigrants Bone Up for Driver Test Report: Climate Change Here

U

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WEST

Inside This Issue

On The Cover

Special Report:

2014 Super Regional P/C Insurers

May 19, 2014 • Vol. 92 No. 10 • West

W8

W10

20

28

NATIONAL COVERAGE

WEST COVERAGE

IDEA EXCHANGE

10 Walmart Begins Selling Auto

Insurance Online

W2 Snowpack Survey Gives Bleak

Summer Outlook for California

32 Essentials: An Agent’s Duty

to Additional Insureds

11 Overstock.com Brings Insurance

Sales to Retail Site, Agents React

W3 Landlords Who Evicted Tenants

for Airbnb Sued by San Francisco

36 Minding Your Business: Catherine

Oak & Rachel Schoeffler

18 Special Report: AAMGA’s Letson

on MGAs Today

W8 High Net Worth Carrier PURE

Enters California

40 Growing Your Property Casualty

Agency: Alan Shulman

SR1 Special Report: 2014 Super

Regional P/C Insurers

W10 Immigrants in California Study

for Driver Test Months Out

42 Why Facebook Is Still Relevant

for Your Agency

19 The World of MGA Specialists:

Conning

W12 U.S. Report: Climate Change

Here, Deal With It

44 2014 Premium Finance Directory

20 Closer Look: What the Hail Is

Going On?

W14 Policyholders File Claims, Get

Payments for California Quake

24 Spotlight: How to Minimize

Exposure from Information Loss

W20 Study: Company Data Breach

Now Costs $3.5M on Average

28 Insurance and Risk Issues

for Hospital Employed Physicians 30 The Potential Liabilities

and Insurance Coverage

Implications of Solar Panels

6 | INSURANCE JOURNAL-WEST May 19, 2014

50 Closing Quote: Management

Liability — Hard Market or Sea

Change?

DEPARTMENTS 8 Opening Note W6 People 14 Business Moves 16 Declarations 16 Figures 22 MyNewMarkets

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NATIONAL COVERAGE

Opening Note ‘Balance’ for Workers’ Comp

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he workers’ compensation market is returning to a state of “balance.”

That’s according to this year’s state of the industry address at NCCI’s annual symposium where analysts reported that the workers’ compensation combined ratio rang in at 101 in 2013, a seven-point decrease from 2012 and a 14-point decline since 2011.

“We are finally starting to see an industry in balance with these results,” said NCCI President and CEO Steve Klingel. “Today, industry costs are largely contained, claims frequency continues to decline, and the system in most states is operating efficiently. In short, the market is operating as it should on behalf of most stakeholders.”

Overall, the workers’ comp line showed a number of positive results in 2013, said Kathy Antonello, NCCI chief actuary. Premiums grew for the third consecutive year, and at the same time, the combined ratio fell by seven points.

While the workers’ comp calendar year combined ratio for private carriers was 101 for 2013, the accident year results also showed notable improvement in 2013, falling eight points to a combined ratio of 99, NCCI reported.

In other good news, lost-time claim frequency maintained a path of decline in 2013, down 2 percent, on average, in NCCI states.

‘We are finally starting to see The 2 percent decline is an industry in balance with within NCCI’s long-term these results.’ annual estimate of a of 2-4 percent decline per year.

For the fourth consecutive year, the ratio of investment gains on insurance transactions to premium remained near the long-term average of 14 percent.

This investment gain outcome, combined with the underwriting results, produced a workers’ compensation pretax operating gain of 14 percent for 2013.

This represents a significant increase over 2012, and the industry’s first double-digit return since 2007.

The overall reserve position for private carriers improved in 2013, following five consecutive years of deterioration. NCCI estimates the year-end 2013 reserve position to be an $11 billion deficiency for private carriers.

In states where NCCI is the rating organization, the average indemnity cost per lost-time claim increased by a modest 2 percent in 2013, following increases of about 1 percent in both 2011 and 2012. The average medical cost per lost-time claim increased by 3 percent in 2013.

The workers’ comp residual market experienced a second straight year of significant growth in 2013. Premiums grew by more than 30 percent, and the average market share in the residual market increased from 7 percent to 8 percent.

While there was good news out of 2013, the industry faces challenges ahead, including slow growth in employment, unsustainable investment gains, the uncertain impact of healthcare reform and Andrea Wells the pending expiration of the Terrorism Editor-in-Chief Risk Insurance Act. 8 | INSURANCE JOURNAL-NATIONAL May 19, 2014

Publisher Mark Wells | mwells@wellsmedia.com EDITORIAL Editor-in-Chief Andrea Wells | awells@insurancejournal.com V.P. Content Andrew Simpson | asimpson@insurancejournal.com East Editor Young Ha | yha@insurancejournal.com Southeast Editor Michael Adams | madams@insurancejournal.com South Central Editor/Midwest Editor Stephanie K. Jones | sjones@insurancejournal.com West Editor Don Jergler | djergler@insurancejournal.com International Editor Charles E. Boyle | cboyle@insurancejournal.com ClaimsJournal.com Editor Denise Johnson | djohnson@claimsjournal.com MyNewMarkets.com Associate Editor Amy O’Connor | aoconnor@mynewmarkets.com Columnists Catherine Oak, Steven Plitt, Alan Shulman Contributing Writers Steven Badger, Bailey McBride, John Boudreau, Chris Christian, Kevin Dean, Samantha Evans, Paul Greve, Barry Koestler, Rachel Schoeffler SALES V.P. Sales & Marketing Julie Tinney (800) 897-9965 x148 | jtinney@insurancejournal.com West Dena Kaplan (800) 897-9965 x115 | dkaplan@insurancejournal.com South Central Mindy Trammell (800) 897-9965 x149 | mtrammell@insurancejournal.com Midwest Lauren Knapp (800) 897-9965 x161 | lknapp@insurancejournal.com Southeast Howard Simkin (800) 897-9965 x162 | hsimkin@insurancejournal.com East Dave Molchan (800) 897-9965 x145 | dmolchan@insurancejournal.com New Markets Sales Manager Kristine Honey | khoney@insurancejournal.com Classifieds, Jobs, Agencies Wanted/For Sale Ly Nguyen (800) 897-9965 x125 | lnguyen@insurancejournal.com MARKETING/NEW MEDIA Marketing Administrator Gayle Wells | gwells@insurancejournal.com Advertising Coordinator Erin Burns (619) 584-1100 x120 | eburns@insurancejournal.com New Media Producer Bobbie Dodge | bdodge@insurancejournal.com Videographer/Editor Matt Tolk | mtolk@insurancejournal.com DESIGN/WEB V.P. of Design Guy Boccia | gboccia@insurancejournal.com V.P of Technology Joshua Carlson | jcarlson@insurancejournal.com Audience Development Elizabeth Duffy | eduffy@wellsmedia.com Marketing Director Derence Walk | dwalk@insurancejournal.com Web Developer Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Chris Thompson | cthompson@insurancejournal.com IJ ACADEMY OF INSURANCE Online Training Coordinator Barbara Whiffen | bwhiffen@ijacademy.com ADMINISTRATION Chief Executive Officer Mitch Dunford Chief Financial Officer Mark Wooster | mwooster@wellsmedia.com

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NATIONAL COVERAGE

News & Markets Walmart Begins Selling Auto Insurance Online

By Amy O’Connor

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almart has partnered with AutoInsurance.com to offer car insurance to its customers at “everyday low prices.”

The new arrangement provides an auto insurance comparison service through the AutoInsurance.com website from national insurance carriers that include Progressive, Esurance, Safeco, Travelers, and 21st Century.

Walmart said it will direct customers to the website through its own website and in stores but will not sell the insurance directly.

Walmart customers using AutoInsurance. com, which is operated by Fort Lee, N.J.-

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almart’s decision to market auto insurance through its partnership with AutoInsurance.com ruffled the feathers of many InsuranceJournal.com readers. Many felt the low-priced policies would mean insufficient limits and coverage. However, a few readers believe this is the direction personal lines insurance is going: Roger says: I call this rod and reel marketing.

They throw out the bait (low premiums) and reel you in. Then in court you lose your assets because they low balled your coverage. Once again proving that they are baiting you. A professional agent is going to explain the various limits of liability and uninsured motorist. State min10 | INSURANCE JOURNAL-NATIONAL May 19, 2014

based licensed property/casualty insurance agency Tranzutary Insurance Solutions, will see multiple quotes from each of the carriers.

The offerings are currently available in only eight states — Arkansas, Louisiana, Mississippi, Missouri, Oklahoma, Pennsylvania, Tennessee, and Texas— but the companies said they have plans to expand nationwide and also add more carriers.

Daniel Eckert, senior vice president of services for Walmart U.S., says the retailer began looking into areas where it could bring its “everyday low prices” and where customers are looking to save money about two and a half years ago. The firm said its studies showed that auto insurance was one area where customers expressed frustration.

“Insurance is one of our consumers’ biggest monthly expenses and many feel they are overpaying for the insurance they have and don’t know if they are getting the best coverage and the coverage they need,” he says. “We thought we could bring something to life in both of these arenas.”

The Walmart deal follows the announcement earlier this month that online dis-

imum liability limits are a joke and these guys over the internet don’t care what happens when you have a claim. Find a “Trusted Choice” agent and you can sleep at night, knowing you choose not to roll the dice with your families’ assets.

Auto, home, umbrella with one company will best protect your future. Plus, you can walk into an agent’s office and talk to them face to face, about whatever is on your mind. Hooks are sharp and they can hurt very bad. buckeye ins agent says: This comment is for the agents – don’t laugh this is scary stuff. The lizard was considered a low-end company for a long time. I see them in a lot of quality housecontinued on page 12

count retailer Overstock.com is also starting to sell insurance on its website (see page 11).

Prior to this launch, Walmart piloted a single insurance carrier option in stores in Georgia and South Carolina and an aggregator model with multiple carriers in Pennsylvania. Walmart also experimented with offering Esurance auto insurance discount cards to consumers at kiosks in Illinois.

“We wanted to get a sense of if we were hitting the mark with customers and find out what is the best approach,” says Eckert.

Eckert and Joshua Kazam, founder of AutoInsurance.com, say that both single carrier and aggregator pilots were successful. The annual savings reported by customers in Pennsylvania was $1,168 on average.

Kazam says AutoInsurance.com was already established and in the insurance business but the partnership with Walmart led to a rebuilding of AutoInsurance.com into a website where consumers can shop and compare.

“We really worked diligently to be able to take online shopping to a new level and directly integrated with carriers,” he says.

“The website allows consumers to compare apples to apples and makes ‘We really worked insurance covdiligently to be able erage shopping to take online shopvery easy to understand.” ping to a new level.’

Walmart will receive monthly fees for marketing the service in its stores and will also promote it on its own website, according to Eckert. Customers can access the AutoInsurance.com site through Walmart.com.

Kazam says they wanted to make the experience for consumers as easy and unique as possible. The site is able to pre-populate information fields by accessing consumers’ existing policies and directly integrates with carriers to facilitate quoting.

AutoInsurance.com says it retains all of continued on page 12 www.insurancejournal.com

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News & Markets Seawater May Be Drought Solution for One California City

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WIAA Objects to In-House Producer Disciplinary Hearings in California

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ith California in a drought, the coastal city of Santa Barbara is thinking about firing up a desalination plant that has been in storage for more than two decades.

The city built the plant in the 1990s during the last drought but turned it on for only three months after heavy rains eliminated the need for extra water.

Desalination involves removing salt from ocean water or groundwater, but it’s not a quick drought-relief option. It takes years of planning and overcoming red tape to launch a project.

Water officials estimate the plant will need $20 million in technological upgrades. Any restart would require City Council approval, which won’t vote until next spring after reviewing engineering plans and the latest drought conditions.

Many environmentalists think desalination should be a last resort.

Copyright 2014 Associated Press.

he Western Insurance Agents Association is throwing up some objections to a California Department of Insurance proposal that would enable the department’s hearing bureau to adjudicate agent/broker and carrier disciplinary proceedings.

Producer disciplinary proceedings in California have been held for more than 50 years in the state Office of Administrative Hearings, a separate body with independent administrative law judges who handle disciplinary matters for most government agencies in the state, WIAA argued.

CDI’s proposal would allow the insurance commissioner to choose which cases would be kept in-house and which would be heard by OAH. WIAA’s arguments include: It’s inappropriate for CDI judges to issue rulings best made by independent judges because these decisions can affect the ability of a licensee to earn a living.

The department’s request for attorney fees and costs raises due-process issues in terms of affordability for producers if they lose, and would likely prevent agents and brokers from pursuing their rights to a hearing.

The department’s hearing bureau, which would take the cases the commissioner doesn’t farm out to OAH, was established following Proposition 103 to rule on rate cases. Because these cases are highly complex and involve actuarial and other technical data, the bureau’s judges have special training.

Snowpack Survey Gives Bleak Summer Outlook for California

Disaster Loans Made Available for New Mexico Small Businesses

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ith summer approaching state water managers say California’s snowpack is at 18 percent of average for the date.

The Department of Water Resources at the end of April said the season’s final survey of the Sierra Nevada snowpack found more bare ground than snow.

The Sierra snowpack is an essential element of California’s water supply. It accounts for about one-third of the state’s water.

The last measurement was on April 1, considered the peak of the snow season. It showed that the state’s snowpack was about 32 percent of average water content.

DWR Director Mark Cowin says the dire results reaffirm that every drop of water in the state needs to be saved.

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mall businesses in eight New Mexico counties are eligible for federal disaster loans due to the drought.

The U.S. Small Business Administration made the announcement in April, saying the loans can help offset economic losses from reduced revenues caused by the drought.

The counties include Catron, Dona Ana, Grant, Lincoln, Luna, Otero, Sierra and Socorro.

Officials say small, nonfarm businesses, small agricultural cooperatives and most private, nonprofit organizations may qualify for loans of up to $2 million.

Eligibility is based on the financial impact of the disaster, not on any actual property damage.

The deadline to apply for these loans is Dec. 23.

U.S. Agriculture Secretary Tom Vilsack’s disaster declarations for 2014 cover all of New Mexico and much of the Southwest.

Copyright 2014 Associated Press. www.insurancejournal.com

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News & Markets Landlords Who Evicted Tenants for Airbnb Sued by San Francisco

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he city of San Francisco has sued two landlords for allegedly evicting tenants to rent out rooms on such websites as Airbnb, opening a new front in a controversy over increasingly popular home-rental services.

In separate lawsuits filed by City Attorney Dennis Herrera, the city named two groups of defendants that it called the “most egregious” offenders because they evicted disabled tenants before listing rooms online for as much as $595 a night.

The lawsuits have come amidst a broader crackdown on illegal rentals in San Francisco, where the rental services, which also include Homeaway.com and VRBO.com, have been blamed for pushing up housing prices because they remove rooms from the rental market.

Sites like Airbnb, which help landlords

list rooms and take a cut of the payments, have operated in a legal gray area in many U.S. markets — and sometimes outright illegally in cities including San Francisco, which outlaws rentals for less than 30 days.

The services have been under scrutiny elsewhere in the United States, including in New York state, where Attorney General Eric Schneiderman has issued a subpoena for a list of Airbnb hosts in New York City, which also prohibits short-term apartment rentals. The company has refused to divulge its hosts and is now battling the subpoena in court.

The company, which has been pushing legislation in San Francisco to legalize its business, swiftly banned the landlords from its service following Herrera’s law-

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suits and applauded him in a statement.

“We wholeheartedly support efforts to bring those landlords to justice,” the company said, while maintaining that “a small number of predatory landlords are abusing platforms like ours.”

Although San Francisco has long prosecuted landlords for illegal rentals or hotel conversions, a city spokesman said the lawsuits were the first of their kind in the “age of Airbnb.”

San Francisco Mayor Ed Lee, who has deep ties to the city’s flourishing tech industry, has been a political champion for Airbnb, a stance that has pitted him against other officials and housing activist groups.

Separately, the San Francisco Tenants Union said it has begun a process with city regulators to sue seven other landlords on similar charges.

“The city attorney pursuing two landlords will definitely send a message, but pursuing seven is going to send an even better message,” said Joseph Tobener, a lawyer for the union.

Despite its uncertain legal status, Airbnb recently closed a $475 million round of financing that valued it at $10 billion, according to media reports.

Copyright 2014 Reuters. www.insurancejournal.com

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People Patrick Zerarka

Ryan Krauser

Rob Flynn

The Iroquois Group named Patrick Zerarka as the Southwest team as a regional manager in Arizona.

Zerarka has 15 years of experience in the insurance industry with a background in agency operation, marketing and sales. Prior to Iroquois, he worked as a marketing representative for Travelers, MetLife and Nationwide Insurance. He also owned and operated an Allstate Agency in Arizona.

Zerarka will split the Arizona member base with Iroquois regional manager John Maurer. Maurer will continue to service the Las Vegas and Utah areas.

Headquartered in Allegany, N.Y., The Iroquois Group is a network of independent insurance agencies with more than 2,100 members in 39 states.

Leavitt Group hired Ryan Krauser in the agency’s Reno, Nev., office as a business insurance agent.

Krauser’s responsibilities include risk management, customer service, policy administration and general new business development.

Prior to Leavitt Group, Krauser worked with a startup agency in Reno. He started his insurance career as a sales representative for Liberty Mutual Insurance.

Leavitt Group’s Bay Area, Sacramento and San Jose offices in California, as well as its Reno office, are part of Jenkins Insurance Services.

Hull & Company Inc. has hired Rob Flynn as a property/casualty broker in its Irvine, Calif., office.

Flynn will focus his efforts in the commercial lines marketplace.

Flynn began his insurance career with a retail agency in Rocklin, Calif., and progressed through the industry as account executive, producer and broker with both local and national firms.

Hull & Company is a wholly-owned subsidiary of Brown & Brown Inc. and has offices throughout the United States Atlas General Insurances Services LLC has named has named Rod Taylor president of its commercial division.

Taylor will be responsible for growing Atlas’ commercial lines business across the nation as well as the workers’ compensation business outside of the California marketplace.

He was formerly a consultant with Distinguished Programs.

San Diego, Calif.-based Atlas is a general insurance agency that offers a range of insurance services.

W6 | INSURANCE JOURNAL-WEST May 19, 2014

Reno, Nev.-based Employers named Larry Rogers senior vice president and chief underwriting officer and Frank Buonomo vice president of IT infrastructure and operations.

Rogers and Buonomo will be based out of Employers’ headquarters in Reno.

Rogers has more than 25 years of experience in the industry, in particular with small business markets. Most recently, he was west zone executive for the Tower Group Cos. Prior to that, he held positions with Fireman’s Fund Insurance Co., Reliance Insurance Co. and ITT Hartford Insurance Group.

Buonomo has more than 20 years of experience in the information technology field. He comes from Aon Service Corp., where he was responsible for global insurance consulting and risk management services.

Employers Holdings Inc. is a holding company with subsidiaries that are specialty providers of workers’ compensation insurance and services.

PartnerOne Environmental named Vonnie Nuce as senior underwriter.

Nuce will be based in the Denver, Colo., office and will be responsible for underwriting new and renewal business for all PartnerOne products.

Nuce has more than 25 years of experience in the insurance industry, working in a variety of capacities, including underwriting, account management and program development.

PartnerOne provides coverage for a variety of small- to middle-market contractors, consultants, and property owners and managers.

Lynn Finch has joined Lockton’s energy practice in Denver, Colo.

Finch is an account executive with the energy practice.

She will operate from Lockton’s Denver office.

Finch has more than 15 years of experience as an insurance professional specializing in energy, utilities, natural gas, and refined product pipelines, and she’s familiar with the public entity sector. Her background includes claims management in property/casualty, environmental liability, directors and officers, and employment practice liability.

Previously, Finch served as a client executive and energy practice leader for Marsh. Prior to that, she worked as a claims manager and human resources coordinator.

More than 4,950 professionals at Kansas City, Mo.-based Lockton provide 35,000 clients around the world with risk management, insurance and employee benefits consulting services that improve their businesses.

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News & Markets High Net Worth Carrier PURE Enters California

By Don Jergler

PURE began its launch in May with a direct mail and advertising blitz. all it a little luck or a good timing — To help it build up high net maybe a bit of both — but an insurer worth clientele in California the focused on high net worth individuals company is turning to insurance has added California to the list of states agents with big books of busiin which it does business at a time when ness in that arena. the number of wealthy households in the “We are likely to add someGolden State has reached pre-recession where between 50 to 100 agents levels. across the state in the next year According to Phoenix Marketing or so,” Galante said.

International’s Global Wealth Monitor, The company started as a sinin 2013 there were 777,624 households gle-state carrier in Florida and moved up in California with $1 million or more in the coast and beyond. investable assets. That exceeds the 663,394 Following the roll out in California the households with $1 million in investable company will be launching in Alaska and assets in 2006.

Idaho.

California ranked 11th in millionaires Galante said being in California will per capita in 2013, with 6.04 percent of help the company gain a stronger footing households worth $1 million and up, the in the other Western states. report shows. Maryland (7.70 percent), “We’re at the point now where it just New Jersey (7.49 percent) and Connecticut makes perfect sense to complete the foot(7.32 percent) were the top three. print by adding California and some other Wealth has returned, and so has luxury states,” he said. home values. A total of 39,175 homes were The type of agents that the carrier is sold for $1 million or more in 2013, that’s looking to work with up 45.1 percent from 2012, ‘The growth of the number will be those who already and it was of million-dollar households work in the high net space, according to the highest I think it emblematic of the worth Galante. number sold “In the screening prosince 42,506 in economic growth and the cess we look for agents 2007, according good weather in the state.’ and brokers that have a to San Diegosuccessful track record of serving successbased DataQuick Information Services. ful individuals and families,” he said.

“The growth of the number of mil While there are other high net worth lion-dollar households I think it emblemcarriers in California, Galante thinks atic of the economic growth and the good there’s room for more. weather in the state,” said Mark Galante, “We think there’s a tremendous opporchief marketing officer of the Privilege tunity for PURE to add value in the marUnderwriters Reciprocal Exchange Group ketplace,” he said, adding that “California’s of Insurance Cos. marketplace is big.”

PURE, which specializes in high net PURE is compiling a dataset of houseworth indivduals, has been expanding hold prospects to which they plan to across the country. California became the conduct mail marketing that is based on carrier’s 48th state when it began offerhomes that are at least $1 million in value ing policies in early May. The company and at least 4,000 square feet. received its license from the California “That number alone is over a quarter of Department of Insurance on Jan. 17.

