Insurance Journal West 2017-04-17 by Insurance Journal

WEST REGION Calif. Comp Mid-Year Filing State Fundâ&#x20AC;&#x2122;s 128K Policies Manager on Agency Fraud

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Contents April 17, 2017 • Vol. 95 No. 8 • West

West W1 Online Tool Locates California Agents, Brokers Who Speak a Foreign Language

W1 ONLINE TOOL LOCATES CALIFORNIA

AGENTS, BROKERS WHO SPEAK A FOREIGN LANGUAGE

16 Top 25: P/D Direct Premium Written Up 4%

W2 California State Fund 2016 Report Shows 128K Policies Written

20 Closer Look: Employers Benefit from Mitigating Workplace Violence

W6 Report: Claims from Workers in California’s Sierras Involve Only 4 Industries

22 OSHA Offers Mitigation Tips to Protect Against Workplace Violence

W8 Golden Bear Claims Manager Addresses Agency Fraud

24 Special Report: Social Services Agencies, and Insurers, Looking to Grow

Idea Exchange

28 Special Report: Understanding the Needs of the Hybrid Nonprofit

36 The Wedge: Getting Drunk on Single Entry, Then Working Through the Hangover

42 Closing Quote: Four Regulatory Scenarios to Watch in 2017

8 Personal Auto Rate Hikes Not Keeping Up with Losses: Fitch 10 Insurance Rates for Architects, Engineers Stabilize or Decline: Survey

W2 California Worker’s Comp Governing Committee Votes for Lower Mid-Year Filing

40 Minding Your Business: Key Deal Makers and Deal Breakers

National

34 Spotlight: Insuring Fairs, Festivals & Other Special Events

PERSONAL AUTO RATE HIKES NOT KEEPING UP WITH LOSSES: FITCH

Departments W4 People 11 Declarations 11 Figures

20 EMPLOYERS BENEFIT FROM MITIGATING

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WORKPLACE VIOLENCE

14 Business Moves 32 MyNewMarkets INSURANCEJOURNAL.COM

Data Insured.

Hospital Insured. Employees Insured.

Technology Insured.

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OPENING NOTE

Write the Editor: awells@insurancejournal.com

What Young Agents Like and Don’t Like

verall, young agents seem happy with their career choice. They enjoy the freedom and challenges that come with the job of an independent agent. That’s acording to the 2017 Young Agents Survey where nearly 600 young agents nationwide shared their views on the insurance industry and their experience as an agent. (see the April 3 issue of Insurance Journal magazine for the full report). But what do young agents like best? What do they like least about their jobs? Here are two top 10 lists taken from the survey on what young agents like MOST and LEAST about their job.

What Agents Like MOST:

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

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 Columnists Erin Burns (619) 584-1100 X120 Catherine Oak, Bill Schoeffler, Randy eburns@insurancejournal.com Schwantz Insurance Markets Manager Contributing Writers Kristine Honey (619) 584-1100 X132 Dr. Hemant Chowdhary, Emery khoney@insurancejournal.com

Dalesio, Chris Frederick, Richard Godfrey, George Hanley, Scott Social Media Manager Grieco, Douglas Powell, Bruce Ly Short (619) 890-7735 Schreiner Lshort@insurancejournal.com 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

Classifieds, Jobs, Agencies Wanted/For Sale Sr. Sales & Marketing Coordinator Kelly De La Mora (800) 897-9965 X125 kdelamora@insurancejournal.com

DESIGN/WEB

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

Videographer/Editor Ashley Waldrop awaldrop@insurancejournal.com

CIRCULATION

Circulation Manager Elizabeth Duffy eduffy@wellsmedia.com

‘What I like most about being an independent agent is the freedom and independence I have to run my business the way I see fit.’

1. The freedom. Being able to work from almost anywhere. 2. Having access to so many products allows me to be able to assist with any risk. 3. The ability to help people and make as much money as you want. 4. The ability to differentiate myself and my agency from the other competitors by responding to clients’ specific needs with creative options. 5. Ability to control my book without having various people looking over my shoulder. 6. Work/life balance. 7. I get to learn daily and help people every day. 8. Access to markets. 9. The diversity of our clientele and the challenge that comes along with that. 10. Career advancement opportunities.

What Agents Like LEAST:

1. Competing with branding and big marketing (overpriced companies). 2. The outside perception of being an insurance agent. 3. Underwriters that are looking for reasons to decline accounts rather than reasons to write them. 4. Low brand awareness of our agency. 5. Technology/educational support is lacking. 6. Other brokers can be frustrating when they FOR QUESTIONS act less than ethically. It gives all of us a REGARDING SUBSCRIPTIONS: Call: 855-814-9547 bad reputation. Outside the U.S., call 847-400-5951 or you may subscribe or change your address online at: 7. The paperwork! Wow. The push for agents insurancejournal.com/subscribe to do more paperwork and rating, and we Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media get lower commission and put in more 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 effort. per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this pub8. First two years are very tough. It’s hard lication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to generate revenue as a young producer. 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 9. Technology limitations of client manage- Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. ment interface and carrier systems. Insurance Journal is a publication of Wells Media Group, Inc. POSTMASTER: Send change of address form to Insurance Journal, 10. Resistance Circulation Department, PO Box 708, Northbrook, IL 60065-9967 to change in the ARTICLE REPRINTS: For reprints of articles in this issue, contact: Kelly De La Mora at 1-800-897-9965 ext. 125 or Editor-in-Chief industry. kdelamora@wellsmedia.com

Andrea Wells

Visit insurancejournal.com/reprints/ for more information.

6 | INSURANCE JOURNAL | NATIONAL APRIL 17, 2017

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National

Personal Auto Rate Hikes Not Keeping Up with Losses: Fitch

.S. personal auto underwriters increased premium rates “significantly” in 2016, but the rate increases weren’t high enough. Loss trends are still outpacing rate changes. Also, the U.S. P/C industry statutory combined ratio will likely hit 108 in the coming months, a 3.5 percentage point rise and the weakest result in 15 years, Fitch Ratings noted in a new report, “U.S. Personal Auto Underwriting Weakens (Pricing Actions Unable to Repel 2016 Deterioration).” “Results are likely to improve moderately in 2017, but competitive forces and market fundamentals will inhibit a shift back to an underwriting profit in personal auto for some time,” the report said. A number of factors indicate the market is still weakening, Fitch said. GAAP auto segment results show higher combined 8 | INSURANCE JOURNAL | NATIONAL APRIL 17, 2017

ratios for nearly all of a group of 10 publicly traded insurers in 2016, with an average combined ratio increase of 3.3 points from 2014 to 2016. Carriers generated major underwriting profit for personal auto despite industry weakness. But the overall market continues to weaken in annual underwriting performance because of higher catastrophe-related losses and unfavorable claims experience, the report explained. Personal auto underwriters face adverse loss trends that drove higher claims costs in the past two years, including claims frequency jumps from more miles driven, more distracted driving, higher physical damage losses because of more complex automobile parts, and higher bodily injury costs from more severe accidents. Consumer Price Index data for auto

insurance costs grew by 7.6 percent in February 2017. Fitch said that points to continuing rate increases in the short term, which should lead to some modest underwriting improvements through the year. Yet Fitch said that modeling for the sector should be better. “Personal auto insurance is technologically the most advanced P/C market segment with tremendous progress over time in data analytics that enhance risk selection, price segmentation and predictive claims models. Recent poorer results in auto insurance reveal that the most sophisticated models may not fully anticipate changes in loss cost trends.” Fitch added that underwriters may not be paying full attention to what risk modeling tells them “due to competitive pressures and an interest in maintaining premium volume and policy retention levels.” INSURANCEJOURNAL.COM

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NATIONAL | News & Markets

Insurance Rates for Architects, Engineers Stabilize or Decline in 2016: Survey

lthough a slim majority of insurance companies providing architects and engineers professional liability insurance saw their rates stabilize in 2016, nearly one in three experienced modest rate decreases, according to a new survey by Ames & Gough. The broker found market competition and favorable claim results are holding premium rates down. Most insurers reported they are looking to keep rates flat this year to retain or expand their business. According to the survey of 19 insurance companies (which represent more than 80 percent of the market providing professional liability insurance to architects and engineers in the U.S.), premium rates remained flat in 2016 for 53 percent. Meanwhile, 32 percent saw rate decreases, and 16 percent reported higher rates. In 2015, 38 percent had rate

increases, 57 percent had flat rates and 8 percent reported lower rates. Last year, no rate increases achieved by any insurer in the survey exceeded 5 percent; and decreases ranged from below 2 percent to between 6 percent and 10 percent. At the start of 2016, no insurers surveyed expected to lower rates. The actual increases achieved in 2016 by insurers planning to raise rates at the start of the year fell short of expectations. “As stable to improving claims experience continues to make this line of coverage profitable for insurers, more insurance companies are entering the marketplace or looking to expand their business,” said Dan Knise, president and CEO of Ames & Gough. “Besides holding the line on rates for design firms with good loss experience and favorable risk profiles, some insurers are now

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expanding what they’re willing to cover.” Some are adding endorsements for cyber risk to professional liability insurance policies and considering new endorsements for liability risks related to drones. Nonetheless, Knise said that stand-alone cyber insurance policies typically offer more robust protection against first-party exposures, such as notification and credit monitoring requirements, business income losses, ransomware, and network and data damage than professional liability policies that include cyber coverage. Despite intense competition, insurers are maintaining underwriting discipline and placing greater emphasis on claims experience. This year, 95 percent of the insurers surveyed identified recent claims experience as a top reason to raise a firm’s professional liability insurance rates, a significant jump from the 79 percent that cited the factor last year. The other top three underwriting factors this year are: type of projects (84 percent); historic claims experience dating back more than two years (63 percent), and type of work or service (47 percent).

Underwriting concerns

When asked whether plans to develop and repair the U.S. infrastructure raised concerns for architects and engineers professional liability exposures, 63 percent of the insurers surveyed cited the failure of design firms to adhere to contractual best practices when negotiating new projects, 53 percent pointed to firms accepting contractual responsibility outside their expertise,

and 32 percent were wary of the inability of design firms to effectively assess and manage subconsultants. “Even though there’s widespread enthusiasm over opportunities arising from the anticipated investment in infrastructure, design firms still need to maintain sound risk management in evaluating new projects, beginning with reviewing their contracts,” said Joan DeLorey, Ames & Gough senior vice president and partner. “While the insurance market is competitive, the buyers benefitting the most will be those that maintain high standards for managing risk, including evaluating the risk-reward potential of new projects and knowing how a change in project mix might affect their risk profile and insurance program.”

