Insurance Journal West 2016-02-22

WEST EDITION Targeting High-Risk Shoppers Rideshare Insurance in Arizona Calif. Hospital WC Claim Severity

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WEST

Inside This Issue

On The Cover

Special Report:

Agency Compensation: Unequal Pay for Women?

February 22, 2016 • Vol. 94 No. 4 • West

W2

W6

22

34

NATIONAL COVERAGE

WEST COVERAGE

IDEA EXCHANGE

10 Greenberg Confident Most Top

Talent, Agents to Stay with New

Chubb

W2 California Hospital Workers’ Comp

Report Shows Claim Severity

on Rise

34 The Whole Package: Negotiating

Beyond Salary

14 P/C Direct Premium Written

Up 4.2 Percent

W2 Mercury Begins Offering

Ridesharing Insurance in Arizona

16 Spotlight: 10 Things to Know

About Deer Breeding Operations

W2 Fatal Fire in Washington Bikini

Coffee Stand Caused by Propane

18 M&A Review: Merger, Acquisition

Activity Sets New High-Water

Mark

W6 Expert: Targeting High-Risk

Shoppers with Mobile Makes

Sense

36 Minding Your Business: Catherine

Oak & Bill Schoeffler 38 Closing Quote: Technology’s Full

Potential

22 Closer Look: Travelers’ Shasha

Talks Boats for the Summer 26 Special Report: 2016 Agency

Salary Survey – Unequal Pay

for Women?

DEPARTMENTS W4 People 11 Declarations 11 Figures 12 Business Moves

6 | INSURANCE JOURNAL-WEST February 22, 2016

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NATIONAL COVERAGE

Opening Note

Publisher Mark Wells | mwells@wellsmedia.com

Top 10 Discrimination Claims

R

etaliation charges increased by nearly 5 percent in 2015 and continue to be the leading concern raised by workers across the country.

Disability charges increased by 6 percent from last year and are the third largest category of charges filed.

The U.S. Equal Employment Opportunity Commission (EEOC) released breakdowns of the 89,385 charges of workplace discrimination that the agency received in fiscal year 2015.

EEOC said it resolved 92,641 charges in fiscal year 2015, and secured more than $525 million for victims of discrimination in private sector and state and local government workplaces through voluntary resolutions and litigation.

The year-end data shows that retaliation again was the most frequently filed charge of discrimination, with 39,757 charges, making up 45 percent of all private sector charges filed with EEOC. The fiscal year ran from Oct. 1, 2014, to Sept. 30, 2015. The agency is currently seeking public input on its proposed update of enforcement guidance addressing retaliation and related issues as part of its commitment to inform the public about the EEOC’s interpretation of the law and promote voluntary compliance.

Top 10 Charges The majority of the lawsuits The charge numbers filed alleged violations of Title show the following breakVII of the Civil Rights Act of downs by bases alleged.

The percentages add up 1964. to more than 100 because some charges allege multiple bases.

• Retaliation: 39,757 (44.5 percent of all charges filed) • Race: 31,027 (34.7 percent) • Disability: 26,968 (30.2 percent) • Sex: 26,396 (29.5 percent) • Age: 20,144 (22.5 percent) • National Origin: 9,438 (10.6 percent) • Religion: 3,502 (3.9 percent) • Color: 2,833 (3.2 percent) • Equal Pay Act: 973 (1.1 percent) • Genetic Information Non-Discrimination: 257 (0.3 percent) Charges raising harassment allegations made up nearly 28,000 charges, or 31 percent. Employees claimed harassment in charges based on race, age, disability, religion, national origin and sex, including sexual orientation and gender identity.

The agency filed 142 merits lawsuits last year, up from 133 the previous year. The majority of the lawsuits filed alleged violations of Title VII of the Civil Rights Act of 1964, followed by suits under the Americans with Disabilities Act (ADA). This included 100 individual lawsuits and 42 lawsuits involving multiple victims of discriminatory policies.

EEOC lawyers resolved 155 lawsuits alleging Andrea Wells discrimination.

Editor-in-Chief

8 | INSURANCE JOURNAL-NATIONAL February 22, 2016

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 Lisa Howard | lhoward@wellsmedia.com Senior Editor Susanne Sclafane | ssclafane@insurancejournal.com ClaimsJournal.com Editor Denise Johnson | djohnson@claimsjournal.com Columnists Catherine Oak, Bill Schoeffler Contributing Writers David Coons, Paul Lienert, Adrienne Lindsey, Douglas Powell, Laird Rixford, Meredith Reeves, David Shepardson, Bernie Woodall 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 Romeo Valdez (800) 897-9965 x172 | rvaldez@ijacademy.com.com Midwest Lisa Whalen (800) 897-9965 x180 | lwhalen@insurancejournal.com South Central Mindy Trammell (800) 897-9965 x149 | mtrammell@insurancejournal.com East (NY, PA and CT only) Dave Molchan (800) 897-9965 x145 | dmolchan@insurancejournal.com Southeast & East (except for NY, PA and CT) Howard Simkin (800) 897-9965 x162 | hsimkin@insurancejournal.com New Markets Sales Manager Kristine Honey | khoney@insurancejournal.com Classifieds, Jobs, Agencies Wanted/For Sale Kelly De La Mora (800) 897-9965 x125 | kdelamora@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 Tim Layer | tlayer@wellsmedia.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 | mdunford@wellsmedia.com Chief Financial Officer Mark Wooster | mwooster@wellsmedia.com

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News & Markets Chubb’s Greenberg Confident Most Top Talent, Agents to Stay

By Mark Hollmer

C

hubb Chairman and CEO Evan Greenberg believes opportunity and incentives will encourage most executives to stay with the insurer in the wake of its recently completed mega-merger.

“I don’t kid myself. We’re not going to keep everybody,” Greenberg said during his first earnings call on Jan. 27, after his ACE Ltd.completed its $29.7 billion acquisition of Chubb on Jan. 14 and kept the Chubb name. “I firmly believe this, that the loss of talent that we have will be very much on the margin. It won’t be in large numbers and we have great depth within the organization.”

“This organization is on the ascendancy,” Greenberg added. “Why wouldn’t you want to be here?”

As Greenberg said, some executives will always leave. One notable one did so before the merger deal was even finished. Chubb Veteran Dino E. Robusto had been slated to become an executive vice president of the post-merger Chubb, and co-president of the North America Insurance division after

is hardworking, that is driven to win, that has an aggression to it — a certain aggressive stance, all those attributes that I can describe, they are juiced and energized by this. I don’t have any concerns about losing those people.”

Greenberg explained that he believed those qualities reflect the “overwhelming vast majority of talent of the combined organization.”

“At the end of the day, it’s not just about organizations, but individual motivations and aspirations.

But people also work to be paid,” Greenberg added. “They want to be incented. We have no problem incenting for performance. We believe that our value creation in the future is substantial and in front of us. Anybody holding equity in the combined companies’ ‘We’re going to preserve the agency stock, that is a pretty good of retention.” culture. We’re going to preserve the motivator Greenberg, in answer to agency distribution.’ a related question during the call, said that “legacy Chubb” the merger. In mid-November, news broke and “legacy ACE” executives and employthat he’d become chairman and CEO of ees are working hard to meet with clients CNA Financial Corp. instead. and partners and hit the ground running, post-merger.

Greenberg asserted during the company’s “Legacy Chubb and legacy ACE of all earnings call, however, that the post-merger branches, and all regions, are getting themChubb has plenty of factors in play to keep selves together quickly. They’re out meeting executives engaged and motivated. agents and delivering the message that we “It’s a little bit of a self-selecting process,” are open for business,” Greenberg said.

Greenberg said. “Those who want to sign He explained that the mission right now on to an environment that is ambitious, that 10 | INSURANCE JOURNAL-NATIONAL February 22, 2016

is to deliver the message from the combined company that “we are bringing more to you.”

“The senior executives, everyone is out, we are doing it around the world,” Greenberg noted. “I am out there seeing agents. I was out last night seeing agents. Our business comes from producers and they need to feel comfortable.

Value creation is not in the inside,” Greenberg said. “Value creation is out there, and that’s where we live.”

Agency Culture In July, soon after announcing the plan for ACE to acquire Chubb, Greenberg made a point of stressing that the new Chubb would, in his words, “preserve” the agency culture of Chubb. He said then that the new company would adopt the best of both companies and that Chubb’s agency system is better than ACE’s, whereas ACE is better at brokerage.

He called Chubb a “great” agency company. “We’re going to preserve the agency culture. We’re going to preserve the agency distribution. We’re going to preserve the branch system,” said Greenberg in July.

The ACE CEO also said he would not be changing the contingent commission system — to do so he’d have “to be stupid or have rocks” in his head, he said. Some insurers pay contingent commissions to agents for achieving certain goals with the insurer, such as placing a particular amount of business, retaining a number of policies or achieving a particular loss ratio.

The plan for the new company calls for not only keeping the agency distribution and branch structure of Chubb but also growing this distribution channel with new products and customers, he said. In urban centers where both ACE and Chubb have branches, the plan calls for combining the two.

Hollmer is editor of CarrierManagement.com’s daily newsletter, where the original version of this article was published. www.insurancejournal.com

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News & Markets California Hospital Workers’ Comp Report Shows Claim Severity on Rise

C

alifornia workers’ compensation claim severity continues to increase, while claims frequency declines, according a newly released report.

The latest California hospital report benchmarking workers’ comp costs by Milliman and Keenan Healthcare uses data from 35 hospital systems and individual facilities within California to provide more than 3,500 claims for review.

The report offers a glance at factors including claim frequency and severity, impact of workers’ comp reforms, medical and indemnity costs and allocated loss adjustment expense over the past 10 to 12 years. Also included is data on payroll and utilization, age, litigation status and future medical claims.

Trends identified in the report include: Overall losses per $100 of payroll remained flat over the 10 years ending 2014, with severity of claims on the rise while claim frequency declined.

Estimates of costs per indemnity claim for accidents occurring during 2014 have decreased approximately 10 percent from 2013.

Projected 2015 loss cost per $100 of payroll was at $2.20.

The first notable trend in the report is that severity per paid indemnity claim — indemnity, medical and allocated loss adjustment expense combined — showed an increase of nearly 5.5 percent annually during the period between 2005 through 2014.

The report also notes that the drop off in claim severity that occurred from 2003 to 2004 was due to reform laws enacted during that time. Indemnity claim frequency declined dramatically up until 2008.

The net effect of these two trends combined has been that overall losses per $100 of payroll have been largely consistent across the past 10 years, the report shows.

The decline in claim frequency has been seen both in claims that incur an indemnity payment and in medical-only claims, according to the report. The smallest component, ALAE costs, have increased as a

Mercury Begins Offering Ridesharing Insurance in Arizona

M

ercury Insurance is offering ridesharing insurance to cover Uber, Lyft and other transportation network company drivers in Arizona.

The new coverage announced in February will provide drivers with insurance that will bridge the gap between their personal auto insurance and the coverage provided by their TNC. Mercury’s ridesharing coverage will provide drivers with coverage throughout the entire drive cycle.

Mercury will be offering the insurance for as little as 20 cents per day.

The ridesharing drive cycle is divided into three periods. Period 1 is when drivers W2 | INSURANCE JOURNAL-WEST February 22, 2016

have turned on the ridesharing app, but haven’t accepted a fare. Period 2 is when drivers have accepted a fare and are on their way to pick up a passenger.

During period 3 drivers are transporting passengers to their destinations.

Mercury’s ridesharing insurance will extend drivers’ personal auto policies from period 1 through period 3 of the drive cycle, allowing them to obtain coverage not provided by their ridesharing companies.

Mercury’s ridesharing insurance will also fix the insured’s vehicle in a covered loss if those coverages had been purchased from Mercury.

percentage of overall claim costs in recent years.

Workers between the ages of 36 to 55 account for more than half of the paid indemnity claims. The report indicates that the share of overall losses for each age range is less than its share of overall claims for ages 30 and younger, which indicates lesser average severity of indemnity claims for younger workers.

While litigated claims contribute only 20 percent of the total claims with indemnity payment, they account for roughly 54 percent of total incurred losses, the report states.

Copyright 2016 Associated Press.

