Insurance Journal West 2015-05-18 by Insurance Journal

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Inside This Issue

On The Cover

Special Report:

2015 Super Regional P/C Insurers

May 18, 2015 • Vol. 93 No. 10 • West

W10

W17

NATIONAL COVERAGE

WEST COVERAGE

IDEA EXCHANGE

10 Insurers Warn Against Encroachment on State Regulation

W2 WCRI: Medical Payment Per Claim in California Fell Following Reforms

W10 Legal Outlook: Fracking, Earthquakes and Insurance: A Collision Course?

W2 Data Stolen on 900 Southern California Mental Health Patients

30 Selling Your Agency May Be Hazardous to Your (Financial) Health

10 GEICO to Raise Auto Insurance Premiums 16 What Risk Managers Expect from Their Insurance Brokers 18 Agent Support, Ratings Added to Expanding Google Compare SR1 Special Report: 2015 Super Regional P/C Insurers Revealed 20 Bitcoins: The Next Cyber Risk? 24 P/C Insurers Post Underwriting Profit, Record Surplus for 2014 28 Spotlight: AAMGA Incoming President Ware on Canadian Expansion & More 34 2015 Premium Finance Directory

6 | INSURANCE JOURNAL-WEST May 18, 2015

W4 New Mexico AG Says Uber, Lyft Drivers Need Drug Testing W4 California Jury Awards Woman $13 Million for Asbestos Exposure from Talcum W8 Cyber, Talent, Data Among Game Changers for Insurers, Risk Managers W17 First Licensed Autonomous Freight Truck Hits the Road in U.S.

32 An Agent’s Guide to Finding & Converting Online Leads 39 Growing Your Property Casualty Agency: Alan Shulman 40 Minding Your Business: Catherine Oak & Bill Schoeffler 42 Closing Quote: The Value of Hurricane Forecasts

DEPARTMENTS W6 People 11 Declarations 11 Figures 14 Business Moves 27 MyNewMarkets

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Opening Note

Publisher Mark Wells | mwells@wellsmedia.com

Wearable Devices in Insurance

early two-thirds of insurers expect wearable technologies to have a significant impact on the industry. According to a survey in Accenture’s annual Technology Vision report, where more than 200 insurance executives across nine countries responded, 63 percent believe that wearable technologies will be adopted broadly by the insurance industry within the next two years. Nearly one-third (31 percent) said they are already using wearables to engage customers, employees or partners. The report, “Accenture Technology Vision for Insurance 2015 — Digital Insurance Era: Stretch Your Boundaries,” highlights emerging developments in IT that will have a great impact on the industry in the next three to five years. Nearly three-quarters (73 percent) of insurers said that providing a personalized customer experience is one of their top three priorities within the organization, and half (50 percent) claim to already see a positive return from their investment in personalized technologies. “While insurers have traditionally based their underwriting and pricing processes on a limited view of certain customer variables, emerging technologies such as wearables and other connected devices Insurance companies will can help insurers break benefit from human and from their traditional busitechnology collaboration. ness models and provide outcome-based services for their customers,” said John Cusano, senior managing director of Accenture’s global Insurance practice. For example, John Hancock recently began providing new policyholders with a free fitness band to track their health progress — and then reward their healthy living with a reduction in life insurance premiums. However access to large volumes of new data is also causing insurers some challenges. The survey found that most insurers struggle to fully use their existing data. More than half (56 percent) said that managing data is “extremely” or “very challenging” considering the changes in volume, variety and velocity. Nearly nine in 10 respondents (86 percent) said they believe that software intelligence will be integral to simplifying their IT function. The Accenture report says that as the “intelligent enterprise” is making machines smarter and embedding software intelligence into every aspect of its business, these machines can help insurers get more value out of the scale of information in big data and discover associations among the data that an individual might not be able to make. Thomas Meyer, managing director of Accenture’s Insurance practice in Europe, Africa and Latin America, said insurers will benefit from human and technology collaboration, “with workers leveraging new technologies such as wearables to augment their abilities and Andrea Wells help them make better decisions.”

Editor-in-Chief

8 | INSURANCE JOURNAL-NATIONAL May 18, 2015

EDITORIAL Chief Content Officer Andrew Simpson | asimpson@insurancejournal.com Editor-in-Chief Andrea Wells | awells@insurancejournal.com East Editor Young Ha | yha@insurancejournal.com Southeast Editor Michael Adams | madams@insurancejournal.com South Central Editor/Midwest Editor Stephanie K. Jones | sjones@insurancejournal.com West Editor Don Jergler | djergler@insurancejournal.com International Editor Charles E. Boyle | cboyle@insurancejournal.com Senior Editor Susanne Sclafane | ssclafane@insurancejournal.com ClaimsJournal.com Editor Denise Johnson | djohnson@claimsjournal.com MyNewMarkets.com Associate Editor Amy O’Connor | aoconnor@mynewmarkets.com Columnists Catherine Oak, Bill Schoeffler, Alan Shulman Contributing Writers Sara Burnett, Kathy Finn, Chen Foley, Mark Hollmer, Barry Koestler, Robert Pettinicchi, James Riebel, Eric Scheiner, Alan Scher Zagier SALES Chief Marketing Officer Julie Tinney (800) 897-9965 x148 | jtinney@insurancejournal.com Sales Manager Lauren Knapp (800) 897-9965 x161 | lknapp@insurancejournal.com West Dena Kaplan (800) 897-9965 x115 | dkaplan@insurancejournal.com South Central Mindy Trammell (800) 897-9965 x149 | mtrammell@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 DESIGN/WEB Chief Technology Officer/Chief Innovation Officer Joshua Carlson | jcarlson@insurancejournal.com V.P. of Design Guy Boccia | gboccia@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 V.P. of Education Chris Boggs | cboggs@ijacademy.com 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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News & Markets Insurers Warn Against Encroachment on State Regulation By Mark Hollmer

nsurance companies are calling for Congress to ensure state-based insurance regulation remains protected from federal or international “regulatory encroachment.” “Congress must now increase its oversight regarding the unprecedented federal and international intrusion into state insurance regulation,” Kurt Bock, CEO of Country Financial, said in written testimony before the Senate Banking Subcommittee on Securities, Insurance and Investment, in late April. He spoke on behalf of the Property Casualty Insurers Association and the National Association of Mutual Insurance Cos. “Clarity regarding the intended outcomes of federal and international involvement is necessary,” Bock said. “Such action should include a clear statement of policy, applicable to federal and international negotiations, that reaffirms and defends the exist-

ing state-based system of regulation for all U.S. insurers and insurance groups.” He said that such an effort should encourage “greater collaboration and unity among our U.S. agencies that supports more transparency and accountability.” What’s more, Bock urged Congress to make sure any new regulations in this regard are “rare” and only cover “documented gaps in protecting U.S. consumers, rather than just a forced compromise between state insurance and federal banking or global standards.” The insurance industry is wary about federal and international regulatory momentum. One area of concern: the Federal Reserve and Department of Treasury’s involvement (through the Federal Insurance Office and the Financial Stability Oversight Council) in overseeing “too-big-to-fail” insurers as part of the Dodd-Frank financial reform law. There’s also an ongoing effort through the International Association of

Insurance Supervisors (IAIS) to apply global capital requirements to large U.S. insurers who have significant international operations. Robert Falzon, executive vice president and CFO of Prudential Financial, who spoke on behalf of the American Insurance Association (AIA) and The American Council of Life Insurers, and whose company is designated by the FSOC as “systemically important,” said U.S. insurers are worried that international capital standards are being developed through the IAIS too quickly. He said that process isn’t necessarily taking into account a law passed in late 2014 that clarifies the Federal U.S. Reserve Board can develop unique capital standards for insurers rather than defaulting to “inappropriate” policies applied to banks. Falzon said that the IAIS timeline, which will be stretched out incrementally over several years, should accommodate U.S. implementation of this new law.

GEICO to Raise Auto Insurance Premiums By Andrew Simpson

EICO, which “everybody knows” saves drivers 15 percent on auto insurance, said it will raise its auto premiums after underwriting results declined in the first quarter. The giant direct writer said its underwriting profit for the first quarter was $160 million, a decline of $193 million compared to the first quarter of 2014. In the first quarter of 2015, GEICO experienced increases in claims frequencies and severities in several of its major coverages and its loss ratio increased to 80.1, compared to 75.8 in 2014. “As a result, we are implementing premium rate increases as needed,” the company said in its most recent SEC filing. Premiums written in the first quarter of 2015 were $5,886 million, an increase of 10.2 percent compared to 2014. 10 | INSURANCE JOURNAL-NATIONAL May 18, 2015

Losses and loss adjustment expenses incurred in the first quarter of 2015 were up 16.6 percent. Underwriting expenses were up 9.5 percent. “The automobile insurance business is highly competitive in the areas of price and service. Some insurance companies may exacerbate price competition by selling their products for a period of time at less than adequate rates. GEICO will not knowingly follow that strategy,” the management said in its year-end 2014 filing. The company said that a result of “an aggressive advertising campaign and competitive rates,” voluntary policies-in-force have increased about 39 percent over the past five years. According to SNL, GEICO spends more on advertising — $1.18 billion in 2013 — than any other property/casualty insurer and has been the biggest spender for years. GEICO was ranked the second largest

private passenger auto insurer, behind State Farm, in the United States in terms of premium volume in 2013 by SNL. According to A.M. Best data for 2013, the five largest automobile insurers have a combined market share of 52 percent, with GEICO’s market share being approximately 10.4 percent. Now, GEICO management said it believes that has grown to approximately 10.8 percent. For the full year 2014, the auto insurer reported written premiums of approximately $21 billion, an increase of 9.8 percent compared to premiums in 2013. The loss ratio for 2014 was 77.7 compared to 76.7 in 2013, while underwriting expenses in 2014 increased 7 percent to $3.4 billion. www.insurancejournal.com

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News & Markets WCRI: Medical Payment Per Claim in California Fell Following Reforms

he average medical payment per claim for treating injured workers fell by 5 percent in California in 2013, according to a study by the Workers Compensation Research Institute. The findings could reflect some early impact of the state’s reform legislation, Senate Bill 863, according to WCRI. The WCRI study, CompScope Benchmarks for California 15th Edition, monitored changes over time in the state for income benefits, medical benefits other metrics. It also compared California’s performance with workers’ comp systems in 16 other states. Using data through March 2014, WCRI looked at the average medical payment per claim for 2013 claims with more than seven days of lost time. This measure fell 5 percent in 2013, after a couple of years of moderate growth between 2010 and 2012 and a period of rapid increase from 2006 to 2009, the report shows. By contrast, in many other study states, medical payments per claim grew in 2013, according to the report. California underwent reforms of its workers’ comp system effective Jan. 1, 2013, thanks to reform legislation SB 863, which had multiple goals: to increase permanent disability benefits for injured workers, to create cost savings where possible; to improve the quality of and access to medical care and to make the workers’ comp process more efficient. Several provisions of SB 863 may have been part of the reason for the results WCRI found, according to Ramona Tanabe, WCRI’s executive vice president and counsel. “For example, one provision reduced fee schedule rates for ser-

vices provided in ambulatory surgery centers from 120 percent of Medicare to 80 percent of Medicare. This may be related to the decrease in medical payments per claim in 2013,” Tanabe said in a statement. “SB 863 also eliminated separate reimbursement for implantable medical devices, hardware, and instruments for spinal surgeries. This could be another factor underlying the decrease reported.” The average indemnity benefit per claim in California grew moderately at 3 percent per year in 2012 and 2013, in part because of small increases in wages and the duration of temporary disability benefits, the study showed. The study also found expenses for delivering benefits to injured workers in California had moderate growth for 2013 claims with experience through the first quarter of 2014. This indicates the decrease in these measures anticipated by the passage of SB 863 has yet to be observed, according to WCRI. WCRI is an independent, not-for-profit research organization based in Cambridge, Mass.

Several California Hospitals Given Low Patient Safety Grades

Data Stolen on 900 Southern California Mental Health Patients

early 40 percent of California hospitals earned low ratings for patient safety in a recent national assessment. Nonprofit The Leapfrog Group issued a national report card in late-April that gave nearly four in 10 California hospitals a C or lower for patient safety. Leapfrog’s President Leah Binder says there is room for improvement in the state’s hospitals. The report gave 43 percent of California hospitals an A rating this year, and 29 of the state’s hospitals have received straight A’s on patient safety since Leapfrog began rating them in 2012. Those include 17 hospitals run by Kaiser Permanente, including its centers in West Los Angeles and Riverside. Medical experts say hospital errors cost the nation about 400,000 lives annually. Copyright 2015 Associated Press. W2 | INSURANCE JOURNAL-WEST May 18, 2015

uthorities say personal information on 900 Los Angeles County mental health patients was stolen but it’s unclear if any of it was misused for ID theft. Documents with Social Security numbers, birth dates, medical and insurance information were found on April 3 at the home of a nurse who worked at the Augustus F. Hawkins Mental Health Center. The information was for patients who were treated at the county mental health facility between 2011 and this year. Those patients are being offered a free year of identity theft protection through a private company and authorities are urging them to set up fraud alerts with credit reporting agencies. The theft remains under investigation. Copyright 2015 Associated Press. www.insurancejournal.com

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News & Markets New Mexico AG Says Uber, Lyft Drivers Need Drug Testing

rivers of ridesharing services Lyft and Uber in New Mexico should face strict drug testing requirements like taxi drivers and keep detailed records of such tests, the state Attorney General Hector Balderas told regulators in April. In a letter to the state’s Public Regulation Commission, Balderas asked commissioners to strengthen public safety standards around ridesharing services amid new rules. Earlier in the month, the state’s Public Regulation Commission voted 4-1 on new regulations clearing way for the companies to function under guidelines separate from those that govern traditional

taxi services. But detailed drug testing requirements were dropped. Instead, the commission voted to adopt rules requiring testing only after accidents. The San Francisco-based Lyft and Uber had been operating in New Mexico despite complaints for taxi companies. Spokeswomen for Lyft and Uber did not immediately return emails from The Associated Press. The legal status of Uber and Lyft in New Mexico had been in limbo since they began offering services in the state last

Bumble Bee, 2 Managers Charged in Oven Death of California Worker

umble Bee Foods and two managers have been charged by Los Angeles prosecutors with violating safety regulations in the death of a worker who was cooked in an industrial oven with tons of tuna. Jose Melena was performing maintenance in a 35-foot long oven at the company’s Santa Fe Springs, Calif., plant before dawn Oct. 11, 2012, when a co-worker, who mistakenly believed Melena was in the bathroom, filled the pressure cooker with 12,000 pounds of canned tuna and it was turned on. When a supervisor noticed Melena, 62, was missing, an announcement was made on the intercom and employees searched for him in the facility and parking lot, according to a report by the California Division of Occupational Safety and Health. His body was found two hours later after the pressure cooker, which reached a temperature of 270 degrees, was turned off and opened. The company, its plant Operations Director Angel Rodriguez and former safety manager Saul Florez were each charged W4 | INSURANCE JOURNAL-WEST May 18, 2015

with three counts of violating Occupational Safety & Health Administration rules that caused a death. Rodriguez, 63, and Florez, 42, could face up to three years in prison and fines up to $250,000 if convicted of all charges, prosecutors said. Bumble Bee Foods faces a maximum fine of $1.5 million. The state’s occupational safety agency previously cited the San Diego-based company for failing to properly assess the danger to employees working in large ovens and fined it $74,000. Bumble Bee, which has appealed the penalties, said the company improved its safety program after the tragedy. “We remain devastated by the loss of our colleague Jose Melena in the tragic accident,” the company said in a statement. “We disagree with and are disappointed by the charges filed by the Los Angeles district attorney’s office.” Florez refused to comment, and messages seeking comment from Rodriguez were not immediately returned. Copyright 2015 Associated Press.

year. The two businesses say the state’s Motor Carrier Act doesn’t apply to them because neither operates as a commercial taxi business. Rather, they offer an online service that allows people with cars to connect with people seeking rides, the companies said. Copyright 2015 Associated Press.

