WEST EDITION Wildfire Prevention and Liability California’s Earthquake Safety Bills Insurer’s Ridesharing Endorsement
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Inside This Issue
On The Cover
Special Report: Wearable Devices Disrupt Insurance
June 15, 2015 • Vol. 93 No. 12 • West
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WEST COVERAGE
IDEA EXCHANGE
10 Commercial Drones: ISO Endorsements, Insurers Responding to Interest
W1 California Assembly Advances Earthquake Safety Bill
28 E&O Insights: When Should Agents Offer an Umbrella?
14 For P/C Insurers, a Better-Than Average Year
W2 Effective Wildfire Prevention Hampered by Liability, Weather, Development
33 Growing Your Property Casualty Agency: Alan Shulman
16 FEMA Reconsidering Private Insurers’ Role in Flood Insurance
W6 First Major California Insurer to Offer Ridesharing Endorsement
18 Opportunities for Carrier-Agency Marketing: Channel Harvest
W7 $4M Fire-Prevention Grant Ignites Passions in Northern California
19 Direct Written Premium Report; Top 25 P/C Carriers
W8 Women Impaled by Coffee Presses Sue Companies in Oregon
34 Top 5 Issues with Business Interruption 36 Minding Your Business: Catherine Oak & Bill Schoeffler 38 Closing Quote: It’s Time for Congress to Prepare for Hurricane Season: Jimi Grande
Special Report: Medical Professional Liability 20 The $6 Billion Medical Liability Epidemic: Data Breaches 21 Medical Malpractice Payouts Continue to Climb 22 Telemedicine Tensions in Texas 23 Spotlight: 10 Things to Know About Personal and Commercial Umbrellas 24 Special Report: How Wearable Devices Could Disrupt the Insurance Industry
DEPARTMENTS W4 People 11 Declarations 11 Figures 12 Business Moves 17 MyNewMarkets
30 Closer Look: Additional Insured Endorsements in Construction
6 | INSURANCE JOURNAL-WEST June 15, 2015
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A RECALL CAN BE EXPENSIVE, A RECALL POLICY DOES NOT HAVE TO BE
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Designed for companies with sales of up to $25MM, ACE Recall Plus can provide your clients with protection from financial loss and a tarnished brand name. With coverage limits ranging from $50,000 to $1MM, products can be custom tailored to the specific needs of your client’s business. Backed by ACE Westchester’s team of expert underwriters, best-in-class service, and a solid balance sheet, ACE Recall Plus is a unique comprehensive product recall insurance coverage for your small business clients. For more information please contact Florian Beerli at (203) 747-3406 or visit acewestchester.com
© 2015 ACE Group. The above is a product summary only. The insurance policy actually issued contains the terms and conditions of the contract. All products may not be available in all states and surplus lines products can only be offered through licensed surplus lines producers. ACE Westchester is the U.S.-based excess and surplus property and casualty operations of the ACE Group of Companies, headed by ACE Limited (NYSE: ACE). The ACE Group of Companies provides insurance and reinsurance for a diverse group of clients around the world. Additional information can be found at www.acewestchester.com. ACE®, ACE logo®, and ACE insured.® are registered trademarks of ACE Limited.
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Opening Note
Publisher Mark Wells | mwells@wellsmedia.com
Playing It Safe Feeling old? Risk-averse? You’re not alone. It’s been 46 years since Woodstock, which drew 400,000 young people to upstate New York for three days of free music and art in 1969. It was a defining moment for the Baby Boom generation, according to some media, and was all about challenging the status quo and pushing the limits of expression. That sentiment may seem a long way off to today’s Baby Boomers (Americans aged 50-68) who, according to the 2015 Northwestern Mutual Planning & Progress Study, are playing it safe across just about every aspect of their lives. The study shows that while they are just shy of being as conservative as Matures (aged 69+), Baby Boomers are considerably more risk-averse than Gen X and Millennials in areas such as their social lives and career choices; where they choose to live and how they manage their money. Across all generations, Americans are uncomfortable with taking risk, and have gotten even more risk-averse since the financial crisis. Compared with the fall of 2008, one third (32%) of Americans are less comfortable today taking risks with their finances; one fifth (20%) are less comfortable taking risks in their careers; and more than one fourth (28%) are less comfortable taking risks with their healthcare coverage. “The findings from our study show just how sensitive Americans are to risk – which, as a financial instinct – is a good thing,” says Rebekah Barsch, vice president of planning and sales at Northwestern Mutual. She said that what sometimes is overlooked is how to build risk protection into a financial and insurance plan to help navigate the unexpected. The Northwestern study found Americans are risk-averse in their social relationships, preferring to stick close to friends they know. They are also like the idea of working for one employer all their life and living in the same home long-term, even if moving might bring career and/or financial growth. While people are playing it safe with their money, careers, relationships and home lives, there are two parts of their lives where they are throwing some caution to the wind: in their diets and driving. They are more inclined to eat what they want, even if unhealthy, and live (or die) with the consequences. And one in 10 admit to driving too fast. Baby Boomers’ aversion to risk stands out against the attitudes of their kids and younger colleagues from the Gen X and Millennial generations. “While the idealism of youth is fantastic, so too is the pragmatism and practicality that often come with the experience of getting older,” says Nationwide’s Barsch. She favors playing it safe. Where do you, or your clients, stand on the risk scale?
Andrea Wells Editor-in-Chief 8 | INSURANCE JOURNAL-NATIONAL June 15, 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 Amy O’Connor | aoconnor@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@carriermanagement.com ClaimsJournal.com Editor Denise Johnson | djohnson@claimsjournal.com MyNewMarkets.com Associate Editor Amy O’Connor | aoconnor@mynewmarkets.com Columnists Catherine Oak, Curtis M. Pearsall, Bill Schoeffler, Alan Shulman Contributing Writers Jimi Grande, Denise Johnson, Dwight Kealy, Douglas A. Powell, David Warren 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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WORKERS’ COMP COVERAGE HELPS PROTECT THEIR MOST VALUABLE ASSET. THEIR PEOPLE. For a small business, one employee’s absence can be felt by the whole team. The Hartford sets the standard for injured worker care. With claims management programs that promote better outcomes and help employees return to work quickly. Helping keep costs and premiums under control. Talk to your customers about Workers’ Compensation coverage from The Hartford, and help them prevail. Visit THEHARTFORD.COM/WC. Prepare. Protect. Prevail.® 52680B
All property and casualty policies are underwritten by Hartford Fire Insurance Company, Inc., and its property and casualty affiliates, Hartford, CT. In TX, this insurance is written by Sentinel Insurance Company, Ltd., Hartford Casualty Insurance Company, Hartford Lloyd’s Insurance Company, Property and Casualty Insurance Company of Hartford, Hartford Underwriters Insurance Company, Twin City Fire Insurance Company, Hartford Accident and Indemnity Company and Hartford Fire Insurance Company. Employee benefits are underwritten by Hartford Life Insurance Company and Hartford Life Accident Insurance Company, Hartford, CT. © 2015 The Hartford Financial Services Group, Inc. All Rights Reserved.
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News & Markets P/C Carriers Responding to Commercial Drone Interest By Mark Hollmer
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roperty/casualty insurers have responded positively to the soaring interest in and use of commercial drones, even as global regulators struggle to keep up with the nascent industry, Marsh said in a report. Some insurers are being so proactive they have written their own safety rules to fill the gap left by regulators, Marsh said. At the same time, insurers that plan to offer the coverage have plenty to learn even as real estate agents, Hollywood studios, Amazon and other businesses are testing commercial drone use to enhance their work, the global broker noted. “The road ahead … is filled with challenges of comprehension, education and provision, both to end users and manufacturers,” Marsh said. “Concerns over privacy also abound, and there is little doubt that this subject will generate much debate in the future, particularly once a precedent has been set following a successful series of claims.” That precedent will be hard to obtain, however, Marsh said, because insurers embracing commercial drones are dealing with a new client base that itself is adjust-
ing to rapidly changing technology. Marsh said that there aren’t yet enough precedents in terms of claims and education to let underwriters accurately assess commercial drone risks. They expect that to change over time, however, as manufacturers develop standards and the U.S. Federal Aviation Administration and other government officials around the world create official regulatory structure for drone use in this new age. Regulations for commercial drone use vary widely around the world. The European Aviation Safety Agency, for example, has a policy on commercial drone operations, but it lacks details on operator/pilot requirements or aircraft licensing. Individual European countries vary on what they allow. On the other hand, countries including Brazil and Canada have no current regulations on commercial drone use. As Marsh noted, the F.A.A. in the U.S has proposed commercial
drone regulations, which are now in draft form, but insurers and other businesses are lobbying for quicker action. The use of drones could become common practice for almost 40 percent of businesses in fewer than five years, according to corporate risk managers surveyed by Munich Re at this year’s Risk and Insurance Management Society (RIMS) conference. Those same risk managers said they will buy drone insurance even if it’s not mandated. Meanwhile, insurers including AIG, USAA and State Farm have obtained FAA exemptions to test commercial drones for insurance claims review after natural disasters, risk assessment, and other underwriting functions. Marsh cited statistics asserting that one tenth of the global civil aviation fleet will be unmanned within 10 years, and annual global spending on commercial drones will double to $11.5 billion. Marsh’s report is called “Dawning of the Drones: The Evolving Risk of Unmanned Aerial Systems.”
ISO Drone Insurance Endorsements Available in Most States
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SO’s new coverage and exclusion options for commercial drones have gone into effect in most ISO jurisdictions. The options were designed to provide insurers with tools to help develop insurance programs for businesses that may use drones. The new options, effective as of June 1, address the growing liability exposures of commercial drones, which have already developed a wide range of potential and reported uses, including package delivery, crop protection, and aerial photography. Many insurers have provided coverage by writing their own safety rules as they waited on regulations by the Federal Aviation Authority announced at the end of March. 10 | INSURANCE JOURNAL-NATIONAL June 15, 2015
The new ISO options modify coverage under ISO’s Commercial General Liability and Commercial Liability Umbrella/Excess programs. Six core options are available under each program (three optional exclusions and three limited-coverage endorsements) and can be used to address a number of potential exposures with respect to bodily injury, property damage, and other potential liability related to drones. An estimated 30,000 commercial and civil drones could be in the skies in the U.S. by 2020, according to the Federal Aviation Administration (FAA). The Association for Unmanned Vehicle Systems International (AUVSI) estimates
that between 2015 and 2025, the drone industry will create 100,000 jobs and contribute $82 billion to the U.S. economy, according to the Munich Re study. “As more businesses introduce drones into their operations, insurers need underwriting tools available to them to address the potential wide range of exposures they’ll likely face,” said Ron Beiderman, vice president of Commercial Lines Coverage Products at ISO Insurance Programs and Analytic Services. Beiderman said the new endorsement can help insurance carriers tailor coverage to address exposures to suit their risk tolerance. www.insurancejournal.com
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News & Markets California Assembly Advances Earthquake Safety Bills
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Arizona Court Ruling on Marijuana DUI Not Retroactive
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he California Assembly is advancing a pair of bills designed to help buildings withstand earthquakes. The legislation approved unanimously earlier this month would expand financial incentives for seismic retrofits. Assembly Bill 428 would establish a 30 percent tax credit to help cover the costs of upgrading buildings that could collapse during earthquakes. The program would last five years. Assembly Bill 1440 expands a program offering homeowners up to $3,000 to strengthen their houses’ foundations. The bill would make thousands of additional Californians eligible for the grants. Both bills were authored by Assemblyman Adrin Nazarian. The Los Angeles Democrat says earthquake preparedness should be a priority before it’s too late. California has feared devastating earthquakes in part because of the large San Andreas fault line that cuts through it. The legislation heads to the Senate. Copyright 2015 Associated Press.
n Arizona court has ruled that a previous decision on driving under the influence of drugs doesn’t apply retroactively. A 2014 state Supreme Court decision said authorities can’t prosecute Arizona motorists for driving under the influence of marijuana unless the person is impaired at the time of the stop. That ruling focused on marijuana compounds detected in blood and urine, one that causes impairment and one that doesn’t but stays in a user’s system for weeks. A woman convicted of driving under the influence due to having a non-impairing cocaine compound in her system cited the marijuana DUI ruling in her own appeal. However, the state Court of Appeals rejected the woman’s argument. The court said the 2014 ruling didn’t change existing law so it didn’t apply retroactively. Copyright 2015 Associated Press.