Claims experience steady

For the second consecutive year, 79 percent reported no change in their overall claim activity compared to prior years; in 2016, however, a greater percentage of insurers (21 percent) saw their claims experience improve and none had a worse experience. Meanwhile, insurers have been monitoring emerging issues. Among the most prominent were: judicial rulings that are eroding protections for design firms under state statutes, such as economic loss doctrine (79 percent); evolving project delivery methods (e.g., design-build and private-public partnerships), cited by 68 percent; innovation, such as the use of BIM, technology and new construction materials/methods, and international exposures (each at 32 percent). INSURANCEJOURNAL.COM

West

Online Tool Locates California Agents, Brokers Who Speak a Foreign Language

he California Department of Insurance has launched an online language locator tool to enable consumers to find insurance agents and brokers in their area who speak their language. The tool gives access to information on more than 11,000 agents and brokers in California, allowing searches for a nearby agent or broker who speaks the same language the consumer does. Consumers enter their language and city or ZIP code into the tool and the agents and brokers listed will be located near the consumer’s selection. The list provides INSURANCEJOURNAL.COM

consumers with a licensee’s phone number, links to CDI’s Check License Status webpage and a Google map for each of a licensee’s business locations. The tool is accessible from both mobile devices and desktop computers, and is also available for consumers searching for public adjusters and bail agents. There are producers listed who are available for 36 languages, including: American Sign Language; Arabic; Armenian; Bengali; Bosnian; Cambodian; Cantonese; Croatian; Dutch; Farsi; Finnish; French; German; Greek; Hebrew; Hindi; Hmong; Italian;

Japanese; Korean; Malay-Indonesian; Mandarin; Mongolian; Polish; Portuguese; Punjabi; Romanian; Russian; Serbian; Spanish; Tagalog; Thai; Turkish; Ukrainian; Urdu; and Vietnamese. “Insurance agents are a trusted source in helping consumers determine how best to protect themselves and their assets,” Insurance Commissioner Dave Jones said in a statement. “Having an agent who can communicate in your language results in a better understanding of the policies and helps ensure you get the appropriate coverage for your needs.” APRIL 17, 2017 INSURANCE JOURNAL | WEST | W1

WEST | News & Markets

California Worker’s Comp Governing Committee Votes for Lower Mid-Year Filing

he insurer and public members of the Workers’ Compensation Rating Bureau Governing Committee have voted to authorize the Governing Committee to submit a lower mid-year pure premium rate filing to the California Department of Insurance. The filing will propose a July 1 average advisory pure premium rate of $2.02 per $100 of payroll, which is 16.5 percent lower than the corresponding industry average filed pure premium rate of $2.42 as of Jan. 1. It’s 7.8 percent less than the insurance commissioner’s approved average Jan. 1 advisory pure premium rate of $2.19. The committee cited a lower

medical loss and allocated loss adjustment expense development, continued acceleration in claim settlement, and recent indemnity claim frequency decreases, The decision was based on the WCIRB Actuarial Committee’s analysis of insurer loss and loss adjustment experience as of Dec. 31, 2016, which was reviewed at public meetings this year of the Actuarial Committee held on March 21 and April 3. The Actuarial Committee noted that cumulative trauma

claims continue to increase, particularly in the Los Angeles region. In addition, medical severities are beginning to increase after several years of more modest severity trends driven by the worker’s comp reform bill, Senate Bill No. 863. Despite these upward pressures on system costs, the Governing Committee believed that lower frequency and favorable loss and allocated loss adjustment expense development, partially driven by increases in claim settlement rates, warranted a reduction in

the industry average pure premium rate as of July 1. As of press time, the WCIRB was anticipating submitting its filing to the CDI by April 14. California Department of Industrial Relations Director Christine Baker issued a statement on the rate reduction: “The 2012 reforms in SB 863 sought to increase benefits and improve care to injured workers while controlling rising costs for employers. Not only did benefits for injured workers increase by 30 percent, but an anticipated rate spike was prevented. Employers have had four consecutive rate reductions, and today’s recommendation will continue that trend.”

Report: Traffic Deaths in L.A. Jumped Sharply in 2016

California State Fund 2016 Report Shows 128K Policies Written

report finds traffic deaths in Los Angeles jumped sharply despite a high-profile campaign by city leaders to eliminate fatal crashes. The Los Angeles Times reported that 260 people were killed in traffic crashes on city streets in 2016. That’s an increase of nearly 43 percent over the previous year. And so far in 2017, crash fatalities are 22 percent higher than in the same period last year. The newspaper says the rising numbers underscore the challenges facing Mayor Eric Garcetti’s Vision Zero policy, which went into effect last

he California State Compensation Insurance Fund’s 2016 annual report shows a net income of $192 million in 2016. Other important highlights from the newly released report include: • 128,000 policies written in 2016 • Earned net premiums of $1.5 billion • Policyholders’ surplus grew by $156 million since Dec. 31, 2015 • Net investment income of $627 million. “Last year marked another year of healthy competition in the California workers’ compensation market,” Vern

year. Its goal was a 20 percent drop in traffic deaths by the end of 2017. Seleta Reynolds of the city’s transportation department says the number of fatalities could be connected to booming car sales and an increase in distractions that drivers have in their vehicles. Copyright 2017 Associated Press.

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Steiner, State Fund’s president and CEO, said in a statement. “We were pleased to introduce a rate filing that included an overall decrease in collectable premium of 9.5 percent as well as an expanded pricing model, which further enhances pricing accuracy and makes our rates more stable year over year.” Other accomplishments include transitioning to an outcomes-based medical provider network, the State Fund MPN by Harbor Health. The network is designed to improve physicians’ ability to manage injured worker’s treatment and improve patient outcomes. State Fund is California’s largest provider of workers’ comp insurance. INSURANCEJOURNAL.COM

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“I love to travel the world. In fact, when it comes to touring, I’m a seasoned professional! “My Med Mal partners at General Star are also seasoned professionals. Needless to say, their A++ rating and Berkshire Hathaway backing are impressive, but it’s their deep knowledge, longevity and specialization in health care risk management that are most important to me. “Whether I’m navigating Budapest for the first time, or tackling an unusual risk with General Star, I’m confident of a positive outcome. I rely on seasoned experience, including my team at General Star, to help me solve every challenge.” To locate the General Star broker nearest you, visit our website at www.generalstar.com.

© 2016 General Star National Insurance Company is licensed in the District of Columbia, Puerto Rico and all states. General Star National Insurance Company has its principal place of business in Stamford, CT and operates under NAIC Number 0031-11967. Insurance is placed with General Star National Insurance Company by licensed producers. General Star Indemnity Company is an eligible surplus lines insurer in all states, the District of Columbia, Puerto Rico, and the Virgin Islands. It has the status as an unlicensed insurer in California and operates under NAIC Number 0031-37362. Insurance is placed with the General Star Indemnity Company by licensed producers and, for risk that qualify, by licensed surplus lines brokers. Atlanta 404 239 6777

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Kristin Palmer

Kristin S. Palmer has been named senior vice president and head of communications at the Insurance Information Institute. Palmer previously was vice president of media relations for the AARP. Prior to that, Palmer was the director of public affairs for Child Care Aware of America and w as senior communications manager for Atlanta Mayor Shirley Franklin. Palmer previously managed communications for the National Association of Black Journalists and the Association of Public Television Stations. Palmer will be based in the Washington, D.C. office. In addition to leading the I.I.I.’s media relations operations, she will be responsible for developing a communications strategy. Palmer assumes the role held previously by Jeanne Salvatore, who has been appointed chief engagement officer and senior spokesperson. JLT Specialty USA has named Gavin Shiels senior vice president. Shiels will be based in San Francisco, where his primary focus will be on client development within JLT’s real estate practice. Shiels has more than a decade of experience in the insurance industry. Shiels comes from Aon, where he was senior vice president in the San Francisco office, focused on building and managing teams to provide risk advisory, consulting and brokerage services to clients in the real estate, technology, financial institution, and food and beverage industries. Shiels managed a team of property brokerage professionals in San Francisco prior to that. JLT Specialty USA is the U.S. platform of the specialty business advisory firm, Jardine Lloyd Thompson Group. XL Catlin’s environmental insurance business has appointed Denali Marlane as its Western regional underwriting manager in San Francisco. Marlane will manage XL Catlin’s environmental underwriting operations. She comes from AIG, where she most recently was a claims sales leader. XL Catlin insurance companies offer property/ casualty, professional, financial lines and specialty insurance products globally. Reno, Nev.-based LP Insurance Services Inc. has named Tim Holland as its newest shareholder. Holland will continue as an employee benefits sales executive with LP Insurance. He has served in

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that role since 2011. LP Insurance Services Inc. is a risk services and insurance brokerage firm. The Rockhill Insurance Group has named Steve Caporelli to its environmental unit. Caporelli will be based in the San Francisco, Calif., office. Caporelli more than 15 years of underwriting and risk assessment experience. He previously worked at Starr Cos. as a senior environmental underwriter. He was an underwriter at AIG before that. Rockhill is part of the State Auto Group. RIC Insurance General Agency has named Patty Herron a business development manager to expand its commercial and personal lines marketing efforts. Herron will work primarily with retail insurance agents in California in Orange, San Diego and Imperial counties. Herron was a sales underwriter with Hanover in San Diego County prior to joining RIC. At Hanover she specialized in commercial insurance offerings. As an underwriter for Travelers commercial accounts, she focused on helping retail agents place business in manufacturing, technology, construction, real estate, hospitality, habitational and international sectors. RIC is a wholesale insurance brokerage and managing general agency. QBE North America has appointed John Beckman as chief underwriting officer. Beckman will be responsible for efforts to enhance underwriting practices and processes, including product development, technical leadership and risk appetites. Beckman will also serve as a member of the QBE North America Executive Management Board and chair of the North America Underwriting Committee. He will be based in New York and will report to Russell Johnston, chief executive officer, QBE North America. Beckman has more than 25 years of industry experience. He was chief underwriting officer of CNA’s Commercial Insurance business from 2011 to 2015. Most recently Beckman served as senior vice president and chief transformation officer at CNA Insurance, where he was responsible for developing new predictive pricing tools, and replacing legacy underwriting and policy administration systems. INSURANCEJOURNAL.COM

THE FIRST CYBER PROGRAM WITH A BUILT-IN INCENTIVE FOR CLIENTS WHO DO MORE TO GUARD THEMSELVES.

Introducing The Hartford’s CyberChoice First Response. Now you can reward your clients for boosting their defense against cyber attacks. The Hartford gives them a premium incentive to invest in cyber security.1 And helps fund those services as part of the insurance policy if they file a claim.2 Two innovative ways to prevail. Only from The Hartford. SM

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1) Via an approved cyber security provider 2) Coverage is available by endorsement Eligibility for surplus insurance coverage is subject to state regulation and requires the use of a licensed surplus lines broker. Surplus lines insurance policies are generally not guaranteed by state guaranty funds. Policies should be examined carefully for suitability and to identify all exclusions, limitations, and other terms and conditions. Surplus lines coverage is underwritten by Pacific Ins. Co. Ltd (except in CT and HI) and Hartford Ins. Co. of Illinois in CT and HI. The Hartford® is The Hartford Financial Services Group, Inc. and its subsidiaries. Its headquarters is in Hartford, CT. All rights reserved. 15-1218A © 2017 The Hartford Financial Services Group, Inc. All rights reserved.

Business Insurance Employee Benefits Auto Home

WEST | News & Markets

Report: Claims from Workers in California’s Sierras Involve Only 4 Industries

ore than half of all claims from workers living in California’s Sierras involve only four industries, according to a report from the California Workers’ Compensation Institute. The CWCI’s California Workers’ Comp Regional Score Card examines the claims experience of workers living in the Sierras and compares it to the experience of injured workers from the rest of the state. The Sierra Score Card is the last installment of an eightpart series initiated last fall that uses a database to profile claimant characteristics and highlight data compiled from claims filed by residents of

different regions of the state. The score card uses data from 32,000 accident year 2005–2015 claims filed by residents of 11 counties that comprise much of Gold County and the mountainous areas that border Nevada from Sierra County south to Death Valley. The region accounts for only 1.7 percent of all California workers’ comp claims. The report’s findings conclude: • More than half of all claims from the region involve workers employed in just

four industries (construction, retail trade, healthcare, and hotel and food services). • Three diagnoses that represent just 4 percent of the region’s claims account for 20 percent of all loss payments. • The Sierras have the highest

percentage of temporary disability claims in the state but permanent disability claims are less prevalent. • Despite relatively low attorney involvement rates, short claim durations, and few lien claims, over the past decade the Sierras have experienced some of the fastest growing claim costs in the state.