California Jury Awards Woman $13 Million for Asbestos Exposure from Talcum

Los Angeles, Calif. jury has awarded $13 million to a 73-year-old woman who contracted a deadly disease from using asbestos-containing talcum powder manufactured by ColgatePalmolive Co. The verdict last month in Superior Court found that New York-based Colgate was 95 percent responsible for Judith Winkel’s mesothelioma, a fatal lung disease. Winkel’s lawyers say she got the disease from using Cashmere Bouquet talcum powder. Lawyers say the company knew or should have known about the dangers of asbestos since the 1930s. A spokesman for Colgate didn’t immediately return after-hours messages seeking comment, and lawyers who represented the company didn’t immediately respond to a phone call or emails. Lawyers for Winkel say they reached a confidential settlement before the jury was set to hear evidence to determine punitive damages. Copyright 2015 Associated Press. www.insurancejournal.com

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People Greg Jacobi

Tina Abrams

Robert Jellen

Stephanie Barnes

GEICO has named Greg Jacobi assistant vice president of underwriting in its San Diego, Calif., regional office. Previously, Jacobi served as assistant vice president of underwriting for the company’s Dallas regional office. He succeeds Frankie Silva, who will lead underwriting at GEICO’s Lakeland, Fla., regional operation. Jacobi joined GEICO as an insurance counselor in 1993, then worked in education and training in GEICO’s Woodbury, N.Y., regional office before becoming a service administrator. He then managed operational services and planning and control in Woodbury before being promoted in 2004 to sales and service director for GEICO’s Buffalo regional operation. GEICO is a member of the Berkshire Hathaway family of companies. Los Angeles, Calif.-based Topa Insurance Co. has named Tina Epstein Abrams a commercial wholesale brokerage team leader. As team leader, Abrams leads the underwriting teams in property/casualty. Abrams has more than 30 years of experience, mainly in the excess and surplus writing areas, as well as brokerage and facultative reinsurance experience. Prior to Topa she was at Endurance and Colony Specialty. She also chairs the Surplus Line Association of California’s education and compliance committee. Topa, which recently expanded to a production underwriting model, is a P/C insurer offering comprehensive business and personal insurance, as well as specialty program insurance. Hub International Ltd. added Robert Jellen to Hub’s Los Angeles, Calif.-based entertainment practice. Hub also added Seth Cohen, vice president, and Dany Rodriguez, account executive, to round out Jellen’s Los Angeles-based entertainment team. Jellen has more than 40 years of experience providing insurance solutions for studios, television networks, independent filmmakers, Fortune 500 advertisers and advertising agencies. Chicago, Ill.-based Hub provides property/casualty, life and health, employee benefits, investment and risk management products and services through offices located in North America. Leavitt Group of Boise named Stephanie Barnes a commercial account manager in Idaho. Barnes has 26 years of experience. She specializes in insurance for municipalities, professional offices, retail

W6 | INSURANCE JOURNAL-WEST May 18, 2015

operations, construction and those in the service industry. Barnes has assisted in developing 13 new independent agencies over her career. Leavitt Group is a privately-held insurance brokerage. Wells Fargo Insurance named Steve Anderson managing director for the San Francisco Bay Area region. Anderson will lead business development, cross-sell, and sales for Wells Fargo’s four insurance offices. He is based in San Francisco, and will report to Sam Elliott, regional managing director for Wells Fargo Insurance’s West region. A 15-year company veteran, Anderson joins Wells Fargo Insurance from the Wells Fargo Corporate Banking group, where he was division head and executive vice president of the West region. Previously, he was regional vice president for the Pacific Northwest. Anderson also held leadership positions at Bank of America and Security Pacific Merchant Bank prior to joining Wells Fargo. Wells Fargo Insurance is part of Wells Fargo & Co. IFG Cos. named Michael R. Denton executive managing director in property. Denton is based in IFG’s Irvine, Calif., office. He assumes responsibility for leading and managing the brokerage property division while also overseeing property products for commercial underwriting and bind property. Denton has 27 years of experience. He began his career at the Hartford Insurance Group. He moved into reinsurance at USF Re, where he had a variety of leadership posts. In 1996, Denton joined General Star Management Co. In 2001, he assumed responsibility for General Star’s nationwide property brokerage unit and was senior vice president of Property Brokerage. After General Star, he worked for Argo Group International Holdings Ltd. as a senior vice president of U.S. property. IFG provides property/casualty insurance on both a non-admitted basis and an admitted basis. San Diego, Calif.-based ICW Group Insurance Cos. in California has named Danny Engell vice president of enterprise strategic planning and analytics. In this newly created position Engell will report to President and CEO Kevin Prior. He will be responsible for driving analytics and business intelligence. Engell started with the company as an actuarial analyst in 2005, and has since held several leadership roles. He was previously vice president of workers’ compensation underwriting. ICW Group actively writes primary workers’ comp insurance in 12 states, along with incidental coverage in 34. www.insurancejournal.com

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News & Markets Cyber, Talent, Data Among Game Changers for Insurers, Risk Managers By Kathy Finn

rotecting clients against growing and poorly understood risks associated with information technology system failures is a leading concern of the insurance industry today, a group of underwriters and brokers told risk managers in May. Along with cybersecurity, the insurance professionals are focused on improving their use of data, maintaining high levels of service in an era of more demanding customers and drawing young talent into the industry to replace experienced people who are retiring. “We’ve got a lot of really great young people coming into the business, and they need to be prepared to ultimately take care of our clients,” said J. Patrick Gallagher Jr., chairman and CEO of global brokerage firm Arthur J. Gallagher and Co. He and seven other industry representatives spoke during a forum for senior executives at the RIMS 2015 Conference in New Orleans. During the session entitled, “Game changers in the insurance industry,” the group took questions from a moderator and the audience of about 80 people. The panelists quickly zeroed in on cybersecurity as an area driving new demand among insurance customers. Cyber Curve Steve McGill, group president with Aon PLC, a multinational insurance and reinsurance brokerage based in the United Kingdom, said increasing numbers of large companies along with many smaller firms today have some form of cyber insurance. But he said that the rapid evolution of cyber threats may be making it difficult for the insurers to stay ahead of the curve. “Currently, the insurance industry is delivering products to the market and not delivering solutions,” McGill said. John Doyle, CEO of commercial insurW8 | INSURANCE JOURNAL-WEST May 18, 2015

ance with AIG, weighed in with the underwriter perspective. He conceded that in the industry’s early responses to cyber security threats, “the product probably missed the mark” in terms of addressing the actual need for coverage. “I think our initial foray came from the financial view and not the customer point of view,” he said. But he added that, following many high-profile data breaches that “led to very significant disruptions in some major companies,” carriers came to understand the depth of the cyber risk concern among businesses of all sizes. “It came up in every single client meeting I’ve had recently,” he said. Daniel Riordan, CEO of Zurich Global Corporate, North America, said that five years ago, perhaps 15 percent of companies had some type of cyber insurance protection, whereas the figure now is closer to 40 percent, with retail and financial services firms hitting new peaks in both demand and claims. “Data breaches are becoming daily occurrences,” he said. Broader Spectrum Riordan said insurers are starting to see cyber concerns across a broader spectrum of clients. “Some of our energy customers and multinational customers … are looking at

the potential impact (of a cyber breach) on property and business interruption,” he said. “The growing risk of hackers taking down a power grid or a manufacturing operation is a real and present danger for some companies.” Dominic Casserly, CEO of the Willis Group, added that the uncertainty and newness of the cyber area make it “very fertile ground” for meaningful discussions with clients. “It’s not just about insuring the risk, it’s about managing an evolving risk,” he said. “We have to be in the risk advisory and management space as much as in the insurance brokerage space.” Regulation The underwriters and brokers also agreed about some of the other issues that could alter the global insurance landscape during the next five years. High on their list was regulation. Insurance regulators around the world are becoming more aggressive, and the lack of uniform standards from one country to another creates challenges for companies that operate across many borders, they said. “With often conflicting regulations, compliance and the cost of compliance is a huge deal,” said Gallagher. Millennials, Alternative Capital Attracting and retaining talented personnel to serve worldwide markets is both critical and an ongoing challenge, said David Batchelor, International Division president with Marsh LLC. He said that Marsh is trying to capitalize on the “millennial” generations and tap the best people to provide high levels of service while extending the Marsh brand continued on page W14 www.insurancejournal.com

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Legal Outlook Fracking, Earthquakes and Insurance: A Collision Course?

here is increasing information suggesting that hydraulic fracturing, commonly known as “fracking,” is not all it’s cracked up to be. While it is clear that the resurgence of oil and gas production in the United States has been made possible by the process, new research suggests that the increase of earthquakes in certain parts of the United States is By Eric Scheiner potentially attributable to fracking-related activities. The impact of this new research to the companies that engage in various parts the fracking process, as well as their insurers, could be and Chen Foley significant. Fracking 101 At a very basic level, hydraulic fracturing involves pumping a combination of water, sand and additives under high pressure into a well to break up hard and dense deposits of shale rock located deep

underground. The purpose is to release oil fluid is comprised of sand, used to keep and gas reserves stored in the shale. While the fissures open and permit a continunot new — the process has been around ous bleed of oil or gas. The remaining 2 since the 1950s — its use has only become percent is comprised of chemical addiextensive in recent years. tives. The most popular of those additives Fracking has (reported in 65 been credited percent of all ‘While hydraulic fracturing with the dramatic seen clearly has economic benefits, disclosures increase in domestic by the EPA) are it may not be the savior its gas production in hydrochloric acid the U.S., which may proponents declare it to be.’ (hydrogen fluoride), contribute to the methanol (methyl elimination of energy imports between alcohol) and hydrotreated light petroleum 2020 and 2030. According to some, the distillates (distillates). economic growth derived from hydraulic The health risks associated with these fracturing has helped offset the economadditives are well documented. They creic shock of the most recent recession. ate occupational exposures for employees, Fracking is also hailed with having driven as well as pollution risk and general liabilidown energy prices, while spurring job ty risks where third parties are accidentalcreation and investment, often in small ly exposed to them. rural communities. Assuming there is no sudden or accidental spill or other containment breach prior There’s Something in the Water to the fracturing fluid being pumped into While hydraulic fracturing clearly has the ground, there remains a risk that, if a economic benefits, it may not be the savior borehole ruptures, fluid will escape. The its proponents declare it to be. The need fallout could lead to contamination of the to source thousands, and sometimes milsurrounding land, and depending on the lions, of gallons of fresh water to fracture depth at which the leak develops, might the shale is itself problematic. also threaten groundwater supplies. Since 2011, the U.S. Environmental Protection Agency has reportedly been Out of Sight Is Not Out of Mind studying the impact of hydraulic fracturing The vast amounts of water used in on the quantity and quality of available fracking do not disappear once the oil and drinking water. As a result of this progas is retrieved. This water, referred to as cess, it recently released data on the wastewater, is becoming an increasingly water and chemicals used at fractured problematic byproduct of the extraction wells in 20 states. process. While some wastewater remains The data shows that fracturing fluid is in the well, much is expelled. It can be primarily comprised of water (on average collected in pits or held in tanks at the 88 percent of the fluid by mass site, but must ultimately be treated or is made up of water), while disposed of someplace else. A common another 10 percent of the disposal method involves re-injecting the wastewater back into the ground. Opinion is mixed about whether the continued on page W12

W10 | INSURANCE JOURNAL-WEST May 18, 2015

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Legal Outlook continued from page W10 ings, it is a wholly different thing to estabstorage of wastewater below the surface outside Denver, which was also believed lish a sufficient nexus between wastewater is problematic. However, the science to be attributable to wastewater disposal). disposal and seismic activity in order to appears to be tilting the scales in favor of The USGS’s study of the Trinidad quake create legal liability in court. heightened caution. Opponents of fracking concluded that, “the M5.3 earthquake Fracking related litigation, including and some plaintiffs have long argued that likely occurred on a pre-existing, naturally allegations of property damage and it causes earthquakes. However, personal injury from fracking-reuntil recently, evidence of a ‘Even if no direct link is ever proved to connection between the two has the satisfaction of a court, the sector will lated earthquakes, is not new. However, the position of those who arguably been tenuous. nonetheless be forced to pay legal fees believe they have been harmed by On April 23 the United States and associated costs for experts in an man-made earthquakes is likely Geological Survey released a report that links an increase in attempt to disclaim the existence of one.’ to now be strengthened, which will inevitably lead to increased the frequency of earthquakes litigation. Further, while no plaintiff has since 2009 in the Central and Eastern stressed fault, but that the fault was trigyet been able to establish a conclusive United States to “industrial operations that gered to slip by wastewater injection.” link between wastewater disposal and dispose of wastewater by injecting it into For its part, the government of an earthquake, and subsequently a link deep wells.” While the USGS’s findings Oklahoma has now also acknowledged between that earthquake and the damage have been tempered with a qualification a link between earthquakes and the disor injury, it will be interesting to see if — “[a]lthough the disposal process has posal of “billions of barrels of wastewater and/or how the USGS report, Oklahoma the potential to trigger earthquakes, most from oil and gas well” underground. The government acknowledgments and other wastewater disposal wells do not produce Oklahoma Geological Survey, as reported recent studies will impact such litigation felt earthquakes” — the press release by The New York Times, said that it is “very going forward. accompanying the report goes on to note likely” that wastewater wells are causing There is currently one case pending that “[m]any questions have been raised the majority of the state’s increasing earthbefore the Oklahoma Supreme Court on about whether hydraulic fracturing . . . . quakes. In fact, before the 2000s when oil this point. It raises the question of whethis responsible for the recent increase of and gas exploration increased significanter a magnitude 5.7 earthquake on Nov. 5, earthquakes. ly, Oklahoma experienced an average of 2011 (the strongest earthquake recorded in “USGS’s studies suggest that the actual under two earthquakes a year exceeding the state until that time), causing Sandra hydraulic fracturing process is only occathe magnitude of 3.0. By contrast, in 2014 Ladra to suffer property damage and persionally the direct Oklahoma experienced 585 earthquakes sonal injury, was caused by wastewater cause of felt earthwith a magnitude of over 3.0, including disposal. It total, 13 homes were reported quakes.” Further, the some earthquakes well in excess of that as being destroyed. USGS found that magnitude that have caused significant Despite being the subject of early juristhere has been an damage. dictional wrangling, the court is expected observed increase Additionally, the Oklahoma Office of to address the liability of energy compain seismic activithe Secretary of Energy and Environment nies named in the suit sometime this year. ty in 17 identifihas now started the website www.earthIf liability is ultimately found in the case, able areas in eight quakes.ok.gov as part of its efforts to develthere could be a potentially significant Central states since 2000, op solutions and coordinate efforts to sea-change in the litigation landscape with and a substantial increase address the phenomenon of increasregard to wastewater disposal and the in earthquakes in those areas ing seismic activity. fracking industry in general that would since 2009. The journal Geology also released cause, at the very least, a significant The USGS study builds on its a peer-reviewed paper conincrease in litigation. earlier findings, which appeared cluding that injection From cases filed previously, it can be to link wastewater disposal with a wells used to store expected that plaintiffs will assert liability magnitude 5.3 earthquake in August wastewater from fracktheories based on negligence, gross negli2011, near Trinidad, Colo. The Trinidad ing activities were gence, strict liability and/or nuisance. But earthquake was reportedly the largest related to certain energy companies and others involved in recorded seismic event along the Rocky earthquakes. But the process should be mindful that liabilMountain Front Range since 1967 (when even with continued on page W14 another magnitude 5.3 earthquake hit these findW12 | INSURANCE JOURNAL-WEST May 18, 2015

