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Contents August 7, 2017 • Vol. 95 No. 15 • West
West W1 Tesla Workers in California Seek Safety Plan, Clarity on Pay
W6 JUDGE REFUSES TO BLOCK CALIFORNIA
GAS FACILITY FROM REOPENING
14 Report: Surplus Lines Shows Nationwide Jump in Premium
W2 Court Rules for NBC in Defamation Suit by Oregon Sporting Goods Company
W6 Judge Refuses to Block California Gas Facility From Reopening
10 Insurtech Funding Jumps to $1B: Willis Towers Watson/CB Insights Report 12 U.S. Building Owners Reviewing Structural Materials After London Tower Blaze
W2 Chevron Spending $20M to Protect Workers in Wake of California Fire
W4 California Commissioner Counters AGs, Other Commissioners over Climate Initiative
National
14 AAMGA, NAPLSO Merge to Form Wholesale Specialty Insurance Association
12
U.S. BUILDING OWNERS REVIEWING STRUCTURAL MATERIALS AFTER LONDON GRENFELL TOWER BLAZE
20 Autonomous Vehicles: Timeline for the Future 24 Top 25: P/C Direct Premium Written Up 4.8% in Q1 26 Special Report: Top 100 Independent P/C Agencies
W12 Mercury Names Most Affordable Electric Vehicles to Insure in California
29 Special Report: Top 20 Agency Partnerships
W14 California Earthquake Authority Policy Sales up 5.4% in 2Q from Year Ago
30 Special Report: Top 20 Banks in Insurance 31 Industry Veteran Tony Markel Shares Views on the 5 Ps 36 Spotlight: How Insurers Can Tap into New Revenue Streams by Using ‘Data Exhaust’
Idea Exchange W10 MGA Advice: Running Your MGA Like an Insurance Carrier Is a Mistake
20 FROM HERE TO AUTONOMY
40 How to Catch Commercial Auto Use Fraud 44 The Competitive Advantage: On the Other Side of the Desk 46 Closing Quote: Insurers Respond to Rising Claims Abuse
38 Closer Look: When Recreation Turns to Adventure
Departments W8 People 11 Declarations 11 Figures 16 Business Moves 34 MyNewMarkets
6 | INSURANCE JOURNAL | WEST AUGUST 7, 2017
INSURANCEJOURNAL.COM
OPENING NOTE
Write the Editor: awells@insurancejournal.com
Congratulations Top Agencies
T
his year marks the 13th annual publication of Insurance Journal’s Top 100 Agencies special report. This year’s Top 100 welcomes eight newcomers and returning agencies: Poms & Associates; Ascension Insurance Inc.; Shepherd Insurance; Baldwin Risk Partners; JGS Insurance; HomeServices Insurance; L/P Insurance Services Inc.; and SouthGroup. This year’s Top 20 Agency Partnerships held strong with the same agency partnership groups with nine organizations moving up or down the ranking. And what about the Future Top 100? While the following agencies didn’t make the cut in 2017, their total P/C revenue came very close. Special mention goes out to the following agencies:
Publisher Mark Wells mwells@wellsmedia.com
EDITORIAL
SALES
Editor-in-Chief Andrea Wells awells@insurancejournal.com
West Sales Dena Kaplan (800) 897-9965 X115 dkaplan@insurancejournal.com
East Editor Elizabeth Blosfield eblosfield@insurancejournal.com
Romeo Valdez (800) 897-9965 X172 rvaldez@insurancejournal.com
Chief Content Officer Andrew Simpson asimpson@insurancejournal.com
Southeast Editor/MyNewMarkets Amy O’Connor aoconnor@insurancejournal.com South Central Editor/ Midwest Editor Stephanie K. Jones sjones@insurancejournal.com West Editor Don Jergler djergler@insurancejournal.com International Editor L.S. Howard lhoward@insurancejournal.com Columnists Chris Burand
Chief Marketing Officer Julie Tinney (800) 897-9965 X148 jtinney@insurancejournal.com
South Central Sales Mindy Trammell (800) 897-9965 X149 mtrammell@insurancejournal.com Southeast and East Sales (except for NY, PA and CT) Howard Simkin (800) 897-9965 X162 hsimkin@insurancejournal.com Midwest Sales Lisa Whalen (800) 897-9965 X180 lwhalen@insurancejournal.com East Sales (NY, PA and CT only) Dave Molchan (800) 897-9965 X145 dmolchan@insurancejournal.com Advertising Coordinator Erin Burns (619) 584-1100 X120 eburns@insurancejournal.com
Contributing Writers
Insurance Markets Manager Melinda Deslatte, Dan Fash, Kristine Honey (619) 584-1100 X132 Logan McFaddin, Douglas Powell, khoney@insurancejournal.com William Stander, Alex Young Social Media Manager IJ ACADEMY OF INSURANCE Ly Short (619) 890-7735 Director Lshort@insurancejournal.com Patrick Wraight pwraight@ijacademy.com Classifieds, Jobs, Agencies Wanted/For Sale Associate Director Sr. Sales & Marketing Coordinator Barbara Whiffen Kelly De La Mora (800) 897-9965 X125 bwhiffen@ijacademy.com kdelamora@insurancejournal.com
ADMINISTRATION
Chief Financial Officer Mark Wooster mwooster@wellsmedia.com
MARKETING
DESIGN/WEB
Chief Technology Officer/ Chief Innovation Officer Joshua Carlson jcarlson@insurancejournal.com
Marketing Director Derence Walk dwalk@insurancejournal.com
V.P. of Design Guy Boccia gboccia@insurancejournal.com
Marketing Administrator Gayle Wells gwells@insurancejournal.com
Senior Web Developer Chris Thompson cthompson@insurancejournal.com
NEW MEDIA
Web Developer Jeff Cardrant jcardrant@insurancejournal.com
New Media Producer Bobbie Dodge bdodge@insurancejournal.com Videographer/Editor Ashley Waldrop awaldrop@insurancejournal.com
Web Developer Terrance Woest twoest@wellsmedia.com
CIRCULATION
Circulation Manager Elizabeth Duffy eduffy@wellsmedia.com
Crest Insurance Group Atlas Insurance Brokers LLC Eustis Insurance and Benefits Harden Lamb Financial Group Kapnick Insurance Group York International Agency The Nitsche Group World Insurance Associates LLC Shoff Darby Insurance Agency Inc. Watkins Insurance Group Dean & Draper Insurance Agency LP Frank H. Furman Inc. Ross & Yerger Der Manouel Insurance Group K & S Insurance Agency Ames & Gough PSA Insurance & Financial Services Kaplansky Insurance Wallace Welch & Willingham FOR QUESTIONS Insurance Journal’s Top 100 and Top 20 Agency Partnerships reports would not be possible without the willing participation of all of the agencies, brokerages and agency groups that have shared their information over the years. We thank the many agencies that have contributed and invite others that have never submitted information for the report to consider it next year.
Andrea Wells Editor-in-Chief
8 | INSURANCE JOURNAL | NATIONAL AUGUST 7, 2017
REGARDING SUBSCRIPTIONS: Call: 855-814-9547 Outside the U.S., call 847-400-5951 or you may subscribe or change your address online at:
insurancejournal.com/subscribe Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media 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 per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended 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 Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Media Group, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 708, Northbrook, IL 60065-9967 ARTICLE REPRINTS: For reprints of articles in this issue, contact: Kelly De La Mora at 1-800-897-9965 ext. 125 or kdelamora@wellsmedia.com Visit insurancejournal.com/reprints/ for more information.
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Insurtech Funding Jumps to $1B: Willis Towers Watson/CB Insights Report
I
nsurtech funding volume hovered close to $1 billion in the 2017 second quarter, a result nearly 150 percent larger than the same period a year ago, according to a quarterly report on the sector from Willis Towers Watson and CB Insights. That was a 248 percent jump from the 2017 first quarter and reflected a record 64 transactions, compared to $283 million and 38 transactions for insurtech funding deals in the previous quarter. Insurtech funding in Q2 is also 148 percent higher than the $398 million in funding for 34 transactions in the 2016 second quarter, an 88 percent increase yearover-year, according to the report titled “Quarterly InsurTech Briefing Q2 2017.” Why such a big jump? It turns out that funding volume soared due to the sheer increase in number of transactions, reflecting an escalating move toward insurtech capabilities. A huge number of large capital intensive
investments globally also drove the results higher, the report noted. One of the bigger trends the numbers indicate is insurtech financing continues to go global. The U.S. accounted for 65 percent of the transactions since 2012, but domestic transactions were just 45 percent of the total during the 2017 second quarter. Insurtech funding is also going early stage. For Q2, early stage/seed/Series A financing hit a record $289 million in Q2, representing 63 percent of the total deals during that period. Also, worth noting is that well-established insurers and reinsurers are increasingly investing in the InsurTech upstarts increasingly dotting the corporate landscape. Lemonade, for example, has investments from Allianz Ventures and XL Innovate. Net Insurance attracted investment money from Markel Ventures, Munich Re/HSB Ventures and nationwide
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Ventures. Trov has Suncorp Group, Sompo Japan, and Munich Re on its investor roster.