Fatal Fire in Washington Bikini Coffee Stand Caused by Propane

F

ire investigators say they’ve completed their investigation into a blaze that killed a woman working in a coffee stand where baristas wear bikinis.

Everett Fire Department investigators said in a February news release the fire Jan. 7 was accidental and caused by a propane heater.

Officials say 26-year-old Courtney Campbell had been in the stand refilling a small space heater with propane.

Investigators said it was apparent that an accidental release of propane vapor occurred immediately before a flash that caused the fire.

Campbell was burned while escaping the flames and died later at Harborview Medical Center in Seattle.

Officials said Campbell had recently bought the stand.

Copyright 2016 Associated Press. www.insurancejournal.com

Beyond Security®

“It Takes Discipline”

Marty Hacala Fitness Enthusiast General Star President & CEO

“Rolling out of bed at 5am every morning to work out requires discipline. It’s my way of getting the very most out of my busy day.

“At General Star, we strive to get the very most out of our wholesale broker relationships. As a member of the Berkshire Hathaway family of companies, our financial strength is unsurpassed. But it’s our disciplined approach to building and maintaining profitable partnerships with a select group of brokers that drives us.

“Discipline: Whether sticking with an early morning exercise regimen or standing firm with a limited number of valuable wholesale broker relationships, it remains the cornerstone of our success.”

To locate the General Star broker nearest you, visit our website at www.generalstar.com.

© 2015 General Star National Insurance Company is licensed in the District of Columbia, Puerto Rico and all states. General Star National Insurance Company has its principal place of business in Stamford, CT and operates under NAIC Number 0031-11967. Insurance is placed with General Star National Insurance Company by licensed producers. General Star Indemnity Company is an eligible surplus lines insurer in all states, the District of Columbia, Puerto Rico, and the Virgin Islands. It has the status as an unlicensed insurer in California and operates under NAIC Number 0031-37362. Insurance is placed with the General Star Indemnity Company by licensed producers and, for risk that qualify, by licensed surplus lines brokers.

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People Sara Owens

William Guthrie

Melissa Kaufman

Hub International Ltd. named Sara Owens senior vice president of engagement.

Owens will be responsible for engaging key constituents of Hub’s Los Angeles, Calif., operation.

She will report to Andrew Forchelli, regional president of Hub International Los Angeles.

Owens was a vice president at Hub. Chicago, Ill.-based Hub is an insurance brokerage that provides property/casualty, life and health, employee benefits, investment and risk management products and services.

William Guthrie was named chief risk officer, and Melissa Kaufman was named vice president of product development of Menlo Park, Calif.-based Pacific Specialty Insurance Co. Pacific Specialty is part of the McGraw Group of Cos. Guthrie is responsible for risk management operations.

He will also continue to have oversight of the research and development department as well as McGraw Powersports.

Kaufman is responsible for the development, maintenance and profitability of Pacific Specialty’s personal lines insurance programs.

Guthrie was previously senior vice president of product development.

Kaufman was formerly director of product development.

Prior to Pacific Specialty she was with the law firm of Roger, Scott & Helmer. Prior to that she was counsel for Safeco Insurance Co. Pacific Specialty sells a variety of products, including property, powersports and liability.

Gov. Doug Ducey appointed Leslie Hess as the interim director of the Arizona Department of Insurance.

Hess has worked in the insurance and financial services industries for more than 25 years. Hess was with the Department of Insurance for 12 years as deputy receiver and legal advisor. She was with the Arizona Legislative Council and worked for the Arizona Corporation Commission, Securities Division in legal counsel positions.

Hess worked for both Merrill Lynch and Bear Stearns in New York. Most recently, Hess was the director of compliance and corporate secretary for Oxford Life Insurance Co. and its subsidiaries.

Ellen Sims Langille was named general counsel of the California Workers’ Compensation Institute.

Langille will manage the CWCI’s internal and external legal affairs. She will also serve as staff liaison to the legal committee, which directs CWCI’s amicus activities.

W4 | INSURANCE JOURNAL-WEST February 22, 2016

Langille is currently a partner at the defense firm of Finnegan, Marks, Theofel & Desmond in San Francisco.

She has served as amicus counsel for the CWCI and other organizations in a number of cases, including Angelotti Chiropractic v. Baker; Dubon v. World Restoration; Brodie v. WCAB; Lockheed Martin v. WCAB; Stuart v. WCAB; and Avalon Bay Foods v. WCAB (Moore).

Alliant Insurance Services Inc. named Michael Heffernan executive vice president in its construction services group.

Heffernan will be responsible for Alliant’s construction operations in San Jose, Calif.

Heffernan has more than 25 years of risk management experience. Prior to Alliant Heffernan was an executive vice president at a global retail broker.

Newport Beach-based Alliant provides property/casualty, workers’ compensation, employee benefits, surety and financial products and services.

Walnut Creek, Calif.-based Heffernan Insurance Brokers named Christopher Dewey vice president.

Dewey joined Heffernan in 2008 in the small business division, and was promoted to Heffernan’s large commercial division in 2009.

Heffernan has California offices in San Francisco, Petaluma, Menlo Park, Los Angeles and Orange County, and in Portland, Ore., St. Louis, Mo., Long Island and New York.

Reno, Nev.-based LP Insurance Services Inc. has named Lindsay Minor chief marketing officer.

Minor will support offices in marketing and community efforts.

Minor was most recently the company’s strategic communications manager.

LP Insurance is a risk management and commercial insurance brokerage firm.

EPIC Insurance Brokers and Consultants has named Joshua Allen Western region risk management loss control specialist.

Allen will be based in EPIC’s Concord, Calif., office and report to Marianne Schleicher, chief operating officer of the Bay area region. He is responsible for providing safety management and loss control services to EPIC’s larger, more complex risk management clients.

Allen has more than 10 years of safety and loss control experience. He comes from the Hartford.

EPIC is retail property/casualty and employee benefits insurance brokerage and consulting firm. www.insurancejournal.com

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News & Markets Expert: Targeting High-Risk Shoppers with Mobile Makes Sense

By Don Jergler

H

igh-risk shoppers may be one of the best segments for insurance agencies

ABRAM16746.indd 1

W6 | INSURANCE JOURNAL-WEST February 22, 2016

and carriers to target with online and mobile quoting and services.

New data from online agency CoverHound shows high-risk shoppers are

2/9/16 9:37 AM

93 percent more likely to conduct research for insurance on their mobile devices as compared to lower risk shoppers.

“The main thing to remember about online insurance shoppers is that they come in all shapes and sizes,” said Rory Joyce, CoverHound’s chief product officer and co-founder.

When it comes to variety, Joyce isn’t just talking demographics. According to him, an assessment of the users who came to CoverHound.com shows they visited on 2,200 different devices.

The disparity between how high-risk versus low-risk shoppers’ online insurance researching and buying profiles is worth noting: Compared to higher risk shoppers, lower risk shoppers are 49 percent less likely to complete an insurance purchase on a desktop.

Compared Rory Joyce to higher risk shoppers, lower risk shoppers are 43 percent less likely to complete an insurance purchase on mobile.

The above differences in lower risk shoppers’ digital insurance shopping behaviors — both desktop and mobile — could be due to more complex insurance needs.

Higher risk shoppers are 7 percent more likely to purchase their insurance within the first week compared to lower risk shoppers.

High-risk shoppers tend to go online for a number of reasons, and they tend to be more comfortable not only self-servicing during the quote process, but also purchasing online, Joyce said.

This is because high-risk shoppers are continued on page W8 www.insurancejournal.com

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News & Markets continued from page W6 immediate purchase typically younger, and younger segments decision. are inherently more active on the web, What accounts according to Joyce. for that?

“There is less demand, from a carrier “I don’t think it’s standpoint, to write high-risk policies,” he any one thing — it’s added. pretty interesting,” Going online allows the segment to Joyce said. “A coumaximize their options.” ple of factors: high While the low-risk segment maybe be a risk shoppers, for little bit less comfortable actually purchasexample, they tend ing insurance online, they are comfortable to be more likely to getting that initial comparison online be without insurwithout talking to an agent, according to ance, so that creates Joyce. a greater sense of Another notable difference is the highurgency.” risk segment seems more willing to use It may also be mobile devices for a majority of their impulse. Younger people are more likely to needs. want to get a purchase made sooner than “It could be more younger folks tend later, and these high-risk to be what we ‘There is less demand, from shoppers typically have consider highfewer overall options in risk and the a carrier standpoint, to the market, so when they lower-income write high-risk policies.’ see a deal they’re comfolks,” he said. pelled to jump on it, he said.

“In many cases, a mobile device can be The message in all of this may not be their only connection to the web.” totally new, but the take-home is that CoverHound data also shows that highoffering a good online experience is risk shoppers are more likely to make an

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10/2/15 4:10 PM

important.

“You really need to have a dynamic experience that really takes the specific segment’s behaviors and preferences in account and build your experience accordingly,” Joyce said.

Joyce also offers a reassuring message to agents who feel online insurance purchasing is leaving them out in the rain: The majority of the market may be comfortable getting an initial quote online, but they still want to pick up the phone and close the deal with an agent.

“Obviously there are going to be segments, who tend to be the younger generation, where they’re just conditioned to absolutely not want to talk to anyone over the phone,” he said. “We find that when given the option to not talk to an agent versus purchase online, most of that segment is going to do so.”

However, the majority of the market still is only comfortable in getting that initial quote online or through an app. They still want interaction with an agent, and they prefer close the deal with an agent, Joyce said.

He added: “I think the best lesson here is: the need for agents isn’t going away overnight. And then make sure that we’re always giving the best service possible across the board, high-risk, low-risk, middle market.”

Listen to the full podcast at InsuranceJournal.tv.

www.insurancejournal.com

NATIONAL COVERAGE

FIGURES

439,238

The number of Pennsylvanians who signed up for the 2016 health insurance plans that were sold through the federal marketplace. The enrollment number fell compared to last year when about 471,000 Pennsylvanians signed up. Officials said some people have migrated to Medicaid after the program’s eligibility guidelines expanded. Pennsylvania’s Medicaid program grew by 440,000 people in 2015 to a record of nearly 2.7 million.

$34 Million

The amount the city of Chicago has had to pay in misconduct settlements involving 124 of Chicago’s roughly 12,000 police officers. The officers are identified in nearly a third of the misconduct lawsuits settled since 2009. The Chicago Tribune reported one officer had seven lawsuits against him that were settled. The lawsuits have largely escaped city council scrutiny because the settlements have been at or under $100,000.

If they’re larger, aldermen must approve them.

$5 Million

The amount that Time Warner Cable has agreed to pay to settle lawsuits that claimed it owed Los Angeles millions in city fees.

$2.8 Million The amount Arkansas highway officials plan to spend on the state freeway system with a focus on reducing wrong-way crashes on the state freeway system. The changes include replacing more than 4,000 “wrong way,” “do not enter” and “one way” signs at exit ramps with brighter sheeting, and installing them at a lower height. The department also plans to put down more noticeable pavement directions and add reflectors on off-ramps that indicate the driver is going in the wrong direction.

$1 Million The amount a South Carolina jury awarded in punitive damages to a woman injured in a car crash involving James Boulware, a repeat drunken driver. The jury also awarded Jami Allison Owens $89,000 in actual damages for unspecified injuries suffered in the Oct. 1, 2011, crash after a University of South Carolina football game.

DECLARATIONS E-Cigarette Marketing

“The health of New York City kids is not for sale.”

— New York City Comptroller Scott Stringer on the need to investigate and regulate marketing of e-cigarettes. Stringer hosted a rally with dozens of advocates, parents and youth to call on e-cigarette companies to stop marketing to youth. He cited a Centers for Disease Control and Prevention study that found 70 percent of young Americans have been exposed to e-cigarette advertisements.

800-Pound Gorilla

“Right now, the 800-pound gorilla in the room for most Oklahoma citizens is the fact that the largest and most important investment that they make in their lifetime, their homes, are shaking underneath them.”

— Oklahoma Rep. Scott Inman, D-Del City, believes the oil and gas industry should subsidize the costs of researching earthquakes in his state.

Democrats want to prohibit out-of-state wastewater from being dumped in Oklahoma. They also want to roll back a law that prohibits cities or counties from regulating oil and gas activities.