All eight Regional Score Cards and the summary bulletins are available to CWCI members and research subscribers. Others may purchase them on the group’s website.

Owners of California Hotel Cleaning Firm Plead Guilty to Workers’ Comp Fraud

Trov in California Closes $45M in Series D Financing for Insurtech

he owners of a cleaning company serving luxury hotels in Southern California and Nevada have pleaded guilty in connection with a nearly $7 million insurance and tax scam. Hyok “Steven” Kwon and his wife, Woo “Stephanie” Kwon, owned Irvine-based Good Neighbor Services. They were accused of concealing the existence of 800 employees over nearly a decade to avoid paying millions in payroll taxes and workers’ compensation insurance. Steven Kwon pleaded guilty to felony charges related to fraud and employment tax

an Francisco, Calif.-based Trov announced that it has closed $45 million in Series D funding led by Munich Re/HSB Ventures, bringing its total funding to just over $85 million. All of Trov’s Series C investors participated in the round: Oak HC/FT; Suncorp Group; Guidewire and Anthemis. Also participating in the financing was Sompo Holdings. The new capital will be used to bring Trov’s on-demand insurance capability to more people, expand the categories of items it covers and accelerate the development of applications. In addition to its investment, Munich Re is expanding its strategic alliance to include underwriting throughout

evasion last month. He was sentenced to eight years in prison. His wife admitted to similar charges in December and was given more than six years in prison. She’s now serving part of her term on probation. Several others were charged in the case. Copyright 2017 Associated Press.

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Europe, Asia and South Africa. SOMPO is investing in the financing round through SOMPO’s wholly owned subsidiary Sompo Japan Nipponkoa and partnering with Trov to offer its on-demand insurance throughout Japan. The Trov app is available on iOS and Android in the UK and Australia, where Trov users are presented a quote and can turn insurance on or off for an individual item for any length of time. The app features micro-duration policies, algorithmic pricing, integrated billing and bot-assisted claims. Users can add their possessions by snapping a photo of an item/ receipt, forwarding an electronic receipt or searching the product database. INSURANCEJOURNAL.COM

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WEST | News & Markets ciplinary action against them, because they want to hire the best people to work for their agency.

Golden Bear Claims Manager Addresses Agency Fraud By Don Jergler

eth Ossino, claims manager at Golden Bear Insurance Co. in Stockton, Calif., puts dealing with agency fraud high on her radar. She talked with Insurance Journal about agency fraud, and how agency owners should go about avoiding being involved with fraud. This has been edited for brevity and clarity.

Insurance Journal: Tell us

a little bit about agency fraud. What’s going on with this? Ossino: Agency fraud runs the entire gambit. It could be something as simple as where an agent might be trying to sneak in a few extra coverages to boost a premium, to boost a commission trying to help

the insured by misrepresenting some of the items on the application to help them get a lower premium. It could be that the agent takes the premium dollars that the insured is paying and keeps the money and never purchases the policy for them.

IJ: How should agencies avoid this?

Ossino: It’s never the wrong

time to do the right things. They should always put the interest of their insured – they have a fiduciary duty to do so – to put the interest of their insured first, which means doing what they say they’re going to do to help protect the insured. I would suggest, if they’re going to hire people to come in and work as agents, that they should check their licensing background to see if these licenses have had any other dis-

W8 | INSURANCE JOURNAL | WEST APRIL 17, 2017

IJ: To what extent does agency fraud impact the end-user? Ossino: It could be something very simple, where maybe an insured is being charged for a few extra coverages that they don’t need, so they’re paying a little additional premium. It could be toward the very other end of the spectrum, where they thought they had a policy of insurance and they have no coverage whatsoever, where the agent never placed the policy. If their house should burn down, they could lose everything that they have. If they have placed coverage for a life insurance policy, and the policy was never placed, that could put the family, the survivors, in a very bad position. If they don’t place a work coverage policy and a worker’s injured, that could also be very devastating, so it could have a devastating impact on the end-user. If there’s some type of intentional misrepresentation on the application, then the insurance company could void the policy or rescind the policy leaving an insured with no coverage whatsoever. It could really impact somebody’s life and take away all that they’ve worked for.

fraud that we suspect to our local department of insurance. If we see something where we feel that a consumer has been taken advantage of or is not being protected in the way they should, we do report that to the local Department of Insurance so that they could follow up on this agency to make sure that they are working within the boundaries of the law and not breaching their fiduciary duty to any insured. IJ: To recap, I think one of the bottomlines for our listeners is that if you’re an agency owner, you should basically look out for red flags, and make sure that you do your homework on agents that you hire. Anything else? Ossino: No, that’s a very good point, because sometimes, even in the applications that we see for agencies through Golden Bear, there’re misrepresentations where there could have been disciplinary action against the applicant’s license that they’ve tried to conceal, so it is very important. Any consumer can go on to the Department of Insurance website and check their agents’ licensing history to make sure that there are no disciplinary action against the license, and they’d want to go to an agent that they trust, that has a good reputation, and has a clean license record with the Department of Insurance.

‘It could really impact somebody’s life and take away all that they’ve worked for.’

IJ: What are insurers doing to deal with agency fraud? Ossino: We work very closely with the Department of Insurance, and insurance fraud is a crime in 48 states. We are required to report any type of

Podcast Hear full podcast of this conversation on www. InsuranceJournal.tv INSURANCEJOURNAL.COM

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826 results for “contractors”

Figures

12,615

$250

The estimated number of barrels of crude oil spilled from the Belle Fourche crude oil pipeline in western North Dakota in December. That number is around three times bigger than pipeline owner True Companies’ original estimate of 4,200 barrels spilled. Oil from the pipeline leaked into the Ash Coulee Creek, making it the largest crude leak to affect water in the state in more than a decade.

$52.4 BILLION

How much California Gov. Jerry Brown and fellow Democrats who control the state legislature are proposing to raise over 10 years by boosting fuel taxes and vehicle fees. The money would go to road and bridge repairs. Republicans say the state collects plenty of money but has put it to other uses.

Leaks Happen

“The hypocrisy really lies in the pipeline corporations that say their pipelines are safe, say leaks don’t happen. They blame activists who are trying to stop global cataclysm by taking action to point out what they do every day, which is leak and spill.” — Jay O’Hara, a spokesman for the environmental group

Climate Direct Action, which has targeted valves on pipelines in North Dakota, Minnesota, Montana and Washington state. O’Hara was reacting to a report by Texas-based Energy Transfer Partners, developer of the Dakota Access pipeline, that there have been “coordinated physical attacks” on the much-protested line, just as it’s almost ready to carry oil.

Just Milk

“All Mary Lou wants to do is sell skim milk that contains literally one ingredient — pasteurized skim milk — and label it as pasteurized skim milk.”

— Institute for Justice lawyer Justin Pearson, who represents

dairy owner Mary Lou Wesselhoeft in her lawsuit against the state of Florida over what the dairy can label its product. The state had demanded the creamery label the milk as “imitation” because vitamins aren’t added to it. A Florida Appeals Court disagreed, and ruled the dairy wasn’t being deceptive in labeling the product skim milk.

MILLION

The amount-plus in damages that 15 tourists from Texas are asking for in lawsuits following the March 7 train and bus crash in which a CSX freight train slammed into a tour bus at a humped rail crossing in Biloxi, Miss. Four people were killed. CSX Transportation Inc. and the tour company, Dallas-based Echo Transportation Inc., are among the defendants.

Declarations

An Unusual Year

“It has been a very unusual year for us. This year we also had to bring in personnel from 34 different states, in different capacities, to address the fires.”

18,000

— Oklahoma State Forester George Geissler remarks

on 2017’s status as one of the state’s most active years on record for wildfires. The Oklahoma Forestry Services agency has responded to more than 800 wildfires so far that resulted in more than 450,000 acres of burnt woodlands and grasslands. Geissler said the number could increase if the state sees “a bad summer season.”

The number of chickens destroyed at a northwest Georgia poultry firm after avian influenza was found in the flock at the end of March. The state was one of four — including Alabama, Kentucky, and Tennessee — that reported bird flu in poultry flocks last month. The Georgia case was the first commercial flock to be infected by bird flu in the state, officials said.

InsuranceJournal.com

$10 MILLION

What’s your biggest challenge as a young agent?

The amount sought by dairy drivers in an overtime pay lawsuit concerning Maine’s overtime law, in which a missing Oxford comma led to a lack of clarity concerning which of the drivers’ responsibilities are exempt from the overtime law. A federal appeals court sided with the drivers in the case.

Disaster Response Plans

“It is important for all insurers, whatever the scale of their business, to understand that their ability to recover from a disaster ultimately impacts the needs of New York consumers.” — New York Department of Financial Services (DFS)

Superintendent Maria T. Vullo. The DFS is asking all insurance companies licensed to conduct business in the state to submit updated disaster response and recovery plans by June 16, 2017.

Poll

19.5% Finding new markets 42.8%

Finding new employees Finding new customers

52.9% 24.8% 34.7%

Finding new motivation Finding new efficiencies

Source: 2017 Young Agents Survey

APRIL 17, 2017 INSURANCE JOURNAL | NATIONAL | 11

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NATIONAL | Business Moves

EPIC Insurance Brokers & Consultants, The Capacity Group

EPIC Insurance Brokers & Consultants has acquired The Capacity Group of Companies in Mahwah, N.J. Terms of the deal were not disclosed. The firm will now operate as The Capacity Group – an EPIC Company, and the Capacity Group’s leadership team will continue to play a role with the EPIC organization. The addition of The Capacity Group expands EPIC’s capabilities, adding more than 280 professionals, 15 locations and a client base centered in the Northeast. The Capacity Group – an EPIC Company offers a range of standard and customized insurance and financial products. EPIC is a retail property/ casualty and employee benefits insurance brokerage and consulting firm.

MassMutual, Commonwealth Financial Group MassMutual Southern New England in Warwick, R.I., and MassMutual Northern New

England in Bedford, N.H., have merged with Commonwealth Financial Group (CFG), a Boston-based comprehensive financial planning firm. CFG, a general agency of Massachusetts Mutual Life Insurance Co., was established in 1857 with the commitment of providing financial services and products to individuals, families and business owners. The firm has expanded through this merger to just less than 200 advisors. It has also broadened its outreach from metropolitan Boston to greater New England. CFG now has corporate offices in Boston; Hingham, Mass.; Hyannis, Mass.; Warwick; Bedford, N.H.; and Burlington, Vt.

Ryan Specialty Group LLC, LoVullo Associates Inc.

Ryan Specialty Group LLC (RSG) has reached a definitive agreement to acquire substantially all of the assets of LoVullo Associates Inc., a wholesale insurance brokerage and binding authority operation based in Depew, N.Y. LoVullo will become part of RT Specialty LLC, the whole-

14 | INSURANCE JOURNAL | NATIONAL APRIL 17, 2017

sale brokerage unit of RSG, and will establish the RT Specialty Buffalo, N.Y., office at the current LoVullo location. With the acquisition, Dave Pietrowski, president of LoVullo Associates, will become president of RT Specialty’s Buffalo office. Founded by Leonard S. LoVullo in 1949, LoVullo serves more than 1,200 independent brokers in the Northeast, employs more than 100 people in the Buffalo area, and operates as an excess and surplus lines broker and managing general agent. LoVullo distributes commercial, professional and personal lines products. The leadership team is led by Senior Vice President Paul LoVullo and CEO Leonard T. LoVullo. In connection with the acquisition, RSG and LoVullo anticipate that RSG will acquire LoVullo’s affiliated premium finance business, Superior Payment Plan LLC (Superior), which also operates out of the Depew location. RSG and LoVullo expect that the acquisition of Superior will occur later in 2017, subject to fulfillment of standard licensing requirements and other customary conditions. It is intended that Superior will roll into RSG’s overall operations and establish a platform to offer payment solutions to RSG’s clients. Superior was formed in 2002 and has provided finance solutions for clients seeking extended terms for the payment of their insurance premiums. Terms of the transaction were not disclosed.