A Greater Focus on Claims Tech
Other insurtech financing trends from the report: • 34 property/casualty insurtech transactions during Q2 reflected a 48 percent hike from the 23 P/C deals in the 2017s first quarter. The number is also 89 percent higher than the 18 P/C deals in the 2016 Second quarter. • There were 31 private technology investments by insurers and reinsurers during Q2, their highest to date. The results are 19 percent higher than the 26 investments in Q1 2017, and 1 percent larger than the 27 investments tallied in Q2 2016. • Claims technology is becoming a new area of insurtech financing focus for insurers and reinsurers. INSURANCEJOURNAL.COM
West
Tesla Workers in California Seek Safety Plan, Clarity on Pay
A
group of Tesla Inc. workers in California have asked the electric car maker’s board to provide a plan to address employee safety and information on pay and promotion. The worker group, which hopes to become part of the United Automobile Workers union, said Tesla had a safety record worse than that of “sawmills and INSURANCEJOURNAL.COM
slaughter houses.” “We’re tired of suffering preventable injury after preventable injury,” Michael Catura, a Tesla production associate, said in a statement. The group also asked for clarity around Tesla’s compensation practices. Starting pay at Tesla’s Fremont, Calif., auto factory was $18 per hour, far below
the national average for auto workers, the worker group said. Chief Executive Elon Musk said in late July that the company is going to go through at least six months of “manufacturing hell” as it ramps up its efforts to produce 500,000 cars per year, close to six times its 2016 output. Copyright 2017 Reuters. AUGUST 7, 2017 INSURANCE JOURNAL | WEST | W1
WEST | News & Markets
Chevron Spending $20M to Protect Workers in Wake of California Fire
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hevron Corp. and state regulators have reached a settlement related to a 2012 fire at its Richmond, Calif. refinery that will require the company to spend about $20 million on safety improvements, officials announced this week. The agreement requires Chevron to replace all carbon steel piping that transports corrosive liquids with chrome-alloy piping, which is better at resisting corrosion. Chevron will also have to implement procedures to monitor equipment that alerts operators when replacements are needed, Cal/OSHA, the state’s workplace safety agency, said in a statement. “This means safer operations at the
refinery, which will help protect refinery workers and those who work and live nearby,” Cal/OSHA Chief Juliann Sum said. In 2013, the state fined Chevron nearly $1 million after a fire at the company’s Richmond refinery sent a cloud of gas and black smoke over residential areas. Investigators found “willful violations” in Chevron Corp.’s response before, during and after the Aug. 6, 2012, fire caused by an old, leaky pipe in one of the facility’s crude units that the company had neglected to replace, even after inspecting areas near
the segment that failed less than a year earlier. Cal/ Osha also said at the time the company didn’t follow recommendations its own inspectors and scientists made in 2002 to replace the corroded pipe that ultimately ruptured and caused the fire. Smoke and gas from the blaze prompted thousands of people to seek medical treatment, with many complaining of eye irritation and breathing problems. No workers were seriously injured in the incident. Copyright 2017 Associated Press.
Court Rules for NBC in Defamation Suit by Oregon Sporting Goods Company By Jonathan Stemple
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federal appeals court has ruled that NBC News did not defame an Oregon sporting goods company by characterizing its exploding rifle targets as “bombs” in a report on the “Today” show. The 2nd U.S. Circuit Court of Appeals in New York late last month said Tannerite Sports LLC did not show that NBCUniversal, part of Comcast Corp., made false statements about its targets, which contain chemicals that detonate when mixed together and shot with high-velocity bullets. Writing for a three-judge panel of the appeals court, Judge Rosemary Pooler also said that when reporter Jeff Rossen told viewers in the March 2015 report he was “basically holding a bomb in my hand,” his description was “at the least, substantially true.” W2 | INSURANCE JOURNAL | WEST AUGUST 7, 2017
A lawyer for Tannerite, based in Pleasant Hill, Oregon, did not immediately respond to requests for comment. The decision let stand an October 2015 dismissal of Tannerite’s lawsuit by U.S. District Judge Shira Scheindlin, who has since left the bench. Tannerite sued over the “Today” report and an accompanying online article, “Bombs for sale: Targets containing dangerous explosive being sold legally,” saying that its rifle targets were not bombs and were “inert” when sold in stores. Pooler, however, said the company appeared not to recognize the distinction between products that happen to explode and those designed or intended to explode. The Tannerite target’s “singularity of explosive purpose – the fact that it is designed to be dispersed in a violent or rapid manner upon detonation – marks it
as a kind of bomb,” she wrote. Pooler said no reasonable viewer could conclude that Tannerite targets could explode in stores, noting that Rossen said it was “not dangerous being in the studio right now” and that “you need a catalyst” before a target could explode. According to the decision, the targets enhance long-range recreational shooting, and a 2014 Tannerite product guide said: ” trike your target and the gratification is instant.” David Cargille, a lawyer who represented Tannerite earlier in the appeals process, said the court denied the company its day in court by deciding on its own “the truth or falsity of NBCUniversals statements.” An NBCUniversal spokeswoman said in a statement: “NBC News is very pleased that the court determined our reporting was accurate, and that there was no basis for a libel suit.” The case is Tannerite Sports LLC v NBCUniversal News Group, 2nd U.S. Circuit Court of Appeals, No. 15-3485. Reporting by Stempel in New York; Editing by Leslie Adler Copyright 2017 Reuters. INSURANCEJOURNAL.COM
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WEST | News & Markets
California Commissioner Counters AGs, Other Commissioners over Climate Initiative
C
alifornia Insurance Commissioner Dave Jones fired off a letter to the 12 oil state attorneys general and one governor from states like Texas and Oklahoma over threats to sue him if he did not stop his Climate Risk Carbon Initiative, which asks insurers to voluntarily divest from thermal coal investments and requiring that insurers publicly disclose their investments in coal, oil, gas and utilities. “I am not deterred by your threats,” Jones’ letter last month to the governor and attorneys general states. “We will not stop asking insurance companies to consider climate related risks and in particular we will not stop our Climate Risk Carbon Initiative. Our Climate Risk Carbon Initiative
is a sound regulatory endeavor that is grounded in financial risk analysis, consistent with the state-based system of insurance regulation. Sound regulation of the insurance industry includes consideration of climate related risks.” Jones said one of his primary responsibilities includes making sure insurers are financially sound. That responsibility, coupled with the volatility of carbon-based investments, is what Jones said led him to request insurers to publicly disclose investments that are at risk of becoming “stranded assets” as governments may increasingly restrict the use of fossil fuels, and consumers and businesses potentially move away from relying on fossil fuels.
Jones noted that the G-20 Financial Stability Board, the Prudential Regulatory Authority of the Bank of England, insurance regulators across the globe, and others have called for disclosure by insurers of climate-related risks. Jones also came under attack from other state insurance commissioners over his
initiative. Several insurance commissioners have called the initiative an “affront to sound insurance regulation.” His wrote a letter to those commissioners, which states: “While politically popular in your states, denying or ignoring climate change, its impacts and related risks, is contrary to the evidence based approach that lies at the core of our system of state based insurance regulation. The National Association of Insurance Commissioners in 2009 adopted a Climate Risk Disclosure Survey to be administered to insurers for this very reason — that it is important to recognize that there are risks associated with climate change and its impacts which insurers and insurance regulators should consider and address.”