Nevada Governor Signs Bills Authorizing Ridesharing Companies
California Bill Would Intercept Insurance Claims to Fund Child Support
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ov. Brian Sandoval has signed two bills to regulate ridesharing companies like Uber and Lyft in Nevada. Sandoval gave final approval to Assembly Bill 175 and Assembly Bill 176 at the end of May, just as cab drivers in Las Vegas staged a protest against the companies. AB175 sets up a regulatory framework for ride-hailing companies and imposes a 3 percent tax on taxi and Uber rides that’s expected to raise $70 million over two years. AB176 places ride-hailing companies under the jurisdiction of the Nevada Transportation Authority. Sen. Kelvin Atkinson has said the companies want to begin operations in Nevada in July, although Uber isn’t committing to a specific launch date. Uber briefly operated in Nevada last fall before a judge issued a restraining order against the company, saying it wasn’t following taxicab regulations. Copyright 2015 Associated Press. www.insurancejournal.com
alifornia lawmakers advanced a bill that would intercept more insurance payments and use them to pay beneficiaries’ overdue child support. About a quarter of insurance companies now voluntarily participate in the program. It collects about $17 million annually from insurance claims, settlements and awards that would otherwise go to individuals who owe child support. The measure approved by the state Senate earlier this month would make insurance companies’ participation mandatory. Sen. Connie Leyva, a Democrat from Chino, says that will greatly increase payments. Senate Bill 585, sought by Insurance Commissioner Dave Jones, lets the departments of Insurance and Child Support Services cooperate to match those who owe child support with those set to receive insurance payouts. The measure passed on a 29-4 vote and headed to the Assembly. Copyright 2015 Associated Press. June 15, 2015 INSURANCE JOURNAL-WEST | W1
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News & Markets Effective Wildfire Prevention Hampered by Liability, Weather, Development
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prescribed fire use in the South over the last decade, these increases have attenuated in the last five years,” Kobziar said. Public land managers said burning can be limited by staffing and budget, while private land managers were more concerned about liability. “Even though prescribed burns cannot prevent all wildfires, survey respondents agree that regular burning helps reduce wildfire intensity and severity, and therefore cuts costs and risks for firefighters and the public,” he said. According to the survey, prescribed burns are conducted to restore unhealthy ecosystems. A beneficial prescribed burn can minimize flammable materials and the spread of pest insects and disease. It can also improve habitat for threatened and endangered species, recycle nutrients back to the soil and promote vegetation growth. As time passes, prescribed burns lose their effectiveness, according to the UF study. If forest managers wait five years or more between ‘Even though prescribed burns cannot prevent prescribed burns, only 10 all wildfires, survey respondents agree that said regular burning helps reduce wildfire intensity percent they saw reducand severity, and therefore cuts costs and risks tions in wildfire in pine forests. for firefighters and the public.’ But forest managers can’t do prescribed burns as be done every few years to prevent wildoften as they’d like because of constraints fires or reduce their severity, depending on such as weather and smoke management, weather and the type of ecosystem land said Kobziar, an Institute of Food and managers are trying to protect, according to Agricultural Sciences faculty member. the survey. Another hurdle is the proximity of com “Although managers reported increases in orest managers would prefer to use prescribed burns every few years to help prevent costly wildfires and rebuild unhealthy ecosystems, but hurdles like staffing, budget, liability and new development hinder them. That’s according to a University of Florida study. Fighting wildfires is costly. The U.S. government now spends about $2 billion a year just to stop them, according to the National Interagency Fire Center. That’s up from $239 million in 1985. The study shows southern land managers would like to use prescribed burns more frequently to prevent wildfires and protect the ecosystem. But they face numerous barriers, including insurance, costs and proximity to development. Leda Kobziar, an associate professor of fire science and forest conservation in UF’s School of Forest Resources and Conservation, led a web-based survey of 523 public and private land managers across Region 8 of the U.S. Forest Service, which consists of 13 Southern states, including Florida. She and her colleagues wanted to see whether front-line experts think prescribed burns prevent wildfires and maintain vegetation and healthy ecosystems. And if they do, what are the circumstances under which such burns work best. As it turns out, prescribed burns should
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mercial and residential areas to forests. Private forest managers cite liability as an impediment to more prescribed burns. Although many Southern states offer liability protection for burn managers, private landowners remain concerned about potential costs of smoke-related incidents. While less than .01 percent of prescribed fires escape, such concerns force private contractors to purchase prescribed burning insurance, which can cost $1,000 to $10,000 annually, or up to $700 per burn, according to Kobziar. Still, given the critical nature of prescribed burning for maintaining fire-adapted ecosystems across the South, the benefits outweigh the costs, according to survey responses. As one manager said, “Prescribed burning is the most important forest management tool we have.” Kobziar tries to help fire managers use prescribed burns through the Southern Fire Exchange, www.Southernfireexchange.org. The portal includes resources to help land managers predict and thereby, better manage, potential smoke impacts, she said. Kobziar’s study is published online in the journal Forests. Source: University of Florida www.insurancejournal.com
Chivalry is Alive! As the manager of the Simi Valley office, Matt invites you to come remember the days of old. When knights were bold, fearless and would gallantly offer their assistance. Matt is intent on showing you that at Monarch, honor is a way of life. • Property • Builders Risk / COC • Manufacturers • Product Liability • Umbrella & Excess • Contractors – Artisans & Generals • Restaurants • Apartments One Who Serves Matt Merkle • Inland Marine Assistant VP / Branch Manager • Distributors Simi Valley Office x2226 • BOPS mattm@monarchexcess.com • Lessor’s Risk Matt Merkle is ready to serve and ready to show you that chivalry in insurance is alive and well.
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People Jennifer Knox
Todd Eckert
Swiss Re Corporate Solutions has named Jennifer Knox to its North America regional sales team as senior vice president and sales leader of the West region. Knox will be based in Santa Ana, Calif. She is responsible for generating new business, managing broker and client relationships and driving growth in the West region. Knox has more than 20 years of industry experience. Swiss Re Corporate Solutions is backed by the Swiss Re Group. Capital Insurance Group has named Todd Eckert agency development manager for the Ventura territory in Southern California. Eckert is replacing the retiring John Higbee after 14 years. Eckert has a background in improving production and profit for national and regional property/casualty carriers. CIG is a P/C insurer serving the Western U.S. Burns & Wilcox Brokerage has named Karl Olson vice president and professional liability regional practice leader in its San Francisco team. Olson will be responsible for delivering professional liability brokerage services and growing the practice. He will report to Burns & Wilcox President Denis Brady. Olson has 15 years of wholesale brokerage experience. He most recently was vice president/branch manager at Sullivan Brokers Wholesale Insurance Solutions. Detroit, Mich.-based Burns & Wilcox is owned by the H.W. Kaufman Financial Group. Alliant Insurance Services has named Jeffrey Strassner a managing director in surety in its construction services group. Strassner is based in the Los Angeles, Calif., office. He is charged with expanding the commercial surety expertise and delivering contract surety advice to construction firms. Strassner has 28 years of experience in construction, commercial, environmental and international surety. Prior to Alliant, he was a managing director at a retail insurance broker. He also has experience as a surety underwriter with Safeco Insurance. Newport Beach-based Alliant provides property/casualty, workers’ compensation, employee benefits, surety and financial products and services. Victor O. Schinnerer & Co. has named Steve Falecki vice president and forest and logging practice leader. Falecki will lead Schinnerer’s forest and logging under-
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writing unit in Sacramento, Calif. He will report to Scott Thomas, senior vice president. He comes from Fireman’s Fund Insurance Co., where he was West region casualty underwriting director. Prior to that he worked for Marsh as a casualty client advisor. Schinnerer is an underwriting manager that provides specialty insurance programs. Lafayette, Calif.-based Stone Creek Insurance Agency has hired three new people for its Northern California office. Russell Wong has been named a personal lines broker. He specializes in personal lines insurance. Wong has 16 years of experience as a captive agent at CSAA. Diane Kaplowitz was named personal lines private client representative. Kaplowitz specializes in high net worth clients and life insurance. She has seven years of experience in the private carrier insurance industry. Before Stone Creek she worked as an agent for State Farm. Marit Winborne was named a marketing intern. Stone Creek is an insurance brokerage that specializes in personal and commercial lines. Beazley has named Nicholas Little and Timothy Regilio to the company’s private enterprise team, which focuses on the professional liability needs of small businesses. Both Little and Regilio will be based in San Francisco, Calif. Little is relocating to San Francisco to strengthen the company’s small business underwriting presence in the U.S. Regilio will be responsible for strengthening broker relationships in the Western region of the U.S. Prior to Beazley, Little worked at CFC Underwriting as a cyber, technology and media underwriter. Before that he was an assistant underwriter with QBE European Operations. Regilio was formerly a business development manager with AIG, where he worked to help grow market share in that company’s small and mid-sized commercial market. Beazley is a specialist insurer. RENO, Nev.-based LP Insurance Services Inc. has named Trevor Johnson a financial analyst. Johnson is responsible for financial modeling and forecasting as well as merger and acquisition support for LP Insurance. Johnson was previously with Sierra Nevada Corp. LP Insurance specializes in property/casualty, surety, workers’ compensation, employee benefits, medical/professional practice and risk management services. www.insurancejournal.com
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News & Markets First Major California Insurer to Offer Ridesharing Endorsement By Don Jergler
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armers became the first large California insurer to start offering a ridesharing insurance product in late-May. In an announcement made at the Los Angeles office of California Department of Insurance, California Insurance Commissioner Dave Jones and Farmers Group Inc. CEO Jeff Dailey outlined the new ridesharing endorsement on Farmers personal auto insurance policies. The endorsement will add 8 percent to a customer’s premium, and is available for drivers participating in any ridesharing companies, also referred to as transportation network companies, like Uber, Lyft and Sidecar. The new policy enables drivers to select coverages including comprehensive and collision, uninsured and underinsured motorist and medical payments coverage. “This is the first major California insurer who is offering this not just for one transportation network company, but for all of them associated with Farmers insurance,” said Jones, who headed a National Association of Insurance Commissioners task force to come up with recommendations for state regulators to deal with ridesharing issues. “So this is a big deal.” Earlier this year Jones approved a filing to enable Uber drivers purchasing coverage through Metromile to add a new coverage endorsement to their personal auto policy.
a smartphone app and is actively looking for a ride. During this period, under AB 2293 either the TNC or driver must have insurance for $50,000/$100,000/$30,000 with excess coverage of $200,000. “We think this is really an important coverage for the state of California,” Dailey said. He called the endorsement “Farmers Ridesharing Coverage,” and said the company was ready to distribute it through its agency channel. “We have a network of close to 4,000 agents across the state of California who are looking to actively start selling this product.” Los Angeles-based Farmers earlier this year introduced its first rideshare product in Colorado. Most personal insurance policies have a livery exclusion, which excludes ‘We think this is really an important commercial activities from coverage. coverage for the state of California.’ Rideshare watcher Harry Campbell, a Newport Beach, Calif., blogger for Forbes who goes by the han Jones announced in November that dle “The Rideshare Guy,” said he believes his department was accepting rideshare the Farmers endorsement will reduce the insurance product proposals in anticipanumber of ridesharing drivers who are contion of a law going into effect in July 1. The ducting the activity without their insurers’ law signed last year, Assembly Bill 2293, knowledge. requires TNCs to carry a $1 million com “My hope is that more companies will mercial policy for death, personal injury, follow suit seeing as there are over 70,000 and property damage, and it specifies coverrideshare drivers in California alone and ages for different driving periods. based off the numbers from my last reader The Farmers endorsement covers the survey in January, over 80 percent of them first period, when a rideshare driver has on W6 | INSURANCE JOURNAL-WEST June 15, 2015
have not told their insurance company that they are a rideshare driver,” Campbell said. An email reply to a request for comment from Uber spokesman Eva Behrend stated: “It is encouraging that Farmers is embracing ridesharing as an important transportation option and innovating to meet the needs of the marketplace here in California.” Lyft offered the following comment: “We are encouraged by the creation of modern insurance products tailored for drivers who participate in peer-to-peer transportation, and we hope Farmers’ policy is one of many options approved and available to ridesharing drivers in California.” Sidecar spokeswoman Margaret Ryan provided a similar comment, and included a call for more such insurance products: “We encourage other insurance companies to also step up and create modern insurance products to serve the thousands of TNC drivers nationwide.” Despite the turbulence between ridesharing companies, regulators and the insurance industry over how ridesharing activities should be enforced and insured, the activity continues to grow. In 2014 Lyft reported averaging 2.2 million rides per month and Uber nearly 12 million, and so far in 2015 Lyft reports averaging 2.5 million and Uber 30 million rides monthly, according to figures provided by Jones. www.insurancejournal.com
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News & Markets $4M Fire-Prevention Grant Ignites Passions in Northern California
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ity officials accepted a $4 million federal grant to chop down trees in the ritzy Oakland hills, a decision that ignited debate over how best to prevent deadly wildfires in the affluent Northern California region. The Oakland City Council voted to approve the Federal Emergency Management Agency grant after a late-night meeting earlier this month. The city and its fire department say clearing young eucalyptus trees and other non-native plants would deter another deadly firestorm like the one that whipped through the hills in 1991. That blaze killed 25 people and destroyed nearly 3,500 homes. The densely populated and wooded hills in drought-stricken California have long served as a potential fire hazard, especially when hot “diablo” winds blow. How best to reduce the danger has been a source of heated debate since the 1991 firestorm. Some residents and environmentalists argue that low-lying brush, so-called ground fuel, is the primary concern rather than the 500,000 eucalyptus trees dotting the hills. Hills Conservation Network, an environmental group, has filed a federal lawsuit to scuttle the tree-cutting project. The Sierra Club and another environmental organization have also sued, but argued that the tree-cutting plan does not go far enough. The Sierra Club wants all the eucalyptus trees in the region toppled and replaced by native plants, saying the trees are highly flammable and were never meant to grow in the area. Before the tree-cutting begins, state authorities must conduct an environmental review, Oakland interim City Manager John Flores said. The federal government initially wanted to cut all eucalyptus trees in the area. But www.insurancejournal.com
the project was scaled back after FEMA received 13,000 comments from residents and others. The plan now calls for “thinning” smaller non-native trees over a
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10-year period. FEMA spokeswoman Mary Simms declined to comment. Copyright 2015 Associated Press.
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June 15, 2015 INSURANCE JOURNAL-WEST | W7
WEST COVERAGE
News & Markets Oregon Woman Hit by Errant Golf Ball Sues Course
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California woman and her husband seek $900,000 in a lawsuit alleging she suffered serious injuries when struck by an errant golf ball while visiting the Oregon coast two summers ago. The suit filed in early June in Portland says Joan Eckerstrom suffers from vertigo, ringing in her ears and other injuries. It states she was walking on a street east of Gearhart Golf Links when the ball hit her in the head. She seeks $500,000 in the suit against
the golfer and the golf course. Her husband Eric Eckerstrom seeks $400,000, claiming he has suffered a loss of companionship because of his wife’s injuries. The suit says the course should have erected barriers to prevent balls from leaving the course. Course general manager Jason Banglid declined comment when contacted by The Oregonian. Copyright 2015 Associated Press.