ProAg, International Ag Insurance Solutions

Producers Ag Insurance

Group Inc. (ProAg), a member of the Tokio Marine HCC group of companies, has agreed to acquire crop managing general agent, West Des Moines, Iowa-based International Ag Insurance Solutions LLC (International Ag). The transaction, which is subject to a number of closing conditions including final approvals by certain International Ag members and regulatory authorities, is expected to close by April 3, 2017. International Ag manages multiperil crop, crop hail and named peril crop insurance. In 2016, the company managed gross premiums of $67.4 million, as reported by National Crop Insurance Services (NCIS). ProAg is headquartered in Amarillo, Texas, with seven offices across the United States. ProAg employs about 400 people supporting crop insurance operations in 41 states. Headquartered in Houston, Tokio Marine HCC is a specialty insurance group with offices in the United States, United Kingdom, Spain and Ireland.

Risk Strategies Co., Terrell Insurance Services

Boston-based Risk Strategies Co. has acquired Terrell Insurance Services, an independent insurance agency headquartered in Dallas. Terms of the deal were not disclosed. Founded in 2012 by President and Principal Charles T. Terrell Jr., Terrell Insurance offers tailored insurance and employee benefits plans for commercial clients, as well as a private client insurance services program offering a broad range of custom-tailored coverages. INSURANCEJOURNAL.COM

NATIONAL | News & Markets

P/C Direct Premium Written Up 4 Percent in 2016

By Douglas A. Powell

irect premium written (DPW) for property/ casualty insurance companies continues to increase, albeit gradually. At year-end

2015, more than $582 billion of DPW was reported. For 2016, total DPW for all P/C insurers aggregately increased 4 percent over 2015, an increase of $23.4 billion. More than 60 percent of this premium growth is attributed to the Top 25 P/C insurers in terms of growth. For the 12 months ending Dec. 31, 2016, P/C companies comprising the Top 25 insurers leveraged their experience and increased their DPW nearly 14 percent over 2015, or $14.1 billion. In contrast, the remainder of the industry reported an increase in DPW of 1.9 percent, or $9.2 billion, year over year.

It is important to note that while increasing DPW, P/C companies have aggregately maintained a sufficient level of policyholdersâ&#x20AC;&#x2122; surplus (PHS). One measure that indicates P/C companies are conservatively leveraged is the DPW to PHS ratio. An insurerâ&#x20AC;&#x2122;s DPW to PHS ratio is indicative of its premium leverage on a direct basis, without considering the effect of reinsurance. Since 2010, this ratio for P/C companies has remained stable at approximately 70 percent. Although the market continues to exhibit signs of firming and DPW continues to increase,

P/C insurers should not expect a traditional hard market in the near future. It is possible that the double-digit premium growth experienced in the historical hard market cycles may have created unrealistic premium growth expectations for this current recovery. It is more realistic that expectations should relate to gradual, stable growth. If the industry continues to hold to its 10-year historical pattern, growth in 2017 would again result in the highest level of year-end DPW ever reported by the P/C industry. Powell is a senior financial analyst with Demotech Inc. Email: dpowell@ demotech.com.

Top 25 Property/Casualty Companies Based upon dollar amount of direct premium written (DPW) growth Year-to-date results Dec. 31, 2016, versus Dec. 31, 2015

Company Name

State Farm Mutual Automobile Insurance Co. Liberty Insurance Underwriters Inc. Allstate Fire and Casualty Insurance Co. GEICO General Insurance Co. USAA General Indemnity Co. American Bankers Insurance Co. of Florida USAA Casualty Insurance Co. LM General Insurance Co. Evanston Insurance Co. GEICO County Mutual Insurance Co. XL Specialty Insurance Co. Farmers Insurance Exchange GEICO Casualty Co. Allstate Vehicle and Property Insurance Co. American Family Insurance Co. Continental Casualty Co. Standard Fire Insurance Co. Liberty County Mutual Insurance Co. Auto-Owners Insurance Co. Government Employees Insurance Co. GEICO Advantage Insurance Co. GEICO Indemnity Co. Garrison Property and Casualty Insurance Co. Ohio Security Insurance Co. Nationwide General Insurance Co.

DPW 12/31/2016

$37,093,556,809 $2,997,430,358 $7,700,979,641 $8,605,583,249 $3,383,504,509 $3,786,979,579 $5,791,560,846 $2,971,198,015 $1,233,685,425 $1,151,485,019 $1,831,291,196 $4,031,140,953 $3,668,431,675 $1,883,079,479 $771,532,322 $6,766,222,738 $2,016,050,092 $836,938,039 $3,047,950,748 $5,379,632,614 $922,459,815 $5,190,195,106 $1,719,212,918 $1,558,765,297 $1,199,205,415

Top 25 P/C Companies by DPW Growth $115,538,071,857 All Other P/C Companies $490,324,493,783 Total $605,862,565,640

DPW 12/31/2015

$34,588,540,295 $1,573,028,794 $6,987,428,733 $7,910,456,898 $2,811,299,487 $3,216,931,085 $5,222,821,998 $2,407,623,000 $684,304,886 $696,440,376 $1,391,406,236 $3,596,689,805 $3,239,766,178 $1,474,604,228 $363,846,869 $6,375,416,729 $1,629,133,277 $458,173,648 $2,687,546,986 $5,034,131,012 $584,473,309 $4,879,252,986 $1,410,843,943 $1,263,200,816 $903,882,262

$101,391,243,836 $481,052,301,618 $582,443,545,454

$ Growth

$2,505,016,514 $1,424,401,564 $713,550,908 $695,126,351 $572,205,022 $570,048,494 $568,738,848 $563,575,015 $549,380,539 $455,044,643 $439,884,960 $434,451,148 $428,665,497 $408,475,251 $407,685,453 $390,806,009 $386,916,815 $378,764,391 $360,403,762 $345,501,602 $337,986,506 $310,942,120 $308,368,975 $295,564,481 $295,323,153

$14,146,828,021 $9,272,192,165 $23,419,020,186

% Growth

7.24% 90.55% 10.21% 8.79% 20.35% 17.72% 10.89% 23.41% 80.28% 65.34% 31.61% 12.08% 13.23% 27.70% 112.05% 6.13% 23.75% 82.67% 13.41% 6.86% 57.83% 6.37% 21.86% 23.40% 32.67%

13.95% 1.93% 4.02%

Data Source: The National Association of Insurance Commissioners, Kansas City, Mo., by permission. Information derived from an SNL product. The NAIC and SNL do not endorse any analysis or conclusion based upon the use of its data.

16 | INSURANCE JOURNAL | NATIONAL APRIL 17, 2017

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Facing the new reality

Terrorism, Malicious Acts and Entertainment

A frank discussion about new Combined Crisis Cover with Scott Carroll of Take 1 Insurance. Where did the idea of Combined Crisis Cover (CCC) originate?

In London, March 2016, at the International Live Music Conference. A panelist was talking about the Bataclan nightclub disaster, and the question was asked, “Do you believe that the Bataclan was a random act or was it a specific target of terrorists? The answer came back “random act.” That didn’t make a lot of sense to me, (so I asked) additional people within the London insurance community what their thoughts were. I asked Lloyd’s of London’s terrorist experts and specific music industry experts what they thought. And the answers always came back: “We believe that the music industry specifically, and the entertainment industry in general, is a target of terrorists.” Who stands behind the CCC coverage?

Lloyd’s of London. Take1 is a unique Coverholder at Lloyd’s for this product. Lloyd’s of London is the most significant insurance marketplace in the world relative to terrorism. What makes CCC unique?

Combined Crisis Cover (contemplates) the Aurora movie shooting… the Boston Marathon…the Pulse nightclub…the San Bernardino shootings…the Nice, France truck disaster. Some of these were declared terrorism, some were not. Our policy would respond in either situation, and that’s a critical distinctive difference between the Combined Crisis Cover and TRIA or TRIPRA, or frankly any other product that’s available today.

Did anything like this exist before?

TRIPRA is the most common cover purchased by insureds in the United States against terrorist acts specifically. TRIPRA is a very limited cover, because it requires (a) Secretary of the Treasury declaration. It requires $5 million in damage to have occurred.

What industries are benefitting from CCC?

This innovative program was designed especially for the live entertainment and sports industries. It can also apply to many other industries and business… But specifically, we wrote it for event planners, producers, promoters, event service firms, such as equipment rental firms; film, television, DICE production companies; touring entertainers, fairs and festivals, special events, venues and stadiums, motorsports, theaters, staging, gaming, casinos, shell corporations. How much does CCC cost?

Scott T. Carroll, EVP, Program Director Take1 Insurance

What is the CCC difference?

Business interruption can wreak havoc upon insureds in ways that they can’t contemplate. If your business is shut down for a day or a month, you have expenses that continue to go on. Combined Crisis Cover…anticipates business interruption caused by malicious acts, or threats of malicious acts or a terrorist act, even if you didn’t have property damage. That is the single biggest difference between Combined Crisis Cover and a regular property policy… Under CCC, you do not have to have property damage to declare a business interruption loss.

At $960 of Premium for a $100,000 limit and a $1,000 deductible, anybody can afford the breadth of coverage provided by Combined Crisis Cover, and it was intended for the very small insureds that I write. (We can also) offer up to $35 million in limits for the very large insured. Can I combine CCC with my current coverage?

We anticipated it to be “in addition to,” not “separate and apart from.” However, if you wanted to buy it as the sole coverage from me, and I don’t sell you any other type of policy, I would be happy to do so. What else do they do?

Take1 specializes in insurance for music and entertainment production and events, sports and motorsports. Today, more than ever, Take 1 or take your chances.

To view the entire video, go to: http://take1insurance.com/crisis-cover/ To learn more, visit take1insurance.com

Terrorists and Active Assailants create chaos. Our breakthrough coverage restores order. Now you can offer your clients the first comprehensive, affordably-priced insurance that covers Malicious Acts, Active Assailants and Terrorism. Live events and venues like movie theaters, nightclubs, fairs, festivals — even corporate events — are exposed by today’s harsh new realities. That’s why Take 1 created Combined Crisis Cover (CCC), with up to $35 million annually in the event of, or even the threat of, malicious or terrorist acts that disrupt an event or insured location. CCC includes: • Active Assailant property damage, business interruption and bodily injury • Terrorism property damage and business interruption • Threat(s) of Malicious Acts • Liability resulting from an Active Assailant or Terrorism incident Other programs fall short. For example, under existing policies, a Business Interruption (BI) loss may not be covered if no physical property damage occurred. With Take 1 CCC, BI losses are covered where no physical damage occurs— even if the loss was caused by a threat. With Take 1 CCC, there is no minimum loss amount (in excess of the deductible) that must be achieved for coverage to kick-in. Nor does our policy require a Treasury Department determination of a terrorist act. This breakthrough annual coverage starts at $960, but to get a specific quote, visit take1insurance.com or call us at 800.856.7035. Today, more than ever, Take 1 or take your chances. © 2017 Take1 Insurance Take1 is a division of U.S. Risk, LLC., a specialty lines underwriting manager and wholesale broker headquartered in Dallas, Texas. Operating 12 domestic and international branches, it offers a broad range of products and services through its affiliate companies.

