Insurance Journal West 2017-02-20 by Insurance Journal

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Contents February 20, 2017 • Vol. 95 No. 4 • West

West

National 8 Insurers Dispute Consumer Report on Tactics Used in No-Fault Accidents

W1 San Francisco Says Sinking 58-Story Millennium Tower Is Safe to Occupy

14 U.S. Estimates Hurricane Matthew Damage to Recreational Boats at $110M

W2 Washington Insurance Commissioner Fines State Farm, Others W2 California Commissioner Can Prohibit Pass Thru of Advertising Costs, Court Says W6 Snow Damage Found to Be Origin of Idaho Fire

W1 SAN FRANCISCO SAYS SINKING 58-STORY

MILLENNIUM TOWER IS SAFE TO OCCUPY

18 Special Report: Winning the War on Talent with a Soft Strategy

W7 Report: Self-Driving Prototypes Getting Better at Navigating California Streets

30 The Wedge: The Art of Intimidation: Randy Schwantz

15 Yacht Consortium Launched by Brit Ltd. 16 D&O Coverage to Expand, Get Cheaper in 2017: Marsh

W6 California Homeowners Lack Understanding of Retrofitting, Research Shows

Idea Exchange

14 W.R. Berkley Suspends Underwriting Marine Business in London

23 Special Report: 2017 Agency Salary Survey

U.S. ESTIMATES HURRICANE MATTHEW DAMAGE TO RECREATIONAL BOATS AT $110M

26 The Future of Fraud Fighting: IoT and Telematics 28 Closer Look: Grinnell Mutual Grows From Complacent to Dynamic

32 Is Money the Key to Happiness? Not Anymore! 34 Closing Quote: The Year After Google Compare

Departments W4 People 11 Declarations 11 Figures

32 IS MONEY THE KEY TO HAPPINESS?

NOT ANYMORE!

4 | INSURANCE JOURNAL | WEST FEBRUARY 20, 2017

12 Business Moves 27 MyNewMarkets INSURANCEJOURNAL.COM

OPENING NOTE

Write the Editor: awells@insurancejournal.com

Top 10 Discrimination Claims in 2016

T Publisher Mark Wells mwells@wellsmedia.com

EDITORIAL

SALES

Editor-in-Chief Andrea Wells awells@insurancejournal.com

West Sales Dena Kaplan (800) 897-9965 X115 dkaplan@insurancejournal.com

East Editor Elizabeth Blosfield eblosfield@insurancejournal.com

Romeo Valdez (800) 897-9965 X172 rvaldez@insurancejournal.com

Chief Content Officer Andrew Simpson asimpson@insurancejournal.com

Southeast Editor/MyNewMarkets 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 L.S. Howard lhoward@insurancejournal.com Columnists Randy Schwantz Contributing Writers

David Coons, Laird Rixford IJ ACADEMY OF INSURANCE Director Patrick Wraight pwraight@ijacademy.com Associate Director Barbara Whiffen bwhiffen@ijacademy.com

ADMINISTRATION

Chief Financial Officer Mark Wooster mwooster@wellsmedia.com

MARKETING

Marketing Director Derence Walk dwalk@insurancejournal.com Marketing Administrator Gayle Wells gwells@insurancejournal.com

NEW MEDIA

New Media Producer Bobbie Dodge bdodge@insurancejournal.com Videographer/Editor Ashley Waldrop awaldrop@insurancejournal.com

CIRCULATION

Chief Marketing Officer Julie Tinney (800) 897-9965 X148 jtinney@insurancejournal.com

South Central Sales Mindy Trammell (800) 897-9965 X149 mtrammell@insurancejournal.com Southeast and East Sales (except for NY, PA and CT) Howard Simkin (800) 897-9965 X162 hsimkin@insurancejournal.com Midwest Sales Lisa Whalen (800) 897-9965 X180 lwhalen@insurancejournal.com East Sales (NY, PA and CT only) Dave Molchan (800) 897-9965 X145 dmolchan@insurancejournal.com Advertising Coordinator Erin Burns (619) 584-1100 X120 eburns@insurancejournal.com Insurance Markets Manager Kristine Honey (619) 584-1100 X132 khoney@insurancejournal.com Social Media Manager Ly Short (619) 890-7735 Lshort@insurancejournal.com Classifieds, Jobs, Agencies Wanted/For Sale Sr. Sales & Marketing Coordinator Kelly De La Mora (800) 897-9965 X125 kdelamora@insurancejournal.com

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Chief Technology Officer/ Chief Innovation Officer Joshua Carlson jcarlson@insurancejournal.com V.P. of Design Guy Boccia gboccia@insurancejournal.com Senior Web Developer Chris Thompson cthompson@insurancejournal.com Web Developer Jeff Cardrant jcardrant@insurancejournal.com Web Developer Terrance Woest twoest@wellsmedia.com

Circulation Manager Elizabeth Duffy eduffy@wellsmedia.com

he U.S. Equal Employment Opportunity Commission (EEOC) said it resolved 97,443 charges of employment discrimination in fiscal year 2016 and secured more than $482 million for victims of discrimination in private, federal and state, and local government workplaces. Charges of employer retaliation, racial bias and discrimination due to disability were the most common charges. EEOC legal staff resolved 139 lawsuits and filed 86 lawsuits alleging discrimination in fiscal year 2016. The lawsuits filed by EEOC included 55 individual suits and 31 suits involving multiple victims of discriminatory policies. The $482 million recovered for victims of discrimination included $347.9 million for victims of employment discrimination in private sector and state and local government workplaces through mediation, conciliation, and settlements; $52.2 million for workers harmed by discriminatory practices obtained through litigation; and $82 million for federal employees and applicants. At the end of the fiscal year, EEOC had 168 cases on its active docket, of which 48 (28.6 percent) involve challenges to systemic discrimination and an additional 32 (19 percent) are multiple-victim cases. EEOC resolved 1,650 charges and recovered $4.4 million for lesbian, gay, bisexual and transgender (LGBT) individuals who filed sex discrimination charges with EEOC in fiscal year 2016. Additionally, the data show a steady increase in the four years the agency has been collecting LGBT charge data. From fiscal year 2013 through fiscal year 2016, nearly 4,000 charges were filed with EEOC by LGBT individuals alleging sex discrimination, and EEOC recovered $10.8 million for victims of discrimination. The top 10 employment charges handled by EEOC in 2016, in descending order, were: • Retaliation: 42,018 (45.9 percent of all charges filed) • Race: 32,309 (35.3 percent) • Disability: 28,073 (30.7 percent) FOR QUESTIONS • Sex: 26,934 (29.4 percent) REGARDING SUBSCRIPTIONS: Call: 855-814-9547 • Age: 20,857 (22.8 percent) Outside the U.S., call 847-400-5951 or you may subscribe or change your address online at: • National Origin: 9,840 (10.8 percent) insurancejournal.com/subscribe • Religion: 3,825 (4.2 percent) Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media • Color: 3,102 (3.4 percent) Group, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 • Equal Pay Act: 1,075 (1.2 percent) per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this pub• Genetic Information Non-Discrimination lication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended Act: 238 (.3 percent) to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2016 Wells The percentages add up to more than 100 Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. because some charges allege multiple bases. Insurance Journal is a publication of Wells Media Group, Inc.

Charges of employer retaliation, racial bias and discrimination due to disability were the most common charges.

Andrea Wells Editor-in-Chief

6 | INSURANCE JOURNAL | NATIONAL FEBRUARY 20, 2017

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National

Auto Insurers Dispute Consumer Report on Tactics Used in No-Fault Accidents By Andrew Simpson

national consumer group has charged that innocent drivers in most states are being forced to pay more for auto insurance for accidents in which they are not at fault. The report from the Consumer Federation of America (CFA) further claims that drivers with higher incomes are penalized less than moderate income insureds involved in no-fault accidents. Insurance industry groups say the research is flawed in its conclusion and in its methodology of comparing the experience of a new customer with no prior insurance with that of a driver who has had prior coverage. But CFA and the industry agree it proves the value of consumers shopping around for the best deal on insurance. CFA said it analyzed premium quotes in 10 cities from five of the nation’s largest auto insurers. Among the cities tested,

drivers in New York City and Baltimore pay out the most for doing nothing wrong, and customers in Chicago and Kansas City also face average increases of 10 percent or more when another driver crashes into them, according to CFA.

‘Innocent drivers who don’t cause accidents should not be charged more because someone else hit them.’ CFA said it found that insurers vary in how they handle no-fault accidents. Progressive used the not-at-fault penalty most aggressively, surcharging drivers in every test where such an increase is not prohibited by state law, according to the report. GEICO and Farmers sometimes raised rates by 10 percent or more for notat-fault accidents. Allstate occasionally penalized drivers who did not cause the accident, while State Farm never increased

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premiums for these accidents. The CFA report compared the experiences of two female drivers in each city who lived at the same address, were 30 years old, licensed for 14 years, and drove a 2006 Toyota Camry 10,000 miles each year. The upper income driver was married, a homeowner and a bank executive with a Master’s degree. The moderate-income driver was a bank teller, who was single, rented an apartment, and had a high school degree. The upper income driver has had auto insurance with the same insurer for the past three years, while the moderate-income applicant has not had insurance because she has not had a car. Comparing these two good drivers, CFA found the following: • Higher-income drivers paid $78 more on average after a not-at-fault accident; • Moderate-income drivers paid $208

continued on page 10

INSURANCEJOURNAL.COM

NATIONAL | News & Markets continued from page 9 more on average after a not-at-fault accident; • Higher-income drivers faced a 6.6 percent penalty on average after a not- at-fault accident; • Moderate-income drivers faced a 9.6 percent penalty on average after a not- at-fault accident. “Innocent drivers who don’t cause accidents should not be charged more because someone else hit them,” said J. Robert Hunter, CFA’s director of insurance and the former Insurance Commissioner of Texas. “Most people know that if they cause an accident or get a ticket they could face a premium increase, but they don’t expect to be punished if a reckless driver careens into them.” CFA called on state lawmakers to prohibit penalties on innocent drivers. It said that California and Oklahoma already have regulations preventing insurers from raising rates on drivers when they are involved in an accident that was not their fault. The National Council of Insurance Legislators (NCOIL), which represents state lawmakers involved with insurance legislation, tends to agree with CFA. While he had yet to review the CFA report in detail, Tom Considine, CEO of NCOIL and former New Jersey insurance commissioner, said insurers shouldn't be assessing a surcharge or raising premiums on innocent parties involved in no-fault accidents. “In these situations, the insurer of the faultless party should use subrogation against the at-fault party’s insurer to recoup its expenses,” he

said. “The blameless driver should have no adverse economic consequences.”