‘Office Of Cannabis’ OK’d by San Francisco Supervisors
Colorado Town Will Use Odor Ordinance to Regulate Fracking
an Francisco officials have approved a new Office of Cannabis in advance of recreational marijuana sales starting in California next year. The San Francisco Chronicle reported that the Board of Supervisors also directed the new office to analyze disparities that keep certain minority groups out of the cannabis business. Its other task is to make recommendations on how to keep medical marijuana affordable
Colorado town has updated its public health and safety code so it can locally regulate the oil and gas industry. The Daily Camera reported Erie trustees approved an ordinance allowing the town to consider complaints against fracking-related odors. The measure is the region’s first step toward local regulation of the fracking industry. The decision comes two weeks after trustees failed to pass an emergency approval for the same ordinance.
S
Board President London Breed suggested San Francisco follow in the steps of Oakland, California, where lawmakers established a cannabis equity program this year. The program sets aside half of business licenses to city residents who have been arrested on a cannabis crime or who live in neighborhoods with historically high numbers of marijuana arrests. Copyright 2017 Associated Press.
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A
Erie ordinances typically take effect 30 days after approval. Complaints from Erie residents against oil and gas operations-related odors will be handled by local police. Violation charges could then be sought in municipal court. Copyright 2017 Associated Press. INSURANCEJOURNAL.COM
WEST | News & Markets
Porter Ranch, California - January 26, 2017: Aerial view of the Southern California Gas Company Aliso Canyon storage facility. The facility was the site of the largest methane leak in US history.
Judge Refuses to Block California Gas Facility From Reopening
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judge has refused to block a Los Angeles, Calif. natural gas storage facility from reopening a yearand-a-half after a major blowout spewed methane that drove thousands of families from their homes. Los Angeles Superior Court Judge John Wiley ruled last month that state laws prevented him from stopping Southern California Gas Co. from restarting operations at Aliso Canyon. The state had given approval to allow the company to pump gas into underground storage wells after an overhaul and rigorous testing. The facility above the San Fernando Valley has been largely out of commission since an old well failed in October 2015, unleashing methane for nearly four months and leading 8,000 families to evacuate. The blowout released the largest-known amount of climate-changing methane in U.S.
history and led to widespread complaints of nosebleeds, nausea, headaches and symptoms that persisted even after the leak was capped last year. Wiley said he understood opponents’ arguments that an extensive safety review had not taken into account the risk of an earthquake from a fault that runs through the field. He acknowledged that the reopening was important to residents of Porter Ranch and surrounding suburbs but that lawmakers had taken authority away from Superior Court judges to overturn orders by the California Public Utilities Commission. “So what’s my power?” Wiley said. “Zero. I have zero power. Because in the 1950s the Legislature said, ‘Hands off. The PUC owns this problem.’” Skip Miller, a lawyer for Los Angeles County, disagreed with the judge and filed an appeal to block the facility from reopening.
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“I think your honor is just dead-bang wrong,” Miller said. “This is super important to the county of LA and the 30,000 people who live out there.” The county asked the 2nd District Court of Appeal to block the restart because it was notified the company had planned to resume operations. Chris Gilbride, a SoCalGas spokesman, said the utility has a few steps to complete before it can resume storing gas and wasn’t sure when it would restart. The state allowed SoCalGas to resume limited operations under stricter rules put into effect after the blowout. Fewer than half the 114 wells in the field have passed tests that would allow them to be used. The county, however, said the state’s review didn’t adequately address the threat of a strong quake rumbling across the Santa Susana Mountains where the field is located.
“That’s a recipe for disaster,” Miller said. “We think they’re jumping the gun.” The county’s legal filing included emails and a declaration from a former SoCalGas manager who raised concerns several years ago about the danger. Jim Mansdorfer, who managed the company’s gas storage wells for years, said the Santa Susana fault could rupture all wells and release gas at 100 to 1,000 times the rate of the 2015 blowout. In response, the state said the facility has likely undergone more scrutiny from a regulatory agency than any facility in the U.S. and the county didn’t have a valid claim but could appeal to regulators. The county’s claims are based on “the vague possibility of a future, hypothetical catastrophic earthquake,” the state said. “Fearmongering and heated rhetoric aside, the county fails to allege a legal or factual basis upon which relief, let alone emergency relief, may be granted,” Deputy Attorney General Jennifer Rosenfeld said. SoCalGas echoed the state’s arguments in a legal filing. In a letter to politicians and policymakers it said the county’s claims were “baseless and wrong.” The company said it didn’t agree with Mansdorfer’s opinion, but it had forwarded his concerns to regulators. While the company and the state have deemed the facility necessary for home heating and to fuel gas-fired power plants, Southern California has avoided predictions of blackouts over the past year while the facility was closed. Copyright 2017 Associated Press. INSURANCEJOURNAL.COM
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Ken Cook
Bothell, Wash.-based EagleView Technologies has named Kenneth Cook senior vice president. Cook will lead field services while collaborating with engineering and product teams to develop solutions for claims and underwriting professionals in the property insurance space. He was previously vice president of client relations at EagleView. He has worked in the insurance industry for 26 years, holding positions with insurance carriers including State Farm Insurance and Farm Bureau Financial Services. EagleView is a provider of aerial imagery, data analytics, property data and GIS solutions for government, infrastructure and commercial sectors. Salt Lake City, Utah-based GBS Benefits Inc. has named Scott Schneider president. Schneider has a background in finance, underwriting and sales. Schneider most recently was vice president of sales and marketing for SelectHealth. Rick Fielding, who has been the president of GBS since the company’s inception in 1989, will continue to lead GBS Benefits as CEO. GBS Benefits is an insurance and employee benefits firm and a member of Leavitt Group. Alliant Insurance Services Inc. has named Jason VanderYacht a vice president within its energy and marine group. VanderYacht will be based in Los Angeles, Calif. He has experience covering an array of marine risks
and a specialty in cargo insurance and surety solutions. VanderYacht was an account executive with specialty insurance brokerage Roanoke Trade prior to joining Alliant. Before that he was a multiline claims adjuster with Capital Insurance Group. Newport Beach, Calif.-based Alliant provides property/casualty, workers’ compensation, employee benefits, surety and financial products and services. Brown & Brown Insurance has named Todd Davis a sales consultant in California. He will advise clients on their group and individual insurance plans. Davis came to B&B from Heffernan Insurance, where he was an assistant vice president of employee benefits. He was a risk adviser with Ascension Insurance Inc. before that. Brown & Brown through its subsidiaries offers a range of insurance products and services. TLB Insurance Services has named Scott Scherer an employee benefits agent in the agency’s Walnut Creek, Calif., office. Scherer was previously president and owner of Hall of Fame Benefits. He was vice president of sports and entertainment at Cole Capital, and a vice president at Genworth financial before that. He started his insurance career in 1999 with The Hartford. TLB is a subsidiary of Leavitt United Insurance Services, part of Leavitt Group.
WEST | News & Markets
Progressive Unveils Online Homeowners Insurance Comparison Shopper
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rogressive announced a new tool called HomeQuote Explorer, an online platform designed to enable homeowners to compare home insurance quotes from multiple carriers. The insurer says it takes 15 minutes or less to get most quotes. “This might sound familiar because it’s the formula we used to put the power of comparison shopping in the hands of auto insurance customers in 1996,” Progressive W8 | INSURANCE JOURNAL | WEST AUGUST 7, 2017
CEO Tricia Griffith said in a statement. “We think HomeQuote Explorer will compel a lot of homeowners to take a few minutes to make sure they’re getting the right coverage at the right rate.” The platform pulls in publicly available information on a property automatically, and has a series of prompts to help the user enter other required information, according to Dan Witalec, the insurer’s customer acquisition leader.
Progressive writes homeowners through its subsidiary ASI that it acquired in 2015.
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Bob Borisoff On the Anniversary of his passing.