Flint Water Lawsuits

“How can they look at themselves in the mirror? … It’s an embarrassment for government officials to take the safety of their citizens so lightly.”

— New York attorney Hunter Shkolnik, who has filed one of the many lawsuits over lead contamination in Flint, Mich.’s water system. Gov. Rick Snyder, the former mayor, public employees, and almost anyone else who may have had a role in supplying the city with corrosive river water are being sued. The lawsuits accuse them of violating civil rights, wrecking property values and enriching themselves by selling a contaminated product.

Don’t Worry, Be Gassy

‘Telling people who are upset that it is not a problem or serious is a terrible crisis management strategy.’

— Susan Tellem, a partner at Tellem Grody Public Relations in Los Angeles, knocked Sempra Energy’s consistent “Don’t worry” message to Los Angeles residents ever since one of its wells in California started spewing natural gas.

Stormy Seas

“The thing about this storm was that it was forecast for days. So why in the world would a cruise ship with thousands of passengers go sailing right into it?”

— Sen. Bill Nelson, D.-Fla., who has called for the National Transportation Safety Board to investigate the Royal Caribbean cruise ship that ran into stormy seas in the Atlantic Ocean.

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February 22, 2016 INSURANCE JOURNAL-NATIONAL | 11

NATIONAL COVERAGE

Business Moves revenues of approximately $10.0 million in 2015.

SSAD will continue to operate from its Norwell location under the sales leadership of Ann Marie Beaudoin and operational leadership of Megan Reid. The SSAD operations will report to Julie Turpin, CEO of The Advocator Group.

Brown & Brown Inc. is headquartered in Daytona Beach, Fla.

The Hilb Group, Dowling & O’Neil The Hilb Group, a middle market insurance agency based in Richmond, Va., has acquired Dowling & O’Neil, an independent agency in Hyannis, Mass. Terms of the transaction were not disclosed.

Founded in 1841, Dowling & O’Neil provides general property/casualty insurance services with niches in high net worth personal lines and healthcare facilities.

Dowling & O’Neil co-owners Rob Miller and Mark McCartin will continue to lead 31 employees and operate in the Hyannis location under their current name.

The Dowling & O’Neil acquisition is The Hilb Group’s first transaction in 2016.

Established in 2009, The Hilb Group is a portfolio company of Boston-based private equity firm, ABRY Partners.

Brown & Brown, SSAD Brown & Brown Inc.’s subsidiary, The Advocator Group LLC, has acquired substantially all of the equity interests of Social Security Advocates for the Disabled LLC (SSAD) in Norwell, Mass. Terms of the transaction were not disclosed.

Since its founding in 1994, SSAD has provided Social Security disability insurance (SSDI) advocacy services to individual clients on behalf of long-term disability insurance carriers. SSAD had annual net 12 | INSURANCE JOURNAL-NATIONAL February 22, 2016

Anderson, Bagley & Mayo, Judy A. Mendolusky Anderson, Bagley & Mayo Insurance Agency, an independent agency based in Leominster, Mass., has acquired Judy A. Mendolusky Insurance Agency, also based in Leominster. Terms of the transaction were not disclosed.

Founded in 1986, Judy A. Mendolusky Insurance Agency has been an independent agency offering property/casualty insurance services to local residents and businesses.

Anderson, Bagley & Mayo is a family owned and operated firm offering property/ casualty insurance services to more than 7,000 families and 800 businesses in the north central Massachusetts region.

AssuredPartners, Suydam Insurance AssuredPartners Inc. has acquired Suydam Insurance Agency in Somerset, N.J. Terms of the transaction were not disclosed.

Suydam Insurance Agency has provided business and personal insurance coverage to clients in the greater New Jersey area since its founding in 1879. The Suydam team of eight will continue operations in Somerset under the leadership of Robin Suydam and Ryck Suydam.

Based in Lake Mary, Fla., AssuredPartners acquires and invests in insurance brokerage businesses across the United States and in London. From its founding in 2011, AssuredPartners has grown to $550 million in annualized revenue, with more than 125 offices in 30 states and a London office.

World Insurance, Alamo Insurance World Insurance Associates LLC, an independent agency based in Tinton Falls, N.J., has acquired Alamo Insurance Services Inc. of Toms River, N.J. Terms of the transaction were not disclosed.

The Alamo Insurance Services acquisition is World Insurance Associates’ 13th business acquisition since its founding in 2012.

Established in 1974, Alamo Insurance Services is an independent agency offering automobile, homeowners, flood, health, life, and commercial insurance services.

World Insurance Associates will maintain Alamo’s Toms River location. Alamo’s three staff members will join World Insurance Associates as part of the transaction.

World Insurance Associates LLC is an independent agency with 60 employees and 10 offices in the Northeast region and places more than $90 million in annual premiums.

Tompkins Financial, Shepard, Maxwell & Hale Tompkins Financial Corp., a financial services company headquartered in Ithaca, N.Y., announced that its insurance agency subsidiary, Tompkins Insurance Agencies Inc., has acquired Shepard, Maxwell & Hale Insurance in upstate New York. Terms of the transaction were not disclosed.

Established in 1957, Shepard, Maxwell & Hale is an independent agency with two offices in Batavia and Hamlin, N.Y. Shepard, Maxell & Hale’s two principals, Daniel G. Hale and Stephen S. Maxwell, will remain with the agency. Five other employees will also join the Tompkins Insurance team.

Hub International, Columbian Agency Insurance brokerage Hub International Ltd. has acquired operations assets of the Columbian Agency, based in New Lenox, Ill. Terms of the acquisition were not disclosed.

Columbian operations specialize in providing commercial lines insurance and surety bond solutions for the construction industry. Columbian’s owners Kevin Scanlon, Gary Eaton, Lee McWethy and Rob Kegley, will join Hub Midwest. www.insurancejournal.com

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All admitted coverages are written by Philadelphia Indemnity Insurance Company. Coverages are subject to actual policy language.

NATIONAL COVERAGE

News & Markets P/C Direct Premium Written Up 4.2 Percent

D

irect premium written (DPW) for property/casualty insurance companies continues to increase, albeit gradually, according to a Demotech analysis. At year-end 2014, more than $570 billion of DPW was reported, a recordhigh for the industry.

For 2014, total DPW for all P/C insurers

By Douglas A. Powell aggregately increased 4.5 percent over 2013, an increase of $24.7 billion. Through the third quarter of 2015, the insurance industry’s growth trend has continued, as DPW for all P/C insurers aggregately increased 4.2 percent over 2014.

For the nine months ended Sept. 30, 2015, P/C companies comprising the Top 25 insurers in terms of DPW increased their

DPW 12.2 percent over the first nine months of 2014. This continued the Top 25 insurers’ impressive display of premium growth and financial stability. The Top 25 accounted for more than 55 percent of the growth in the P/C insurance industry’s DPW. In contrast, the remainder of the industry reported an increase in DPW of 2.3 percent, or $8 billion year-over-year.

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 of the effect of reinsurance. Since 2010, this ratio for P/C companies has remained stable at approximately 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.

There is always a fair amount of uncertainty in making projections based on third-quarter data, but if the industry holds to its 10-year historical pattern, growth in 2015 would result in the highest level of year-end DPW reported by the P/C industry.

Powell is a senior financial analyst with Demotech Inc. Email: dpowell@demotech.com.

Top 25 Property/Casualty Companies Based upon dollar amount of direct premium written (DPW) growth Year-to-date results September 30, 2015 versus September 30, 2014

Company Name

DPW 9/30/2015

DPW 9/30/2014

$ Growth

% Growth

Allstate Northbrook Indemnity Co. Allstate Fire and Casualty Insurance Co. American Home Assurance Co. Wesco Insurance Co. State Farm Mutual Automobile Insurance Co. Continental Casualty Co. Liberty Insurance Underwriters Inc. Allstate Vehicle and Property Insurance Co. American Bankers Insurance Co. of Florida GEICO General Insurance Co. Zurich American Insurance Co. USAA General Indemnity Co. LM General Insurance Co. GEICO Casualty Co. State Farm Fire and Casualty Co. Auto-Owners Insurance Co. GEICO County Mutual Insurance Co. Ohio Security Insurance Co. Nationwide Agribusiness Insurance Co. Standard Fire Insurance Co. Liberty Insurance Corporation USAA Casualty Insurance Co. Nationwide General Insurance Co. Farmers Insurance Exchange Everest National Insurance Co. Top 25 P/C Companies by DPW Growth All Other P/C Companies Total

1,349,938,048 5,188,773,339 414,763,995 1,600,716,115 26,057,095,340 4,727,399,780 1,053,115,048 1,083,573,364 2,400,345,121 5,950,811,319 4,745,084,435 2,091,245,302 1,808,836,334 2,446,945,792 14,647,389,844 2,040,451,111 504,251,192 929,375,810 975,374,654 1,205,099,454 2,090,855,862 3,958,601,029 657,234,391 2,695,103,875 838,483,126 91,460,863,680 354,353,406,940 445,814,270,620

87,476,781 4,507,281,437 -262,985,301 1,120,170,948 25,580,599,478 4,302,249,643 638,355,292 670,650,620 1,992,152,425 5,560,823,143 4,361,073,415 1,709,888,245 1,435,897,605 2,076,271,232 14,317,624,026 1,724,693,183 212,171,691 650,320,845 707,545,677 950,440,765 1,840,655,041 3,729,155,995 454,601,306 2,503,960,437 647,529,557 81,518,603,486 346,320,135,661 427,838,739,147

1,262,461,267 681,491,902 677,749,296 480,545,167 476,495,862 425,150,137 414,759,756 412,922,744 408,192,696 389,988,176 384,011,020 381,357,057 372,938,729 370,674,560 329,765,818 315,757,928 292,079,501 279,054,965 267,828,977 254,658,689 250,200,821 229,445,034 202,633,085 191,143,438 190,953,569 9,942,260,194 8,033,271,279 17,975,531,473

1,443.20% 15.12% -42.90% 1.86% 9.88% 64.97% 61.57% 20.49% 7.01% 8.81% 22.30% 25.97% 17.85% 2.30% 18.31% 137.66% 42.91% 37.85% 26.79% 13.59% 6.15% 44.57% 7.63% 29.49% 12.20% 2.32% 4.20%

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.

14 | INSURANCE JOURNAL-NATIONAL February 22, 2016

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SPOTLIGHT

Farm & Ranch 10 Things to Know About Deer Breeding Operations

By Adrienne Lindsey

D

eer breeding operations can generate high receipts.

A relatively new type of risk, deer breeding has many peculiarities that agents should be aware of to better service their clients. Here are some of them: 1. Fencing is imperative when looking at deer breeding operations. Because of the ability of this type of livestock to jump an average fence, the entire perimeter must be game fenced. Some carriers will approve 8-foot game fencing, and others may not allow anything under 10 feet. Because most farm/ranch policies don’t include deer in the definition of livestock, the insureds need to make sure to keep them safe and enclosed.

2. Deer are bred in two ways. They may be penned in a game fenced area during breeding season where they will breed naturally. Alternatively, bucks will be darted in the field and the semen extracted. A vet may then come onsite and artificially inseminate a darted doe. When using a veterinarian onsite, their coverage needs to be verified and a certificate of insurance obtained.

Also, make sure the vet has experience with this type of procedure.

3. When bucks are darted and semen extracted, the appropriate pens must be available in which to allow them to wake up after the medication has worn off. Pens need to be dark and enclosed, and the animals should be kept away from each other.

The bucks are then placed into an outside pen until they can be safely released to their natural habitat. To ensure that both employees and other livestock are not injured, the buck’s horn racks must be removed. This will limit the liability exposure of injury for everyone on premises.

16 | INSURANCE JOURNAL-NATIONAL February 22, 2016

4. Operations may breed high-valued bucks to sell their offspring to other hunting ranches, which advertise such stock to draw high-priced hunts. Others breed to increase the stock on their own premises. Breeding options affect the rating for insurers because selling the deer increases products exposure and needs to be charged for appropriately.

5. Hunting is an incidental operation that will probably take place on the premises. This exposure can be minimal if only employees and family members are allowed to hunt. If the insured sells hunts to outside parties to increase profit, this could be an additional liability exposure that needs to be addressed and charged for by the insurer.