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Legal Outlook continued from page W12 ity may not just stem from direct actions taken against them. Homeowners policies and other property coverages are likely to be the first port of call for those suffering tangible loss to property. In this regard, if those policies are triggered, affected carriers may sue the companies that operate the wastewater wells. Despite the low severity of these claims, their cumulative value could significantly impact wastewater operator companies and their direct insurers. The Wall Street Journal reports that a judgment against an energy company would have a devastating effect on the sector. While there have been no reported judgments, energy companies have in the past taken steps to settle similar litigation. For example, BHP Billiton and Chesapeake Energy Corp. settled cases brought against them by homeowners in Arkansas, and EOG Resources resolved property damage litigation in Texas. The terms of those compromise agreements are confidential. But Is a Judgment Against the Energy Sector Likely? Although the proverbial jury is still out, what bodes well and in the favor of the energy sector is that recent scientific developments probably do not go far enough to establish liability against those

engaged in fracking — as opposed to the wastewater well operators, where there is at least more of a direct connection. However, that is unlikely to sway plaintiffs. The recent findings will likely be seen by them as justifying legal action on their part. Even if no direct link is ever proved to the satisfaction of a court, the sector will nonetheless be forced to pay legal fees and associated costs for experts in an attempt to disclaim the existence of one. The science may not be the magic bullet for which plaintiffs had hoped, but it will certainly serve to open Pandora’s Box in terms of increased litigation and efforts to refute any connection between earthquakes and fracking-related activities by the energy sector. In a strange turn of events, on March 3 the Oklahoma Insurance Commissioner issued a bulletin, mandating that homeowner’s carriers not deny coverage for earthquake claims on the basis they were man-made events. He said that the science linking earthquakes with fracking was “unsettled” at the time, and that carriers that were denying coverage were doing so on the basis of, “the unsupported belief that these earthquakes were the result of

continued from page W8 around the world “Remaining relevant in the changing world is a challenge,” Batchelor said. All of the panelists said their companies are investing heavily in data, not only to acquire more information but also to better manage it and extract from it key points that can shape a clearer picture of their clients’ needs and potential risks. And several noted that the growing role of “alternative” capital — coming into the industry from hedge funds, pension funds and the like — has helped bolster the industry, even in the face of increasing numbers of catastrophic events around the world. “Alternative capital is coming in because

they see it as a good return” as compared with the low yields available on riskfree investments, said John Lupica, ACE Group’s insurance chairman for North America. Lupica said that a major force driving the insurance business overall is an expanding worldwide middle class. “As you have a growing middle class you have a growing need for insurance,” he said. As money continues to flow into the insurance business, the industry is better equipped than ever to pay claims while growing profits, several panelists said. Pointing to a series of catastrophes ranging from hurricanes to earthquakes to

W14 | INSURANCE JOURNAL-WEST May 18, 2015

fracking or injection well activity.” Where developments this past April leave homeowners insurers in that state is far from clear given the more recent pronouncements discussed above, but the insurers of the companies involved in fracking and/or wastewater disposal associated with fracking should clearly be concerned. Scheiner is a partner in the Chicago office of Sedgwick LLP. Foley is in the Bermuda office of Sedgwick Chudleigh Ltd. Scheiner phone: (312) 6419050. Email: eric.scheiner@sedgwicklaw.com. Foley phone: (441) 278-7161. Email: chen.foley@sedgwicklaw.com

the economic meltdown of 2008-09, Lupica took note of the strength shown by the insurance industry. “We lost about $80 billion of capital out of the industry in 2008, without (an actual financial) loss,” he said. McGill took it a step further. With $4.2 trillion of capital in the insurance industry, “the claims-paying capacity of the industry has never been stronger,” he said. “We don’t think even a $100 billion hurricane hitting the East Coast, or a massive earthquake, is necessarily going to turn the market, because new capital is going to come in to replace what goes out.” Finn is a New Orleans-based freelance writer. www.insurancejournal.com

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News & Markets First Licensed Autonomous Freight Truck Hits the Road in U.S.

“With the Freightliner Inspiration vehicle operating system that enables the n a ceremony at Hoover Dam in May, Truck, drivers can optimize their time driver to cede full control of all safety-critDaimler Trucks North America unveiled on the road while also handling other ical functions under certain traffic or envithe Freightliner Inspiration Truck, what it important logistical tasks, from schedulronmental conditions. The autonomous says is the first licensed autonomous coming to routing,” he said. “The autonomous vehicle system is responsible for mainmercial truck to operate on an open public vehicle technology not only contributes to taining legal speed, staying in the selected highway in the United States. improved safety and efficiency, but allows lane, keeping a safe braking distance from The vehicle promises to reduce accifor improved communication through dents, improve fuel consumption, cut connectivity and integration.” highway congestion and have less of ‘With the Freightliner Inspiration Other manufacturers are also develan environmental impact than other Truck, drivers can optimize their oping vehicles that partially automate trucks. time on the road while also handling driving but do not eliminate drivers The Nevada Department of Motor completely. Vehicles granted it a license to operate other important logistical tasks, Also, while the DTNA exhibit is the on public roads in the state. Nevada from scheduling to routing.’ first on roads in the U.S., Australia Gov. Brian Sandoval affixed a license mining firms have been using driverless other vehicles, and slowing or stopping plate to the truck and took part in the certrucks for hauling at iron ore mines. the vehicle based on traffic and road conemonial first drive. DTNA unveiled two trucks with this ditions. The vehicle monitors changes in In 2012, Nevada was the first state to equipment. conditions that require transition back to approve a license for Google to test its Trucking industry analysts and media driver control when necessary in highway autonomous car. will be given the chance to ride in the two settings. The driver is in control of the The Freightliner Inspiration Truck is trucks on public roads near the Las Vegas vehicle for exiting the highway, on local not driverless. Its highway pilot techMotor Speedway as the vehicle operates in roads and in docking for making delivernology links together cameras and radar autonomous mode. ies. with lane stability, collision avoidance, Freightliner Trucks is a division of The driver is a key part of a collaboraspeed control, braking, steering and other Daimler Trucks North America, headquartive vehicle system, according to Richard monitoring systems. This combination cretered in Portland, Ore. Howard, senior vice president, DTNA. ates what is called a Level 3 autonomous

The Nevada Department of Motor Vehicles granted a license to Daimler Trucks North America’s autonomous truck. (Daimler Trucks North America) www.insurancejournal.com

Daimler Trucks North America unveiled what it says is the first licensed autonomous commercial truck to operate on an open public highway in the U.S. (Daimler Trucks North America)

May 18 2015 INSURANCE JOURNAL-WEST | W17

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FIGURES

3.9

The magnitude of an earthquake that hit the Los Angeles, Calif.-area on May 3. It was the second earthquake in less than a month along the Newport-Inglewood fault.

DECLARATIONS

13 The number of injuries reported at major Florida theme parks in the first quarter of 2015, according to the quarterly injury reports the parks released to the state. Six of the ride-related injuries happened at Walt Disney World and seven were reported at Universal. SeaWorld, Wet `n Wild, and Legoland reported no injuries.

8 15 The number of states, mostly in the Midwest, in which court battles are cropping up against Dow Chemical after it received federal approval to use a new herbicide on genetically engineered U.S. corn and soybean crops. Conservationists, food safety and public-health advocates want to block the use of Enlist Duo until the court can consider its impact on human health. Enlist Duo’s ingredients include 2,4-D, a component of the defoliant Agent Orange widely used by the U.S. military in the Vietnam War. The substance has been linked to Parkinson’s disease, non-Hodgkin lymphoma and reproductive problems, the plaintiffs say.

The number of tornadoes confirmed to have touched down across parts of rural Texas in late April. The twisters on April 26 flattened buildings, tore the roofs off other structures and forced people to rush for shelter in an area southwest of Fort Worth, the National Weather Service said. Hail described as the size of ping pong balls and larger showered the area, and several inches of rain caused flash flooding and inundated roadways.

— Sen. Michael Merrifield, D-Colorado Springs, applauded additions, such as treatment instead of jail, to a felony DUI bill to make a fourth DUI a felony punishable by up to six years in prison and a fine of as much as $500,000.

Still an Issue

“I hope that this will inspire others and bring in an awareness that there is still an issue out there.”

— Indiana Girl Scout Katie Floyd, who raised funds for a tornado siren for Green Township, which previously had none. Floyd says she saw the need for a siren in 2012 when a deadly tornado went through southern Indiana communities. She contacted Illinois-based Federal Signal Corp., which knocked $17,000 off the cost of the siren and also received a $10,000 grant.

Fuzzy DUI Videos

“The DUI sky is not falling. There’s no problem with the law.”

— Heath Taylor with the South Carolina Association of Criminal Defense Lawyers in response to a request by South Carolina prosecutors to have the current state law de-emphasize police video in driving under the influence cases. Prosecutors contend that too many cases are being dismissed because of imperfect recordings. Defense attorneys counter the solution is better officer training.

Preventable Deaths

“The names and faces change from year to year, but we see so many of the same tragic circumstances that lead to preventable workplace deaths every year.”

— Steven Tolman, president of the Massachusetts AFL-CIO, on workplace fatalities. Fifty workers died from injuries on the job in Massachusetts in 2014, according to a report released in April by the Massachusetts AFL-CIO and the Massachusetts Coalition for Occupation Safety and Health.

17,447 The number of tickets that New York State Police say they issued during their five-day “Operation Hang Up” distracted driving crackdown. From April 10 through April 15, troopers were on the lookout for drivers using cell phones, not properly buckled up, violating the “Move Over” law or driving while impaired or distracted. www.insurancejournal.com

Treatment Options

“I don’t think in Colorado we spend nearly enough on treatment.”

Blown Away

“They were on the downslope of the bridge heading off the bridge and were working on pulling off onto a siding. Before they could get to that siding … the five cars were blown off of the back end.”

—Union Pacific Railroad spokesman Jeff DeGraff, describing the scene where five rail cars carrying six to eight freight containers fell from the bridge outside New Orleans during a violent storm in late April. None of the containers held hazardous cargo and nobody was injured.

May 18, 2015 INSURANCE JOURNAL-NATIONAL | 11

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Business Moves Its product offering include homeowners and condominium property insurance, including umbrella policies, wind and wind only, general and excess flood, earthquake, builder’s risk, and others. Orchid Underwriters Agency does business in 27 states, the Bahamas and the Caribbean. Orchid was acquired by Gryphon Investors, a San Francisco-based middle market private equity firm, in November 2014.

Orchid Underwriters, Coastal Agents Alliance Orchid Underwriters Agency LLC, a Vero Beach, Fla.-based program administrator and wholesale broker of excess & surplus (E&S) insurance focusing on coastal properties, has acquired Coastal Agents Alliance, a managing general agent (MGA) in West Atlantic City, N.J. Terms of the transaction were not disclosed. Coastal Agents Alliance specializes in catastrophic coastal-exposed E&S homeowners’ insurance and writes in the Northeast and Mid-Atlantic. Orchid Underwriters Agency said this acquisition is an important step in Orchid’s growth and geographic expansion, and that the transaction would help expand Orchid’s reach into the Northeast. Tim Byrne will remain president of Coastal Agents Alliance and will have a significant ownership stake in Orchid. Byrne will also serve in a senior executive capacity for Orchid. All other members of Coastal Agents Alliance’s management team will remain with the firm, which will continue to be based in West Atlantic City. Founded in 1998, Orchid Underwriters Agency specializes in providing specialty insurance products for homeowners and other difficult-to-insure properties throughout the United States and the Caribbean. 14 | INSURANCE JOURNAL-NATIONAL May 18, 2015

GEICO Giant auto insurer GEICO said in April that it is hiring more than 300 associates in 2015 to add to its office in Woodbury, located in Long Island, N.Y., as well as for legal offices located throughout Long Island, N.Y. GEICO said it is seeking to add positions in liability and no-fault claims, sales, customer service and auto damage, as well as for the Management Development Program, one of its leadership programs. In addition, GEICO is looking to hire more than 40 legal staff in 2015. The auto insurer’s office in Woodbury, which sits on the North Shore border of Suffolk and Nassau counties, opened in 1973 and has close to 3,000 associates. GEICO (Government Employees Insurance Company), a member of the Berkshire Hathaway family of companies, serves more than 13 million private passenger customers, insuring more than 22 million vehicles (auto and cycle). The Holmes Organisation, Hub Midwest Hub International Ltd. (Hub) subsidiary Hub International Midwest Ltd. (Hub Midwest) has acquired the assets of The Holmes Organisation (Holmes), a Tulsa, Okla.-based multiline property and casualty, employee benefits and personal lines brokerage. Terms of the acquisition were not disclosed. The Holmes team will continue to operate from its existing offices in Tulsa and

Little Rock, Ark., and will become part of Hub Midwest, establishing Hub Midwest’s fourth location in Oklahoma. Stuart F. DeSelms, president of Holmes, will join Hub Midwest as executive vice president and chief sales officer. Arthur J. Gallagher, Integrated Healthcare Strategies Itasca, Ill.-based Arthur J. Gallagher & Co. has acquired Integrated Healthcare Strategies located in Kansas City, Mo., and Minneapolis. Terms of the transaction were not disclosed. With operations dating back to 1974, Integrated Healthcare Strategies (Integrated) provides strategic human resources consulting services specifically to healthcare organization clients throughout the United States. Bob Erra and his team will continue to operate from their current locations under the direction of William Ziebell, head of Gallagher’s North Central employee benefit consulting and brokerage operations. Triton, Phoenix Triton Insurance Group Inc., based in Margate, Fla., has entered the commercial insurance market with the acquisition of Phoenix Insurance Group, located in Coral Springs, Fla. Currently, Triton Insurance Group Inc., offers personal lines insurance in the state of Florida and has purchased Phoenix Insurance Group with the intention of bringing its same business model to the commercial insurance industry. According to Triton Owner and Partner William “B.J.” Michaud, the commercial market is a natural fit for Triton, whose clients are “professionals, business owners, decision-makers, and influencers that have more complex needs than most, in both their personal and professional lives.” The acquisition will provide Triton access to hundreds of commercial markets and relationships. Triton Insurance Group is a Florida provider of home, auto, business, motorcycle, umbrella, boat and workman’s compensation insurance. www.insurancejournal.com

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News & Markets What Risk Managers Expect from Their Insurance Brokers: RIMS

By Kathy Finn

broker who does not fully understand a client’s business or lacks direct links with insurers may not only fall short in advising on coverage, but can cause headaches on all sides of the insurance relationship, according to an attorney representing policyholders. Selena Linde, a partner with the Seattle law firm of Perkins Coie LLP, told attendees at the Risk Insurance Management Society 2015 conference that choosing an insurance broker carefully can be crucial to effectively managing risk in nearly any company. “Talk to your broker and see what services they can offer you,” she advised risk managers. “Brokers have a lot of tools in their arsenal that are really quite helpful, but if your relationship has gone stale they may not be giving you that information,” Linde said. “You have to ask the questions.” Joining Linde in the session titled “What has your broker done for you lately?” was Craig Hoffman, risk manager for Wakefearn Food Corp., a Keasby, N.J.-based company that is the largest retailer-owned cooperative in the United States. Hoffman, who in recent years has over16 | INSURANCE JOURNAL-NATIONAL May 18, 2015

hauled his company’s risk management program, said a key to effectively managing the wide-ranging risks employers of all sizes routinely face is making sure the right people are on hand to guide the company through policy decisions, claims filing and every other insurance-related function. “We do things the old-fashioned way,” he said of his company’s approach to designing its insurance coverage. “It’s all about relationships, with brokers and underwriters.” Insurance professionals “are an extension” of the risk management department, he said. “You have to make sure you have the team that can understand your business and your needs as a company.” Both panelists noted that risk managers are looking for ways to customize their insurance coverage. That has led many businesses that previously relied on a single broker to scout for multiple brokers. Issuing RFPs The panelists urged risk managers to consider issuing a request for proposals (RFP) to identify well-qualified brokers. The benefits of RFPs go beyond simply selecting the best insurance professional, they said. “You’ll actually learn a lot about what’s going on in the industry through the RFP

process,” Linde said. Offering samples of generic RFP documents, the panelists explained that risk managers should carefully customize the RFP to a business and allow time for brokers to respond with a thoughtful proposal. A business should provide the brokers with as much useful information as possible — including key financial data and past claims information — to give them an opportunity to evaluate the company’s needs and provide a meaningful response. But in providing information to a broker, Linde emphasized that the relationship is not privileged. “You do have to be careful in discussing (sensitive) information with your brokers,” she said, reminding that brokers also work closely with insurers and could share information that might adversely affect the client in the event of a coverage dispute. She said any broker who is provided with potentially sensitive company information should be required to sign a confidentiality or nondisclosure agreement first. Good Brokers Linde offered several other tips that can help distinguish a good broker. Brokers who want to be responsive to a client’s insurance needs will go the distance to show their interest and learn the client’s industry, she said. Typically, they will make multiple visits to the office or work site throughout the year and will work closely with insurers to shape appropriate coverage. A good broker should help to educate the company on insurance products, propose ways to minimize risk and stay abreast of changes in the client’s industry, Linde said. Hoffman added that the broker can be an invaluable team member when it comes to getting claims paid. Noting that members of in-house risk management teams often oversee claims filing and payment, Hoffman said he likes to tap the broker for help in this area. Finn is a New Orleans-based journalist.