NATIONAL | Closer Look | Risk Management

Employers Benefit from Mitigating Workplace Violence By Denise Johnson

ach year, close to 2 million workers are victims of workplace violence in the United States, according to the Occupational Safety and Health Administration (OSHA). The federal agency defines workplace violence as any act or threat of physical violence, harassment, intimidation or other threatening behavior that occurs at a worksite. It can range from threats and verbal abuse to physical assaults and homicide. To reduce these incidents, experts recommend employers conduct vulnerability assessments and training that will assist employees in identifying questionable behaviors. Victims of workplace violence miss 1.8 million days of work every year, and the annual cost of workplace violence for employers is estimated to be nearly $121 billion, according to statistics from the Department of Justice and the National Institute for Occupational Safety and Health. An employer can be held civilly liable for injuries sustained by a victim if the employer knew or should have known that violence could occur. Under OSHA, an employer can also be penalized if it violated the General Duty Clause. According to the clause, employers have a duty to

protect employees from all hazards, even if there is no standard. Employers’ increased concern to protect staff from these incidents has led insurers to focus on the issue. According to Denise Balan, Americas Head for XL Catlin’s Crisis Management insurance business, “Any act of workplace violence can result in employee injury, business interruption and reputational damage.” The insurer introduced workplace violence coverage last year. A survey by crisis coaching firm Firestorm revealed that more than 90 percent of employees are concerned about workplace violence, while only about 50 percent have had any formal training related to it. Jim Satterfield, president, chief operating officer and founder of Firestorm, said there are

20 | INSURANCE JOURNAL | NATIONAL APRIL 17, 2017

warning signs that precede most workplace violence incidents. Isolated work environments, lone workers and places where alcohol is served could affect the likelihood of violence, according to a 2017 CNA whitepaper, “Managing the Threats of Workplace Violence.” According to CNA’s whitepaper, workplace “threats” can be both internal (co-worker, supervisor or customer) or external (family member, stranger). The simple act of holding a door open for a coworker might be enough to grant entry “to someone terminated the day before who has returned for revenge,” the whitepaper stated.

Mitigating Violence

Experts say having policies and procedures in place is one step in mitigating workplace violence. They recommend training employees to identify behaviors that may be predictive of a future violent event. Satterfield said many employers have no formal

structure to address observations beforehand. He explained the value in having a central data repository, because it can assist in connecting the dots of what may appear to be unrelated behavior. Documentation of what coworkers and employers see and hear, as well as documentation of an employee’s actions, are to be included in the repository. Continued focus and senior management commitment in personnel security is required to mitigate workplace violence, according to the CNA whitepaper. “Staying on top of workplace culture, staffing and assessing the impact of workplace policies can uncover conditions, situations and moods adversely affecting worker morale, performance, production, and efficiency that eventually lead to workplace conflict. Contributing factors include downsizing or reorganizing departments, sizable layoffs, growth of technology, recession, large mergers, post modernism and unemployment.” Brendan King, CEO of Crisis Consultant Group, spent eight years working with at-risk youth at a locked residential treatment facility where he constantly faced violent behavior. “I went through a number of different training programs in how … to verbally deescalate, how to try to predict crisis, how to identify things early. Quite honestly, a lot of them were very bad. They worked

continued on page 22

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NATIONAL | Closer Look | Risk Management continued from page 20

great on paper, but when it came time to actually use their system or their techniques, they were really ineffective,” King said. King also served in the Marine Corps and worked in law enforcement for several years before starting the Richmond, Va.-based company in 2004. “We know from Virginia Tech … it’s alleged that there were about 13 to 14 visits that Cho had with staff at Tech, with mental health staff and other individuals that work in the organization,” King said. King developed a curriculum of preventative tips for employers. “If there’s opportunities where we can preemptively try to stop these things before they happen, then obviously, that’s what we want to do. Run, hide, fight is great. We, of course, teach that but … we break it down into three distinct subject areas. We call it LLT,” King said. “Look, listen, tell.” Look and listen means to watch for changes in behavior, changes in statements and even abrupt changes in political beliefs, King said. King said that some employees may not want to report something potentially suspicious to a supervisor, fearing they may be wrong. Instead, he recommended talking to a coworker about it. “If you’re not comfortable going to the supervisor, go to the coworker, someone who also works alongside that individual and say, ‘Hey, can I talk to you for a second? I know we both work with John. I’ve noticed … ever since his divorce, he seems like he’s really just negative and his

attitude’s changed. Have you heard anything, have you noticed anything? I’m a little worried about him,” King said.

‘Any act of workplace violence can result in employee injury, business interruption and reputational damage.’ CNA examined how vulnerability assessments and a tiered approach to mitigating workplace violence through training and education can assist in mitigating these types of events:

Tier 1 – Policies and Procedures Tier 2 – Awareness Training Tier 3 – Managers and Supervisors Training Tier 4 – Threat Management Team Training Tier 5 – Crisis Management and Executive Team According to the paper’s authors, “there is compelling evidence to suggest that employers who take a proactive stance toward problematic behavior will be more successful in deterring workplace violence. By detecting and interceding “at risk” or intimidating behavior in the early stages, the threat can often be mitigated or avoided before it becomes dangerous or life-threatening.” The paper stated that most violent incidents end prior to law enforcement arrival. Thus, employees must learn to manager fear and keep their emotions in check to survive a violent workplace incident. For employers slow to adopt workplace violence training, there may be another reason to do so sooner rather than later. OSHA is preparing to announce

22 | INSURANCE JOURNAL | NATIONAL APRIL 17, 2017

a new standard related to workplace violence prevention training, policy and planning, King said. The agency currently mandates that all companies provide basic workplace violence prevention training to their employees, should they be exposed to violence. “Just like when you go to a new job and they require you to have first aid and they require you to have sexual harassment training and prevention in the workplace, they are considering making a new standard that says every company must provide workplace violence prevention training,

specifically around assault and use of weapons, active shooter type events,” King said. He said companies will become more proactive in seeking this type of training to avoid the expected fines associated with a future OSHA rule. “As you know, it really stems from liability,” explained King. “If you don’t train your employees and prepare them well, they’re going to say, ‘You never prepared me, and that’s why you’re liable.’” Share

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OSHA Offers Mitigation Tips to Protect Against Workplace Violence

ccording to OSHA, employers should establish a zero-tolerance policy toward workplace violence. In addition, the agency suggests the following: • Provide safety education for employees so they know what conduct is not acceptable, what to do if they witness or are subjected to workplace violence, and how to protect themselves. • Secure the workplace. Where appropriate, install video surveillance, extra lighting and alarm systems, and minimize access by outsiders through identification badges, electronic keys and guards. • Provide drop safes to limit the amount of cash on hand. Keep a minimal amount of cash in registers during evenings and late-night hours.

• Equip field staff with cellular phones and hand-held alarms or noise devices, and require them to prepare a daily work plan and keep a contact person informed of their location throughout the day. Keep employer-provided vehicles properly maintained. • Instruct employees not to enter any location where they feel unsafe. Introduce a “buddy system” or provide an escort service or police assistance in potentially dangerous situations or at night. • Develop policies and procedures covering visits by home healthcare providers. Address the conduct of home visits, the presence of others in the home during visits and the worker’s right to refuse to provide services in a clearly hazardous situation.

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NATIONAL | Special Report | Social Services

By Andrea Wells

his is shaping up to be a watershed year for nonprofit and social service organizations. Major changes loom, especially with the new Trump Administration that is

aiming to slash federal spending. The organizations are adjusting by turning more to private donations and expansion into other service areas, where they potentially face new opportunities and risks. Insurance producers spe-

24 | INSURANCE JOURNAL | NATIONAL APRIL 17, 2017

cializing in nonprofits are both concerned and encouraged. “Federal funding might be drying up, but we don’t see nonprofits leaving us or failing because they’re going out of business,” said Riley Binford, executive vice president at

Charity First Insurance Services Inc. in San Francisco. “We just don’t see that.” What Binford and other specialists in this sector do see is a nonprofit industry adapting to survive in current market conditions. INSURANCEJOURNAL.COM

Brian Norman, president of Norman-Spencer Agency Inc., a national property/casualty insurance provider, says organizations aiding individuals with food insecurity in particular face a tough road. “More than 90 percent of food bank resources come from the federal government,” Norman said. “They have been advised that the new administration may cut that (funding) by greater than 40 percent …. How as a country can we turn our backs on hungry children?” Trump’s budget proposes eliminating discretionary funding for at least 19 federal agencies and 61 other programs, including cutting funding for: • Corporation for National and Community Service, which funds AmeriCorps, Senior Corps and the Social Innovation Fund; • 21st Century Community Learning Centers, which supports community learning centers that provide before-and afterschool programs for children, particularly those in high-poverty areas; and • Community Services Block Grant, which funds projects aimed at reducing poverty in communities, including projects focused on education, nutrition, employment and housing. “Clearly, there’s not a huge pot of new money coming into the world of behavioral healthcare in terms of funding whether it’s federal, state or local government money,” said Nicholas Bozzo, president of Negley Associates, an underwriting management firm for behavioral healthcare agencies and social services organizations. “It’s forcing people to do more INSURANCEJOURNAL.COM

with less, which is increasing the risk exposure and putting pressure on insureds’ budgets.” While they may have fewer public dollars to support their communities’ needs, social services agencies are getting more support from private donations but whether those donations will fill funding gaps remains to be seen.

‘Clearly, there’s not a huge pot of new money coming into the world of behavioral healthcare in terms of funding whether it’s federal, state or local government money.’ Americans are embracing philanthropy at a higher level than ever before, according to W. Keith Curtis, Giving USA foundation chair and president of nonprofit consulting firm The Curtis Group. Donations from America’s individuals, estates, foundations and corporations topped $373 billion in 2015, setting a record for the second year in a row, according to “Giving USA 2016: The Annual Report on Philanthropy for the Year 2015.” Donations for 2014 and 2015 grew a combined 10.1 percent. The nonprofit/social service sector has indeed been growing over the past decade, according to the Urban Institute’s 2016 Nonprofit Almanac. The number of employees increased 14.0 percent from the 2003 to 2013. A major driver of this employment growth is the increased demand for healthcare and social services. More

than half of all nonprofit workers are employed by the healthcare and social assistance industry (54.8 percent), which includes hospitals, mental health centers, crisis hotlines, blood banks, soup kitchens, senior centers and similar organizations. In 2013, this industry employed over a million more nonprofit workers than it did in 2003, showing the largest absolute growth in number of employees of any nonprofit subsector. According to Norman, nonprofit and social services organizations are continuing to adapt by looking into new areas to serve.

“We see nonprofits expanding their services into areas outside of their typical area of specialty,” he said. “Human services agencies and nonprofits across the country have recognized crucial needs in the communities they serve, and are responding with an expansion of their services, allowing them to help their consumers in new and different ways,” said Scott Grieco, president, middle market for The Hanover Insurance Group (see his article on page 28). “Whether it’s a community counseling center that is now offering physicals or an ear-

continued on page 26

Abuse Coverage Most Misunderstood Area in Social Services

he most misunderstood coverages by insureds and their agents in the social services arena tend to be coverages for abuse and molestation, according to the experts. Agents need to understand the exposure as well as coverage forms, said Brian Norman, president of Norman-Spencer Agency. Specifically, with abuse and molestation coverage there’s often confusion over the definition of an insured. “Who does it cover … employees, volunteers, officers, etc.? Does it include physical, mental and sexual abuse? Background checks are important when a risk is involved with children, elderly or those providing one-on-

one services.” Mike Liguzinski, divisional president, Specialty Human Services, for Great American Insurance Co., says abuse and molestation coverage is the trickiest coverage his company provides. Different carriers offer the coverage in varied ways, too. “Some companies offer very limited coverage,” Liguzinski said. “Whether it’s small limits, a small definition of what’s covered, small or narrow definition of who’s covered, beware,” he said. “It’s good to have a specialist agent or a partner that understands these differences,” Liguzinski said. “You don’t want the nonprofit to be caught with the bare bones minimum.”