6. When hiring outside of the operation to extract and store semen, it is very important to verify that the outside party has its own coverage, and to obtain a certificate of insurance.

7. Semen storage is also something to look at when writing these types of opera-

tions. The semen of prize bucks can be very highly valued. This semen needs to be stored in a temperature-controlled facility that will provide coverage for spoilage in the event that the facility’s systems fail and the semen becomes no longer viable.

8.

When livestock is being sold to others, they are either picked up by the new owner or delivered to the new premises.

Because transporting deer can be a difficult task, many times owners/buyers outsource the delivery. Care, custody and control needs to be in place by the hauling company to make sure that in the event the stock doesn’t make it through the delivery, the money for the livestock isn’t lost.

9.

When dealing with high-value livestock, coverage for the animal itself definitely needs to be in place.

But sometimes, in addition to a prize buck the doe herd should be insured, as well.

Mortality/livestock policies can help with this exposure. Coverage forms vary from carrier to carrier, but usually coverage can be tailored depending on the circumstances. Whether it is a policy for a $250,000 prize buck, or a limit on the entire herd, policies can be purchased for both types.

10. Because these operations can generate high receipts, and tend to have increased land/property values and expensive stock, an umbrella policy is a wise choice for these risks. And because this is a fairly new risk, the limits that could be paid are undetermined. Being prepared for a high-liability loss will help keep the operation intact and moving forward during a claim.

Lindsey, an underwriter, commercial AG, at Texasbased Tejas American General Agency, holds Certified Insurance Counselor and Agribusiness and Farm Insurance Specialist certifications.

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We live it.

Rick Dayner, trainer and Great American policyholder

Dina Sapienza, rider and Great American underwriter

With specialty insurance expertise like this, it’s hard to tell our people from our policyholders.

In hundreds of niche industries, Great American’s expertise is built on the knowledge and experience of people who know our insureds’ business as well as our own.

People like Dina, an underwriter who has competed for years on the Hunter/Jumper circuit. Her passion has been forged in the stables and rings—and on the job.

That’s expertise you and policyholders like Rick can count on when looking for a company that provides protection for specialty business risks.

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Agriculture • Annuities • Cyber Risk • Environmental • Equine • Excess & Umbrella • Fidelity & Surety • Financial Institutions Inland & Ocean Marine • Non-Profits • Professional Liability • Transportation • Workers’ Compensation Great American Insurance Group, 301 E. Fourth St., Cincinnati, OH 45202. Policies are underwritten by Great American Insurance Company, Great American Assurance Company and Great American Security Insurance Company, authorized insurers in all 50 states and the DC. The Great American Insurance Group eagle logo and the word marks Great American®, Great American Insurance Group®, and We Live It® are registered service marks of Great American Insurance Company. © 2013-2016 Great American Insurance Company. All rights reserved.

NATIONAL COVERAGE

M&A Review Merger and Acquisition Activity Sets New High-Water Mark

M

erger and acquisition activity for 2015 set a new record with 456 deals, sailing past the previous high-water mark of 325 deals set in 2012, according to recent data. The fourth quarter closed with 104 announced transactions, pushing the total deal volume up an impressive 42 percent over the prior year, as market condiBy Meredith Reeves tions led to increased buyer demand and opportunities for sellers.

The availability of capital along with an expanding buyer pool helped to create a surge of activity among insurance brokerages backed by private equity. Private equity-backed brokers drove activity with 212 deals or 46 percent of the total deal count for 2015. Independent agencies accounted for 119 deals or 26 percent of the total activity. Public brokers completed 39 deals (9 percent of the total) and banks, insurance companies, and other buyers completed the remaining 19 percent of acquisition activity.

Activity in 2015 shifted more heavily toward the property/casualty firm, with

those firms accounting for 57 percent of all sellers during the year. Multi-line agencies, those with both property/casualty and employee benefits, comprised 28 percent of all deals. Employee benefits-only firms dropped to 15 percent of total activity.

Retail agencies comprised 82 percent of all deals with the specialty distribution segment taking the remaining 18 percent.

Within the specialty distribution segment, activity was split among program administrators (72 deals) and wholesale brokers (11 deals). While retail agencies make up the majority of the transaction activity, the volume of specialty distributors increased 32 percent (20 more deals) from the prior year.

There were 44 buyers in 2015 with multiple acquisitions, but it was the five most active that really drove activity to new heights, with 33 percent of all announced transactions. The top five, all private equity-backed, each had their most active years to date. Topping the leader board was Acrisure LLC with 39 U.S. based deals, the highest transaction count seen on record for any buyer. AssuredPartners Inc. and Hub International Ltd. followed with 34 and 30 U.S. based deals, respectively. BroadStreet

Announced Deals

(U.S. Transactions; Year-to-Date as of Dec. 31, 2015)

Partners Inc. became an active player in 2015 with 26 announced transactions, a marked increase from two deals the prior year. Rounding out the top five most active with 20 deals was Confie Seguros Insurance Services, continuing to build its presence with regional personal lines brokerages.

With a combined 149 deals, these five buyers announced 72 more deals in 2015 than the prior year.

Expanding the leader board brings in two public brokers, Arthur J. Gallagher & Co. (18) and Brown & Brown Inc. (12). Also completing the year in the double digits was NFP Corp. with 16 announced transactions, more than twice its prior year count.

While demand swelled for the historically active buyers, there were many new entrants that stepped in from the sidelines.

In 2015, there were 188 buyers in the market, 100 of them first-time acquirers. Compared to the total 136 buyers the prior year, there were 38 percent more buyers making acquisitions.

In our opinion, activity in 2015 was propelled to new heights by the low cost of capital, all-time high valuations and buyer demand that seemed difficult to satiate.

While market dynamics can change at any time and acquisition activity could significantly relax, based on what we are seeing, the end of the buying spree is not currently visible on the horizon.

Securities offered through MarshBerry Capital Inc., Member FINRA and SIPC, and an affiliate of Marsh, Berry & Co. Inc. 28601 Chagrin Blvd., Suite 400, Woodmere, Ohio 44122. Phone: 440354-3230. Except where otherwise indicated, the information provided is based on matters as they exist as of the date of preparation. Past performance is not necessarily indicative of future results.

Reeves is a senior consultant with Marsh, Berry & Co. Inc. Website: www.marshberry.com.

Sources: SNL Financial, Insurance Journal, other publicly available sources and MarshBerry proprietary databases. Disclosure: All deal count metrics are inclusive of completed deals with U.S. targets only.

18 | INSURANCE JOURNAL-NATIONAL February 22, 2016

See Corresponding M&A Activity chart on page 21

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continued from page 18

Merger and Announced Acquisition Activity Date Buyer Announced Date

Buyer

10/01/15 10/31/15 11/01/15 11/01/15 11/01/15 11/01/15 11/01/15 11/01/15 12/01/15 12/01/15 12/01/15 12/01/15 12/01/15 12/01/15 12/01/15 12/05/15 12/17/15 12/21/15 12/31/15 11/01/15 10/13/15 10/23/15 12/01/15 12/11/15 12/18/15 12/18/15 12/21/15 12/07/15 10/05/15 10/16/15 10/21/15 12/01/15 12/21/15 12/30/15 12/30/15 10/02/15 10/01/15 10/01/15 10/22/15 10/01/15 10/01/15 10/29/15 11/30/15 12/01/15 12/31/15 11/17/15 11/30/15 12/09/15 12/17/15 10/01/15 10/08/15 12/16/15 10/02/15 10/02/15 10/02/15 10/02/15 10/31/15 10/31/15 11/16/15 12/21/15 11/15/15 10/01/15 12/31/15 11/01/15 10/07/15 10/30/15 12/16/15 12/01/15 10/27/15 10/01/15 10/02/15 10/05/15 10/12/15 11/04/15 11/05/15 12/02/15 12/01/15 10/20/15 12/01/15 10/28/15 11/04/15 12/01/15 12/04/15 12/11/15 11/18/15 12/16/15 10/13/15 11/01/15 10/15/15 10/22/15 12/14/15 11/10/15 12/07/15 11/15/15 12/14/15 12/31/15 10/09/15 10/09/15 10/09/15 12/01/15 10/13/15 12/09/15 10/01/15 12/01/15

Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC All Risks Ltd. Alliant Insurance Services Arthur J. Gallagher & Co. Arthur J. Gallagher & Co. Arthur J. Gallagher & Co. Arthur J. Gallagher & Co. Arthur J. Gallagher & Co. Arthur J. Gallagher & Co. Associates of Glens Falls Inc. AssuredPartners Inc. AssuredPartners Inc. AssuredPartners Inc. AssuredPartners Inc. AssuredPartners Inc. AssuredPartners Inc. AssuredPartners Inc. BB&T Corp.

BenefitMall Beneflex Insurance Services Inc. Bremer Financial Corp.

BroadStreet Partners Inc. BroadStreet Partners Inc. BroadStreet Partners Inc. BroadStreet Partners Inc. BroadStreet Partners Inc. BroadStreet Partners Inc. Brown & Brown Inc. Brown & Brown Inc. Brown & Brown Inc. Brown & Brown Inc. CBIZ Inc. Charles W. Merriam & Son Inc. Chestnut Hill Insurance Group LLC Confie Seguros Insurance Services Confie Seguros Insurance Services Confie Seguros Insurance Services Confie Seguros Insurance Services Confie Seguros Insurance Services Confie Seguros Insurance Services Confie Seguros Insurance Services Cross Insurance CWI Underwriters LLC Driskell Peterson Insurance Agency LLC DSP Insurance Services Eastern Bank Corp.

Fairfax Financial Holdings Limited Fairfax Financial Holdings Limited First Bancorp First Mid-Illinois Bancshares Inc. GDP Advisors LLC Hilb Group LLC Hub International Limited Hub International Limited Hub International Limited Hub International Limited Hub International Limited Hub International Limited J. Smith Lanier & Co. Kelso & Co. LIA Great Bend Inc. Maritime Insurance LLC Marsh & McLennan Cos. Inc. NFP Corp.

NFP Corp.

NFP Corp.

Orchid Underwriters Agency LLC Oswego Valley Insurance Agencies LLC Parsons Insurance Services LLC Paul Hanson Partners Specialty Insurance Solutions People’s United Financial Inc. Pfenninger, Claxton, & Estelle Insurance Group Provident Insurance Group LLC Risk Strategies Co. LLC Risk Strategies Co. LLC SEK Holding Co. LLC Senior Market Sales Inc. Tarpey Insurance Group Inc. TowneBank TowneBank TowneBank U.S. Risk Insurance Group Inc. USI Holdings Corp.

Wallace, Welch & Willingham Inc. Westaim Corp.