‘The end result is a report that attempts to present auto insurers negatively but fails to provide consumers with accurate or useful information.’ Insurance industry groups took issue with CFA’s data collection, methodology and conclusion. Loretta Worters, vice president of communications for the Insurance Information Institute, cautioned that data collected through an insurer’s website is not the full story. There are often questions surrounding no-fault accidents. “[I]t is rarely clearcut as to whom the at-fault party is after a collision between two vehicles. Insurance companies look at each claim based on many factors. In addition, a not-at-fault driver’s insurer often incurs expenses after an accident because of subrogation,” said Worters. She said “assigning fault in an accident is rarely a zero-sum process where one driver is 100 percent at-fault whereas the other driver is zero percent at-fault.” CFA’s choice of driver profiles to compare came in for criticism. “Prior auto insurance is a commonly used rating factor that is highly predictive of future loss," said David Snyder, vice president of policy development and research for the Property Casualty Insurers of America (PCI). "Rather than using the same prior insurance status to compare the moderate and higher income driver, CFA used no prior insurance for the moderate-income driver, but three years with the same insurer for the higher income driver. The result is a study that provides no real insights about the effect of a not at fault accident on premiums." Snyder also claimed the report fails to consider the variety of state laws concerning at-fault accidents. He said some states have blanket prohibitions, while others address the specific cir-

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cumstances CFA provided as examples like being hit while parked or struck from the rear. “The end result is a report that attempts to present auto insurers negatively but fails to provide consumers with accurate or useful information,” Snyder charged. According to Neil Alldredge, senior vice president, State and Policy Affairs, for the National Association of Mutual Insurance Companies, the report underscores the fact that insurance rates can vary widely from company to company, based on how companies weigh the many factors considered in determining rates. He also criticized CFA for comparing one driver with prior coverage with another who didn't. “This is significant because some companies reward loyal customers by forgiving infrequent accident claims – a practice that belies the CFA’s claim that insurers are trying to ‘train’ their customers not to file claims of any sort,” Alldredge said. Alldredge also noted the CFA report didn't state whether any consumers are paying these rates, suggesting that in the real-world consumers are often entitled to various discounts including for buying renters or homeowners coverage from the same insurer. While critical of CFA, Alldedge couldn’t resist noting that the one insurer that did not penalize for no-fault accidents was a mutual insurer, namely State Farm. The American Insurance Association (AIA) drew an overriding conclusion from the report: consumers are wise to shop around. “Personal automobile insurance remains one of the most highly regulated and competitive markets in the United States. State regulators review policies and rates, including factors cited by the Consumer Federation of America, to ensure that they are not excessive, inadequate or discriminatory,” said Lawrence Eckhouse, AIA counsel. He said “even the CFA report” highlights the variability of rating factors, business outcomes and prices, “while also encouraging consumers to shop around.”

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West

San Francisco Says Sinking 58-Story Millennium Tower Is Safe to Occupy

an Francisco inspectors say the sinking Millennium Tower is safe to occupy, despite strain on its foundation and electrical systems. The San Francisco Chronicle reported that an inspection report concludes there was no evidence of “life-safety concerns” INSURANCEJOURNAL.COM

at the Millennium Tower. That’s based on city inspections made on Dec. 2 and Jan. 11. A spokesman for the developer, Millennium Partners, called the inspection report “good news.” The 58-story downtown building has

settled about 16 inches into landfill and is tilting about 2 inches. Homeowners in the 419-unit tower have filed multiple lawsuits against the developer and the city. They contend pilings holding up the tower didn’t reach bedrock. Copyright 2017 Associated Press.

FEBRUARY 20, 2017 INSURANCE JOURNAL | WEST | W1

WEST | News & Markets

Washington Insurance Commissioner Fines State Farm, Others

ashington Insurance Commissioner Mike Kreidler issued fines in January totaling $15,000 against insurance companies, agents and brokers for violating state insurance regulations. Following are the entities, the fines and Kreidler’s reasoning for issuing those fines:

State Farm Fire & Casualty Co., Bloomington, Ill.; fined $10,000

State Farm failed to notify 151 farm-ranch homeowner policyholders that flood damage was not covered by their policies. The company also failed to notify 141,001 people who purchased homeowner, renter, condominium unit or manufactured home policies, but later provided notification when the policies renewed.

Health Alliance Northwest Health Plan, Wenatchee, Wash.; fined $5,000

Washington law requires health carriers to indemnify certain healthcare services with an insurance policy, bond, securities or cash deposit. The company allowed the surety bond it was using to meet this requirement to lapse and did not replace it with another form of indemnity until the insurance commissioner contacted the company. It ultimately corrected the problem by depositing funds in a special trust account that met the indemnity requirement.

Walmart Stores Inc., Bentonville, Ark.; ordered to cease and desist Walmart sold tire warranties to consumers without being a registered service contract provider. It sold

112,561 warranties worth $1.1 million to Washington consumers from June 2014 through July 2016. As of the date of this order, the company has not yet registered as a service contract provider in Washington and has stopped selling the warranty to Washington consumers.

Thomas C. Johnson, Tacoma, Wash.; issued probationary license

Johnson applied for a Washington insurance producer’s license in October 2016 to sell life insurance. He disclosed two military offenses in 2005 on his application. The probationary license means he must be accom-

panied by another licensed insurance agent or broker anytime he meets with a client; he must submit a list of clients he met with quarterly to the insurance commissioner; and his license will be revoked if he violates any insurance or state laws other than minor traffic violations. Since 2001, Kreidler’s office has reportedly assessed $21.9 million in fines, which are deposited in the state’s general fund.

California Commissioner Can Prohibit Pass Thru of Advertising Costs, Court Says

California Court of Appeal has decided in favor of California Insurance Commissioner Dave Jones in a case against Mercury Insurance Co. and a coalition of insurance industry groups, which sued Jones to challenge his authority regarding “institutional” or “brand” advertising expenses as well as the commissioner’s order reducing Mercury’s homeowners’ insurance rates by 5.4 percent. The court in mid-February rejected the insurers’ challenge and ruled in favor

of Jones on both issues. Jones prohibited Mercury from passing on $2.8 million in brand advertising costs to consumers because he said the advertising did not give them meaningful information about the insurance products sold by the insurer. The court upheld the commissioner’s decision to prohibit insurers from passing along to consumers the cost of brand

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advertising, including advertising at sporting events and venue sponsorships. The insurance companies also challenged the commissioner’s order to reduce Mercury’s homeowners’ rates as unconstitutional. The court rejected the insurers’ argument and upheld the commissioner’s order to reduce Mercury’s homeowner rates by 5.4 percent. “Insurers spend millions of dollars on brand advertising which provides zero bene-

fit to consumers, including paying tens of millions for stadium and arena naming rights and sponsorships of tournaments and other sporting events,” Jones said in a statement. “The appellate court rejected the insurers’ legal challenge and affirmed my authority to stop insurers from passing along to consumers brand advertising costs, such as expenses for sports stadium naming rights, sponsoring sporting events, or advertising the name of the insurance companies on a blimp.” INSURANCEJOURNAL.COM

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WEST | PEOPLE The California Earthquake Authority has named Todd Coombes chief insurance and technology officer and Kellie Schneider chief operations offi-

Todd Coombes

Kellie Schneider

Norman Allen

Bill Bergstrom

Adam Frugoli

cer. This follows the retirement of Bob Stewart, the chief operations officer. The CEA split up Stewart’s duties between Coombes and Schneider. Coombes was the CEA’s first chief information officer. Before the CEA he was with ITT Educational Services Inc. as executive vice president and CIO. Before ITT he was with CNO Financial Group. Schneider has more than 17 years of experience in human resources and administrative management and consultation. She joined the CEA in 2016 as the chief administrative officer. She was previously with the Department of Resources Recycling and Recovery. The CEA is a publicly managed, privately funded organization that provides residential earthquake insurance. San Francisco, Calif.-based Woodruff-Sawyer & Co. has named Norman Allen corporate executive protection practice leader. Allen will be responsible for providing vision and focus for the practice. Allen joined Woodruff-Sawyer in 2009 when the firm acquired the Western region direct practice of Carpenter Moore Insurance services, where he was senior managing director. Allen was a litigator with a practice focused on complex insurance and corporate litigation prior to that. Woodruff-Sawyer has offices throughout California, and in Oregon, Washington, Colorado, Hawaii and New England. EPIC Insurance Brokers and Consultants has named Bill Bergstrom to lead the operations of its golf insurance services program. He will be based in EPIC’s Sacramento, Calif. office. EPIC has also hired Duane Dennis as a senior consultant and principal in the firm’s Southern California employee benefits consulting practice. Dennis will be based in EPIC’s Los Angeles office. He will be responsible for business development, strategy, program design, implementation and management of employee benefits programs. Bergstrom previously was with Pennbrook Insurance Services Inc. as chief operating officer

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and managing principal. Dennis joins EPIC from benefit consulting technology company HIXME, where he was executive vice president in sales and marketing. Dennis previously was at Mercer Human Resource Consulting. EPIC is a retail property/casualty and employee benefits insurance brokerage and consulting firm. EPIC Insurance Brokers & Consultants has named Adam Frugoli vice president of its health care strategy group. He will divide his time between EPIC’s Idaho Falls, Idaho and Sacramento, Calif., offices. Frugoli will be responsible for new business devel opment, program design and management, marketing and coverage placement, and will oversee EPIC’s delivery of products, services and solutions to clients in the healthcare, consumer finance and banking industries. Frugoli has more than 16 years of experience serving health care and financial services clients. Frugoli spent eight years as vice president and insurance broker with the Leavitt Group prior to joining EPIC. He started his career in 2001 at US Bank N.A., where he was a vice president of branch investment advisory services. EPIC is a retail property/casualty and employee benefits insurance brokerage and consulting firm. Appalachian Underwriters Inc. has added Melissa McKee as a workers’ compensation underwriter to its Scottsdale, Ariz. office. McKee will focus on the production of new workers’ comp business, with a primary focus in California. She will also be working to grow opportunities in Arizona, Colorado, New Mexico, Nevada, Oklahoma, Oregon and Utah. Appalachian Underwriters is an managing general agency and wholesale insurance brokerage. California-based The Doctors Co. has named Bill Fleming chief operating officer. Fleming replaces Rob Francis, who is leaving the company. Fleming is a 24-year veteran of The Doctors Co. and had been senior vice president and regional operating officer for the Northeast. He previously served in capacities, including claims, underwriting and product development. Walnut Creek, Calif. CSAA Insurance Group has

continued on page W8

INSURANCEJOURNAL.COM

WEST | News & Markets

Snow Damage Found to Be Origin of Idaho Fire

nvestigators from the Idaho State Fire Marshal’s Office looking into a fire at the start of the month at a local business in Council believe the blaze could have been caused by heavy snowfall. Many parts of Idaho have received record-breaking snowfall since mid-December. The owner of the business removed snow from the roof, but the excess snow from the roof piled up along the back side of the building and against the propane gas pipe to the building, according to investigators. The added weight and shifting of the snow pile caused the pipe to crack, allowing propane to fill the building, investigators say. A security video shows a worker checking the pilot light on the hot water heater

after smelling propane when she opened up the business, then leaving the storage room. A few minutes later, the propane ignites and begins to burn at the wall where the broken pipe was located, according to a release from the Idaho Department of Insurance. The DOI and State Fire Marshal Knute Sandahl offered some safety recommendations that can be passed along to home and business owners: Walk around the perimeter of a home during and after snowfall and check for blocked vent pipes. Furnaces, dryers and other flame-heated appliances are often

vented to the outside through walls. Blocked vent pipes could cause deadly amounts of carbon monoxide to build up inside a home or building. A carbon monoxide detector is a must if a house or building has any appliance heated by flame. Have flame-heated appliances checked and inspected regularly by a qualified technician. Loose fittings, cracks in piping and other issues can be found and corrected before a tragedy occurs. If you happen to smell natural gas or propane, leave the building and call 911 from outside or from a neighbor’s home.