Women Impaled by Coffee Presses Sue Companies in Oregon
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lawsuit has been filed on behalf of two women who say their hands were impaled while using Bodum-brand coffee presses. According to the suit, Vanessa Dittenhofer and Julie Jenkerson bought the presses in 2013 from a Starbucks in Portland, Ore. The women say they sustained puncture wounds when the rod of the plunger unit broke through the rubber
knob when they pressed down, and now have decreased range of motion. The suit seeks more than $300,000 for each woman and lists Bodum USA and Starbucks as defendants. A Starbucks spokeswoman said the company will investigate the claims. A Bodum spokeswoman didn’t immediately respond to a request for comment. Copyright 2015 Associated Press.
Former Railway Workers File Asbestos Suit Against BNSF in Oregon
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PROFESSIONAL LIABILITY E&O - D&O - EPLI
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hree former employees have sued BNSF Railway, claiming they suffer from lung disease caused by job-related exposure to asbestos. The lawsuit filed earlier this month in Portland, Ore., says the men had to work with and around items that contained asbestos while employed by the railway and its predecessor, Spokane, Portland and Seattle Railway. According to the suit, the plaintiffs — Charles Anderson, Harold Gjerman and Gary Sachtjen — all spent at least 34 years in the industry before leaving in the first decade of the 21st Century. Each of them seeks $300,000. BNSF has faced similar lawsuits in recent years. A company spokesman, Gus Melonas, declined comment. Copyright 2015 Associated Press. www.insurancejournal.com
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NATIONAL COVERAGE
FIGURES
$11.2 Million
DECLARATIONS
$100 Million
The amount ConAgra Foods agreed to pay to settle a federal charge that the company shipped Peter Pan peanut butter tainted with salmonella from a Georgia plant in 2007. The amount includes $8 million in criminal fines, which the U.S. Justice Department said was the highest criminal fine ever in a food investigation. More than 600 people were sickened in 47 states by the salmonella outbreak, triggering a massive recall of the company’s peanut butter that was manufactured between 2004 and 2007.
The amount that a Delaware jury in May ordered Boston Scientific to pay to a woman who, despite two surgeries, still has pieces of transvaginal mesh embedded inside her. The 51-year-old Newark woman had the mesh inserts implanted in 2009 but has had complications since then. The jury found Boston Scientific failed to warn doctors and patients of the risk of the poorly designed inserts. Boston Scientific says the company dedicates significant resources to ensure products are safe.
$25 Million
$2.5 Million
The size of lawsuit filed by a 31-year-old man against a California police department. The lawsuit by Jerome Hill alleges he lost his left eye after Fairfield police used a Taser gun on him and hit him in his eye, back and thigh.
The amount a jury has awarded to Waverly, Minn., dairy farmers who say stray voltage from their power company’s faulty equipment cut deeply into their production. The Wright County jury sided with farm owners Harlan and Jennifer Poppler and Roy Marschall against the WrightHennepin Cooperative Electric Association. The farmers had alleged that Wright-Hennepin’s electrical system caused shocks to their cows because it was outdated, undersized and poorly maintained.
597,951
The number of National Flood Insurance Program policies in force in Texas as of March 31, 2015. That figure represents nearly $375 million in premium. According to the NFIP, Texas is second only to Florida in the number of flood insurance policies in force.
www.insurancejournal.com
Uncharted Territory
“Losing the qualification to self-bond and turning to the corporate surety market is uncharted territory.”
— Robert Duke, chief counsel for the Surety & Fidelity Association of America, said it’s difficult for cash-strapped Wyoming mining companies to acquire surety bonds or offer collateral to backstop current reclamation obligations.
Not Worth It
“We don’t think that one Port-A-Potty is worth $32,000.”
— Attorney Myles Holbrook, in response to a lawsuit filed by rental equipment company Emergency Disaster Services against Morgan County, Ky. The nearly $1 million lawsuit claims the county has yet to pay its bill for equipment rented from EDS following a 2012 tornado. Officials in Morgan County say the original deal was “questionable” and accuses EDS of price-gouging. Morgan County’s insurance company — Underwriters Safety & Claims of Louisville — is also disputing the costs.
Negative Territory
“Job growth in Oklahoma and North Dakota, two energy-producing states, has moved into negative territory.”
—Creighton University economist Ernie Goss, who oversees a survey of the Midwest economy, says slower economic growth is likely through the end of the third quarter this year for nine Midwestern and Plains states. In addition to energy, firms linked to agriculture are also experiencing a drop in economic activity, Goss says.
Starting Over
“It’s giving residents the opportunity to start their lives over again.”
— New Jersey Gov. Chris Christie on the post-Superstorm Sandy buyout initiative called the Blue Acres program. Christie said during a May 27 news conference that more than 300 homes have now been acquired by the state under this program. The two-year-old program seeks to buy homes from willing sellers in areas that have been plagued by flooding and return the land to open spaces.
Guns and Stress
“I have concerns about introducing guns into a university environment already fraught with stress.”
—Texas Sen. Jose Rodriguez, an El Paso Democrat, who voted against a bill passed by the state Legislature that allows concealed handguns on public college campuses. The Senate Republican majority approved the “campus carry” bill. June 15, 2015 INSURANCE JOURNAL-NATIONAL | 11
NATIONAL COVERAGE
Business Moves Confie acquired R&R&R Brokerage Inc. in New York City, a provider of auto insurance founded in 1979. In addition, Confie said it expanded in the Rochester, N.Y., region with the acquisition of Eastern General Insurance Services Inc., which has five locations in Rochester and Buffalo. Confie also acquired Colyer Insurance Agency Inc. of San Antonio, Texas. Colyer Insurance has been part of the San Antonio community for more than 35 years providing personal lines.
Marsh & McLennan Agency, MHBT Marsh & McLennan Agency LLC (MMA), a subsidiary of Marsh LLC, has acquired Dallas-based MHBT Inc., one of the nation’s largest independent insurance brokers. Terms of the transaction were not disclosed. With roots dating back nearly 100 years, MHBT provides insurance, risk management, and employee benefits solutions to businesses and individuals throughout the United States. The firm has annual revenue of approximately $76 million and 350 employees in five offices throughout Texas. All MHBT employees will join MMA and operate under the name “MHBT, a Marsh & McLennan Agency LLC company.” MHBT will serve as MMA’s Southwest regional hub under the leadership of MHBT CEO Bill Henry. Anthony C. Gruppo, who has been MMA’s Southwest regional CEO since 2013, will continue as CEO of MMA Houston. Confie Seguros Confie Seguros, based in Huntington Beach, Calif., has acquired two insurance brokerages in New York, including its first location in New York City, and one in Texas. Terms of the transactions were not disclosed. 12 | INSURANCE JOURNAL-NATIONAL June 15, 2015
Hub, Lovsted-Worthington Hub International Ltd. has acquired the assets of LovstedWorthington Insurance, which serves Seattle and Western Washington. Terms of the deal were not disclosed. LW will become part of the Hub International Northwest operations. LW is a commercial and personal lines brokerage. The firm has locations in Seattle, Bothell and Chehalis, which will remain in operation. Carl Lovsted III, CEO of LW, will join Hub Northwest as executive vice president serving on the region’s leadership team and overseeing the LW operations in Seattle and Chehalis. Dean Young, president of LW, will join Hub Northwest as senior vice president working in the combined Bothell operations with a continued focus on sales and working directly with customers. Alliant, Mary Roach Newport Beach, Calif.-based Alliant Insurance Services has acquired Mary Roach Insurance Agency Inc., a provider of crop insurance to the agribusiness community. Roach, the founder, will join Alliant as senior vice president in agribusiness and food services. The merged firm will operate as Mary Roach Insurance Agency Inc., a division of Alliant Insurance Services Inc. and will continue to be located in Fresno. NFP, Horenberg Insurance NFP, a New York City-based provider of
employee benefits, property/casualty insurance, retirement and wealth management services, has acquired Horenberg Insurance Services Inc., an independent agency in Burtonsville, Md. Terms of the transaction were not disclosed. The agency’s president, Glenn Horenberg, who has more than 35 years of industry experience, will serve as managing director, NFP Property & Casualty. Risk Strategies, Dubraski & Associates Risk Strategies Co. acquired San Diegobased Dubraski & Associates Insurance Services, a national brokerage and consulting firm that provides risk and insurance solutions to the healthcare industry. Founder and CEO Robert Dubraski, his partner Riggs Stephenson and their teams will remain with the firm. Dubraski will continue as president and CEO of Dubraski & Associates, will lead the combined national healthcare practice and will become a member of Risk Strategies’ senior leadership team. Keystone Insurers Group Keystone Insurers Group added three Missouri agencies as franchise partners: Missouri General Insurance Agency in St. Louis; Springfield, Mo.-based agency Barker Phillips Jackson; and Winter-Dent & Company of Jefferson City. Missouri General offers business and personal insurance, and benefits and financial services. Barker Phillips has more than 60 employees and has satellite locations in Rolla and West Plains. Winter-Dent employs 50 staff members and offers a full range of insurance, bonds, employee benefits and financial services. Arthur J. Gallagher, James R. Weir Insurance Arthur J. Gallagher & Co. acquired James R. Weir Insurance Agency Inc. in Mankato, Minn. Terms of the deal were not disclosed. Weir is a retail insurance broker providing commercial property/casualty, risk management consulting, employee benefits and personal lines insurance services. www.insurancejournal.com
We live it.
®
Gary Dunbar President, Great American Bond Division
Bernie Fineman President, Caldwell Tanks Great American customer since 1986
With specialty insurance expertise like this, it’s hard to tell our people from our policyholders Great American’s expertise is built on the knowledge and experience of people who know our customers’ business as well as our own. Gary spent over a decade in the steel and construction industries before joining Great American 25 years ago. His passion evolved from building structures to forging bonds with customers like Bernie – on the site, on the job.
www.GAIG.com/WeLiveIt
For specialty business risks, like multi-million dollar water tank construction, that’s expertise and commitment you can count on.
Agriculture • Annuities • Cyber Risk • Environmental • Equine • Excess & Umbrella • Fidelity & Surety • Financial Institutions Inland & Ocean Marine • Non-Profits • Professional Liability • Transportation • Workers’ Compensation Coverage is underwritten by Great American Alliance Insurance Company, Great American Assurance Company, Great American Insurance Company and Great American Insurance Company of New York, licensed insurers in 50 states and DC. ©2015 Great American Insurance Company. 301 E Fourth Street, Cincinnati, OH 45202
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News & Markets For P/C Insurers, 2014 Was Better-Than-Average Year
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nalysts who predicted the U.S. property/casualty industry would have a tough time topping its 2013 results in 2014 were largely correct, as there was some slippage. However, while property/casualty insurers were not as profitable as they were in 2013, they did manage an underwriting profit again in 2014, and other 2014 metrics were better than historic averages. Insurers’ net income fell 12.5 percent to $55.5 billion in 2014 from $63.4 billion in 2013, and the industry’s overall profitability dropped to 8.4 percent from 10.2 percent, according to the annual financial results reported by ISO and the Property Casualty Insurers Association of America (PCI).
$21.3 billion in 2014 to $674.7 billion, a new record-high. Moderate Year Insurers have reason to feel good for what was “another moderately good year,” according to Robert Gordon, PCI’s senior vice president for policy development and research. “The industry’s profitability, premium growth and underwriting ratios all performed better than long-term historical averages, and policyholders’ surplus reached record levels,” he said. Robert P. Hartwig and Steven N. Weisbart of the Insurance Information Institute, agree that 2014 was a year of moderation. “The industry’s performance in 2014 could be considered a return to long-term trends, neither as strongly profitable as in 2013 nor as catastrophe-impacted as in 2011 and 2012,” the I.I.I. economists said in their analysis.
• Net written premiums rose $19.5 billion, or 4.1 percent, to $496.6 billion for 2014 from $477.0 billion for 2013. That growth was down from 4.4 percent in 2013 but above the 1.6 percent average of the past 10 years. • Net gains on underwriting decreased from $15.2 billion in 2013 to $12.3 billion in 2014, a change mainly attributable to the growth in net losses and loss adjustment expenses, which grew by $19.7 billion, or 6.2 percent, to $334.7 billion. The increase in overall LLAE is predominantly due to non-cat losses. • Policyholders’ surplus climbed $21.3 billion to a record-high $674.7 billion as of Dec. 31, 2014, from $653.4 billion at year-end 2013. Additions to surplus in 2014 included insurers’ $55.5 billion in net income after taxes and $11.5 billion in unrealized capital gains on investments (not included in net income). • The P/C industry’s results include the contribution of mortgage and financial guaranty (M&FG) insurers. Excluding M&FG insurers, the industry’s rate of return fell to 8.2 percent in 2014 from 9.8 percent in 2013.
Insurers’ combined ratio was 97 in 2014, a small deterioration from 96.2 in 2013. Net written premium growth slowed slightly from 4.4 percent in 2013 to 4.1 percent in 2014. Growth for insurers writing mostly commercial lines slowed the most, at 3 percent in 2014 down from 4 percent in 2013, while premium growth for insurers writing mostly personal lines accelerated to 5.8 percent in 2014. Insurers writing more balanced books of business saw premium growth slip to 3.3 percent from 4.1 percent. Policyholders’ surplus increased by
Cat Losses While profitability, premium growth and underwriting ratios performed better than average, insurers were helped in 2014 by below-average catastrophe losses. Property losses from catastrophes striking the U.S. Q4 2014 Results grew $2.6 billion to $15.5 billion in The industry closed out 2014 with good 2014 from $12.9 billion in 2013. The underwriting results in the fourth quarter. $15.5 billion in direct catastrophe According to the ISO and PCI report: losses were $7.2 billion below the Fourth quarter 2014 net gains on under$22.7 billion average for the past 10 years. writing improved to 6.4 percent of the “Right now, good underwriting results $125.3 billion in premiums earned during are a must for insurers. But with much of the period compared with Q4 2013. the improvement in underwriting results The industry’s combined ratio improved for the last two years attributable to moderto 94.9 in fourth quarter 2014 from 97.2 in ate catastrophe losses and fourth quarter 2013. At 94.9, ‘Right now, good the combined ratio was the dependent on continued underwriting results lowest recorded in nearly reserve releases, one has to wonder just how susthree decades. The fourth are a must for tainable the net gains on quarter combined ratio has insurers.’ underwriting will be,” said averaged 106.5 since 1986 but Beth Fitzgerald, president of ISO Insurance has reached as high as 123.3 in 1992. Programs and Analytic Services. Net income fell to $17.8 billion in Some highlights of 2014 results as reportfourth-quarter 2014, down $2.9 billion from ed by ISO and PCI: $20.7 billion in fourth-quarter 2013.