APRIL 17, 2017 INSURANCE JOURNAL | NATIONAL | 25

NATIONAL | Special Report | Social Services continued from page 25 ly-intervention program that has added a dental clinic, many nonprofits have expanded their missions to include medical services as a complement to their traditional social, counseling and support focuses.” Norman notes that this growth can bring additional risk as they expand into unfamiliar areas of expertise.

Market Expansion

Some insurers see the nonprofit and social services sector as an attractive market at a time when they themselves are looking for places to grow. “It’s a good time to be a nonprofit, for sure, as far as insurance goes. It’s very competitive,” said Binford. “The insurance industry is now in a place where more people are looking for growth and they are looking to get a

better return on their capital,” said Negley’s Bozzo. “It’s a big issue right now,” he said. “You have a lot of insurance providers that focus on the world of social services; it’s a big space.” But Bozzo worries that some of the providers entering the market and driving down prices may not be in the market for the right reasons, at the right price or for the long haul. They may see that there are a lot of potential clients, but may not understand the level of difficulties in certain risk profiles. “There are too many generalists starting to play in very difficult areas of the social services/ behavioral healthcare field,” he said. “What you have going on is people who have historically just been in the world of benign social service who are now venturing into areas

that are upstream, or higher on the food chain in terms of risk profile and severity potential,” Bozzo said. “What they don’t realize is there is a tail to this business. While they are making money now, in five, six or seven years from now when claims develop on this business they are going to be surprised at the results. The price they are currently trying to write this business at is not sustainable.” Going downstream to a more benign social service exposure is easy, but going upstream to a more difficult class is tough, he added. “Unfortunately, they are going to learn the hard way.” As an example, he cites the current push in the social services arena toward integration of primary medical care and behavioral medical care.

Norman-Spencer’s New Nonprofit Division Gives Back

orman-Spencer Agency is a newcomer to the nonprofit market. This national property/casualty insurance provider launched its nonprofit division in late March 2017 by offering three programs: food distribution and thrift stores; foundations and grant making; and housing and shelters. Coverage lines being provided by the nonprofit division are property, inland marine, crime, auto, cyber, directors and officers liability, equipment breakdown and data compromise, accident and health, and umbrella up

to $15 million. Enhancements include separate general liability limits, professional liability limits of $1 million/$3 million, unlimited defense limits, social service broadening endorsements, and abuse or molestation. While its division is in its infancy, Norman-Spencer is no stranger to the nonprofit world. The agency has operated its own nonprofit foundation, NS Cares, since the end of 2014. “The nonprofit division of Norman-Spencer was created after our involvement with our corporate foundation, NS Cares,” Spencer explained.

26 | INSURANCE JOURNAL | NATIONAL APRIL 17, 2017

“We got so involved working with the communities and working with some specific nonprofit segments both as volunteers and donors that we saw a need and had a desire to find other ways to help those organizations. One way we felt we could help was through our insurance knowledge.” To date, NS Cares has distributed more than $300,000 to charitable organizations nationwide. Spencer said the new nonprofit insurance division will donate 50 percent of its divisional profits to nonprofit organizations through its NS Cares foundation.

“Now you are dealing with traditional medical malpractice and no longer just behavioral healthcare,” he said. “New people jumping into this market is driving rates down in the wrong areas.”

‘Federal funding might be drying up, but we don’t see nonprofits leaving us or failing because they’re going out of business.’ According to Binford, in most lines of coverage for social service accounts, insurance rates tend to be “flat to maybe even a decrease in some areas.” Mike Liguzinski, divisional president, Specialty Human Services, for Great American Insurance Co., describes the current market for social service organizations as “mildly soft.” He says there are still areas where rates are slightly increasing or flat, except commercial auto where rates are on the way up. “Lower gas prices, more cars on the road, more auto accidents, and distracted drivers are driving that trend,” Liguzinski said. Bozzo said on a rate per million concept there’s more premium involved in the more difficult classes of risk such as child welfare or in tougher classes of business where there might be a larger doctor population than counselor population. “Doctors have a higher degree of risk because the standard of care is higher and expectations are higher,” he said. Share this article with

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NATIONAL | Special Report | Social Services

Understanding the Needs of the Hybrid Nonprofit Organization

he nonprofit of yesterday has evolved, and a new, hybrid nonprofit model has emerged, bringing with it an array of complexities. Human services agencies and nonprofits across the country have recognized crucial needs in the communities they serve, By Scott Grieco and they are responding with an expansion of their services, allowing them to help their consumers in new and different ways. Whether it’s a community

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counseling center that is now offering physicals or an early-intervention program that has added a dental clinic, many nonprofits have expanded their missions to include medical services as a complement to their traditional social, counseling and support focuses. This trend has created a great opportunity for independent agents to provide valued counsel to their nonprofit clients.

The Hybrid Nonprofit: An Emerging Trend in Holistic Care

nonprofits exist to address. These organizations often want to provide the best, most comprehensive service possible for their consumers, and addressing the physical well-being of their populations is a natural next step for many. This trend is specifically common for organizations like community clinics, community behavioral health organizations and children’s programs, such as Head Starts or early intervention programs. Many counseling centers are no longer only offering counseling. Now, they’re offering dental care, vision care and physicals. These new services come with additional exposures for the organizations, meaning medical malpractice coverage is

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NATIONAL | Special Report | Social Services continued from page 28 often needed, in addition to traditional professional liability protection. The challenge for these groups is medical and traditional nonprofit coverages often do not come packaged together. This can leave gaps in coverage that can put the organization at risk of potentially costly claims. For agents, looking for a carrier that can seamlessly address both needs of this hybrid nonprofit can make a major difference in the level of protection for clients.

Four Tips for the Hybrid Nonprofit

When nonprofits expand their services, there often are changes in reporting, medical requirements, insurance and legal issues. Training and expert advice can go a long way. Agents who are leading the way in this space often consider these four items when developing a comprehensive insurance program for these clients. 1. Reporting requirements may change. Reporting requirements will most likely change for nonprofits that expand their missions to include medical service(s) or expand across state lines. A nonprofit staff that is well-trained on the differences can help avoid potential issues. 2. The proper risk transfer contract is needed for any medical providers.

Limiting the responsibility of nonprofits for the errors committed by specifically trained clinicians and medical professionals is critical. As a best practice, organizations should be sure the professionals they hire provide proper proof of risk transfer. When using an outside, independent professional, it is recommended that a signed contract outlining duties, deliverables and responsibilities is in place. 3. Medical malpractice coverage is nec-

Identifying the Hybrid Nonprofit Organization

t can be difficult to distinguish whether a client is a hybrid nonprofit. To help provide the best insurance protection for nonprofit organizations, the following are some questions top agents ask. This can help agents to identify which of their clients have hybrid missions. • Is there a medical clinic open to individuals other than a focused client base? • Is there a medical clinic strictly for a focused client base that provides ser-

30 | INSURANCE JOURNAL | NATIONAL APRIL 17, 2017

vices beyond well-checks? • Are there employed psychiatrists or other medical professionals that need primary medical malpractice insurance? • Is skilled nursing care provided in clients’ homes or at the organization’s facility? • Is there a visiting nurses program? • Are there medically fragile clients that require skilled nursing care? • Does the organization describe itself as a behavioral healthcare provider?

essary. As the best independent agents know, when nonprofits bring in clinicians, medical malpractice coverage is a necessity. If clinicians are employed as staff members of the nonprofit, the nonprofit’s insurance program should provide medical malpractice coverage. If the clinicians are independent contractors, it’s good practice to request a copy of their medical malpractice and professional liability insurance policies to keep on record. Solid contracts that address client service responsibilities, duties and insurance requirements, along with reviewing and documenting license records, can help best protect nonprofits. 4. The funder(s) may have insurance requirements. Insurance programs must meet the needs and requirements of the funder(s). Funder requirements may change when a nonprofit expands its mission. If it’s a government-funded program that is adding medical services, the requirements will usually change drastically. It’s important to obtain a copy of the contract between the funder and nonprofit to ensure the nonprofit’s insurance program is compliant.

Opportunity for Independent Agents

Hybrid nonprofits need an individualINSURANCEJOURNAL.COM

ized insurance program that can protect their expanded exposures, which presents an enormous opportunity for agents. The best agents understand the nuances between true medical malpractice and traditional professional liability policies, and when each is needed to fully protect their clients. It may not be in a nonprofitâ&#x20AC;&#x2122;s best interest to expect a traditional professional liability policy to be effectively endorsed to address medical malpractice needs.

As a trusted adviser to nonprofit clients, experienced and knowledgeable independent agents are well-positioned to help their clients successfully navigate the sea of exposures that face the hybrid nonprofits of today.

Share this article with a colleague. IJMAG.COM/î&#x201D;´417EE Grieco is president, middle market for The Hanover Insurance Group.

This surge of nonprofits providing medical services is caused by a variety of factors, including changes in the way nonprofits are funded, as well as research showing the significant role physical health plays in addressing the issues these nonprofits exist to address. There are often different coverage triggers between medical malpractice and traditional professional liability offered to nonprofit organizations. Agents bring a key value when it comes to understanding claims-made versus occurrence coverage triggers, and guiding nonprofit organizations through this critical issue. Similarly, there are not many one-stop shops in the insurance marketplace to get the coverage that is necessary for a nonprofit that also offers healthcare services. Often, two separate coverage plans are needed. The best independent insurance agents are identifying the carriers that offer these two products as one comprehensive plan. Beyond the proper coverages, independent agents are looking for carriers with risk solutions teams that have the unique experience to advise on both the nonprofit and healthcare areas as one. For claims in this arena, a specialized team that is experienced in handling claims for nonprofits that offer medical services is a major value-add for many nonprofit clients. This team can help them avoid major risks. INSURANCEJOURNAL.COM

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NATIONAL | MyNewMarkets Trustees and Officers

Liability (ELL) policy and may also be written as a stand-alone UE policy. UE’s ELL policy treats directors, trustees, and officers of educational institutions as a separate category of individual insureds, with rights and protections, including:

Market Detail: United Educators (www.

ue.org) offers trustees and officers liability coverage, sometimes known as directors and officers (D&O) coverage, through its United Educators’ (UE) Educators Legal

defense and indemnity (damages) for errors and omissions (wrongful acts). UE’s policy defines “wrongful acts” to include actual and alleged wrongs, including acts performed in the discharge of duties to the educational institution or its affiliates, or on their behalf. Additional coverage features include: an order of payments provision so that, if policy limits are insufficient to cover a loss, trustee obligations are paid before those of the institution; coverage for trustees’ spouses, domestic partners, and estates (for the acts of the trustees); severability for statements or knowledge of other trustees or officers are not imputed to individual trustees in determining availability of coverage. Coverage is non-rescindable for trustees for any reason. Blanket coverage available for those serving on other 501(c)3 nonprofit boards on the institution’s behalf, in excess of any indemnity or coverage provided by the other organization. No policy securities or shareholder exclusions, often an important consideration for trustees (the equivalent of side A coverage.) Discrimination and student-related issues, including coverage that is sometimes referred to as employment practices liability (EPLI). Coverage after leaving the board if the claim is made during the policy period and the institution is still insured by UE. Available limits: As needed Carrier: Unable to disclose, admitted States: All states Contact: Lisa Vogt at 240-482-2239 or e-mail: lvogt@ue.org

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NATIONAL | Spotlight | Special Events

What to Know About Insuring Fairs, Festivals and Other Special Events By Andrea Wells

he world of fairs and festivals has evolved well beyond the pie judging, chili cook-off, apple bobbing days of the traditional county fair. Today, there’s an event for nearly every hobby, interest or culture imaginable. For 65 years, underwriters at K&K Insurance have been in the business of insuring crowds. Stephanie Waldron, senior vice president of events and attractions division, and Warren Mead, senior underwriter, both of K&K Insurance, offer a few insights into the world of insuring fairs, festivals and other special events. Here’s what they had to say.