California Homeowners Lack Understanding of Retrofitting, Research Shows

new study on California homowners shows a general awareness of earthquakes and other natural hazards, but that those owners did not necessarily take action to mitigate risks, and many didn’t know whether their home had been retrofitted. Results of a study offering insight into the 2014 South Napa earthquake’s impact on houses in the city of Napa were presented at a research forum hosted by the California Earthquake Authority in Sacramento this month. The CEA-sponsored “South Napa Single-Family Home Impact Study,” a two-phase study begun in 2015, centered on understanding impacts of the magnitude-6.0 earthquake that produced severe shaking in parts of Napa. The study’s goal was to document impacts on single-family houses and

homeowners, assess how well retrofitted properties fared during the quake and gain insight into homeowners’ views and behaviors regarding earthquake mitigation and insurance. “The Napa earthquake resulted in costly damage for many homeowners, and we wanted to take the opportunity to learn as much as possible from their experiences in order to help all Californians become better prepared before the next damaging earthquake strikes,” CEA CEO Glenn Pomeroy said in a statement. Phase-one study results, covering impacts reported by Napa residents through an online survey, were announced in August 2015. Phase-two results presented in February 2017, based on interviews with homeowners and inspections of their houses, included sev-

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eral findings: Study participants showed general awareness of earthquakes and other natural hazards that could pose a risk to their house, but they did not necessarily take action to mitigate risks. Many participants lacked specific knowledge about the status of their property and about retrofit concepts. For example, one-third of owners interviewed did not know whether their house had been retrofitted. Others thought their house had been retrofitted when it had not, and several respondents believed their house had been adequately retrofitted because their chimney was braced. Participants were largely aware of the existence of earthquake insurance, and many had high interest in coverage, but they were not aware of the options available to them today. For home inspectors, the study indicated that more training and practice were needed in calculating a house’s seismic hazard score. INSURANCEJOURNAL.COM

Report: Self-Driving Prototypes Getting Better at Navigating California Streets By Justin Pritchard

elf-driving car prototypes appear to be getting better at negotiating California streets and highways without a human backup driver intervening, according to data made public by California transportation regulators. The data reflect safety-related incidents reported by 11 companies that have been testing more than 100 vehicles on public roads, primarily in the Silicon Valley neighborhoods where the technology has grown up. The reports were made to California’s Department of Motor Vehicles, which posted them online. The documents catalog the number of times from December 2015 through the end of November that humans took over control from a car’s software for safety reasons. Waymo, as Google’s self-driving car project was recently rebranded, did far more testing than the other 10 companies combined. Waymo reported that its fleet drove itself more than 635,000 miles with 124 safety-related “disengagements,” which must be reported when the technology fails or the backup driver takes control out of concern the car is malfunctioning. The Google project’s disengagement rate was the equivalent of two incidents every 10,000 miles, a notable decrease over the prior year, when there were eight disengagements per 10,000 miles. “This four-fold improvement reflects the significant work we’ve been doing to make our software and hardware more capable and mature,” Dmitri Dolgov, Waymo’s head of self-driving technology wrote in a blog post. Waymo’s chief critic acknowledged the improvement, but John Simpson of the nonprofit Consumer Watchdog said the number of disengagements shows the cars still “simply aren’t ready to be released to roam our roads” without human backup INSURANCEJOURNAL.COM

drivers. Cruise Automation, a startup acquired last year by General Motors, reported driving the second most test miles. Cruise said its prototypes had 181 disengagements over 9,776 miles (185 per 10,000 miles) and that it was “pleased with our progress” during testing on the complex streets of San Francisco. Though imperfect, the data represent the best peek the public gets into the secretive and fiercely competitive world of self-driving cars and how the prototypes are performing. California required the disengagement reports as part of regulations governing testing on public roads. Separately, the state also requires companies to report any collisions involving its cars. When the technology will be ready for the public depends on several factors, including regulators’ readiness and company confidence the vehicles are safe. While Tesla’s Elon Musk has been bullish, talking about months rather than years, companies such as Waymo have suggested 2017 or 2018 is more realistic. Tesla’s disengagement report said four prototypes drove a total of 550 miles last fall, experiencing 182 disengagements; the equivalent of 3,309 disengagements every 10,000 miles. Tesla logged the miles primarily to develop a publicly posted video, set to the Rolling Stones song “Paint It Black,” of the driver’s seat perspective in a car where a person does not have to put their hands on the wheel or feet on the pedals. The video

promoted how Tesla was shipping cars with advanced sensors that will be activated in the future. The company already is gathering tens of millions of miles of real-world data when owners engage the current Autopilot feature, which can control steering and speed but is not sophisticated enough to make the cars self-driving from the regulatory perspective. The Department of Motor Vehicles has been working for several years on regulations that will govern how the technology can be rolled out to the public when companies believe testing shows it is ready. The state expects to release final “public operation” regulations within six weeks, according to Melissa Figueroa, a spokeswoman for California’s State Transportation Agency. The Department of Motor Vehicles, which is part of the agency, made public a first draft in December 2015, nearly a year after final rules were supposed to be in place. The department has since revised the language based on developments at the federal level and input from industry and other groups. The agency and the department declined to comment on the reports.

FEBRUARY 20, 2017 INSURANCE JOURNAL | WEST | W7

WEST | PEOPLE continued from page W4 named Kevin Yoo its claims executive.

Yoo will lead claims, planning and administrative responsibilities Yoo most recently was Chubb’s head of claims for the Asia Pacific Region. He was chief claims officer at Solera Holdings prior to Chubb. Yoo has held various claims leadership positions at insurance companies including Allstate, Affirmative and Progressive. CSAA Insurance Group offers automobile, homeowners, and other personal lines of insurance to AAA members.

RIC Insurance General Agency has named Travis Campbell as a senior broker in its excess and surplus division. Campbell will be working primarily with retail insurance agents in the California counties of Orange, San Diego and Imperial. Campbell was previously a broker at USG Insurance Services Inc. specializing in oil and gas, construction, habitation, hospitality, environmental, products and manufacturing, professional, medical and healthcare coverage. He was a broker before that at Sloan Mason Insurance Services. He worked as a retail producer at Olin Hill and Associates, specializing in commercial lines, before Sloan Mason. Tustin-based RIC is a managing general agency and program administrator that specializes in workers’ comp coverage. Professional Program Insurance Brokerage of Novato, Calif. has promoted

Liquor Liability

Lockton is expanding to Seattle Wash., and adding Laura Walton as a senior vice president. The move is part of Lockton’s expansion in the Pacific Northwest. Walton will lead business development and client strategy for Lockton in its new office. Walton works with clients on risk management and commercial insurance in industries, including food processing, financial services, aerospace/aviation, technology, manufacturing, hospitality, retail and real estate. Walton previously has advised middle-market and complex clients at Willis

Towers Watson and The Fournier Group. Kansas City, Mo.-based Lockton is a privately held independent insurance broker.

tion of underwriter. Rogers has been with PPIB for three years learning underwriting and serving as executive assistant. Le has been with PPIB for two years handling renewals for medispas, tattoo shops and permanent cosmetic technicians. PPIB is a program manager with more than 11 contracts and binding authorities. Beazley has hired life sciences underwriter Marc Amis in its San Francisco, Calif. office. Amis comes from Chubb, where he was a senior life sciences underwriter for the Western region. He was previously a regional underwriter for G.E. Risk Solutions and also held positions at several other insurance firms in Northern California. Beazley plc is the parent company of specialist insurance businesses with operations in Europe, the US, Asia, Middle East and Australia. San Diego, Calif.-based Champion Risk & Insurance Services has added Steven Dietz to its employee benefits team. Dietz has 25 years of experience providing employee benefits insurance services to a wide variety of industries. Risk & Insurance Services is a regional insurance brokerage.

Taverns

Idaho Department of Insurance Director Dean Cameron has been named as vice chair of the National Association

Bar

of Insurance Commissioners’ Life Insurance and Annuities Committee for

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W8 | INSURANCE JOURNAL | WEST FEBRUARY 20, 2017

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2017. Cameron was elected secretary of the NAIC Western Zone last fall. He was appointed department director by Gov. C.L. “Butch” Otter in June 2015. Cameron worked in the insurance industry for 26 years and served 24 years in state government, including eight terms as chair of the Senate Finance Committee and co-chair of JFAC, the state’s budget committee.

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Figures

$700K The amount a former employee of a Connecticut real estate management and development business firm has been sentenced to four years in prison for stealing from the HB Nitkin Group. Federal prosecutors said Debra Biagi was sentenced to three years of probation and ordered to repay the money. She pleaded guilty to the theft.

$1 MILLION $560,000

Declarations Harassment Drones

“The worst thing that can happen is you get mamas separated from their babies, and that’s one of my biggest concerns.”

— Republican Rep. Scott Chew wants to send people to jail for

harassing farm animals with drones. The Utah lawmaker said he introduced the bill because farmers incur significant costs and hardships when livestock are injured.

Conspiracy Theory

“Every town, every city and every county has been affected by this dumping of drugs in West Virginia. And they’ve all incurred substantial costs that they would not have otherwise incurred but for the dumping of these drugs and the conspiracies by these doctors and these pharmacies to allow it to occur.” — Charleston, W.Va., Attorney Rusty Webb said in a response

to a lawsuit filed by the town of Kermit against out-of-state drug distributors. The town is suing five prescription drug wholesalers over the costs of dealing with the opioid crisis currently affecting its community and state.

Construction Death Epidemic

The amount for which Bay Area Rapid Transit agreed to pay to settle a lawsuit accusing the agency of violating waste and hazardous-materials laws.

$62 MILLION

“The epidemic of construction worker deaths in New York City is in part a result of OSHA being grossly understaffed and overworked. We’re not going to end this crisis so long as the left hand and the right hand aren’t working together.” — Council Member Rory Lancman, chair of the Committee

The amount of a civil forfeiture that California-based human resources software startup Zenefits has agreed to pay for alleged insurance code violations in Illinois. Illinois Department of Insurance investigators found the startup violated state law by allowing unlicensed employees to sell insurance to Illinois-based businesses.

$1 MILLION

The estimated cost to repair schools in Baton Rouge that were flooded in August 2016. Of the 10 schools that were forced to temporarily relocate because of the August flood, just one has been fully repaired and is back open. Four administrative centers have also been closed since the flood. FEMA has agreed to reimburse up to 90 percent of flood costs, but has not yet distributed any funds.

The estimated worth of timber that was destroyed by a tornado that hit the Mississippi counties of Lamar, Forrest and Perry in January, according to the Mississippi Forestry Commission. The tornado, which cut a 31-mile path, also damaged 118 acres of public lands managed by the commission.

on Courts and Legal Services comments on the New York City Council’s Construction Safety Act, a legislation package of 18 bills calling for increased worksite safety and training programs in New York City.

Wind, then Fire

“Seems every time the wind gets up good, there’s a fire somewhere.”

— Oklahoma wheat farmer Jim Freudenberger, who is keeping

closer watch over his 750-acre property in Coyle, a town in north-central Oklahoma where several wildfires have broken out. Oklahoma has been placed under a national fire advisory as much of the state struggles with unrelenting drought and tinder-dry vegetation. Dozens of wildfires have scorched thousands of acres in the past two months.

InsuranceJournal.com

Poll

Which of these Trump Administration priorities should most benefit the P/C insurance industry? Tax reform 22.69% (76 votes) Replace Obamacare 16.42% (55 votes) Reform Dodd-Frank 10.45% (35 votes) Scale back federal regulations 17.61% (59 votes) Immigration reform 5.97% (20 votes) Infrastructure spending 26.86% (90 votes) Total Votes: 335

INSURANCEJOURNAL.COM

FEBRUARY 20, 2017 INSURANCE JOURNAL | NATIONAL | 11

NATIONAL | Business Moves Risk Strategies Company is a privately held national insurance brokerage and risk management firm. It has offices in more than 35 locations nationwide including Boston, New York, Chicago, Miami, Atlanta, Dallas, Nashville, Tenn., Los Angeles and San Francisco.

RSG Underwriting Managers, Interstate Insurance

Markel, SureTec

Markel Corp. has agreed to acquire surety firm SureTec for approximately $250 million, inclusive of a three-year earn out. SureTec is one of the largest privately owned surety companies in the U.S. SureTec’s largest subsidiary, SureTec Insurance Co., is rated A (Excellent) by A.M. Best. In partnership with surety producers and independent agents, the company specializes in small to midsize contract bonds and commercial surety. SureTec operates in 50 states and has one international affiliate. The company has offices in Atlanta, Austin,, Texas, Dallas, Houston, San Antonio, San Diego, and Orange County, California. Following the acquisition, SureTec will operate as a separate business unit, with John T. Knox Jr., SureTec’s current chairman and chief executive officer, leading his team. The operating unit will become part of Markel’s Specialty division and U.S. Insurance segment. The transaction is expected

to close in the first half of 2017. TigerRisk Capital Markets & Advisory served as financial advisor and Sidley Austin LLP served as legal advisor to Markel. Locke Lord LLP served as legal advisor to SureTec.