C

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a million households,” Galante said.

Galante said the company plans to compete in California by introducing “a higher level of service and a greater number of solutions” to address some of the insurance needs that are unique to Californians, such as earthquake coverage.

According to Galante, with the current offering consumers must make an “all or nothing” choice when purchasing earthquake coverage.

“We think the consumer should be able to have some more flexibility,” he said.

PURE offers limited earthquake insurance with the pricing reflecting a lower level of risk, or flexibility with deductibles, Galante said.

Earthquake coverage will be offered as an endorsement to the home policy, with two coverage options: basic and broad.

Basic comes at a lower price point, but is not as comprehensive as the broad form.

The broad form includes an “Agreed Value Coverage Option,” enabling a policyholder to purchase less than the full replacement cost of their home, and deductible options ranging from 5 percent to 25 percent of the dwelling limit.

PURE is also coming into California with its wildfire mitigation program, which includes consultation with a risk manager and prevention advice, and emergency response services that may include removal of flammables and application of PhosCheck fire retardant to vulnerable areas of the property. www.insurancejournal.com

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News & Markets Immigrants in California Study for Driver Test Months Out

By Amy Taxin

T

here’s a lot riding on a California law to grant driver’s licenses to immigrants in the country illegally, and supporters are already preparing prospective drivers in the most populous U.S. state to pass the test required to get one.

A Mexican consulate is hosting monthly driver’s license test preparation classes. A community college is designing a 15-hour course to help immigrants prepare. And the state’s Department of Motor Vehicles has put together new audio materials in Spanish with months to go before the new licenses are issued.

The push comes after Nevada saw 90 percent of immigrants fail the written test in the first few weeks a new driver authorization card was offered. The California Department of Motor Vehicles is also concerned that immigrants may not know they need to take a written test when they apply for a license, and that some applicants may not have the literacy proficiency needed to pass.

“What we’re being sensitive to is we have a population that probably has never come to a DMV, doesn’t really know what they can expect,” said Lizette Mata, DMV’s deputy

director of special projects, who has been which will contain a distinct marker. traveling the state to meet with community After Nevada’s high failure rate, immigroups. “I’ve had people tell me: ‘I didn’t grants have been urged to start preparing for know I need to take the exam the day I the written test early. applied.”’

“We didn’t want to wait to the last min California is one of several states that ute,” said Berenice Diaz Ceballos, consul of recently approved driver’s licenses for immiMexico in Oxnard. She said her office has grants in the country illegally. With immibeen holding information sessions about grants from many countries living in the what prospective applicants should do to state, state officials want the new license in prepare, and has seen an increase in requests California to be an example for other states for passports and consular ID cards, which to follow. may be required for the new licenses.

Getting immigrants to pass the test ‘We didn’t think the failure rate is critical to ensuring the success of the new license. Supporters pushed was going to be as high as it was.’ for the license to make life easier for California’s immigrants and to create safer In Nevada, officials were surprised by road conditions for everyone, arguing that the failure rate after they updated a Spanish many immigrants already get behind the version of the driver handbook and met wheel but lack the training and testing with community groups to publicize the required of other drivers and may not carry driver authorization cards, said David Fierro, insurance. a Nevada DMV spokesman. Since those first The state expects 1.4 million people will few weeks, the failure rate has fallen to apply for the license once it is available in about 66 percent, much closer to the 57 per2015 and plans to open five new offices to cent of those seeking a traditional license, he handle the anticipated deluge of applicasaid. tions.

“We didn’t think the failure rate was Like legal residents, the immigrants will going to be as high as it was,” Fierro said. need to provide proof of identity and pass “The word circulated to people that there written and road tests to obtain the license, is a test, and if you don’t know the answers, you’re going to fail.”

Passing the 36-question written test for a driver’s license has long been a challenge for many in California. Roughly half of those who took the exam in English and more than 70 percent who took it in Spanish failed the first time, according to a study of 11,000 test forms filed with the DMV in 2005.

Immigrants in the country illegally may have an even harder time if they don’t speak English well or have lower levels of education, Mata said. Immigrants who crossed a border illegally to get to the U.S. had fewer years of schooling than those who arrived with a visa, according to a 2008 report published by the Public Policy Institute of California.

Copyright 2014 Associated Press.

W10 | INSURANCE JOURNAL-WEST May 19, 2014

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News & Markets U.S. Report: Climate Change Here, Deal With It

By Don Jergler

C

limate change is in the here and now, according to a massive report issued earlier this month.

The White House’s National Climate Assessment report is part of President Barack Obama’s effort to prepare the nation for the impacts of a changing climate now and in the future.

The report was guided by a 60-member federal advisory committee and was reviewed by experts, federal agencies and the National Academy of Sciences. It highlights how individual regions are being affected and steps that can be taken to prepare for the impacts of climate change and ways to mitigate it.

This illustration is part of the White House’ National Climate Assessment report, which was Rather than painting a gloomy picture of attacked as being timed as part of a federal energy tax proposal. The illustration shows how a future where no steps taken to mitigate Earth’s climate is warming over decades. White arrows indicate increasing trends; black are climate change have led to a harsher planet, decreasing. (Source: NOAA NCDC) the theme in this report is one of immediacy. scaping ordinances could be updated to The timing of the report was criticized as “Residents of some coastal cities see their improve energy efficiency, conserve water a political tool for Obama to push through streets flood more regularly during storms supplies, protect against insects that spread costly emissions regulations. and high tides. Inland cities near large rivers disease (such as dengue fever), reduce sus Senate GOP Leader Mitch McConnell said also experience more flooding, especially in ceptibility to heat stress, and improve prothe report is timed so Obama can renew his the Midwest and Northeast. Insurance rates tection against extreme events,” the report call for a national energy tax that will “get are rising in some vulnerable locations, and states. loud cheers from liberal elites — from the insurance is no longer available in others.

The report points to an “urgent need” for kind of people who leave a giant carbon footHotter and drier weather and earlier snow decision-making that will increase flexibility print and then lecture everybody else about melt mean that wildfires in the West start and resilience in the face of ongoing and low-flow toilets.” earlier in the spring, last later into the fall, future impacts.

The report outlines sometimes dire conand burn more acreage. In Arctic Alaska, “Climate change, once considered an sequences to climate change, such as major the summer sea ice that once protected the issue for a distant future, has moved firmly challenges to agriculture, drought, water coasts has receded, and autumn storms now into the present,” the report shortages and runcause more erosion, threatening many comstates. “Corn producers in off problems, severe ‘Climate change, once munities with relocation.”

Iowa, oyster growers in storms, rising sea considered an issue for a Washington State, and maple Industry Reaction levels and flooding. distant future, has moved syrup producers in Vermont It encourages The reaction from one of the insurance are all observing climate-relarge reductions in firmly into the present.’ industry’s largest associations was not one of lated changes that are outglobal emissions of shock or urgency — or denial — but more side of recent experience.” heat-trapping gasses such as carbon dioxide, like “we’ve been preaching this all along.”

The report highlights noticeable changes, increasing energy efficiency, more efficient The “this” the Property Casualty Insurers like longer and hotter summers, while winuse of water supplies and better adaptation Association of American has been talking ters are shorter and warmer, and rain downto the changes that are already occurring — about for quite some time is resiliency, said pours are heavier. the report states that the climate of the past David Kodama, PCI’s senior director for It also highlights more dramatic and is no longer a good basis for future planning. research and policy analysis. noticeable changes: continued on page W16 “For example, building codes and landW12 | INSURANCE JOURNAL-WEST May 19, 2014

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News & Markets NORCAL Mutual Expands Medical Professional Liability Coverage to Nevada

N

ORCAL Mutual Insurance Co. is now offering medical professional liability insurance to Nevada physicians. For the past eight years, Nevada healthcare professionals have been offered coverage from Medicus Insurance Co., a NORCAL Mutual wholly owned subsidiary. Upon renewal, Medicus policyholders will be transitioned to a NORCAL Mutual policy.

As a member of a physician-led mutual insurance company, Nevada NORCAL Mutual policyholders will have the right to vote in the election of board of directors and share in any dividends that may be declared. NORCAL Mutual has declared dividends for 34 of the past 36 years.

NORCAL Mutual also offers coverage in Alaska, California, Rhode Island, Texas and

Bill Allowing Insurers to Drop Drivers Axed by Arizona’s Brewer

A

rizona Gov. Jan Brewer vetoed a bill that would have allowed insurance companies to drop drivers from their coverage if their car was driven mostly out of the state.

The bill would have affected college students and snow birds who are insured in Arizona but who drive their cars out of the state for long periods of time.

House Bill 2327 was passed as a last-minute amendment in the Senate and failed in the House but was brought back for reconsideration and passed.

Brewer says wording in the bill is too vague and could have unintended consequences.

Arizona law prohibits insurers from canceling a policy based on location of residence.

Copyright 2014 Associated Press.

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NORCAL is a part of the NORCAL Group of companies, medical professional liability insurers providing protection to healthcare extenders, medical groups, hospitals, community clinics and allied healthcare facilities throughout the nation.

Policyholders File Claims, Get Payments for California Quake

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he California Earthquake Authority reported it has paid numerous claims for damage to homes that sustained “relatively minor damage” from the magnitude 5.1 earthquake that struck La Habra on March 28.

Most CEA claim payments to date from the shake in the Orange County city were to help cover costs for emergency repairs, according to CEA, which touted its new feature in homeowners policies that does not require meeting a deductible to receive payment.

According to CEA officials, home insurance companies that offer CEA polices have responded to hundreds of calls from California residents asking if they have coverage for earthquake damage.

“Home insurance policies do not cover earthquake damage,” CEA CEO Glenn Pomeroy said in a statement.

Many claims filed after the La Habra quake were denied because many of those residents did not have separate earthquake insurance policies, while other claims were denied because damage did not exceed their coverage deductibles, according to CEA. California has two-thirds of the nation’s earthquake risk, yet fewer than 11 percent of California residents have protected their household finances with earthquake insurance, according to the California Department of Insurance. www.insurancejournal.com

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News & Markets continued from page W12 next 12 months? That’s still an unknown,” “We will use that as an opportunity to Kodama said. “We don’t know what kind reinforce the need for proactive preparedof hurricane season we’ll have from June ness,” Kodama said. through November. You could have high Following the report, PCI will continactivity, but not a lot make landfall, or you ue its campaign to educate the insurance could have few hurricanes but only one hits marketplace about the growing number of and it’s the next Hurricane Sandy.” risks associated with phenomena like hotter He added, “That’s the challenge with takweather or more severe storms. ing these type or reports and saying ‘What PCI has joined with the National Oceanic does this mean for the insurance industry?’ and Atmospheric Administration on a It’s still something that needs to be assessed national risk preparedness campaign to drive and evaluated for each company.” home the preparedness and resilience mes Lindene Patton was on the National sage in the face of extreme weather.

Assessment Development While there are insurance industry ‘We will use that as an and Advisory Committee she helped organize takeaways in the report, opportunity to reinforce and and develop the report.

Kodama said insurance “The point there was to companies will have to the need for proactive try and take this science take a look at their own preparedness.’ … and make it accessible risks, what they are and and make it actionable,” she said. “So it can how much risk they have in areas affected by be used by businesses and the community climate change as outlined in the report. to improve resilience and get prepared. To And there’s a great deal of volatility in understand vulnerabilities, and make plans.” these risks, so just how much risk is out Patton is the chief climate product offithere and how to deal with it is still a big cer for Zurich Insurance Group, although unknown for the industry, he said. she was not speaking for the carrier, but in “This is all good information to have, but the role of her federal appointment on the how does it impact the underwriting for the

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committee.

Patton and others involved in the report say it’s the first of its kind to offer up a climate change picture from regional standpoints.

“The report gives information on changing risks in every region of the country,” said John Posey, director of research for the East-West Gateway Council of Governments, who was involved in developing the report.

“For example, it highlights increasing risk of wildfires in the Southwest, increasing flooding risk in the Midwest, and risk of coastal flooding in the Southeast. There is something of interest to every American in this report.”

The report details by regions the present and future impacts its authors say are being driven by climate change: Northeast The Northeast, where 64 million people are concentrated, depends on aging infrastructure that has already been stressed by climate hazards including heat waves and heavy downpours. More than any other U.S. region the Northeast has experienced a greater recent increase in extreme precipitation with more than a 70 percent increase in the amount of precipitation falling in very heavy events between 1958 and 2010.

Southeast In the Southeast the sea level rise poses widespread and continuing threats to the region’s economy and environment, while extreme heat and decreased water availability will also have economic and environmental impacts.

Midwest In the Midwest longer growing seasons and rising carbon dioxide levels will increase the yield of some crops, but those benefits will be offset by extreme weather events to eventually produce a decrease in agricultural productivity.

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News & Markets continued from page W16 are leading to increased demand for water and energy. Parts of the region will see constrained development due to these factors.

New agriculture practices will need to be developed to cope with these changing conditions.

Southwest In the Southwest region, which includes Arizona, California, Colorado, Nevada, New Mexico and Utah, increases in heat, drought, insect outbreaks and wildfires are being driven by climate change. Declining water supplies, reduced crop yields and flooding in coastal areas are other problems.

Northwest Changes in the timing of stream flow are reducing water supplies in the Northwest, where sea level rise, erosion, inundation, risks to infrastructure and increasing ocean acidity are threats. Other threats from climate change in the Northwest include wildfire, insect outbreaks and tree diseases.

Alaska and Hawaii The largest state in the U.S. is facing some of the most severe effects of climate change.

Alaska has warmed twice as fast as the rest of the nation, sea ice is rapidly receding, thawing permafrost is leading to more wildfires and rising ocean temperatures and acidification will alter marine fisheries.

In Hawaii, warmer oceans are leading to increased coral bleaching and disease outbreaks, as well as changing distribution of tuna fisheries, while freshwater supplies will become more limited on many islands.

Coastal flooding and erosion are expected to increase, and mounting threats to food and water security, infrastructure, health and safety will lead to increasing human migration.

Some critics of the Obama Administration saw the report as proof that more federal regulations are not the answer.

Senate Western Caucus Chairman John Barrasso, R-Wy., said in a speech responding to the report that it inadvertently makes the argument that environmental stewardship W18 | INSURANCE JOURNAL-WEST May 19, 2014

should be carried out at the state level.

“As this report demonstrates, extreme regulations imposed by Washington undermine the work being done at the state level.

Whether it’s to manage lands, to manage natural resources, protect air and water, or conserve species,” Barrasso said.

Posey, with the East-West Gateway Council of Governments, said he hopes people who read the report take away a few distinct messages.

“Climate change is already happening,” he said. “It’s not a problem for the future.”

Adaptation The report outlines several steps individuals and communities can take to reduce vulnerability to climate change impacts, such as storm water management techniques and open space conservation to reduce flooding risk, and effective evacuation planning to reduce risks associated with natural disasters.

Posey said the report emphasizes ways to mitigate and adapt to the impact of climate change, and the latter is one way in which the insurance industry can get involved.

“It’s common in climate change circles to distinguish between mitigation and adaptation,” he said. “As used in the context of climate change, mitigation refers to efforts aimed at reducing greenhouse gas emissions, while adaptation refers to efforts aimed at reducing vulnerability to the impacts that are happening now, or that are likely to happen. Insurance can serve as an important adaptation to climate change by providing a means to manage risks.”

The report’s authors relied on scientific measurements, long-term records from weather stations, satellites, ocean buoys, tide gauges. The report puts climate change squarely on the shoulders of human activity.

“Precipitation patterns are changing, sea level is rising, the oceans are becoming more acidic, and the frequency and intensity of some extreme weather events are increasing,” the report states. “Many lines of independent

evidence demonstrate that the rapid warming of the past half-century is due primarily to human activities.”

The report’s authors say that climate science developed in recent decades now shows that some changes, like sea level rise and Arctic sea ice decline, have outpaced earlier projections.

“What is new over the last decade is that we know with increasing certainty that climate change is happening now,” the report states. “While scientists continue to refine projections of the future, observations unequivocally show that climate is changing and that the warming of the past 50 years is primarily due to human-induced emissions of heat-trapping gases.”

The report states that U.S. average temperature has increased by 1.3°F to 1.9°F since 1895, most of which has occurred since 1970.

“The most recent decade was the nation’s and the world’s hottest on record, and 2012 was the hottest year on record in the continental United States,” the report states.

That’s not the worst news in the report.

Temperatures are projected to rise another 2°F to 4°F in most areas of the United States over the next few decades, and by the end of this century the report projects a roughly 3°F to 5°F rise in temperatures even under a lower emissions scenario, which would require “substantial reductions in emissions.”

Without these substantial reductions the report projects a 5°F to 10°F rise in temperatures.

Prolonged periods of high temperatures and persistence of high nighttime temperatures in many locations over the past half century have become associated with droughts and longer wildfire seasons and larger wildfires, the report states.

“Evidence indicates that the human influence on climate has already roughly doubled the probability of extreme heat events such as the record-breaking summer heat experienced in 2011 in Texas and Oklahoma,” the report states. “The incidence of record-breaking high temperatures is projected to rise.” www.insurancejournal.com

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News & Markets Study: Company Data Breach Now Costs $3.5M on Average

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he average cost of a corporate data breach increased 15 percent in the last year to $3.5 million, according to a recent study.

The study by the Ponemon Institute out of Michigan also found that the cost incurred for each lost or stolen record containing sensitive and confidential information increased more than nine percent to a consolidated average of $145.

The study says that companies that said they have a strong security posture were able to reduce the cost by as much as $14 per record.

Consistent with Ponemon’s previous studies, the most common cause of a data breach is a malicious insider or criminal attack.

However the causes of data breaches vary by country and also include human error and system failures, according to the report.

The most costly data breaches were those $201 and $195 per compromised record, caused by malicious and criminal attacks. respectively.

The Ponemon Institute’s ninth annual • The least expensive data breaches were Cost of Data Breach Study: Global Analysis in India and Brazil at $51 and $70, tallied responses from 314 companies spanrespectively. ning 10 countries.

• Root causes of data breaches differ “The goal of this research is to not just among countries. Countries in the help companies understand the types of Arabian region and Germany had more data breaches that could impact their busidata breaches caused by malicious or ness, but also the potential costs and how criminal attacks. best to allocate ‘Clearly, malicious insiders and India had the resources to most data breachthe prevention, criminal attacks are a growing caused by a detection and concern for businesses, especially es system glitch or resolution of when we consider how persistent business process such an incidata has become in the age of failure. Human dent,” said Dr. error was most Larry Ponemon, cloud and mobility.’ often the cause in chairman and the United Kingdom and Brazil. founder of Ponemon Institute.

• The appointment of a Chief Information This year’s Cost of Data Breach Study Security Officer to lead the data breach also provides guidance on the likelihood incident response team reduced the cost an organization will have a data breach. of a breach by more than $6.

The study is sponsored by IBM. • The involvement of business continuity Among the study’s other key findings: management reduced the cost of data breach by an average of almost $9 per • The most costly breaches occurred record, the study found. in the United States and Germany at W20 | INSURANCE JOURNAL-WEST May 19, 2014

“Clearly, malicious insiders and criminal attacks are a growing concern for businesses, especially when we consider how persistent data has become in the age of cloud and mobility,” said Kris Lovejoy, general manager, IBM Security Services Division.

“A data breach can result in enormous damage to a business that goes way beyond the financials. At stake is customer loyalty and brand reputation.”

Companies in the study said that the greatest threats are malicious code and sustained probes. Companies estimate that they will be dealing with an average of 17 malicious codes each month and 12 sustained probes each month.

Unauthorized access incidents have mainly stayed the same and companies estimate they will be dealing with an average of 10 such incidents each month.

Only 38 percent of companies have a security strategy to protect their IT infrastructure. A higher percentage (45 percent) has a strategy to protect their information assets.

Source: Ponemon Institute www.insurancejournal.com

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News & Markets Overstock.com Brings Insurance Sales to Retail Site, Agents React

By Amy O’Connor

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ustomers of Overstock.com can now furnish their home or office and insure them through the same source. The online retailer this month began selling small business, auto and home insurance along with furniture, rugs, beauty products and electronics.

The mega-“etailer” launched Overstock. com Insurance Agency through a partnership with Insuritas, a provider of private-label insurance agencies whose CEO believes online shopping is replacing traditional insurance agencies because it is what consumers want. He urges agents to start installing their services in other businesses.

According to CEO and founder of Overstock.com, Patrick Byrne, the Salt Lake City-based company’s mission is saving people money and it is always looking for new niches where it can do so for its large customer base.

“A lot of our customers are home buyers and are either buying, furnishing or refurnishing homes or apartments so it seemed like a natural fit for us to offer a home insurance product,” says Byrne.

Now listed at the top of the Overstock. com website is an “Insurance” tab where customers can click and receive a personalized auto, residential or business insurance quote. Insurance purchases are paid for in the same shopping cart as other Overstock. com home and beauty products. Customers can also manage their policy through their Overstock.com accounts.

Coverage is provided through major carriers, including Safeco, that have been secured through Insuritas, which handles all of the agency and policy details for Overstock, including the technology, call center and policy binding.

Insuritas has been providing insurance agency functions to banks and credit www.insurancejournal.com

unions nationwide for the last 15 years but this is the first retailer it has worked with.

Jeff Chesky, CEO of Insuritas, says what is different about this arrangement compared to its partnerships with banks and credit unions is that Overstock.com owns the agency and policies while Insuritas provides the backroom services, operational infrastructure and products.

Customers will connect with Insuritas’ agents in its call center in Hartford, Conn., but the policies will come from Overstock. com Insurance Agency. Insuritas will be compensated by the retailer a portion of the gross income of the agency.

Carriers on Overstock will be paid directly by the consumers who purchase a policy from Overstock.com and then remit the commission to the retailer.

Overstock announced its insurance venture the same week that giant retailer Walmart announced it would be offering insurance through its website.

Unlike the Overstock deal, Walmart will

A

gents and brokers reacted strongly to Overstock.com’s decision to sell insurance, but especially to Chesky’s comments about the current agency system becoming irrelevant: AgencyEquity says: The problem with this kind of thinking is that one size does not fit all, it misses the point of providing advice and presumes that insurance is all the same. There are different market segments out there, there are also hundreds of different types of insurance policy types. Some people want to do things online, others have more sophisticated needs and demand professional expertise. This is especially true with higher net-worth personal

not own the agency; it is simply directing customers to the website AutoInsurance. com through its own website.