14 | INSURANCE JOURNAL-NATIONAL June 15, 2015
www.insurancejournal.com
Source: PCI/ISO
This is
insured.
Brookfield Manhattan West Project, NYC | Primary, Excess and Environmental Insurance | acegroup.com/us
What does it mean to be ACE insured? It means one of the largest gantry cranes in the United States can be used to construct a 2.6 acre platform over an intersection of active railways in the heart of Manhattan. ACE has the financial strength and expertise to underwrite complex construction risks. Our team of experts understands and has the tools to take on the risks of high-profile construction programs, so our clients can focus on new developments and innovative projects.
息 2015 ACE Group. Coverages underwritten by one or more companies of ACE Group. Not all coverages available in all jurisdictions. ACE速, ACE logo速, and ACE insured.速 are registered trademarks of ACE Limited.
NATIONAL COVERAGE
News & Markets FEMA Reconsidering Private Insurers’ Role in Flood Insurance
F
ederal officials have agreed to consider a proposal calling for an end to the federal flood insurance model that allows private insurance carriers to write and service policies. Senator Charles E. Schumer, D-N.Y., citing alleged “widespread fraud” and “unjust denials” in the handling of Superstorm Sandy claims, urged the Federal Emergency Management Agency (FEMA) to scrap the decades-old Write Your-Own (WYO) insurance model from the National Flood Insurance Program (NFIP) and “move forward to overhaul the process entirely.” Schumer says the system is too profit-oriented and too complicated for serving disaster victims. In a letter to FEMA, Schumer said “profit-driven motivations and incentives” are understandable “but not commensurate” with a federal program designed to provide fair payments to those that suffer losses. Additionally, the WYO system is too complicated with “potentially 80 different companies selling policies to property owners, 80 different systems for collecting premiums, and 80 different processes for calculating proper payouts to victims,” Schumer said. He said the WYO system encourages 16 | INSURANCE JOURNAL-NATIONAL June 15, 2015
the WYOs to fight homeowners in court because they are not responsible for the legal expenses. “The only way to change this unacceptable culture is to scrap it,” he said. FEMA said it is reviewing the entire insurance program in light of the experience with Sandy claims and will consider all reform options. “We expect WYO companies who partner with us to share FEMA’s values of putting survivors first. We’re pleased that Senator Schumer shares our concerns and as we work to reevaluate the program and consider future reforms, everything is on the table, including reexamining role that WYOs have in servicing our program,” Rafael Lemaitre, FEMA spokesperson, told Insurance Journal. The WYO model, in place since 1983, allows participating insurance companies to write and service policies in their own names. There are currently over 80 different companies that sell policies. WYO carriers receive about 30 percent of premiums for expense and commissions. A number of insurers and engineering firms have been sued by homeowners claiming they used doctored engineering reports to avoid paying Superstorm Sandy damages.
The firms have denied any wrongdoing and claimed there is no incentive in the WYO system for them to lowball claims. Insurers also noted that more than 99 percent of all Sandy claims were paid and closed efficiently. Schumer cited a “60 Minutes” TV show segment in early March during which a senior FEMA official claimed to have seen evidence of claims fraud by insurers and engineering firms dating back to 2013. In light of the allegations, FEMA in March agreed to reopen every ‘The only way flood insurance to change this claim filed by unacceptable Sandy victims. culture is to That is approximately 144,000 scrap it.’ claims, including 2,200 currently in litigation. Schumer dismissed arguments of those who say the WYO system encourages competition. “True competition does not exist in the current WYO model anyway, as these providers know that the federal government is ultimately paying for losses they must pay out,” he told FEMA. He said FEMA’s inability to acquire data associated with NFIP policies from WYO carriers is another “glaring deficiency” in the current model. FEMA should retire WYOs from system and instead allow the NFIP to offer all flood insurance policies directly to the property owners, Schumer said. The senator told FEMA that it does not need to wait for Congressional action in order to make changes. FEMA chief Craig Fugate told a congressional task force on April 28 that he wants to see more importance given to paying the full amount of legitimate claims. “We want to fix this,” Fugate said. “If we owe money, we pay. Too often in government we are focused on not making an overpayment, putting more emphasis on not overpaying a claim. I gotta get it right. How do we get to something that’s more successful and works better the first time?” www.insurancejournal.com
NATIONAL COVERAGE
MyNewMarkets International Health Insurance Market Detail: Clements Worldwide (www.clements.com) offers international health insurance with flexible medical benefits and borderless coverage to ex-pats and international organizations in more than 170 countries. Medical benefits include: emergency medical evacuation at no additional cost; coverage of hospitalization, physician, surgeon, specialist fees, and prescription drugs; and choice of quarterly, semi-annual, and annual payment plans. GlobalCare is portable, so insurance can be taken across borders. Under GlobalCare, Clements offers guarantee of payment to more than 6,000 providers worldwide, which means Clements sends payment in advance of approved treatments. Coverage for first two children up to age nine is free if both parents are insured. Wellness benefit can be applied to an annual physical, mammogram or colonoscopy. Optional coverage includes: dental, vision, accidental death and dismemberment, or war and terrorism-related injuries. Available limits: As needed Carrier: Unable to disclose States: International Coverage Contact: Customer service at 800-872-0067
Division offers general liability, business owners policies, commercial auto and additional lines of coverage. Available limits: As needed Carrier: Various, admitted States: All states except Dela. and Hawaii Contact: Customer service at 877-66-ATLAS
Stores Market Detail: Advanced E&S – Southeast Region (www. advancedesgroup.com) offers a program for all types of stores. Coverages include commercial property and/or commercial liability. Additional property enhancement coverages are also available. Sameday quotes and binders available. Available limits: Minimum $25,000, maximum $10 million Carrier: Various, admitted and nonadmitted available States: Ind., Iowa, Kan., Ky., Ill., Mich., Minn., Mo., Neb., Ohio, and Wis. Contact: Karen Keller at 312-957-4043 or email: kkeller@aesins.com
BOPs for Surplus Lines Risks Market Detail: Texas All Risk’s (www.allriskga.com) Rater platform allows appointed agents to build their own businessowners’ policies (BOPs) and package policies online. Quotes can be customized from an à la carte menu of coverages. The e-underwriting technology prequalifies the risk by class and by carrier to bring back every carrier that wants the risk. Payment processes and digital signatures are built-in. Extra coverages are available on surplus lines BOPs across a variety of risks. Available limits: Minimum $100,000, maximum $2 million Carrier: Various, admitted States: La., Okla., and Texas Contact: David Day at 800-627-0303 or email: dday@allriskga.com
Schools/School Boards - Self Insured Excess Coverage Market Detail: Berkley Public Entity Managers (www.mybpem. com) provides self-insured excess programs for schools and school boards. Coverage includes general, professional, sexual abuse and employment practices liability. Available limits: Maximum $10 million Carrier: Unable to disclose, non-admitted States: All states Contact: Ryan Fulmer at 215-557-7386 or e-mail: rfulmer@wrberkley. com
Commercial Package Market Detail: Atlas General Insurance Services’ (www.atlas. us.com) Commercial Division offers insurance options that complement its workers’ compensation programs. With a focus on small- to medium-sized business throughout the nation, the Commercial www.insurancejournal.com
Limousine Market Detail: Pacific Gateway Insurance Agency (www. pgiainsurance.com) offers coverage for stretched and non-stretched limos and includes filings. Available limits: As needed Carrier: National Indemnity Co. States: Ariz., Calif., Nev., and Ore. Contact: Amanda Johnson at 661-775-5977 or email: amanda_ johnson@pgiainsurance.com
Miscellaneous Professional Liability Market Detail: Blackmoor General Insurance Agency (www. Blackmooragency.com) professions include but are not limited to: speech pathologists; mental health facilities; consultants; caterers; social workers; tax preparers; travel agents; property managers; photographers; nutritional counselors and more. Available limits: As needed Carrier: Unable to disclose, admitted and non-admitted available States: Dela., Md., N.J., and Pa. Contact: Rita Hanebury at 267-495-2367 or e-mail: rhanebury@ blackmooragency.com June 15, 2015 INSURANCE JOURNAL-NATIONAL | 17
NATIONAL COVERAGE
News & Markets New Survey Identifies Opportunities for Carrier-Agent Marketing
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ost independent insurance agents are saw an increase of less than 5 percent. Just interested in adding new carriers to 7 percent of agents report a decrease in those they place business with — but very agency revenue. few independent agents are interested in Agencies also grew in terms of the carriadding new products to the selection of ers with which they place business. About products and services that they offer cushalf (48 percent) of agents reported that tomers. their firms added new carriers in 2014. Most This is one of the findings agents hope to follow up of a recent national survey Agents’ interest in this growth by adding even of independent insurance new carriers in 2015: adding new carri- more agents conducted by Channel Nearly three-in-10 are “very Harvest Research. The study, ers isn’t matched interested,” and 42 percent by their interest “Key Success Factors in “somewhat interested,” in Agent/Carrier Relationships,” in adding new adding new carriers. Only 29 is the eighth in a series examof agents are “someproducts beyond percent ining agents’ views on propwhat interested” or “very erty/casualty carriers and var- property/casualty uninterested” in working ious marketplace issues. More coverages. with new carriers. than 2,200 agents provided The full Channel their responses for the survey, which was Harvest report identifies which subgroups sponsored by Insurance Journal. of agents are more or less interested than agents as a whole in adding new carriers. Agencies Want to Grow These subgroups are good targets/lesser Last year was a good year for independent opportunities for carrier-to-agent marketing agents: Fully 51 percent of agents report because they are more or less likely than that their agencies’ revenue grew by 5 pertheir independent agent colleagues to bring cent or more in 2014, and another 19 percent on new carriers.
Most Agencies Don’t Want to Expand Beyond P/C
A
gents’ interest in adding new carriers isn’t matched by their interest in adding new products beyond property/casualty coverages. The Channel Harvest survey asked agents how interested they are in adding each of 10 new products — and, as the chart shows, their interest is minimal. Many agents already offer some of these products, however. The Channel Harvest report examines other ways that carriers might capitalize on agents’ interest in adding new markets. In particular, the report explores the appeal of carrier assistance in niche marketing, communications, annual planning, and other insurance marketplace issues. For more information on obtaining the survey report, contact John Campbell, principal of Channel Harvest, at john@channelharvest.com. www.insurancejournal.com
NATIONAL COVERAGE
News & Markets P/C Direct Premium Written Up 4.5 Percent
D
irect premium written (DPW) for property/casualty insurance companies continues to increase. At year-end 2013, nearly $546 billion of DPW was reported, which was an all-time high for the industry. For 2014, total DPW for all P/C insurers aggregately increased 4.5 percent over 2013, an increase of more than $24.7 billion. More By Douglas A. Powell than 48 percent of this premium growth is attributed to the Top 25 P/C insurers in terms of growth. Overall, P/C insurance companies have continued to serve their clients by responding to catastrophic events, difficult economic conditions and regulatory uncertainty. For the 12 months ending Dec. 31, 2014,
P/C companies comprising the Top 25 insurers leveraged their experience and increased their DPW 11.7 percent over 2013, or $11.9 billion. This continues the Top 25 insurers’ impressive display of premium growth and financial stability. In contrast, the remainder of the industry reported an increase in DPW of 2.9 percent, or $12.8 billion, year-over-year. It is important to note that while increasing DPW, P/C companies have aggregately maintained a sufficient level of policyholders’ surplus (PHS). One measure that indicates P/C companies are conservatively leveraged is the DPW to PHS ratio. An insurer’s DPW to PHS ratio is indicative of its premium leverage on a direct basis, without considering the effect of reinsurance. Since 2010, this ratio for P/C companies has remained stable at approxi-
mately 70 percent. Although the market continues to exhibit signs of firming and DPW continues to increase, P/C insurers should not expect a traditional hard market in the near future. More importantly, it is possible that the double-digit premium growth experienced in the historical hard market cycles may have created unrealistic premium growth expectations for this current recovery. It is more realistic that expectations should relate to gradual, stable growth. If the industry continues to hold to its 10-year historical pattern, growth in 2015 would again result in the highest level of year-end DPW ever reported by the P/C industry. Powell is a senior financial analyst with Demotech Inc. Email questions and comments to dpowell@ demotech.com.