World Insurance Associates LLC

September to December 2015 Seller Seller Undisclosed Independent Agency Winant-Bomack Insurance Agency LLC Undisclosed Independent Agency Undisclosed Independent Agency Undisclosed Independent Agency Undisclosed Independent Agency Undisclosed Independent Agency Undisclosed Independent Agency Undisclosed Independent Agency Undisclosed Independent Agency Undisclosed Independent Agency Undisclosed Independent Agency Undisclosed Independent Agency Undisclosed Independent Agency Undisclosed Independent Agency Undisclosed Independent Agency Anthony & Co. Inc. H.D. Segur Inc. Undisclosed Independent Agency Specialty Risk Underwriters Inc. Certain books of business Sigma II Insurance Agency Inc. McPherson Benefits Group LLC Centennial Insurance Agency LLC Brown Hobbs & McMurray Insurance Managed Healthcare Solutions Inc. Hawk Agency Inc. Loomis & LaPann Inc. Wilson H. Flock Insurance Inc. D.M. Lovitt Insurance Agency Alliance Insurance Group Insurance Marketing Center Inc. Redmond General Insurance Agency Glenn/Davis & Associates Inc. Church Insurance and Financial Services Inc. Connecticut Underwriters Inc. Forest Financial Group Inc. Insurance Dimensions Inc. Nonprofit Insurance Advisors Debra LaVelle Inc. Commercial Insurance Group Inc. Bayberry Insurance Bramlett Agency Inc. Linda R. Goble Liberty Truck Insurance Inc. Certain assets of BenTrust MBA Insurance Agency Smith Insurance Inc. Ocean Marine Insurance Agency Inc. Pension Resource Group Inc. Scherff Insurance Agency Inc. Rotatori Insurance Inc. All Florida Insurance Group Inc. Dunlap & Bajak Inc. Schmitt & Kraft Inc. TS Insurance Group LLC AFA Claims Services Realty Support Services Inc. California Insurance Specialists Knapp, Schenck & Co. Insurance Agency Inc. Weston Financial Group Inc. Eby Insurance Agency Certain assets of Willis of Illinois’ Schaumburg office Northwestern Benefit Associates Insurance Agency Inc. Travel Insured International Inc. Brownyard Programs Ltd. Bankingport Inc. Illiana Insurance Agency LTD Insurance Connection of Texas Gentry Insurance Agency Inc. IAS Associates LLC Johnson & Wood Insurance Services Inc. Oxford Coverage Inc. RFO Enterprises Inc. Employee Benefits Group Inc. Forest Financial Group Inc. Rogers, Parker & Associates Inc. Risk Strategies Albright Insurance Agency Inc. Port City Holdings LLC Dawson Insurance Agency Inc. Pieper-Ramsdell Agency Inc. Absolute Advantage Insurance Services LLC Vanorsdale Insurance Services Inc. Platinum Partners Banach Insurance Agency Alpha Insurance Agency Inc. Universal Insurance Facilities Ltd. Kesten-Brown Insurance LLC Ameriana Insurance Agency Inc. Eaton & Associates M. G. Welbel & Associates Inc. Re-Solutions Intermediaries LLC All In One Insurance Services Inc. Futurity First Insurance Group Inc. Wilson Insurance Agency Inc. B.H. Baird Insurance Agency Invincia Insurance Solutions Total Insurance Planning LLC Matias Underwriters LLC Gardner & Associates Enterprises Inc. Sondregger Insurance Agency Inc. Capital Risk Underwriters Inc. Redmond Insurance Associates Inc.

Sources: SNL Financial, Insurance Journal, other publicly available sources and MarshBerry proprietary databases Disclosure: All deal count metrics are inclusive of completed deals with U.S. targets only. MarshBerry estimates that only 15 percent to 30 percent of all transactions are actually made public. Past performance is not necessarily indicative of future results.

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February 22, 2016 INSURANCE JOURNAL-NATIONAL | 21

CLOSER LOOK

Boats On the Water: Travelers’ Shasha Talks Boats for the Summer There are a number of competitors, including us, who are chasing market share. But there’s ample appetite for boat and yacht risks. For Travelers, we do have a multitude of products that are available for customers.

We sell (products) for boats and yachts, but as a personal insurance company, we also sell auto, home, condo, tenants, umbrella and personal articles. We do offer a discount off our boat and yacht products if you do have an account rounded piece of business. For example, if you have two or more policies with Travelers, you can get up to 15 percent off your boat policy premium.

W

ith more than 12 million registered vessels nationwide, the boat and yacht market presents an interesting opportunity for agents and brokers to add to their book. Boats are a growing opportunity for Travelers as well, says Todd Shasha, managing director, personal insurance boat and yacht, Travelers.

In this interview with Insurance Journal’s Andrea Wells, Todd Shasha Shasha, a life-long boat owner, talks about why insuring boats and personal watercraft offers agents opportunities to round out accounts this summer.

Insurance Journal: Describe the boat and yacht market in a post-recession environment. Are you seeing an uptick 22 | INSURANCE JOURNAL-NATIONAL February 22, 2016

We have seen an increase in boat new business coming in throughout 2015.

We’re hoping the same maintains for 2016. in business? Is the market growing now?

Todd Shasha: Boat sales have trended up throughout 2015. We have seen an increase in boat new business coming in throughout 2015. We’re hoping the same maintains for 2016. We are very optimistic. … There’s been a downturn over the last couple of months. Obviously, that will be a watch item to see if that impacts boat sales in the near-term to long-term. But ultimately, overall, a solid year for 2015 for boat sales.

How would you describe the insurance market for boats and yachts today? Is it competitive?

Shasha: Generally, the marketplace for boat and yacht insurance is very healthy.

How have coverages changed for the market?

Shasha: You’ll find a variety of coverage across carriers with maybe more specialized coverage. It really will vary carrier per carrier on the coverages that are offered.

I think each carrier might add unique endorsements that they would proffer their customers. It depends on the products as well. Your yacht product will be a little more sophisticated or potentially a lot more sophisticated than a boat policy, per se.

Usually more coverages with that type of a vessel versus the boat potentially.

What’s the biggest challenge agents might see when insuring watercraft, whether it’s a small personal boat or a large yacht?

Shasha: With your boat and your yacht policies, typically, there are warranties under that policy. We’ll speak to the yacht policy. In the Northeast, we have something called the layup provision, which is a warranty under the policy. You get a premium discount if your yacht is decommissioned based on a certain time period. You might say, “I’m not using the yacht after December or before March 1.” Generally, you get a premium discount for that, but the customer has to be very careful that they’re not navigating with that vessel between that time frame. Otherwise, coverage could be continued on page 24 www.insurancejournal.com

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Boats continued from page 22 potentially not there for the customer if something should happen when they’re navigating the vessel.

The other thing is the territories where your vessel is used. If you have a yacht and you pick a navigation territory of New England, if you navigate outside those waters, there could potentially be no coverage as well. Those are two areas.

On a boat policy, you could have inland or coastal navigation; you want to be very cognizant of the coverage that you have.

The obligation is on the agent and the customer — ultimately the customer — to really understand the coverage that the policy provides for navigation of the vessel.

The sharing economy is affecting a number of areas of property/casualty insurance. It seems that some boat owners maybe considering renting out their boats in a sharing capacity. How

do you handle that as an underwriter?

Shasha: That’s such an interesting concept. We have actually seen manufacturers promoting that (rentals) as potentially a method to offset the high payment of a boat. Travelers is a personal insurance writer. Sharing of your vessel, receiving compensation, is dealt into a commercial risk aspect. If you are renting out your boat, coverage would not be provided by the policy. I think that’s probably pretty typical across the industry. The reason for that is you underwrite the owner of the vessel and potentially the operators.

If you’re renting out to somebody, is the person familiar with the waters that are being navigated? What is their experience operating a vessel? Those are questions you’ll ask the owner when you’re underwriting the risks.

We don’t have that opportunity to do that if they’re renting out the vessel. It really

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is a very different categorization of risk.

Compensation is considered a commercial exchange. We would not provide coverage under that circumstance.

Owning a boat is generally a luxury for most people. Is there opportunity in this market to grow, or does the market depend solely on the economy?

Shasha: I think the economy certainly does impact, to an extent, boating. With boaters, you have a very passionate group.

For instance, I started boating at a fairly young age. It’s in my blood. It’s an interest I have. I hopefully will always own a boat. I wanted to share that with my kids so they take up that hobby as well.

But if you look at boat registrations from the U.S. Coast Guard statistics, you’re looking at probably more than 12 million boaters nationwide or registered vessels nationwide. I think it was down the last couple of years but we’re starting to trend back up again. The strengthening economy probably plays a role in that and hopefully the economy will continue to expand forward and present opportunities.

It is a luxury item. It is a very expensive hobby, but it’s one that people are very passionate about.

Lastly, what are the typical claims you see in the boating world?

Shasha: Boats and yachts might be a little bit different. With boats you’re using a trailer. With yachts you’re navigating further. But the top five claims are: 1.

Collisions, such as hitting a submerged object like a log; 2. Mechanical breakdowns; 3. Collisions, such as docks, piers, other vessels etc.; 4. Windstorm events; and 5.

Collisions, such as running aground. www.insurancejournal.com

SPECIAL REPORT

Agency Salary Survey

26 | INSURANCE JOURNAL-NATIONAL February 22, 2016

www.insurancejournal.com

By Andrea Wells

Average Management Salaries

women, men out-earned their female counSalary terparts by 70 percent on average ($126,529 President/CEO $181,239 omen who are top leaders or producto $74,239),$173,340 according to the survey.

Agency Owner/Principal ers in property/casualty insurance respondents — owners, Commercial Lines Manager Nearly 1,400 $98,441 Office Manager $83,750 agencies make materially less than men in producers and agency support staff — from the same positions. Marketing Manager every state $97,094 participated in this year’s annual Accounting Manager $65,505 While females make up almost half of survey.

Technology Officer $91,000 all agency employees (48.3 percent), across the board femals earned 109 percent less Why the Compensation Gap? than male agency employees, according to According to some experts, it’s an opporInsurance Journal’s 2016 Agency Salary Survey. tunity gap, more the result of fewer women Producerbeing Salaries bypaying Line The Agency SalaryAverage Survey also found in the higher jobs than it is Salary that: agencies paying men more than women for Commercial $72,544 • Female support staff membersProducers average the same job.

It may also reflect age and Personal Producers $45,514 $1,100 less per year than male support experience. staff.

The exact reasons are difficult to quan• Female producers earn $13,428 less on tify, says Paul Osborne, senior consultant average than male producers. Salaries at Demotech Inc., Insurance Journal’s official Average Producer by Region • Female managers earn $79,531 less on research partner, who provided data analyCommercial Lines Producer Personal Lines Producers average sis for the 2016 Agency Salary Survey.

East than male managers. $75,474 $32,855 “For instance, for a commercial lines Midwest $60,735 $36,901 Even when comparing the same job, such manager, does that$77,906 pay difference tend to South Central $66,877 Southeast lines manager where respon$86,293 as commercial happen at smaller $40,001 agencies or in certain West dents to the survey were equally men$67,338 and regions? Are there$52,350 other factors that would

W

Average Management Salaries by Gender President/CEO Agency Owner/Principal Commercial Lines Manager Personal Lines Manager Office Manager Marketing Manager Accounting Manager Technology Officer

Female

Male

$146,702 $121,569 $74,239 $66,500 $69,278 $81,143 $65,505 N/A

$185,827 $183,242 $126,529 $92,375 $152,000 $36,000 N/A $91,000

Average Salaries By Gender Manager/Owners

Female Male

$101,300 $180,831

Producers

Staff

$55,996 $69,424

$58,839 $59,937

Average CSR Salaries By Gender Commercial Lines

Female Male

www.insurancejournal.com

$64,491 $60,416

Personal Lines

Staff

$64,491 $52,375

$58,839 $59,937

help account for the discrepancy like experience or age?” he asked.

Even so the data shows a difference in pay by gender, Osborne said. “I think it is pretty clear that there is a bias, as the numbers are significantly different, but pinning it down is difficult unless you have two people doing the exact same job.”

In management, the survey revealed that in five of the eight agency management positions, men outpaced women in average salaries. See “Average Management Salaries by Gender” chart below. The survey showed: • Female president/CEO positions average $39,125 less per year than male president/ CEOs. • Female agency owners/principals earn $61,673 less on average than male owners/ principals.

• Female commercial lines managers earn $52,290 less on average than male managers.

• Female personal lines managers earn $25,875 less on average than male managers.

• Female office managers earn $82,722 less on average than male office managers.

Not Unique to Insurance The gender salary gap is not unique to the insurance agency business.

According to the U.S. Census Bureau, women in the U.S. earned 78.6 percent of what men earned in 2014 compared with 77.6 percent in 2013.

In 2014, the U.S. median annual earnings for women working full-time, year-round was $39,621, compared with $50,383 for men, the Census reported.

At the current rate, if trends are projected forward, women will not receive equal pay until 2059, according to a 2015 analysis of the most recent U.S. Census data by the Institute for Women’s Policy Research (IWPR). This date is one year further out from the 2014 IWPR analysis, which signifies the gender wage gap isn’t closing.

“For decades, women have been increascontinued on page 28 February 22, 2016 INSURANCE JOURNAL-NATIONAL | 27

SPECIAL REPORT

Agency Salary Survey continued from page 27 ing their level of educational attainment earned $1,026 per week on average. and gaining job experience, which econo Gender disparity may be most noticeable mists would call increasing their human in top leadership roles of commercial propcapital,” said IWPR president and economist erty/casualty insurance carriers and reinHeidi Hartmann. “Yet, their earnings have surers, where a 2012 study by St. Joseph’s not kept pace with these increases.”