1928-2003
“He was my mentor in insurance and my teacher in life. I watched him turn clients into friends, friends into family and family into guarded treasures. A true gentleman of the industry. Always making people feel good about themselves. He was my hero and my Dad.� Derek Borisoff CEO
WEST | News & Markets
Mercury Names Most Affordable Electric Vehicles to Insure in California
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ercury Insurance put together a list of the 10 most affordable electric vehicles to insure, and Fiat, Kia and Nissan models top the list. Mercury researchers examined the 2017 electric vehicles available at car dealerships today or in the near future to compile a list of the most affordable vehicles to insure. The list was created based on the Mercury price for full coverage — liability, comprehensive and collision — in California. “Consumer interest and intent to buy electric vehicles has increased substantially,” Chong Gao, a senior product manager for Mercury Insurance, said in a statement. “We put together this list to help inform your decision, because many people don’t consider what it will cost to insure a vehicle before they buy it.” The top 10 list for 2017 all-electric vehi-
cles begins with the most affordable make and model to insure: • Fiat 500e • Kia Soul EV • Nissan Leaf • Volkswagen e-Golf • Smart ForTwo Electric Drive • Mitsubishi i-MiEV • Ford Focus Electric • Hyundai IONIQ Electric • BMW i3 • Tesla Model 3 Mercury developed the list using a 30-year-old male with a clean driving record, who lives in Newport Beach, Calif., and travels 13,000 miles per year. The full coverage with a $500 deductible includes
liability limits of $100,000 in injuries per person, $300,000 per accident and $50,000 in property damage. Mercury is a multiline carrier predominantly offering personal automobile, homeowners and commercial insurance through a network of independent agents.
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California Earthquake Authority Policy Sales up 5.4% in 2Q from Year Ago By Don Jergler
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alifornians may be getting the idea that they live in earthquake country. That’s the underlying message that can be found in the latest figures out from the California Earthquake Authority. The CEA, a not-for-profit, publicly managed organization, announced at the end of July that it ended its second quarter of 2017 with policies in force up nearly 5.4 percent from the same quarter a year ago. The CEA now has more than 950,000 policies in force, continuing a trend of increased earthquake insurance sales that began in 2016. The authority in 2016 reported a net gain of more than 52,000 policies, more than seven times the CEA’s average gain annually over the past 10 years. Interest in earthquake insurance remains
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strong in 2017, with 18,804 more policies in force after the first six months, bringing the authority’s total policies in force to 950,393 at the end of June 2017, according to the CEA. Glenn Pomeroy, CEO of the CEA, offered several reasons behind the increased policy sales. And those reasons are in lieu of the usual driving force behind earthquake policy sales, which would be recent temblors. There haven’t been many of note in and around California for a while. “We’re attributing to it to a sum total, realizing what’s happening collectively out there,” Pomeroy said. “You do have the scientific community speaking with a clearer and stronger voice than they have in the past.” Pomeroy views one scientist’s warning in particular as turning point for spurring the interest of Golden State residents in
financially protecting themselves from earthquakes. That warning came last year in May from Thomas Jordan, director of the Southern California Earthquake Center, during a national earthquake conference. He told the audience that the southern section of the San Andreas Fault is “locked, loaded and ready to roll.” The catchy quote was picked up by news outlets around the country. “That seems to be a turning point in more and more people paying attention to what scientists are saying,” Pomeroy said. The overall earthquake policy take up in California has been rising slowly over the last few years, according to figures from the California Department of Insurance. In 2016, the latest figures available, 10.79 percent of California homes that had homeowners insurance also had earthquake insurance. That figure was 10.23 percent in 2015. New messaging mandated by the state also gets some credit from Pomeroy. Beginning last year, a new law took effect changing the way that people get notified about the availability of earthquake insurance. “The mandatory offer law” mandates that carriers that sell homeowners insurance must offer earthquake insurance and mail out notices that if a home is not covered that earthquake insurance is available to be purchased. Last year the Legislature successfully put through a bill to make the wording on the offers being mailed to homes more reader friendly. The CEA itself may have had a hand in the policy sales uptick. The CEA last year rolled out new policy options, an online earthquake insurance calculator and a new deductible structure with options for 5 percent, 10 percent, 15 percent, 20 percent or 25 percent. “All these efforts combined have put us in the position where we’re able to speak more effectively to Californians,” Pomeroy said.
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Figures
Declarations
9
Egregious Fallony
“The Fallons’ alleged theft from injured workers is particularly egregious. By stealing from injured workers who depend on the funds for future care, the Fallons may have left many victims without the resources they need for medical treatment.”
The number of cases of Legionnaires’ disease attributed to an outbreak at The Guest House at Graceland in Memphis, Tenn. Health officials said on July 19 the number of cases had increased from five to nine, with the hotel’s pool and hot tub being considered the source of the bacteria.
— Insurance Commissioner Dave Jones had harsh words for
Tom Fallon, 63, and his daughter, Christina Fallon, 28, who allegedly embezzled $273,954 from injured workers who trusted him to invest settlement funds from workplace accidents.
Not Blaming Tesla
“I did not intend to put the blame on Tesla or the auto pilot system as I am aware that I need to be in control of the vehicle regardless if the auto pilot system is engaged or not.”
$150 MILLION $317 MILLION
— David Clark, 58, in an email to Minnesota’s
Kandiyohi County Sheriff’s Department. Clark was driving a 2016 Tesla when it was involved in a crash in Minnesota on July 16. According to the sheriff’s department, Clark previously said that when he engaged the Autopilot system, it caused the vehicle to suddenly accelerate and then roll over. In the email recently released by Tesla, Clark said instead he believed he had disengaged the Autopilot system at the time of the crash.
Massachusetts Marijuana The amount of a recently finalized settlement for contractors and vendors who are owed millions of dollars after the owner and president of a Vermont ski resort were accused of massive fraud. The Caledonian Record said the federal receiver overseeing Jay Peak ski resort expects to receive the first payment in the settlement from Raymond James Financial Inc.
$3.1 MILLION That’s how much a former altar boy at a Portland, Ore., church is suing the church for contending he was repeatedly sexually abused by a choir director in the early 1960s. The Portland man, now in his late 60s, contends in the lawsuit the abuse took place at St. Michael and All Angels Episcopal Church.
INSURANCEJOURNAL.COM
“We feel confident this will bring in enough revenue to properly implement and regulate this new marketplace, and allow us to invest in key areas such as substance abuse.” — Rep. Mark Cusack, after Massachusetts House and Senate
negotiators reached an agreement on a revamped version of Massachusetts’ voter-approved marijuana law that would allow retail pot sales to be taxed at a maximum 20 percent rate. Cusack led the House in the talks, which carried on well past the June 30 deadline.
The amount Louisiana Gov. John Bel Edwards’ administration has earmarked for hazard mitigation protection projects around Louisiana. The dollars are allocated by the Federal Emergency Management Agency, and each project must receive FEMA approval. Projects include drainage pipe replacements, water pump station upgrades and levee improvements.
Dust Storm Pileup
“Everybody hit everybody.”
— Upton County (Texas) Sheriff Dan Brown said a zero-visibility dust storm caused a 10-vehicle pileup in West Texas that left eight people hurt, including one in critical condition. Brown said dirt from recently plowed fields blew across the highway and that nobody could see. The accident happened Sunday afternoon on Highway 349, near Rankin, about 275 miles northwest of San Antonio.
InsuranceJournal.com
$200,000 The amount of premium Ohio’s Franklin County, which includes Columbus, is paying for a $10 million cyber insurance policy. The Franklin County Data Center currently spends about $3 million a year on cyber security. The insurance would pay for security improvements in the event of a hack and other mitigation.
Poll
In which one of these areas would you MOST like to see the P/C insurance industry develop new products? 22.22 Small Business 17.78 Homeowners 9.63 Management/Professional Liability 42.22 Cyber 8.15 Commercial Property Total Votes: 270
AUGUST 7, 2017 INSURANCE JOURNAL | NATIONAL | 11
NATIONAL | News & Markets
U.S. Building Owners Reviewing Structural Materials After London Grenfell Tower Blaze By Jeff Martin
U
.S. building owners should review what materials their structures are built with following a deadly fire in London that showed how flames can quickly cover a high-rise, devouring it from the outside, fire experts said. An Associated Press review found that the manufacturer of the panels used in the London tower said the same panels were used in some U.S. buildings. However, many building owners were unaware of that. British authorities are investigating whether those Reynobond PE panels and other materials helped spread flames across the doomed Grenfell Tower. “I think the public has this awareness of this stuff they never had before, and the building owners have
more awareness,” said Robert Solomon, a fire protection engineer with the National Fire Protection Association. That awareness is prompting a renewed look at exterior materials — often called cladding — at several U.S. buildings. Local fire marshals are among the best resources for anyone concerned about a building’s safety, said Jon Narva, a spokesman with the National Association of State Fire Marshals. “The fire marshals are going to be aware of the circumstances surrounding the Grenfell fire, and they should be able to help any concerned building owners with finding out information,” Narva said. Officials are awaiting test results to determine if the Baltimore Marriott Waterfront hotel, which rises more than 30 stories over the city’s harbor, used Reynobond PE panels.