Chesky of Insuritas says it was no problem getting its carriers to sign up because Overstock’s customers are primarily women between the ages of 34-55 who have high credit scores —a prime target group for insurers. “The customers we bring in for insurance shopping are very attractive risks to carriers,” he said.

“Our carrier partners are thrilled to underwrite the customers of Overstock. com, just like they are thrilled to have us distribute their products in banks and credit unions because [the financial institutions] are giving them loans so there is a good claims risk there,” Chesky said. “Carriers are increasingly recognizing credit score as an indicator of claims risk.”

Chesky thinks Overstock customers are more desirable to insurers than Walmart’s.

“We are looking for very attractive segments of the marketplace that our carriers have a very strategic appetite to write,” he said, adding that he is “not sure how Walmart will align its customer base” with continued on page 12

lines and almost all of commercial lines.

Most insurance by agents is submitted online, if it were that easy, they would be able to transfer the portal from agent to consumer. But it’s not happening because there are a number of variables that make it very difficult, including the knowledge, professional advice and account management that is needed to make sure things are being done properly. Lastly, America is a marketplace of options, that is what makes us great, for one person to say “this is the only way to do it” is not accurate as this has never been the case in America.

Libby says: Equity, while I want to agree with continued on page 12 May 19, 2014 INSURANCE JOURNAL-NATIONAL | 11

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News & Markets continued from page 10 holds now with higher limits coverage at half or less of what most carriers are selling it for. Their claims service is getting good marks too so you can’t pick on them for that either. This is a legit threat to the agency model as we know it. The carriers need to get more aggressive and the agents need to step up their game or sell the agency.

ExciteBiker says: Will independent agents continue to sell Safeco and Travelers products, or will they refuse to do business with carriers that are apparently seeking to undermine the independent agency system and turn insurance into a commodity available at Walmart?

I wonder what these carriers are telling their agents… “blah blah blah,

continued from page 10 increasing our brand awareness, blah blah blah…” Sound about right?

Sarah says: This has been coming for decades now. Let’s look at banks in the insurance business, Warren Buffet and Geico, now a new company says they can steal your business in 7 1/2 minutes vs. Geico’s 15 minutes. If you want to see what is happening in the future look to what Walgreens, CVS, and Walmart have done to prescription shops/drug stores across the country. Or Expedia, Priceline has done to travel agencies? Almost all of the personal lines insurance products sold in this country will be sold online within the next 10 to 15 years. Commercial lines and specialty lines will be the only product we will be selling 15 years from now.

continued from page 11

continued from page 11

carriers’ models.

As for consumers, Chesky says they are not only looking for but also demanding the “no-hassle” online insurance shopping experience like Insuritas and Overstock.com have created. He says this is being proven by his company’s organic growth.

He believes the traditional insurance sales model of customers sitting down with an agent and discussing policies is dying.

“Consumers don’t want a relationship with an agent or even a carrier,” says Chesky.

“They just don’t want to spend money on something they didn’t use but still want to protect their investments and assets.”

Overstock founder Byrne says his firm doesn’t have any set goals for the first year and expects it could take a few years for the agency to take off. Overstock.com also plans to expand into life and health insurance later this year through the Insuritas system.

Insuritas is prepared to offer any and all insurance that is available, says Chesky.

“The consumer is looking for a store or aisle in a store where the shelves are stuffed with every risk management product they need and that’s what we will keep doing for Overstock,” he says.

you I’m not so sure. With the huge numbers of millenials coming of age, they like to do things online. And they don’t care if it’s a big ticket item.

In addition, you are forgetting that the customer WILL be dealing with an agent. I’m sure they don’t just spit out a number and walk away. They more than likely give several options and follow up by phone or email.

I’m thinking this is a slick idea for personal lines/BOP business. I’m pretty sure it won’t work for middle-market commerical business, though.

12 | INSURANCE JOURNAL-NATIONAL May 19, 2014

farmerjohn says: Well, at least it sounds like the personal lines opportunities we’ll be missing can be replaced by increased opportunities in the E&O world!

Insexpert says: Some independent agents have to prove their worth, or lose their business to set ups like these. Too many independents commoditize their products, swapping folks from cheaper carrier to cheaper carrier without taking time to

the customer information and does not distribute it to the carriers until a consumer goes through with policy purchasing and binding.

AutoInsurance.com agents are also available to provide advice or assist consumers through the buying process.

As of now, the two companies plan to only work with auto insurance and no other lines.

Eckert says the cost savings through this new partnership are compelling to Walmart’s large customer base.

“One of the things we were most struck by was the power of comparison. In our year-long [pilot] people saw savings of $1,100 a year — that’s a lot of money for customers,” he says. “The savings are real and the comparison model offers the best choice for customers.”

explain the differences, and why you get what you pay for. If the only value you bring is a cheaper rate, you will be easily replaced. The best agents’ clients stay for the agent; not the price. Let’s face it. The vast majority of shoppers are shopping price. That’s a fine start, but a good agent redirects the conversation to “value”, of the product and the agency, based on the stories they tell. Make your clients stick for the reasons they can’t find anywhere else. Let’s send these “knick knacks and insurance” clowns packin’.

G. Hatfield says: More cheapening of the insurance process for the consumer and the agents. I hope the agents that work with these “major insurance carriers” begin choosing other carriers for their business who are committed to their distibution channel and let Travelers, Safeco and the others work with Walmart and other retail establishments …. I’ll bet Burger King has a bunch of folks they could send them …. a whooper my way and homeowners insurance please! www.insurancejournal.com

We are

insured.

My business is insured

by ACE.

Insurance for businesses, families and individuals | acegroup.com/us

What does it mean to be ACE insured?

It means my business is protected by an AA- rated insurer, one of the largest and strongest in the world. ACE people truly understand my risks and go out of their way to help. I can focus on growing my company because ACE is there when I need them.

© 2014 ACE Group. Coverages underwritten by one or more companies of the ACE Group. Not all coverages available in all jurisdictions. ACE®, ACE logo®, and ACE insured are trademarks of ACE Limited.

NATIONAL COVERAGE

Business Moves

Eastern Insurance, Smith Buckley & Hunt Eastern Insurance Group has acquired Smith Buckley & Hunt, an insurance agency based in Brockton, Mass.

Smith Buckley & Hunt was founded in 1875, and the Smith Family has owned the agency since 1922. The principals of the agency are MacKenzie Smith, James S. Smith and Christopher Sheppard.

Smith Buckley & Hunt’s office in Brockton will remain open and re-branded as an Eastern Insurance location later this year. Upon completion of the transaction, Eastern Insurance will have 24 locations in New England.

Following the merger, James Smith will remain with Eastern Insurance, serving as senior vice president of commercial insurance. Sheppard will continue as a senior vice president of sales.

For Eastern Insurance, the acquisition increases its customer base south of Boston, where it already has 10 locations. The move also strengthens Eastern Bank’s overall position in southeastern Massachusetts. In 2012, Eastern Bank acquired The Community Bank in Brockton. Eastern Insurance has completed more than 34 insurance agency acquisitions since 1994.

Eastern Insurance, based in Natick, Mass., is a subsidiary of Eastern Bank.

14 | INSURANCE JOURNAL-NATIONAL May 19, 2014

Capacity Coverage, TriPartners Field Claims Services Capacity Coverage Co. of New Jersey Inc. announced that its affiliate company has made a strategic investment in Tri-Partners Field Claims Services in Warren, N.J. Tri-Partners Field Claims Services was previously owned 50/50 by Fleming & Hall Administrators Inc. and RCA Insurance Group. Under the deal, Capacity Coverage is purchasing a third of Tri-Partners Field Claims Services — with Fleming & Hall Administrators, RCA Insurance Group and Capacity Coverage now each owning one-third of TriPartners. Additional terms of the transaction were not disclosed.

Tri-Partners focuses on providing investigation and adjustment services to specialty insurance carriers throughout the United States.

Capacity Coverage Co. said that through this investment, it has partnered with Fleming & Hall and RCA to continue TriPartners’ growth in its national field claims service operation. Capacity Coverage is a specialty insurance and financial services organization headquartered in Mahwah, N.J., with more than 280 employees in 14 retail and wholesale offices.

Fleming & Hall is a privately held national third-party administration firm providing risk management, claims management and information management services to specialty and surplus lines insurance and Lloyd’s markets. Headquartered in Atlanta, Fleming & Hall has additional offices in New York, Georgia, Florida and California.

RCA, headquartered in Clifton, N.J., is a general agency and program manager, specializing in offering a package program to the restaurant/tavern market niche.

Hub International, E.J. Wells Insurance Agency Hub International New England LLC, a subsidiary of global insurance broker Hub International Ltd., has acquired the

assets of E.J. Wells Insurance Agency Inc., a Westford, Mass.-based insurance brokerage firm. Terms of the acquisition were not disclosed.

The E.J. Wells operations will become part of Hub International New England’s existing office in Acton, Mass. In connection with the acquisition, Paul J. Coffey, president of E.J. Wells, will join Hub International New England as executive vice president.

Founded in 1900, E.J. Wells offers property/casualty, employee benefits and personal insurance to businesses and individuals located throughout the New England region. The E.J. Wells team has an expertise in providing specialty insurance, risk management and consulting services to the construction industry.

Maguire Agency, Kelly Agency Roseville, Minn.-based Maguire Agency and the Kelly Agency, a St. Paul, Minn.based commercial insurance agency, have joined forces.

Employees of the Kelly Agency, which is known as a specialist in construction insurance, joined Maguire Agency on April 1.

Maguire Agency offers property/casualty insurance, employee benefits, and personal insurance.

Keystone Insurers Group, Van Gundy Insurance Normal, Ill.-based agency Van Gundy Insurance has joined Keystone Insurers Group as its newest franchise partner in Illinois.

Van Gundy Agency was founded in 1946

by Lander Van Gundy. With his roots in the harness racing industry, Van Gundy established a nationwide insurance network for insuring harness horses, stables and race tracks. Today the agency is under the management of six partners: David McGrew, Mark Brent, John Lenahan, Mike McNeely, Rod Brent and Mike McGrew.

Keystone Insurers Group was founded in 1983 and headquartered in Northumberland, Pa. KIG is owned by its franchise partners and employees in Pennsylvania, North Carolina, Virginia, Indiana and Ohio. www.insurancejournal.com

We take on the risk so you can take on the opportunities.

One-of-a-kind insurance solutions for one-of-a-kind risks.

At Lexington Insurance, we’ve spent over forty years finding new and innovative ways to insure what others won’t – so that your clients can take their business to heights their competitors wouldn’t dream of. Whether it’s protecting a company’s bottom line in the event of a global product recall, or protecting a 1,776-foot symbol for freedom, as the market leader in surplus lines insurance, we have the strength and flexibility to stay one step ahead of risk. Have a client with an idea nobody else will cover? Call us. To learn more, go to www.lexingtoninsurance.com

Lexington Insurance Company, an AIG company, is the leading U.S.-based surplus lines insurer. AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit www.aig.com. Products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Not all products and services are available in every jurisdiction, and insurance coverage is governed by actual policy language. Certain products and services may be provided by independent third parties.

Insurance products may be distributed through affiliated or unaffiliated entities. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.

NATIONAL COVERAGE

FIGURES

$25 Million

The amount of the claim filed by the family of a Washington man who was mistakenly shot and killed by Los Angeles County sheriff’s deputies.

An attorney for John Winkler’s family said the April 7 shooting was “a preventable act.”

DECLARATIONS

5%

The percentage of vehicle fires in Texas that are intentionally set. Arson accounts for $3.5 million in vehicle fire losses, according to the Texas State Fire Marshal’s Office. The FBI’s Uniform Crime Reporting Program indicates that in the past 10 years, vehicle arsons accounted for 26.5 percent of all arson cases annually.

Hot As ...

“Early in the season, especially as the temperatures spike, all workers, regardless of fitness, should be given the opportunity to acclimatize to handle heat stress and prevent serious injuries from heat illness.”

—In an announcement that came a bit earlier in the season that usual, Cal/OSHA in late April advised all employers to protect their outdoor workers from the risks associated with heat illness with temperatures that were expected to be 15 to 25 degrees above normal in both Northern and Southern California.

Premium Financing

$2.4 Million The settlement amount the town of Greenwich, Conn., recently reached with its insurer AIG to cover damage to municipal buildings and other property by Superstorm Sandy in October 2012. The settlement with AIG also resulted in a 10 percent rise in insurance premiums for the town. AIG charges Greenwich about $1 million a year for property insurance.

17.7 The average number of workplace fatalities per 100,000 employees recorded in North Dakota in 2012. The state has the highest worker death rate in the United States, according to a recently released AFL-CIO report. The 2012 rate is a dramatic increase from the seven deaths per 100,000 workers recorded in 2007, before the state’s oil and economic boom took off.

75 The potential maximum speed limit on Florida highways if Gov. Rick Scott signs a bill passed by the state House of Representatives on a 58-56 vote. The bill’s opponents said raising the state’s maximum speed limit from 70 to 75 mph would lead to more deaths. SB 392 would not raise speed limits automatically, but would allow the Department of Transportation to increase the limit when it sees fit.

16 | INSURANCE JOURNAL-NATIONAL May 19, 2014

“Financing companies are required to give Massachusetts customers adequate protections and proper notice of auto insurance cancellations so they can determine a solution for continued coverage.”

— Massachusetts Attorney General Martha Coakley on a recent settlement with First Insurance Funding Corp., a premium financing provider. First has agreed to pay $200,000 to resolve allegations that it illegally and prematurely cancelled certain financed auto policies affecting nearly 200 Massachusetts customers. First also will modify its auto insurance cancellation procedures.

A Better Organization

“Today, OBWC is unquestionably a much more professional and accountable organization than it was in 2005.”

— A report by Ohio’s inspector general says the Ohio Bureau of Workers’ Compensation has changed for the better, following an investment scandal that rocked the state in 2005. Inspector General Randall Meyer made no new findings of wrongdoing in “Coingate,” a scandal that resulted in 19 convictions reaching up to then-Ohio Gov. Bob Taft. Meyer used the report to detail the status of 75 reforms at the BWC.

Tornado Rating

“We’re trying to rate a tornado based on what the tornado did, rather than how much damage was done by other houses coming apart and then hitting your house.”

— John Robinson, a meteorologist at the National Weather Service office in North Little Rock, Ark. NWS officials said that a tornado that killed 15 people was just shy of being rated Arkansas’ first top-of-the-scale storm in 85 years.

www.insurancejournal.com

SPECIAL REPORT

AAMGA Issue Changing MGA Market, Specialization and the Future: Hanover Excess & Surplus’s Letson

M

atthew Letson, incoming president of the American Association of Managing General Agents (AAMGA), found the insurance industry like most do — by accident.

After college, he landed a job at Markel doing marketing research in 1991. From Matthew Letson there he moved into Markel’s wholesale brokerage unit. Then in 1994, Letson moved to Wilmington, N.C., to join Hanover Excess & Surplus Inc., a 30-plus year old managing general agency.

Today, Letson is part owner of the firm where he now serves as president as of Jan. 1, 2014.

Prior to AAMGA’s annual meeting in May, Letson answered a few questions on the MGA market today, changes in the AAMGA’s membership bylaws, and why being a specialist is the only way to operate.

In the past year we’ve really worked toward understanding some of the needs of the new types of members. … We’ve had several new members in the program space join. But this is slow growth; we are not looking to disrupt the current membership of AAMGA. We are trying to slowly grow membership into what we think is a better reflection of the wholesale market right now.

Over time the hope is that we will bring in more members so that we can learn from each other. … Our goal now is to really understand what these new types of members need. … The ultimate goal in this area during my term will be to hold a specific meeting for the non-MGA new members of the AAMGA.

times for MGAs. Are MGAs seeing upward growth trends?

Letson: We certainly saw a firming of the market over the last few years and as a result of that we have seen growth in the MGA space at least for the AAMGA membership. Growth with surplus lines carriers, growth with specialty carriers and growth in the Lloyd’s marketplace has been considerable over the last few years, and at least in the London market we have returned to numbers that we were seeing prior to 2008.

Insurance Journal: The AAMGA changed its membership structure in 2013 to allow for broader wholesale industry participants to become eligible members. How has that change played out?

Matthew Letson: It’s gone very well. The change was part of our strategic plan. A couple of years ago we worked toward educating the membership to let them know why the bylaw change was necessary.

The reason for that change was that there was increased specialization in the MGA/wholesale space. There have also been quite a few mergers and acquisitions in the MGA space. What we are trying to do is create better depth of membership and represent a wider class of wholesale and underwriting entities. So we changed the bylaws, and really it’s not been quite a year. …

IJ: MGAs are specialists by nature but are you seeing even more specialization today?

Letson: We’ve seen some of our MGAs get into the program space. We see a lot of professional liability lines being written. I think a lot of times coverage gets pushed IJ: You mentioned M&A activity in into the professional form as we see more the MGA space. How has that activity and more things get excluded off the generchanged the MGA market in recent al liability form. That’s not years?

Finding a specialty, unusual. There are a lot of Letson: It’s very similar to different examples we could the retail agency space. being an expert provide of MGAs moving to MGAs in the last three to in it, and being a specialized products. four years have gone through resource to retail At Hanover Excess & a significant merger and Surplus we are specialacquisition cycle. I think the agents is the way ized in what we offer in numbers are upwards of 160 to go. the coastal territories. or 170 in each of the last two Specialization — that’s typically just a years alone. We are seeing fewer and fewer reflection of the marketplace. … Standard independently owned MGAs and some are carriers taking on more Main Street busicertainly larger MGAs. This trend is very ness. We have to create specialized products impactful on the MGA space right now. and take advantage of those opportunities.

But this particular business by its nature … We’ve always got to keep our eyes open is very entrepreneurial. So I do think this and be diligent about developing products M&A cycle is just that — it’s a cycle. It will and looking for opportunities and taking change. I don’t know what it will change advantage of those opportunities. Right to — it will either speed up or slow down now it is specialization. I think in the — but it won’t stay the same. Either way, I future, if you are a generalist MGA you think there will be plenty of opportunities might find it hard to compete. There’s a for those in this business. lot of very tough competition out there for general lines. Finding a specialty, being an IJ: How would you describe the MGA expert in it, and being a resource to retail market today? Certainly the recesagents is the way to go. sion and soft market brought tougher

18 | INSURANCE JOURNAL-NATIONAL May 19, 2014

www.insurancejournal.com

SPECIAL REPORT

2014 Super Regional P/C Insurers

TM

Demotech Inc. Reveals Leading Multi-State P/C Insurers Specialists, Strategic Subsidiaries, Risk Retention Groups, Surplus Lines Carriers, Reinsurers and companies with less than $1 million in direct premium written.

A company cannot be assigned to more than one category. Therefore, a company not designated as a Super Regional is given another classification.

I

n order to continue the discussion regarding what constitutes a Super Regional and to give definition to this important group of insurers, Demotech Inc. analyzed year-end 2013 data. This data was utilized to classify and stratify insurers reporting data to the National Association of Insurance Commissioners (NAIC).

The original criteria and objective definition for Super Regional Property/Casualty Insurers™ was estabBy Barry J. lished in the Feb. 12, Koestler II 2007 issue of Insurance Journal. Prior to the establishment of an industry-wide definition, a number of property/casualty insurers had referred to themselves as Super Regionals. Demotech, the

Criteria and Thresholds To determine the companies for the 2014 Super Regional Property/Casualty Insurer™ list, Demotech used these specific, objective qualifying criteria and thresholds evaluated as of Dec. 31, 2013: • Active, individual companies not under regulatory supervision.

• Reporting data using the property/casualty annual statement format.

• At least $1 million of direct premium written in each of two to 34 states.

• Less than 90 percent of direct premium written in any one state.

• Less than 90 percent of direct premium written in any one line of business.

• Policyholders surplus of at least $100 million.

• Net premium written of at least $50 million.

• Direct premium written of at least $25 million.

official research partner of Insurance Journal, has compared the data to the criteria and updated the list of Super Regionals.

2014 Property/Casualty Insurance Cos. Demotech Company Classifications Demotech Company Classification System Direct Premium Written Less than Demotech has again applied Near Nationals 1.9% $1 million 4.4% Nationals 2.1% its classification system for Reinsurers 2.4% Super Regionals 5.8% property/casualty (P/C) insurSurplus Lines Carriers 6.8% ance companies. The Demotech Risk Retention Groups 8.9% Company Classification System Regionals 9.1% categorizes P/C insurers into one of 11 categories based on an Strategic analysis of the data reported by Subsidiaries State Specialists 16.5% the companies.

28.6% The 11 categories that Coverage Specialists comprise the system are 13.5% Nationals, Near Nationals, Super Regionals, Regionals, State Specialists, Coverage

SR1 | INSURANCE JOURNAL-SPECIAL REPORT May 19, 2014

www.insurancejournal.com

In general terms, a Super Regional Property/Casualty Insurer™ is an individual company writing multiple lines of insurance in multiple states. Risk retention groups, surplus lines insurers and reinsurers are not eligible for the Super Regional category as they are assigned to other classifications.

2014 Super Regional P/C Insurers™ Demotech identified 155 Super Regional Property/Casualty Insurers™ for 2014. They are presented in this exclusive Insurance Journal Special Report both alphabetically and by size as ranked by direct premium written as of Dec. 31, 2013.

Also included in this report are 20 com-

panies that are new to the Super Regional Classification for 2014, as well as 26 insurers that have been reclassified into another category based on year-end 2013 information.

Demotech believes that Super Regional insurers are critically important to the insurance industry, and of particular importance to their agents, producers and insureds.

These companies are typically strong, stable markets that work hard for their agents, insureds and their reinsurers.

Insurance Journal and Demotech expect this year’s report to advance the discussion on the role of Super Regionals, as well as the definition and criteria used in determining the classification, so that future reports can continue an industry dialogue on Super

Regional Property/Casualty Insurers™.

Insurers and interested readers are encouraged to review the selection criteria and thresholds used to determine the 2014 Super Regionals. The selection criteria remain quantitative and transparent. Demotech is focused on setting benchmarks at levels that accurately categorize the industry. The relative consistency of the company type distribution over time suggests that the categorizations that have been established are valid and effective in classifying the industry.