Risk Strategies Company, University Health Plans

Risk Strategies Company has acquired University Health Plans (UHP). Terms of the deal were not announced. UHP is a Quincy, Mass.-based brokerage firm specializing in student health insurance programs. Built on a proprietary, webbased platform, UHP allows students of client institutions to navigate the school-sponsored student health insurance program and decide whether to waive or enroll in that program. Students also have the option to select from a range of ancillary coverages such as vision, dental and a variety of international health insurance plans for students traveling. This acquisition serves to expand Risk Strategies’ Higher Education Practice group.

12 | INSURANCE JOURNAL | NATIONAL FEBRUARY 20, 2017

RSG Underwriting Managers (RSGUM) has agreed to acquire the total assets and operations of Interstate Insurance Management Inc. (Interstate). Interstate was represented in the transaction by Marsh, Berry & Company Inc. Terms of the agreement were not released. Interstate is a transportation managing general agent founded in 1970 and led by President and CEO Jack Buchan. Headquartered in Johnstown, Pa., it serves the greater MidAtlantic region and maintains underwriting authority with multiple transportation markets. Interstate also underwrites specialty property and casualty coverages through its regional retail distribution network. The acquisition is expected to help Interstate expand its geographic presence and product set while giving its employees an opportunity for continued growth. Ryan Specialty Group LLC is an international holding company consisting of a wholesale broker, R-T Specialty LLC, a series of underwriting managers, RSG Underwriting Managers LLC, and an insurance service provider, Ryan Direct Group Ltd. E. RSGUM is the managing general underwriting division of RSG and consists of a series of

specialty property and casualty managing general underwriters. It provides centralized governance, shared services and executive oversight to its specialty underwriting businesses.

Jardine Lloyd Thompson, Construction Risk Partners

Jardine Lloyd Thompson Group plc (JLT) has acquired a majority stake in Construction Risk Partners LLC (CRP). JLT provides insurance, reinsurance and employee benefits-related advice, brokerage and associated services. CRP is a construction risk and surety specialty insurance broker. The partnership means added scale, specialist construction capability and market presence for JLT Specialty USA, which aligns well with the group’s strategy to build out its U.S. Specialty business. Through this acquisition, CRP provides JLT with a platform to accelerate the expansion of its construction business, adding capability in the North American market to JLT’s global specialty strength in construction. CRP will have access to JLT’s global resources to support its continued expansion across the U.S. and introduce JLT’s wider specialist insurance products to its clients. JLT and CRP work closely together serving JLT’s global construction clients, as CRP’s product specialties align with JLT’s global construction capabilities. All of CRP’s management team members will remain with the business. This will be referred to as Construction Risk Partners, a JLT Group company. INSURANCEJOURNAL.COM

NATIONAL | SPOTLIGHT | Marine

U.S. Estimates Hurricane Matthew Damage to Recreational Boats at $110M

urricane Matthew, which threatened four coastal states as it corkscrewed through the Atlantic in early October, caused an estimated $110 million in damage to recreational boats, according to Boat Owners Association of The United States (BoatUS). The national safety organization suggests that in addition to the storm remaining offshore, boaters and the marine industry had a hand in lessening the damage. In contrast, more than 65,000 recreational boats were damaged or lost as a result of Hurricane Sandy, according to BoatUS, resulting in damage estimated around $650 million. “The storm moved slowly, so everyone

had plenty of early warning and time to prepare. We believe that helped keep boat damage down,” said BoatUS Vice President of Public Affairs Scott Croft. In a previous statement, BoatUS reported that while there were some localized areas of dock destruction and boat losses, damage to recreational boats as a result of Hurricane Matthew was not widespread. “Damage turned out to be less than anticipated because the storm’s wall stayed offshore, but I’d also like to think boaters played a part as well in reducing damage,” Croft said. When a boat is in the path of a NOAAnamed storm and a hurricane watch or warning is posted, a BoatUS insured is eli-

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gible for 50 percent of the cost of labor, up to $1,000, to have the boat professionally hauled out, prepared and tied down by professionals. If the boat cannot be hauled, the coverage also includes hiring the services of a paid captain to move the boat to a protected “hurricane hole.”

1/6/17 2:25 PM 1/5/17 4:44 PM

.R. Berkley has put under review and is suspending underwriting for its London marine book until it can determine the direction of this business going forward. W/R/B Underwriting, the company’s Lloyd’s managing agent, is suspending its $30 million marine book, which has underwritten marine hull and cargo, marine liability and marine war. W/R/B Underwriting will continue to underwrite property, specialty casualty, aviation, accident & health, engineering & construction, crisis management and asset protection, market sources confirmed. Overall capacity for W/R/B Underwriting during 2017 is $280 million. Poor marine results have been common INSURANCEJOURNAL.COM

across the Lloyd’s market, and sources suggest that W/R/B Underwriting is undertaking rigorous cycle management by suspending underwriting for its marine book. As is common in such business moves, sources indicate that the company will honor all quotes and claims for its marine book. W.R. Berkley would not comment on its plans for the business. An indication of W/R/B Underwriting’s ongoing commitment to its Lloyd’s business is its recent appointment of Miriam Goddard as director of underwriting for specialty casualty. She will join the company from Hiscox, where she has been head of professions since 2013. In previous years, she was senior liability underwriter at Jubilee Managing Agency Ltd., an errors and omissions underwriter at Brockbank Managing Agency and an underwriter at Lexington Insurance Co., according to her LinkedIn profile. W/R/B Underwriting was established in 2015 by uniting W.R. Berkley Syndicate 1967 with the U.K. and Irish branches of W.R. Berkley Insurance (Europe) Ltd., under a single brand, said the company’s LinkedIn page.

agents and clients will be supported by a 24/7 claims service. Anthony Forsyth, divisional director at Brit Global Specialty, said, “We are pleased to have Brit launch and lead this new yacht consortium, which will further strengthen our leading marine offering. By combining Brit’s ability to deliver innovative solutions with a tailored approach to each policy, we are confident this consortium builds on our focus for delivering service. Furthermore, our global network of surveyors and claims professionals will enable us to give immediate and local solutions to clients in the

event of a claim.” Matthew Wilson, Brit Group CEO, commented: “Marine is a key line for Brit, and I’m delighted that we have been able to further enhance our client offering in the space through the launch of this consortium. Not only does this deliver on our strategy to build our presence in markets where we believe Brit brings a compelling proposition, but it also underscores our commitment to creating appealing client solutions through innovation in specialty areas where we already bring considerable expertise.”

Brit Launches Lutine Yacht Consortium with Capacity of $250M

rit Ltd., the London-based specialty insurer, announced the launch of a new Lloyd’s consortium for yachts, called the Lutine Yacht Consortium. The consortium has a capacity of $250 million, offering 100 percent Lloyd’s security to insure motor and sailing vessels valued at more than $10 million. The consortium also offers worldwide coverage, has global reach through Lloyd’s brokers and their INSURANCEJOURNAL.COM

FEBRUARY 20, 2017 INSURANCE JOURNAL | NATIONAL | 15

NATIONAL | News & Markets

D&O Coverage to Expand, Get Cheaper in 2017: Marsh

irectors and officers liability policies are likely to become broader and continue getting cheaper in 2017. This is among the likely trends expected for the financial and professional liability insurance marketplace in the months ahead, insurance broker Marsh said in a new report, “The U.S. Financial and Professional Market in 2017: Our Top 10 List.” Marsh said that public directors and officers (D&O) liability insurance rates will keep dropping in 2017, following nine continuous quarters of rate decreases. But the rate of decline should slow somewhat, despite a spike in federal filings, according to the report. There was a notable spike in federal filings in 2016 — the most since 2002. However, “the impact from those claims will take months, perhaps years, to be reflected in insurance rates,” Marsh said. As price declines continue, however, the market is seeing a related trend: pure individual D&O coverage policies are fading, with insurers focusing on

broadening their D&O offerings and making them unique to stay competitive, Marsh said. Among the ways insurers are trying to keep their D&O offerings unique: providing or improving entity investigation cost coverage, adding reinstatement of limits for full coverage, and continuing increases in excess derivative investigative cost sublimits. Excess insurers are also reimbursing a percentage of an insured's retention, if able to successfully obtain an early securities class action dismissal with prejudice, Marsh said. Other trends expected in 2017: Securities regulations

and corresponding enforcement/claims changes with

President Donald Trump and a Republican-controlled Congress. Changes will include deregulation for financial institutions and other organizations, with potentially fewer corporate penalties even as “culpable individuals” are held accountable. Deregulation could lead to more claims due to less transparency and “man-

date corporate guidelines.” More shareholder activism. This could breed more litigation and more global regulatory activity. Andrew Puzder, CEO of CKE Holdings (the owner of Hardee’s and Carl’s Jr.) was nominated as the new head of the U.S. Department of Labor. Marsh said that if he is confirmed (at press time his confirmation hearing had not taken place), his policies could affect “the frequency and severity of employment, wage and hour, and fiduciary liability litigation.” He has been a frequent critic of federal policies in all areas, including plans to expand overtime protection. Likely more mergers and acquisitions (M&A), along with other corporate arrangements. Marsh said that the M&A trend will continue in 2017, which could fuel interest in representations and warranties insurance, in part, to help make sure the deal closes. But Marsh said companies will also see nonM&A collaborations including joint ventures, partnerships and alliances. If they do, Marsh warns that companies should review their D&O policies to make sure these other structures are covered. Cyber insurance will evolve

to address more D&O-related risks. This includes business interruption and a potential bridge of financial, professional and property insurance programs to prevent coverage gaps. Marsh said it sees data analytics also informing evolving cyber coverage. Payouts will rise for

Employee Retirement Income Security Act fee litigation settlements. “Given the large

dollar amounts that are held in 401(k) plans today and the recent successes of plaintiff firms, fee cases remain sufficiently attractive for plaintiffs’ lawyers to pursue. The emergence of financial and technology risks. Marsh notes that financial and technology advances are converging, but they have added risk exposures to corporations that were typically more technology-industry-related. Financial regulators don’t always know how to “classify new players whose risk profiles combine the two sectors,” Marsh said. A rise in D&O/Errors and Omissions claims due to global enforcement cooperation, with joint sharing of information and tactics. Share this arti-

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See related articles at: ij.com/riskmanagers r tspecialty.com R-T Specialty, LLC (RT), a subsidiary of Ryan Specialty Group, LLC, provides wholesale brokerage and other services to agents and brokers. RT is a Delaware limited liability company based in Illinois. As a wholesale broker, RT does not solicit insurance from the public. Some products may only be available in certain states, and some products may only be available from surplus lines insurers. In California: R-T Specialty Insurance Services, LLC License #0G97516. ÂŠ 2017 Ryan Specialty Group, LLC

NATIONAL | Special Report | Agency Salary Survey

By Andrea Wells

18 | INSURANCE JOURNAL | NATIONAL FEBRUARY 20, 2017

INSURANCEJOURNAL.COM

nsurance agencies that stress “soft” benefits have the upper hand in recruiting workers in today’s competitive job market. Employees are increasingly seeking out “soft” benefits in addition to traditional “hard” benefits from their employers. While employees still greatly value salaries, commissions, bonuses and even stock options, they also like time off, telecommuting and training. Experts agree that soft benefits tend to

be an area of compensation that can make a huge impact on employee satisfaction when tailored to meet the desires of the agency workforce. Yet too many agencies either don’t extend soft benefits or, if they do, they undersell them when recruiting. Satisfaction comes with the total compensation package, not just salary, according to Sharon Emek, president and CEO of Work at Home Vintage Experts (WAHVE), a national staffing firm that places “vintage” insurance professionals in agencies and