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New York-based Arconic Inc. has stopped selling those panels for use in high-rise buildings. In general, U.S. buildings made of concrete, steel or glass will merit few concerns, Solomon said. “If you have something that’s not in those three categories, people are starting to take a look at that,” Solomon said. Building owners with concerns can remove a two-story section about 10 feet wide and test it for fire spread — a roughly $30,000 full-scale test to see how the entire section as it is constructed on the building reacts to fire, Solomon said. “One of the things we periodically hear is that it’s too expensive to test all these combinations of materials,” Solomon said. “As a fire engineer, I just scratch my head. You think $30,000 is too much to spend
on a $50 million building project?” Though Marriott officials say they are awaiting test results on the building, the company has not specified what type of testing is being done. If dangerous materials are found in any building, options include removing the materials entirely, changing how much of the material is used or changing where it’s used on a building, Solomon said. Innovative solutions — such as an exterior sprinkler system that can send water raining onto a building’s outer walls — have also been discussed in the United Arab Emirates, where some high-rise buildings have burned in recent years, Solomon said.
Copyright 2017 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. INSURANCEJOURNAL.COM
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NATIONAL | News & Markets
Surplus Lines Insurance Premium Up Nationwide
A
mid-year compilation of excess and surplus (E&S) insurance premium amounts by the Surplus Lines Stamping Office of Texas (SLTX) shows a 6.6 percent increase in premium nationally compared with the same period last year. SLTX used information from the 15 managing service offices across the U.S. region in its analysis. Across the U.S., service offices reported total premium of $14.3 billion, with E&S policy items and filings up almost 11 percent. Arizona, Utah, North Carolina and Minnesota saw the greatest premium spikes of 29 percent, 27 percent, 19 percent, and 16 percent, respectively. The positive news
reported from each of these state’s executive directors were that the increases were attributed from market changes in property and construction, new/improved business technology platforms, and policy increases in premium. California, Florida, Texas and New York all saw increases in premium volume ranging from 5 to 8 percent. These four offices represent much of the U.S. premium volume, totaling $10.9 billion of the total $14.3 billion mid-year value. As with most states, Florida’s surplus lines premium contin-
ues in an upward trend. “The primary factors of our 6 percent growth for the first 6 months of 2017 are an improving economy, particularly in housing, and the fact that more policies written are being renewed rather than re-entering the admitted market at the end of the period,” Gary D. Pullen, executive director of the Florida Surplus Lines Service Office, said in the SLTX.
Other western states with reported E&S premium increases are Idaho (7.4 percent), Oregon (5.2 percent) and Washington (5 percent). Overall, the 2017 mid-year review provides a good snapshot. The industry is experiencing growth in almost all regions across the U.S. Albeit soft market conditions, stability is a factor that is as valuable for 2017 and beyond, SLTX said.
New Wholesale & Specialty Association Is Born
M
embers of the American Association of Managing General Agents (AAMGA) and the National Association of Professional Surplus Lines Offices (NAPSLO) have approved a merger of the two associations, creating the new Wholesale & Specialty Insurance Association (WSIA). According to the joint announcement, 89 percent of the AAMGA’s votes and 93 percent of NAPSLO’s votes were in support of the merger and affirmed the creation of the WSIA, effective August 1, 2017. Hank Haldeman, Merger Committee chair, said members voted for more than a sim-
ple merger of the two existing organizations. Instead they have “endorsed the creation of a new world-class member services association that will serve the entire wholesale, specialty and surplus lines industry.” WSIA will be governed by a board of directors that includes both legacy organizations’ members. Corinne Jones, AmWINS Access, will serve as president.
14 | INSURANCE JOURNAL | NATIONAL AUGUST 7, 2017
“It is an honor to serve as the first president of WSIA, and I’m looking forward to the work that’s ahead,” said Jones. “This is an exciting time for our association,” said NAPSLO President Dave Leonard. WSIA became fully operational on August 1 with services and programs. One of the first opportunities to participate at WSIA will be at the WSIA Annual Marketplace,
formerly the NAPSLO Annual Convention, which is Sept. 10-13 in San Diego. “Members will see the WSIA brand incorporated into all programs and services in coming months, as we offer a combined slate of education programs that includes all the same opportunities that each organization has traditionally offered,” said Brady Kelley, WSIA executive director. Kelley said WSIA will also continue its forum for its under-40 members by combining the programming and events of the AAMGA’s Under Forty Organization and NAPSLO’s Next Generation into WSIA’s U40. INSURANCEJOURNAL.COM
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Hub International Limited, Unilite Insurance Agency
Markel, State National
Markel Corp. will acquire Texas-based State National Companies Inc. for $919 million, a deal that the Virginiabased insurer and reinsurer said will help diversify its underwriting and revenue streams. Both companies’ board of directors voted unanimously to approve the deal, which calls for Markel to pay $21 per share to acquire all outstanding shares of State National common stock. Plans call for closing the acquisition in the 2017 fourth quarter, assuming State National shareholders and state regulators approve the deal. State National is a specialty property/casualty insurance services provider focused on collateral protection insurance that insures personal automobiles and other vehicles held as collateral for loans made by credit unions. Its program services segment provides access to the U.S. property/casualty insurance market in exchange for ceding fees. According to its website, State National is the largest and
longest-standing pure-play U.S. insurance fronting business with approximately $1.4 billion in gross written premium (2016) and more than 60 programs. It employs about 400 people. Markel, based in Virginia, is a holding company for insurance, reinsurance and global investment operations.
The McGowan Companies, NAPLIA
The McGowan Companies, a Fairview Park, Ohio-based company offering specialized insurance programs, has purchased the assets of Framingham, Mass.-based North American Professional Liability Insurance Agency LLC. NAPLIA will be re-branded under the McGowan Program Administrators brand and will function as a division of McGowan & Company Inc. following the transaction. Established in 1999, NAPLIA is a program administrator for professional liability insurance for accountants, bookkeepers and investment advisors. All McGowan brokers will
16 | INSURANCE JOURNAL | NATIONAL AUGUST 7, 2017
Hub International Limited, a global insurance brokerage, has acquired the assets of Unilite Insurance Agency Inc. Terms of the acquisition were not disclosed. Based in Lake Success, N.Y., Unilite was formed in 1991 and specializes in providing insurance products and services to the commercial real estate, construction and manufacturing industries. Robert Eisman and Eli Blisko, co-owners of Unilite, will join Hub’s Northeast region, reporting to Doug Schenendorf, president of its Long Island operations.
Alliant Insurance Services, Boynton & Boynton Insurance Professionals
Alliant Insurance Services Inc. has acquired Fair Haven, N.J.-based Boynton & Boynton Insurance Professionals in an effort to continue expanding its footprint throughout the northeast region of the U.S. Terms of the agreement were not disclosed. Boynton & Boynton is a private insurance agency and is expected to add personal and commercial insurance solutions to the company’s growing Alliant Americas division. Following the transaction, Boynton & Boynton will operate as part of Alliant Americas. Boynton & Boynton President Jay Lynch, along with the entire Boynton & Boynton management team and staff, will join Alliant and continue to service clients from
its offices in New Jersey and Pennsylvania. Founded in 1929, Boynton & Boynton provides a range of commercial and personal insurance solutions to clients in New York, New Jersey and Pennsylvania. Alliant Americas provides midsized businesses with targeted insurance, risk management and consulting services. As a middle-market platform with offices throughout the U.S., Alliant Americas delivers a range of products and services that are regionally focused.
Conifer Holdings, RHP General Agency Inc.
Conifer Holdings, headquartered in Michigan, has agreed to sell the book of HomeValue business produced through Sycamore Insurance Agency to Texas-based RHP General Agency Inc. As part of this renewal rights transaction, the entire team at Sycamore Waco will become employees of RHP General Agency. Conifer specializes in restaurants, bars and taverns throughout the United States inclusive of liquor liability. RHP General Agency through its subsidiary insurance company, Southern Vanguard, is a specialty provider of low value dwellings in Texas.