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NATIONAL COVERAGE

News & Markets Agent Support, Ratings Added to Expanding Google Compare By Don Jergler

he auto insurance comparison website Google Compare is expanding into Texas, Illinois and Pennsylvania, as well as adding ratings and insurance agent support. That announcement was made on May 5 by Stephanie Cuthbertson, group product manager for Google Compare, at Google’s annual AdWords Performance Summit, which was broadcast via livestream. “Based on the user feedback we’ve received in California, I’m excited to share that drivers in Texas, Illinois, and Pennsylvania will soon be able to quickly find and compare customized quotes, which includes both price and rating for quoted insurers,” Cuthbertson said during a conference talk that Insurance Journal obtained in transcript form. According to Cuthbertson, “millions of people have used Google to find quotes” since Google Compare launched in California in March. She also said more than half the site’s users say they’ve received a quote cheaper than their existing policy. Now Google Compare wants to go beyond merely offering the best price, she said. “To provide drivers with more, relevant information as they compare, we’re introducing ratings for each insurer,” Cuthbertson said. “With a tap of your finger, you can drill in to see ratings for things like customer service, claims satisfaction, and whether other users recommend the insurer.” Beyond that Google Compare will also add a way for consumers to contact agents, according to Cuthbertson. “Now when comparing insurers, you’ll have the ability to buy online or call a local agent to get help with your policy,” she said. “This includes support for insurers’ own agent networks, and independent agents.” A Google spokesman said the company wasn’t offering comments or details. Neither are any of the company’s partners.

The partners include Compare.com, CoverHound, BOLT Solutions Inc. and myriad insurers. Industry Response Groups like the Independent Insurance Agents & Brokers of America Inc. and the Insurance Information Institute usually temper such enthusiastic announcements as this one with an industry perspective. Michael Barry, I.I.I.’s vice president of media relations, said that when word first began to spread about Google Compare the sense was the new service would hurt agents. But it appears that’s not the case. “Their willingness to incorporate agents into the product is also an acknowledgement that agents play an important role in the process for many drivers,” Barry said. “This kind of dovetails with what we’ve found in various studies, which show that while the process of shopping for auto insurance often starts on the web, often it leads to a meeting with an agent.” The IIABA wasn’t immediately available for comment, but the group in the past has dismissed the notion that all lines of insurance can be easily commoditized, and it has maintained that what Google is doing isn’t much different than operations like Progressive Direct, GEICO, Esurance, Nerd Wallet, Quote Wizard and Bank Rate. “Most of the marketing for these kinds of websites is based allegedly on low-cost and convenience,” IIABA Virtual University Director Bill Wilson said in a past interview. Many online comparison sites claim to offer an insurance quote in minutes. But Wilson

asked: “How can you really help a consumer identify their exposures to loss and match it with the right customized product for those exposures” in minutes? That’s why he believes that when it comes to online comparison tools like Google Compare, consumers will ultimately be on the losing end. “Consumers are being duped into believing that all of these policies and the service providers are exactly the same,” ‘[W]hile the he said. “The process of only difference is shopping for auto price.”

insurance often

Mortgages starts on the web, Google also often it leads to a announced it is meeting with an adding mortgages to its compariagent.’ son tool via an AdWords blog posted on May 5. “Buying a home is one of the biggest financial decisions in life, so understanding your options and having the right tools is critical. The newest addition to Google Compare in the U.S. is coming soon: mortgages. Whether someone is a first-time home-buyer or looking to refinance, consumers will soon be able to find the latest mortgage rates from multiple mortgage providers, and review a customized set of criteria like interest rate, terms of the loan and fees. They’ll be able to apply directly with an approved lender or speak to a qualified adviser for more information, directly from the Google search ad.” During the annual conference Google focused on improving mobile experiences and offering better marketing tool measurements. Mobile searches have now surpassed desktop searches on Google in 10 countries, including the U.S. and Japan. www.insurancejournal.com

SPECIAL REPORT

2015 Super Regional P/C Insurers

Demotech Inc. Reveals Leading Multi-State Property/Casualty Insurers 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, perhaps Near National, Regional, or State Specialist.

n order to continue the discussion regarding what constitutes a Super Regional P/C Insurer™ and to give definition to this important group of insurers, Demotech Inc. analyzed year-end 2014 data for property/casualty insurance companies. This data was utilized to classify and stratify insurers reporting data to the National Association of Insurance Commissioners. The original criteria and objective definition for Super Regional P/C By Barry J. Insurers™ was estabKoestler II lished in the Feb. 12, 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

Super Regional Criteria and Thresholds To determine the companies for the 2015 Super Regional Property/Casualty Insurer™ list, these specific, objective qualifying criteria and thresholds evaluated as of Dec. 31, 2014 were used: • Active, individual companies. • 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. • Policyholder surplus of at least $100 million. • Net premium written of at least $50 million. • Direct premium written of at least $25 million.

Regionals. Demotech, the official research partner of Insurance Journal, has compared the data to the criteria and updated the list of Super Regionals for 2015. 2015 Property/Casualty Insurance Cos. Demotech Company Demotech Company Classifications Classification System Direct Premium The Demotech Company Written Less than Near Nationals 2% $1 million 4% Classification System catNationals 2% Reinsurers 2% egorizes property/casualty Super Regionals 6% Surplus Lines Carriers 7% insurers into one of 11 categories based on an analysis Risk Retention Groups 8% Regionals of the data reported by 9% the companies. The 11 categories that comprise the Strategic system are Nationals, Near Subsidiaries State Specialists 17% Nationals, Super Regionals, 29% Coverage Regionals, State Specialists, Specialists Coverage Specialists, Strategic 14% Subsidiaries, Risk Retention Groups, Surplus Lines

SR1 | INSURANCE JOURNAL-SPECIAL REPORT May 18, 2015

www.insurancejournal.com

In general terms, a Super Regional is an individual company writing multiple lines of insurance in multiple states. Risk retention groups, surplus lines carriers and reinsurers are not eligible for the Super Regional category as they are assigned to other classifications. The 2015 Super Regional Property/ Casualty Insurers™ For 2015, 154 Super Regional Property/ Casualty Insurers™ were identified. They are presented in this Insurance Journal special report both alphabetically and by size as ranked by direct premium written as of Dec. 31, 2014. Also included in this report are eight

Super Regional companies for 2015 that were not classified as Super Regionals in 2014, as well as nine insurers identified as Super Regionals in 2014 that have been reclassified into another category this year based on yearend 2014 information. Of the 154 Super Regionals for 2015, 80 have been designated as such for all nine years that the Company Classification System has been applied. 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. This is why Insurance Journal continues

to have Demotech quantify and identify the criteria used to define an insurer as a Super Regional. 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 2015 Super Regionals. The selection criteria remain quantitative and transparent. Demotech is focused on setting benchmarks at levels that accurately categorize

2015 Super Regional Property/Casualty Insurers™ Alphabetical Listing

ACUITY, a Mutual Insurance Co. Alaska 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 Mercury Insurance Co. American Road Insurance Co. American Select Insurance Co. American Strategic Insurance Corp. Amerisure Insurance Co. Amerisure Mutual Insurance Co. AMEX Assurance Co. AmGUARD Insurance Co. Aspen American Insurance Co. Atlantic States Insurance Co. Auto Club Insurance Association Automobile Insurance Co. of Hartford, CT Auto-Owners Insurance Co. Bay State Insurance Co. BITCO General Insurance Corp. BITCO National 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. Central States Indemnity Co. of Omaha 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 Insurance Co. of Nebraska Farmington Casualty Co. Farmland Mutual Insurance Co. FCCI Insurance Co. Federated Rural Electric Insurance Exchange Federated Service Insurance Co. 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. Great Midwest 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 Integon National Insurance Co. Jewelers Mutual Insurance Co. Lightning Rod Mutual Insurance Co. Lititz Mutual Insurance Co. Lyndon Property 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 Lloyds Insurance Co. Nationwide Mutual Fire Insurance Co. NGM Insurance Co. North River Insurance Co. North Star Mutual Insurance Co. Occidental Fire and Casualty Co. of North Carolina 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. Truck Insurance Exchange Unigard Insurance Co. United Financial Casualty Co. United Fire & Casualty Co. United Ohio Insurance 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 18, 2015 INSURANCE JOURNAL-SPECIAL REPORT | SR2

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 business models. It is not equivalent to ratings of the individual insurers.

Moreover, 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. Since 1985, Demotech has been providing independent Financial Stability Ratings速 of property/casualty insurers and title underwriters. FSRs are an indicator of financial sta-

bility, providing an objective baseline of the future solvency of an insurer. Please send comments to Barry Koestler at bkoestler@ demotech.com or Andrew Simpson, vice president of content for Insurance Journal, at asimpson@insurancejournal.com. Koestler II is the chief ratings officer of Demotech Inc., a financial analysis firm specializing in evaluating the financial stability of regional and specialty insurers. Website: www.demotech.com.

NEW 2015 Super Regionals Company Name

2015 Demotech Company Classification

2014 Demotech Company Classification

2013 Demotech Company Classification

2012 Demotech Company Classification

2011 Demotech Company Classification

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

Regional Strategic Subsidiary Strategic Subsidiary Near National Regional Regional Near National Near National

Regional Strategic Subsidiary Strategic Subsidiary Super Regional Regional Regional Near National Near National

Regional Strategic Subsidiary Strategic Subsidiary Super Regional Strategic Subsidiary Regional Super Regional Near National

American Select Insurance Co. Aspen American Insurance Co. Central States Indemnity Co. of Omaha Federated Service Insurance Co. Great Midwest Insurance Co. National Lloyds Insurance Co. Occidental Fire and Casualty Co. of NC Truck Insurance Exchange

RECLASSIFIED 2014 Super Regionals Company Name

American Home Assurance Co. Bankers Standard Insurance Co. Berkley Insurance Co. Farmers Mutual Hail Insurance Co. of Iowa Insurance Co. of the West Markel American Insurance Co. National Indemnity Co. National Liability & Fire Insurance Co. United States Fidelity and Guaranty Co.

2015 2014 2013 Demotech Demotech Demotech Company Company Company Classification Classification Classification

2012 Demotech Company Classification

2011 Demotech Company Classification

Why Company Does Not Qualify as a 2015 Super Regional

Strategic Subsidiary Near National Near National Coverage Specialist Coverage Specialist Near National Near National Near National Strategic Subsidiary

Super Regional Super Regional Coverage Specialist Super Regional Super Regional Super Regional Super Regional Super Regional Coverage Specialist

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

DPW States > 34 States > 34 LOB > 90% LOB > 90% States > 34 States > 34 States > 34 DPW

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

Super Regional Super Regional Coverage Specialist Super Regional Super Regional Super Regional Super Regional Super Regional Coverage Specialist

LOB = Line of Business; DPW = Direct Premium Written

SR3 | INSURANCE JOURNAL-SPECIAL REPORT May 18, 2015

www.insurancejournal.com

2015 Super Regional P/C Insurers™

As developed by Demotech Inc. for Insurance Journal. Ranked by Direct Premium Written as of 12/31/2014. Company

12/31/2014 DPW DPW Growth Group OOOs omitted 2014 vs 2013 Name

American Family Mutual Insurance Co.

$5,270,083

1.7%

2 3

Erie Insurance Exchange Farmers Insurance Exchange

$4,190,127 $3,325,687

Mid-Century Insurance Co.

State Of Domicile

5.3% 4.5%

American Family Insurance Group Erie Insurance Group Farmers Insurance Group

PA CA

$2,668,061

-0.6%

Farmers Insurance Group

Auto-Owners Insurance Co.

$2,347,134

8.7%

Auto Owners Group

Owners Insurance Co.

$1,886,884

5.2%

Auto Owners Group

Nationwide Mutual Fire Insurance Co.

$1,658,401

3.2%

Nationwide Corp. Group

8 9

Fire Insurance Exchange COUNTRY Mutual Insurance Co.

$1,512,463 $1,509,417

4.8% 0.8%

10 11

Shelter Mutual Insurance Co. Westfield Insurance Co.

$1,339,261 $1,310,318

Progressive Northern Insurance Co.

$1,281,220

ACUITY, a Mutual Insurance Co.

$1,242,975

Progressive Casualty Insurance Co.

$1,172,163

$1,112,734

16 17 18 19

Farm Bureau Property & Casualty Insurance Co. West Bend Mutual Insurance Co. Farmers Insurance Co. Inc. MemberSelect Insurance Co. United Financial Casualty Co.

Farmers Insurance Group CA Country Insurance & Financial IL Services Group 9.6% Shelter Insurance Group MO 14 - AR,CO,IL,IN,IA,KS,KY,LA,MS,MO,NE,NV,OK,TN 2.2% Westfield Group OH 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 0.8% Progressive Group 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 10.6% N/A WI 23 - AZ,CO,ID,IL,IN,IA,KS,KY,MI,MN,MO,MT,NE,NV,NM,ND,OH, PA,SD,TN,UT,WI,WY 12.9% Progressive Group OH 22 - AZ,AR,CA,CO,CT,DC,HI,KY,ME,MD,MA,MN,MO,NV,NY,OH, PA,RI,TX,VT,VA,WA 5.5% Iowa Farm Bureau Group IA 8 - AZ,IA,KS,MN,NE,NM,SD,UT

$985,283 $973,477 $894,012 $888,590

9.3% -2.1% 1.5% 9.8%

N/A Farmers Insurance Group Automobile Club MI Group Progressive Group

WI KS MI OH

20 21

Erie Insurance Co. Citizens Insurance Co. of America

$836,678 $826,943

27.0% -1.3%

Erie Insurance Group The Hanover Insurance Group

PA MI

Truck Insurance Exchange

$748,337

3.0%

Farmers Insurance Group

$721,036

-0.2%

State Auto Mutual Group

$587,791

-2.5%

Travelers Group

State Auto Property & Casualty Insurance Co. Automobile Insurance Co. of Hartford, CT Peerless Insurance Co.

$546,842

-28.1%

Liberty Mutual Group

26 27

Frankenmuth Mutual Insurance Co. Central Mutual Insurance Co.

$545,195 $542,620

4.6% 8.5%

Pennsylvania National Mutual Casualty Insurance Co. Integon National Insurance Co. Grange Mutual Casualty Co. Selective Insurance Co. of South Carolina

$541,403

29 30 31 32

$538,079 $532,181 $516,935

33 34

Occidental Fire and Casualty Co. of North Carolina Progressive Northwestern Insurance Co. State Automobile Mutual Insurance Co.

$495,380 $485,464 $484,809

United Fire & Casualty Co.

$484,693

36 37

Mercury Casualty Co. American Strategic Insurance Corp.

$478,151 $453,198

38 39 40

Motorists Mutual Insurance Co. Hastings Mutual Insurance Co. Selective Insurance Co. of America

$436,484 $412,922 $396,120

Farm Family Casualty Insurance Co.

$389,432

Old Republic General Insurance Corp.

$386,324

NGM Insurance Co.

$377,710

Amerisure Mutual Insurance Co.

$376,378

45 46 47

Pekin Insurance Co. North Star Mutual Insurance Co. SECURA Insurance, a Mutual Co.