University showed that just 6 percent In another analysis, online publisher 24/7 of top executive positions were held by Wall St. identified the largest gender wage women. gap to be that of the insurance agent.

One area where female workers in agen A 24/7 Wall St. article titled, “Jobs with cies appear to come close to their male the Widest Pay counterparts in Gaps Between pay, according ‘Every one of our businesses Men and to the Insurance will suffer if we don’t take Women,” where Journal Agency diversity seriously.’ the publication Salary Survey, is reviewed U.S. that of support Bureau of Labor Statistics earnings data staff. However, females are almost six times from 2012, said women insurance agents (5.87) more likely to hold a support staff earned just 62.5 percent of men’s earnings. position as a male, while males are about According to the 24/7 Wall St. analysis, two-and-a-half times more likely (2.64) to be which reviewed data for 389,000 workers, a manager, the survey revealed. women agents earned just $641 per week In terms of producers, the genders are on average compared to men agents who fairly even in number, the survey showed.

Average Management Salaries Salary

President/CEO Agency Owner/Principal Commercial Lines Manager Office Manager Marketing Manager Accounting Manager Technology Officer

$181,239 $173,340 $98,441 $83,750 $97,094 $65,505 $91,000

Average Producer Salaries by Line Salary

Commercial Producers Personal Producers

$72,544 $45,514

Average Producer Salaries by Region East Midwest South Central Southeast West

Commercial Lines Producer

Personal Lines Producers

$75,474 $60,735 $66,877 $86,293 $67,338

$32,855 $36,901 $77,906 $40,001 $52,350

28 | INSURANCE JOURNAL-NATIONAL February 22, 2016

Average Management Salaries by Gender

Salary Gap Concerns Some industry experts have been talking about the gender pay gap in insurance for awhile.

Sharon Emek, who runs Work At Home Vintage Experts LLC (WAHVE), a company that looks for ways to outsource retired baby boomers from the insurance industry back to insurance firms, brokers and carriers, says the insurance industry has a long way to go to close the gender salary gap.

“The salary gap is closing, but it still has much to go,” Emek said. A more significant concern to Emek is the lack of gender diversity among insurance industry leaders.

“There are still few women in the c-suite and few women in ownership positions at insurance brokerages,” Emek said.

In her view, technology is helping to address this issue. “With technology enabling work from home, women in the future will no longer be penalized for having to manage a career and family.”

Tracey Carragher, CEO of Breckenridge Insurance Group, agrees that the industry has a long way to go when it comes to closing the gender salary gap.

Carragher has been outspoken on gender and diversity issues. She was honored last year at the annual Association of Professional Insurance Women Awards as Insurance Woman of the Year.

“The salary disparity is still there,” Carragher said. “It’s ridiculous if you take a look at studies; (female) MBAs getting out of school start at around the same salary (as men). What happens four years later — the disparity between men and women is significant.”

Carragher believes that the salary gap exists in all levels of insurance industry.

“So while we have made a lot of progress, I don’t think we’ve gotten close enough at all,” Carragher told Insurance Journal last year in a podcast interview.

Carragher says she’s not surprised by the most recent Agency Salary Survey findings.

“Clearly this is an issue that continues to prevail,” she said. “Constant conversation about this situation has not materially moved the needle.” www.insurancejournal.com

Support Staff/CSR/Account Executive

3.0%

3.5%

2.8%

2014 3.9% 4.4% 3.4%

2013 4.3% 5.1% 2.5%

*Includes all income changes in year

Average Agency Salary Adjustment Management/Agency Owner/Agency Principal Producer/Sales Support Staff/CSR/Account Executive

2015 3.8% 2.1% 3.5%

Carragher says she could cite other studies that are similar but they are not going How Agencies Base Compensation Incentive Plans to change the industry’s reality. “I think we have to talk about solutions that are actionAgency profits 34.1% able and measureable by us as individuals.

Productivity 30.9% Every one of our businesses will suffer if we don’t take diversity seriously,” she said.

Revenue growth 28.5% Others see the issue less as gender bias Contingent commissions 15.4% in salaries and more as bias against giving Individual performance 43.0% women opportunities to occupy the higher paying jobs in agencies.

No incentive plan 22.9% “I can’t remember the last time it was Other 6.7% addressed in a real life situation,” said Al Diamond, president of the Cherry Hill, N.J.based Agency Consulting Group (ACG), an independent agency valuation and consultManager/Owners Producers Staff ing firm serving organizations nationwide.

Less than 3 years $100,500 $44,650 $41,129 That’s not to say that all gender issues 3-5 years $71,844 $41,249 $42,956 have all been overcome, he added.

6-10 years $80,315 $71,837 $47,547 According to Diamond, the real prob11-20 years $120,302 $64,076 $52,905 lem remains getting the “good old boys” to 21-30 years $186,189 $76,578 $66,280 recognize that females are just as qualified More than 30 years $170,499 $77,883 $70,052 to become producers as their male counterparts. “But rarely do I see salary differences between compensation of different genders in the same roles,” he said.

Manager/Owners Producers Staff Producer compensation is generally East $208,569 $66,040 $67,414 defined by the same commission percentagMidwest $152,821 $47,991 $51,360 es, regardless of gender, Diamond says. The South Central $180,747 $71,465 $62,308 gender gap in service positions is generally Southeast $126,065 $61,880 $48,657 attributable to agency owners tending to West $126,931 $65,141 $57,980 hire females in service roles over males.

“But the salaries are generally defined similarly whether the service reps are male or For Mary Newgard, partner and senior producer compensation is producer comfemale,” he adds. search consultant at Capstone Search pensation. “It would be very easy to call out Diamond says in ACG’s own analysis of Group, a staffing and recruiting firm that a problem if you noticed that producers, producer compensation, which includes exclusively serves the insurance industry, a in particular, were being paid differently more than 4,000 agencies, the commission gender wage gap is not a big concern. based on their gender,” she said. “I have not rates do not dif“I haven’t seen seen anything like that.” fer for compena ton of it on the With support staff, Newgard says, she ‘Women need to be much more agency side, for sating male and hasn’t seen enough hires of men in those forceful in standing their ground the most part,” female producroles to really say if there is a salary disers. “So, if the Newgard said. If parity by gender. “Probably, 99.9 percent of and asking for more money.’ ‘female’ group there is a disparity your account managers and client service sold less overall in pay, Newgard staff are female, at least the positions, and insurance than the ‘male’ group, wouldn’t it says it is not a result of malicious intention. candidates, and employees that we see. … look like they were earning less than their “But it’s still a segmented group, where It would be pretty easy to call out.” male counterparts when the reality is that most of your client service support staff are an artificially created group (all females) female, and the producers are male,” she Closing the Gap may simply have sold less than the other said.

Erin Hamrick, a partner and founder artificially created group male producers?”

Newgard agrees with Diamond that continued on page 30

Average Agency Salaries By Experience

Average Agency Salaries by Region

www.insurancejournal.com

February 22, 2016 INSURANCE JOURNAL-NATIONAL | 29

010 0.6% 0.2% .6%

What Strategies Agencies Implemented in 2015 vs. 2014

in 2015 47.0%

2015 4.1% 14.9% 9.5% 5.1% 29.8% 19.0% 31.2% 41.0%

Cut benefits

Shift health plan REPORT costs to employees SPECIAL Increase benefits Force reduction of employees Postpone hiring Postpone raises Increase hiring Increase compensation

2014 6.6% 13.0% 6.4% 6.6% 30.8% 20.1% 29.8% 38.2%

Agency Salary Survey What Strategies Agencies Plan to Implement in 2016 2016 1.7% 7.7% 5.9% 5.0% 17.3% 10.4% 49.3% 47.5%

Cut benefits Shift health plan costs to employees Increase benefits Force reduction of employees Postpone hiring Postpone raises Increase hiring Increase compensation

What Benefits Agencies Offer Group health insurance Health Savings Account Dental Group life/disability 401(k) Profit Sharing IRAs Pension Plan ESOP Stock Options Flexible Savings Account Education reimbursement Childcare/Daycare* No Benefits Provided

2016 75.8% 35.8% 55.0% 53.7% 59.4% 18.1% 9.9% 6.4% 3.6% 4.8% 25.2% 32.2% 2.6% 12.8%

2015 75.4% 37.7% 56.3% 55.6% 60.0% 17.5% 11.2% 5.9% 4.8% 5.3% 28.2% 30.5% 3.2% 13.7%

2014 80.6% 38.3% 57.2% 56.6% 63.4% 18.9% 8.4% 6.0% 4.4% 4.9% 29.3% 32.8% 2.2% 10.5%

2013 77.7% 32.2% 52.5% 53.7% 57.7% 17.8% 10.4% 5.7% 4.6% 4.5% 24.4% 28.0% 3.0% 11.7%

Health Insurance: % Paid by Agency for Employee East Midwest South Central Southeast West

65% 55% 53% 56% 65%

Health Insurance: % Paid by Agency for Employee Under $1 million $1 million - $5 million $5 million - $10 million $10 million - $25 million $25 million - $50 million $50 million - $100 million $100 million or more

25.5% 48.4% 68.3% 76.0% 77.6% 81.7% 69.3%

Changes to Health Insurance Plan in Past Year Increased employee contribution Increased deductible limits Implemented higher co-pays for participants Reduced drug benefit Reduced other benefits 30 | INSURANCE JOURNAL-NATIONAL February 22, 2016

45.0% 61.2% 39.2% 11.6% 12.1%

Higher than 2014 Lower than 2014 Same in 2015 compared to 2014

7.6%

Agency Staff Size in 2015 Increase continued from page 29 Decrease

45.4%

45.4%

42.2%

12.4%

the same ofStayed Sterling James, a New York-based global specialist in executive search and leadership advisory services for theStaff insurance sector, has Anticipated Agency spent nearly 20 years negotiating compensaSize in 2016 48.6% tion packages for industry leaders.

46.4% Hamrick Increase led the CEO search for Michael McGavick, Decrease 5.0% XL’s CEO Stay the samesince 2008, and former chairman, president and CEO of Safeco Corp. While many of Hamrick’s top executive clients Agency Salary include men, sheSurvey takes a personal interest Demographics in advocating and placing top female leaders 28.4% Management/Agency Owner/ 53.5% throughout the industry.

Agency Principal 18.1% Producer/Sales Gender diversity in the insurance world is Support Staff/CSR/Account Executive “an absolute passion,” Hamrick said. “I speak on the topic all the time and have a reputation of being a big promoter of women in the Producer Commissions industry.” in 2015 42.5% 46.6% Increase Hamrick says some of the issues that create gender disparity in compensation in Decrease 10.9% Stayed the same in 2015 compared to 2014

‘I think it is pretty clear that there isPlans a bias, as the 5.5% Agencies’ to Change Commission Structure 12.8% numbers are significantly Changed in 2015 but pinning it down different, 81.8% Will change in 2016 changes isNodifficult unless you have two people doing the exact same job.’ Determine How Agencies Fees 34.6% insurance sectors can be solved70.9% as women % of Premium get better at asking for what they want.

Flat fee based on account type “The reality is that any business is going to get away with paying whatever they need to pay in order to get the talent and keep them Producer Compensation happy,” Hamrick said. “With women they and Fees 38.4% tend not to ask for more money, ever.”59.4% And Producer receives % of fee that’s a problem.

2.1% Producer receives all of fee receive fee who is responsible for Producer “If youdoesn’t are someone making a profit and you have a woman who is working and arguably very happy, there’s Producer Bonus for really no incentive to pay them more unless Exceeding Sales Goal 39.9% that woman asks,” Hamrick said. “You don’t 60.1% get it if you don’t ask. So who’s fault is that?

Yes It’s No not up to the manager to make sure that the woman gets fair pay.” It’s not up to the government either, she said.

Owners Thinking “You don’t ask, youAbout don’t get,” she said.

5.1% 9.0% Selling the Agency “Women need to be much more forceful in standing their ground and asking for more Yes 85.9% No money.”

Not applicable Hamrick says in her experience, women www.insurancejournal.com

ting ger

0 13 0 3 10 6 69

10 6% 2% 6%

do not negotiate in the same manner that Agency Cos their male counterparts do andGives that hasAnnual led to pay disparity. of Living Increase Average Salary Paid Average Hours Worked “I’ve been negotiating compensation for Commercial lines CSR $62,959 39.73 Yes a long time and men negotiate their comp Personal lines CSR $47,124 37.38 No packages; women don’t,” she said. Women Support staff average $54,508 37.00 Not Sure tend to be more focused on company culture and where they can make a difference.