Top 25 Property/Casualty Companies Based Upon Dollar Amount of Direct Premium Written (DPW) Growth Year-to-Date Results Dec. 31, 2014 versus Dec. 31, 2013 Company Name
DPW 12/31/2014
DPW 12/31/2013
$ Growth
% Growth
State Farm Mutual Automobile Insurance Co. American Bankers Insurance Co. of Florida Allstate Fire and Casualty Insurance Co. State Farm Fire and Casualty Co. GEICO Casualty Co. Wesco Insurance Co. LM General Insurance Co. USAA General Indemnity Co. Allstate Vehicle and Property Insurance Co. CGB Insurance Co. State Compensation Insurance Fund Ohio Security Insurance Co. Allstate Northbrook Indemnity Co. GEICO General Insurance Co. Continental Casualty Co. Arch Insurance Co. National Liability & Fire Insurance Co. GEICO County Mutual Insurance Co. Liberty Insurance Corp. National Fire & Marine Insurance Co. Zurich American Insurance Co. USAA Casualty Insurance Co. ACE American Insurance Co. Nationwide Agribusiness Insurance Co. GEICO Indemnity Co. Top 25 by DPW Growth All Other P/C Companies Total
33,908,724,033 2,717,875,596 6,077,906,988 18,736,861,871 2,760,589,273 1,554,170,358 1,918,965,899 2,289,183,264 944,316,241 420,429,467 1,529,578,973 908,235,643 479,911,937 7,351,890,431 5,758,297,913 1,747,169,322 667,591,385 312,629,995 2,427,416,869 541,421,042 5,618,429,222 4,872,219,217 4,279,994,149 990,313,770 4,653,763,638 113,467,886,496 457,157,244,998 570,625,131,494
32,236,152,562 1,739,871,263 5,264,962,684 17,971,068,027 2,150,763,913 965,218,360 1,399,800,010 1,818,233,213 477,635,319 0 1,112,517,683 537,882,843 115,301,049 6,994,505,522 5,413,154,389 1,416,330,577 348,182,524 -34,879 2,132,795,282 270,767,728 5,351,181,841 4,610,619,666 4,030,268,711 773,668,431 4,441,323,642 101,572,170,360 444,321,645,480 545,893,815,840
1,672,571,471 978,004,333 812,944,304 765,793,844 609,825,360 588,951,998 519,165,889 470,950,051 466,680,922 420,429,467 417,061,290 370,352,800 364,610,888 357,384,909 345,143,524 330,838,745 319,408,861 312,664,874 294,621,587 270,653,314 267,247,381 261,599,551 249,725,438 216,645,339 212,439,996 11,895,716,136 12,835,599,518 24,731,315,654
5.19% 56.21% 15.44% 4.26% 28.35% 61.02% 37.09% 25.90% 97.71% -37.49% 68.85% 316.23% 5.11% 6.38% 23.36% 91.74% -13.81% 99.96% 4.99% 5.67% 6.20% 28.00% 4.78% 11.71% 2.89% 4.53%
Data Source: The National Association of Insurance Commissioners, Kansas City, Mo., by permission. Information derived from an SNL product. The NAIC and SNL do not endorse any analysis or conclusion based upon the use of its data. www.insurancejournal.com
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SPECIAL REPORT
Medical Professional Liability The $6 Billion Medical Liability Epidemic: Data Breaches
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one data breach; 39 percent experienced ybercriminals are out to get the healthtwo to five data breaches; 40 percent had care industry. more than five over the past two years. In Healthcare facilities and professionals comparison, 59 percent of their business are facing a surge in data breaches, secuassociates experienced data breaches. rity incidents and criminal attacks that are exposing millions of patients’ medical According to the FBI, criminals are tarrecords to abuse and medical providers to geting the healthcare sector because personliability. al, credit and protected health information Perhaps the scariest trend is that the are accessible in one place, which translates cyber attacks within the medical field are into a high return when sold. increasingly the result of criminal activity The size of an organization is no shield rather than accidents or human errors. against a breach because patient data can Data breaches are costing the healthcare be easily transmitted and exposed, says ID industry $6 billion annually, while the Experts. average economic impact of data breaches Those especially vulnerable are healthper organization is $2.1 care organizations includ90% of healthcare million, according to the ing hospitals, clinics, providers suffered most recent benchmark private or public healthstudy on healthcare privacy breaches in the past care providers and their and security conducted by two years. business associates, which the Ponemon Institute and include patient billing, sponsored by ID Experts. health plans, claims processing, and cloud The study found that criminal attacks in services. healthcare are up 125 percent since 2010 and Small- to middle-market organizations are now the leading cause of data breach, are at greater risk for data breach as they with nearly 45 percent of data breaches in have limited security and privacy processes, healthcare a result of criminal activity. personnel, technology, and budgets, the report says. Unprepared Medical organizations say they lack Few healthcare firms are immune. Nearly the resources to fight the cyber epidemic. 90 percent of healthcare providers suffered More than half of healthcare organizations breaches in the past two years, half of them and half of their business associates don’t criminal in nature, the report found. believe their incident response process has Medical files, as well as billing and insuradequate funding. One-third of respondents ance records, are the top stolen targets. don’t even have an incident response pro “While employee negligence and lost/stocess in place. The majority of them fail to len devices continue to be primary causes of perform a risk assessment for security incidata breaches, criminal attacks are now the dents, despite a federal mandate to do so. number-one cause,” said Dr. Larry Ponemon, chairman and founder, Ponemon Institute. Incident Reporting Yet, according to the study, only 40 There are many more security incidents percent of healthcare organizations are conthan data breaches. Under federal law, all security incidents need to be assessed to cerned about cyber attacks. determine if they are data breaches that The findings also show that most require reporting. The study indicates that healthcare organizations are unprepared to organizations are not thoroughly assessing address this cyber threat environment. their security incidents. In fact, one-third All healthcare organizations, regardless do not have an incident response process. of size, are at risk for data breach. Ninety “A breach is a breach, no matter how one percent of healthcare organizations had 20 | INSURANCE JOURNAL-NATIONAL June 15, 2015
small. Whether 5,000,000, 5,000, or 50 individuals are affected, the impact to each and every person is a big deal,” said Rick Kam, co-founder of ID Experts. “How many more individuals could be at risk due to unreported data breaches?”
Where and How Breaches Occur
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etween 2010 and 2013, there were more than 900 data breaches of protected health information affecting at least 500 individuals, with most of them resulting from overt criminal activity, according to a study in the Journal of the American Medical Association (JAMA). Vincent Liu, M.D., M.S., of the Kaiser Permanente Division of Research, Oakland, Calif., and colleagues evaluated a database maintained by the U.S. Department of Health and Human Services of breaches reported by health plans and clinicians covered under the Health Insurance Portability and Accountability Act. Some of their findings: • Six of the breaches involved more than 1 million records each and the number of reported breaches increased over time (from 214 in 2010 to 265 in 2013). More than 29 million records were affected by the breaches included in the study. • Breaches affecting 500 individuals or more accounted for 82 percent of reports. • Breaches were reported in every state, D.C. and Puerto Rico. Five states (California, Texas, Florida, New York, and Illinois) had 34 percent of breaches. • Most breaches occurred via electronic media (67 percent), frequently involving laptop computers or portable electronic devices (33 percent). Most breaches also occurred via theft (58 percent). • The combined frequency of breaches resulting from hacking and unauthorized access or disclosure increased during the study period (12 percent in 2010 to 27 percent in 2013). • Breaches involved external vendors in 29 percent of reports. www.insurancejournal.com
Medical Malpractice Payouts Continue to Climb in U.S.
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or the second consecutive year, medical malpractice payouts in 2014 increased over four percent from the previous year. After declining from 2003 through 2012, malpractice payouts started to rise in 2013 and continued to rise at a steady pace in 2014 – marking a trend of increased medical malpractice payouts in the U.S., according to an analysis by Diederich Healthcare, a division of Diederich Insurance Agency, which specializes in medical malpractice insurance. According Diederich’s report, the National Practitioner Data Bank (NPDB) data in 2014 reported an increase of 4.4 percent in payout amounts, bringing the nationwide total to $3.9 billion. If the trend continues, 2015 could be the year that the total crosses the $4 billion threshold. Several states, including California and much of the West region, saw decreases. However, most states saw an increase – particularly states in the South and the Northeast. New York is again the highest state in terms of per capita payouts at $36.15 paid out for every individual residing in the state. The Northeast as a whole had a per capita payout rate of $28.20, which is more than three times greater than the next highest region, the Midwest. The 2014 data showing medical malpractice payouts are again trending upward after nearly a decade of decreasing payouts could affect rates. Diederich Healthcare, which is based in Carbondale, Illinois, says it saw physician malpractice insurance premiums generally go down as the payouts decreased and now that payouts nationwide have started to increase the last couple of years, Diedrich brokers say they expect malpractice insurance carriers to review their rates to determine if they are still adequate in light of this increasing trend. The NPDB keeps records of all negative actions that have been brought against any medical worker. The full report and inforgraphic can be downloaded at: http://www.diederichhealthcare.com/ the-standard/2015-medical-malpracticepayout-analysis/. Source: Diederich Healthcare, a division of Diederich Insurance Agency.
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June 15, 2015 INSURANCE JOURNAL-NATIONAL | 21
SPECIAL REPORT
Medical Professional Liability Texas Case Highlights Tensions Over Telemedicine
By David Warren
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federal judge has determined claims made by the Texas Medical Board in adopting new telemedicine rules were “suspect” and barred the rules from taking effect until a civil trial can be held. The ruling by U.S. District Judge Robert
Pitman hinges largely on a revised rule the board adopted in April that requires a patient to have a “face-toface visit or in-person evaluation” before a prescription can be dispensed. The board has argued such a measure is crucial to ensuring patient safety and quality care. But Dallas-based Teladoc, which challenged the board’s action, argued the panel violated antitrust laws because the rule significantly impairs its business model. Teladoc, a leading telemedicine provider, offers a network in Texas in which a patient consults by phone with a physician and then can upload over the Internet or by mobile app images or other medical data, Teladoc spokeswoman Meredith Adams said. The new revisions would damage
this service by first requiring a face-to-face examination, Adams said. Lawyers for the board had argued during a May hearing that Teladoc was being speculative when it argued the new rules would lead to increased prices for patients, fewer choices and other drawbacks. “The court disagrees,” Pitman said in his ruling. “Plaintiffs’ evidence shows the average costs of visits to a physician or emergency room are $145 and $1,957, respectively, and the cost for a Teladoc consultation is typically $40.” The agency isn’t commenting on the ruling. In a statement last month, board president Dr. Michael Arambula said the board wants to avoid any sort of initial treatment done by telephone that doesn’t provide “any objective diagnostic data” to help a doctor serve a patient. “The board recognizes that as technology evolves, so too must regulations governing telemedicine,” Arambula said. Teladoc CEO Jason Gorevic said telehealth is important in Texas, where many rural regions have few doctors and it can be difficult for patients to travel long distances to medical centers. Teladoc operates in 48 states and hasn’t encountered the legal tussles that have transpired in Texas, Gorevic said. “We have not ended up in court in any other state,” he said. “This represents the sixth time that the courts have found in our favor in Texas.” Lawyers for the board said in May that it’s critical for a patient to have an established relationship with a physician, arguing that treatment notes are more likely to become part of the patient’s “permanent medical record” than if they were provided by a Teladoc consulting physician. But Pitman said in reality patients do not have a single medical record, and instead have records scattered across a variety of providers. Copyright 2015 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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SPOTLIGHT
10 Things to Know About Personal & Commercial Umbrella Personal umbrellas can be sold as a monoline policy. While umbrellas are often tied to auto and home policies, there are companies that offer standalone umbrellas at very reasonable prices. If an insured’s auto is with one carrier and their home is with another that doesn’t disqualify them from purchasing a personal umbrella. — Bill Gatewood, Burns & Wilcox
A personal umbrella provides an additional layer of liability coverage above and beyond the liability limit in auto and homeowner policies. Coverage starts at $1 million and goes up from there. — Bill Gatewood, corporate vice president and director of personal insurance at Burns & Wilcox.
The personal umbrella policy is extremely undersold. The vast majority of people with personal lines exposures don’t have an umbrella policy but they should, as it is one of the most inexpensive coverages available. An umbrella policy with $1 million of liability coverage can be had for around $200 dollars or less per year. — Bill Gatewood, Burns & Wilcox
An insured doesn’t need to be a millionaire to have a $1 million personal umbrella policy. They don’t need to own a home, be married, have kids or be a certain age to have one. If the insured drives a car, crosses a street or has people over to their home (either rented or owned), they need this coverage. Even if someone is trespassing on your property, you could be liable for any injuries. — Daina Kawchack Smith, PersonalUmbrella.com Personal umbrella is not something people buy; it’s something they have to be sold. Most customers are not going to ask for an umbrella, an agent has to proactively educate the customer and let them know what it is. In cases where customers are educated about what an umbrella does, how it can protect them and how inexpensive it is, the close rate is probably somewhere in the 70 percent range. — Bill Gatewood, Burns & Wilcox
A commercial umbrella policy provides additional liability limits over and above the primary limits in commercial general liability, commercial auto and employment liability policies. In some cases it may schedule over a professional liability policy. — Chris Longo, CEO, McGowan Excess and Casualty and professor, Insurance Journal’s Academy of Insurance
There is no contract standardization in commercial umbrella policies, most carriers have their own. Three commonly used contracts for umbrellas are the ISO umbrella policy, the A/B umbrella policy and the excess “follow form” policy, which is not strictly an umbrella policy but is nevertheless commonly available. The “follow form” policy provides additional liability coverage but is not as broad as the ISO or A/B policies. — Chris Longo, McGowan Excess and Casualty, IJ Academy of Insurance Commercial umbrellas offer a per occurrence limit, as well as a policy aggregate, and include a self-insured retention (SIR). — Chris Longo, McGowan Excess and Casualty, IJ Academy of Insurance
Most personal umbrella policies include an expert legal team on retainer and pay for legal defense at their own expense outside of policy limits to defend the insured and negotiate a fair settlement. — Daina Kawchack Smith, chief marketing officer for PersonalUmbrella.com Insurance Services Inc.