$361,711 $359,668 $357,254

SR4 | INSURANCE JOURNAL-SPECIAL REPORT May 18, 2015

Number/States Greater than $1 Million DPW as of 12/31/2014

18 - AZ,CO,ID,IL,IN,IA,KS,MN,MO,NE,NV,ND,OH,OR,SD,UT, WA,WI 11 - DC,IL,IN,MD,NC,OH,PA,TN,VA,WV,WI 33 - AL,AZ,AR,CA,CO,GA,ID,IL,IN,IA,KS,ME,MD,MI,MN,MO,MT, NE,NV,NJ,NM,ND,OH,OK,OR,SD,TN,TX,UT,VA,WA,WI,WY 34 - AL,AZ,AR,CA,CO,GA,ID,IL,IN,IA,KS,MD,MI,MN,MO,MT,NE, NV,NJ,NM,NY,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 16 - AL,CA,CO,MI,MN,MO,MT,NE,NV,ND,SD,TX,UT,WA,WI,WY 17 - AL,AK,AZ,CO,GA,IL,IA,KS,MN,MO,NV,ND,OK,OR,TN,WA,WI

11 - IL,IN,IA,KS,KY,MI,MN,MO,NE,OH,WI 5 - AR,IA,KS,MO,OK 8 - IL,IN,IA,MI,MN,NE,ND,OH 27 - 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,WA,WV 12 - DC,IL,IN,MD,NY,NC,OH,PA,TN,VA,WV,WI 24 - AL,AZ,CA,CO,CT,GA,IL,IN,ME,MA,MI,MN,MO,NH,NJ,NY,OH, PA,RI,SC,VT,VA,WA,WI 33 - AL,AZ,AR,CA,CO,CT,ID,IL,IN,IA,KS,MD,MI,MN,MO,MT,NE, NV,NJ,NM,NY,OH,OK,OR,PA,SD,TN,TX,UT,VA,WA,WI,WY 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 33 - AL,AZ,AR,CO,CT,DC,GA,ID,IL,IN,KS,KY,ME,MD,MN,MS,MO, MT,NV,NH,NY,NC,OH,OK,OR,PA,SC,TN,TX,UT,VA,WA,WI 27 - CA,CT,DE,GA,IL,IN,KS,KY,LA,ME,MD,MA,MN,MO,NH,NY,NC, OH,OK,PA,RI,SC,TN,TX,VT,VA,WI 14 - AL,GA,IL,IN,KY,ME,MI,NH,NC,OH,SC,TN,VT,WI 18 - AZ,CO,CT,GA,IL,IN,MA,MI,NH,NM,NY,NC,OH,OK,SC,TN, TX,VA 10 - AL,DE,MD,NJ,NC,PA,SC,TN,TX,VA

Frankenmuth Mutual Group MI Central Mutual Insurance Co. OH Group 3.3% Pennsylvania National PA Insurance Group 13.6% Amtrust Group NC 13 - AL,AZ,CA,FL,MI,NJ,NY,NC,OH,PA,RI,TX,VA -1.6% Grange Mutual Casualty Group OH 9 - GA,IL,IN,KY,OH,PA,SC,TN,VA 3.1% Selective Insurance Group IN 22 - CT,DE,GA,IL,IN,IA,KY,MD,MA,MI,MN,MO,NJ,NY,NC,OH,PA, RI,SC,TN,VA,WI 3.0% IAT Reins Co. Group NC 33 - AL,AZ,AR,CA,CO,CT,FL,GA,IL,IN,IA,KS,KY,LA,MD,MA,MN, MS,MO,NV,NJ,NY,NC,ND,OH,OK,OR,PA,SC,TN,TX,VA,WA 1.6% Progressive Group OH 14 - AK,AZ,AR,CT,ID,IN,KS,ME,MO,MT,NY,ND,VA,WA 9.0% State Auto Mutual Group OH 29 - AL,AZ,AR,CO,CT,FL,GA,IL,IN,IA,KS,KY,MD,MA,MI,MN,MS, MO,NC,ND,OH,PA,SC,SD,TN,TX,VA,WV,WI 13.7% United Fire & Casualty Group IA 27 - AL,AZ,AR,CA,CO,FL,ID,IL,IN,IA,KS,LA,MI,MN,MS,MO,MT,NE, NM,ND,OK,SD,TN,TX,UT,WI,WY 5.2% Mercury General Group CA 5 - AZ,CA,NV,NY,VA 21.9% ARX Holding Corp. Group FL 22 - AL,AZ,CO,CT,FL,GA,IL,MD,MA,MN,NV,NJ,NC,OH,OR,PA,SC, TN,UT,VA,WA,WI 2.3% Motorists Mutual Group OH 6 - IN,KY,MI,OH,PA,WV 4.9% N/A MI 6 - IL,IN,IA,MI,OH,WI -7.4% Selective Insurance Group NJ 24 - CA,CT,DE,DC,GA,HI,IL,IN,IA,MD,MI,MN,MO,NJ,NY,NC,OH, PA,RI,SC,TN,VA,WA,WI 1.8% American National Financial NY 11 - CT,DE,ME,MA,NH,NJ,NY,RI,VT,VA,WV Group 5.7% Old Republic Group IL 26 - AL,AZ,CA,CO,CT,FL,GA,HI,IL,IN,KS,LA,MD,MA,MI,MS,MO, NV,NJ,NY,NC,OK,PA,TN,TX,VA -4.3% Main Street America Group FL 23 - AZ,CT,DE,FL,GA,IL,ME,MD,MA,MI,NV,NH,NJ,NY,NC,PA,RI, SC,TN,TX,UT,VT,VA 8.6% Amerisure Co. Group MI 29 - AL,AZ,AR,CA,CO,FL,GA,IL,IN,IA,KS,KY,LA,MD,MI,MN,MS, MO,NV,NJ,NC,OK,PA,SC,TN,TX,UT,VA,WI 10.2% Pekin Insurance Group IL 6 - AZ,IL,IN,IA,OH,WI 9.4% North Star Co. Group MN 6 - IA,MN,NE,ND,OK,SD 9.5% Secura Insurance Group WI 12 - AZ,CO,IL,IN,IA,KS,KY,MI,MN,MO,ND,WI

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Company

12/31/2014 DPW DPW Growth Group OOOs omitted 2014 vs 2013 Name

State Of Domicile

FCCI Insurance Co.

$343,880

19.4%

FCCI Mutual Insurance Group

Amerisure Insurance Co.

$340,489

4.0%

Amerisure Co Group

$338,796

-33.1%

BCBS of SC Group

Companion Property and Casualty Insurance Co. BITCO General Insurance Corp.

$335,046

10.9%

Old Republic Group

Courtesy Insurance Co.

$322,144

5.7%

JM Family Group

53 54

$318,811 $313,206

5.8% 9.6%

Vermont Mutual Group N/A

Vermont Mutual Insurance Co. Farmers Mutual Insurance Co. of Nebraska EMCASCO Insurance Co.

$312,339

2.4%

EMC Insurance Co. Group

AmGUARD Insurance Co.

$302,899

31.4%

Berkshire Hathaway Group

57 58

Merrimack Mutual Fire Insurance Co. General Casualty Co. of Wisconsin

$300,638 $297,316

5.9% -4.1%

Andover Group QBE Insurance Group

MA WI

59 60 61

Westfield National Insurance Co. American Commerce Insurance Co. Electric Insurance Co.

$296,353 $296,068 $292,792

-1.8% 5.2% -15.5%

Westfield Group Mapfre Insurance Group Electric Insurance Group

OH OH MA

American Road Insurance Co.

$291,089

8.9%

N/A

63 64 65

Preferred Mutual Insurance Co. Donegal Mutual Insurance Co. Western National Mutual Insurance Co.

$289,801 $278,382 $270,702

4.1% 7.2% 5.5%

NY PA MN

66 67

Mutual of Enumclaw Insurance Co. Aspen American Insurance Co.

$266,950 $263,648

-1.5% 21.8%

Farmington Casualty Co.

$251,680

-10.9%

N/A Donegal Group Western National Mutual Group Mutual of Enumclaw Group Aspen Insurance Holding Group Travelers Group

$241,128

0.6%

Pekin Insurance Group

Farmers Automobile Insurance Association California Casualty Indemnity Exchange

$240,916

2.7%

71 72

Alaska National Insurance Co. First Colonial Insurance Co.

$240,898 $226,464

5.0% 31.1%

California Casualty Management Group N/A Allstate Insurance Group

$224,495

11.1%

MS & AD Insurance Group

Mitsui Sumitomo Insurance Co. of America Motors Insurance Corp.

$215,517

4.0%

75 76 77 78

Quincy Mutual Fire Insurance Co. Auto Club Insurance Association Republic Underwriters Insurance Co. Pacific Specialty Insurance Co.

$214,499 $214,330 $209,182 $208,018

1.9% -6.4% 7.0% 12.3%

79 80

Selective Way Insurance Co. Endurance American Insurance Co.

$204,296 $202,903

-15.3% 97.3%

GMAC Insurance Holding Group Quincy Mutual Group Automobile Club MI Group Delek Group Western Service Contract Group Selective Insurance Group Endurance Group

81 82

$198,051 $196,139

15.5% 6.8%

Builders Group Horace Mann Group

83 84

Builders Mutual Insurance Co. Horace Mann Property & Casualty Insurance Co. Cherokee Insurance Co. Utica Mutual Insurance Co.

$195,342 $195,323

16.5% 0.2%

N/A Utica Group

85 86

Merchants Mutual Insurance Co. Farmland Mutual Insurance Co.

$192,900 $192,158

9.7% 9.1%

Merchants Mutual Group Nationwide Corp. Group

87 88 89

Society Insurance, a Mutual Co. Unigard Insurance Co. American Family Home Insurance Co.

$188,321 $187,581 $187,051

6.2% 1.4% 0.0%

N/A QBE Insurance Group Munich Amer Holding Group

AMEX Assurance Co.

$186,650

3.0%

N/A

Mountain West Farm Bureau Mutual Insurance Co. Century-National Insurance Co. North River Insurance Co.

$180,433

8.6%

Mountain West Farm Group

$178,853 $172,441

10.4% 1.2%

N/A Fairfax Financial Group

$172,167 $167,692

9.5% 3.8%

Donegal Group Indiana Lumbermens Group

Atlantic States Insurance Co. Pennsylvania Lumbermens Mutual Insurance Co. Jewelers Mutual Insurance Co.

$161,750

6.7%

N/A

97 98 99

Old United Casualty Co. ProAssurance Casualty Co. Securian Casualty Co.

$159,609 $158,840 $155,383

3.7% -5.1% 22.2%

Van Enterprises Group ProAssurance Corp. Group Minnesota Mutual Group

92 93 94 95

SR5 | INSURANCE JOURNAL-SPECIAL REPORT May 18, 2015

Number/States Greater than $1 Million DPW as of 12/31/2014

18 - AL,AR,FL,GA,IL,IN,KY,LA,MD,MI,MS,MO,NC,OH,SC,TN,TX, VA MI 25 - AL,AZ,AR,FL,GA,IL,IN,IA,KS,KY,LA,MD,MI,MN,MS,MO,NC, OK,PA,SC,TN,TX,UT,VA,WI SC 20 - AL,AK,CA,DE,FL,GA,IL,LA,MD,MS,MO,NJ,NC,OK,PA,SC,TN, TX,VA,WV IL 32 - 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,WV,WI,WY FL 23 - AL,AR,CA,CO,FL,GA,IL,MD,MA,MS,NH,NJ,NM,NC,OH,OK, OR,PA,SC,TN,TX,VA,WI VT 7 - CT,ME,MA,NH,NY,RI,VT NE 2 - NE,SD 29 - AL,AZ,AR,CO,CT,GA,IL,IN,IA,KS,LA,MI,MN,MS,MO,NE,NM, NC,ND,OH,OK,OR,PA,SC,SD,TN,TX,VA,WI 22 - CA,CT,DE,DC,FL,GA,IL,ME,MD,MA,NH,NJ,NY,NC,PA,RI,SC, TN,TX,VT,VA,WV 8 - CT,IL,ME,MA,NH,NJ,NY,RI 31 - AL,AZ,AR,CA,CO,CT,GA,IL,IN,IA,KS,MA,MI,MN,MS,MO,MT, NE,NV,NY,NC,ND,OH,PA,SC,SD,TN,TX,UT,WA,WI 13 - AZ,CO,IL,IN,IA,KY,MI,MN,NM,OH,PA,TN,WV 16 - AZ,CT,FL,ID,IL,IN,KY,NJ,NY,OH,OR,PA,RI,TN,TX,WA 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 31 - AL,AZ,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 4 - MA,NH,NJ,NY 11 - DE,GA,IN,IA,MD,NE,OH,PA,TN,VA,WI 6 - IL,IA,MN,ND,SD,WI

WA 5 - AZ,ID,OR,UT,WA TX 29 - AL,AZ,CA,CO,CT,DC,FL,GA,IL,IN,KS,KY,LA,MD,MA,MI,NV, NJ,NY,NC,OH,OK,PA,TN,TX,UT,VA,WA,WV CT 28 - AL,AZ,CO,CT,DE,DC,GA,IL,IN,KS,KY,LA,MD,MI,MN,MS,MO, NH,NM,NY,NC,OK,PA,RI,SC,TN,TX,UT IL 4 - IL,IN,IA,WI CA 20 - AL,AZ,AR,CA,CO,CT,DE,GA,IN,KS,LA,MD,MN,NV,NM,OK, PA,TN,TX,VA AK 7 - AK,CA,CO,ID,NV,OR,WA FL 23 - AZ,CO,FL,GA,IL,IN,KS,LA,MA,MO,NV,NJ,NC,OH,OK,OR,PA, SC,TN,TX,UT,VA,WA NY 31 - AL,AZ,CA,CO,CT,FL,GA,HI,IL,IN,KY,LA,MD,MA,MI,MN,MS, MO,NV,NJ,NY,NC,OH,OR,PA,SC,TN,TX,VA,WA,WI MI 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 MA 4 - CT,MA,NY,RI MI 5 - IL,MI,MN,NE,WI TX 7 - AR,CA,LA,MS,NM,OK,TX CA 7 - AZ,CA,CO,CT,FL,NJ,TX NJ 10 - DE,DC,GA,MD,MI,NJ,NY,PA,SC,VA DE 30 - AZ,AR,CO,DE,DC,GA,HI,IL,IN,IA,KS,KY,LA,MD,MA,MI,MO, NV,NJ,NY,OH,OK,OR,PA,RI,SC,TX,UT,WA,WI NC 9 - DC,FL,GA,MD,MS,NC,SC,TN,VA IL 33 - AL,AK,AZ,AR,CA,CO,DE,FL,GA,IL,IN,IA,LA,MD,MN,MO,NE, NV,NH,NC,OH,OK,OR,PA,SC,TN,TX,UT,VT,VA,WA,WV,WI MI 16 - AL,AR,CA,IN,KS,MI,MS,MO,NE,NC,OK,PA,SC,TN,TX,VA NY 24 - CT,DE,GA,IL,IN,KY,MD,MA,MI,MN,MO,NH,NJ,NY,NC,OH,OR, PA,SC,TN,TX,VA,WA,WI NY 9 - MA,MI,NH,NJ,NY,OH,PA,RI,VT IA 33 - AL,AZ,AR,CA,CO,FL,GA,ID,IL,IN,IA,KS,KY,MI,MN,MS,MO,MT, NE,NC,ND,OH,OK,OR,PA,SC,SD,TN,TX,UT,WA,WI,WY WI 4 - IL,IN,IA,WI WI 8 - AZ,CA,ID,MT,NV,OR,UT,WA FL 33 - AL,AZ,AR,CA,CO,FL,GA,IL,IN,KY,MD,MA,MI,MS,MO,NE,NV, NJ,NM,NY,NC,OH,OK,OR,PA,RI,SC,SD,TN,TX,VA,WA,WI IL 32 - 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,WI WY 2 - MT,WY CA 6 - AZ,CA,FL,IL,NV,WA NJ 25 - AL,AR,CA,CT,FL,GA,HI,IL,IA,LA,MD,MA,MI,MN,MO,NJ,NY, NC,OH,PA,SC,TN,TX,VA,WI PA 9 - DE,GA,IN,IA,MD,OH,PA,TN,VA PA 34 - AL,AZ,AR,CA,CO,CT,FL,GA,IL,IN,KS,KY,LA,MD,MA,MI,MN, MS,MO,MT,NJ,NY,NC,OH,OK,OR,PA,SC,TN,TX,VT,VA,WA,WI WI 34 - AL,AZ,AR,CA,CO,CT,FL,GA,HI,IL,IN,KS,KY,LA,MD,MA,MI, MN,MO,NV,NJ,NM,NY,NC,OH,OK,OR,PA,SC,TN,TX,VA,WA,WI KS 6 - AZ,CA,FL,KS,MI,TX MI 14 - CA,DE,FL,GA,IL,IA,KY,MI,MN,NE,NV,NJ,OH,WI MN 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

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Company

12/31/2014 DPW DPW Growth Group OOOs omitted 2014 vs 2013 Name

State Of Domicile

100 Federated Rural Electric Insurance Exchange 101 American Select Insurance Co. 102 National Lloyds Insurance Co. 103 Redwood Fire and Casualty Insurance Co. 104 Vanliner Insurance Co.

$154,793

-1.7%

N/A

$148,606 $147,935 $147,409

72.8% -2.0% 457.9%

Westfield Group NLASCO Group Berkshire Hathaway Group

$146,375

11.6%

American Financial Group

105 106 107 108

United Ohio Insurance Co. Concord General Mutual Insurance Co. Grange Insurance Association Federated Service Insurance Co.

$145,858 $144,217 $144,015 $140,518

5.9% 0.2% 4.9% -2.6%

Ohio Mutual Group Concord Group Grange Insurance Group Federated Mutual Group

109 110 111 112 113 114

$138,256 $136,346 $133,930 $130,979 $126,394 $125,696

-3.9% 5.1% 12.8% -8.2% 5.1% 3.5%

115 116

Mid-Continent Casualty Co. Brethren Mutual Insurance Co. Utica First Insurance Co. Columbia Mutual Insurance Co. Cambridge Mutual Fire Insurance Co. American Hallmark Insurance Co. of Texas Farmers Alliance Mutual Insurance Co. Central States Indemnity Co. of Omaha

$121,904 $120,694

2.0% 10.2%

American Financial Group N/A N/A Columbia Insurance Group Andover Group Hallmark Financial Services Group Alliance Insurance Group Berkshire Hathaway Group

117 118 119 120

Insurance Co. of North America Middlesex Insurance Co. Public Service Insurance Co. Lyndon Property Insurance Co.