“Whereas a man will say, ‘I need all that Agencies’ Plans plus I need this number.

And if they don’t to Chang Commercial Lines Personal Lines Support Staff Payroll Expense in 2016 get it they don’t move.”

East $74,776 $55,536 $57,688 She also says that women as Reducedon’t payrollmove expense Midwest $55,658 $37,466 $51,873 Increase payroll expense often for a number of reasons, including South Central $68,340 $52,154 $45,417 Keep personal considerations as the wellsame as loyalty to Southeast $48,764 $47,094 $50,825 Not sure their workplace.

West $61,965 $40,425 $59,527 “They do feel much more loyal so they will stay at one place for a long time and Agency Salary Increases What Strategies Agencies Implemented if anyone stays in the same company for a CSR Sala 2015 what we Agencies' long time they will in experience in 2015 vs.Average 2014 Salaries by Premium Volume (Management) call salaryCommercial compression,” Hamrick said. “A Commercial l Owners/Principals Office Accounting Personal Marketing Higher than 2014 2015Sales 2014 P/C Premium Volume President/CEO Manager Manager Linescompany Mgr. Lines Mgr.giveLower Manager can only you so much than 2014of an Personal line Cut benefits 4.1%Manager 6.6% 2015 compared to 2014 staff increase on an annual Same basisinwhereas if you Support Shift health plan costs to employees 14.9% 13.0% Under $1 million $51,500 $45,179 $42,000 $31,000 $30,750 $43,750 $55,000 move you can get a 15 percent to 20 percent Increase benefits 9.5% 6.4% $1 million - $5 million $75,259 $45,631 $53,580 $35,918 $36,500 $45,602 $102,813 Force reduction of employees 5.1%$92,593 6.6% increase.”$61,198 $5 million- $10 million $101,853 $63,917 $50,774 $47,656 $54,250 CSR Ave Postpone Hamrick says these discussions withSize Agency $10 million hiring - $25 million $155,257 $77,537 29.8%$99,813 30.8% $55,303 $60,861 $69,194 $68,143 Staff Postpone $25 million raises - $50 million $181,424 $89,143 19.0%$168,750 20.1% $81,875 $110,161 $106,908 $108,810 women can be painful.

“But if you are not in 2015

CSR Salaries and Hours

CSR Average Salaries

Increase $50 millionhiring - $100 million Increase compensation $100 million or more

$244,095 $312,500

$95,804 $97,031

31.2%$145,441 29.8% $88,889 41.0%$229,643 38.2% $94,342

What Strategies Agencies Plan to Index* Agency Compensation Satisfaction Implement in 2016 2016 2015 Management/Agency Owner/Principal Cut benefits Producer/Sales Shift health plan costs to employees Support Staff/CSR/Account Executive Increase benefits * 5 = Most Satisfied; 1 of = Least Satisfied Force reduction employees Postpone hiring Postpone raises Increase hiring Increase compensation

2016 3.63 1.7% 2.97 7.7% 2.84 5.9% 5.0% 17.3% 10.4% 49.3% 47.5%

$77,500 $108,750

$89,808 $142,647

3.62 3.12 2.73

2014 3.68 3.19 2.90

2013 3.51 3.03 2.75

2012 3.28 2.87 2.58

2014 6.7% 5.7% 3.5%

2013 7.2% 8.8% 2.8%

2012 4.5% 5.5% 2.3%

2011 3.9% 3.3% 2.2%

Average Agency Total Income Change* Management/Owner/Principal Producer/Sales What Benefits Agencies Offer Support Staff/CSR/Account Executive

2015 5.7% 4.7% 3.0%

2016 2015 2014 2013 *Includes all income changes in year Group health insurance 75.8% 75.4% 80.6% 77.7% Health Savings Account 35.8% 37.7% 38.3% 32.2% Dental 55.0% 56.3% 57.2% 52.5% Group life/disability 53.7% 55.6% 56.6% 53.7% 401(k) 59.4% 60.0%2015 63.4% 201457.7% Management/Agency Owner/Agency Principal 17.5%3.8% 18.9% 3.9% 17.8% Profit Sharing 18.1% Producer/Sales IRAs 9.9% 11.2%2.1% 8.4% 4.4% 10.4% Support Staff/CSR/Account Executive6.4% Pension Plan 5.9%3.5% 6.0% 3.4% 5.7% ESOP 3.6% 4.8% 4.4% 4.6% Stock Options 4.8% 5.3% 4.9% 4.5% www.insurancejournal.com How Agencies Base Compensation Incentive Flexible Savings Account 25.2% 28.2% 29.3% Plans 24.4% Education reimbursement 32.2% 30.5% 32.8% 28.0%

Average Agency Salary Adjustment

$85,476 $118,269 Increase Decrease Stayed the same

East Midwest South Central Southeast West

continued on page 32

Anticipated Agency WhatStaff Str Size in 2016 in 2015 v Increase Decrease Stay the same

Cut benefits Shift health pl Increase benef Force reductio Postpone hirin Postpone raise Agency Salary Survey Increase hiring Demographics Increase comp Management/Agency Owner/ Agency Principal Producer/Sales Support Staff/CSR/Account Executive

What Str Impleme Cut benefits

2013 4.3% 5.1% 2.5%

2012 2.8% 2.9% 2.2%

Producer Commissions Shift health pl 2011 2010 Increase bene in 2015 1.1% -0.6% 1.6% 2.1%

Force reductio

-0.2% Postpone hirin Increase 0.6% Decrease Postpone rais Stayed the same in 2015 Increase hiring compared to 2014 Increase comp

February 22, 2016 INSURANCE JOURNAL-NATIONAL | 31

Agencies’ Plans to Chang

SPECIAL REPORT

Agency Salary Survey continued from page 31

Non-Owner Producer Compensation 15.3%

Salary Only

33.1%

Salary plus commission

26.2%

Commission only

9.4%

Draw against commission

6.7%

Other

How Agencies Charge Fees 61.6%

Fees are charged in addition to commissions

38.4%

Fees are charged in lieu of commissions

Incentives for Non-Owner Producers 35.2%

No Incentive

15.4%

Trips

21.7%

Contests

7.9%

Club memberships

31.0%

Education

44.9%

Cash bonus

8.7%

happy you need to move,” she said. “Don’t try to make the sandbox you are currently in better; just pick up your toys and go find a better sandbox. … The only person that can take care of you is you.”

WAHVE’s Emek says given the nature of the insurance industry and what it provides to consumers, more should be done to expand gender diversity, especially in top leadership roles. “Our industry, because it is a knowledge industry, should be at the forefront of enabling women to contribute their knowledge and experience in a flexible environment,” she said.

Breckenridge’s Carragher adds that even the industry’s business partners should be held accountable when it comes to diversity.

“We need to hold our business partners, our vendors, and ourselves responsible to establish and communicate gender and race parity,” Carragher said. Her recommendations: “Assess and then shine a light on the composition of your respective team, especially at the manager and senior levels. Clients see it. Investors see it. Talented women see it,” Carragher said. “You have to bring ‘the elephant in the room’ out and rally a few key supporters to develop a relevant plan of action.”

Doing so is “absolutely a strategic initiative — involving real work, plans and timelines,” she said. Then engage a diverse team within the agency to develop and implement the plan and report to executives and others on its progress. The most important part, she adds, is to start somewhere, anywhere. “But start.”

Car

How Incentive Compensation for CSRs is Determined

Insurance Journal’s 2016 Agency Salary Survey collected 1,399 responses from independent insurance agencies and brokerages nationwide via an online survey. For more information, contact Andrea Wells at: awells@insurancejournal.com.

Workload in 2015 Compared to 5 Years Ago 32.7%

Higher today than ever before

14.6%

No. of policies sold

34.9%

Steadily increasing

30.4%

New business commissions

13.7%

Increases only slightly each year

13.3%

Renewal commissions

5.6%

Steadily decreasing

Set dollar amount

5.0%

Less today than ever before

Do not offer incentive comp

8.2%

Same today compared to 5 years ago

8.0% 41.8%

32 | INSURANCE JOURNAL-NATIONAL February 22, 2016

www.insurancejournal.com

10.4% 49.3% 47.5%

Agency Salary Survey Demographics

ncies Offer 2016 75.8% 35.8% 55.0% 53.7% 59.4% 18.1% 9.9% 6.4% 3.6% 4.8% 25.2% 32.2% 2.6% 12.8%

2015 2014 2013 75.4% 80.6% 77.7% 37.7% 38.3% 32.2% 56.3% 57.2% 52.5% Agency Annual Cost 55.6% Gives 56.6% 53.7% 9.3% 60.0% 63.4% 57.7% of Living Increase 30.0% 17.5% 18.9% 17.8% 8.4% 10.4% Yes11.2% 60.7% No 5.9% 6.0% 5.7% Not4.8% Sure 4.4% 4.6% 5.3% 4.9% 4.5% 28.2% 29.3% 24.4% 30.5% 32.8% to Change 28.0% Agencies’ Plans 6.0% 3.2% 2.2% 3.0% 8.2% Payroll Expense in 2016 13.7% 10.5% 11.7% Reduce payroll expense Increase payroll expense Keep the same Not sure

33.0%

52.7%

aid by Agency for Employee 65% Agency Salary Increases 55% in 2015 53% Higher than 2014 56% Lower than 2014 Same in 2015 compared to 2014 65%

45.4%

47.0%

7.6%

Paid by Agency for Employee Agency Staff Size

n n on

in 2015

42.2%

25.5% 45.4% 48.4% 12.4% 68.3% 76.0% 77.6% Anticipated Agency Staff 81.7% Size in 2016 69.3% 46.4% 48.6% Increase Increase Decrease Stayed the same

Decrease Stay the same

5.0%

surance Plan in Past Year

ntribution 45.0% Agency Salary Survey Demographics 61.2% mits o-pays for Management/Agency participants Owner/ 39.2% Agency Principal 11.6% Producer/Sales Support Staff/CSR/Account Executive s 12.1% Producer Commissions in 2015

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Producer Commissions in 2015

53.5%

28.4% 53.5% 18.1%

42.5%

Increase Decrease Stayed the same in 2015 compared to 2014

Changed in 2015 Will change in 2016 No changes

46.6%

10.9%

Agencies’ Plans to Change Commission Structure

5.5% 12.8% 81.8%

How Agencies Determine Fees % of Premium Flat fee based on account type

Producer Compensation and Fees Producer receives % of fee Producer receives all of fee Producer doesn’t receive fee

34.6% 70.9%

38.4%

59.4%

2.1%

Producer Bonus for Exceeding Sales Goal

39.9% 60.1%

Yes No

Owners Thinking About Selling the Agency

28.4% 18.1%

Management/Agency Owner/ Agency Principal Producer/Sales Support Staff/CSR/Account Executive

Yes No Not applicable

5.1% 9.0%

85.9%

February 22, 2016 INSURANCE JOURNAL-NATIONAL | 33

IDEA EXCHANGE

Compensation The Whole Package: Negotiating Beyond Salary

F

or many recent graduates and young professionals, salary is a key component of the job search. However, in their focus on a starting wage, Millennials often overlook the additional perks and benefits that make up a complete compensation package. While salary is, of course, an important factor when considering a job

By David E. Coons offer, take-home pay is only a fraction of what today’s emerging workers should consider in making a career decision.

In an economic climate where Millennials find themselves earning far less than their predecessors, negotiating beyond base salary is key to unlocking the “hidden paycheck” and achieving one’s full earning potential. How does the state of compensation for young professionals and recent graduates stack up against past generations?

What should these individuals negotiate for beyond salary?

The Growing Compensation Gap The recent recession has played a significant role in deteriorating starting salaries for entry-level professionals. According to the National Association of Colleges and Employers, the average starting salary for college graduates increased by a mere 2.4 percent in 2015 compared to 2014. Currently, the median salary for graduates in 2015 is nearly 24 percent lower than the average starting salary in 2009, at the beginning of the downtown.