Read It!

It is most important for agents to advise insureds about their contractual obligations. But to understand any contract, an insured and their agent should read it first. “This sounds elementary but it happens a lot,” said Mead. “Certificates of insurance tie right into contractual language when it comes to product and service providers being used by the event,” he said. “Make sure you read the contract before you sign it.”

Certificates of Insurance

Once contracts have been reviewed with the insured, the next step is to make sure that the contractor is providing

the appropriate insurance and additional insured status to the event, Mead said. “This is another really critical area and a key element where an agent or broker could step in,” he said. “Talk to the insured to make sure the insured has a protocol in place to get properly executed certificates in place, with adequate limits, good companies. Make sure the coverage dates are correct and that the additional insured status is correct. This is absolutely critical for the festival.” It’s their first line of defense if an incident occurs related to that product or service provider, Mead said.

Changing Exposures and Red Flags Whether it is a county fair, music festival or standalone event, there’s always something new and different coming along from an activity standpoint. Twenty years ago the new fad for attractions and activities involved

bungie jumping. Today, ziplining — tomorrow, who knows? Sporting events that involve mud runs, color runs, beer runs, zombie runs or other extreme running events have become the “red flags” in sports-related event underwriting, Waldron said. Other events that might spark an underwriting “red flag” are political protest events, she said. However, some political events not classified as protests fit well into a new K&K program. In January, K&K launched a program designed for political campaigns and events that provides coverage for campaign offices, political conventions, inaugurations, campaign rallies, speeches, fund-raising activities, debates and other campaign-related appearances. Coverage is available for all levels of political campaigns includ-

ing national, regional and local races. National Casualty Insurance Co. is the carrier for that program. Security protocols at events have become another changing exposure in today’s climate. “It’s manageable; it’s a known entity, as opposed to terrorism-related situations,” Mead said. “But it’s become a much bigger part of our underwriting process.”

Unique Coverages

Transmissible pathogens coverage is one that might be important to some fairs but not others, Waldron said. “This coverage might be relevant for events, for example, where e-coli could be contracted because of animal contact at a fair,” she said. Drones are another emerging area that present risk. “We underwrite that exposure and we sometimes have the ability to offer some coverage but we are finding that

many events are starting to restrict drones completely when they understand

“When they gather, what they are watching, how active they are when they are watching. … Those are some of the things that help us decide how we underwrite and how much we charge for coverage.’ the danger they could cause at the event,” she said. Volunteer accident coverage

is another important added coverage for most events, Mead said. “That’s probably the most frequently purchased optional coverage for an event because a large majority of fairs and festivals use volunteer staffing. There are very few employees typically,” he said. Volunteer accident coverage is a no-fault coverage as long as the person was injured while on duty as a volunteer at the event. Other additional coverages options could include: liquor liability; fireworks liability; contingent ride coverage for carnivals; and sexual abuse coverage for events where there might be a childcare service.

Market Conditions

Mead said the market for fairs, events and other festivals mirrors the rest of the property/ casualty industry. Rates are competitive and coverage is available. But there are a few steady players that have always been in this class. “There’s maybe three carriers all the time in this class of business that have been there for years,” he said. “Then there are what I would call ... tier two carriers, those companies that jump in the market when it’s hot, then all of a sudden they are gone.” Both Mead and Waldron advise agents and brokers to seek out a specialist when writing this class. “Most of the time

agents and brokers do not write a lot of this kind of business,” Waldron said. Fairs, festivals and events are concentrated exposures that require unique thought processes and different approaches when it comes to underwriting, she said. “We insure crowds,” she said. “That’s what we do. When they gather, what they are watching, how active they are when they are watching. … Those are some of the things that help us decide how we underwrite and how much we charge for coverage.” Share

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APRIL 17, 2017 INSURANCE JOURNAL | NATIONAL | 35

Idea Exchange

The Wedge

Getting Drunk on Single Entry, Then Working Through the Hangover (Top Seven Problems You Really Want to Solve)

By Randy Schwantz

gency owners with an entrepreneurial spirit want to grow their agencies, but staff makes it difficult. Many have said, “It’s like herding cats.” Here’s a list of producer problems: • Problem #1 - Producers are not motivated to go sell. • Problem #2 - Producers don’t like to prospect. • Problem #3 - Producers haven’t defined “real” differences and have low confidence as a result. • Problem #4 - Producers often sell “better price/coverage” and then get rolled by the incumbent. Agency owners have problems, too: • Problem #1 - Agency owners conduct “spreadsheet liars club” sales meetings, which do very little to help build champion producers who win way more than they lose. • Problem #2 - Agency owners have never committed to a “sales protocol,” there- fore it’s impossible to do meaningful “sales and prospecting” skills building. • Problem #3 - Agency owners do not have a method to find, hire and develop new producers, and with the current “growth culture” it’s difficult to attract really talented people.

We’ll Just Keep Trying

As an optimistic and hopeful entrepre36 | INSURANCE JOURNAL | NATIONAL APRIL 17, 2017

neur, you can hear the battle cry: “We’ll just keep trying,” but they are really thinking: “How do we work ourselves out of this mess?” If we could eavesdrop on the conversation between two agency owners, they’d probably say to each other: “Man, this shouldn’t be so hard.” “I agree, I thought growing this place would be easier, but I’ve struggled with it.” Talk about pipeline management quickly turns to a speech on single-entry: “Here’s the answer to agency growth. Now you can get this fantastic pipeline management tool — and even more important: it integrates with your agency management system. Problem solved, you can now manage your contacts without the headache of double-entry.” The intoxication hits just like the second martini. “No double-entry; this is something my producers will use. Now they’ll prospect more, sell more and we’ll grow.” Within weeks you take the plunge, sign the agreement, gain access to the software and hope reigns eternal. It’s like any new toy; you want to play with it, see what it does. And for a couple of weeks, it’s intriguing. Then the newness wears off and the producers who weren’t motivated still aren’t motivated. The producers who didn’t prospect still don’t prospect. The producers who sold price/ coverage and get rolled by the incumbent still get rolled by the incumbent. No differentiation is still no differentiation.

Problem Compounded, Not Solved

Expenses just went up while much time was invested, and producer problems still exist.

You are still running “spreadsheet liars club” sales meetings. You have no sales process that you can drive. You struggle hiring new producers. And, you have a service culture, not a sales culture. You solved a problem, but maybe not the right problem. If you flipped the problem on its head and thought about it like a workers’ comp problem, things would change rapidly. You know the experience mod won’t get reduced unless you go to the root of the problem and fix it. You have to find out how people are getting hurt. Then determine if it’s an equipment problem or a training problem. If you have employees that will not wear eye protection or use machine guards, then you train them first. If they still refuse to use the protection, you have to either re-assign them or let them go. If you want to change your agency’s culture and move it toward a sales culture, don’t you have to do the same thing? A high X-mod is not that different from a low closing ratio. An empty pipeline, meaning producers are not prospecting, is not that different

from having employees that won’t use the safety equipment. Growing a sales culture is a lot like creating a safety culture.

An empty pipeline, meaning producers are not prospecting, is not that much different from having employees that won’t use the safety equipment. Growing a sales culture is a lot like creating a safety culture. Change What You Drink

It’s easy to get lured into drinking from the fountain that “software will change your world.” In some cases it will help, but it will never be a replacement for the hard work we have to do as sales leaders. Here is a proven formula for changing your agency from a service culture to a sales culture — called the EG5 Framework: 1. Commit to Growth: Sounds simple, but you will run into a lot of roadblocks. If you are not committed, you’ll quit the pursuit and go back to what was easy. 2. Install a Sales Playbook: You cannot drive an idea; you can only drive a process. Your sales playbook is your process. Once you install it, you can drive it. 3. Train Your Playbook: The secret to building skilled and confident producers is no different from creating skilled and confident athletes: Train hard and train often. If you don’t have a sales playbook, you have nothing concrete to train on. 4. Drive Playbook Behaviors: After you’ve built the skills through training, you still need to drive behaviors. The same is true on the basketball court or football field. That’s why there are coaches on the sideline driving the outcomes they want. 5. Drive Playbook Accountability: If there are no consequences for poor performance, you will have poor performance. Don’t get stuck saying: “No one had to hold me accountable; no one had to tell me what to do.” Set performance standards and hold to them. If producers don’t perform to those standards, things happen that are sometimes unpleasant. That’s how life works.

For a free copy of my book, Agency Growth Machine, which goes into detail about the EG5 framework, visit: http:// thewedge.net/insurance-journal-freebook-offer/ Share this article with a col-

league.

IJMAG.COM/417KF Schwantz is founder of The Wedge Group. Phone: 214-446-3209. Website: www.thewedge.net. Email: randy@thewedge.net

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APRIL 17, 2017 INSURANCE JOURNAL | NATIONAL | 37

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NATIONAL | MyNewMarkets continued from page 32

cations. Alive Risk works with agents to deliver special insurance classifications for go-kart, waterparks, trampoline facilities and family entertainment centers. Coverage features include: excess liability towers available up to $50 million; ability to manuscript coverages; state-of-the-art program for difficult classes; in-house legal consultation, loss control and risk management services; 24/7 claims services. Available limits: As needed Carrier: Unable to disclose States: All states Contact: Customer service at 410-5054836

Paratransit

Market Detail: Atlas Financial Holdings

(www.atlas-fin.com) provides a market for public auto/para-transit products defined as coverage for non-emergency paratransit, medi-vans, funeral vehicles, church vehicles, and other public transportation vehicles with one to 15 passenger capacity. Available limits: As needed Carrier: American Service Ins. States: Ill., Ind., Mo., and Ohio Contact: Robert Fattore at 847-472-6700 or e-mail: rfattore@asilink.com

Inland Marine

Just like the air that we breathe or the wind that fuels our turbines, operations are not visible to the naked eye but they are vital to the growth and profitability of insurance organizations. Call us to hear how leading insurance organizations work with ReSource Pro to rethink operations at 1.877.761.7276, email more@resourcepro.com or visit us at www.resourcepro.com.