$117,514 $116,188 $115,633 $114,047

2.8% 3.8% -19.8% -0.8%

121 Harford Mutual Insurance Co. 122 Goodville Mutual Casualty Co.

$112,742 $112,281

11.1% 15.1%

123 Imperium Insurance Co.

$111,954

13.4%

124 Cumberland Mutual Fire Insurance Co. 125 IMT Insurance Co. 126 St. Paul Mercury Insurance Co.

$111,321 $111,161 $110,458

0.8% 5.8% -11.8%

127 Stillwater Insurance Co. 128 Western Reserve Mutual Casualty Co. 129 Philadelphia Contributionship Insurance Co. 130 Penn National Security Insurance Co.

$106,640 $105,788 $102,282

10.6% -0.3% 2.4%

$101,718

4.2%

131

$99,694

3.5%

132 Milbank Insurance Co. 133 Great Midwest Insurance Co. 134 Physicians Insurance, a Mutual Co.

$94,656 $93,745 $92,351

-0.6% 17.6% 6.3%

135 Lightning Rod Mutual Insurance Co. 136 TransGuard Insurance Co. of America Inc. 137 American Mercury Insurance Co. 138 Toyota Motor Insurance Co. 139 Providence Mutual Fire Insurance Co. 140 Harco National Insurance Co.

$91,240 $83,918

2.4% 9.0%

$82,377 $82,096 $81,707 $81,225

-17.0% 23.9% 7.5% 38.3%

Mercury General Group N/A Providence Group IAT Reins Co. Group

OK IA RI IL

141 MHA Insurance Co. 142 Capitol Indemnity Corp.

$79,426 $78,589

4.5% -3.4%

Promutual Group Alleghany Group

MI WI

143 Triton Insurance Co. 144 BITCO National Insurance Co.

$76,922 $75,502

-20.7% 19.3%

Citigroup Group Old Republic Group

TX IL

145 146 147 148 149 150 151 152 153

$74,526 $66,762 $62,980 $60,859 $58,074 $53,508 $50,572 $50,299 $37,911

11.7% 9.5% 5.7% 9.8% -25.8% 13.6% 5.9% -5.8% 12.6%

LA PA CA IL TX MA CA IN OH

$35,956

7.8%

Gray Insurance Group Lititz Mutual Group N/A RLI Insurance Group Unitrin Group Andover Group Civil Service Employee Group Fortress Group Central Mutual Insurance Co. Group Motorists Mutual Group

Hartford Insurance Co. of Illinois

Gray Insurance Co. Lititz Mutual Insurance Co. Dentists Insurance Co. Contractors Bonding and Insurance Co. Trinity Universal Insurance Co. Bay State Insurance Co. Civil Service Employees Insurance Co. Yosemite Insurance Co. All America Insurance Co.

154 Motorists Commercial Mutual Insurance Co.

Number/States Greater than $1 Million DPW as of 12/31/2014

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 OH 11 - CO,GA,IL,IN,IA,MI,MN,OH,PA,TN,WV TX 5 - GA,MO,OK,TN,TX NE 5 - AZ,CA,NE,NV,TX MO 30 - AK,AZ,CA,CO,CT,FL,GA,IL,IN,IA,KS,KY,MD,MA,MI,MN,MO, NE,NV,NJ,NY,NC,OH,PA,SC,TN,TX,VA,WA,WI OH 5 - CT,ME,NH,OH,RI NH 3 - ME,NH,VT WA 6 - CA,CO,ID,OR,WA,WY MN 33 - AL,AZ,AR,CA,CO,CT,FL,GA,IL,IN,IA,KS,KY,LA,MI,MN,MS,MO, NE,NV,NY,NC,OH,OK,OR,PA,SC,SD,TN,TX,VA,WA,WI OH 13 - AR,FL,KS,LA,MI,MO,MT,ND,OK,SC,TX,UT,WY MD 3 - MD,PA,VA NY 6 - CT,MA,NJ,NY,OH,PA MO 12 - AR,GA,IL,IA,KS,MS,MO,NE,OK,SD,TN,TX MA 8 - CT,IL,ME,MA,NH,NJ,NY,RI TX 16 - AR,GA,HI,ID,IN,MT,NM,OH,OR,PA,TN,TX,UT,VA,WA,WY

KS 8 - CO,ID,KS,MT,NE,ND,OK,SD NE 27 - AZ,AR,CA,CO,GA,IL,IN,IA,KS,KY,LA,MI,MN,MO,NE,NY,NC, OH,OK,OR,PA,SC,TN,TX,UT,WA,WI Ace Ltd. Group PA 3 - CA,MA,NY Sentry Insurance Group WI 11 - CA,CT,FL,GA,IN,MI,NJ,TN,TX,WA,WI Public Service Group IL 10 - CA,CT,IL,MA,NH,NJ,NY,PA,RI,WA Protective Life Insurance Group MO 23 - AZ,CA,CO,FL,GA,IL,IN,ME,MA,MI,MN,MO,NE,NV,NC,OH, OK,PA,TN,TX,VA,WA,WI Harford Group MD 8 - DE,DC,MD,NJ,NC,PA,TN,VA Goodville & German Mutual PA 8 - DE,IL,IN,KS,OH,OK,PA,VA Group Lightyear Delos Group TX 24 - AL,AZ,CA,CO,FL,GA,IL,KY,LA,MA,MN,MS,NV,NJ,NM,NY,NC, OK,PA,SC,TX,VA,WV,WI Cumberland Group NJ 4 - DE,MD,NJ,PA IMT Mutual Holding Group IA 6 - IL,IA,MN,NE,SD,WI Travelers Group CT 30 - CA,CO,CT,FL,GA,IL,IN,IA,KS,KY,MD,MA,MI,MN,NJ,NM,NY, NC,ND,OH,OK,PA,RI,TX,UT,VA,WA,WV,WI,WY WBL Group CA 15 - AZ,CA,FL,MO,NE,NV,NM,NY,OH,PA,SC,TN,TX,VA,WA Western Reserve Group OH 2 - IN,OH Philadelphia Contributionship PA 2 - NJ,PA Group Pennsylvania National PA 9 - AL,DE,MD,NJ,NC,PA,SC,TN,VA Insurance Group Hartford Fire & Casualty IL 3 - IL,NY,PA Group State Auto Mutual Group IA 7 - AZ,CO,IN,MN,ND,SD,UT Lightyear Delos Group TX 14 - AL,CO,GA,IL,IN,KY,MI,NV,OH,OK,PA,TX,VA,WV Physicians Insurance, a Mutual WA 3 - ID,OR,WA Group Western Reserve Group OH 2 - IN,OH IAT Reins Co. Group IL 10 - CA,CO,FL,GA,IL,MT,NJ,NC,PA,TX 7 - AK,CA,FL,GA,OK,TX,VA 15 - AZ,CA,DE,FL,IL,MD,MA,NV,NJ,NY,OH,OR,PA,VA,WA 7 - CT,ME,MA,NH,NJ,NY,RI 24 - AR,CA,CO,CT,FL,GA,IN,IA,LA,MI,MN,MO,NE,NV,NJ,NY,NC, OH,OK,PA,TN,TX,WA,WI 7 - IA,MI,MN,ND,OH,SD,WI 24 - AL,AZ,CA,CO,FL,GA,IL,IN,MI,MN,MO,MT,NE,NV,NY,ND,OH, OK,OR,PA,SD,VA,WA,WI 12 - CA,DE,FL,GA,IL,MI,NJ,NY,NC,PA,TX,VA 18 - AR,CO,FL,GA,IL,IA,LA,MO,NE,NC,OK,OR,PA,SC,TN,TX, VA,WI 7 - AL,FL,GA,LA,MS,OK,TX 8 - DE,KS,MD,MO,NC,PA,SC,VA 5 - CA,HI,IL,MN,PA 9 - AZ,CA,FL,MT,NV,NM,OR,TX,WA 7 - AL,AR,ID,MT,OK,TX,UT 3 - MA,NJ,NY 3 - AZ,CA,NV 15 - CA,CO,FL,GA,IL,IN,KY,NC,OH,PA,SC,TN,TX,VA,WA 12 - AZ,CT,GA,IN,MA,MI,NY,NC,OH,SC,TN,VA

OH 12 - IL,IA,KY,MA,MI,MN,NE,NH,OH,PA,TX,WI

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.

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May 18, 2015 INSURANCE JOURNAL-SPECIAL REPORT | SR6

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News & Markets Bitcoins: The Next Cyberinsurance Risk? corporations who are interested in it from a technological standpoint as well as its investment potential. With an estimated $3.5 billion worth of Bitcoins in circulation, 82,000 merchants now accept Bitcoins, Sagalow said. Eight million users have set up Bitcoin “wallets” — accounts where they “store” and manage the currency — and the number is growing. Bitcoins are a way of using and moving money without a bank account or credit card. The currency fluctuates in value against other currencies, just as the U.S. dollar and many others do. Recently, a Bitcoin was worth about $226 in U.S. dollars, Sagalow said.

By Kathy Finn

onsumers around the world are racking up more than 100,000 financial transactions every day without using cash, credit cards or a barter system. How are all those buyers doing it? With Bitcoins, of course. The growing use of the six-year-old virtual currency and its implications for the insurance industry were the subjects of a panel discussion at the Risk and Insurance Management Society (RIMS) 2015 Conference in New Orleans last month. In a session titled, “Bitcoins: the Next Cyberinsurance,” Ty Sagalow, CEO and 20 | INSURANCE JOURNAL-NATIONAL May 18, 2015

founder of Innovation Insurance Group, said it’s no surprise that the use of Bitcoins still raises eyebrows among skeptics, given the “shady” nature of the currency’s startup. Dark Origins “Many carriers remember that when Bitcoin began in 2009, it was first used for the purpose of buying any type of drug you could think of, or to pay for murder for hire — some really bad stuff,” he says. But Sagalow said the currency has moved away from its dark past and has been embraced by Silicon Valley-funded

Insurer Concerns Along with a rocky startup linked to the illegal drug trade, insurers that consider the possibilities of protecting Bitcoin users have other lingering concerns, said Robert Parisi, managing director and national Cyber Risk Product Leader at Marsh in New York. For one thing, “Bitcoin has some volatility, so you can’t have the same approach to storing it as you would a commodity,” he said, adding that the currency has a certain “perishable” quality. “Volatility in price is one of the things carriers are concerned about,” Parisi said. An upward move in price can be beneficial to an owner, but trying to understand exactly how a Bitcoin is created and what causes its price movements “is a very complex problem” for insurers. In addition, the security of Bitcoin use is still untested in the larger market. Bitcoins held by an individual or business are protected in much the same way a safe deposit box at a bank secures valuables. Once stored in a virtual wallet, the currency can only be removed or accessed through the use of two “keys” — or codes — one held by the Bitcoins’ owner and the other held publicly. “A person could lose the thumb drive continued on page 22 www.insurancejournal.com

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News & Markets continued from page 20 that has the private key on it then they are no longer able to unlock their Bitcoin wallet,” Parisi warned. Still, investment in Bitcoins has been relatively robust. Sagalow said the growth in

investment so far in the short life of the currency has been stronger than the growth of Internet-related investment during a similar period in its startup. Venture capital companies have invested

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more than $670 million worth of Bitcoins into security-related enterprises, he added. Cyber Issue James Kirtland, vice president of corporate risk management for Voya Financial Inc., said that so far, insurers have viewed Bitcoin use as a cyber security issue. “Insurance companies are definitely looking at it,” he said, noting that it is reminiscent of the dawn of cyber security, when “everybody looked to their general liability policies to cover it, but the policies didn’t cover it.” So now, carriers are looking for new options. “There really is no product for it yet,” Parisi said. ‘I honestly believe Sagalow made that Bitcoin is the a distinction, however, between cutting edge of insuring Bitcoins’ where monetary value and covering systems may be the management going.’ of a Bitcoin company. The price of the currency cannot be insured, he said, but the company could be covered. Bitcoin theft insurance is available. “It’s pricy and there are only a few policies, but over time more folks will get involved and there will be more consistency in the security of the underwriting,” Sagalow said. Parisi says an interesting aspect of Bitcoins is the anonymity of users. While every Bitcoin transaction is digitally recorded, parties to the transactions are identified only by account numbers, not names. But Parisi points out that any transaction that is done via email leaves an electronic “track” that can be followed back to the user, so the anonymity is hardly complete. The panelists said Bitcoins could become a simple and reliable currency for millions of people. “I honestly believe that Bitcoin is the cutting edge of where monetary systems may be going,” Kirtland said, though he did not suggest that would happen overnight. “The biggest hurdle we have is, we don’t know enough about it,” he said. Finn is a New Orleans-based journalist.

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News & Markets P/C Insurers Post Underwriting Profit, Record Surplus for 2014

he U.S. property/casualty insurance industry posted its second consecutive year of profitable underwriting results in 2014, according to A.M. Best. Surplus for this sector increased by $21.9 billion and reached another record level at year-end 2014. The Best’s Special Report, titled “Profits Continue for U.S. P/C Industry, Supporting Record Level of Policyholders’ Surplus Level,” also notes the net premiums written grew 4.4 percent to $501.2 billion in 2014 compared with the prior-year period. Last year marked the first time since 2009 that the pace of premium growth exceeded the prior year’s rate of growth.

Premium Growth According to the report, net premium growth remains solid, but companies have reported more challenging conditions, particularly for new business. While premium growth slowed for most lines of business in 2014, inland marine, homeowners and commercial auto liability posted large increases. After an unusually moderate level of catastrophe and non-cat weather-related claims in 2013, the industry returned to a more normal level of activity in 2014. Overall, cat losses added 4.0 points to the combined ratio in 2014. Overall, however, core underwriting results remained favorable, deteriorating just 0.5 points to a combined ratio of 92.7,

which is partially attributable to an increase in non-catastrophe weather losses and an increase in fire losses in the first six months. Low Interest Rates The persistent low interest rate environment continues to put pressure on P/C insurers’ results, although net investment income increased in 2014. The increase relates to a dividend of approximately $7 billion in shares of non-financial affiliates paid to National Indemnity Co. (NICO) by GEICO. As a result, the industry’s net investment income grew 9.0 percent in 2014. Companies that anticipate a spike in rates have been increasing liquidity, with lower investment income in the short term in exchange for lower duration that affords greater flexibility to reallocate the portfolio if rates move up quickly.