Employee Benefits Satisfaction Index* Satisfaction Index When Offered

Profit Sharing Pension Plan Education reimbursement Group life/disability 401(k) IRAs Group health insurance Health Savings Account Stock Options ESOP Dental Flexible Savings Account Childcare/Daycare Trips Contests Club membership dues Educational courses Cash bonuses Company car None Provided

Satisfaction Index When Not Offered

3.69 3.52 3.57 3.46 3.38 3.59 3.41 3.46 3.37 3.43 3.38 3.35 3.52 3.91 3.73 3.88 3.85 3.79 4.16 2.95

3.23 3.31 3.22 3.15 3.23 3.29 3.06 3.24 3.31 3.31 3.23 3.3 3.3 3.28 3.29 3.3 3.25 3.24 3.3 3.37

* 5 = Most Satisfied; 1 = Least Satisfied

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* Non Provided

INSURANCEJOURNAL.COM

2017 75.4% 36.5% 56.7% 54.4% 61.4% 19.4% 10.5% 5.3% 4.8% 4.9% 26.7% 28.2% 3.2% 12.1%

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%

brokerages who work from home on a fulltime or part-time basis. The best compensation packages are based on a variety of elements, Emek said. “Salary is crucial and employees obviously should be paid for the job they do. But I also think it’s about the benefits that you supply.” Those benefits can be hard benefits such as a solid 401(k) with a good company match. Or they can be soft benefits such as workplace flexibility. Remote working, or telecommuting, has become so important in recent years that people will give up a hard benefit for the flexibility in work-life balance, according to the WAHVE executive. “If they can work from home two days a week and be with their family and children that is totally worth (not getting) an increase in their salary if they can improve the quality of their life,” Emek said. The value of soft benefits might even surpass the value of those provided by more traditional hard benefits to some employees. Insurance Journal’s 2017 Agency Salary Survey confirms that soft benefits and other employee incentives do make a difference in employee satisfaction. Satisfaction scores (see Employee Benefits Satisfaction Index chart) are higher in every category when agencies offer benefits, whether they are hard benefits like profit sharing, group health or 401(k) plans, or softer benefits such as educational courses, club memberships or trips. Employees will always value salary but they also want to be 2013 rewarded for their hard work, if 77.7% not financially then in other cre32.2% 52.5% ative ways, Newgard said. 53.7% Soft benefits can be anything 57.7% that may not cost an employer 17.8% much financially but can make a 10.4% 5.7% huge difference for the employ4.6% ee. The soft benefits offered are 4.5% often unique to each organization 24.4% but they range from unlimited 28.0% vacation days to flex time, remote 3.0% 11.7% working to four-day work weeks,

continued on page 20

FEBRUARY 20, 2017 INSURANCE JOURNAL | NATIONAL | 19

NATIONAL | Special Report | Agency Salary Survey continued from page 19

Average Management Salaries Salary

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

$204,206 $136,427 $104,091 $74,333 $82,057 $96,400 $70,900 $50,000

Average Producer Salaries by Line Salary

Commercial Producers Personal Producers

$75,690 $40,304

Average Producer Salaries by Region East Midwest South Central Southeast West

Commercial Lines Producer

Personal Lines Producers

$96,065 $63,385 $58,107 $68,716 $94,404

$48,538 $36,773 $26,680 $38,000 $49,030

Average Management Salaries by Gender

20 | INSURANCE JOURNAL | NATIONAL FEBRUARY 20, 2017

Female

Male

cellphone reimbursement to exercise facilities on site, or redesigning workspaces for an open and healthy feeling. They can even include opportunities for charitable work. Free food or coffee in the breakroom works as well. Soft benefits are about creating a working environment that is pleasant and comfortable for employees, said John H. Clark, Jr., senior vice president, benefits practice leader for Assurex Global. The value of providing such benefits in today’s independent agency cannot be overlooked, he said. “It’s huge and especially important with the millennial generation,” Clark said. Clark said Assurex Global partners, which include some of the largest privately-held independent commercial insurance, risk management and employee benefits brokerages, have been investing to better the environment for their most valued asset - their human capital. He said one Assurex Global firm has even rebranded the organization to market its “total rewards” policy for its employees. Another partner, IMA Financial Group, offers free Starbuck’s in its Denver office. “That soft benefit makes working at IMA

INSURANCEJOURNAL.COM

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

more comfortable and appealing,” Clark said. Soft benefits don’t always mean hard dollar expenses, said Mary Newgard, senior search consultant at Capstone Search Group, a national insurance industry search firm. “It’s all of those things that get employees excited but it doesn’t necessarily mean cost,” Newgard said. “I’ve even seen benefits like pet bereavement. It sounds crazy but the amount of cost and impact of a pet bereavement (policy) is so minimal that the employer will hardly ever see it. But if you are a pet lover who has a loss and you don’t have to use a PTO [personal time off] day for that loss, that’s a huge, tangible benefit (to the employee) that didn’t cost the employer.” The consultants stress that soft benefits alone are not enough and caution that workers may become discouraged if softVolume P/C Premium benefits are offered to make up for what $1 million they perceive as inferior hardUnder benefits or $1 million - $5 million overall compensation. $5 million- $10 million “It’s about the (complete) benefits pack$10 million - $25 million age and the ability to have a flexible work$25 million - $50 million

2016 4.4% 4.5% 2.9%

2015 3.8% 2.1% 3.5%

2014 3.9% 4.4% 3.4%

How Agencies Base Compensation Incentive Plans Agency profits Productivity Revenue growth Contingent commissions Individual performance No incentive plan Other

34.7% 29.4% 27.6% 18.9% 41.5% 22.2% 5.0%

Average Agency Salaries By Experience Manager/Owners

Less than 3 years 3-5 years 6-10 years 11-20 years 21-30 years More than 30 years

$25,000 $67,682 $92,452 $131,928 $134,973 $163,489

Producers

Staff

$36,362 $45,106 $68,998 $67,587 $64,058 $106,246

$31,886 $41,368 $66,311 $57,712 $61,065 $67,609

Agencies' Average Salaries by Premium Volume (Management)

continued on page 22

$50 million - $100 million $100 million or more

Owners/Principals President/CEO

Office Manager

Sales Manager

Accounting Manager

$51,500 $75,259 East $101,853 Midwest $155,257 South Central $181,424 Southeast $244,095 West $312,500

$45,179 $45,631 $63,917 $77,537 $89,143 $95,804 $97,031

$42,000 $31,000 Manager/Owners $53,580 $35,918 $197,200$50,774 $92,593 $124,120$55,303 $99,813 $118,071$81,875 $168,750 $124,518$88,889 $145,441 $133,652$94,342 $229,643

Personal Lines Mgr.

Average Agency Salaries by Region

$30,750 $36,500 $80,945 $47,656 $52,473 $60,861 $44,523 $110,161 $59,005 $77,500 $77,362 $108,750

Producers

Commercial Lines Mgr.

Marketing Manager

$43,750 Staff $45,602 $60,711 $61,198 $51,935 $69,194 $60,963 $106,908 $53,053 $89,808 $69,132 $142,647

$55,000 $102,813 $54,250 $68,143 $108,810 $85,476 $118,269

Agency Compensation Satisfaction Index* Management/Agency Owner/Principal Producer/Sales Support Staff/CSR/Account Executive

2017 3.61 3.02 2.97

2016 3.63 2.97 2.84

2015 3.62 3.12 2.73

2014 3.68 3.19 2.90

2013 3.51 3.03 2.75

2015 5.7% 4.7% 3.0%

2014 6.7% 5.7% 3.5%

2013 7.2% 8.8% 2.8%

2012 4.5% 5.5% 2.3%

2015 3.8% 2.1% 3.5%

2014 3.9% 4.4% 3.4%

* 5 = Most Satisfied; 1 = Least Satisfied

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

2016 5.5% 6.6% 3.1%

*Includes all income changes in year

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

INSURANCEJOURNAL.COM

2016 4.4% 4.5% 2.9%

How Agencies Base Compensation Incentive FEBRUARYPlans 20, 2017

2013 4.3% 5.1% 2.5%

2012 2.8% 2.9% 2.2%

INSURANCE JOURNAL | NATIONAL | 21

Average CSR Salaries by Region

East Midwest South Central Southeast West

Commercial Lines

Personal Lines

Support Staff

$70,106 $58,450 $64,270 $59,238 $78,724

$48,429 $37,471 $55,050 $40,908 $49,200

$51,382 $52,418 $48,600 $50,056 $55,964

Agencies’ Plans to Change Payroll Expense in 2017

NATIONAL | Special Report | Agency Salary Survey continued from page 21

ing environment,” Emek said. said Capstone Search Group’s Newgard. Strategies Implemented What Soft benefits are part ofAgencies a complete package, a substitute for hard Recruitment Tools in not 2016 vs. 2015 vs. benefits. 2014 2015 2014 offer soft benefits, “With the way that the market is right 2016 While many agencies Cut benefits 2.6% 4.1% now in insurance, an experienced profesor other perks, some6.6% of them may not be Shift health plan costs to employees 11.6% 14.9% 13.0% sional is very sought after, and if you sufficiently advertising those benefits to Increase benefits 13.3% 9.5% 6.4% can’t them of raises to a substantial hires. That’s a mistake, Newgard Forcegive reduction employees 4.8% potential 5.1% 6.6% degree youhiring are going to run the risk of 24.9% said, because the right compensation plan Postpone 29.8% 30.8% Postpone raises 20.1% having a revolving door (of employees),”14.2% – with19.0% a good mix of hard and soft beneIncrease hiring Increase compensation

33.1% 42.3%

31.2% 41.0%

29.8% 38.2%

What Strategies Agencies Plan to Implement in 2017 vs. 2016 Cut benefits Shift health plan costs to employees Increase benefits Force reduction of employees Postpone hiring Postpone raises Increase hiring Increase compensation

2017 1.8% 8.8% 10.3% 1.8% 16.7% 7.6% 55.1% 41.4%

2016 1.7% 7.7% 5.9% 5.0% 17.3% 10.4% 49.3% 47.5%

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

63.7% 49.4% 55.9% 52.8% 62.3%

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

22.4% 43.7% 68.3% 73.0% 75.2% 79.5% 70.4%

Changes to Health Insurance Plan in Past Year Increased employee contribution 39.1% Increased deductible limits 64.3% Implemented higher co-pays for participants 35.7% Reduced drug benefit 9.6% Reduced other benefits 9.8%

Reduce payroll expense Increase payroll expense Keep the same Not sure

36.7%

51.0%

fits – isAgency important to competing in today’s Salary Increases environment. “It’s the most difficult time in 2016 43.1% to hire in the insurance industry space,48.4% at Higher than 2015 any level of experience,” she said. 8.5% Lower than 2015 Newgard advises agency owners to be Same in 2016 compared to 2015 transparent with compensation plans and be sure to highlight the soft benefits offeredAgency to employees. Staff Size “People want the transparent employer,” in 2016 43.3% she said. Employment candidates want to 46.4% Increase know about corporate charitable endeavDecrease 10.4% ors and philanthropy. Stayed the same They want to know about organizational structure and career pathing. “Experienced and inexperienced professionals want a culture of transparenAnticipated Agency Staff cy in any organization,” Size in 2017 she said. 48.8% Young agency employees, in particular, 48.1% Increase are looking for employers that will allow Decrease 3.2% them to maintain Stay the samea positive work-life balance, according to Madelyn H. Flannagan, vice president, agent development, educationAgency and research, at the Independent Salary Survey Insurance Agents and Brokers of America, Demographics 27.1% “TheyManagement/Agency want opportunities to grow,” both Owner/ 52.6% Agency Principal professionally and financially, Flanagan 20.4% said. ButProducer/Sales they also want the latest techSupport Staff/CSR/Account Executive nology and telework options. “They want professional development and retirement plans.”Producer Commissions Noelle Codispoti, executive director of in 2016 35.9% Gamma Iota Sigma (GIS), an international 50.5% Increase fraternity for students of insurance, risk Decrease 13.6% management actuarial Stayed and the same in 2016 science, agrees. 2015our students com “Whatcompared we see to with ing into entry level positions is less of an emphasis on that cash component and Agencies’ Plans to Change more of an emphasis on the culture of the 8.1% Commission Structure 13.5% company,” Codispoti said. How those dis2016 78.4% cussionsChanged evolveinwith the potential employWill change in 2017 er could depend No changeson whether the graduate accepts the job. “A company’s willingness to discuss what the compensation look like, what How Agencies will Determine their career Feeswith the company would look 31.1% like, what kind of help they will give to the 72.9% individual, whether it’s professional desAs a % of Premium ignationsFlat orfee going an MBA, basedto onget account type the support the company provides for community outreach, even the company’s mission on giving Producer back to the Compensation community,” she said. Angela andPilotti, Feesmanaging director/ 37.1% content development, at The Institutes, 60.1% Producer receives % of fee the educational organization behind the Producer receives all of fee Producer doesn’t receive fee