It is important to reiterate that the Demotech Company Classification System is an objective stratification of the companies that comprise the industry based on their

2014 Super Regional Property/Casualty Insurers™

Alphabetical Listing

ACUITY, a Mutual Insurance Co. Alaska National Insurance Co. All America Insurance Co. American Commerce Insurance Co. American Family Home Insurance Co. American Family Mutual Insurance Co. American Hallmark Insurance Co. of Texas American Home Assurance Co. American Mercury Insurance Co. American Road Insurance Co. American Strategic Insurance Corp.

Amerisure Insurance Co. Amerisure Mutual Insurance Co. AMEX Assurance Co. AmGUARD Insurance Co. Atlantic States Insurance Co. Auto Club Insurance Association Automobile Insurance Co. of Hartford, CT Auto-Owners Insurance Co. Bankers Standard Insurance Co. Bay State Insurance Co. Berkley Insurance Co. Bituminous Casualty Corp.

Bituminous Fire and Marine Insurance Co. Brethren Mutual Insurance Co. Builders Mutual Insurance Co. California Casualty Indemnity Exchange Cambridge Mutual Fire Insurance Co. Capitol Indemnity Corp.

Central Mutual Insurance Co. Century-National Insurance Co. Cherokee Insurance Co. Citizens Insurance Co. of America Civil Service Employees Insurance Co. Columbia Mutual Insurance Co. Companion Property and Casualty Insurance Co. Concord General Mutual Insurance Co. Contractors Bonding and Insurance Co. COUNTRY Mutual Insurance Co. Courtesy Insurance Co. Cumberland Mutual Fire Insurance Co. Dentists Insurance Co. Donegal Mutual Insurance Co. Electric Insurance Co. EMCASCO Insurance Co. Endurance American Insurance Co. Erie Insurance Co. Erie Insurance Exchange Farm Bureau Property & Casualty Insurance Co. Farm Family Casualty Insurance Co. Farmers Alliance Mutual Insurance Co. Farmers Automobile Insurance Association

www.insurancejournal.com

Farmers Insurance Co. Inc. Farmers Insurance Exchange Farmers Mutual Hail Insurance Co. of Iowa Farmers Mutual Insurance Co. of Nebraska Farmington Casualty Co. Farmland Mutual Insurance Co. FCCI Insurance Co. Federated Rural Electric Insurance Exchange Fire Insurance Exchange First Colonial Insurance Co. Frankenmuth Mutual Insurance Co. General Casualty Co. of Wisconsin Goodville Mutual Casualty Co. Grange Insurance Association Grange Mutual Casualty Co. Gray Insurance Co. Harco National Insurance Co. Harford Mutual Insurance Co. Hartford Insurance Co. of Illinois Hastings Mutual Insurance Co. Horace Mann Property & Casualty Insurance Co. Imperium Insurance Co. IMT Insurance Co. Insurance Co. of North America Insurance Co. of the West Integon National Insurance Co. Jewelers Mutual Insurance Co. Lightning Rod Mutual Insurance Co. Lititz Mutual Insurance Co. Lyndon Property Insurance Co. Markel American Insurance Co. MemberSelect Insurance Co. Merchants Mutual Insurance Co. Mercury Casualty Co. Merrimack Mutual Fire Insurance Co. MHA Insurance Co. Mid-Century Insurance Co. Mid-Continent Casualty Co. Middlesex Insurance Co. Milbank Insurance Co. Mitsui Sumitomo Insurance Co. of America Motorists Commercial Mutual Insurance Co. Motorists Mutual Insurance Co. Motors Insurance Corp.

Mountain West Farm Bureau Mutual Insurance Co. Mutual of Enumclaw Insurance Co. National Indemnity Co. National Liability & Fire Insurance Co. Nationwide Mutual Fire Insurance Co. NGM Insurance Co. North River Insurance Co. North Star Mutual Insurance Co.

Old Republic General Insurance Corp.

Old United Casualty Co. Owners Insurance Co. Pacific Specialty Insurance Co. Peerless Insurance Co. Pekin Insurance Co. Penn National Security Insurance Co. Pennsylvania Lumbermens Mutual Insurance Co. Pennsylvania National Mutual Casualty Insurance Co. Philadelphia Contributionship Insurance Co. Physicians Insurance, a Mutual Co. Preferred Mutual Insurance Co. ProAssurance Casualty Co. Progressive Casualty Insurance Co. Progressive Northern Insurance Co. Progressive Northwestern Insurance Co. Providence Mutual Fire Insurance Co. Public Service Insurance Co. Quincy Mutual Fire Insurance Co. Redwood Fire and Casualty Insurance Co. Republic Underwriters Insurance Co. SECURA Insurance, a Mutual Co. Securian Casualty Co. Selective Insurance Co. of America Selective Insurance Co. of South Carolina Selective Way Insurance Co. Shelter Mutual Insurance Co. Society Insurance, a Mutual Co. St. Paul Mercury Insurance Co. State Auto Property & Casualty Insurance Co. State Automobile Mutual Insurance Co. Stillwater Insurance Co. Toyota Motor Insurance Co. TransGuard Insurance Co. of America Inc. Trinity Universal Insurance Co. Triton Insurance Co. Unigard Insurance Co. United Financial Casualty Co. United Fire & Casualty Co. United Ohio Insurance Co. United States Fidelity and Guaranty Co. Utica First Insurance Co. Utica Mutual Insurance Co. Vanliner Insurance Co. Vermont Mutual Insurance Co. West Bend Mutual Insurance Co. Western National Mutual Insurance Co. Western Reserve Mutual Casualty Co. Westfield Insurance Co. Westfield National Insurance Co. Yosemite Insurance Co.

May 19, 2014 INSURANCE JOURNAL-SPECIAL REPORT | SR2

business models. It is not equivalent to ratings of the individual insurers. Inclusion on the list of Super Regionals does not imply that a company is superior to companies not included in that classification.

Future issues of Insurance Journal will

report on the other categories within the Demotech Company Classification System.

Please send suggestions, comments and criticisms to Barry Koestler at bkoestler@ demotech.com or Andrew Simpson at asimpson@insurancejournal.com.

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

NEW 2014 Super Regionals Company Name American Family Home Insurance Co. AMEX Assurance Co. AmGUARD Insurance Co. Berkley Insurance Co. Contractors Bonding and Insurance Co. Electric Insurance Co. EMCASCO Insurance Co. Farmers Insurance Co. Inc. Imperium Insurance Co. Integon National Insurance Co. Pennsylvania Lumbermens Mutual Insurance Co. Philadelphia Contributionship Insurance Co. Providence Mutual Fire Insurance Co. Redwood Fire and Casualty Insurance Co. Securian Casualty Co. Selective Insurance Co. of South Carolina St. Paul Mercury Insurance Co. United Ohio Insurance Co. United States Fidelity and Guaranty Co. Western Reserve Mutual Casualty Co.

2014 Demotech Company Classification

2013 Demotech Company Classification

2012 Demotech Company Classification

2011 Demotech Company Classification

2010 Demotech Company Classification

Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional

Near National Near National Strategic Subsidiary Coverage Specialist Regional Near National Regional Strategic Subsidiary Regional Coverage Specialist Near National Regional Regional Strategic Subsidiary Regional Regional Near National State Specialist Coverage Specialist Regional

Near National Near National Regional Coverage Specialist Regional Near National Regional Strategic Subsidiary Super Regional Regional Super Regional Regional Regional Strategic Subsidiary Regional Regional Near National State Specialist Coverage Specialist Regional

Near National Near National Regional Super Regional Super Regional Near National Regional Regional Super Regional Regional Super Regional Regional Super Regional Strategic Subsidiary Regional Regional Near National State Specialist Super Regional Regional

Super Regional Near National Coverage Specialist Super Regional Super Regional Near National Regional Regional Super Regional Strategic Subsidiary Super Regional Regional Super Regional Strategic Subsidiary Regional Regional Regional State Specialist Super Regional Regional

RECLASSIFIED 2013 Super Regionals Company Name

2014 2013 2012 Demotech Demotech Demotech Company Company Company Classification Classification Classification

2011 Demotech Company Classification

2010 Demotech Company Classification

Why Company Does Not Qualify as a 2014 Super Regional

American Economy Insurance Co.

Strategic Subsidiary

Super Regional

Super Regional

Near National

Near National

PHS, NPW

Berkley Regional Insurance Co. Berkshire Hathaway Homestate Insurance Co. Brotherhood Mutual Insurance Co. Canal Insurance Co. CastlePoint Insurance Co. CastlePoint National Insurance Co. Federated Service Insurance Co. General Insurance Co. of America Harleysville Preferred Insurance Co. Harleysville Worcester Insurance Co. Horace Mann Insurance Co. Hudson Insurance Co. Indiana Insurance Co. Loya Insurance Co. Middlesex Mutual Assurance Co. Netherlands Insurance Co. New York Marine and General Insurance Co. OneBeacon Insurance Co. Preferred Professional Insurance Co. Progressive Gulf Insurance Co. Protective Insurance Co. Safeco Insurance Co. of Illinois Seneca Insurance Co. Inc. Technology Insurance Co. Inc. Tower Insurance Co. of New York

Strategic Subsidiary Near National Near National Coverage Specialist NA NA Near National Strategic Subsidiary Strategic Subsidiary Strategic Subsidiary Near National Near National Strategic Subsidiary Coverage Specialist Regional Strategic Subsidiary Near National Strategic Subsidiary Strategic Subsidiary Regional Near National Strategic Subsidiary Strategic Subsidiary Near National NA

Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional

Super Regional Strategic Subsidiary Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional

Super Regional Strategic Subsidiary Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Near National Super Regional Super Regional State Specialist Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional

Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Near National Super Regional Super Regional Super Regional Super Regional Super Regional State Specialist Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional

NPW States > 34 States > 34 LOB > 90% Data not available Data not available States > 34 NPW NPW NPW States > 34 States > 34 PHS, NPW LOB > 90% PHS PHS, NPW States > 34 States, LOB, NPW, DPW NPW PHS States > 34 NPW NPW States > 34 Data not available

LOB = Line of Business; NPW = Net Premium Written

SR3 | INSURANCE JOURNAL-SPECIAL REPORT May 19, 2014

www.insurancejournal.com

2014 Super Regional P/C Insurers™

As developed by Demotech Inc. for Insurance Journal. Ranked by Direct Premium Written as of 12/31/2013.

Company

12/31/2013 DPW 000s omitted

1

American Family Mutual Insurance Co.

5,180,130

2 3

Erie Insurance Exchange Farmers Insurance Exchange

4

Group Name

State of Domicile

Number/States with Greater than $1 Million DPW as of 12/31/2013

WI

18 - AZ,CO,ID,IL,IN,IA,KS,MN,MO,NE,NV,ND,OH,OR,SD,UT,WA,WI

3,978,369 3,181,706

American Family Insurance Group Erie Insurance Group Farmers Insurance Group

PA CA

Mid-Century Insurance Co.

2,684,531

Farmers Insurance Group

CA

5

Auto-Owners Insurance Co.

2,158,404

Auto Owners Group

MI

6

Owners Insurance Co.

1,793,066

Auto Owners Group

OH

7

Nationwide Mutual Fire Insurance Co.

1,607,053

Nationwide Corp Group

OH

8

COUNTRY Mutual Insurance Co.

1,497,595

IL

11 - DC,IL,IN,MD,NC,OH,PA,TN,VA,WV,WI 34 - AL,AZ,AR,CA,CO,GA,ID,IL,IN,IA,KS,LA,ME,MD,MI,MN,MS,MO,MT,NE,NV,NM, ND,OH,OK,OR,SD,TN,TX,UT,VA,WA,WI,WY 33 - AL,AZ,AR,CA,CO,GA,ID,IL,IN,IA,KS,MD,MI,MN,MO,MT,NE,NV,NJ,NM,ND,OH, OK,OR,PA,SD,TN,TX,UT,VA,WA,WI,WY 26 - AL,AZ,AR,CO,FL,GA,ID,IL,IN,IA,KS,KY,MI,MN,MO,NE,NC,ND,OH,PA,SC,SD, TN,UT,VA,WI 25 - AL,AZ,AR,CO,FL,GA,ID,IL,IN,IA,KS,KY,MN,MO,NE,NC,ND,OH,PA,SC,SD,TN, UT,VA,WI 31 - AL,AZ,AR,CA,CT,DE,DC,FL,GA,IL,IN,KY,ME,MD,MI,MS,NH,NY,NC,OH,OK,OR, PA,RI,SC,TN,TX,VT,VA,WA,WV 17 - AL,AK,AZ,CO,GA,IL,IA,KS,MN,MO,NV,ND,OK,OR,TN,WA,WI

CA OH

9 Fire Insurance Exchange 10 Westfield Insurance Co.

1,443,246 1,281,788

Country Insurance & Financial Services Group Farmers Insurance Group Westfield Group

11

Progressive Northern Insurance Co.

1,271,296

Progressive Group

WI

12 Shelter Mutual Insurance Co. 13 ACUITY, a Mutual Insurance Co. 14 Farm Bureau Property & Casualty Insurance Co. 15 Progressive Casualty Insurance Co.

1,221,963 1,124,310 1,054,472

Shelter Insurance Group N/A Iowa Farm Bureau Group

MO WI IA

1,038,323

Progressive Group

OH

16 Farmers Insurance Co. Inc. 17 American Home Assurance Co.

994,507 928,608

KS NY

23 - AZ,AR,CA,CO,CT,DC,HI,IL,KY,ME,MD,MA,MN,MO,NV,NY,OH,PA,RI,TX,VT, VA,WA 5 - AR,IA,KS,MO,OK 18 - CA,CO,DC,FL,GA,HI,IL,LA,NV,NJ,NY,OH,OK,SC,TN,TX,VA,WA

18 West Bend Mutual Insurance Co. 19 MemberSelect Insurance Co.

901,376 880,883

WI MI

11 - IL,IN,IA,KS,KY,MI,MN,MO,NE,OH,WI 8 - IL,IN,IA,MI,MN,NE,ND,OH

20 Citizens Insurance Co. of America

837,911

MI OH

23 - AL,AZ,CA,CO,CT,GA,IL,IN,ME,MA,MI,MN,MO,NH,NJ,NY,OH,PA,RI,VT,VA, WA,WI 28 - AK,AZ,AR,CA,CO,DE,ID,KS,KY,ME,MD,MA,MN,MT,NV,NH,NM,NY,ND,OH, PA,RI,SD,UT,VT,VA,WA,WV 29 - AR,CA,CT,DE,GA,IL,IN,KS,KY,LA,ME,MD,MA,MN,MO,NE,NH,NY,NC,OH,OK, PA,RI,SC,TN,TX,VT,VA,WI 27 - AL,AZ,AR,CT,GA,IL,IN,IA,KS,KY,MD,MI,MN,MS,MO,NC,ND,OH,OK,PA,SC, TN,TX,UT,VA,WV,WI 15 - AR,CO,IL,IN,IA,KS,MI,MN,MO,NE,ND,OH,OK,SD,WI

21 United Financial Casualty Co.

809,046

Farmers Insurance Group American International Group N/A Automobile Club MI Group The Hanover Insurance Group Progressive Group

22 Peerless Insurance Co.

760,318

Liberty Mutual Group

NH

23 State Auto Property & Casualty Insurance Co. 24 Farmers Mutual Hail Insurance Co. of Iowa

722,625

State Auto Mutual Group

IA

664,560

IA

25 Erie Insurance Co. 26 Automobile Insurance Co. of Hartford, CT

658,670 602,575

Farmers Mutual Hail Insurance Group Erie Insurance Group Travelers Group

27 Insurance Co. of the West 28 Grange Mutual Casualty Co.

592,021 541,019

29 Pennsylvania National Mutual Casualty Insurance Co. 30 Frankenmuth Mutual Insurance Co.

523,858

31 Companion Property and Casualty Insurance Co. 32 Selective Insurance Co. of South Carolina

506,223

33 Central Mutual Insurance Co.

500,045

34 Progressive Northwestern Insurance Co. 35 Integon National Insurance Co. 36 Bankers Standard Insurance Co.

477,910 473,675 461,526

Selective Insurance Group Central Mutual Insurance Co Group Progressive Group Amtrust Group Ace Ltd Group

37 Mercury Casualty Co. 38 State Automobile Mutual Insurance Co.

454,715 444,725

Mercury General Group State Auto Mutual Group

CA OH

39 Selective Insurance Co. of America

427,940

NJ

40 Motorists Mutual Insurance Co. 41 United Fire & Casualty Co.

426,508 426,314

42 NGM Insurance Co.

394,623

43 Hastings Mutual Insurance Co. 44 Farm Family Casualty Insurance Co.

393,644 382,409

45 American Strategic Insurance Corp.

371,863

46 Old Republic General Insurance Corp.

365,567

Selective Insurance Group Motorists Mutual Group United Fire & Casualty Group Main Street America Group N/A American National Financial Group ARX Holding Corp Group Old Republic Group

47 National Liability & Fire Insurance Co.

348,183

521,119

501,564

SR4 | INSURANCE JOURNAL-SPECIAL REPORT May 19, 2014

ICW Group Grange Mutual Casualty Group Pennsylvania National Insurance Group Frankenmuth Mutual Group BCBS of SC Group

Berkshire Hathaway Group

PA CT

16 - AL,CA,CO,MI,MN,MO,MT,NE,NV,ND,SD,TX,UT,WA,WI,WY 26 - AL,AZ,AR,CO,DE,FL,GA,IL,IN,IA,KY,MD,MI,MN,MO,NM,NC,OH,OK,PA,SC, TN,TX,VA,WV,WI 23 - CT,DE,IL,IN,IA,KY,ME,MN,NE,NV,NH,NM,NY,OK,OR,PA,RI,SC,SD,VT,VA, WI,WY 14 - AR,CO,IL,IN,IA,KS,KY,LA,MS,MO,NE,NV,OK,TN 20 - AZ,CO,ID,IL,IN,IA,KS,KY,MI,MN,MO,NE,NM,ND,OH,PA,SD,TN,UT,WI 8 - AZ,IA,KS,MN,NE,NM,SD,UT

CA OH

12 - DC,IL,IN,MD,NY,NC,OH,PA,TN,VA,WV,WI 33 - AL,AZ,AR,CO,CT,DC,GA,ID,IL,IN,KS,KY,ME,MD,MS,MO,MT,NV,NH,NJ,NY,NC, OH,OK,OR,PA,SC,TN,TX,UT,VA,WA,WI 12 - AK,CA,FL,IL,MO,NV,NC,OR,SC,TN,UT,WA 9 - GA,IL,IN,KY,OH,PA,SC,TN,VA

PA

10 - AL,DE,MD,NJ,NC,PA,SC,TN,TX,VA

MI

14 - AL,GA,IL,IN,KY,ME,MI,NH,NC,OH,SC,TN,VT,WI

SC

21 - AL,AZ,CA,CT,DE,FL,GA,IL,LA,MD,MS,NJ,NC,OK,PA,SC,TN,TX,UT,VA,WV

IN

22 - CT,DE,GA,IL,IN,IA,KY,MD,MA,MI,MN,MO,NJ,NY,NC,OH,PA,RI,SC,TN,VA,WI

OH

18 - AZ,CO,CT,GA,IL,IN,MA,MI,NH,NM,NY,NC,OH,OK,SC,TN,TX,VA

OH NC PA

MI NY

14 - AK,AZ,AR,CT,ID,IN,KS,ME,MO,MT,NY,ND,VA,WA 12 - AL,AZ,CA,FL,GA,MI,NY,NC,PA,RI,TX,VA 32 - AZ,CA,CO,CT,DE,DC,FL,GA,IL,KS,KY,MD,MA,MI,MN,MO,NV,NJ,NY,NC,OH, OR,PA,RI,SC,TN,TX,VT,VA,WA,WI,WY 5 - AZ,CA,NV,NY,VA 24 - AL,AZ,AR,CO,CT,GA,IL,IN,KS,KY,MD,MI,MN,MS,MO,NC,OH,PA,SC,TN,TX, VA,WV,WI 25 - CA,CT,DE,DC,GA,HI,IL,IN,IA,MD,MI,MN,MO,NE,NJ,NY,NC,OH,PA,RI,SC,TN, VA,WA,WI 6 - IN,KY,MI,OH,PA,WV 25 - AL,AZ,AR,CO,FL,ID,IL,IN,IA,KS,LA,MN,MS,MO,MT,NE,NM,ND,OK,SD,TN, TX,UT,WI,WY 23 - AZ,CT,DE,FL,GA,IL,ME,MD,MA,MI,NV,NH,NJ,NY,NC,PA,RI,SC,TN,TX,UT, VT,VA 6 - IL,IN,IA,MI,OH,WI 11 - CT,DE,ME,MA,NH,NJ,NY,RI,VT,VA,WV

FL

19 - AL,AZ,CO,CT,FL,GA,IL,MD,MN,NV,NJ,NC,OH,OR,PA,SC,VA,WA,WI

IL

29 - AL,AZ,CA,CO,CT,DE,FL,GA,HI,IL,IN,KS,LA,MD,MA,MI,MS,MO,NV,NJ,NY,NC, OK,PA,TN,TX,UT,VA,WV 33 - AL,AZ,AR,CA,CT,DE,FL,GA,IL,IN,LA,MD,MA,MI,MN,MS,MO,NV,NJ,NY,NC,ND, OH,OK,OR,PA,SC,TN,TX,VA,WA,WV,WI