One key issue with a commercial umbrella is whether it provides defense costs inside or outside the policy limits. In cases of large and severe claims, it is important to have defense outside the policy limits so that policy limits are preserved to pay for the claim. — Chris Longo, McGowan Excess and Casualty, IJ Academy of Insurance
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June 15, 2015 INSURANCE JOURNAL-NATIONAL | 23
SPECIAL REPORT
Technology How
Wearable Devices Could Disrupt the Insurance Industry By Denise Johnson
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early 50 years after Captain Kirk began using his wrist communicator on the television show, Star Trek, wearable technology is taking hold. From Fitbit and Nike Fuelbands to Google Glass and Golden-I, the technology is influencing how people live and work. While there are many benefits to utilizing wearable technology in the insurance industry, there are also risks, according to experts. Wearable technology refers to miniature electronic devices worn under or on top of clothing or are somehow attached to the
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body. They can even be part of clothing. These devices are capable of collecting a variety of data including video and audio on the driving, eating, exercise and other habits and behavior of those wearing them and then communicating this data over computers or smartphones to third parties such as insurance companies. The most popular wearable devices currently available include headsets for gaming and entertainment, wristbands for tracking exercise and fitness, and smart watches for monitoring health. Google Glasses offer appointment reminders, weather reports, dictation, messaging, visual directions, as well as photography and capabilities. Twenty percent of Americans already own a wearable device and this number is expected to rise quickly, according to a PwC report, The Wearable Future. Millennials are leading this consumer market, with more than 50 percent estimated to purchase fitness bands next year, while 23 percent to 40 percent say they will purchase other wearable devices. They are looking for devices for a variery of purposes: to tell
them their exercise efficiency (81 percent), their dietary and medical information (71 percent), and deals on retail purchases (51 percent). More than half told PwC that they would be strongly motivated to use a wearable technology if it had a feature to monetarily reward them for using it frequently. Insurer Interest The insurance industry is paying attention. A survey conducted in 2014 by Strategy Meets Action (SMA), a Boston-based research advisory firm for the insurance industry, found that about 3 percent of insurers are already using wearable devices and another 3 percent are experimenting with the new technology, while 22 percent are in the process of developing a strategy for using them. A new survey of insurer executives in nine countries by Accenture found that 63 percent of insurer executives believe that wearable technologies will be adopted broadly by the insurance industry within the next two years, while nearly one-third (31 percent) said they are already using wearables to engage customers, employees or partners. Within insurance, there are various areas of potential use for wearable devices including marketing, underwriting, risk managewww.insurancejournal.com
ment, new product development, workers’ compensation and personal auto injury claims management. Tom Benton, a vice president of Research and Consulting in the Insurance practice at Novarica, outlined some key insurance industry uses for wearable technology in a
Potential uses include marketing, underwriting, risk management, product development, workers’ compensation and personal auto injury claims. 2014 executive brief, Wearable Technologies and Insurance. Since wearables capture data near the wearer, providing “a record of what the wearer is seeing and hearing,” they have application in claims assessments. “In such use cases, wearables such as Google Glass can capture video, pictures or audio to document damages to property and take statements from property owners and witnesses,” he wrote. Wearables can also capture data and provide feedback about the wearer. A Canadian
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court recently ruled that FitBit data revealing a change in activity after a personal trainer was injured in car crash could be used in a personal injury lawsuit. Dr. Ismail Nabeel, deputy medical director at the Selikoff Centers for Occupational Health, Ichan School of Medicine at Mount Sinai, participated in a Google Glass demonstration recently. Later, from his experience, he identified some of the benefits of wearable devices in a National Institute for Occupational Safety blog: “I experienced many advantages to this technology — displaying driving directions, translating multiple languages, providing flight information and reminding me of appointments,” wrote Nabeel. “Wearable technology can be used for working in remote locations, disaster areas and underserved communities. It is possible to transmit information/data/images/scenarios back to other healthcare providers and workers at multiple sites simultaneously.” Google Glasses could also provide audio or video of the wearer’s whereabouts and driving, including a vehicle or workplace accident scene.
Types of Devices According to Denise Garth, a partner at the research firm, SMA, the wearable device industry is much broader than smart watches and Google Glasses. Devices include a baby pacifier than can monitor a baby’s activities, a wearable tattoo with embedded chips, and even an artificial kidney. A recent SMA survey sought to learn what the industry thinks versus what those outside the industry think and see about this new technology. “The contrast is that outside the industry there’s
a view that is being adopted much quicker and that there’s a lot more opportunities out there, versus where the industry is,” she said. Return-to-Work Garth considers wearable technology a game changer for the insurance industry with the benefits of using wearable devices appearing in the areas of risk management and return-to-work. “All of these wearables are really fascinating from the standpoint of helping to manage or reduce risks. It’s helping to restore people’s health in a faster way by being able
Google Glass can grab video, pictures or audio to document damages to property and take statements from parties involved. to remotely, in a real-time basis, monitor them and get them back to work…and then also to be able to manage the overall risk of the individual,” said Garth. “It really allows a whole different way of monitoring and managing their [injured workers’] recuperation to get them back to work. That lowers claims cost,” said Garth. “That’s the real opportunity there.” She offered an example where an adjuster wearing Google Glasses could stream information from a loss scene back to the home office in order to evaluate the next steps to adjust and resolve the claim. Catastrophe Claims Claims adjusters at National ConnectForce Claims (NCC) in Alpharetta, Georgia, began testing Google Glass in that way last spring. The adjusting company found that Google Glass could have the most immediate impact in its catastrophe division by providing real-time feedback from field adjusters who are on the ground working complex losses. continued on page 26 June 15, 2015 INSURANCE JOURNAL-NATIONAL | 25
SPECIAL REPORT
Technology continued from page 25 Matt Anderson, chief operating officer of NCC, believes Google Glass could not only help improve the process of scoping a loss but also the quality of information collected at each loss location. “The end result is improved customer service for both our clients and their customers,” Anderson said.
Those outside insurance see more opportunities in insurance than do those within the industry. “We will be able to use this technology for real-time claims and catastrophic event assessments and to assist in training prospective adjusters,” said Michael Hearn, director of operations of NCC. Customer Engagement Wearable technology also offers insurers an opportunity to add value-added services by giving them the opportunity to engage customers on a more frequent basis, experts said.
“Typically, the only time we hear from an insurance company is when we have to pay our premium or when we have a claim. Not exactly the two best times to interact with you because it’s all about money,” said Garth. Insurers may need to rethink their business/revenue model so that they are selling services instead of products. Garth says the insurance industry might look to what is happening in the auto industry, which has seen a lot of change due to technology. Mark Fields, CEO of Ford Motor Co., said Ford needs to move away from the idea that it is an automotive company and toward the concept of being a mobility company delivering an array of services and experiences. “I think the possibilities are limitless. What we need to do is use our imagination and think about it and rethink the business process and the business model,” said Garth. “If we only limit ourselves to how we do our business today, we’re going to limit the opportunities and the potential.” While consumers like the potential health, safety and lifestyle benefits that
wearable devices promise, they do have concerns related to privacy. According to the PwC report, 82 percent of consumers buying the devices say they are concerned with the potential invasion of privacy and 86 percent are concerned with potential security breaches. Recognizing this concern, technology companies have agreed that the customers
Consumers have privacy concerns and may demand something of value in return for sharing their data. will own all data acquired by wearable devices and they will have control over authorizing the use and access of the data, according to Garth. “And by authorizing the use and access of that, they’re going to expect something in return. So what they’re going to expect in return is probably some kind of discount, some kind of service, something else that’s going to be a value that they’re willing to share their data,” Garth said. Privacy Tools Additional privacy protections may be on the way. Assistant professors Apu Kapadia and David Crandall, both at Indian University Bloomington’s School of Informatics and Computing, along with Dartmouth College sociology professor Denise Anthony, have received $1.2 million in new funding from the National Science Foundation to advance their work developing new technologies to improve the privacy of people captured in images taken by certain wearable devices.
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“A sudden rise in such image gathering has novel privacy implications for both individuals and society,” Kapadia said. “Our challenge is to understand these privacy implications from both a sociological and technical perspective, and to design new and relevant image and context analysis tools that can help people manage their privacy.” While these cameras open up all sorts of novel and exciting applications, at the same time they are going to collect many private images including images of other people, of sensitive documents, of private emails on computer screens, of private places like homes and offices, even inside bathrooms and bedrooms, Crandall said. “So we’re
One challenge is how to protect the privacy of bystanders.
managed by someone or something else without their participation,” Kapadia said. “Here we are moving toward a socio-technical approach where wearers of cameras could express ‘propriety settings’ and thereby reduce the privacy concerns of bystanders.” As much as wearable devices promise health benefits, they also pose health risks. Workers using wearable technologies in the workplace could experience headaches, double vision and dizziness, according to Dr. Nabeel of Mt. Sinai. Google Glass could cause distracted driving. As is the case when employees bring their own technology devices to work, employers may have to implement policies restricting the use of wearable devices in order to limit their liability, according to experts.
investigating computer vision techniques that can automatically find potentially private content in images,” he said. Lifelogging Image gathering and dissemination for the purpose of gathering family histories and collecting continuous personal information, or lifelogging, is expected to become increasingly popular, the researchers said. A device called Narrative Clip takes 120 photos an hour while Autographer takes 360 per hour. These users and those around them might welcome some control. “We’ve found that lifeloggers are concerned about their privacy and that of others, yet it’s doubtful they would give up control of their devices to have their images
Johnson is editor of ClaimsJournal.com.
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IDEA EXCHANGE
Umbrella E&O Insights: When Should You Offer an Umbrella?
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f one were to ask an agency how many of its personal and commercial accounts have an umbrella, most agencies should be able to determine that number without much difficulty. After all, many agency management systems have the ability to generate reports based on certain scenarios such as “how many personal lines accounts have an auto and homeowners, but no umbrella?” If agencies have not By Curtis M. Pearsall run that number in some time, it would be interesting to calculate the number for personal lines customers and commercial accounts, and determine whether that number is rising. A key question agencies need to answer about accounts that don’t have an umbrella is “Why?” Why don’t more accounts have this extra level of protection? There may be a variety of reasons, including the following:
it is doubtful that the underlying limits will be sufficient for the damages caused. The customer never asked the agency to provide an umbrella quote. No doubt, there are agencies that just duplicate the current coverage when looking to take over an account from another agency. If the customer did not have an umbrella, the new agency did not address the issue. Is the agency staff making the decision? This may be of surprise to many agencies, but there are circumstances where the agency sales person, such as the account executive or producer, did not even address the issue of an umbrella because he or she believed the customer could not afford it or did not have sufficient assets to worry about. When a customer comes into your agency, he or she may not present themselves as individuals or businesses of high worth. Who knows better the net worth of your customers: your agency or that individual? The individual, of course. Agency sales staff must be extremely careful not to have per-
ceptions of current or prospective customers. Let’s presume for the sake of argument that the personal lines customer is heavily in debt. Maybe the client is a recent college student with $200,000 of college loans to pay off. What is this person’s net worth? Probably a negative number. Some agency staff may not address the issue of an umbrella under the belief that the customer cannot afford it. But is that really the key issue? Does someone’s net worth determine how good of a driver he or she is? While some personal lines carriers may contend that it does due to credit scores and predictive analytics, it would be easy to argue that the individual of lower net worth still has the ability to cause a serious accident. In fact, statistics may show he or she is more likely to cause a serious car accident. Suppose, then, a serious car accident occurs and your customer is sued. If you don’t believe the courts could garnish your customer’s wages, just ask an attorney. The above scenario, with the college grad-
The customer’s underlying limits are not at the necessary level. Every writer of umbrella coverage has certain minimum requirements for the underlying coverages. Why are the underlying limits not higher? It is possible that the customer does not have the financial resources to afford higher limits. Is there the possibility that the customer believes because he or she doesn’t have a greater amount of assets that his or her financial position would limit the amount for which the client could be sued? The customer may not believe he or she could cause an accident where the underlying limits would not be sufficient. Most personal lines umbrella carriers require underlying limits of 250/500/250. For many customers, this may seem like a significant amount. Unfortunately, probably every day, one could review the newspaper and read of accidents that occurred where 28 | INSURANCE JOURNAL-NATIONAL June 15, 2015
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dous potential for a sizeable general liability loss.
uate who is heavily in debt, Customers may need Commercial Clients recently happened. to be reminded how In commercial lines, When the graduate contrast the customer with easy it is for them caused a serious car multiple vehicles and a accident and was sued, the to cause an accident storefront operation with a courts garnished his wages one-person operation, such where the underto the tune of $500,000. lying limits are not as a contractor or salesIf only there had been an person. Does one of these sufficient and what exposures offer a greater umbrella. additional liabilities likelihood there will be a So which agency clients need an umbrella? sufficient claim? could result. Asking the question in While the customer a somewhat different manner, which cliwith multiple vehicles probably presents a ent has the potential to cause an accident greater exposure, it does not mean the cuswhere the underlying auto or homeowners tomer with one vehicle has no exposure. limits will not be sufficient? They most In addition, accounts such as contractors likely all do! have other exposures that present tremen-
BUILD
Sell More Umbrellas Oftentimes, during the sales process, customers may need to be reminded how easy it is for them to cause an accident in which the underlying limits are not sufficient and what additional liabilities could result. “Painting the claim picture” and then asking the customer “could this happen to you?” helps every customer realize that while he or she has never been involved in a serious car accident, it could happen. This falls under the “educating your customer” category. At minimum, agencies should offer a variety of limits for the various underlying coverages and then add an umbrella to the options to consider. When presented with options, the customer is prompted to make a decision: which option to choose, if any, and which to not choose. Therefore, the customer is ultimately making the decision. Bottom line, make sure you are not making the decision for them. Pearsall is president of Pearsall Associates Inc., a risk management consulting firm specializing helping agents protect themselves. He is also a special consultant to the Utica National Agents E&O program. Phone: 315-768- 1534. Email: curtis@ pearsallassociates.com. Blog: www.agentseotips. com.