JenCap Holdings, Special Risks Facilities
JenCap Holdings LLC has agreed to acquire privately held Special Risks Facilities Inc., an MGA/contract binding authority and wholesale insurance brokerage firm based in Sterling Heights, Michigan.
continued on page 18
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r tspecialty.com R-T Specialty, LLC (RT), a subsidiary of Ryan Specialty Group, LLC, provides wholesale brokerage and other services to agents and brokers. RT is a Delaware limited liability company based in Illinois. As a wholesale broker, RT does not solicit insurance from the public. Some products may only be available in certain states, and some products may only be available from surplus lines insurers. In California: R-T Specialty Insurance Services, LLC License #0G97516. Š 2017 Ryan Specialty Group, LLC
NATIONAL | Business Moves continued from page 16 Special Risks was formed in 1971 and has been led by Jack Klebba and Randy Kaszeta. The company has an additional office in Peoria, Arizona. JenCap Holdings (JCH) was formed in March 2016 by The Carlyle Group and JCH management to consolidate specialty insurance distribution businesses, including managing general agents, program managers and transactional wholesale brokers. The acquisition of Special Risks (SRF) is the fifth such transaction by JCH, which is headquartered in New York.
binding operations in Texas, and IMS’ Stephen Vallender has been appointed executive vice president at U.S. Risk Brokers Inc. Headquartered in Houston, Texas, with additional offices in Dallas and San Antonio, IMS London American has been committed to providing superior underwriting and brokerage services since its founding in 2005. U.S. Risk Insurance Group operates internationally and is headquartered in Dallas.
Crest Insurance Group, Troon
Crest Insurance Group LLC has acquired Tucson, Ariz.-based Troon Insurance Property/casualty wholesaler, U.S. Risk Services. Insurance Group LLC, has acquired Texas Terms of the deal were not disclosed. based IMS London American Brokerage Troon was founded by Clebern Best and and Underwriting Services. has been serving the greater Phoenix area IMS President Larry Mennes has been 12:36 for 20 years. A&M helps BIG.pdf 1 1/5/16 PM named president of U.S. Risk’s contract Crest has Arizona offices in Tucson,
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7/20/17 2:58 PM
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Ryan Specialty Group, N-Surance Outlets Ryan Specialty Group LLC, has reached a definitive agreement to acquire N-Surance Outlets (NSO), a wholesale insurance brokerage and binding authority operation headquartered in Roswell, Ga. NSO will become part of R-T Specialty LLC (RT Specialty), the wholesale brokerage unit of Ryan Specialty Group (RSG), and will enhance RT Specialty’s Atlanta office while remaining at the current Roswell location. N-Surance Outlets specializes in commercial P/C, transportation, and garage risks and was founded in 1985 by Gregory K. Murrey. Jason Murrey, President of NSO, and his team will continue to service and expand their client base. Terms of the transaction were not disclosed. R-T Specialty, LLC, a subsidiary of Ryan Specialty Group LLC, provides wholesale brokerage and other services to agents and brokers.
Alera Group, Group Benefits
Alera Group – an independent insurance agency and employee benefits firm - has acquired Group Benefits LLC of Memphis, Tenn. Group Benefits LLC is a benefits broker and consulting firm providing employee benefits products since its inception in 2009. This acquisition is the latest announcement from Alera Group.
GBS Benefits, Volk & Associates
Longmont, Colo.-based Volk & Associates has been purchased by GBS Benefits, a member of Leavitt Group. Volk & Associates has operated as an insurance and human resources consulting firm in northern Colorado. GBS Benefits Inc. is an employee benefits firm and a member of Leavitt Group. Leavitt Group is a privately-held insurance brokerage that provides property/ casualty insurance, risk management and employee benefits solutions. INSURANCEJOURNAL.COM
NATIONAL | News & Markets
From Here to Autonomy
Morality and Retirement Timeline for Auto Insurance Pros By Andrew Simpson
W
hile the media, ethicists and perhaps the public like to ponder whether a self-driving car in a crisis should be programmed to hit a group of nuns crossing the street or hit a bus full of schoolkids, the drive toward autonomous driving is unlikely to be slowed by such moral dilemmas, insurance executives were told recently. That’s because while scenarios involving split second decisions and catastrophic consequences are worth considering, the odds of some of them happening are very low whereas the odds of automated driving saving many lives are very high, Joe Schneider, managing director, KPMG Corporate Finance, suggested before attendees at the Super Regional P/C Insurer Conference in Lake Geneva, Wis. “My personal viewpoint is that in many ways it’s kind of a thing that the media latches onto because it’s a very interesting hypothetical question,” said Schneider, when asked about programming ethical choices. “I don’t know if in reality, there’s going to be many nuns crossing the street and school bus situations. With that said, it
is something to certainly consider.” The point stressed by Schneider and other panelists at the Super Regional conference is that automated driving will be fueled more by safety than by anything else. Many people will appreciate that driverless cars free-up time, some firms will benefit economically by cutting the costs of employing drivers, and others who have not been able to drive will welcome their new freedom to travel. But the paramount promise of driverless cars is that they will save lives. They will do so by eliminating human error, which is responsible for most traffic fatalities in the U.S. every year. “The important point with the almost 40,000 fatalities is that over 90 percent of those are attributable in some way to human or driver error, whether it’s distracted driving or whatever,” said panelist Peter Rafferty, who is manager of the Transportation Systems Management and Operations (TSM&O) unit at the University of Wisconsin and involved in the university’s U.S. government-approved testing site for driverless vehicles. “The automated vehicles … they don’t fall asleep, they don’t get drunk, they see all around them. They react much faster,”
20 | INSURANCE JOURNAL | NATIONAL AUGUST 7, 2017
said Rafferty. “So that’s where big safety gains are going to be happening.” KPMG’s Schneider brought a copy of his firm’s most recent research into what all this means for the auto insurance industry. In a 2015 report, KPMG said the market would shrink by as much as 60 percent by 2040. However, according to KPMG’s updated study, The Chaotic Middle: The Autonomous Vehicle and Disruption in Automobile Insurance, the auto insurance sector will dwindle by more than 70 percent or $137 billion by 2050 due not only to autonomous vehicle technology but also a rise in on-demand transportation and a shifting of liability to manufacturers. According to many researchers, the transition from mostly human-controlled to human-free motoring will happen over the next 25 years. The road will likely be marked by regulatory bumps and a “chaotic middle” as KPMG calls it, or a “messy middle” as Rafferty characterizes it, where vehicles with varying levels of autonomy and human involvement are on the roads.