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Builder’s Risk Market Detail: CorRisk Solutions (CorRiskSolutions.com) covers commercial ground-up construction projects including renovations (existing structure on referral). Minimum premium starts at $1,000. Limits: $7.5 million per occurrence, including soft costs; $100,000 Property in Transit per occurrence; $100K property in temporary storage per occurrence; $2.5million flood sublimit per occurrence and aggregate; and $2.5 million earth movement sublimit per occurrence and aggregate. Available limits: Minimum $100,000, maximum $7.5 million Carrier: Allianz States: All states Contact: Heather Jensen at marketing@corrisksolutions.com

New Trucking Program Market Detail: Brookside General Insurance Services Inc. (www. brooksidegeneral.com) has a new trucking program with an admitted market for local to long-haul trucking. Accepting new ventures and foreign licensed drivers. Available limits: As needed Carrier: Unable to disclose, admitted States: Ariz. only Contact: Rudy Mendoza at 209-476-8022 or email: rudy@ brooksidegeneral.com

Architects and Engineers E&O Program Market Detail: U.S. Risk Insurance Group’s (www.usrisk.com) exclusive national program includes the ability to write primary and excess limit options for an expanded number of classes. The program will be underwritten by certain underwriters at Lloyd’s www.insurancejournal.com

California Real Estate Risks Market Detail: Bentley Wholesale Insurance Solutions Inc. (www. the-brokers-broker.com) offers real estate coverage for California risks. Comprehensive coverage includes: limits offered up to $1 million/$2 million; minimum retentions starting at $5,000; property management coverage available; and prior acts coverage available. To be eligible, real estate related services must not exceed $1 million in prior year revenue and no prior claims or known circumstances during the past five years. Base form coverage enhancements include full limits for third-party discrimination; owned property coverage; $50,000 sublimit for contingent bodily injury/property damage; $500,000 sublimit for failure to disclose pollutants (including mold); $50,000 sublimit for open-house claims; $10,000 defense of licensing proceedings; $10,000 subpoena assistance; 50/50 hammer clause; independent contractors included in the definition of insured; personal and advertising injury coverage; joint venture coverage; and franchisor coverage as an additional insured Available limits: As needed Carrier: Lloyd’s and various States: California Only Contact: Paul Byrne at 949-415-7726 or email: paul.byrne@ the-brokers-broker.com May 18, 2015 INSURANCE JOURNAL-NATIONAL | 27

SPOTLIGHT

AAMGA Incoming President Ware Talks About Canadian Expansion & Why AAMGA Is More Than MGAs By Andrea Wells

he American Association of Managing General Agents (AAMGA) expanded its membership again in 2015 with the addition of eight new organizations, all based in Canada. The Canadian organizations sought to become part of the AAMGA in an effort to access additional education on emerging risks and the ability to network with other MGAs and program managers all across North America. But adding Canadian organziations to the AAMGA fold meant a change in organizational bylaws for the association, said Bernd G. Heinze, executive director of the AAMGA. “We were approached by a group of Canadian managing general agents about two years ago, and they asked whether they could join the AAMGA,” Heinze said. “At that time, we didn’t have the ability to do

that, so we changed the bylaws to allow them to join.” In April 2015, the eight firms officially joined the association. Those members included: • Creechurch International Underwriters, Ltd. in Toronto, ON • Western Underwriting Managers, Ltd. in Vancouver, B.C. • Aurora Underwriting Services, Inc. in Edmonton, AB • National Brokerage Services, Inc. in Montreal, Quebec • Groupassur, Inc. in Saint-Leonard, Quebec • Beacon Underwriting, Ltd. dba Can-Sure Underwriters in Salmon Arm, B.C. 28 | INSURANCE JOURNAL-NATIONAL May 18, 2015

• Angus-Miller, Ltd., in St. John, New Brunswick • Special Risk Insurance Managers, Ltd., in Langley, B.C. AAMGA’s Incoming President Roger Ware said the Canadian managing general agents is a significant addition to the association’s vast pool of specialized and international underwriting talent. “Given the number of underwriting specialties currently in the wholesale insurance market and the multitude of opportunities within Canada, furthering our engagement with our colleagues is mutually beneficial,” Ware said. “Our new Canadian members now have access to a deep network of resources and expertise, and AAMGA benefits by playing a Roger Ware bigger role in the shape of things to come in the Canadian insurance market.” AAMGA will host a delegation of its new Canadian members at its annual meeting this month. Insurance Journal: Why did you open up AAMGA to Canadian companies? What was the motivation? Roger Ware: There were a couple reasons. First and foremost, Canada doesn’t really have an association similar to the AAMGA. … We have educational opportunities. We get involved in a lot of regulatory issues. We certainly have a voice at the table in London, and those were some of the things that these Canadian brokers wanted … On the flip side, from an association perspective, we’ve always realized that we could learn a tremendous amount by spreading our wings, and learning from people in different parts of the world. We all learned a tremendous amount from London, and

I think London has learned a tremendous amount from us. … Having folks from Canada in our association is extremely exciting, because we can learn as much from them as they can from us. Our association is there for the entire wholesale industry; it’s not just in the U.S. Canada is the first step, but none of us see it as the last step. We’re looking to see who fits in our association, really anywhere on the globe. If they can help us learn, and we can help them learn, we just think it benefits everybody…. Some of the Canadians do business in the United States, and some of our folks also do business in Canada. It’s a borderless economy, especially, with technology the way it is. … We think there’s the potential for more than 30 more Canadian members. IJ: The AAMGA has changed its membership bylaws in the past couple of years. In 2013, the organization expanded to the broader wholesale industry; not just MGAs. Do you anticipate further expansion? Ware: We are, and we have. We also incorporated anybody that’s in the program space. The way we look at it is that nobody really fits the definition anymore of a true MGA. Almost everybody has transitioned over the past five to 10 years to doing more than just writing business for one or two carriers. Most of us have multiple carriers on both a binding authority and brokerage basis. Most of our members do programs. When you look at the membership and how it’s transitioned over the past five to 10 years, it made perfect sense to expand because all of our members have changed dramatically. … Everybody is looking to grow their operations, and there has been a lot of her interactivity over the past four or five years. We’re more than just MGAs. Most of us have programs, we are aggregators, a lot of us do business on an admitted, standard marwww.insurancejournal.com

ket basis, and we are just providing those markets to retailers. Our business has just transitioned. … I think a lot of it has been driven by technology, and a lot of us can get our products out to a broader audience. … Our membership does not look today like what it did five years ago, and it isn’t going to look the same three or four years from now as it does today. It’s constantly changing. IJ: Are you seeing consolidation continue in the MGA space? Ware: Yes, 15 years ago there were some people who thought MGAs wouldn’t survive 10 or 15 years. They thought an MGA would be a thing of the past. Not only have we survived, as an industry, as MGAs and wholesalers, we have thrived. Now, people want to own MGAs. They want to own the type of organizations that are members of the AAMGA. We are now very popular to a

lot of people. I don’t think we’ve ever been more popular, as an industry, then, we are now. It seems every carrier wants to start an MGA type of division within their company — and there’s a reason for that. If you go back five, 10, 15, 20, 30 or 40 years, MGA companies on the whole outperform most companies on a combined ratio standpoint by 10 points. That’s continued through today, and it’s been that way for the past 30 to 40 years.

Side of the Insurance Marketplace.” That’s really what it is. We see more and more young people who are entrepreneurial, wanting to get involved in the E&S marketplace, because it Bernie Heinze gives them that freedom to be creative, to be competitive. To expand their minds beyond the rates and forms that you see in ISO forms, which are very good for the admitted side, and they work. But there’s also that side of the marketplace that we represent and that is exciting to young, fresh talent. … We’re seeing students wanting to become involved in an industry where they can really exercise their minds, their innovative skills, their creative talents, and really rise above what admitted forms may be able to provide for them.

IJ: Looking at AAMGA demographics, more than 85 percent of the membership is younger than 50. Some 63 percent are younger than 40. Are younger people more attracted to the wholesale side of the industry? Bernie Heinze: We give presentations to students online and from around the country, and we always title our presentation, “E&S Insurance: The Exciting and Sexy

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5/1/15 12:01 PM

May 18, 2015 INSURANCE JOURNAL-NATIONAL | 29

IDEA EXCHANGE

Perpetuation Planning Selling Your Agency May Be Hazardous to Your (Financial) Health An Economic Case for Internal Perpetuation

f you just sold your agency to one of the many private equity backed brokerage firms, congratulations, but you may want to flip this page. Now that the former agency principal has moved on to the next article, I would like to tell you why I By Robert J. Pettinicchi believe there is a good reason for you to strongly consider perpetuation for your agency. Our agency seller colleague, who is now reading the next article, may regret having sold the agency his or her family built over the last three generations. There is a sound and understandable economic justification that suggests that there is as much value to be realized over time by retaining and investing in your agency. After doing the math, you may find that a perpetuation is potentially more attractive than an outright sale, even given the recent frothy deal valuations. Consider what happens when you completely sell your agency to a third party. In exchange, for likely a very tidy sum, you give up all of the future cash flows of the agency, and all of the clients you and your family have amassed. Chances are that the guaranteed portion of the sale is all that may be realized because there is risk of achieving the full earn-out beyond your control. Also, since you no longer own the shares, you cannot enjoy any future appreciation in the value of the stock. When you take the sale proceeds, besides purchasing a sailboat, you will need to make investments in other assets, such as securities, which will probably not produce a yield as great as the return from running and owning a good performing agency. You will certainly not be able to duplicate the return you would receive from owning the agency with any alternative investment approaching a similar risk profile. If you perpetuate your agency, even if you sell a 30 | INSURANCE JOURNAL-NATIONAL May 18, 2015

small share to employees, chances are that you will have a more valuable agency in the coming years such that your (smaller) ownership share is worth more down the road than the full share would be worth today. Here is a brief description of the math exercise you may wish to attempt. The impact of taxes will not be considered. If one assumes an agency with commission revenue of $5.0 million with relatively good performance delivering a 22.5 percent EBITDA (earnings before interest, taxes, depreciation and amortization) margin, the value on an outright sale may be $9.5 million. Conversely, the value for an internal sale, of less than a full interest, would be $5.6 million. The EBITDA valuation multiples used are conservative — 8.5 and 5.0 times, respectively. Now assume that you sell 30 percent of the shares of your agency to your best producers. Because you were able to retain your best people with an equity stake, they are even more productive and your agency revenue records organic growth of 5 percent per year and grows to $6.4 million revenue in five years. At the 22.5 percent EBITDA margin and same 5.0 multiple, the agency is now worth $7.2 million and your 70 percent interest is worth $5.0 million. But, over

the same period, you received annual cash flows from your 70 percent stake totaling $4.5 million. Add the cash flows received to the projected value and your “total investment” is worth approximately $9.5 million. While the numbers are simplified and ignore taxes and the time value of money, a case can be made that perpetuation can be very attractive since modest growth and retention of cash flows yields a similar value after five years. The best part is that you can continue to do this serially for as long as you care to bring on additional owners or allow the widened group of owners to increase their shares. In addition, you always have the ability to sell out in total, should you want to. This is the equivalent of having the best of both worlds. Naturally, you would need sound legal advice to craft the share purchase and redemption agreements. Attractive Choice Here is another thought worth considering but I can’t model it out for you. Why are agencies so attractive? Besides the fact that there is a lot of capital in search of a return hoping to tap into your reliable and recurring cash flow stream, agencies own something that lends

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great value to the cash flow. Those potential ‘The ability to own Agencies are in the enviable owners are encouraged the customer is position of “owning the customto obtain a loan from a exactly what is er.” The ability to own the cusspecialty lender such as tomer is exactly what is driving driving entrants InsurBanc secured by entrants such as Google into such as Google into the stock purchased. As your industry. They desperately a seller, you want the your industry.’ want a piece of the insurance purchasers to actually distribution space. Google is “buy” the equity. This not setting out to be an insurance carrier places the exercise of financial discipline since that risk is too great. Don’t be afraid on the part of the buyers and readies them of Google entering your industry but ask for greater financial responsibilities in the yourself why they are entering and you will future. realize that you have something very spe To facilitate the financing, as a seller, you cial. That is why they want a part of it. would agree to the bank that you would Think next for a moment of the Amazon repurchase the shares to regain control of model. Amazon is doing all it can do to the stock, likely at a discount, in the event become the distributor of choice to the conthat one of the minority principals defaultsumer for all types of goods. The ultimate ed on their loan. The downside risk to you value of, and success of, Amazon will be as a seller is therefore greatly diminished. realized when one no longer thinks of driv Now, you may ask, “What is the best way ing to Walgreens to purchase deodorant, to start the process of planning for and but simply orders it online from Amazon implementing a perpetuation based on a over their tablet and it is delivered to their sale of stock to your future leaders?” The door, with free shipping. Being the distributor is the preferred, and far less risky, place to be than being the manufacturer or producer of the product. Clients are satisfied when given wide choices, with excellent guidance and support, preferring to repeatedly purchase through a single point of sale. Does this sound familiar to your business? Perpetuation Scenarios There are a variety of perpetuation scenarios that are available. I will focus on the simplest and easiest to implement. Consider approaching perpetuation candidates at an earlier age by offering equity ownership in your business. It has been said that talent flows to equity. I would advise you that the opportunity to purchase equity in your business only be extended to those individuals that have demonstrated that they are high performers. Those who are able to produce business, manage relationships and exhibit the same passion you have for your business and want to be part of its future. Those who are willing to devote some of their financial resources to buy into your business. Equity ownership is a proven way to attract and retain the best talent. www.insurancejournal.com

agency principal who is considering what I have discussed will need to have a very good assessment of the current value of their agency and a projection of the value of the agency several years from now after the implementation of the perpetuation plan and making appropriate investments in the business. We would be very pleased to provide some advice to you and provide referrals for qualified valuation consultants. Always seek accounting and legal advice from the best qualified professionals. We have all been reminded repeatedly of the challenges facing the industry. Crafting and implementing a perpetuation strategy cements your chance for a solid financial future by widening ownership in your agency and diversifying the ages of the owners, while giving you the best options to maximize your investment. Pettinicchi is executive vice president, chief lending officer, at InsurBanc. Email: rpettinicchi@InsurBanc. com. Phone: 866-467-2262. Website: InsurBanc.com.

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May 18, 2015 INSURANCE JOURNAL-NATIONAL | 31 4/8/15 11:40 AM

IDEA EXCHANGE

Marketing An Insurance Agent’s Guide to Finding & Converting Online Leads

odern consumers shop online for everything from groceries to new homes. It only makes sense that they’re looking to the web for insurance polices as well. After all, why would they pick up the phone and call an agent when they have unprecedented access to information online? Readily available, summarized inforBy James Riebel mation is helping consumers compare policy options to make smarter purchasing decisions, and the trend is only gaining momentum. Depending on the insurance vertical, up to 83 percent of consumers would use the Internet to conduct research before making a purchase if it were an option. As an insurance agent or company owner, it’s time to consider how your business is responding to this shift. To continue to grow your book of business, you need a strategy to harness the power of the Internet. Your options are plentiful: buying leads, creating websites, running Facebook ads, updating Facebook pages, etc. All of these modern channels allow you to track and automate sales practices. I’ve heard on more than one occasion that all of this seems overwhelming and expensive. Without a plan, that can certainly be true. However, the best practices mentioned in this article will not only prevent you from getting overwhelmed, but also help your business flourish. Define your target audience. The first step is figuring out what types of customers you need. Ask yourself these initial questions: • Are you targeting more home items this year? • Do you need to grow life production? • Is auto what you open the sales process with? • Or is all of the above a priority? Determining your target consumer seg32 | INSURANCE JOURNAL-NATIONAL May 18, 2015

ment allows you to discover where and how these people use the Internet, positioning you to determine how to get your business in front of them. In most cases, this requires hiring a lead generation company to purchase leads for your sales producers to work. Hire a lead generator to ensure you’re purchasing quality leads. Many lead vendors outsource much of the work, meaning they have little control over the quality of the leads they produce. Working with companies that control the process through internal operations produces more effective outcomes, but be wary of aggregated, incentivized, and co-registered leads. They’re often low-intent consumers used by suppliers to boost lead volume and inflate your cost-per-policy metrics. Build a follow-up process. A reliable, thorough follow-up process is necessary to effectively work your leads and minimize waste. You have to build rapport with clients to create long-lasting relationships by being readily available when they call and actively checking in with them from time to time. Test your processes again and again. Working with the same company for a long time can leave you prone to missing opportunities. The market changes every day. You need to test early and often so you don’t get too comfortable in your routine — even if it’s currently working.

Leverage social media. While you’ll likely have to pay for some lead generation if you want to consistently fill your sales pipeline, there’s also plenty of online marketing you can and should be doing on your own, namely through social media. Make sure you leverage your company’s social media presence to tap into online traffic and target audiences. Think Like a Lead-Converting Pro For these tips to work, you may need to change how you look at online consumers. There are many effective tactics to convert www.insurancejournal.com

leads into customers, but the key is the folby month, and always across multiple comlow-up process, which is often overlooked munication channels — until the person either converts or opts out. or undervalued. Here are four tactics for Use technology. Following up with successful online conversion. leads consistently is vir Be agile. Don’t treat It takes modern tually impossible without online leads like referrals agents to flourish technology, especially or walk-ins. Studies show that you’re 76 percent more in an era of modern since your lead generation services will (hopefully) likely to make a sale to an consumers. be funneling thousands of online lead if you contact the customer within the first three minutes prospects into your pipeline. Automated after an inquiry. When it comes to online dialing platforms, lead management leads, there are two types of agents: the systems, email marketing systems, and quick and the dead. auto-quoting platforms are vital to making Be consistent. Persistence is the key to leads work for you right from your office. success with follow-ups across all industries Ask your lead provider whom you should and lead types. On average, you should work with. make nine to 10 calls to reach someone. The Work smarter, not harder. Of course, most successful agents have a sophisticated you need the right people to make it all follow-up process to contact leads multiple come together. The best way to use your times — first per day, then by week, then people is to automate the follow-up system

Innovation / YES

as much as possible. This way, your salespeople can focus on building relationships with clients and developing new sales strategies rather than making mundane follow-up calls and sending emails. Use technology to make your sales processes smarter. The shift to online shopping and digital marketing is quickly reshaping the landscape of our industry. On one hand, this challenges business-as-usual approaches to reach customers and close deals. On the other hand, this change represents huge opportunities for agents and carriers that can quickly adapt with the shopping habits of consumers. It takes modern agents to flourish in an era of modern consumers. Riebel is the senior vice president of business development at Underground Elephant, a provider of online marketing and customer acquisition.