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CLOSER LOOK
Construction Additional Insured Endorsements in Construction
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o get on a job, contractors often have to show proof of insurance and name the individuals hiring them as additional insureds on the contractors’ commercial general liability (CGL) policies. By doing this, the individuals hiring the contractors hope that the additional insured endorsement will defend them in case they get sued for By Dwight Kealy something relating to the contractor’s work. Whether or not this is true depends on the additional insured endorsement. Additional Insured Endorsement CG 20 10—11/85 and beyond The most common additional insured endorsement for contractors is the CG 20 10. The CG 20 10 changed significantly after the November 1985 edition. In the November 1985 edition — called the CG 20 10 11 85 — the entity being added as an additional insured was only an insured “with respect to liability arising out of ‘your work.’” The “your work” refers to the work of the named insured — that is, the contractor. “Your work” includes the contractor’s ongoing operations and completed operations. After 1985, the entity being added as an additional insured using the CG 20 10 was only an insured “with respect to liability … caused … by your ongoing operations.” “Ongoing operations” does not include completed operations. Therefore, the change from “your work” in the CG 20 10 11 85 to “ongoing operations” in later versions effectively removed completed operations coverage for the additional insured. Sample Ongoing Operations Occurrence To understand the effect of this change, imagine a property owner hiring a contractor to build a brick wall. While building the 30 | INSURANCE JOURNAL-NATIONAL June 15, 2015
wall, the contractor drops a load of bricks on top of a line of cars. This causes property damage arising out of the contractor’s ongoing operations. The car owners sue the property owner. If the property owner was named as an additional insured on the contractor’s CGL policy using CG 20 10 11 85, the property owner should be covered. This is because the CG 20 10 11 85 provides coverage for liability arising out of “your [the named insured/contractor’s] work,” and “your work” includes both the named insured’s ongoing and completed operations. If the property owner was named as an additional insured using the CG 20 10 after 1985, the property owner would also be covered as an additional insured on the contractor’s policy because the CG 20 10 after 1985 provides coverage for ongoing operations, and this was an ongoing operations exposure. Sample Completed Operations Occurrence Two months after the contractor finishes the wall, the wall falls on a line of cars. This is property damage out of the contractor’s completed operations. Once again, the car owners sue the property owner. If the property owner was named as an additional insured using the CG 20 10 11 85, the property owner would have coverage for the completed operations exposure as “your work.” If the property owner was named as an additional insured using the CG 20 10 with an edition date after 1985, the property owner would not have coverage for the completed operations exposure under the contractor’s CGL policy. The CG 20 10 after 1985 does not provide coverage to the additional insured for completed operations. It only provides coverage for ongoing operations, and this was a completed operations exposure.
the Insurance Service Office (ISO) created CG 20 37 Additional Insured — Owners, Lessees or Contractors — Completed Operations. As the name implies, this endorsement provides coverage to the additional insured for completed operations. It does not provide coverage for ongoing operations. Using our wall example, if the contractor named the property owner as an additional insured using CG 20 37 (Completed Operations), there would be no coverage for the sample ongoing operations occurrence. There would only be coverage for completed operations exposures. The CG 20 37 is not necessary if a business is able to get the CG 20 10 11 85 because the CG 20 10 11 85 provides coverage for “your work,” and “your work”
Additional Insured Endorsement CG 20 37: Completed Operations To address the CG 20 10’s gap in completed operations coverage after 1985, www.insurancejournal.com
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includes both the ongoing operations of the current CG 20 10 and the completed operations of the current CG 20 37. Blanket Additional Insured Endorsements “Blanket” — also called “automatic” — additional insured endorsements are endorsements that the insurance company provides to automatically add as additional insureds, those individuals or entities 1) for whom the named insured is performing operations, and 2) with whom the named insured has agreed in writing to name as an additional insured. A positive feature of the blanket endorsement is insurance agencies can often send out these endorsements without requesting permission from the insurance carriers. This often makes the blanket endorsements quicker to process. A negative feature is the written contract requirement. Blanket Additional Insured Endorsement CG 20 33 Additional Insured— Owners, Lessees or Contractors— Automatic Status When Required in Construction Agreement with You The blanket additional insured that most resembles the CG 20 10 is the CG 20 33. A significant difference between the CG 20 10 and CG 20 33, is CG 20 33’s requirement that there must be a written contract or agreement between the additional insured and the named insured. As a way to explain the significance of the written contract requirement, imagine a custom home building project. For this project there is an owner, a general contractor and 15 subcontractors. General Contractor signs a written contract to build a house for owner. The contract requires the general contractor to have a CGL policy that names the owner www.insurancejournal.com
E NVIRONMENTAL C OVERAGE
as an additional insured. The contract also requires all subcontractors to have a CGL policy that names the owner as an additional insured. The general contractor hires 15 subcon-
If someone is told that they just need to be named as an additional insured to protect themselves in a construction project, they may need more information. tractors to help with the project. The general contractor and each subcontractor sign a written contract. The contract requires each subcontractor to name general contractor and owner as additional insureds on the subcontractors’ CGL policies. Each subcontractor sends the owner an endorsement showing the owner is an additional insureds on the subcontractors’ CGL policies using blanket CG 20 33. The problem with this scenario is that there is no written contract between the owner and the subcontractors. The CG 20 33 requires a written contract between the named insured and the additional insured. Imagine that there is a massive claim at the job site and the owner is sued. The claim involves the work of the 15 subcontractors. The owner thinks he or she is an additional insured with direct rights to the 15 subcontractor CGL policies. What the owner really has are 15 pieces of paper from 15 subcontractors saying owner is named as an additional insured using CG 20 33. The CG 20 33 required a written contract between the additional insured and the named insured. There was no written contract between the owner and subcontractors. One way to avoid the owner’s situation would have been for the owner to be named as an additional insured using CG 20 10. The CG 20 10 does not require a written contract between the named insured and additional insured. A second solution continued on page 32
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Construction continued from page 31 would have been for the owner to enter a written contract with each subcontractor. A third option would have been for the owner to be named on the subcontractors’ policies using CG 20 38. Blanket Additional Insured Endorsement CG 20 38 Additional Insured—Owners, Lessees or Contractors—AUTOMATIC STATUS FOR OTHER PARTIES WHEN REQUIRED IN WRITTEN CONSTRUCTION AGREEMENT The primary distinction between the CG 20 33 and the CG 20 38 is that the CG 20 38 provides coverage for upstream parties. Upstream parties are the entities or individuals above the level where an entity is contracting. Whereas the CG 20 33 only provides additional insured status where there is a direct written contract, the CG 20 38 extends coverage to “any other person or organization you are required to add as an additional insured under the contract or agreement.” Using our custom home example, the subcontractors signed a contract with the general contractor saying they would name USA12043.qxd 1/4/08 2:26 PM Page the general contractor and owner as addi-
CG 20 10 11 85
CG 20 10 04 13 CG 20 37 04 13
Requires you to name the person/entity to be added as an additional insured
Requires you to name the person/entity to be added as an additional insured
Requires you to name the person/entity to be added as an additional insured
No written contract requirement
No written contract requirement
No written contract requirement
“Your work”
CG 20 33 04 CG 20 38 04 13 (Blanket/ 13 (Blanket/ Automatic) Automatic) Does not require Does not require you to name the you to name the person/entity person/rntity to be added as to be added as an additional an additional insured insured Written contract Written contract requirement requirement No upstream parties
Upstream parties
Ongoing Completed operoperations only ations only
Ongoing operations only
Ongoing operations only
Liability caused in whole or in part by named insured
Liability caused in whole or in part by named insured
Liability caused in whole or in part by named insured
Liability caused in whole or in part by named insured
Only to the extent of law
Only to the extent of law
Only to the extent of law
Only to the extent of law
tional insureds, but the subcontractors did not sign a contract with the owner. There 1 was no coverage for the owner under the
subcontractors’ policies when they used the CG 20 33 because the CG 20 33 requires a written contract between the named insured and the additional insured. If the subcontractors used the CG 20 38, the owner would have additional insured status because the owner is a “person or organization [the named insured is] required” to add as an additional insured under the contract with the general contractor. If someone is told that they just need to be named as an additional insured to protect themselves in a construction project, they may need more information. Does the person want to be an additional insured for ongoing or completed operations? Do they have a written contract agreement? Do they want coverage from subcontractors? A careful review of additional insured endorsements is essential to protect those looking for coverage as additional insureds. Kealy is an attorney and principal of his own law firm in Murrieta, Calif. He is a Certified Insurance Counselor and faculty member with the National Alliance for Insurance Education & Research.
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Growing Your Property Casualty Agency How Well Do Your Producers and CSRs Really Get Along?
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o foster growth, property/casualty agency managers need to actively encourage their employees to achieve a desirable level of mutual trust and respect. In some offices there is a professional chasm between job positions and departments. Its depth varies by agency, of By Alan Shulman course, but even a minor fissure can cause internal problems. Such issues distract from your core function: to help insureds protect their assets from insurable risks while simultaneously growing the business itself. And to properly grow, everyone needs to be fairly compensated and work together. Here are eight potential avenues for building intra-office camaraderie. Start Early. Have inexperienced producers work side-by-side with seasoned client service representatives (CSRs) for a reasonable time, to learn what really happens in a P/C agency — and to understand the vital functions that reps perform. If you bypass this once-in-a-career opportunity, new producers may ultimately treat CSRs as underlings instead of teammates, which doesn’t bode well for the future.
Carrier-Sponsored Events. Don’t limit attendance at company functions to just management and producers. Ask carriers to invite an agency CSR or two as well. Why? Because your front-line staffers are equally important to any successful agency-company relationship. Company Evaluations. Just as carriers routinely evaluate your agency’s past performance and future potential, you should do the same with the carriers you represent. Invite CSRs and producers to speak up at agency-wide company evaluation meetings. The opinions of both inside and outside personnel are essential to seeing the entire picture. Promotional Events. People-packed events such as fairs, flea markets, auto and home shows, business expos, etc., all have something in common. They are tangible venues for the promotion of your agency, as well as camaraderie. So, form multiple teams of producers and CSRs to run your agency’s booth wherever you exhibit. Ride-Alongs. Encourage producers to occasionally invite CSRs to accompany them on outside client visits and property
inspections as a team-building exercise. Reps enjoy getting out of the office and seeing the people and premises they insure, or hope to write, while producers get to show what they do while away from their desks. Joint Prospecting. Some CSRs might like taking a brief break from their routine client service activities to help agency producers locate fresh target market leads from online and other sources. Team prospecting can also build goal-oriented relationships between reps and agents. Everyone in your office doesn’t have to like each other. It’s nice if they do, but professional respect and a shared mission (success) is a viable substitute. Still, it’s counterproductive to pull busy people away from their primary job functions too often and for too long. So it’s in your best interests to keep team-building activities short in length but long in impact. 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.
Internal Classes. Ask producers and CSRs to jointly conduct training classes for their fellow employees on timely topics of their choice. Let one producer and one CSR work together, as equal partners, on a “show and tell” that explains something of value while simultaneously promoting camaraderie. Two or three such sessions can easily fit into an agency’s lunch hour. External Classes. Encourage CSRs and producers to take continuing education classes and earn professional designations together. Their joint attendance facilitates both knowledge and fellowship. www.insurancejournal.com
June 15, 2015 INSURANCE JOURNAL-NATIONAL | 33
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Business Interruption Top 5 Issues in Business Interruption Insurance By Denise Johnson
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he high costs related to business interruption should provide an impetus for companies to prep for their clients in advance, according to industry experts. During a recent webinar hosted by global broker Marsh, insurance experts detailed the top five issues related to business interruption and why risk managers should anticipate all possible worst-case scenarios in anticipation of loss. “Risk management and risk transfer must work together to make companies more resilient,” said Caroline Woolley, Marsh’s Business Interruption Center of Excellence leader. The causes of business interruption can range from cyberattacks to terrorism. Insurers face the most exposure in the area of property damage. According to Woolley, there are policy limitations. That’s because the coverage was developed in the 1930s and was never designed to meet the needs of businesses today.