OH IA FL

CT

www.insurancejournal.com

Company

12/31/2013 DPW 000s omitted

Group Name

State of Domicile

48 Amerisure Mutual Insurance Co.

346,505

Amerisure Co Group

MI

49 Electric Insurance Co.

346,458

Electric Insurance Group

MA

50 North Star Mutual Insurance Co. 51 Pekin Insurance Co. 52 Amerisure Insurance Co.

328,637 328,254 327,468

North Star Co Group Pekin Insurance Group Amerisure Co Group

MN IL MI

53 SECURA Insurance, a Mutual Co. 54 General Casualty Co. of Wisconsin

326,234 309,991

Secura Insurance Group QBE Insurance Group

WI WI

55 EMCASCO Insurance Co.

305,028

IA

56 Courtesy Insurance Co. 57 Bituminous Casualty Corp.

304,905 302,243

EMC Insurance Co. Group JM Family Group Old Republic Group

58 Westfield National Insurance Co. 59 Vermont Mutual Insurance Co. 60 FCCI Insurance Co.

301,788 301,296 288,074

61 Farmers Mutual Insurance Co. of Nebraska 62 Merrimack Mutual Fire Insurance Co. 63 Farmington Casualty Co.

285,841 283,917 282,378

64 American Commerce Insurance Co. 65 Preferred Mutual Insurance Co. 66 Mutual of Enumclaw Insurance Co.

281,539 278,435 270,903

67 American Road Insurance Co.

267,222

68 Donegal Mutual Insurance Co. 69 Western National Mutual Insurance Co.

259,598 256,485

70 Selective Way Insurance Co.

241,208

71 Farmers Automobile Insurance Association 72 California Casualty Indemnity Exchange

239,604 234,478

73 AmGUARD Insurance Co.

230,535

74 Alaska National Insurance Co. 75 Auto Club Insurance Association

229,400 229,068

76 Quincy Mutual Fire Insurance Co. 77 Motors Insurance Corp.

210,568 207,292

78 Mitsui Sumitomo Insurance Co. of America

202,065

79 Republic Underwriters Insurance Co. 80 Utica Mutual Insurance Co.

Westfield Group Vermont Mutual Group FCCI Mutual Insurance Group N/A Andover Group Travelers Group

FL IL OH VT FL NE MA CT

Number/States with Greater than $1 Million DPW as of 12/31/2013 25 - AL,AZ,AR,CA,FL,GA,IL,IN,IA,KS,KY,LA,MI,MN,MS,MO,NC,OK,PA,SC,TN,TX, UT,VA,WI 33 - AL,AZ,CA,CO,CT,FL,GA,IL,IN,KS,KY,LA,ME,MD,MA,MI,MN,MO,NH,NJ,NY,NC, OH,OK,PA,SC,TN,TX,UT,VT,VA,WA,WI 6 - IA,MN,NE,ND,OK,SD 6 - AZ,IL,IN,IA,OH,WI 24 - AL,AZ,AR,FL,GA,IL,IN,IA,KS,KY,LA,MI,MN,MS,MO,NM,NC,OK,PA,SC,TN, TX,VA,WI 12 - AZ,CO,IL,IN,IA,KS,KY,MI,MN,MO,ND,WI 29 - AL,AZ,AR,CA,CO,CT,GA,IL,IN,IA,KS,MA,MI,MN,MS,MO,NE,NY,NC,ND,OH, PA,SC,SD,TN,TX,UT,WA,WI 28 - AL,AZ,AR,CO,GA,IL,IN,IA,KS,LA,MI,MN,MS,MO,MT,NE,NC,ND,OH,OK,OR, PA,SC,SD,TN,TX,VA,WI 22 - AL,AR,CA,CO,FL,GA,IL,MD,MA,MS,NJ,NM,NC,OH,OK,OR,PA,SC,TN,TX,VA,WI 31 - AL,AR,CO,FL,GA,IL,IN,IA,KS,KY,LA,MI,MN,MS,MO,MT,NE,NM,NC,OK,OR,PA, SC,SD,TN,TX,UT,VA,WA,WI,WY 11 - CO,IL,IN,IA,KY,MN,OH,PA,TN,WV,WI 7 - CT,ME,MA,NH,NY,RI,VT 16 - AL,FL,GA,IL,IN,KY,LA,MI,MS,MO,NC,OH,SC,TN,TX,VA 2 - NE,SD 8 - CT,IL,ME,MA,NH,NJ,NY,RI 29 - AL,AZ,AR,CO,CT,DE,DC,GA,IL,IN,KS,KY,LA,MD,MI,MN,MS,MO,NH,NM,NY, NC,OK,OR,PA,SC,TN,TX,UT 12 - AZ,CT,ID,IL,IN,KY,NJ,OH,OR,RI,TN,WA 4 - MA,NH,NJ,NY 4 - ID,OR,UT,WA

Mapfre Insurance Group N/A Mutual of Enumclaw Group N/A

OH NY WA

PA MN NJ

10 - DE,DC,GA,MD,MI,NJ,NY,PA,SC,VA

IL CA

4 - IL,IN,IA,WI 19 - AL,AZ,CA,CO,CT,DE,GA,IN,KS,LA,MD,MN,NV,NM,OK,PA,TN,TX,VA

PA

21 - CA,CT,DE,DC,FL,GA,IL,ME,MD,MA,NH,NJ,NY,NC,PA,RI,SC,TN,VT,VA,WV

AK MI

7 - AK,CA,ID,LA,MT,OR,WA 5 - IL,MI,MN,NE,WI

MA MI

195,495 194,840

Donegal Group Western National Insurance Group Selective Insurance Group Pekin Insurance Group California Casualty Management Group Berkshire Hathaway Group N/A Automobile Club MI Group Quincy Mutual Group GMAC Insurance Holding Group MS & AD Insurance Group Delek Group Utica Group

30 - AL,CA,CO,CT,FL,GA,IL,IN,IA,KS,KY,LA,MD,MA,MI,MN,MS,MO,NE,NJ,NY,NC, OH,OK,PA,SC,TN,TX,VA,WI 11 - DE,GA,IN,IA,MD,NE,OH,PA,TN,VA,WI 6 - IL,IA,MN,ND,SD,WI

81 Berkley Insurance Co.

193,212

WR Berkley Corp Group

DE

82 American Family Home Insurance Co.

187,131

FL

4 - CT,MA,NY,RI 27 - AL,AR,CA,CO,FL,GA,IL,IN,IA,KS,LA,MI,MN,MS,MO,NE,NJ,NY,NC,ND,OH, OK,PA,SC,SD,TN,TX 29 - AL,AZ,CA,CT,FL,GA,IL,IN,KY,LA,MD,MA,MI,MS,MO,NV,NJ,NY,NC,OH,OR, PA,RI,SC,TN,TX,VA,WA,WI 7 - AR,CA,LA,MS,NM,OK,TX 24 - CT,DE,GA,IL,IN,ME,MD,MA,MI,MN,MO,NH,NJ,NY,NC,OH,OR,PA,SC,TN,TX, VA,WA,WI 26 - AZ,CA,CO,CT,DC,FL,GA,IL,IN,LA,MD,MA,MI,MN,MO,NV,NJ,NY,NC,OH,PA, TN,TX,VA,WA,WI 33 - AL,AZ,AR,CA,CO,GA,IL,IN,IA,KY,MD,MA,MI,MS,MO,NE,NV,NJ,NM,NY,NC, OH,OK,OR,PA,RI,SC,SD,TN,TX,VA,WA,WI 7 - AZ,CA,CO,CT,FL,NJ,TX

MI

NY TX NY

83 Pacific Specialty Insurance Co.

185,240

84 Unigard Insurance Co. 85 Horace Mann Property & Casualty Insurance Co. 86 AMEX Assurance Co.

185,025 183,619

Munich Amer Holding Group Western Service Contract Group QBE Insurance Group Horace Mann Group

181,179

N/A

IL

87 Society Insurance, a Mutual Co. 88 Farmland Mutual Insurance Co.

177,272 176,095

N/A Nationwide Corp Group

WI IA

89 Merchants Mutual Insurance Co. 90 First Colonial Insurance Co.

175,817 172,765

Merchants Mutual Group Allstate Insurance Group

NY FL

91 Builders Mutual Insurance Co. 92 North River Insurance Co.

171,412 170,405

Builders Group Fairfax Financial Group

NC NJ

93 Cherokee Insurance Co. 94 ProAssurance Casualty Co.

167,675 167,394

MI MI

95 Mountain West Farm Bureau Mutual Insurance Co. 96 Century-National Insurance Co. 97 Pennsylvania Lumbermens Mutual Insurance Co. 98 National Indemnity Co.

166,074

WY

2 - MT,WY

CA PA

99 Federated Rural Electric Insurance Exchange 100 Atlantic States Insurance Co. 101 Old United Casualty Co. 102 Jewelers Mutual Insurance Co.

157,547

N/A ProAssurance Corp Group Mountain West Farm Group N/A Indiana Lumbermens Group Berkshire Hathaway Group N/A

8 - AZ,CA,ID,MT,NV,OR,UT,WA 33 - AL,AK,AZ,CA,CO,DE,FL,GA,ID,IL,IN,IA,LA,MD,MN,MO,NE,NV,NH,NC,OH,OK, OR,PA,SC,TN,TX,UT,VT,VA,WA,WV,WI 31 - AL,AZ,CA,CO,CT,DC,FL,GA,HI,IL,IN,KY,LA,MD,MA,MI,MN,MO,NV,NJ,NY,NC, OH,OR,PA,SC,TN,TX,UT,VA,WA 4 - IL,IN,IA,WI 32 - AL,AZ,AR,CA,CO,FL,GA,ID,IL,IN,IA,KS,KY,MI,MN,MS,MO,NE,NC,ND,OH,OK, OR,PA,SC,SD,TN,TX,UT,WA,WI,WY 9 - MA,MI,NH,NJ,NY,OH,PA,RI,VT 23 - AZ,CO,FL,GA,IL,IN,KS,KY,MA,MO,NV,NJ,NC,OH,OK,OR,PA,SC,TN,TX,UT, VA,WA 8 - DC,GA,MD,MS,NC,SC,TN,VA 30 - AL,AZ,AR,CA,CT,DC,FL,GA,HI,IL,IA,LA,MD,MA,MI,MN,MS,MO,NJ,NY,NC,OH, OK,PA,RI,SC,TN,TX,VA,WI 15 - AL,AR,IN,KS,MI,MS,MO,NE,NC,OK,PA,SC,TN,TX,VA 14 - CA,DE,FL,GA,IL,IA,KY,MI,MN,NE,NV,NJ,OH,WI

157,165 153,874 151,646

Donegal Group Van Enterprises Group N/A

5 - AZ,CA,IL,NV,WA 32 - AL,AR,CO,CT,FL,GA,IL,IN,IA,KS,KY,LA,MD,MA,MI,MN,MS,MO,NJ,NY,NC,OH, OK,OR,PA,SC,TN,TX,VA,WA,WV,WI 33 - AK,AZ,AR,CA,CO,CT,DE,GA,ID,IL,IN,KS,KY,ME,MD,MI,MO,MT,NE,NV,NH, NM,NC,ND,OH,PA,SD,TX,UT,VA,WA,WI,WY 34 - AL,AZ,AR,CO,FL,GA,ID,IL,IN,IA,KS,KY,LA,MI,MN,MS,MO,MT,NE,NM,NC,ND, OH,OK,OR,PA,SC,SD,TN,TX,VA,WA,WI,WY 7 - DE,GA,MD,OH,PA,TN,VA 6 - AZ,CA,FL,KS,MI,TX 32 - AL,AZ,AR,CA,CO,CT,FL,GA,HI,IL,IN,KS,KY,LA,MD,MA,MI,MN,MO,NV,NJ,NY, NC,OH,OK,PA,SC,TN,TX,VA,WA,WI

161,974 161,596 157,562

SR5 | INSURANCE JOURNAL-SPECIAL REPORT May 19, 2014

CA WI IL

NE KS PA KS WI

www.insurancejournal.com

Company

12/31/2013 DPW 000s omitted

Group Name

State of Domicile

Number/States with Greater than $1 Million DPW as of 12/31/2013

103 Markel American Insurance Co.

145,011

Markel Corp Group

VA

104 Public Service Insurance Co. 105 Concord General Mutual Insurance Co. 106 Mid-Continent Casualty Co.

144,223 143,963 143,933

IL NH OH

107 Columbia Mutual Insurance Co.

142,745

MO

12 - AR,GA,IL,IA,KS,MS,MO,NE,OK,SD,TN,TX

108 United Ohio Insurance Co. 109 Grange Insurance Association 110 Vanliner Insurance Co.

137,750 137,351 131,187

OH WA MO

111 Brethren Mutual Insurance Co. 112 Securian Casualty Co.

129,767 127,141

Public Service Group Concord Group American Financial Group Columbia Insurance Group Ohio Mutual Group Grange Insurance Group American Financial Group N/A Minnesota Mutual Group

34 - AL,AK,AZ,AR,CA,CT,DE,FL,GA,IL,IN,KY,LA,MD,MA,MI,MN,MS,MO,NJ,NY,NC, OH,OK,OR,PA,RI,SC,TN,TX,UT,VA,WA,WI 9 - CA,CT,IL,MA,NJ,NY,PA,RI,WA 3 - ME,NH,VT 13 - AR,FL,KS,LA,MI,MO,MT,ND,OK,SC,TX,UT,WY

MD MN

113 St. Paul Mercury Insurance Co.

125,231

Travelers Group

CT

114 American Hallmark Insurance Co. of Texas

121,484

TX

115 116 117 118

Cambridge Mutual Fire Insurance Co. Farmers Alliance Mutual Insurance Co. Utica First Insurance Co. Lyndon Property Insurance Co.

120,275 119,550 118,773 114,969

MA KS NY MO

8 - CT,IL,ME,MA,NH,NJ,NY,RI 8 - CO,ID,KS,MT,NE,ND,OK,SD 6 - CT,MA,NJ,NY,OH,PA 22 - AZ,CA,CO,FL,GA,IL,IN,KS,ME,MI,MN,MO,NE,NV,OH,OK,PA,TN,TX,VA,WA,WI

119 120 121 122 123

Insurance Co. of North America Middlesex Insurance Co. Cumberland Mutual Fire Insurance Co. Western Reserve Mutual Casualty Co. IMT Insurance Co.

114,312 111,959 110,454 106,123 105,046

Hallmark Financial Services Group Andover Group Alliance Insurance Group N/A Protective Life Insurance Group Ace Ltd Group Sentry Insurance Group Cumberland Group Western Reserve IMT Mutual Holding Group Endurance Group Harford Group Philadelphia Contributionship Group Mercury General Group Lightyear Delos Group

4 - CT,ME,OH,RI 6 - CA,CO,ID,OR,WA,WY 26 - AK,AZ,CA,CT,FL,GA,IL,IN,KS,MD,MA,MI,MN,MO,NE,NV,NJ,NY,NC,OH,PA, SC,TN,TX,VA,WI 3 - MD,PA,VA 34 - AL,AK,AZ,CA,CO,FL,GA,ID,IL,IN,IA,KS,KY,LA,MD,MI,MN,MS,MO,MT,NE,NM, NC,OH,OK,OR,PA,SC,TN,TX,VA,WA,WI,WY 30 - CA,CO,CT,FL,GA,IL,IN,IA,KS,MD,MA,MI,MN,NJ,NM,NY,NC,ND,OH,OK,PA,RI, TN,TX,UT,VA,WA,WV,WI,WY 16 - AR,GA,HI,ID,IN,MT,NM,OH,OR,PA,SC,TN,TX,UT,VA,WA

PA WI NJ OH IA

5 - CA,DC,FL,MA,NY 10 - CA,CT,FL,IN,MI,NJ,TN,TX,WA,WI 4 - DE,MD,NJ,PA 2 - IN,OH 5 - IL,IA,NE,SD,WI

DE MD PA

18 - CO,GA,IL,IN,IA,KS,LA,MD,MA,MI,MO,NJ,NY,OH,PA,TX,WA,WI 8 - DE,DC,MD,NJ,NC,PA,TN,VA 2 - NJ,PA

OK TX PA

9 - AK,AZ,CA,FL,GA,OK,TX,VA,WA 26 - AL,AZ,CA,CO,FL,GA,IL,IN,KY,LA,MA,MI,MN,MO,NV,NJ,NM,NY,NC,OK,PA, SC,TX,VA,WV,WI 8 - AL,DE,MD,NC,PA,SC,TN,VA

PA TX CA IL

8 - DE,IL,IN,KS,OH,OK,PA,VA 18 - CA,DE,FL,GA,IL,LA,MD,MI,NJ,NY,NC,OH,PA,SC,TN,TX,VA,WA 15 - AZ,CA,FL,MO,NE,NV,NM,NY,OH,PA,SC,TN,TX,VA,WA 3 - IL,NY,PA

IA OH WA

7 - AZ,CO,IN,MN,ND,SD,UT 2 - IN,OH 3 - ID,OR,WA

WI

124 Endurance American Insurance Co. 125 Harford Mutual Insurance Co. 126 Philadelphia Contributionship Insurance Co. 127 American Mercury Insurance Co. 128 Imperium Insurance Co.

102,824 101,449 99,917

129 Penn National Security Insurance Co.

97,586

130 131 132 133

Goodville Mutual Casualty Co. Triton Insurance Co. Stillwater Insurance Co. Hartford Insurance Co. of Illinois

97,572 96,989 96,401 96,331

134 Milbank Insurance Co. 135 Lightning Rod Mutual Insurance Co. 136 Physicians Insurance, a Mutual Co.

95,216 89,119 86,880

137 Capitol Indemnity Corp.

81,371

138 139 140 141 142 143 144 145 146 147 148 149 150

78,276 76,987 76,003 75,976 66,742 66,278 63,305 60,957 59,599 58,736 55,423 53,413 47,761

Trinity Universal Insurance Co. TransGuard Insurance Co. of America Inc. MHA Insurance Co. Providence Mutual Fire Insurance Co. Gray Insurance Co. Toyota Motor Insurance Co. Bituminous Fire and Marine Insurance Co. Lititz Mutual Insurance Co. Dentists Insurance Co. Harco National Insurance Co. Contractors Bonding and Insurance Co. Yosemite Insurance Co. Civil Service Employees Insurance Co.

99,307 98,724

151 Bay State Insurance Co. 152 United States Fidelity and Guaranty Co. 153 All America Insurance Co.

47,121 46,919 33,677

154 Motorists Commercial Mutual Insurance Co. 155 Redwood Fire and Casualty Insurance Co.

33,364 26,421

Pennsylvania National Insurance Group N/A Citigroup Group WBL Group Hartford Fire & Casualty Group State Auto Mutual Group Western Reserve Physicians Insurance, a Mutual Group Alleghany Group Unitrin Group IAT Reins Co. Group Promutual Group Providence Group Gray Insurance Group N/A Old Republic Group Lititz Mutual Group N/A IAT Reins Co. Group RLI Insurance Group Fortress Group Civil Service Employee Group Andover Group Travelers Group Central Mutual Insurance Co Group Motorists Mutual Group

TX IL MI RI LA IA IL PA CA IL WA IN CA

23 - AZ,CA,CO,FL,GA,IL,IN,MI,MN,MO,MT,NE,NV,NY,ND,OH,OK,OR,PA,SD,VA, WA,WI 7 - AL,AR,ID,MT,OK,TX,UT 10 - AZ,CA,FL,GA,IL,MT,NJ,NC,PA,TX 7 - IA,MI,MN,ND,OH,SD,WI 7 - CT,ME,MA,NH,NJ,NY,RI 7 - AL,CA,FL,LA,MS,OK,TX 11 - AZ,CA,DE,FL,MD,NV,NJ,OR,PA,VA,WA 18 - AR,FL,GA,IL,IA,KS,LA,MO,NE,NC,OK,OR,PA,SC,TN,TX,VA,WI 8 - DE,KS,MD,MO,NC,PA,SC,VA 5 - CA,HI,IL,MN,PA 20 - AR,CA,IL,IN,IA,LA,MI,MN,NE,NV,NJ,NY,NC,OH,OK,PA,TN,TX,UT,WA 8 - AZ,CA,FL,MT,NV,NM,OR,WA 17 - AL,CA,CO,FL,GA,IL,IN,KY,NC,OH,PA,SC,TN,TX,VA,WA,WI 3 - AZ,CA,NV

MA CT OH

3 - MA,NJ,NY 12 - AZ,CA,CT,MI,MN,NE,NY,NC,OR,PA,VT,WI 12 - AZ,CT,GA,IN,MA,MI,NY,NC,OH,SC,TN,VA

OH

10 - IL,IA,KY,MA,MI,MN,NH,OH,PA,WI

Berkshire Hathaway Group

NE

5 - AZ,CA,NE,NV,TX

Data Source: The National Association of Insurance Commissioners, Kansas City, Mo., by permission. Information derived from an SNL product.

The NAIC and SNL do not endorse any analysis or conclusion based upon the use of its data.

www.insurancejournal.com

May 19, 2014 INSURANCE JOURNAL-SPECIAL REPORT | SR6

NATIONAL COVERAGE

News & Markets Stable, Attractive MGA Market, Now and in the Future: Conning Report

By Andrea Wells

M

anaging general agents represent an important access point for insurers interested in specialty markets. It’s also a growing segment. That’s according to a new report by Conning, an investment management company for the insurance industry.

The study — “Managing General Agents: A Look at the MGA Specialists 2014” — marks the first Conning report on the MGA market and examined MGAs, their relationship and business model with agents and insurers, as well as the leading insurers who participate in this market.

The report also analyzed the underwriting performance of a composite group of insurers that generate a meaningful portion of their business from “nonaffiliated MGAs.” Bill Broomall, analyst at Conning, said the report broke up the MGA market into three areas: affiliated, nonaffiliated and crop. “Affiliated, in our view, are the MGAs that are primarily owned by an insurer,” Broomall said. “Nonaffiliated, we view as the independent MGA market, while crop insurance MGAs are those that are almost exclusively focused on the federal crop insurance program.”

The Conning report estimates direct written premiums for the MGA industry at about $25.7 billion, or about 9.7 percent of the overall commercial lines market.

That figure is likely underestimated due to the National Association of Insurance Commissioner’s 5 percent threshold, the report said. Other estimates show the MGA market at closer to $30 billion in premium.

More than 45 percent of 2012 direct premiums came from affiliated MGAs with the remaining 55 percent roughly split evenly between nonaffiliated and crop.

Insurer Failures Recent financial challenges with some insurers operating through the MGA space have led some to question whether these www.insurancejournal.com

challenges are signs of more problems to come. But according to Conning, such troubles appear to be isolated events.

“While the MGA market has endured periods of volatility due to their association with a number of insurer failures, the model now appears to be stable due to improvements in risk management practices,” Broomall told Insurance Journal.

According to Broomall, those insurer troubles pushed the market to change.

“The report highlights a number of insurer failures back in the ‘90s and early 2000s that represented a catalyst for both the insurers and the MGAs to look at the business model and evaluate what changes needed to be made,” he said.