Market Detail: Equity Partners Insurance

Services Inc. (www.epinsurance.com) coverage features: ISO manuscript forms; builders risk – ground-up; contractors equipment (scheduled, leased/rented; electronic data processing; installation floaters; mobile equipment floaters; warehouseman’s legal liability; coastal & non-coastal zones considered; crime coverage – all forms, monoline. Available limits: Minimum $500 Carrier: Unable to disclose States: Fla., La., Miss., and Texas Contact: Customer service at 888-8252740

Excess Flood

Market Detail: Insurance Partners

Consortium Inc. (www.ipcins.com) offers flood in excess of underlying NFIP or WYO. IPC is a specialist managing general agent and wholesale broker focused on connect38 | INSURANCE JOURNAL | NATIONAL APRIL 17, 2017

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ing select independent agents to Lloyd’s, London and providing risk management to condominium owners. Available limits: Maximum $5 million Carrier: Unable to disclose, nonadmitted States: Ga., N.C., and S.C. Contact: Karen Toler at 252-269-6569 or e-mail: inquiries@ipcins.com

Excess Reinsurance Workers Comp

Market Detail: Apex Insurance services

(www.apexinsurance.com) represents all major and regional carriers offering excess workers' compensation. A state specific program with Colony is available in Texas & Florida. SIR’s start at $400,000 with police/fire starting at $600,000. Available limits: As needed Carrier: Unable to disclose, admitted States: All states Contact: Customer service at 210-812-5658

Dwelling Fire (DP-1, DP-3)

Market Detail: Quirk & Company (www.

quirkco.com) specializes in apartments, hotels, motels and homeowner associations. Specialties include: apartments/ condominiums; hotels/motels; condo associations/homeowners associations; tenant dwellings; mobile home parks; and aviation. Available limits: As needed Carrier: Unable to disclose States: La., N.M., Okla., Ore., Texas and Wash. Contact: Customer service at 800-2999421

Product Liability Insurance Market Detail: Calco Commercial

Insurance (www.calcoinsurance.com) provides general liability insurance including product liability insurance. Most classes of business are eligible with a phone indication. Specialty is in the hard to place risks. Available limits: Minimum $1 million, maximum $10 million Carrier: Unable to disclose, non-admitted States: All states Contact: Sarkis Kaladzhyan at 877-2252699 or e-mail: sarkis@calcocommercialinsurance.com INSURANCEJOURNAL.COM

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Minding Your Business

Key Deal Makers and Deal Breakers for Agencies Today

By Catherine Oak & Bill Schoeffler

hy are some transactions or “deals,” as they are called, most likely to happen or not happen? There are a number of factors that come into play, and those of us in the industry call them deal makers and deal breakers. Every deal needs to be judged on its own merits. However, there is often a pattern that develops during the merger and acquisition (M&A) process.

Five Deal Breakers Compatibility. Lack of good

compatibility between the parties or due diligence was not done properly. For example, merging a sales and service organization might sound good initially, but in the end can lead to disaster. Buyers and sellers need to understand and appreciate each other’s background and business philosophy before closing a deal. How to Avoid: Bring in a third party to properly assess each firm. An unbiased opinion will prevent issues overlooked by rose-colored glasses. The key is for the seller to factor in how the buyer will run the business. The buyer also needs to understand and appreciate how the business was run and take proper steps for a smooth transition.

Owners are not ready to sell.

They may think they are, but when it comes right down to it they can’t pull the trigger and won’t until they feel “ready.” Some sellers 40 | INSURANCE JOURNAL | NATIONAL APRIL 17, 2017

are afraid to go home to do the “honey do” list. They have no other hobbies and look at selling/ retiring as “dying.” How to Avoid: The seller needs to sit down and review everything: selling the business, life after the sale and financial equity. Again, outside experts can assist with this process. Unfortunately, some sellers will get cold feet no matter what, so the buyer needs to exercise patience. Selling a firm can be similar to facing death for some people. After all, the business has been the largest part of the typical seller’s life. The key to this deal-breaker is what boils down to career counseling and patience for the process to unfold.

Owners have an over-inflated opinion of the price of their firm. They have “heard”

today that firms are going for two to three times commissions, but their profit margin is only in the 15 percent to 30 percent range. How to Avoid: Buyers needs to know what a fair price is for an agency and stick to it. Every once in a while, a buyer will pay an overinflated price for an agency. Buyers should understand what price makes financial sense. Sellers need to educate themselves on agency value and the full impact of the terms of a deal.

own business for years and might lack the skills or temperament to work with a partner or for a new owner. How to Avoid: Sellers need to evaluate what it is they are really getting into and future pace what it would be like to work for someone else. Buyers need to provide a way to make the transition seamless, such as providing the seller with as much local authority as possible and understand what the seller’s “hot” buttons are.

A lack of a transition plan will make a closed deal go sour. A buyer might tell the

seller that nothing will change, and the seller looks forward to that promise. In those cases, both the buyer and seller might not have understood each other’s business model, and they are kidding themselves. How to Avoid: The seller needs to understand that things will change, and the buyer needs to realistically state that fact. During the “courting” process, the buyer and seller must consider how the integration will take place and try to preserve the best aspects of the cultures of each firm.

Many owners/ sellers like sales and often become tired of management of the agency. Despite that, they

are usually afraid to give up control of the firm. They aren’t sure what life will be like when they aren’t calling the shots. Most sellers have been running their INSURANCEJOURNAL.COM

including valuations, mergers acquisitions, clusters, sales and marketing planning and perpetuation planning. Phone: 707-936-6565. E-mail: catoak@ gmail.com.

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

Five Deal Makers: Build rapport. An automatic

real connection develops between the buyer and seller. These are the special deals when the potential seems boundless. The key is to make sure the connection is real and not two sales people trying to wow each other.

Ideal post transaction roles.

When the seller and buyer will be able to do what they like to do best. The role might be things like the ability to write accounts they could not land before due to additional markets and being able to provide new services to their clients. Or, perhaps a seller wants to just service key accounts and not worry about management.

Agency weaknesses that the seller or buyer cannot solve themselves are resolved with the transaction. The ideal

transaction includes complementary strengths and weaknesses, rather than just more of the same.

Effective business succession. The deal provides the

much-needed perpetuation INSURANCEJOURNAL.COM

plan for the owners that they were unable to do with their own key people and/or family members. Smooth Transition. This occurs when both parties are straightforward about the future integration of the firms. The owners will feel change is acceptable and not too drastic. The seller might secure from the buyer an “office”, where they can stay as long as they want. This is the opposite situation of Deal Breaker No. 5, when the two parties ignored that change will occur and both sides underestimate how much and its impact. The ideal scenario is when the transition is planned and the buyer and seller remain flexible.

Summary

The difference between a successful transaction and one that falls apart is a clear understanding of the relevant facts. Use of a third party will remove the biases and personal feelings that too often cloud judgment. The making of a good deal for all parties takes time, patience and experience. Share this article with a col-

league. IJMAG.COM/417DF Oak is founder of international consulting firm Oak & Associates. It specializes in financial and management consulting for independent insurance agencies

Access Home Insurance www.accesshomeinsurance.com S9 Amerisafe www.amerisafe.com SC4, S8 Aon Affinity www.affinityhcp.com 37 Applied Underwriters www.auw.com 44 Aspen Insurance www.aspen-insurance.com 3 Charity First www.charityfirst.com 23 Chubb www.chubb.com 5 Crawford & Company www.contractorconnection.com 29 Demotech www.demotech.com FL17 Digital Recognition Network www.drndata.com 35 FSLSO www.fslso.com FL19 Fujitsu www.fcpa.fujitsu.com 27 General Star www.generalstar.com W3, S3, E5, M5 GIC Underwriters, Inc. www.gicunderwriters.com FL1 Great American Insurance Group www.gaig.com 17 Irwin Siegel Agency www.siegelagency.com 7 K&K Insurance Group www.kandkinsurance.com 15 Maximum www.maxib.com FL3 Midlands Management Corporation www.midlandsmgmt.com FL15 Monarch E&S Insurance Services www.monarchexcess.com W7 Negley Associates www.jjnegley.com 28 NIF Group www.nifgroup.com 31 PersonalUmbrella.Com www.personalumbrella.com 43 Philadelphia Insurance Companies www.phly.com 21 ProAssurance Companies www.proassurance.com 32 Regency Insurance Brokerage Services www.regencyinsurancebrokerage.com FL20 Regions Bank www.regions.com 33 ReSource Pro www.resourcepro.com 38 Ryan Specialty Group www.ryansg.com 12, 13 Safety National www.safetynational.com 9 Sentry Insurance www.sentry.com 2 Shelly, Middlebrooks & O'Leary www.shellyins.com FL5 Summit www.summitholdings.com SC8, S7, M9 Take1 Insurance www.take1insurance.com 18, 19 Texas Mutual www.texasmutual.com SC3, SC7 The Hartford Insurance Group www.thehartford.com W5, SC5, S5, E3, M3 United Fire Group www.ufgsolutions.com W9

APRIL 17, 2017 INSURANCE JOURNAL | NATIONAL | 41

Closing Quote Four Regulatory Scenarios in 2017

By Richard Godfrey and George Hanley

his year has ushered in a wave of change that will drive disruption in the U.S. insurance industry. Following a prolonged period of low interest rates, yields on U.S. Treasuries are rising, and there are expectations of up to three rate increases in 2017. The new administration in Washington could revamp federal regulations critical for the industry, while a number of key states could drive an agenda that may not align with Washington’s goals. Risks pertaining to cybersecurity and privacy, coupled with increased adoption of digital technologies, will present exceptional challenges and opportunities in the delivery of insurance products and services. Against this backdrop of change and disruption, we explore four regulatory scenarios that could affect U.S. insurers in 2017.

Regulatory Standards Evolve Toward Greater Alignment Multiple regulatory influences at the state, federal and international levels that have contributed to uncertainty on

capital requirements may now, for the first time, begin to align. The January 2017 covered agreement by the U.S. and European Union (EU) will not require U.S. insurers to comply with the EU Solvency II regulations, providing a major step toward creating a level playing field for writing business and managing capital. Also, the Federal Reserve Board’s 2016 proposal on capital requirements for systemically important financial institutions (SIFIs) and depository institutions engaged in insurance activities reflected significant input from the industry and echoes evolving state-based approaches. While the definition and implementation of these standards will take time, calling for continued careful monitoring by companies, there are signs that U.S. and global efforts are removing potential barriers to greater alignment of these standards.

Cyber Threats and Data Privacy Remain Top Risks

Cyber threats and data privacy are consistently noted as top risks by U.S. company exec-

42 | INSURANCE JOURNAL | NATIONAL APRIL 17, 2017

utives and are also a key focus for federal and state regulators. Companies may face challenges to hire and dedicate greater resources to all aspects of securing and monitoring their data and networks under heightened standards of an effective cybersecurity program, while meeting the increased expectations of their boards and state regulators.

Fiduciary Conduct Standards Will Become the New Norm

In a widely-anticipated move, the Department of Labor has proceeded with a filing to the Office of Management and Budget to address conflicts of interest in retirement accounts. Despite uncertainty around the rule’s future, the precepts of a best interest standard for retirement accounts are likely to remain a focus for regulators. Traditional approaches to suitability could be extended to challenge whether investors receive unbiased advice unaffected by higher product compensation and incentives. The growing number of retirees will increase regulator attention on fiduciary conduct

rules that are expected to help better align the interests of advisers and investors, even if these rules take a different form than currently proposed.

Increase in State-Based Exams and Enforcement Exams focused on consumer

protection measures regarding sales practices and insurance products, such as annuities, long-term care insurance, and Medicare supplements, will likely continue to be a priority for state regulators. Their focus on sales to seniors, sales practices of agents and investment advice provided by recidivist brokers is expected to be high. As the regulatory exam process becomes more sophisticated by using big data and analytics to pinpoint potential misconduct, companies should increase internal surveillance and develop diagnostic capabilities to identify and address marginal conduct. Godfrey is the National Insurance Advisory Leader at Deloitte. Hanley is Managing Director and Practice Leader for Deloitte’s Regulatory and Compliance Insurance Advisory Practice. INSURANCEJOURNAL.COM

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