She identified the top five business interruption issues as: • Getting the values right. According to a survey conducted by the Chartered Institute of Loss Adjusters in 2012, 40 percent of declarations were deemed too low by about 45 percent. • Settling the indemnity period. • Damage covering a wide area. • Insufficient supply chain coverage. • Lengthy and intensely scrutinized claims settlement process. Duncan Ellis, Marsh’s U.S. Property Practice leader, defined business interruption coverage as property damage and time element insurance or any type of insurance that covers the ongoing expenses created by damage that stems from an insured loss. He noted that the payment will vary based on the length of time the expenses continue to accrue. Examples of this type of coverage include business interruption, contingent business interruption, extra expense, tuition fees,
loss of rental or rental value, additional living expenses and leasehold expenses. What Policies Cover Ellis said business interruption policies typically cover profits, fixed costs, temporary locations, extra expenses and civil authority ingress/egress service interruption. He recommended risk managers prepare for business interruption by: • Understanding the financial impact if a closure occurs. • Having a business continuity plan in place. • Understanding the key areas in the manufacturing or supply chain. • Working with a broker to make sure policy wording, extensions and limits are correct. • Identifying all potential
Calculating Business Interruption Losses By Amy O’Connor
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nsurance broker Beecher Carlson has launched a cloud-based application called CyberSelect BI Vision to help educate policyholders on their exposure to business interruption losses from cyber risk. The app is a cyber business interruption calculator that helps companies analyze and calculate the possible business interruption costs they would face if a cyber event took out their network or multiple networks. According to Christopher Keegan, national Cyber practice leader at Beecher Carlson, the idea is to give companies a mechanism to dig deeper into their cyber business interruption exposure without having to commit to an expensive or inva34 | INSURANCE JOURNAL-NATIONAL June 15, 2015
sive method of doing so. The risk valuation tool allows companies to project maximum foreseeable loss to business income at one or more key locations, by network or division, in the event of a cyber-disaster. The proprietary calculator collects certain financial information and creates an estimated business income exposure specific to an organization’s locations and applications. CyberSelect BI Vision can also capture expenses faced by companies when they are the target of a cyber attack. These expenses include replacing hardware and software as a result of damage from wiper viruses such as Shamoon, which destroyed more than 30,000 servers. The process focuses on the revenue flows and costs at each particular entity, allowing companies to look at the impact on indi-
vidual networks, technology applications and company divisions. The calculator combines those numbers to estimate an overall company impact. Additionally, companies can adjust estimates based upon levels of reliance on technology and work-arounds that may exist to reduce the impact of a cyber-loss. Keegan says companies can use it to determine the risk management procedures they should take and what coverages they should buy. “One of the problems we have had over the years in advising companies on cyber coverage, especially manufacturing companies, is on what limits to buy. It is hard to determine what that number should be and estimate the business interruption loss you would have if a cyber attack happens,” he said. www.insurancejournal.com
areas of loss and documenting them postloss. The experts agreed that business interruption coverage is often misunderstood – starting at valuation. “Accounting gross profits does not necessarily equal insurance gross profits,” said George Magula, senior vice president of Marsh Risk Consulting’s Forensic Accounting and Claim Services. According to Woolley, the indemnity period varies in gross profits policies used globally versus gross earnings policies typically used in the U.S. where the indemnity period needs to be set up front. She said that while it is common to opt for a standard 12 months in gross profits, that is rarely enough. Many policies pay until the property is reinstated. Policies should be evaluated to determine if there is a time element period and whether it includes reinstatement and recovery of profit and incurred increased costs. “In both policies…it’s essential to establish your worst loss scenario, estimate the potential period of interruption…and the consequence to of failing to correctly establish the period of indemnity is that your loss continues but your claim is cut short,” said Woolley. Insurers are getting more restrictive in wide area damage coverage, according to Magula, noting an increase in exclusions on territories and for certain catastrophe events, as well as increased scrutiny on business interruption claims.
was never designed to meet exposures that occur at third party premises. The suppliers’ extension clause is typically first tier or direct suppliers only, for physical damage events and insured perils only, subject to restricted perils, and is severely sublimited. According to Linda Conrad, director of Strategic Business Risk for Zurich, physical damage is not even in the top three causes of supply chain disruptions. In fact, cyber issues contributed to over 50 percent of 2013 supply disruptions. Conrad said risk managers, CFOs and company boards of directors are taking note since supply chain disruption can lead to significant damage in shareholder value. The effect can last two years and she said it can reduce company sales by as much as 10 percent. In addition, a company will likely incur higher costs. Adding insult to injury, extended disruptions can lead to a company closing its doors, said Conrad. Personal Umbrella.pdf 1 1/7/15 Conrad noted that all risk non-damage
coverage is now being offered, which does not require physical damage triggers. This type of coverage could provide coverage for damages related to the recent West Coast port slowdown. Cyber Events Most traditional policies exclude damage to data if there is no other physical damage. “Coverage for data is typically only provided if the media upon which the data resides is physically damaged in the hack,” said Ellis. Woolley said there are several third party and first party coverages available for cyber exposures. These include: • Third party network liability coverage for claims against the insured as a result of a data breach. • First party coverage for costs related to a breach like IT forensic costs and data recovery costs. • First party business interruption coverage due to increased costs and loss of profit as a result of the interruption. Johnson is editor of ClaimsJournal.com. She can be contacted at djohnson@claimsjournal.com.
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Supply Chains Supply chain disruptions can create complex coverage issues, Woolley said. That‘s because companies may have first, second, third and even fourth tier suppliers. Sub tier events are completely out of the insured company’s control which makes it difficult to trace and control the disruption. The time element part of the policy
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June 15, 2015 INSURANCE JOURNAL-NATIONAL | 35
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Minding Your Business Stop Selling Like It’s 1985
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here is a video on Youtube by Jim Muehlhausen of CEO Focus called “Stop Selling Like It is 1985.” It has some great points about the changes that have occurred in the sales process due to the Internet. The example in the video is about how a car was purchased in 1985. The buyer would have to go to the dealBy Catherine Oak & er to find out about the car. The dealer was the one that had all the information and thus controlled the sales process. The potential buyer basically went to the seller and identified him or herself as a prosBill Schoeffler pect. Then, they were subjected to the sales pitch in order to just get basic information on the automobile. Wow! Have things changed. Now, if someone was interested in buying a car they have access to all sorts of information with just a few clicks. This includes the basic information about the car from the manufacturer, but also reviews about the car, known problems, the price the dealer pays, and reviews about the dealer. The consumer has more than enough information about the car in order to make an educated decision before they ever go to the dealer to see and testdrive the car. This shift of access to information from the seller to the buyer has completely changed the sales process. The seller is now in charge of the sales process. This is the new reality. The problem is that many salespeople are still stuck with the old way of doing business. They act and do sales as if they are still in control. Salespeople need to do business the way prospects want to do business, or they will not be successful.
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Invisible Prospects This new paradigm for sales creates the “invisible prospect.” In 1985, the salesperson would know they had a prospect when the door swung open and the prospect walked in. Today, prospects can go through the door of a website virtually undetected. Buyers often remain invisible until they are ready to purchase. They no longer call up a company to get a brochure or wait to speak with a salesperson. Buyers do their homework online and the business has no idea whether or not they have a prospect. Muehlhausen says there are three things businesses need to do. First, offer free and transparent information, including pricing. Next, the information needs to be convenient and packaged in the way a prospect will find convenient. Finally, the process needs to be “salesfree” in the beginning. The new structure of sales for a business is “content marketing.” It is how the con-
sumer gets to know, like and trust a business. The goal of content marketing is first education and consumption, then behavior and decisions. Businesses need to first inform the consumer by offering them material and content that focuses on their problems and desires. Story Telling Versus Selling The beginning stages of contact with the prospect cannot be sales-oriented. Instead, businesses need to tell stories and share examples of other people’s success. This technique will help create a picture of how that business can solve problems. Stories build connections and trust. It is a way of illustrating the value that the business can provide. The human mind has 50,000 years of development geared toward story telling. People get emotionally connected to stories and can remember the detail from a story much better than a table of product specifications or bullet points of product benefits.
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The New Way to Do Marketing The sales funnel is still a good way to describe the modern way of doing sales and marketing. However, there are some updates. To start off, a business needs to cast a low cost, wide net to make initial contact with potential prospects. This can vary from the traditional way of buying mailing lists to having prospects opt-in after they visit the business on the Internet. Connections can be made through online social media, like Facebook and LinkedIn. The next couple of levels in the sales funnel are a little different than they were in 1985. Back then, a potential prospect had to “expose themselves” and take action to move down the funnel. Now, potential prospects can remain somewhat anonymous, but still be connected. For example, they can visit a website, download information or sign up for a newsletter. The middle part of the funnel is now more of a hopper to store prospects until they are ready to move further down. This middle part is where the prospect can get the information they want and need without a sales pitch. Businesses need to offer valuable content in digital format that they own and control. This area is not just for suspects and prospects, but clients and advocates as well. The prospect can stay here for a long time and until they are ready to buy. Businesses just need to keep them interested and informed enough until the need to buy lines up with the securing of know, like and trust. Build a Marketing System A marketing system for a business is a multi-tiered approach. The initial low cost, wide net can be emails, direct mailings and the use of social media. This is augmented with testimonials, tips and general information videos on the company’s websites. Prospects can then opt-in to move to the next level by requesting in-depth information to download or to sign up for a newsletter. Consider adding podcasts or instructional videos. For some businesses, a discussion forum is a great way to keep prospects involved. There are some downwww.insurancejournal.com
sides with forums, especially with negative reviews, so investigate using this approach before it is implemented. The final legs of the modern sales funnel can be direct teaching and education of the prospect. This can be done through seminars, webinars and one-on-one sessions. This is the time to specifically address their problems and offer the potential of a solution. The key is to point them in the right direction, but not solve it all. Summary There is no going back to the time when the business had control over the sales process. Salespeople need to embrace the new way of selling, giving the prospect the information they need to come to the business. The good part is that the first few stages
of the sales process are easier because it is information-driven and not sales-driven. Once established, it will create a proven and repeatable sales process. Developing personal relationships does not need to begin until the prospect is ready to buy. This helps the salesperson focus on pre-qualified leads rather than trying to work with a large pool of prospects. So save the big hair, costume jewelry and preppy clothes for a 1980s theme party. Go out there and sell like it is 2015. Oak is the founder of Oak & Associates. Schoeffler is an associate of the firm. Oak & Associates specializes in financial and management consulting for independent insurance agencies. Phone: 707-9366565. Email: catoak@gmail.com. Website: www. oakandassociates.com.
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Abram Interstate www.abraminterstate.com W7 ACE Insurance www.acegroup.com/us 7, 15 Affinity Healthcare www.affinityhcp.com 29 AmCoastal www.amcoastal.com FL5 Anderson & Murison www.andersonmurison.com 35 Applied Underwriters www.auw.com 40 Beacon Hill Associates www.b-h-a.com 31 Burnett & Company www.bcoinc.com SC4 Burns & Wilcox Brokerage www.burnsandwilcoxbrokerage.com 3 Century National www.cnico.com W5 Florida Hurricane Catastrophe Fund www.sbafla.com/fhcf SE7 FSLSO www.fslso.com FL17 FUBA Workers’ Comp www.fubaworkerscomp.com FL15 GIC Underwriters, Inc. www.gicunderwriters.com FL1 Great American Insurance Group www.gaig.com 13 Gridiron Insurance www.gridironins.com FL9 Insurance Technologies Corp. www.getitc.com W9; FL23 Johnson & Johnson www.jjins.com FL2 Liberty International Underwriters www.liu-usa.com 39
Louisiana Commerce & Trade Assoc. www.lctacomp.com SC5 M.J. Hall & Company www.mjhallandcompany.com W8 McNeil & Company www.mcneilandcompany.com 27 Midlands Management Corporation www.midlandsmgmt.com 22 Monarch E&S Insurance Services www.monarchexcess.com W3 National General Insurance www.nationalgeneral.com 2 PersonalUmbrella.Com www.personalumbrella.com 4, 5 Pro Premium www.pro-premium.com FL16 Regency Insurance Brokerage Services www.regencyinsurancebrokerage.com FL24, SE1; E3 SeaCoast Underwriters www.seacoastunderwriters.com FL11 Shelly, Middlebrooks & O’Leary www.shellyins.com FL19 St. James Insurance Group www.stjamesinsurance.com FL13 St. Johns Insurance Company www.stjohnsinsurance.com FL7, SE9 TAPCO Underwriters www.gotapco.com FL8 Texas Mutual www.texasmutual.com SC3 The Hartford www.privatecompanyinsurance.com 9 Tower Hill Insurance www.thig.com FL21 Universal Service Agency, Inc. www.universalbonds.com 32 June 15, 2015 INSURANCE JOURNAL-NATIONAL | 37
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Closing Quote
It’s Time for Congress to Prepare for Hurricane Season
T By Jimi Grande
housands of Americans have been working to prepare their homes and businesses for this year’s Atlantic hurricane season which began on June 1, so why isn’t Congress taking steps to get its own house in order? Members of Congress can’t stop hurricanes or other natural disasters, but they can stop expecting a pat on the back for simply spending money afterward to rebuild a community that will be just as vulnerable to the next storm. Instead of spending tens of billions of dollars to rebuild after a hurricane only to see the same damage from the next, members of Congress have an opportunity to enact proposed legislation that would make a difference in reducing losses and the need for disaster aid, and most importantly help save lives. The costs of natural disasters have skyrocketed in recent years. Since 1983, the United States has spent nearly $1 trillion on disaster recovery and rebuilding, but more than 10 percent of that, $137 billion, was spent in just the past four years. Studies have shown that disaster mitigation can significantly reduce losses, saving $4 in losses for every $1 spent on mitigation by the government, but federal spending on mitigation programs between 2011 and 2013 was just $22 million. The National Association of Mutual Insurance
38 | INSURANCE JOURNAL-NATIONAL June 15, 2015
Companies (NAMIC) supports these legislative solutions, which are currently awaiting action on Capitol Hill: H.R. 1748, the Safe Building Code Incentive Act – Introduced by Reps. Mario Diaz-Balart, R-Fla., Albio Sires, D-N.J., and Chris Gibson, R-N.Y., the Safe Building Code Incentive Act would create an incentive for states to adopt and enforce model building codes statewide by rewarding those that qualify with increased grants from FEMA in the aftermath of a storm. H.R. 1471, the FEMA Disaster Assistance Reform Act of 2015 – A provision included in legislation allowing for continued operations of the Federal Emergency Management Agency (FEMA), introduced by Rep. Lou Barletta, R-Pa., with House Transportation and Infrastructure Chairman Bill Shuster, R-Pa., ranking member Peter DeFazio, D-Ore., and Rep. Andre Carson, D-Ind., would mandate a comprehensive study of disaster costs and losses, and provide recommendations on how the federal government can reduce its exposure through pre-disaster mitigation. H.R. 2230, the Disaster Savings Accounts Act of 2015 – This bill, introduced by Rep. Dennis Ross, R-Fla., would establish a new tax-preferred savings These simple, biparaccount for the purpose of tisan measures will fortifying residential propprovide real benefits erty in preparation for an impending natural disaster in helping consumers and, in the aftermath, for understand how they rebuilding and damage can better prepare expenses. Homeowners for natural disasters, could contribute up to $5,000 each year in preprotect their homes, tax dollars for qualified and minimize losses. expenses, with any balance rolling over at the end of each year. These simple, bipartisan measures will provide real benefits in helping consumers understand how they can better prepare for natural disasters, protect their homes, and minimize losses. Congress needs to do its part, too. Grande is senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies (NAMIC).
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