Many insurers require MGAs to participate in some form in the performance of business underwritten. The two most common risk-sharing options are a sliding scale commission and the assumption of a portion of the premium by a captive (or rent-a-captive) formed by the MGA. Both options require MGAs to have some “skin in the game” and that has led to better performance over time, Conning report said.

“There have been a lot of changes that have been put in place over time that have helped improve the risk management practices within the industry,” Broomall said.

Attractive Market The Conning report show that insurers remain dedicated to working with MGAs, which has led to steady growth and consistent performance.

“Based on our research, insurers with meaningful relationships with MGAs have remained fairly consistent. The market

consists of large global insurers and those insurers with a business model primarily focused on writing or servicing program business,” said Steve Webersen, director of research at Conning.

Insurers of all sizes use MGAs to produce premium, often a more meaningful channel for the small and midsized insurers, Webersen said.

“Our analysis of MGA insurers indicated that as a group they generated direct premium growth above the commercial property/ casualty industry in seven of the past 10 years and have also outperformed the commercial market in loss ratio,” Webersen said.

The long-term outlook for the MGA market appears favorable as MGAs remain well-positioned to grow, the report said.

“MGAs willing to incorporate technology and data analytics into their product offering can enhance their value proposition to insurers and hold a competitive advantage over the long term,” Webersen said.

Part of the attractiveness of the MGA market is the specialty model.

“A lot of MGAs focus on certain lines of business or geographies and their ability to offer value through this specialist model has the potential to help drive long-term growth.”

Broomall says the industry has seen consistency among the largest insurers using MGAs. That’s because “insurers understand that to attract quality MGAs you need to provide a consistent market.”

“That’s one reason why there’s not much movement when it comes to the largest insurers utilizing MGAs. They understand that the industry is going to have its ups and downs, peaks and valleys. But over time, the MGA market is attractive.”

May 19, 2014 INSURANCE JOURNAL-NATIONAL | 19

CLOSER LOOK

Property The Emerging Hail Risk:

What The Hail Is Going On?

By Steven Badger

have previously focused primarily in hurricane claims, fighting over what constitutes wind damage and the never-ending he number of reported claims involvdebate over wind versus water damage. ing hail damage to residential and Most significantly, in 2008, Hurricane commercial roofing products has increased Ike struck the Texas coast. The feeding dramatically in the past few years. Some frenzy was on. Almost overnight, an reports place the increase at almost double entirely new industry of roofing conhistorical claim totals. tractors, general contractors, claims What is the cause of this significant consultants, and professional appraisers increase? There is no disputing that in appeared ready to help building owners recent years, there have been significant take-on the “greedy insurhail events in large metance companies.” ropolitan areas. But does The increase in hail A new generation this alone account for the damage claims and of public adjusters also near-double increase in appeared. In the past two claim filings? Plus, in addiresulting lawsuits tion to the increase in the have nothing to do years alone, membership in the Texas Association number of claims, an abnorwith abnormally of Public Insurance mally high percentage of large or frequent Adjusters has more than these claims are ending up doubled. Further, to disputed and ultimately in storms. assist these individuals in appraisal or litigation. pursuing their claims, a new generation In Texas, hundreds, literally hundreds, of of “roofing experts” emerged, many with lawsuits are being filed each week in Dallas, absolutely no previous experience with Tarrant, Potter, Hidalgo, and other counties roofing systems but prepared to issue involving alleged underpayment of hail reports. related roof damage claims — far, far more Finally, when the insurers refused to than has ever previously been the case. pay claims that lacked merit, attorneys Has the property insurance industry were everywhere. With Texas tort reform suddenly stopped paying these claims? Or making it difficult for plaintiffs’ attorneys are more sinister forces involved, causing to earn a living handling their usual dockboth the increase in number of claims being et of fender bender and slip-and-fall cases, submitted and number of claims resulting fighting evil insurance companies became in litigation. the go-to practice area. All of a sudden, There is no question it is the latter. every personal injury plaintiffs’ attorney was also a policyholder attorney. Armed What the Hail Is Going On? with favorable Texas laws governing the In the past decade, a cottage industry has underpayment of insurance claims (autoemerged of individuals who believe they can matic 18 percent statutory penalty, attormake a living by involving themselves in the neys’ fees, treble damages and potential insurance claims process. These individuals

T

20 | INSURANCE JOURNAL-NATIONAL May 19, 2014

bad faith damages), the race to the courthouse was on.

Today, almost six years later, most of the Hurricane Ike lawsuits are gone.

But lawsuit coffers need to be filled.

Hail claims have become the obvious next target. Unlike major hurricanes, which only arrive every few years, hail falls many times a year all across Texas. Plus, like wind damage, determining what constitutes hail damage to a roofing product is often subject to debate. With favorable Texas law, hail claims present the perfect full employment opportunity until the next hurricane comes along.

For all of these reasons, it is obvious — the increase in hail damage claims and resulting lawsuits have nothing to do with abnormally large or frequent storms.

It also has nothing to do with insurance companies refusing to pay meritorious claims. Instead, it has everything to do with strangers to the insurance policies in question injecting themselves into the claims process with the intent to bleed-off whatever money they can into their own pocketbooks. That is what the hail is going on.

Managing the Current Crisis These claims are predictable. They all have the same warning signs: Late notice. Most of these claims originate with a contractor knocking on the building www.insurancejournal.com

owner’s door, promising “a free roof from your insurance company” in exchange for execution of a “roofer contingency contract” allowing the contractor to negotiate the claim and perform the roof replacement work. The contractor then orders a “hail report” to find a recent storm somewhere in the general area to use as the date of loss. The claim is then reported. Often this is months or even years after the reported hail

event.

Absence of the insured.

The building owner itself is noticeably absent from the claims process. Only the contractor or public adjuster is involved in the actual handling of the claim. The insured, with no out-of-pocket risk, figures “What the hail? If he’s gonna get me a free roof, I might as well let him try.”

Microscopic damage. Roofs www.insurancejournal.com

seldom actually leak from hail damage.

When they do, building owners call their insurance companies right after the hail event and the claims get paid. The claims at issue today almost always involve roofs that are not leaking and the alleged damage is not visible to the naked eye. Instead, the alleged roof damage “requires microscopic technology to see,” “might leak in the future,” “will cause the roof to prematurely fail,” or “will void the warranty.”

Modified bitumen, built-up or metal roofs.

Again, when damage is obvious, insurance companies pay claims. With a single-ply membrane, the holes or fractures in the membrane are usually quite apparent.

With composition shingles, holes and soft spots are readily apparent. But creativity abounds when identifying alleged damage to other types of roofing systems — “the modified membrane lost granules, which are needed to protect the interplys from long-term deterioration,” “the hail struck and displaced the gravel, which exposed the asphalt flood coat of the built-up membrane, which will now deteriorate,” and of course, “the minor dings in the metal roof will collect water and particulates, which will cause rusting and leaks over time.”

Predictable Patterns With these similarities in issues, these claims all follow a predictable pattern.

Once a dispute arises as to the existence or scope of damage, the contractor or public adjuster has all he needs to demand appraisal. With courts now holding that such disputes are subject to appraisal, all that is needed for a guaranteed payday is an aggressive, manipulative appraiser and a favorable umpire appointment.

Finally, for those

claims that are not dumped into appraisal, litigation is also an attractive option. What constitutes physical loss or damage to a roofing product will often be a factual issue driven by expert testimony. With new “roofing experts” having broad views as to what constitutes hail damage, policyholder attorneys have no problem getting cases to trial. Faced with this reality, the significant cost of litigation, and draconian penalties if they happen to be wrong in their position, insurers typically have no choice but to settle claims.

In response, insurers can do no more to protect themselves than carefully proceed through the claims process and hope to mitigate the predictable outcome.

Below are a few recommended strategies that can help: • Engage qualified engineers with real experience in identifying hail damage; • Refuse to negotiate claims with contractors and other individuals acting as unlicensed public adjusters; • Hold the insured to its policy burdens (establishing physical loss or damage and establishing a date of loss within the insurer’s policy period); • Refuse to accept inflated Xactimate estimates but instead require real bids from real contractors; • Refuse to pay “10+10” overhead and profit when general contractors are not reasonably necessary and their costs not incurred (there is no “Texas Department of Insurance Bulletin” or “three trade rule” dictating otherwise); • Closely monitor appraisals to avoid the inevitable manipulation of the process and race to the courthouse for a favorable umpire appointment; and • Steer clear of the predictable traps.

Finally, insurers can also decide to start fighting the worst abusers, not only in the claims process itself, but also in the shady underworld of referral fees, inflated invoices, kickbacks and outright fraud.

Badger represents the property insurance industry at Zelle Hofmann Voelbel & Mason LLP.

May 19, 2014 INSURANCE JOURNAL-NATIONAL | 21

NATIONAL COVERAGE

MyNewMarkets Adult entertainment/Gentleman’s Clubs Market Detail: Founders Insurance Co. (www.foundersinsurance. com) offers affordable liquor liability protection for hard-to-place risks, including: live entertainment, late closings, new ventures, prior claims, and more. Liquor liability features include: policy limits up to $1 million per occurrence/$2 million aggregate; defense costs covered in addition to the policy limit; additional insured coverage available; no deductible; and premium financing through subsidiary, where available.

Available limits: Minimum $100,000, maximum $1 million Carrier: Founders Insurance Co. States: All states except Miss., N.J., N.M., Pa., S.C., Texas, and W.V. Contact: Customer service at 800-972-8778

Hull and P&I Insurance

States: Calif. only Contact: Commercial Underwriting at 714-738-1383 or e-mail: commercial@rmismga.com

Auto Transporters Program Market Detail: The Insurance Professionals (www.theinspros.com) provide a nationwide program for auto transporters with A+ paper.

Minimum fleet size is 20 available in all states except Alaska, Hawaii and Mass. Very large accounts are eligible.

Available limits: Minimum $500,000, maximum $1 million Carrier: Various, admitted States: All states except Alaska, Hawaii and Mass.

Contact: Michael Chernek at 480-905-5103 or e-mail: mike@ theinspro.com

Market Detail: U.S. Risk Insurance Group (www.usrisk.com) places insurance for all types of commercial watercraft from singleton risk to offshore fleets. Coverage available includes: hull/protection and indemnity (including crew coverage); standalone hull and/or protection and indemnity; fixed pricing or P&I club. Gulf of Mexico and worldwide oilfield support craft risks written, including: supply vessels, crewboats, tugs, lift/spud barges, and research vessels; gauging boats and all manner of vessels engaged in the energy trade.

Towing vessels/barges are also eligible, such as: vessels involved in U.S. and foreign towing; U.S. business including East/West Coast plus inland/coastal Gulf Waters & River Trade; and intracoastal and construction operations. In addition to vessel coverages, U.S. Risk can provide for all primary and excess marine liabilities including, but not limited to: bumbershoots, shiprepairers, wharfingers, charterers, stevedores and maritime employers liability.

Available limits: As needed Carrier: Unable to disclose States: All states Contact: Bill Fehlis at 800-833-8803 or e-mail: bill.fehlis@usrisk.com

Errors & Omissions Liability Insurance

Bankers

Market Detail: A.J. Renner & Associates (www.ajrenner.com) provides coverage to manufacturers, distributors and packagers of generic pharmaceutical products with its RenneRx Insure program.

The exclusive program has been providing primary pharmaceutical product liability coverage since 1990 and is underwritten by Chubb Group of Insurance Cos. with limits up to $15 million. In addition, exclusive capacity of $10 million is available through Ironshore.

Where the majority of revenues are generated from generic pharmaceutical products, the program can entertain: manufacturers; distributors; packagers; contract manufacturers; virtual manufacturers; and products in bio studies and clinical trials.

Available limits: Maximum $15 million Carrier: Unable to disclose States: All states Contact: Tracy Boss at 312-755-0084 or e-mail: tracy.boss @ajrenner.com

Market Detail: IT Risk Managers Inc. (www.itriskmanagers.com) offers E&O, professional liability, cyber liability, technology E&O, D&O, BOP, and miscellaneous professional liability.

Available limits: As needed Carrier: Unable to disclose States: All states except D.C. Contact: Customer service at 888-280-8710

Limousines Market Detail: RMIS (www.rmismga.com) has competitive rates on stretch and extra stretched limos, including single unit new ventures to large fleet accounts. Limits available up to $5 million. Phone quotes are available for up to three units.

Available limits: Maximum $5 million Carrier: Unable to disclose, admitted 22 | INSURANCE JOURNAL-NATIONAL May 19, 2014

Market Detail: Axis Insurance Services LLC (www.axisins.com) builds custom errors and omissions liability insurance products for clients.

Available limits: Minimum $300,000 Carrier: Unable to disclose, non-admitted and admitted available States: All states Contact: Mike Smith at 201-847-9175 or e-mail: msmith@axisins.com

RenneRx Insure

www.insurancejournal.com

4

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CLOSER LOOK

Cyber How to Minimize Exposure from Information Loss

P

ersonal and corporate information stored digitally in a company’s network offers tremendous value, both as a business asset — and when (mis)used in identity fraud. A network or data security breach is often the starting point for identity and corporate fraud incidents. In fact, some 13.1 million Americans were the victims of identity fraud in 2013,

By Kevin Dean up from 12.6 million in 2012 and 11.6 million in 2011, according to Javelin Strategy and Research.

While it is clear that protection of such a valuable asset should be paramount, practice shows that information loss can impact even the most tech-savvy business. The financial impact of an information loss can be tremendous, ranging from internal costs for assessing the nature and extent of the breach to government fines or third-party claims.

The following discussion offers options for helping structure an insurance program to mitigate the financial impact stemming from an information loss event.

loss, regulatory compliance costs and claims from those directly impacted.

Responding to an Information Loss There are many ways a company may learn of a network breach or resulting information loss.

Ideally, it is best when the company discovers a security weakness or breach before information is lost. Unfortunately, such awareness is usually triggered by a breach.

Some are private extortion attempts before Defining the Financial Exposures the information is disseminated widely, “Information loss” as used in this artibut more often the information loss is discle refers to the accidental or intentional covered when the data is out in the public exposure, disclosure or domain. Regardless, Responsive coverage immediate action is unauthorized access or use of personal or corporate required. should respond to information held in a digital the company’s use of A well-rounded format. Regardless of the program targeted to experts in identifying unique exposures facing cause of an information loss, there will likely be financial the scope of loss and the company will help consequences to the company possible exposures. to protect its assets suffering the data breach. and assist in mitigating The final costs will vary depending on losses. the type of data lost, the circumstances Once an information loss is suspected or of the loss, the company’s mitigation and discovered, a company must determine the response efforts and any third-party losses scope of the information loss — how much arising from the incident. Regardless of information, the type of information, the the final sum, the exposures will usually duration of the incident and the identities include: internal costs for managing the of those directly impacted. The answers 24 | INSURANCE JOURNAL-NATIONAL May 19, 2014

will inform the steps required by law and how to mitigate the impact to all affected parties. First-party coverage can be tailored to address these efforts.

Responsive coverage should respond to the company’s use of experts in identifying the scope of loss and possible exposures including: forensic experts to analyze the breach and information exposed; legal counsel to identify the company’s legal obligations under any privacy regulations; and public relations efforts to coordinate and communicate information to the individuals whose information was lost.

Coverage should also include notification costs and various communications targeting both those affected by the loss and government agencies, along with associated vendor expenses. More robust coverage also handles the costs to implement fraud alerts, credit monitoring and assistance in rectifying credit and other financial records damaged by the information loss.

A related and equally necessary coverage addresses the reputational impact the information loss may have on the company.

Often, the manner in which a company communicates to the public about the loss will mitigate future losses, lessen government ire and bolster the company’s goodcontinued on page 26 www.insurancejournal.com

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CLOSER LOOK

Cyber continued from page 24 will. Additionally, if the information has been lost, but not yet disseminated, there may be an opportunity to prevent an ultimate loss. While responding to an extortion demand is not ideal, having coverage for that contingency offers a level of flexibility.

Finally, an information loss is often accompanied by damage to the data still stored by the company. Coverage should respond to the company’s expenses in identifying the level of data corruption and recreating, repairing or restoring any information lost.

Responding to Resulting Claims No matter how extensive the remediation and public relations effort, it will not completely eliminate claims exposures.

Coverage for information loss claims must be broad enough to ensure protection to the company and prevent exposure gaps.

Coverage typically applies on a claims-

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26 | INSURANCE JOURNAL-NATIONAL May 19, 2014

made basis.

There are several types of third-party coverages applicable to network and data security issues and losses. A traditional errors or omissions (E&O) policy provides coverage for losses arising from actions, or inactions, that led to the network breach or security violation. Such coverage typically includes the cost of defending claims seeking compensation. But there are limitations to E&O coverage. It may only cover the losses associated with specifically named activities, services or products.

More comprehensive coverage will address the defense of, and damages awarded in connection with, claims specifically arising from an information loss. Such coverage should be broad enough to encompass the claims from the information loss itself and those arising out of the any related network security breach. In this way, claims alleging loss from potentially exposed data

tied to a breach, without any actual information loss, may remain within coverage.

Finally, the policy should include coverage related to the regulatory exposures arising from the information loss.

Better to Be Protected than Sorry Hackers are getting smarter while companies increasingly rely on digital methods to store and conduct business. Properly safeguarding this critical asset requires having well-documented — and practiced — protocols governing data security. But if the unfortunate were to occur, having a comprehensive and well-structured insurance program will not only mitigate financial loss, but can also ensure that public perceptions and trust remain strong both during and subsequent to a data breach incident.

Dean is vice president and life sciences technical specialist for OneBeacon Technology Insurance.

4/25/14 3:04 PM

www.insurancejournal.com

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SPOTLIGHT

Healthcare Employing Physicians: Insurance and Risk Issues

T

here has been a dramatic change in the practice of medicine in the United States over the past 10 years.

Although the exact numbers are not known, the percentage of physicians and groups in private practice is very likely at or under 50 percent, according to various sources. This is the result of the increasing trend to hospital

By Paul Greve employment of physicians as the health care delivery system in our country reacts to pressures to cut costs from payers, especially the federal government, and employers.

Many industry observers in 2014 think that there has been a notable slowing in the number of practices being acquired by hospitals.

This is due to the large cost of capital involved, especially in purchasing specialty practices. Primary care practices will continue to be desirable targets for hospitals’ acquisition.

There are also other factors driving the move towards physician employment by

hospitals. Reimbursement cuts by Medicare and other payers are a huge factor.

into a self-insurance program. Careful legal and actuarial analysis and advice is necessary as well as advice from the hospital Changing Risk Profile agent or broker. Decisions must be made on Employing physicians whether to offer separate markedly changes a hos- Employing physicians limits of liability coverage pital’s risk profile in many markedly changes a to employed physicians ways. Now the hospital’s hospital’s risk profile and physician extenders entire limits of healthutilizing a self-insurance in many ways. care professional liability vehicle such as a captive or coverage are exposed in a claim whereas risk retention group. physicians in private practice previously had their own separate policy. All physician Opportunities and Advantages extenders of the physician practice now There are advantages for hospitals in expose the hospital to claims as well. employing physicians in that it is arguably The hospital historically was not responeasier to obtain better coordination for qualsible for claims involving misdiagnoses ity, patient safety, and risk management and improper performance of a surgical or initiatives. Many hospitals and hospital operative procedure, for example. That is systems collaborate more closely than ever no longer true. now on these programs. That reduces risk.

Careful due diligence and credentialing The numbers of physician leaving priof physician practices being acquired by vate practice has had a definite effect on hospitals is more necessary than ever. carriers that historically have primarily Addressing how to treat the long-tail insured physicians, chiefly those companies exposures of physician claims is also crucial that are members of the Physician Insurers particularly when specialties like pediatrics Association of America (PIAA). But those and obstetrics are involved. Tail policies can companies have quickly responded to offerbe purchased from the previous physician ing more coverages and services beyond a carrier or the tail exposures can be rolled traditional physician/group policy. Most of them are well-capitalized and have solid financials given the very favorable claims trends of the past 10 years.

Hospitals can access the deep expertise of the PIAA companies by considering purchasing unbundled services such as claims, risk management, and even underwriting.

A number of hospitals have partnered with them to insure employed physicians.

Healthcare reform and employing physicians present challenges for hospital insurance buyers and physician carriers. But there are opportunities to improve patient care and the bottom line of hospitals when thought is given to creative use of the expertise existing within traditional physician carriers.

Greve is executive vice president at Willis Health Care Practice.

28 | INSURANCE JOURNAL-NATIONAL May 19, 2014

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SPOTLIGHT

Claims Liabilities and Insurance Coverage Implications of Solar Panels

S

olar panels are quickly becoming a fixture in our everyday lives. Comprised of photovoltaic cells, solar panels harness and convert the sun’s energy into usable electricity otherwise generated by the use of oil, coal and “dirtier” fossil fuels.

The environmental benefits associated with solar panels cannot mask the potential bodily injury and

By Samantha Evans property damage risks associated with their manufacture and use.

While litigation involving solar panels is sparse, the following scenario highlights the potential bodily injury and property These claims highlight some of the coverdamage claims that manufacturers, installage issues that may arise under a standard ers and disposers may face general liability policy. The manufacturer A manufacturer establishes a processing and disposal company seeking coverage for plant in Rural Town, USA. The manufacturthe homeowner’s exposure claims will have er’s employees produce hundreds of solar to most directly contend with the applicapanels and distribute the panels to the tion of the total pollution exclusion. installer, which installs the panels across The typical total pollution exclusion the country. The manufacturer discovers broadly excludes coverage for damages “aristhat some panels have faulty cells prior to ing out of the actual, alleged or threatened installation and delivers the panels to the discharge, dispersal, release, or escape of disposal company, which disposes of the pollutants.” The manufacturing process unused product in a designated landfill involves chemicals, including silica, that near the plant. courts routinely consider “pollutants,” An employee may sue the manufacturer and an insured would not be entitled to for bodily injury coverage for bodily The environmental benefits injury “arising out damages because of associated with solar panels of” silica. Because chemical exposure.