Automation Levels
The Society of Automotive Engineers
continued on page 22
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NATIONAL | News & Markets continued from page 20 you can’t ride your horse around in a lot of places. You probably won’t be able to drive a vehicle around that can kill people.” KPMG has offered its own timeline. Over the next two or three years, consumers will begin experiencing the safety advantages of new technologies and attitudes will shift towards acceptance of autonomous driving. Right to Left: Joseph Petrelli, KPMG's Joe Schneider, Merlino's Also the first autonomous cars will be Ryan Purdy, UWisconsin's Peter Rafferty on the roads. On-demand transport 0. No Automation — human and the cars will shift into a safe mode of and car-sharing will continue to expand. drivers perform all aspects of driving even operation if a dangerous situation arises. By 2024, the majority of travel within cities when there are warning or intervention and surrounding suburbs will be on-desystems. Timeline mand rather than with a personal vehicle, 1. Driver Assistance — driving assistance Experts have offered different adoption and by 2035 on-demand will be the norm systems of either steering or acceleration/ timelines; Rafferty’s calls for the transition in transportation, according to KPMG’s deceleration. Example: automatic braking being largely completed by 2040. projections. systems. “It’s gonna’ be years or even decades yet 2. Partial Automation — one or more before we really get the full automation Insurance Pros driving assistance systems of both steering and acceleration/deceleration. Example: that can operate everywhere. The vehicle Today’s insurance executives should be Tesla Autopilot can get out of your garage, go through a educating themselves on the technology 3. Conditional Automation — automatneighborhood across town, pick up a kid, and possible timelines because the traned driving system performs all aspects of what not. That’s still a long way away. sition will be happening on their watch, driving with expectation that human will Automated vehicles are here, yes. But according to panelists. respond appropriately if requested to inter- we’re just at the beginning of a rather long “This is not George Jetson stuff,” KPMG’s vene. transition period in my opinion,” he said. Schneider said. “This stuff is real. It’s mov 4. High Automation — automated driv“This is just my impression of things.” ing more quickly.” ing system performs all aspects of driving He urged the Super Regional executives even if human does not respond approprito prepare. ately to request to intervene requested to Although autonomous vehicles are intervene. expected to become very popular, it’s also 5. Full Automation — automated drivexpected that some people will still drive. ing system performs all aspects of driving Schneider recalled a recent global corpounder all roadway and environmental conrate finance meeting in New York where he ditions. gave a presentation on the topic to insur Rafferty expects that by 2020, there will ance professionals. There was a gentleman “At level zero, one and two, the driver be plenty of level three cars on the roads. in the back of the room from Milan who is supposed to always be paying attention By 2025, “shared mobility” fleets using begged to differ that driving will become and ready to take over control of the vehifirms like Uber and Lyft will have caught extinct. In his Italian accent, he insisted, cle if something goes wrong, like the Tesla on. By 2030, highly automated level four “People will always be driving Ferraris. You’re not gonna’ make that car autonoauto-pilot. Levels three, four and five that’s vehicles will start appearing and by 2030, human drivers will be banned on certain mous because people are always driving not the case. If something goes wrong, the roads and in urban areas. By 2040, the Ferraris.” Share this article with a colvehicle is able to go into some sort of safe transition is going to be largely complete, league. condition. That’s the important distinction Rafferty believes. here,” Rafferty said. “From there to 2100 it’s going to be like IJMAG.COM/807AU The “messy middle” will occur between the shift that we just had 100 years ago the level two and three automation period from the horse to the gas-powered autoThe Super Regional P/C Insurance Conference of partially automated vehicles, where the mobile. It’ll be that dramatic. This is really was sponsored by actuarial consulting firm driver should be paying attention but may going to be a change. Not that these things Demotech Inc. and Wells Media’s Insurance be distracted. In later levels, eventually the will be outlawed. It’s just that, like today, Journal and Carrier Management. driver will not be required to pay attention (SAE) has developed widely-accepted classification system for the various levels of automation in driving, which Rafferty highlighted. There are six levels starting with zero. In levels 0 to 2, the human driver monitors the driving environment. In levels 3 to 5, the assisted driving system monitors the driving environment:
‘The automated vehicles … they don’t fall asleep, they don’t get drunk, they see all around them.’
22 | INSURANCE JOURNAL | NATIONAL AUGUST 7, 2017
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NATIONAL | News & Markets
P/C Direct Premium Written Up 4.8 Percent
By Douglas A. Powell
D
irect premium written (DPW) for property/ casualty insurance companies continues to increase, albeit gradually. At year-end
2016, approximately $606 billion of DPW was reported, a record high for the industry. For 2016, total DPW for all P/C insurers aggregately increased 4 percent over 2015, an increase of $23.4 billion. Through the first quarter of 2017, the insurance industry’s growth trend has continued, as DPW for all P/C insurers aggregately increased 4.8 percent over 2016. For the three months ending March 31, 2017, P/C companies comprising the Top 25 insurers in terms of DPW growth increased their DPW nearly 14 percent over the first three
months of 2016. This continues the Top 25 insurers’ impressive display of premium growth and financial stability. The Top 25 accounted for 55 percent of the growth in the P/C insurance industry’s DPW. In contrast, the remainder of the industry reported an increase in DPW of 2.6 percent, or $3.1 billion year-over-year. It is important to note that while increasing DPW, P/C companies have aggregately maintained a sufficient level of policyholders’ surplus (PHS). One measure that indicates P/C companies are conservatively leveraged is the DPW to
PHS ratio. An insurer’s DPW to PHS ratio is indicative of its premium leverage on a direct basis, without consideration of the effect of reinsurance. Since 2010, this ratio for P/C companies has remained stable at approximately 70 percent. There is always a fair amount of uncertainty in making projections based on first quarter data, but if the industry holds to its 10-year historical pattern, growth in 2017 would again result in the highest level of year-end direct premium written ever reported by the P/C insurance 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 March 31, 2017, versus March. 31, 2016
Company Name
State Farm Mutual Automobile Insurance Co. Liberty Insurance Underwriters Inc. GEICO General Insurance Co. Rural Community Insurance Co. American Family Insurance Co. GEICO Casualty Co. GEICO County Mutual Insurance Co. Liberty County Mutual Insurance Co. GEICO Indemnity Co. USAA General Indemnity Co. American Bankers Insurance Co. of Florida Allstate Fire and Casualty Insurance Co. NAU Country Insurance Co. GEICO Advantage Insurance Co. USAA Casualty Insurance Co. ACE American Insurance Co. Farmers Insurance Exchange Government Employees Insurance Co. LM General Insurance Co. Auto-Owners Insurance Co. Ohio Security Insurance Co. United Services Automobile Association Evanston Insurance Co. Allstate Vehicle and Property Insurance Co. Integon National Insurance Co.
DPW 3/31/2017
$10,015,471,290 $821,592,917 $2,383,686,594 $149,071,048 $288,963,021 $1,089,790,642 $414,389,242 $281,858,292 $1,465,436,218 $932,632,487 $955,803,461 $2,005,607,474 $1,036,351,837 $323,038,713 $1,467,686,135 $1,056,023,847 $1,045,422,926 $1,470,404,769 $821,399,239 $762,024,157 $465,151,976 $1,820,468,754 $287,946,420 $443,350,682 $303,022,440
Top 25 P/C Companies by DPW Growth $32,106,594,581 All Other P/C Companies $123,639,340,662 Total $155,745,935,243
DPW 3/31/2016
$9,197,798,644 $576,726,968 $2,169,592,962 -$25,469,982 $135,773,410 $936,845,834 $262,491,723 $130,469,485 $1,321,599,127 $798,398,522 $824,515,622 $1,876,664,565 $909,853,513 $202,168,169 $1,350,066,849 $941,414,095 $933,985,184 $1,362,513,156 $714,640,368 $662,026,940 $365,691,227 $1,729,844,856 $202,341,375 $361,917,970 $223,759,869
$28,165,630,451 $120,469,270,758 $148,634,901,209
$ Growth
$817,672,646 $244,865,949 $214,093,632 $174,541,030 $153,189,611 $152,944,808 $151,897,519 $151,388,807 $143,837,091 $134,233,965 $131,287,839 $128,942,909 $126,498,324 $120,870,544 $117,619,286 $114,609,752 $111,437,742 $107,891,613 $106,758,871 $99,997,217 $99,460,749 $90,623,898 $85,605,045 $81,432,712 $79,262,571
$3,940,964,130 $3,170,069,904 $7,111,034,034
% Growth
8.89% 42.46% 9.87% -685.28% 112.83% 16.33% 57.87% 116.03% 10.88% 16.81% 15.92% 6.87% 13.90% 59.79% 8.71% 12.17% 11.93% 7.92% 14.94% 15.10% 27.20% 5.24% 42.31% 22.50% 35.42%
13.99% 2.63% 4.78%
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.
24 | INSURANCE JOURNAL | NATIONAL AUGUST 7, 2017
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About This Report: Welcome to the
13th annual Insurance Journal Top 100 Independent P/C Agencies report. The Top 100 list is ranked by total property/casualty agency revenue for 2016 and comprises only those agencies whose business is primarily retail, not wholesale. This report also features the nation’s Top 20 Agency Partnerships, which can be found on page 29. This list includes agency groups such as aggregators, clusters, networks and franchise organizations, all of which play an important role in the independent agency system today. Also included is a list of the nation’s Top 20 Bank Holding Companies and Top 20 Banks in Insurance courtesy of the Michael White’s Bank Insurance Fee
Income Report - 2017 Edition. See Sponsored by page 30. Insurance Journal wishes to thank all of the agencies and brokerages that were willing to share their information and cooperated in the process for the Top 100 and Top Agency Partnerships reports. The We encourage all qualifying agencies to result is a glimpse at some of the nation’s submit data for future reports. The more most successful independent insurance submissions Insurance Journal receives agencies and brokerages. the more accurate and comprehensive this All information in this report has been listing can be. Also, submitted data was not garnered from voluntary online submisindependently verified. sions from agencies and brokerages and A special thank you to the 2017 Top 100 best estimates based on other public inforP/C Agencies report sponsor AFS IBEX. mation sources. There may be agencies For more information about this report, eligible for listing but for which no inforcontact Andrea Wells at: awells@insurmation was received or located. ancejournal.com.