22 | INSURANCE JOURNAL | NATIONAL FEBRUARY 20, 2017

5.8% 6.6%

2.8%

INSURANCEJOURNAL.COM

Producer Bonus for

CPCU designation, added that research conducted by her organization has consistently shown other issues outside of salary, including flexibility and soft benefits, are especially valued by younger generation workers as they advance. “We are seeing when you are new to the industry, salary is very important, but over time that becomes less important,” she said. As workers advance in their careers, other benefits like a flexible schedule, the ability to do community service, the ability

to receive training or education, or equity positions in their employer grow in value. When it comes to soft benefits, it’s important for agencies to display their culture by displaying what they offer their employees, Newgard said. “Agencies are behind on that more so than larger insurance companies when it comes to branding what they already do,” she said. “You don’t have to keep raising salary every year to give people things that they assign value to,” she said. “When you give

people flexibility to go to doctor’s appointments or to be able to work from home … these are the kinds of things that make people happy with compensation really, really fast.” What prevents agencies from “going crazy with soft benefits,” Newgard said, “is knowing when it’s too much.” But that’s where transparency comes in. “If you just talk to your employees about what kinds of things they would find value in, they might surprise you.”

Agency Salary Survey: Salaries and Total Compensation Up

alaries for insurance agency management, owners, principals and producers were up in 2016. Total compensation for support staff also increased, although not by as much as

they did the year before. That’s according to Insurance Journal’s 2017 Agency Salary Survey, which revealed that salaries for agency owners, principals and management went up 4.4 percent in

CSR Salaries and Hours Average Salary Paid

Average Hours Worked

$67,351 $45,476 $51,331

39.51 38.29 39.32

Commercial lines CSR Personal lines CSR Support staff average

Average CSR Salaries by Region East Midwest South Central Southeast West

Commercial Lines

Personal Lines

Support Staff

$70,106 $58,450 $64,270 $59,238 $78,724

$48,429 $37,471 $55,050 $40,908 $49,200

$51,382 $52,418 $48,600 $50,056 $55,964

What Strategies Agencies Implemented in 2016 vs. 2015 vs. 2014 Cut benefits Shift health plan costs to employees Increase benefits Force reduction of employees Postpone hiring Postpone raises Increase hiring Increase compensation

2016 2.6% 11.6% 13.3% 4.8% 24.9% 14.2% 33.1% 42.3%

What Strategies Agencies Plan to Implement in 2017 vs. 2016

INSURANCEJOURNAL.COM

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

2016, compared to a 3.8 percent jump in 2015. Producers/sales reported average increases in salary of 4.5 percent in 2016, compared to 2.1 percent in 2015. While salaries for agency support staff went up 2.9 percent on average in 2016, that was less than the 3.5 percent raise Agency Gives Ann they got in 2015. ofSurvey, Living Increase This year’s Agency Salary based on responses from more than 1,300 Yes respondents nationwide, also revealed No bumps in total income, whichNot includes Sure profit sharing, bonuses and other income: • Agency owners, principals and management reported a rise in total Agencies’ income for 2016, which revealed an Plans to increase of 5.5 percent inPayroll total income; Expense in in 2015 total income increased 5.7 Reduce payroll expense percent. Increase payroll expense • Producers/sales total income went Keep the up same 6.6 percent for 2016, compared to an Not sure increase of 4.7 percent in 2015. • Agency support staff total income rose 3.1 percent for 2016, compared to 3.0Salary Agency Incr percent in 2015.

in 2016

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

Satisfaction over agency compensation Higher than 2015 appears to be holding steady,Lower or slightly than 2015 improving as well: Same in 2016 compared to • Management/agency owners/agency principals reported a compensation satisfaction score of 3.61 in the 2017 Agency Staff Size survey, down from 3.63 in the 2016 2016 survey, based on a scalein of 1-to-5 where “5” equaled “most satisfied.” Increase continued on page 24 Decrease Stayed the same

FEBRUARY 20, 2017 INSURANCE JOURNAL | NATIONAL | 23

NATIONAL | Special Report | Agency Salary Survey continued from page 23

Non-Owner Producer Compensation 12.8%

Salary Only

34.7%

Salary plus commission

25.8%

Commission only

9.7%

Draw against commission

5.1%

Other

How Agencies Charge Fees 58.2% Fees are charged in addition to commissions 41.8% Fees are charged in lieu of commissions

Incentives for Non-Owner Producers 35.9%

No Incentive

16.1%

Trips

20.2%

Contests

7.8%

Club memberships

33.1%

Education

43.5%

Cash bonus

7.1%

Car

• •

Producers/sales reported satisfaction of 3.02 in the 2017 survey, up from 2.97 in the 2016 survey. And support staff/CSR/account executives reported a satisfaction score of 2.97 in the 2017 survey, up from 2.84 in the 2016 survey.

Overall compensation satisfaction scored higher when agencies offered employee benefits, both hard benefits such as group health, dental coverage and stock options, and soft benefits such as car reimbursement, trips and contests. (see Employee Benefit Satisfaction Index, page 19). Employee benefit satisfaction ranked highest in the survey when agencies offered profit sharing (3.69) and IRAs (3.59) and lowest for when agencies offered flexible savings accounts (3.35). Even so, when benefits were offered employees showed more satisfaction. More agency management/owners/principals reported that they plan to increase benefits (10.7 percent) in 2017 compared to 2016 when only 5.9 percent said they were going to up benefits. More than half of agency management (55.1 percent) also revealed plans to increase hiring in their agency in 2017, which was up from 49.3 percent the prior year. While management may have plans to increase benefits in 2017, they also have plans to shift health plan costs to employees. Some 8.8 percent reported planning to do so this year, compared to only 7.7 percent in last year’s survey. Even so, three-quarters of agencies responding to the survey (75.4 percent) continue to offer group health insurance to their employees. Insurance Journal’s Agency Salary Survey collected more

than 1,300 responses from independent insurance agencies and brokerages nationwide via an online survey in January 2017. Demotech Inc., Insurance Journal’s official research partner, assisted with analysis of this year’s survey results. For more information, contact awells@insurancejournal.com.

Workload in 2016 Compared to 5 Years Ago

How Incentive Compensation for CSRs is Determined

33.7%

Higher today than ever before

12.8%

No. of policies sold

35.8%

Steadily increasing

29.6%

New business commissions

14.4%

Increases only slightly each year

14.1%

Renewal commissions

5.7%

Steadily decreasing

Set dollar amount

4.6%

Less today than ever before

Do not offer incentive comp

5.8%

Same today compared to 5 years ago

7.7% 37.9%

24 | INSURANCE JOURNAL | NATIONAL FEBRUARY 20, 2017

INSURANCEJOURNAL.COM

41.4%

47.5%

Agency Salary Survey Demographics

Paid by Agency for Employee 63.7% 49.4% 55.9%Cost Agency Gives Annual 52.8% of Living Increase 62.3% Yes No Not Sure

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

10.1% 32.5% 57.4%

Agencies’ Plans to 22.4% Change 5.8% 6.6% Payroll Expense in43.7% 2017 68.3% 36.7% 51.0% Reduce payroll expense Increase payroll expense 73.0% Keep the same Not sure 75.2% 79.5% 70.4% Agency Salary Increases in 2016

nsurance Higher Planthanin2015 Past Year

48.4%

ontribution 39.1% imits 64.3% Agency Staff Size 35.7% o-pays for participants in 2016 9.6% s 9.8% Increase Decrease Stayed the same

46.4%

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

Producer Commissions in 2016

43.3%

10.4%

Anticipated Agency Staff Size in 2017 Increase Decrease Stay the same

43.1%

8.5%

Lower than 2015 Same in 2016 compared to 2015

48.1%

48.8% 3.2%

INSURANCEJOURNAL.COM

35.9%

Changed in 2016 Will change in 2017 No changes

52.6%

50.5%

13.6%

Agencies’ Plans to Change Commission Structure

8.1% 13.5% 78.4%

How Agencies Determine Fees As a % 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

31.1% 72.9%

37.1%

60.1%

2.8%

Producer Bonus for Exceeding Sales Goal

37.7% 62.3%

Yes No

Owners Thinking About Selling the Agency

27.1% 20.4%

52.6% 20.4%

Increase Decrease Stayed the same in 2016 compared to 2015

Paid by Agency for Employee

n on on ion

Producer Commissions in 2016

27.1%

Yes No Not applicable

7.1% 6.3%

86.6%

FEBRUARY 20, 2017 INSURANCE JOURNAL | NATIONAL | 25

35.9%

NATIONAL | News & Markets

The Future of Fraud Fighting: IoT and Telematics By Denise Johnson

eclining costs, the availability of cloud storage and the rise of telematics will likely increase predictive analytic adoption rates, according to Dan Donovan, assistant vice president of Claims Solutions at Verisk Insurance Solutions. Though predictive modeling has been used for some time to thwart fraud, he said, it was mainly used by larger carriers. “A lot of that had to do with the cost of predictive analytics, the lack of data science teams that existed within the companies themselves…

Podcast To listen to the full podcast interview, with Dan Donovan, assistant vice president of Claims Solutions at Verisk Insurance Solutions, visit: http://www.insurance journal.tv/videos/14491/

the IT requirements and cost to support analytics in large data environments,” Donovan explained. In those instances, he said, custom models were built specifically for a carrier’s dataset. At the time, the models needed to be hosted on the carrier’s premises. “Carriers were very reluctant to let any data outside of their own firewall that might contain personally identifiable information or personal health information,” said Donovan. The other issue, he said, was that initially insurers didn’t understand predictive analytics and how to operationalize the output. Over time, as cost barriers declined and insurers hired data scientists and began using the cloud, insurers could see the benefit of utilizing predictive analytics affordably. The types of fraud that predictive modeling can identify and predict is limitless, he said, noting that it’s anything that data can be applied to, starting from the from point of sale.