A homeowner many jurisdictions cannot mask the potential living adjacent to the risks associated with their interpret “arising out manufacturing plant, of” broadly to require manufacture and use. or to the landfill, only a “but for” causal may sue the manufacturer or the disposal connection, an insured may not be entitled company if toxic chemicals contaminate to coverage even where a loss is caused both the homeowner’s potable water supply. A by pollutants and non-pollutants. business owner may seek to recover prop Standard general liability policies provide erty damage costs from the manufacturer coverage for “property damage” caused by to replace individual panels that short and an “occurrence,” defined to include an “accifail. A residential owner may seek to recovdent.” Many jurisdictions hold that faulty er from the installer and the manufacturer workmanship, which does not cause damfor property damage when a panel or series age to third party property, is not an occurof panels catch fire. rence. The installer will be most affected 30 | INSURANCE JOURNAL-NATIONAL May 19, 2014

by the “occurrence” definition to the extent the installer’s faulty workmanship causes property damage to the panels alone.

Liability policies similarly exclude coverage for damage to the insured’s “work,” defined to include the insured’s operations, and “product” defined to include anything the insured manufactures, installs, distributes, or handles.

As with the “occurrence” definition, courts often hold that these exclusions apply to damage to the insured’s work or product, but do not apply to exclude coverage for damage to third party property caused by the insured’s faulty workmanship. Accordingly, the manufacturer and installer may not have coverage for damage to the solar panels, but would have coverage for a fire that causes harm to other parts of the homeowner’s residence.

Realistically, plaintiffs will not only sue parties in the product’s manufacturing chain, but may also name contractors, subcontractors and property owners. Each lawsuit will require an analysis of the coverage implications based on the type of insured involved, the insured’s role in causing the damage and the nature of the damage being claimed.

Evans is an associate in Cozen O’Connor’s Global Insurance Department.

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IDEA EXCHANGE

Essentials Cleveland Indians Baseball vs. New Hampshire Insurance: An Agent’s Duty to Additional Insureds

I

nsurance policies often include a category of insureds other than the named insureds, commonly referred to as “additional insureds.” This typically occurs in one of two ways. First, pursuant to a named insured’s request, an insurance company may permit specific individuals or entities to be added as additional insureds on the named insured’s insurance policy.

Under this type of scenario, the insurance company will issue a specific

By Steven Plitt endorsement expressly naming the individual or entity as an additional insured on the policy. See, e.g., Equilon Enterprises, LLC v. Great American Alliance Ins. Co., 132 Wash.App. 430, 434, 132 P.3d, 758, 759 (Div. 1 2006). On the other hand, a policy may contain a “blanket additional insured” endorsement that provides coverage to a limited category of individuals or entities without having to be expressly identified. See, e.g., National Abatement Corp. v. National Union Fire Ins. Co. of Pittsburgh, PA, 33 A.D.3d 570, 824, N.Y.S.2d, 230, 232 (1st Dept.. 2006); Transport Intern. Pool, Inc. vs. Continental Ins. Co., 166 S.W.3d, 781, 787 (Texas App. 2005).

Irrespective of whether the additional insured is specifically named or merely falls under a blanket endorsement, coverage for an additional insured is typically limited to liability arising out of the named insured’s work or operations.

The process of adding insureds to an insurance policy, whether specifically by name or generally by blanket endorsement, involves the named insured’s broker in the transaction. This gives rise to the general question of whether the insurance agent/ broker owes any duties to the additional insureds as the agent/broker of the transaction.

This issue was recently analyzed by the U.S. Court of Appeals for the Sixth Circuit.

32 | INSURANCE JOURNAL-NATIONAL May 19, 2014

Kids Fun Days In Cleveland Indians Baseball Co. v. New Hampshire Ins. Co., 727 F.3d 633 (6th Cir. 2013), the event producer for “Kids Fun Days” brought an action against its liability insurer seeking a declaration that the insurer was required to defend and indemnify it in an underlying wrongful death action. In turn, the insurer counterclaimed against the producer and then also filed a complaint against Cleveland Indians Baseball Co., which was an additional insured under the policy, alleging that it was not required to defend or indemnify under the policy.

The specific facts revealed that four parties were involved in a series of transactions to obtain an inflatable slide for an event titled “Kids Fun Day” that was held before a Cleveland Indians’ baseball game. 727 F.3d at 635. The inflatable slide collapsed killing one of the patrons and injuring another.

727 F.3d at 635. A personal injury lawsuit was filed against the Cleveland Indians and other parties. As the litigation progressed, a question arose as to whether the insurance broker, CSI Insurance Group, who had mistakenly failed to obtain insurance for the additional insured, would resolve the underlying accident. 727 F.3d at 636.

Prior to the accident, National Pastime Sports entered into a contract with the Cleveland Indians Baseball Co. to produce “Kids Fun Day” events before several Cleveland Indians’ games. National Pastime agreed to provide the inflatable slide that ultimately collapsed. 727 F.3d at 635.

National Pastime was required by an agreement with the Cleveland Indians to purchase a commercial general liability (CGL) policy naming the Cleveland Indians as an additional named insured. National Pastime

engaged CSI Insurance Group to procure the required policy. 727 F.3d at 635. The insurance broker provided National Pastime with a proposal for a policy from New Hampshire Insurance Co., which National Pastime accepted. Six weeks before the accident actually occurred, a certificate of liability insurance was issued, which named National Pastime as an insured and the Cleveland Indians as the certificate holder.

727 F.3d at 635. Neither National Pastime nor the Cleveland Indians received a copy of the full policy by the time that the accident had occurred. 727 F.3d at 635-36.

After the accident, National Pastime contacted the broker to notify it of the accident. At that time, National Pastime learned that, despite its specific request on the application for insurance, the broker had mistakenly failed to procure a CGL policy that expressly covered inflatables like the slide involved in the accident.

727 F.3d at 636.

The tort lawsuit was submitted to New Hampshire for defense.

New Hampshire in turn denied any responsibility to defend or indemnify National Pastime, or the Cleveland Indians based on an “amusement device” exclusion in the policy. 727 F.3d at 636.

National Pastime then sued New Hampshire seeking a declaration that it owed a defense and indemnity for the personal injury and wrongful death lawsuit. 727 F.3d at 636.

New Hampshire then filed a counterclaim against National Pastime and a third-party claim against the Cleveland Indians stating that it was not required to defend or indemnify under the terms of the policy.

727 F.3d at 636. The Cleveland Indians, continued on page 34 www.insurancejournal.com

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Essentials continued from page 32

liable to the Cleveland Indians.

Instead of rejecting this argument, the court found that the special relationship asserted by CSI existed under the facts. CSI knew that the insurance was to cover the “Kids Fun Days” events hosted by the Cleveland Indians before baseball games. 727 F.3d at 639. Second, CSI sent a certificate of insurance directly to the Cleveland Indians listing them as an additional named insured.

727 F.3d at 639-40. Those facts created these special relationIndependent Duty of Care ships that CSI asserted as being The court began its analysis of Michigan necessary to establish liability. law by noting that Michigan courts had 722 F.3d at 640. imposed “an independent duty of care” to The Sixth Circuit Court of be exercised by insurance brokers toward Appeals has answered the questhird parties where the harm was foreseetion of what duty the insurance able and where the defendant had specific broker may owe to additional knowledge that its actions might harm a insureds to procure insurance specific third party. 727 F.3d at 639. The covering the additional insureds. court then concluded that it was reasonably It is not enough that the agent foreseeable that additional insureds such as simply adds the third party as the Cleveland Indians would be harmed if an additional insured, but that an insurance agency or other intermediary by adding the third party as failed to procure to intended coverage just an additional insured, there is no specific as the primary insured would be harmed. exclusion that eviscerates the purpose of 727 F.3d at 639. Michigan courts had repeatthe insurance. edly acknowledged that considerations In the Cleveland Indians case, the agent of fairness, had reason including the to know that In the Cleveland Indians case, the broker’s ability insuragent had reason to know that the the to prevent the ance policy harm, permitted insurance policy in question was to in question a finding that was to cover cover a specific event, i.e., the the broker owed utilization of an inflatable slide. a specific a duty of care to event, i.e., foreseeable third the use of an parties. 727 F.3d at 639. The facts demoninflatable slide to be used as a promotional strated that CSI knew that it was procuring event for the Cleveland Indians. Many addiinsurance for the Cleveland Indians as well tional insured situations do not involve that as for National Pastime, and that it knew level of specificity. exactly what dates and events the issuance It is unclear whether the Sixth Circuit of the policy was for. 727 F.3d at 639. would have found the requisite “special rela CSI argued that foreseeability alone was tionship” in a more basic additional insured not enough to establish liability and that scenario, which might involve adding an there also needed to be some additional additional insured general contractor to a “special relationship” that would make CSI subcontractor’s policy. in turn, filed a counterclaim against New Hampshire and CSI, the insurance broker that failed to procure the insurance as requested. 727 F.3d at 636.

The trial court held that CSI owed no duty to the Cleveland Indians that was “separate and distinct” from CSI’s contractual duties to the party to which it “contracted,” National Pastime. 727 F.3d at 637-38.

The diversity action involved Michigan law regarding the issue of the broker’s duty to an additional insured like the Cleveland Indians.

34 | INSURANCE JOURNAL-NATIONAL May 19, 2014

Standard commercial general liability policies contain a multitude of exclusions that address faulty workmanship type claims. Taken to its extreme, the Cleveland Indians case would suggest that if the insurance agent is aware that the named insured under the policy is a subcontractor, and the insurance agent is being asked to add the general contractor on the policy, that there will be various policy features that will limit or exclude coverage for the typical risks associated with faulty workmanship.

It is unlikely that the Cleveland Indians case will be read by other courts to involve more general additional insured type scenarios, as opposed to the very specific scenario involved in the case, i.e., a special event-type policy with a specific “amusement device” exclusion.

Plitt is a nationally recognized expert in insurance law. He has authored numerous insurance treatises and articles. He has a national expert witness practice. Email: SP@kunzlegal.com.

www.insurancejournal.com

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May 19, 2014 INSURANCE JOURNAL-NATIONAL | 35

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Minding Your Business How to Improve Communication with Insurance Companies

T

oday agents must assume an active role in establishing solid relationships with their insurance companies. The key to any good relationship is communication.

Agencies must devise a well-organized plan to communicate with their carriers. This article shows owners the way.

Since some insurance companies communicate better than others, it’s up to the agency’s management to ensure a

By Catherine Oak & dialog occurs. That means good relations cannot be allowed to stagnate, and weak relations must be improved upon.

The following are steps agencies should take to establish healthy relationships with their carriers.

Rachel Schoeffler Most are relatively easy tasks that shouldn’t take much time. The steps will be easiest for those agencies that have business and sales plans in place.

Before setting up a communications plan, agency owners need to evaluate which companies will meet their needs as competitive, responsive markets.

Relationships of the past may no longer meet today’s needs, especially if either the agency or company has targeted certain classes of business that aren’t of interest to the other.

Insurance companies continue to limit the number of agencies they do business with, often to better their resources and reduce costs. Most companies differentiate between the services they provide their “preferred” agents versus what they provide their “standard” agents.

It’s usually worth the effort to achieve preferred agency status with as many companies as possible, because the preferred agent may receive better underwriters, quality target/niche marketing programs or exclusive programs and often higher commissions.

Another benefit: “preferred” contracts 36 | INSURANCE JOURNAL-NATIONAL May 19, 2014

usually contain enhanced profit-sharing agreements, value-added services, interface capabilities, training programs and financing of various items such as producers, acquisitions and perpetuation.

How does one become a preferred agent?

The key is to focus on better managing the agency company relationships.

Establish an Action Plan First, assign an individual or two from the agency to each carrier. This person(s) will be that carrier’s “relationship manager.”

For the firm’s “top” carriers, divide the relationship manager’s responsibilities among the owners and/or a key non-owner producer or CSR, depending on who has the best relationship with the carrier.

While carrier relationship management should always be a major focus for owners, dividing up the duties with other staff will ensure that the steps are implemented.

A company relationship management plan should include: • Job assignments; • Planned visits; • Information and data to communicate; and • A budget to implement the plan.

• Collecting and presenting information will set the tone of the communication. Prepared and well-informed agencies will immediately grab the company representatives’ attention, since unfortunately most agencies fail to do their homework.

• Keep in mind that it takes time and money to nurture a successful company relationship. Track the plan and make sure it’s followed. Even a strong relationship will eventually die if it’s neglected.

Review the Markets The next step is to learn about the agency’s relationship with its markets.

To do that, make a list of all the firm’s companies and include three years’ worth of the following information:

• Written and earned premium; • Commission paid; • Contingents received; • Number of policies; • Average commission per policy; • Number of submissions; • Number of quotes; and • Hit ratio and loss ratio.

Write down what targeted classes of business that the carriers seem to be interested in and which ones they are competitive in.

Create a report card for the company based on staff input.

Also, determine the carriers’ perceptions of the agency by having them fill out a report card on it. Ask what three things the agency could do to improve the relationship in order to write more business. If the agency dares, tell the carrier the top three things they should do to improve the relationship with the agency’s personnel.

Find out how the agency can take advantage of the value-added services the carriers offer, such as financing new producers or perpetuation, training, etc. continued on page 38 www.insurancejournal.com

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Minding Your Business continued from page 36

Create an Agency Profile The next step is to create a profile of the firm. The profile should be the business plan and firm’s sales and marketing plan. The profile should include the firm’s mission statement, goals and objectives, history, organizational chart, key employees, agency marketing materials, sales approach, top 10 classes of business the firm likes to write as well as its producers and include the firm’s new business history.

If looking for new markets include some key financial statistics on the firm, errors and omissions (E&O) information, the top carriers, premium and loss ratios for the past three to five years.

Agencies, like people have their own unique personality. Agencies that know who they are and know their strengths and weaknesses will be in a good position to communicate their needs to the carriers.

How can agencies expect the markets to meet their needs when they don’t know or understand their needs themselves?

Meet with the Companies Next, take the agency’s business plans or agency’s profile package and the insurance company evaluation directly to the firm’s key markets. Set an annual meeting with them to discuss agency goals and future opportunities.

The agency principal in charge of markets and the relationship manager for that particular carrier should meet with the regional vice president or branch manager of each contract company, as well as the main underwriter assigned to the agency and the marketing rep for three reasons.

• To inform the company’s management about the current status of the agency and the future plans.

• To find out where the company stands

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How does one become a preferred agent? The key is to focus on better managing the agency company relationships. now and its plans for the future.

• To discuss how the agency and the company can and should do more business together in the future.

Being proactive is a sign of strength and the carriers appreciate this. Set up follow-up meetings to discuss progress on the agency-company game plan on at least a quarterly basis.

Both parties need to be open and frank in these meetings. Discuss the agency profile and the company evaluation and establish reasonable goals and commitments for future business.

It is also important to relay the meeting highlights to agency staff.

Enhance this now-stronger relationship by planning ongoing carrier “schmoozing” activities. It is easier to develop a relationship if parties meet often (social visits are especially effective). The entire agency needs to help establish good relations with the markets.

Summary It is extremely important for insurance companies and owners of agencies/brokerages to build partnerships that are responsive to the business plans established each year by each party.

Building improved relationships needs to be a two-way street, so the agent cannot be passive.

Improved communication and a focus on improving relationships will save time and will make both parties more money, guaranteed!

Oak & Associates is a national financial and merger and acquisition firm, consulting with thousands of insurance agencies and wholesalers for the past 23 years. Email: catoak@gmail.com. Website: www. oakandassociates.com. Phone: 707-935-6565.

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Growing Your Property Casualty Agency Some Independent Agents Are Their Own Worst Enemy

S

ome independent agents imagine that they are involved in an eternal sales conflict. Their mortal enemies include the large national insurance marketers, area captive agents, plus a wide swath of local, regional, and digital competitors.

This battle-vision hardens their resolve and motivates them to market smarter and to sell more.

It’s the art of war, insurance-style. However there is another enemy as well, and to borrow a classic

By Alan Shulman line from Pogo, “We have met the enemy and he is us.”

Internal enemies aren’t as clear-cut as external ones. They take on the murky shapes of strategic mistakes and tactical errors. Here are nine such examples.

Book transfers. Internally shifting business between carriers to meet a company’s production requirement, instead of adding accounts organically (or through other means), is a temporary solution at best. At some point, future volume demands cannot be met in this manner, and the agency-com-

pany relationship is in jeopardy. own, and unfortunately, it’s frequently hap Producer-owners. If each producer in hazard. your agency is a shareholder, never allow Mobile missteps. Every agency needs a them to act as maverick “managers.” This modern mobile-friendly website (and percan be problematic if they use their stock haps an app). If you elect to forgo this basic certificates as their authority to interfere necessity, your cellphone-centric insureds with routine office procedures. Doing so and prospects will let their fingers tap on dilutes authority from the actual managers, over to more mobile-ready providers. making it more difficult than necessary to Social dislikes. Like it or not, social enact and enforce important office policies. media is for real and ever-evolving. It’s a Referrals-only. Some agencies take major marketing mistake to forego its amazpride in the fact that they only accept new ing capabilities to build your brand. clients who are referred to them from Endless silence vs. endless noise. current insureds. It’s nice to imagine that How and when an agency communicates you can grow in this exclusive manner, but with its insureds is more vital than ever. in reality, very few agencies can. Referrals Never communicating with insureds are sweet but they seldom beyond a company-sent bill Internal enemies is only slightly worse than sustain. You also need to attract fresh business from aren’t as clear-cut outputting an endless flow the marketplace at large. as external ones. of digital missives. Seriously, Minimal cross-selling. how many emails, blog posts, Every agency executive knows that it’s ease-newsletters, tweets, updates and pins can ier and less costly to sell to existing clients an insured endure before changing their than it is to attract brand new business. email address and their insurance agent?

Yet, too many fail to methodically cross-sell The “right answer” is to keep in touch just and upsell. Instead, it is left up to each CSR enough and no more. Of course, what’s adeand producer to account-round on their quate varies by the account, external events and the agency itself.

Wrong prospects. Minimize marketing and selling to prospects who don’t value your services. It is a waste of time trying to win them over. Instead focus on folks and firms that appreciate your effort and expertise.

Perpetuation. No one works forever.

Agencies that don’t plan ahead for their principal’s retirement are clouding their future. Many carriers reasonably demand a real perpetuation plan before making a new appointment. So if you are unwilling to put together a serious one, you have a grave gap in your short- and long-term strategies.

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

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

40 | INSURANCE JOURNAL-NATIONAL May 19, 2014

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Social Media Why Facebook Is Still Relevant for Your Agency

By John Boudreau

F

acebook wants companies to pay up.

In the past few years, major social media platforms such as Facebook, Twitter, and LinkedIn have started pushing businesses toward promoted posts, paid advertisements, and sponsored accounts.

Yet companies have continued to rely mostly on organic reach.

Facebook is aware of this trend and has made some controversial changes that will eventually reduce the organic reach of business pages to as few as 2 percent of followers. In October 2013, organic reach of content was about 49 percent, but these changes have hit content hard, with organic reach dipping as low as 6 percent.

This raises an important question for insurance agencies: Is Facebook still a relevant tool for word-of-mouth customer engagement and marketing?

Why Facebook Is Still Relevant While emphasis on the paid model has the potential to diminish organic reach for businesses, one study found that Facebook fans were 27 percent more likely than a control group to make a purchase in the four weeks following a paid campaign. This shows that Facebook is still worthwhile for: • Building a community. Companies still have the ability to build a community of fans online, maintain contact with those fans and stay relevant.

• Engaging with fans. Although it’s more difficult now, you can still use your business page to engage with fans and followers — you’ll just have to work a bit harder at it.

• Sharing content. Businesses and marketers are always working to earn fans’ interest; that won’t change, no matter what Facebook does. You can still engage your fans via “likes,” shares, and comments. Someone who is a fan of your brand is going to be a fan, whether you paid for that engagement or not.

• Generating conversations. If your content is interesting enough, people will engage with you. A friend’s endorsement generates a 55 percent higher ad recall than non-social ads. In other words, your customers’ friends’ feelings about your brand means more than a sponsored ad in their news feed.

Why People Still Use Facebook If you’re still not sure that Facebook is a worthwhile investment for your agency, consider the specific reasons users return to Facebook time and time again.

Customer service: Users go to Facebook to ask companies questions, express their satisfaction, write reviews and complain about poor experiences.

Your potential customers are likely using Facebook to gauge the quality of your agency’s customer service, and your responses to comments, questions, and reviews can help develop your agency’s reputation as a helpful, caring company.

Contact information: People use Facebook (especially Facebook Mobile) to find contact information for local businesses. This works well for the local insurance industry. You can tell your customers where you’re located and whether you’re open, all in one convenient location.

Solutions: When interacting with the insurance industry, people are often looking to solve a problem. Many users turn to their Facebook friends for opinions on places to eat, shops to see or even which doctor to visit. Use the opportunity to share what you know and stay top of mind where they’re looking for help.

What Still Works on Facebook One of the biggest challenges for businesses is knowing what to share to engage with their fans. Remember, 93 percent of the most engaging posts on Facebook are photos. Text-only posts rarely gain enough traction to get a share, so your agency needs to focus its efforts on promoting its posts visually.

42 | INSURANCE JOURNAL-NATIONAL May 19, 2014

www.insurancejournal.com

For the insurance industry, these types of posts fare well: • Infographics; • Humor; • Lists; • Jokes; • Fun facts; • Insurance-specific advice related to current events.

Your fans are coming to you as a source of reputable information, so you need to do your best to share engaging, expert content that commands attention.

What to Consider When Segmenting Your Audience One way to get more fans engaged with your posts is to segment your audience and push out the content that different groups will find most useful.

• Facebook’s insights are available to administrators of all pages. You just have to export the file to see the entire lifetime of data, segment it and make changes based on the needs of your fan base.

Is Facebook still a relevant tool for word-of-mouth customer engagement and marketing?

• Consider these four Facebook insights when determining your agency’s social media editorial calendar: • When did a user become a fan of your page?

• How often do you gain new fans? What trends can you predict?

• What content are fans “liking,” sharing, and commenting on?

• How can your fans’ demographics help you predict the information they might want to see (e.g., age, interests, etc.)?

ing solely on Facebook. You need to blend other social media channels, public relations, a helpful agency website and useful blog content into your inbound marketing efforts.

If you use Facebook for agency marketing, use it for customer service. It’s essential

Boudreau is the CEO and co-founder of Astonish, an insurance marketing and sales platform.

Growth

Many agencies would like to purchase their “competitor down the street.” Never having purchased an agency before, how do you start?