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May 18, 2015 INSURANCE JOURNAL-NATIONAL | 33

elcome to Insurance Journal’s 2015 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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Premium Finance Directory

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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

3025 Windward Plaza, Ste. 400, Alpharetta, GA 30005 Phone: 678-578-6600 ; Fax: 866-922-0691 Email: newbiz@inspayco.com www.inspayco.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.

· 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

Johnson & Johnson Preferred Financing, Inc. 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 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 Company, LLC 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

· 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!

Liberty Premium Finance, Inc. 4 Centerpointe Dr., Ste. 300, La Palma, CA 90623 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 · 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

· We keep your insured’s insured · Legendary service · Flexible plans & web-based management N36 | INSURANCE JOURNAL-NATIONAL REGION May 18, 2015

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Premium Finance Directory Mountain West Premium Finance Group of Companies

Premium Finance Corporation P.O. Box 1827, Eau Claire, WI 54702-1827 Phone: (800) 843-7788, Fax: (715) 836-9196 Email: info@pfcins.com www.pfcins.com

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.

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.

· Experienced premium financing with friendly, quality service · Minimal paperwork, agent online access in real time · Flexible payment plans and payment options for insureds

Premins Company 1407 Avenue M, Brooklyn, NY 11230 Phone: (800) 599-3279, Fax: (718) 376-8330 Email: info@preminsco.com www.preminsco.com · Commercial and personal financing for over 50 years · Batched once-a-week cancellations · Get answers and quotes quickly with our fast and effective customer service on the phone and on our customized website

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

PREMCO Financial Corporation 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 · Rate Share, Profit Sharing, Stock Dividends & Referral Fees · FREE Online payments and the option to pay with Credit/Debit cards

www.insurancejournal.com

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

Premium Assignment Corporation P.O. Box 8800, Tallahassee, FL 32314-8800 Phone: (800) 342-0991, Fax: (800) 286-8999 Email: marketing@premiumassignment.com www.premiumassignment.com · Exceptional Service · Competitive Rates – Flexible Terms · Custom Quoting System – Online

Pro Premium Finance Co., Inc.

Premium Finance Associates Oak Street Funding

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

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

P.O. Box 817099, Hollywood, FL 33081 Phone: (800) 491-8937, Fax: (866) 632-9776 Email: marketing@pro-premium.com www.pro-premium.com · 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. · User friendly website with E-submission options available and real time account updates.

Providence Bank Agency Finance 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

May 18, 2015 INSURANCE JOURNAL-NATIONAL REGION | N37

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 2015, $5 of the proceeds will be committed toward the new goal of $65,000 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”.

South Bay Acceptance Corp. 10151 Deerwood Park Blvd., Bldg 100, Ste. 330 Jacksonville, FL 32256 Phone: (800) 393-2012, Fax: (888) 328-6747 Email: contact@sbac-finance.com www.sbac-finance.com · 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!

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

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

N38 | INSURANCE JOURNAL-NATIONAL REGION May 18, 2015

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 · Competitive Rates · Flexible 0-4% Producer Fee (Fully earned after 1st payment) · Finance Broker Fees

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

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IDEA EXCHANGE

Growing Your Property Casualty Agency Interpersonal Relationships Promote Your Agency’s Growth

elationships are the currency of commerce. Without them, no one buys or sells anything. These interactions might involve interfaces or individuals — but the end result is always the same … a product or service and money (or barter) changes hands. For insurance, it always involves a premium, of course. By Alan Shulman Personal relationships, and the lack thereof, can impact such mercantile transactions for the people involved, depending on their nature. Online-Only Relationships Are communications between unseen businesses, friends, likes, connections, followers, etc., on social media actual relationships — or are they mere Potemkin villages along the digital highway? Is shopping for a policy at a safe virtual distance, via a mobile insurance app or website, a boon to the P/C industry? Is it becoming the new normal? Is insurance acquisition enhanced when humans are only tangentially involved in the process? Do these online-only business relationships render old-school person-to-person insurance sales and service obsolete? Person-to-Person Relationships Fortunately, people are never obsolete. When there is direct person-to-person contact between the buyer and seller, there’s a bond between the transacting parties that can last for moments or for years. The latter is why some longtime insureds become lifelong friends. Ditto with company underwriters, marketing reps, and executives. Multi-year business dealings often evolve into work friendships. Such realities don’t translate as easily into the digital-only world. Group Relationships These relationships are similar, but www.insurancejournal.com

they aren’t strictly person-to-person. It’s because the members and leaders within them are subject to change, while the group itself remains constant. As such, it’s a dual track relationship. One track (the leadership) agrees to do business with you, while the other manages it day-to-day (the group’s functionaries). Handled right, it’s a win-win relationship that continuously contributes to the stability and growth of your book. Family Relationships Then there’s family. Insuring a relative is potentially problematic in countless ways. Routine underwriting, loss control engineering, pricing, service, and claims are all under the microscope when family is involved. It’s why many agents don’t insure kin. These “easy” sales can be a distraction that adversely impacts your growth by sapping your energy. Fortunately, you have far more insureds and prospects than you have relatives. You Can Do Both Digital-only insurance relationships are primarily driven by the economies of scale. Essentially, it doesn’t really matter who buys and who cancels as long as your volume is up and your loss ratio is down. This distribution system is accepted as the future of consumer insurance — but it doesn’t have to be for your operation. Your agency can do both. You can establish a strong mobile/digital presence, while simultaneously maintaining and germinating person-to-person client and supplier relationships. The fact that digital is growing

Do online-only business relationships render old school person-to-person insurance sales and service obsolete? doesn’t automatically mean that you have to instantly abandon what’s brought you this far. There’s still plenty of space for both. Something Special True interpersonal relationships make it significantly easier to cross-sell, upsell, gain referrals and retain business. They also make it easier to look past minor issues — caused by either party — that might otherwise generate friction. So never overlook the value of the personal touch, as it’s rewarding on multiple levels. It helps to make an industry that is based on “selling nothing” into something that’s really special. 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.

May 18, 2015 INSURANCE JOURNAL-NATIONAL | 39

IDEA EXCHANGE

Minding Your Business Offering Value Added Services

nsurance producers sell roughly the same product as their competitor. The competitive edge often touted by producers is that their firm “has the best service” or “this policy has broader coverage” or some other generalization. Price is handled by adjusting or justifying limits and deductibles. But most independent agencies’ offerBy Catherine Oak & ings are roughly the same. The majority of firms that specialize in personal lines are run in a similar fashion. Likewise, most firms that specialize in commercial lines or employee benefits are similar to their Bill Schoeffler peers. For most firms, the insurance consumer will not see any major valueSelf difference between agencies.11:41 Serve.pdf 1 1/6/15 Products, price and service are basically the

same and that leaves sales professionals selling on rapport, relationships and skills.

Stand Out How can an insurance agency be perceived as unique and of good quality to the consumer? What can an agency do to make it stand out from the crowd? The answer: Offer the client additional services and products they cannot get from other agencies in town — services and products that the consumer needs and desires. These additional services, or “value added services,” are valuable to the client. Valueadded services (referred as “VAS” in this article) are add-ons to the core services of a business. They have unique characteristics and provide benefits to the client that core services cannot. All VAS share the same characteristics: • They do not form a basic service from the firm, but rather they add value to the total service offerings of the agency. • VAS can be stand-alone products, although in practice it is unlikely. • VAS do not counteract the basic services

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offered, but rather augment them. • Since they are add-ons to the basic insurance services offered for a commission, they may be sold to the client for a fee, and meet the definition of what agencies can charge a fee for by law. Value added services can be anything that insurance customers might want or need. What to Offer? Incorporating VAS into an agency will require rethinking the core beliefs and behaviors of an agency. It requires understanding the clients. It is important to evaluate what value added services and products the client might need and will want. There needs to be a pragmatic assessment on what can be offered by the agency based on staff, time and money limitations. Otherwise these services are often outsourced for a fee. A smaller agency in a rural area might not be able to offer the same exotic services a larger agency or regional broker offers to its high-end clients. However, that same small agency can put together an impressive package of value added services and products that will differentiate it from its competitors. Putting together a customized package of VAS can be rewarding but also time consuming if it becomes too elaborate. If the agency is large, it might make sense to have a full time employee who can research, analyze and create a series of value added services for the agency. For small to medium-sized agencies, the owners with administrative staff will have to do this and decide what can be offered cost-effectively for the firm and for the clients. Keep it Simple There are simple VAS that can be offered for little cost. Mike McGee of Investment Insurance Consultants in Katy, Texas, had these two thoughts: 1) Send out an email to clients with a checklist for disaster preparation, especially just before a pendwww.insurancejournal.com

ing event such as a tornado or hurricane. 2) Video or photograph a client’s possessions for claims purposes on a bi-annual basis and store the videos at the agency. For more sophisticated VAS, internal risk management services and products can be developed from sources such as IRMI and RIMS. Local attorneys, CPAs and HR consultants can be tapped to offer package deals to clients. Third party administrators can be hired for claims management, COBRA administration and other services. There are short cuts that can be used in lieu of creating customized VAS. Research what VAS the insurers might offer. Many companies will put together a package of VAS for their key agents and VIP policyholders. There is a plethora of VAS that can be offered to commercial lines clients. Collaborate with a bookkeeping payroll service and offer it at a discount to clients. Hire a consultant that can develop a business disaster plan and sell that service to clients. Put a risk manager’s hat on and think of what services a client might use. How about loss control training? Some agencies have a library of videos on various loss control issues that they loan out to clients. Help create a safety program for clients. Employee benefits companies might offer training or support for compliance to regulations such as HIPAA and COBRA. Some agencies offer web-based online administration and enrollment for their benefits clients. There are some companies that pre-package a set of value added services that the typical insurance customer might desire. One such company is BizAssure (www. bizassure.com). Members can offer their clients legal, HR and accounting services. This type of arrangement can put the small www.insurancejournal.com

agency ahead of it larger competitors in the eyes of the consumer. These organizations do charge a membership fee for these offerings. Advisen (www. advisen.com) provides its members with a variety of resources related to insurance products and industry specific news and data. Show clients how their insurance portfolio compares to its peers or periodically sending clients key industry specific news related to insurance. Summary There are two benefits to the agency. First, by offering these additional services and products, the agency will bring in a

new income stream. Second, the client will become more of an advocate of the agency and less likely to move to another agent/ broker because of the value these services provide them. Start small and methodically add services and products. Keep the main focus on insurance products. Add value to that service before you add value-added services. Don’t get bogged down handling the details of the VAS — they should be mostly outsourced. Firms that offer value added services will stand out from the competition. Oak is the founder of the consulting firm, Oak & Associates, based in Northern California. Schoeffler is an associate of the firm. Oak & Associates specializes in financial and management consulting for independent insurance agencies, including valuations, mergers acquisitions, sales and marketing planning as well as perpetuation planning. Phone: 707-936-6565. Email: catoak@gmail.com.

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

AAMGA www.aamga.org SC1; SE1; E1; M1 ACORD www.acordlomaforum.org 33 American Reliable www.assurantspecialtyproperty.com 26 Amwins Group, Inc. www.amwins.com 23 Anderson & Murison www.andersonmurison.com 40 Applied Underwriters www.auw.com 4, 5, 44 Burnett & Company www.bcoinc.com SC8 Burns & Wilcox Ltd. www.burnsandwilcox.com 9 California Earthquake Authority www.earthquakeauthority.com/mvp 3 Century National www.cnico.com W3 Epic-Premier Insurance Solutions, Inc. www.epic-premier.com 12, 13 First American Specialty Insurance Company www.firstam.com W15 Fujitsu www.fcpa.fujitsu.com 21 General Star www.generalstar.com W13; SE3; E3; M3 Golden Bear Insurance Company www.goldenbear.com W11 Gorst & Compass Insurance www.gorstcompass.com W9 InsurBanc www.insurbanc.com 22

JM Wilson www.jmwilson.com SE7; M5 M.J. Hall & Company www.mjhallandcompany.com W7 McClelland & Hine www.mhi-tx.com SC7; SE6 McNeil & Company www.mcneilandcompany.com/agents 29 Midlands Management Corporation www.midlandsmgmt.com 31 Monarch E&S Insurance Services www.monarchexcess.com W3 Nautilus Insurance Company www.nautilusinsgroup.com 19 Pacific Gateway Insurance Services www.pgiainsurance.com W5 PersonalUmbrella.Com www.personalumbrella.com 7 Tokio Marine Specialty www.tmsic.com 43 PSIC - Pacific Specialty Insurance Company www.psic-onespot.com 3; W18 Regency Insurance Brokerage Services www.regencyinsurancebrokerage.com SE5; E5 Regions Bank www.regions.com 25 Scottsdale Insurance Company www.scottsdaleins.com 2 South & Western www.southandwestern.com SC3 Texas Mutual www.texasmutual.com SC5 Vertafore, Inc. www.vertafore.com 17

May 18, 2015 INSURANCE JOURNAL-NATIONAL | 41

IDEA EXCHANGE

Closing Quote imal hurricane) is roughly half of the force of a 100-mph wind. But reality is more complex than that, with damage actually calculated from a higher power of the wind speed above a threshold. So for a typical house, a 75-mph wind might cause damage 4 percent of value, whereas a 100-mph wind might cause 25 percent damage. Also, the size of a storm can vary greatly due to phenomena like eyewall replacement cycles and interactions with neighboring weather systems. Thus, even a slight under- or over-estimate of wind speed or size can have major impacts on total forecast damage.

The Value of Hurricane Forecasts

By Charles Watson

hile state of the art of hurricane forecasting has improved over the last two decades, coastal exposures and populations at risk have also increased, offsetting those gains. Given the importance of forecasts to the insurance and financial industries, it is important for users of hurricane forecasts to understand what they are — and what they are not. The primary purpose of hurricane forecasts issued by the National Weather Service is the protection of human life, and support for evacuation decision-making. As such, they are subject to what the forecasters themselves call the “forecast of least regret.” These forecasters are very conservative with respect to both landfall location and intensity. For example, rather than using the best estimate for the intensity of a storm, they will set the intensity at the upper bound of the intensity estimates. If there is doubt about track or landfall location, they will depict it closer to the coast or major cities. This is perfectly understandable, given their responsibilities. Given this, damage estimates based on the official public forecasts are almost always on the high side — sometimes significantly so. Damage to a structure is not related to the wind speed in a linear way. The amount of force the wind creates is related to the square of the wind speed. So theoretically the force exerted from a 75-mph wind (a min-

42 | INSURANCE JOURNAL-NATIONAL May 18, 2015

Hurricane Sensationalism When combined with the media attention surrounding a hurricane landfall, it is no surprise that the ultimate damage is typically not as severe as expected. This creates special problems for the insurance and financial markets, which need accurate estimates to support decisions. An example of the media bias towards sensationalism is the following story: I was scheduled to be interviewed on a major cable news financial program a couple of days before a recent hurricane landfall. Talking to the producer, I mentioned that our latest model runs were showing lower damage forecasts, and that the financial impacts were not likely to be as great as feared. She sounded disappointed, asking, “Oh, so you’re saying it’s not likely to be as bad as everybody thinks?” She politely said that wasn’t really the angle they wanted to cover. Sadly this is a typical response from news outlets, who often seek to dramatize breaking news. It makes sense for A valuable contribution people to use a bad or that the private sector even worse case for life can — and should — and safety, but what make is conveying the about financial decisions? Unbiased forecasts are uncertainty involved in needed, as well as “worst hurricane forecasting. case” scenarios. A valuable contribution that the private sector can — and should — make is conveying the uncertainty involved in hurricane forecasting. Private forecasters have more freedom to make unbiased estimates, but they also run the risk of legal action or creating confusion when their forecasts differ from official government sources. The bottom line is that users of hurricane forecasts should be aware of their intended use, the conscious and unconscious biases of the forecaster, and find the solution that best fits their needs. Watson is founder and director of Research and Development at Kinetic Analysis Corp. in Silver Spring, Md.

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