26 | INSURANCE JOURNAL | NATIONAL FEBRUARY 20, 2017

“You can start attempting to identify fraud at the point of sale, when that application is first submitted to an agent through the underwriting process. We’ve even had discussions with carriers about looking at agency books of business,” Donovan said. “Really, it can start there and then move onto when a claim occurs and then after claims and at the point of renewal for policies, you could again evaluate.” In addition, any book of business can benefit from predictive analytics and fraud scoring, he said. “From a claim standpoint, it’s limitless to the lines of business and the coverage types that you can apply analytics to,” Donovan said. Predictive analytics have been applied to some lines of insurance more easily than others. For example, auto physical damage and bodily injury has seen the greatest uptake, Donovan said. “There’s been an increase in interest in homeowners’ property claims for fraud, but that’s been very slow on the uptake,” he said. However interest is speeding up with the use of the Internet of Things (IoT) and telematics. “IoT’s extremely interesting to the industry as a whole, not just in the fraud space… we really see this as a game changer and believe it represents the next generation of fraud detection capabilities,” Donovan said. “When you start to be able to bring in telematics and IoT data from smart homes and smart auto into the claims process, into the underwriting process, it’s really going to change the game.” Both IoT and telematics offer

data that will likely deter soft fraud. “These claims where you’ve got exaggerated injuries or inflated medical treatment, where the accident may have legitimately happened, but the damage was enhanced or intentional,” Donovan said. “It’s very difficult to prove fraud in these types of losses. Our belief is that for carriers that can start to gather and incorporate IoT and telematics data into their claims and underwriting process, this is really going to allow them to flip that over and be more objective in their evaluations of losses.” Wearables may impact fraud even more, he said, describing a case where a heart monitor’s data was used to prove an individual may have been involved in an arson. According to an Associated Press report, police say data recorded by a man’s cardiac pacemaker helped lead to his indictment on charges of aggravated arson and insurance fraud in a fire at his Ohio home. Court records show a cardiologist reviewing the man’s pacemaker data said his medical condition made it “highly improbable” to have taken all of the actions he described. “The deterrent effect may ultimately end up being the biggest thing that IoT and telematics does from a fraud standpoint, when people start to realize that all of their moves are being tracked, that you can pull information from their car or from their home that will either support their version of events or completely turn it upside down,” said Donovan. “That may get people thinking twice about filing fraudulent claims.” INSURANCEJOURNAL.COM

MyNewMarkets | NATIONAL Available limits: As needed Carrier: Argo States: All states but D.C., and W.Va.

Contact: Customer service at 804-560-4844

Franchised Motorcycle and Powersports Dealerships Market Detail: Williams &

Builders Risk

Agribusiness

Broker LevelFirst (level1st.com/ my_new_markets_ levelfirst) offers extensive market capabilities with comprehensive coverage for residential and commercial builders risk. Coverage features include: new construction, renovations, and additions; broad definition of covered property; monthly and annual reporting policies available; appetite for commercial and residential renovations; temporary storage and transit sub-limits included and can be increased upon request; options to include soft cost, equipment breakdown and shell coverage for renovations; manuscript coverage available for larger projects; no coinsurance option available; builder’s risk capacity to $50 million. Available limits: Maximum $100 million Carrier: Unable to disclose, admitted and non-admitted available States: Ala., Ariz., Ark., Calif., Colo., Ga., Kan., La., Miss., Mo., Neb., N.J., N.M., Ohio, Okla., Ore., Pa., Texas and Wash. Contact: April Moeser at 800-355-4428 or email: amoes@iiat.org

Management Corp. (www. midlandsmgt.com) offers property coverage for buildings, personal property, computers, mobile equipment, stock and business income. The property form also includes many optional coverages. Other coverages include: equipment breakdown; general liability for premises/operations and products liability; commercial auto; workers compensation; commercial umbrella; and employment practices liability insurance. Bloodstock mortality, livestock mortality and animal mortality coverage also available. Loss control services: While no one can control Mother Nature, the insurance carrier will advise the insured on ways to protect their employees and business, reduce property damage, control costs and minimize business interruption. Specialists will partner with the insured to create a customized loss control program to help improve safety and increase profitability. In the event of a loss, claims staff will work with the insured to swiftly facilitate that covered property is restored or

Market Detail: Wholesale

INSURANCEJOURNAL.COM

Market Detail: Midlands

replaced; business operations resume with little delay and loss of income; the injured receives expedient care and attention and third party claims are aggressively defended and fairly resolved. Available limits: As needed Carrier: Unable to disclose States: All states except Okla. Contact: Mandee Wilson at mwilson@midman.com

Medical & Physical Rehab Facilities Market Detail: Argo Pro’s

(www.argoprous.com) allied medical targets risks in longterm care facilities, miscellaneous healthcare facilities and social service industries including assisted living facilities, home healthcare, nursing homes, non-emergency medical transportation, group homes for the mentally or physically impaired, social service agencies, adoption and foster placement agencies, medical imaging centers, counseling centers and independent living. Professional and general liability coverages are offered as well as physical/sexual abuse, hired and non-owned auto, stop gap liability, employee benefits and excess liability.

Stazzone Insurance (www. wsins.com) offers a specialty garage liability program for franchised dealership operations that sell and service motorcycles and power sports. The program includes: garage liability package policy; dealers physical damage (inventory); property, crime, and inland marine; dealer E&O’s; umbrella; discrimination; and pollution. Additional details: Nationwide availability (lower 48); stable insurance program backed by a well-rated carrier; comprehensive form and competitive pricing. Ideal agency partners will have an existing focus on garage liability or have staff with prior experience producing profitable business. Available limits: As needed Carrier: Unable to disclose, admitted States: All states Contact: Vincent Stazzone at 800-868-1235 or email: vstazzone@wsins.com

This section brought to you by Insurance Journal’s sister website: www.mynewmarkets.com

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FEBRUARY 20, 2017 INSURANCE JOURNAL | NATIONAL | 27

NATIONAL | Closer Look | Farm Mutuals

Grinnell Mutual Grows from Complacent to Dynamic By Stephanie K. Jones

mutual insurer created more than 100 years ago to reinsure farm mutual insurance companies in Iowa has grown faster in the past five years than it did during the previous 10 decades, its president and CEO says. Organized in Greenfield, Iowa, in 1909, Iowa Farmers Mutual Reinsurance Association eventually moved to Grinnell, Iowa, and over the years grew into the entity that is now known as Grinnell Mutual and describes itself as the largest primary reinsurer of farm mutual companies in North America. “We’re a 107-year-old company,” said Larry Jansen, president and CEO. “It took us 102 years to grow to about $300 million of surplus. In the last five years, we’ve almost doubled that. At the end of this year, we’re going to be close to if not exceeding $600 million of surplus.” Jansen, who took over the leadership roles at Grinnell Mutual five years ago, has been with the company for 38 years. He attributes the recent rapid growth to “the hard work of our employees in the building, our membership, the mutuals we reinsure and the agents that produce our business.” Grinnell now has more than 250 mutual affiliates and works with more than 1,600 local independent agencies in Illinois,

Larry Jansen, president and CEO

Indiana, Iowa, Minnesota, Missouri, Montana, Nebraska, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Wisconsin and Virginia. The company didn’t come upon this growth trajectory by accident. It was a goal Jansen set when he took over as president and CEO, and one he sought to inspire his employees, members, affiliates and agents to embrace. “One of my concerns was that we had become a typical 100-year-old company. We were very complacent, we were very lethargic, we were very accepting of the status quo,” he said. He wanted to “add some vitality, energize the company and get employees more involved,” as well as to give people a reason to come to work every day. So, he set sights on becoming a $1 billion company within 10 years. Recognizing there were problems within the farm mutual reinsurance business, that’s where the company chose to begin working on achieving that goal. “We had seven or eight years prior to that timeframe where we’d seen significant underwriting losses. We had recoveries from our reinsurers that were unbelievably large,” Jansen said. He began attending regional meetings with farm mutual customers, giving “them some pretty bad news. I said, ‘I’ve looked at the experience over the last seven or

eight years, and the problem we’re having is we’re totally underpricing our product. Over the next three to four years, we’re going to have to double the rates.’” The company followed through with that plan and dramatically turned around its underwriting experience in the farm mutual reinsurance book, which represents about a third of the company’s business. Helped by rising rates and by several years of favorable weather patterns, Grinnell has gone from “losing $50 million every year on that book” to “making $50 to $60 million the last three or four years,” Jansen said. Farm mutuals are limited in most states as to what kinds of business they can write and where they can write it; most are limited to home or farm-related insurance. Grinnell Mutual is able to offer a wide spectrum of commercial and personal lines and makes that business available to the independent agents who also write for the farm mutuals Grinnell reinsures. “That’s how we grow our direct side is through those agents that write for those farm mutuals,” Jansen said. The direct business makes up two-thirds of Grinnell’s business, and is a “strong, stable book of business” that has experienced underwriting profits

‘We spend a lot of time every year going out and having area meetings with our agents to let them tell us what they like, what they don’t like.’

28 | INSURANCE JOURNAL | NATIONAL FEBRUARY 20, 2017

INSURANCEJOURNAL.COM

for 13 of the past 15 years, Jansen said. On the direct side, the company views agents as being its primary customer. “We spend a lot of time every year going out and having area meetings with our agents to let them tell us what they like, what they don’t like,” he said. One thing agents have said is that, technologically speaking, Grinnell Mutual has been difficult for them to work with because of its antiquated legacy system. The company listened and is now in the process of overhauling its technology from top to bottom. Jansen said the company chose the Guidewire system and expects the transition to be “a multiyear project to get it all up and going. We’re actually bringing in the whole shebang. We’re not buying just billing or just the client, we’re buying the policy side, the billing side, the claim side, the whole shebang. It’s a major undertaking.” It’s all about doing the right thing for the employees, agents and policyholders, he

INSURANCEJOURNAL.COM

GRINNELL MUTUAL AT A GLANCE Established 1909 President/CEO Larry Jansen

“A” rating from A.M. Best since 1991 Direct written premium: three years ago versus today Dec. 31, 2013 - $515,326,885; Dec. 31, 2016 - $611,969,301 (18.75 percent increase)

Policyholder surplus: three years ago versus today Dec. 31, 2013 - $399,940,041; Dec. 31, 2016 - $589,902,304 (47.5 percent increase)

How many states the insurer wrote in three years ago versus how many it writes in today 2013 - 13 states; 2016 - 15 states

Mergers, affiliations or partnerships entered into in the past three years Partnerships include Mutual Boiler Re, Beazley, Risk Control Technologies, Guidewire, Cynosure and Palomar Specialty Insurance Co. Cyber Liability and Data Breach Response coverage said. “Our company, 107 years ago, was formed by those companies that we reinsure. Our board of directors is made up of 12 farm

mutual managers,” Jansen said. And that board wants to make sure they do the right thing for both the company and for the member mutuals they represent.

FEBRUARY 20, 2017 INSURANCE JOURNAL | NATIONAL | 29

Idea Exchange

The Wedge

The Art of Intimidation The Roman Empire had mastered the art of intimidation. They wanted you to know that if you are a deserter of their army, an enemy of their empire or a criminal amongst their people, you had a high probability of dying a horrible and terrifying death. While doing so, you would provide entertainment as people witness it, even furthering the intimidation factor.

How Intimidation Affects Salespeople

By Randy Schwantz

magine it’s almost 2,000 years ago and you’re a peasant living in Italy. Your boss sends you into Rome to get some supplies. You saddle up your donkey and head into town. As you make your way through the city, you come upon a huge structure that is about 15 stories tall. You are awestruck. You’ve never seen anything of this magnitude in your life. The large structure sparks your curiosity so much that you ask a Roman guard, “What is that?” He tells you that’s the coliseum. “What’s if for?” you ask. He tells you in a very matter of fact way, “Rich and powerful families use it to host great shows.” The coliseum was built in 80 A.D. by the reigning emperor Vespasian and seats up to 80,000 people. It was used to entertain both the rich and the poor. A typical day had three events. In the morning, it would be beast against beast. Maybe a rhinoceros against a couple of lions and two to three bears. At midday, they would conduct a few executions, mostly deserters, prisoners of war and criminals. They would unleash wild animals on these low-ranking citizens and the spectators would watch for sport. In the afternoon, gladiators who were often times slaves schooled under harsh conditions and socially marginalized would demonstrate their abilities against other gladiators or wild beasts.

That was 2,000 years ago, and things have changed. But the art of intimidation lives on. What does it mean to intimidate, and how does it affect us as salespeople trying to make a living? Intimidate means to frighten or overawe (someone), especially to make them do what one wants. Overawe is an interesting word. It means to impress (someone) so much that they become silent or inhibited. Frighten means to make someone afraid or anxious. Anxious means uneasy or nervous about an uncertain outcome.