Any proposed acquisition should enhance agency value.

Agency principals need to consider their agency’s financial health, conduct proper due diligence on a viable target agency and use knowledgeable consultants - including your banker. There are many “moving parts” to even the most “basic” acquisition.

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Remember the Big Picture Although there’s a lot you can do with Facebook to interact with your customers, remember that it’s just part of your agency’s marketing strategy.

No business is going to succeed by focuswww.insurancejournal.com

that companies respond to every single question, comment or concern from fans to show that they truly care about their customers.

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May 19, 2014 INSURANCE JOURNAL-NATIONAL | 43

W

elcome to Insurance Journal’s 2014 Premium Finance Directory, a comprehensive listing of premium finance companies able to assist agents and brokers with their clients’ financing needs.

All company information listed in this directory was directly submitted to Insurance Journal. To be listed in future editions of Insurance Journal’s Premium Finance Directory, or any other directory, contact Kristine Honey at: khoney@insurancejournal.com.

We hope you find this directory to be a valuable resource when searching for financing options for your clients. Feel free to send us comments and suggestions on how we might improve this directory, or for additional help, e-mail: editorial@insurancejournal.com.

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Aviation Premium Finance, LLC 621 NE Rushbrook Dr., Lee’s Summit, MO 64064 Phone: (816) 832-8150, Fax: (816) 353-1048 Email: am@aviationpremiumfinance.com www.aviationpremiumfinance.com · APF provides aviation insurance buyers with payment options for their annual insurance premiums. · Customers traditionally put 20% down and then make 9 monthly payments. · Our goal is to make aviation affordable for everyone!

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Capitol Payment Plan Birch Financial, Inc. 20946 Devonshire St., Ste. 200, Chatsworth, CA 91311 Phone: (818) 772-4244, Fax: (818) 772-2221 Email: info@birchfinancial.net www.birchfinancial.net · Finance Commercial Lines for the Landscape Industry · Serving California, Arizona and Nevada · Interactive website allows for confirmation of payments, cancellation status, renewal dates, etc.

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52 Corporate Circle, Albany, NY 12203 Phone: (866) 639-1333, Fax: (518) 862-7522 Email: sternj@cappay.com www.cappay.com

· All Accounts Called Prior To Cancellation · ETI–AutoPay – Automatic Monthly Payments from Customer’s Checking Account · Free Acord Form Software for Our Customers

· Committed to helping insurance agents maintain their competitive edge through premium financing solutions since 1979 · Leading local experts to address the unique needs of the personal lines business · State-of-the-art products and programs that maximize efficiency in quoting, leaving more time to focus on your customers

Express Premium Finance Company, LLC 21 E. Main St., Ste. 103, Oklahoma City, OK73104 Phone: (800) 728-2902, Fax: (888) 413-8898 Email: quote@expresspremium.com www. expresspremium.com · Premium Service · Premium Solutions · Premium People

May 19, 2014 INSURANCE JOURNAL-NATIONAL REGION | N45

Premium Finance Directory FIRST Insurance Funding Corp.

Johnson & Johnson Preferred Financing, Inc.

450 Skokie Blvd, Ste. 1000, Northbrook, IL 60062 Phone: (800) 837-3707, Fax: (800) 837-3709 Email: marketing@firstinsurancefunding.com www.firstinsurancefunding.com

200 Wingo Way, Ste. 200, Mt. Pleasant, SC 27464 Phone: (800) 868-5573, Fax: (843) 724-7085 Email: finance@jjpf.com www.jjpf.com

Imperial PFS · Competitive rates, flexible payment terms, multiple funding and payment options with the only written service guarantee in the industry. · On-line quoting with secure paperless loan acceptance and funding and on-line, real-time access to accounts. · Professional agency lending program for agency acquisitions, buildings and equipment, lines of credit, perpetuation and producer development.

Focus Finance, LLC P.O. Box 451899, Sunrise, FL 33345-1899 Phone: (800) 432-3072 Ext. 4825 Email: info@focusfinance.net www.focusfinance.net · Save time and money by letting us do the work for you; ready to sign Premium Finance Agreements sent via email or fax. · We will never cancel a policy without calling your office first...Payment email reminders sent to insured’s & extended courtesy holds per agent’s request. · Payments can be made by phone or online using check or credit card.

General Agents Acceptance Corporation P.O. Box 1177, Lake Forest, CA 92609 Phone: (800) 470-9647, Fax: (800) 568-5462 Email: james@mygaac.com www.mygaac.com · We give your insureds more time to pay · We call the insured before cancelling the policy · We offer very competitive rates

gotoPremiumFinance.com 6200 Canoga Ave., Ste. 400, Woodland Hills, CA 91367 Phone: (888) 875-4000 Ext. 2135, Fax: (818) 610-2066 Email: sales@gotopremiumfinance.com www.gotopremiumfinance.com · A unique one of a kind service designed to help agents grow their insurance business and increase their income. · Nationwide premium finance provider for agents, MGAs & insurance companies. · Online quoting, e-submission of finance agreements, online payment options, real time account status, customized notice delivery & more.

1055 Broadway, 11th Fl, Kansas City, MO 64105 Phone: (800) 838-2350, Fax: (816) 627-0502 Email: marketing@ipfs.com www.ipfs.com · Enabled by flexibility to handle any size account · Powered by teamwork to offer the highest standards in service · Driven by growth, making us the natural choice in premium financing for policy holders, insurance agents & brokers in the United States & Puerto Rico

Insurance Finance Corp.

P.O. Box 315, Des Moines, IA 50306-1315 Phone: (800) 247-4190, Fax: (515) 223-0226 Email: Brian@ifcorp.biz www.ifcorp.biz · IFC is independently owned with no ties to insurance companies, agencies or other financial institutions. That gives us flexibility! · We’ve been providing innovative premium finance solutions to agents and insured’s since 1969. We’re experienced! · Outstanding customer service that truly separates us from the big boys. We’re different!

Insurance Financing, Inc. P.O. Box 968, Edmonds, WA 98020 Phone: (425) 670-3999, Fax: (425) 771-9165 Email: sandy@insurancefinancing.com www.insurancefinancing.com · Legendary friendly service · Family-owned business for 26 years · Flexible payment plans and web-based account management

· Finance most lines of coverage both Commercial and Personal lines · Online software for 24/7 access to quoting, account management and reporting · Multiple funding options for Money in & Money out!

LG Premium Finance 16438 Vanowen St., Ste. 207, Van Nuys, CA 91406 Phone: (800) 452-8505, Fax: (800) 209-0120 Email: info@lgpf.net www.lgpf.net · Complete Premium Financing - Specialized service of your insureds will result in lower cancellation rates. · No Minimum Premiums - Smaller accounts are one of our specialties. · LG Premium Finance can customize a fee program that works for your agency.

Liberty Premium Finance, Inc. 12641 E. 166th St., Cerritos, CA 90703 Phone: (800) 229-8793, Fax: (562) 685-0215 Email: sporter@libertypf.com www.libertypf.com · Flexible monthly payment options for commercial insurance policies · Quote, bind and archive your contracts with our easy-to-use online quoting center · Pay by mail, phone, online or in person with credit card, check or check by fax

Monarch Premium Resources, Inc. 30448 Rancho Viejo Rd., Ste. 100 San Juan Capistrano, CA 92675 Phone: (800) 731-7890 Email: info@MonarchPremium.com www.monarchpremium.com

Insurance Payment Company 3025 Windward Plaza, Ste. 400, Alpharetta, GA 30005 Phone: 678-578-6600 ; Fax: 866-922-0691 Email: newbiz@inspayco.com www.inspayco.com · Independently owned finance company licensed to do business in GA, TN, AL & CO · Personalized customer service and expertise in the insurance industry · Variety of payment options most national companies can’t/won’t offer

N46 | INSURANCE JOURNAL-NATIONAL REGION May 19, 2014

· Exclusive financing arrangements for brokers of Monarch E&S · Interactive Web site for account viewing, reports and On-line payments · Financing Commercial and Personal Lines Insurance Premiums

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Premium Finance Directory Premium Finance Corporation Mountain West Premium Finance Group of Companies 2535 Kettner Blvd., Ste. 3-b3, San Diego, CA 92101 Phone: (888) 280-0235, Fax: (619) 697-0326 Email: dan@financepremium.com www.financepremium.com · We look for ways to say “yes” to financing any commercial account. · Aggressive Cancellation Prevention Program with ALL forms of payment accepted. · Premium Finance Licensing and Third Party Administration available (www.pfcaptive.com).

P.O. Box 1827, Eau Claire, WI 54702-1827 Phone: (800) 843-7788, Fax: (715) 836-9196 Email: info@pfcins.com www.pfcins.com · Experienced premium financing with friendly, quality service · Minimal paperwork, agent online access in real time · Flexible payment plans and payment options for

insureds

Premins 1407 Avenue M. Brooklyn, NY 11230 Phone: (718) 375-8300, Fax: (718) 376-8330 Email: info@preminsco.com www.preminsco.com · Commercial and personal financing in NY & NJ for 50 years · Make payments byy credit card, echecks/ACH, check by fax, and automatic debiting · Get answers and quotes quickly with our fast and effective customer service on the phone and on our website

NCMIC Finance Corporation 14001 University Ave., Clive, IA 50325 Phone: 1-(800) 600-9250, Fax: 1-(800) 630-9250 Email: LLogan@ncmic.com www.nfcfinance.com · Custom solutions – even for smaller insureds or niche markets. · Flexible plans that can include reduced down payments and extended terms. · State-of-the-art software, immediate funding and web-based account management.

Premium Assignment Corporation 3522 Thomasville Rd., Ste. 400 Tallahassee, FL 32309 Phone: (800) 342-0991, Fax: (800) 286-8999 Email: marketing@premiumassignment.com www.premiumassignment.com

11350 N Meridian St., Ste. 600, Carmel, IN 46032 Phone: (866) 625-3863, Fax: (317) 428-3801 Email: osf@oakstreetfunding.com www.oakstreetfundring.com · Customized loans to insurance businesses up to $15 million · Aquisitions, recapitalizations, successions, lines of credit · Over $450 million in loans provided to thousands of agents and brokers

P.O. Box 817099, Hollywood, FL 33081 Phone: (800) 491-8937, Fax: (866) 632-9776 Email: marketing@pro-premium.com www.pro-premium.com

· Superior and Experienced Service · Competitive Rates · Custom Quoting System – Online

· For Insurance premium financing made easy, go with the Pro. · Providing turnkey quoting integration with virtually all agency management systems. · Competitive agent marketing incentives with flexible rate structures.

7603 First Place Dr., B-12, Cleveland, OH 44146 Phone: (866) 374-3630, Fax: (866) 839-3090 Email: info@PremiumFinance.net www.PremiumFinance.net

Providence Bank Agency Finance · Licensed in all 50 states · 24/7 Access to Online Quoting and Viewing system – same day payment posting · Automatic ACH monthly installment withdrawal from insured checking or savings account

2453 Union Blvd., Ste. 20B, Islip, NY 11751 Phone: (516) 668-1234, Fax: (269) 375-6913 Email: dhofmann@go-premco.com www.go-premco.com · We finance all Commercial & Personal lines with same day funding · Offer Profit Sharing and Stock Dividends to investor agents · FREE Online payments and the option to pay with Credit/Debit cards www.insurancejournal.com

7434 Shadeland Station Way, Indianapolis, IN 46256 Phone: (877) 894-2785, Fax: (317) 813-1701 Email: agencyfinance@myprovidencebank.com www.pbagencyfinance.com · Loans and lines of credit for insurance agencies · Working capital, acquisition capital, debt consolidation · Free quotes

Premium Finance Brokerage, LLC PREMCO Financial Corporation

· Financing Commercial & Personal Lines Nationwide · 24/7 Web based access · Pre-approval of loans up to $100,000 & no minimum premium.

Pro Premium Finance Co., Inc.

Premium Finance Associates Oak Street Funding

Prime Rate Premium Finance Corp.

2141 Enterprise Dr., Florence, SC 29501 Phone: (866) 669-0937, Fax: (800) 677-9850 Email: info@primeratepfc.com www.primeratepfc.com

P.O. Box 623, Jarrettsville, MD 21084 Phone: (866) 381-6501, Fax: (866) 381-6502 Email: tlarsen@premiumfinancebrokerage.com www.premiumfinancebrokerage.com

Royal Premium

· Guaranteed Lowest Interest Rates · Access to several national premium finance companies through one point of contact · Flexible payment options, cutting edge technology and a service pledge that’s put in writing

30833 NW Hwy, Ste. 220, Farmington Hills, MI 48334 Phone: (800) 477-7889, Fax: (248) 932-9043 Email: financing@royalpremium.com www.royalpremium.com · Online Payments & Account Status · Same-day turnaround on quote requests & revisions. · Online Quotes system gives agents the option of producing finance quotes and finance contracts anytime.

May 19, 2014 INSURANCE JOURNAL-NATIONAL REGION | N47

Premium Finance Directory

SIUPREM, Inc. P.O. Box 105611, Atlanta, GA 30348 Phone: 1 (800) 925-2546, Fax: (678) 498-4747 Email: info@siuprem.com www.siuprem.com · Independently owned, full service online premium finance company servicing independent agents since 1969. · Industry leading technologies providing real-time data for online policy service by the insured or the agent. · Siuprem Cares. Each time a commercial policy is financed with Siuprem in 2014, $5 of the proceeds will be committed toward the new goal of $60,000 for Breast Cancer Awareness and Research.

Skipjack Premium Finance Company 10150 York Rd, 5th Fl, Hunt Valley, MD 21030 Phone: (800) 611-0955, Fax: (410) 630-1132 Email: info@skipjackpfc.com www.skipjackpfc.com · TECHNOLOGY: Our full service online platform allows your agency to easily manage accounts, create quotes, process Credit Card Down Payments & more! · PRICING/RATES: Competitive rates & terms that can be specifically designed to fit your agency’s book of business. · SERVICE: We deliver the service you deserve! Our dedicated customer service staff goes the extra mile to insure your experience is “smooth sailing”.

Specialty Risk Premium Finance

Thrifty Financial Services, Inc.

7600 Fern Ave., Bldg. 600, Shreveport, LA 71105 Phone: (318) 683-6206 or (318) 683-6222 Email: frances.lee@specialty-risk.com or afulco@specialty-risk.com www.specialty-risk.com

1695 Main St., Springfield, MA 01103 Phone: (800) 987-1011, Fax: (800) 736-5177 Email: thriftyfin@aol.com www.thriftyfinancial.com

· In house financing for policies written with Specialty Risk Associates · 24 hour web access to accounts for you and your clients · Payment methods like check by phone, Echeck and AUTO PAY are available

· The premium finance solution for Massachusetts insurance agents for 25 years. · State of the Art online technology. · Customer service that’s the best in the business and a full time local marketing manager.

Top Premium Finance Company

Superior Payment Plan, LLC

A Division of Premier America Credit Union 19867 Prairie St., Chatsworth, CA 91311 Phone: (800) 458-2228, Fax: (818) 721-3840 Email: TopMarketing@toppremiumfinance.com www.TopPremiumFinance.com

6450 Transit Rd., Depew, NY 14043 Phone: 1 (866) 856-1112, Fax: (716) 206-8237 Email: info@superiorpayment.com www.superiorpayment.com

· Credit Union Rates · Partnership · 11 Pay

· Fully functional website that allows Brokers and Insureds to easily manage accounts - quoting, inquiry, payments, and reporting. · First class customer service team that will personally assist you, as well as an automated response phone system to meet all your customer service needs. · Ability to integrate with several agency management systems to alleviate duplicate work. · Competitive rates and flexible options for down payments, installments and funding - JUST ASK.

TriCentury Bank Aviation Premium Finance 5200 W. 94th Terr, Ste 206, Prairie Village, KS 66213 Phone: (913) 754-5678, Fax: (913) 648-2117 Email: premiumfinance@tricentury.com · Financing of all types of Aviation related Insurance Premiums · Competitive Rates · Rapid Funding

Tepco Premium Finance 1405 S. Rustle Rd., Spokane, WA 99224 Phone: (800) 571-0843, Fax: (509) 622-4702 Email: info@tepcofinance.com www.tepcofinance.com

South Bay Acceptance Corp.

· Easy to use online system for quoting & account management · Free online payments · Licensed in 9 western states plus CO, FL, IL, GA, MI & TX

435 N. Pacific Coast Hwy, Ste. 120 Redondo Beach, CA 90277 Phone: (800) 393-2012, Fax: (888) 328-6747 Email: contact@sbac-finance.com www.sbac-finance.com

US Premium Finance 3169 Holcomb Bridge Rd., Ste. 105, Norcross, GA 30071 Phone: 1 (866) 246-9691, Fax: 1 (866) 246-9692 Email: customerservice@uspremiumfinance.com www.USPremiumFinance.com · SERVICE: Creatively Structured Premium Finance Loans · TECHNOLOGY: User-friendly software, easy access to your customer database any where in the world 24/7 · PRICING / RATES: Flexible, Fair Market Pricing

· Flexible premium financing programs with multiple benefits for your agency and their insured’s! · 24/7 Online Quoting access, account status verification, activate your own quotes immediately! · Creative Producer compensation options ready to provide you additional income!

N48 | INSURANCE JOURNAL-NATIONAL REGION May 19, 2014

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Advertisers Index

Readers, browse, contact, or do product searches on any of our full page advertisers at: www.insurancejournal.com/adshowcase/ ACE Insurance www.acelimited.com 13 American Reliable www.assurantspecialtyproperty.com 33 Amwins Group, Inc. www.amwins.com 51 Applied Underwriters www.applieduw.com 52 Applied Underwriters www.applieduw.com 4, 5 Arrowhead General Insurance Agency www.arrowheadgrp.com W15 Atain Specialty Insurance www.atainins.com 9 Atlas General Insurance Services www.atlas.us.com W4; SE4; M3 Burnett & Company www.bcoinc.com SC7 Burns & Wilcox Brokerage www.burnsandwilcox.com 25 Burns & Wilcox Ltd. www.burnsandwilcox.com 3; SC1 California Earthquake Authority www.earthquakeauthority.com/mvp W3 Century National www.cnico.com W9

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Demotech www.demotech.com 35 First American Specialty Insurance Company www.firstam.com W13 Fujitsu www.fcpa.fujitsu.com 31 General Star www.generalstar.com W1; SE1; E1; M1 Golden Bear Insurance Company www.goldenbear.com W16 Gorst & Compass Insurance www.gorstcompass.com W19 Insurbanc www.insurbanc.com 43 Lexington www.lexingtoninsurance.com 15 M.J. Hall & Company, Inc. www.mjhallandcompany.com W11 McClelland & Hine www.mhi-tx.com SC5; SE3 Midlands Management Corporation www.midlandsmgmt.com 38 Monarch E & S Insurance Services www.monarchexcess.com W7 Pacific Gateway Insurance Services www.pgiainsurance.com W17

PersonalUmbrella.Com www.personalumbrella.com 7 PSIC - Pacific Specialty Insurance Company www.psic-onespot.com 29 Scottish American www.scottishamerican.com 17 Scottsdale Insurance Company www.scottsdaleins.com 2 South & Western www.southandwestern.com SC9; SE5 State Auto Insurance Companies www.stateauto.com SC3 State Compensation Insurance Fund www.scif.com W5 Tejas American General Agency www.taga1.com 3 The Institutes www.theinstitutes.org 23 Vertafore www.vertafore.com 27 Western Security Surplus www.wssib.com W14; SC6

May 19, 2014 INSURANCE JOURNAL-NATIONAL | 49

IDEA EXCHANGE

Closing Quote D&O form when the entity became an insured and the management liability form was created. In many forms, these exclusions bleed over to the insured persons’ coverage. There are few offending markets now willing to modify wording to properly narrow these exclusions.

An abundance of restrictive exclusions is a classic sign of a hard market, but in this case it is also a sign of the lack of understanding of the purpose of a D&O policy — protecting the insured persons from liability that could result in the loss of their personal assets.

This penchant for more restrictive exclusions has also caused many carriers to choke off almost all coverage for the entity. Some claims are properly excluded from coverage for the entity in a management liability policy: breach of contract, pollution and professional liability, for example. Other policies exist for these perils, or they are still considered uninsurable business risks. But the exclusionary wording is overbroad even as it applies to the entity, and many underwriters are no longer willing or able to modify the exclusions as needed to provide functional coverage.

Management Liability: Hard Market or Sea Change?

F

By Chris Christian

or years, directors and officers, and entity coverage for privately held firms was one of the best deals going, with broad coverage, cheap pricing and low retentions.

Over the past several years, market capacity suppressed management liability pricing and retentions below actuarially sound levels. Since the financial meltdown, carriers have responded by taking repeated pricing increases, requiring higher retentions and making other less obvious, but more telling, changes.

The question is whether this is due to a normal market cycle, or whether there’s something insidious at work.

Changes of concern include many markets refusing to write a risk with the least little bit of peach fuzz on it, former market leaders pulling out of entire industries or geographical territories, and underwriters refusing to modify exclusions that neuter coverage for insureds in various industries or situations.

The most reactive markets are generally those that have commoditized the management liability lines, or have used management liability as a training ground. Underwriters that do not have a background in publicly traded directors and officers liability exposures and coverages often do not understand what it means for the insured persons to be properly covered. Certain exclusions were added to the

50 | INSURANCE JOURNAL-NATIONAL May 19, 2014

Fixing the Problem There are three major acceptable approaches to providing coverage under management liability policies: • Coverage for the insured persons that is no narrower than that which they would enjoy were their organization publicly traded; • Coverage only for shareholder or creditor claims; and • Coverage for the operational exposures of the entity.

These can be mixed, matched and deployed in any combination. Educated insureds An abundance of may desire any level or restrictive exclusions combination of coverages provided by these approach- is a classic sign of a es. Carriers must be clear hard market, but in on what approaches they are embracing, and commu- this case it is also a sign of the lack of nicate this to their agency plant. Policy wording, understanding of the underwriting and pricing purpose of a D&O should reflect this approach.

Additionally, agents and policy. brokers need to understand that management liability is not a commodity but a highly complex and nuanced line of coverage. Getting the most out of a policy requires clear and concise communication between the broker and underwriters, and a thorough understanding of the insured’s exposures and the coverages that should be available to address them.

Christian is vice president/senior broker at US Risk Brokers.

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