This disparity is likely to continue throughout the careers of today’s emerging professionals as studies point to an earning potential 2.5 percent to 9 percent less than previous generations. With Millennials predicted to fall short of the earning levels achieved 34 | INSURANCE JOURNAL-NATIONAL February 22, 2016

by their senior counterparts, negotiating a favorable compensation package is an important factor in starting one’s career off on the right foot. Negotiation has become a pivotal piece in combatting the wage disparity between current professionals and the median starting salaries of their pre-recession counterparts. However, not all organizations have flexibility in regards to starting salary. In these cases, what can today’s professionals do in order to bridge the gap?

Unlocking the Hidden Paycheck When it comes to negotiating compensation, many professionals mistakenly view the process as simply tossing salary figures back and forth. As a result, they often fail to consider the value of the full compensation and benefits package they are being offered. Benefits can comprise

up to 30 percent of one’s total salary — no small sum. In fact, total compensation within the insurance industry has experienced substantial recent growth thanks to better corporate performance and profitability.

The key is understanding the full benefits of the total compensation package.

Total compensation should cover all needs, not just the monetary ones. What else is being offered along with the base salary?

What are the health insurance benefits?

Is flexible work an option? Do they offer 401(k) and does the company match contributions? How does the PTO policy compare to the industry standard? Considering hiring bonuses, vacation time, retirement plans and other company benefits part of the total compensation package and open for negotiation is a great way to supplement a lower starting salary.

Many young professionals may be surprised to find that insurers are even beefing up their compensation packages in order to www.insurancejournal.com

trips. Moving expanding their search Negotiating beyond base hunting costs and pre-move visits areas, taking advantage salary is key to unlocking are also being includof Millennial’s desires to travel and offering the ‘hidden paycheck’ ed. Millennials should potential hires comand achieving one’s full approach these negotiapetitive relocation tions with an “it-neverearning potential. benefits. In fact, 29 perhurts-to-ask” mentality cent of organizations while being reasonable. are currently providing employees with a Competitive compensation remains lump sum for relocation, while 19 percent a key selling point for today’s job candireimburse all shipping fees associated with dates. As insurers recognize the value of a a move. well-rounded comp package, great non-sal For professionals willing and able to ary incentives are being incorporated. For relocate for an entry-level position, negoyoung professionals and recent grads, negotiating a competitive relocation package is tiating for these benefits are key to bridging an important, and often overlooked, part the entry-level salary gap and starting their of the job search process. Young profescareers off on the right path. sionals should look into negotiating for relocation assistance that helps to cover Coons is senior vice president of The Jacobson the actual costs associated with the move.

Group, a provider of talent to the insurance This can include temporary housing, realtor industry. Phone: 800-466-1578. Email: dcoons@ Self Serve.pdf 1 1/5/16 12:48 PM assistance and company-provided house jacobsononline.com.

One Application. Multiple Quotes. compete with other industries that are able to provide larger base salaries. With starting salaries remaining relatively flat, insurers are crafting enticing bonus plans and benefit offerings that appeal to Millennial preferences. This includes flexibility in scheduling, work-from-home and other telecommuting options, as well as tuition reimbursement and commuting assistance.

No longer is salary the sole consideration.

Today’s professionals must take a look at the entire compensation package lest they pass up an opportunity to unlock the “hidden paycheck.”

C

M

Y

CM

MY

CY

CMY

Thinking Outside-the-Box More and more, companies are asking their employees to make a move. As the “war for talent” wages, job relocation is becoming a benefit area applicable to more and more young professionals. Recognizing the need to find and attract recent graduates and emerging talent, organizations are www.insurancejournal.com

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February 22, 2016 INSURANCE JOURNAL-NATIONAL | 35

IDEA EXCHANGE

Minding Your Business How to Attract and Retain Great Employees

T

oday, successful high-performing businesses are developing creative programs to guide employees to focus on improving business performance and rewarding them for their contributions. The long-term winners will be companies that provide a flexible and challenging work environment, along with employee recogBy Catherine Oak & nition and rewards.

Organizations have to be willing to share their successes.

What Motivates Employees?

In our work as consultants we often disBill Schoeffler cuss what owners and employees think are the key motivating factors. Most business owners initially think money is the key issue. However, many employees state that they are looking for challenges, recognition and empowerment.

The shortage of skilled insurance workers is still restraining growth for many businesses. Given this environment, what can a firm do to retain and attract the best and brightest employees, while challenging them to achieve the business’ goals?

First, recognize that money, by itself, will not do it. High performing employees are searching for something more than just a high salary. The typical employee compensation plan should include a total package of rewards, recognition and environment. Some of the elements are “satisfiers” that allow a firm to attract and retain employees such as benefits, flex-time and training. Other elements of compensation are “motivators” such as bonuses, incentives, challenge and opportunity. A well designed plan will have long-term and short-term compensation components.

The key to attracting and retaining the 36 | INSURANCE JOURNAL-NATIONAL February 22, 2016

best people is the use of a “total compensation” approach. It is also a critical component in improving employee performance.

A firm that takes the time to carefully customize a “total compensation” package will transform individual employees into high performing and committed employees.

There are three basic ingredients to the total compensation package that every agency must have: Challenging Work: The old system of directing and monitoring every task that an employee performs is out. Employees with multiple skills and authority are in.

For example, a major retailer has a one-paragraph employee handbook that states: “Rule No. 1: Use your judgment in all situations.

There will be no additional rules.” To truly perform at this level requires enormous trust in employees. However, if a business is able to perform at this level it will reach incredible heights.

Provide additional opportunities for learning and skill development to spice work up. Encourage the staff to take classes to get an industry certification and for courses to earn CEUs. An expansion of training could provide more flexibility through a higher skilled workforce.

Work Environment: Today’s workforce is looking for flexibility on the job and balance in their life. Management needs to evaluate ways to realistically provide this sought after flexibility in work. For example, tradition has it that the employees work in an office with established work hours. Could the firm allow for variations, such as four-day work weeks, working at home two days a week or job sharing?

Recognitions: Non-cash recognition awards are a very effective way to reinforce the company’s values. They can be a lowcost, high-impact element of the total compensation package. For example, employees who provide outstanding or innovative customer service receive special awards.

Management needs to think about the types of awards that make sense for employees.

Here are some examples: • Provide a day off with pay.

• Provide tickets to sports, music or cultural events.

• Take out an advertisement in the local newspaper thanking your employees.

• Provide a donation in an employee’s name to a charity.

• Pay for tutoring for the winner’s child.

• Pay for child care.

• Provide health club memberships.

• Pay to have the winner’s car detailed during work.

• Pay for the winner’s house to be cleaned.

• Pay for an evening out for the winner and their spouse — dinner and babysitting.

Once the basic ingredients are established, the firm can consider the following tools to recruit and retain: Profit Sharing Although money is not always king, it

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still has a lot of clout. Firms that establish a bonus plan based on the business’ profitability will have employees that strive to increase sales and cut expenses. Profit sharing can be based on the profitability of the overall business or by profit centers such as commercial lines versus personal lines versus life and health. The pool of bonus money can then be distributed to the staff based on management’s discretion.

A variation of profit sharing is to reduce the employees’ base compensation while providing quarterly bonuses based on a department’s performance. A plan that tracks employee performance will then allow them to see a direct correlation between their effort and compensation.

Deferred Comp Deferred compensation is often used as a method for producers to build long-term value for their efforts directly related to the business they bring to the company. We recommend using deferred compensation instead of ownership in the producer’s accounts. The plan is often phased in over time until the producer is fully vested.

The company benefits by having a system that encourages the producers to build their accounts as well as remain with the firm.

It must be noted that a deferred compensation plan creates a contingent liability for the firm, which does negatively affect business value. However, deferred comp is also “consideration,” which helps uphold the covenant not-to-compete in a producer contract.

This is another good reason to include deferred compensation as part of a producer agreement.

The value of this compensation could be used as a discount toward purchasing stock in the agency.

This should be with www.insurancejournal.com

board approval and not given to every producer that earns deferred compensation. It is important to know that it is very difficult to ever get rid of a partner, so owners should be very careful who they allow the deferred comp to be turned into stock.

Stock Equity Stock ownership usually conjures up visions of importance and respect.

Producers and employees feel that having the word “owner” on their business card will improve sales and stature. Often the employees only understand the benefits of stock ownership and the drawbacks are ignored or not understood.

Business owners are often unclear themselves whether or not they should offer stock to an employee. They usually first think about it either when a current employee is about to walk out the door.

Owners might feel that they are forced to offer stock in order to entice a new producer or to retain a current producer.

We recommend that owners think long and hard before offering stock to an employee. The decision whether or not to make an employee an owner needs to be based on a review of many factors. The right decision can propel the agency forward. The wrong decision can mire the firm in unimportant muck.

A Final Thought If owners want outstanding results, they need to be prepared to pay outstanding rewards. Implementation of a great compensation plan will motivate employees to improve not only their own performance, but the performance of the firm as well.

Oak is the founder of the consulting firm, Oak & Associates, based in Northern California. Schoeffler is an associate of the firm. Oak & Associates specializes in financial and management consulting for independent insurance agencies, including valuations, mergers, and perpetuation planning. Phone: 707-935-6565. Email: catoak@gmail.com.

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February 22, 2016 INSURANCE JOURNAL-NATIONAL | 37

IDEA EXCHANGE

Closing Quote computer. There is a whole generation of keyboard only users who learned how to use a mouse through solitaire.

Once comfortable with that, continue with incremental steps. Maybe ditch the old pen and pad, and use an application like OneNote to take notes. When you convert handwritten notes to text and see how they can be searched across all your devices, you’ll be hooked.

Technology’s Full Potential

T

By Laird Rixford

echnology has transformed how we operate in almost every facet of our life. It has changed the face of business for every industry. Insurance is no different.

Yet, as I look within our industry I see a problem. I see technology being underutilized, overutilized or, worse, completely ignored. The majority of people’s technology usage will fall into these three categories. Which one describes your technology use?

The Technologically Timid User Scared of technology? Tired of those darn Instagramming kids posing on your lawn? Want to go back to the good old days of pencil and paper? You’re not alone.

People of all ages struggle with technology. This is usually caused by a lack of familiarity with the technology. If you don’t understand it, you don’t want it. This mindset leads down a dangerous path of shunning technology for traditional methods.

Where do you start when On the Web: you want to begin your introTo read more from Laird Rixford in the new duction to the digital world?

Insurance Journal Tech Talk blog, as well as Start small. Take pictures other Insurance Journal blogs, visit: and upload them. Play your www.insurancejournal.com/blogs favorite card game on your 38 | INSURANCE JOURNAL-NATIONAL February 22, 2016

The Matrix User Are you the type of person who is plugged in everywhere? Is every aspect of life and business tech driven? If you cannot do it electronically, you don’t need to be doing it, right?

Unfortunately, over-reliance on technology might be worse than ignoring it completely. While technology is there to support daily life, it is not infallible. It is just software and hardware that humans have created, built and coded. Technology will and does fail all of the time.

A user who over-relies on technology to support daily needs should assess whether that technology is actually hindering productivity. Is that email marketing software working as advertised? Or, is it over-spamming your loyal client base? Just because it is “working” does not mean it is actually working for you.

Make sure you have a backup plan for when technology betrays your trust. Nothing strikes more fear in the hearts of tech heads than a battery with less than 4 percent charge on a Wi-Fi-free flight with an hour until touchdown.

The Everyday User Do you have a tablet and smartphone while knowing your way around Excel? Do you post a lot of cat memes to Facebook and Twitter, yet still need your nerdy relative to install the Uber app?

Everyday users understand technology and know just enough to be dangerous. You might not realize that although you use it daily, you’re not using technology to its full potential.

Sure, your iPad is great for playing Candy Crush, surfing the web and replying to emails. Did you know you could run your entire agency from one? Rate quotes, manage clients, document claims, scan and sign documents, and take payments on your tablet of choice. Take the gadgets you are already familiar with and see what else they can do. Research problems in your life. Ask yourself (or your youngest child) how technology can help.

Technology needs users to realize its fullest potential.

Users need technology to realize our fullest potential.

Without both working in unison, no one wins.

Rixford is the president of ITC. Website: www.GetITC.com.

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