Buyers seek to create an environment of fear and uncertainty with sellers, leading them to get what they want (better price, better product, better service). Let me ask you a few questions: • If you were independently wealthy to the point that making a sale would have zero impact on your life, how easy would it be to intimidate you? • If you knew with certainty that your prospect needs you more than you need them, how easy would it be to intimidate you? • If you knew all of your buyer’s tricks and how they were going to try to keep their leverage while making you lose yours, and you knew how to not only defend yourself, but be one or two steps ahead of them, how easy would it be to intimidate you? The fact is this: if you were wealthy, if you knew they need you more than you need them, if you knew their tricks better than they did, you’d have extraordinary power and confidence walking into a sales call. Intimidation be damned.

Beating the Intimidator

Think about this. In sales, the person who is intimidated is toast. Maybe you are not riding to your prospect's office on a donkey, but how many times have you gone to a buyer’s office, sat down on their cushy leather sofa and been made to wait for 30 minutes while looking at all of their trophies?

Buyers seek to create an environment of fear and uncertainty with sellers, leading them to get what they want (better price, product and service).

Mark Cuban do with this situation?” Those guys are all rich and that gives them power to walk away. You too are rich because no one deal is going to have a significant impact on your income or lifestyle. That’s the mindset you need going into every deal.

How many times has a prospect kept you waiting in the lobby, then had their administrative assistant “usher” you into their office and before you had a chance to even say hello, they looked at their watch and said, “Sorry, we’re going to have to cut this short. I’ve only got five minutes. What are you here for?” How many times have you made a cold call, got the person screening calls for your buyer on the phone, and they ask, “Can I tell him the purpose of your call?” It’s at that moment that you go through your inventory of power phrases like, “I can save him money on his insurance,” “I’m a risk transfer expert. I help find gaps in coverage,” or “I want to quote his insurance.” You probably have some really powerful phrases that get people’s attention, but even when you do, they come back on the line and say, “He asked if you could put something in the mail and if he’s interested, he’ll call you.” It’s all a form of intimidation, and if you’re not prepared for it, it’ll make you C shrink up like a prune. M If you want to beat the intimidator, you Y need three things:

crete and tangible value proposition, one that your competitors only wish they had, you have power. If you are still saying things like it’s my knowledge, experience and reputation, you’re screwed. If that is you, stop pretending. Go fix it. 3. Know Their Verbal Tactics: When you know what they are going to say and how they are going to say it, they lose their power to trick you into doing things you don’t want to do. An example of doing something

1. A Rich Man’s Attitude: When I’m in

a tough situation, I ask myself, “What CY would Bill Gates, Donald Trump or CMY

2. They Need Me More Than I Need Them: When you’ve developed a con-

A&M IJ Self Serve.pdf

5/16/16

you don’t want to do is quoting on an account and wasting your time putting together a proposal in hopes that they will “favor” you with the business. If you are relying on that, you just got verbally tricked — shame on you. This too can easily be learned. Intimidation and fear has ruined many great people. If it’s affecting you, you can take action by creating a rich man’s attitude, developing real differentiation and becoming a verbal tactics wizard. Share

this article with a colleague. IJMAG.COM/220JK Schwantz is founder of The Wedge Group, and author of “GRIT: How to Find, Hire and Develop REAL Producers” and “Agency Growth Machine: Transform Producer Potential into Agency Growth and Profit.” Phone: 214-446-3209. Website: www.thewedge.net. Email: randy@thewedge.net.

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FEBRUARY 20, 2017 INSURANCE JOURNAL | NATIONAL | 31

Idea Exchange

Human Resources

Is Money the Key to Happiness? Not Anymore!

By David E. Coons

oes money truly buy happiness? Money does not equate to a happier life, according to economists. However, a number of organizations continue to remain focused on compensation as their sole engagement tool. While

salary is certainly an important determining factor for candidates making a career decision, there are additional aspects of the benefits package that must not be overlooked. Remaining laser focused on salary and ignoring other engagement needs can be the difference between a workforce that is both satisfied and productive, and one that is not. What are these other factors organizations should look at when attempting to engage and retain employees? How can insurance companies ensure they are offering the best benefits package to their employees and potential candidates?

Inside Today’s Benefits Package

According to a recent study by the Harvard Business Review, the top predictor of workplace satisfaction — across all income levels — is no longer pay. When reviewing organizations and opportunities,

32 | INSURANCE JOURNAL | NATIONAL FEBRUARY 20, 2017

modern professionals are now looking at the “hidden paycheck” of culture, leadership and opportunities. In fact, Glassdoor’s Employment Confidence Survey reported that 89 percent of Millennials prefer benefits and perks to pay raises from their employers. They seek organizations that will provide them with career development opportunities, have an attractive company culture and, most importantly, allow for work-life balance. In today’s fast-paced and connected work environment, finding that perfect harmony between the office and home life is important. More and more individuals are looking for a way to bring balance into their lives. They want to work differently and have more flexibility. Organizations need to look at ways to incorporate this flexibility into their compensation and benefit offerings. INSURANCEJOURNAL.COM

— with nearly 60 percent of job seekers having their pick of “two or more” positions — providing a competitive and all-encompassing compensation package may be the key to attracting top talent. With more individuals looking to bring balance to their personal and professional lives, flexibility is a key differentiator. Today’s forward-thinking insurance organizations must develop and implement their own work-life balance strategies lest they fall behind in the growing war for talent. Share this article

Building Work-Life Balance

Recognizing the importance of providing work-life balance for their employees, many insurance organizations are implementing flexible work programs. They are looking at strategies that will allow them to meet their employees’ needs while increasing engagement and advancing organizational success. Fortunately, flexible scheduling and other work-life balance initiatives have been proven to reduce turnover and to have a positive impact on an organization’s bottom line. One of the key ingredients in many work-life plans is flexible scheduling. Whether it is the ability to set one’s own schedule or the option for compressed workweeks, flexible scheduling is becoming increasingly popular. The strategy is to shift the focus toward achieving specific benchmarks and goals and away from the outdated notion of “chaining” employees to a desk to produce outcomes.

It is important to note that work-life balance is not onesize-fits-all. Life harmony means different things to different people. This flexible environment has proven to foster productivity and creativity amongst professionals. No longer are employees stressing about balancing their personal life with work responsibilities. Now, these individuals are able to plan their work around their needs. Whether its adjusting start and end times to meet daycare and schooling needs or working four 10-hour days to enjoy an extra day off, this flexibility is invaluable to today’s professionals. Another popular offering is the ability to telecommute. The work-at-home movement has taken off, with an estimated 30 million professionals in the United States working from home at least once a week — a number that is expected to increase by 63 percent in the next five years. One of the key drivers of this movement is the increased engagement of employees. INSURANCEJOURNAL.COM

While salary is certainly an important determining factor for candidates making a career decision, there are additional aspects of the benefits package that must not be overlooked. Employees who are given the option to work from home are 73 percent happier with their employers. They enjoy the cost-cutting benefits and flexibility provided by a telecommuting program. Whether it is offsetting costs of daycare and pet sitters or saving time otherwise spent commuting, work-at-home is invaluable to providing personal and professional balance. It is important to note that work-life balance is not one-size-fits-all. Life harmony means different things to different people. As a result, not all employees are looking for the same options. Some companies are offering their employees time during the workday to study for exams that will help them attain degrees and credentials. Other organizations are providing the option of workshare for parents looking to spend more time with their children. Regardless of the offering, insurance organizations should consider implementing an a la carte-style program that allows employees to select the benefits that work best for them and their lifestyle needs. In today’s candidate-driven market

with a colleague. IJMAG.COM/220VK

Coons is senior vice president of The Jacobson Group, a provider of talent to the insurance industry. Phone: 800-466-1578. Email: dcoons@ jacobsononline.com.

Advertisers Index

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

Agricultural Insurance Management Services www.aimscentral.com E3 Alper Services www.alperservices.com M3 Amerisafe www.amerisafe.com SC8, S3 Anderson & Murison www.andersonmurison.com 31 Applied Underwriters www.auw.com 2, 3, 36 Atlass Insurance Group www.atlassinsurance.com 14 EZLynx www.ezlynx.com 9 Foremost Insurance Group www.foremoststar.com 5 IICF www.iicf.org 13 M.J. Hall & Company www.mjhallandcompany.com W8 Monarch E&S Insurance Services www.monarchexcess.com W3 PersonalUmbrella.Com www.personalumbrella.com 35 RT Specialty www.rtspecialty.com 17 South & Western www.southandwestern.com SC5 St. James Insurance Group www.stjamesinsurance.com S5 State Compensation Insurance Fund www.statefundca.com W5 Tejas American General Agency www.taga1.com SC3 Texas Mutual www.texasmutual.com SC7 United Fire Group www.ufgsolutions.com W9

FEBRUARY 20, 2017 INSURANCE JOURNAL | NATIONAL | 33

Closing Quote The Year After Google Compare online, and, more people are requesting information or actually buying online. Google attempted to capitalize on this change. But before and after their exit, there were other players noticing the same trend. And, guess what? They are still around.

What has happened since? By Laird Rixford

oogle’s entry into insurance lead generation and aggregation worried agents and carriers. Would Google disrupt the industry as they have so many other industries? Would they short circuit research-driven consumers by dominating the top results? The Google Compare concern was legitimate. Then a year ago, Google abruptly announced they would be exiting the market. The industry sighed a collective relief amidst high fives and a symphony of “I-told-you-so.” Articles about their exit detailed two main points: Why Google decided to pack it in, and, why the industry should take notice of the real changes in consumer research and purchasing habits.

Why did Google decide to enter the market?

Over the past few years, consumers’ habits have changed. According to the last five comScore reports, more shoppers are researching insurance

On the surface it looks like little has changed in the year since Google Compare’s exit, but dig a little deeper and see the flurry of changes in and around the industry. Most notable is the billions of dollars coming into the industry to chase connected consumers. This includes a $192 million investment in MetroMile by investor Mark Cuban (coincidentally Cuban also invested $17 million in The Zebra in 2016); a $34 million B round of funding for Lemonade; Hippo’s raising $14 million; and ACE’s $33 million investment in Coverhound. The majority of the investments occurred in 2016, and are just a few of the many investments in our industry. These investments are driving new startup firms into homeowners, personal auto, commercial and cyber liability.

How are carriers reacting?

Lead generators and aggregators are changing the normal flow of new business through the redirection of consumers away from traditional agents. And, they are starting to offer insurance coverage through

34 | INSURANCE JOURNAL | NATIONAL FEBRUARY 20, 2017

The pervasiveness of mobile devices has changed consumer expectations. new and unique ways – pay-asyou-go insurance, or, instant claim service using artificial intelligence driven chat bots. Carriers have taken notice and are monitoring the changing landscape. They are beefing up their investment in technology and opening direct call centers; they are even revamping their products to match what today’s insureds want.

Are agents adapting?

In the past few years, many agents have buried their heads in the sand. For many it continues to be business as usual, or, they’re shifting their primary offering from personal lines to commercial. Others have recognized they need to fundamentally change and are open to the changing landscape. They are transforming their agencies into a sales-based culture. They use technology, such as comparative rating and automated agency marketing systems, to simplify doing

business with them. They are providing the quick, versatile buying and service experience consumers are demanding. More than that, these agents are providing more value. They are updating their processes away from policy management and focusing on nurturing the complete client relationship.

What does the future hold?

Investment in insurance and its subsequent technology is showing no signs of slowing. Will we see players leave the market as Google did? Sure. Will we see other succeed? Absolutely. Finally, we must not mistake the real driver of this new way of thinking – the modern insurance buyer, who are asking for and using these new ways to research and purchase insurance. You have to be ready to answer. Rixford is president of ITC. You can follow Rixford on Twitter at @lrixford. Website: www.GetITC.com. INSURANCEJOURNAL.COM

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