26 | INSURANCE JOURNAL | NATIONAL AUGUST 7, 2017
INSURANCEJOURNAL.COM
Insurance Journal’s 2017 Top 100 Property/Casualty Agencies Ranked by 2016 Total P/C Revenue
Hub International Lockton Cos. Alliant Insurance Services Inc. USI Insurance Services
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
6 5 7 8 12 9 14 13 10 11 16 18 17 24 20 19
AssuredPartners Confie Acrisure LLC BroadStreet Partners Inc. NFP Integro Group Holdings LP Risk Strategies Co. Insurance Office of America Inc. Leavitt Group Crystal & Co. The IMA Financial Group Inc. Cross Financial Corp., dba Cross Insurance Wortham Higginbotham Heffernan Insurance Brokers Hays Companies
21
25
Woodruff-Sawyer & Co.
22
22
AIS Insurance *
23
23
Answer Financial *
24
26
PayneWest Insurance Inc.
$2,812,925,000 $16,907,118,000 $6,557,061,938 $8,213,632,936
11,554 6,500 2,806 4,353
Main Office
$1,107,702,000 $1,000,411,000 $656,293,229 $574,963,909
$380,364,000 $425,840,000 $245,476,528 $455,160,360
$8,191,839,000 $7,428,780,000 $5,252,492,321 $4,984,602,611
Chicago, Ill. Kansas City, Mo. Newport Beach, Calif. Valhalla, N.Y.
$546,904,035 $515,060,000 $478,614,530 $338,700,000 $214,013,378 $188,637,000 $153,300,000 $147,588,675 $145,976,185 $143,928,000 $116,711,856 $107,100,000 $105,498,000 $96,439,097 $91,947,700 $91,700,000
$294,208,901 N/A $121,418,378 $51,600,000 $755,586,224 $88,824,000 $46,745,000 $18,764,016 $62,568,997 $20,822,000 $29,596,533 $23,000,000 $21,896,000 $58,612,966 $28,009,100 $101,700,000
$89,000,000 $87,953,450
l
1 2 3 4
2016 Other than Full-Time P/C Premium Employees
$7,825,556,098 $1,654,500,000 $5,064,469,075 $2,750,000,000 $1,250,000,000 $1,850,000,000 $1,459,000,000 $1,538,414,369 $1,327,056,225 $1,236,000,000 $1,310,076,472 $851,300,000 $927,509,000 $671,871,000 $673,150,000 $1,030,000,000
$4,413,758,036 N/A $2,526,218,203 $950,000,000 $12,750,000,000 $1,600,000,000 $741,000,000 $270,441,304 $1,132,870,471 $319,000,000 $619,262,283 $656,300,000 $319,569,000 $1,466,561,000 $360,700,500 $1,000,000,000
$30,100,000
$810,300,000
$579,300,000
429
San Francisco, Calif.
N/A
$544,913,100
N/A
505
Cerritos, Calif.
$80,000,000
$2,000,000
$645,000,000
N/A
531
Encino, Calif.
$78,255,327
$21,466,741
$607,983,240
$309,676,926
675
Missoula, Mont.
Jo
1 2 3 4
2016 Total P/C Premiums Written
ur na
2016 Total 2016 Total Other P/C Revenue than P/C Revenue
ce
2017 2016 Rank Rank Agency Name
4,239 Lake Mary, Fla. 4,500 Huntington Beach,Calif. 2,798 Caledonia, Mich. 2,400 Columbus, Ohio 3,600 New York, N.Y. 1,064 New York, N.Y. 905 Boston, Mass. 1,064 Longwood, Fla. 1,692 Cedar City, Utah 469 New York, N.Y. 654 Denver, Colo. 760 Bangor, Maine 526 Houston, Texas 871 Fort Worth, Texas 409 Walnut Creek, Calif. 750 Minneapolis, Minn.
29
Hylant Group Inc.
$69,408,218
$39,005,337
$674,000,000
$1,645,000,000
635
Toledo, Ohio
41
Westwood Insurance Agency *
$64,430,785
N/A
$385,238,744
N/A
121
West Hills, Calif.
27
30
INSURICA Inc.
$63,144,913
$15,821,796
$526,713,096
$213,439,807
529
Oklahoma City, Okla.
28
32
TWFG Insurance
$62,747,669
$2,223,400
$418,317,795
$14,822,664
100
The Woodlands, Texas
$62,465,000
$15,265,000
$551,069,543
$386,900,388
475
Alpharetta, Ga.
$60,478,719
$24,511,684
$491,029,596
$245,116,845
503
Richmond, Va.
$59,654,000
$32,364,000
$515,079,504
$391,757,948
454
Schaumburg, Ill.
$54,365,000
$16,832,000
$470,000,000
$200,000,000
331
Tacoma, Wash.
$51,737,448
$15,084,504
$667,118,173
$270,872,075
427
Poughkeepsie, N.Y. Woodbury, N.Y.
29
28
Prime Risk Partners
30
42
The Hilb Group LLC
ur an
25 26
31
31
Assurance
32
35
Propel Insurance
33
33
Marshall & Sterling Enterprises Inc.
34
37
SterlingRisk
$51,456,000
$11,109,000
$361,329,000
$106,368,000
225
35
34
Eastern Insurance Group LLC **
$51,028,000
$24,365,000
$348,000,000
$411,899,000
370
Natick, Mass.
36
36
Frenkel & Co.
$46,977,000
$25,041,000
$561,490,000
$910,579,000
160
New York, N.Y.
38
The Graham Co.
new
Poms & Associates
Ins
37 38
$46,054,985
$5,185,842
$274,751,240
$49,436,638
174
Philadelphia, Pa.
$43,900,000
$5,600,000
$269,700,000
$85,000,000
200
Los Angeles, Calif. Bowling Green, Ky.
39
Houchens Insurance Group Inc.
$43,471,785
$15,665,334
$324,149,952
$395,717,900
279
40
Professional Insurance Associates Inc.
$42,000,000
N/A
$320,000,000
N/A
52
San Carlos, Calif.
41
44
$40,184,002
$3,779,478
$298,239,884
$125,621,085
230
East Providence, R.I.
42
48
Starkweather & Shepley Insurance Brokerage Inc. Gowrie Group
$39,604,500
$1,800,500
$280,537,000
$30,001,033
177
Westbrook, Conn.
43
45
Lawley Insurance
44
new
Ascension Insurance Inc.
®
39 40
45
43
46 47
$38,511,685
$17,746,852
$313,701,750
$333,698,641
344
Buffalo, N.Y.
$38,088,000
$48,722,000
$331,200,000
$328,500,000
467
Walnut Creek, Calif.
$37,106,129
$9,216,075
$292,575,418
$103,298,316
218
Houston, Texas
46
Bowen, Miclette & Britt Insurance Agency LLC Fisher Brown Bottrell Insurance Agency **
$36,767,223
$8,330,663
$325,074,935
$80,850,412
175
Jackson, Miss.
50
The Horton Group Inc.
$36,691,877
$25,032,669
$344,927,000
$441,615,000
356
Orland Park, Ill.
48
51
TrueNorth
$36,028,310
$15,319,541
$338,901,422
$388,098,578
301
Cedar Rapids, Iowa
49
47
Parker Smith & Feek Inc.
$35,670,000
$9,793,000
$291,825,000
$177,750,000
203
Bellevue, Wash.
50
49
Andreini & Co.
$34,156,950
$8,567,819
$205,746,528
$117,310,323
213
San Mateo, Calif.
51
54
LMC Insurance & Risk Management Inc.
$33,502,744
$12,429,324
$296,117,712
$161,201,794
280
West Des Moines, Iowa
52
52
The Mahoney Group
$32,470,981
$5,411,820
$224,142,017
$62,452,448
174
Mesa, Ariz.
Editor’s Note: * = Carrier Owned Agency; ** = Bank Owned Agency
INSURANCEJOURNAL.COM
AUGUST 7, 2017 INSURANCE JOURNAL | NATIONAL | 27
Insurance Journal’s 2017 Top 100 Property/Casualty Agencies Ranked by 2016 Total P/C Revenue
2016 Total 2016 Total Other P/C Revenue than P/C Revenue
53
57
Robertson Ryan & Associates Inc
54
55
Charles L. Crane Agency
$30,649,000
$4,439,000
55
59
Moreton & Co.
$30,061,000
$13,757,000
56
60
James G Parker Insurance Associates
$29,467,000
$5,075,000
57
56
Rich & Cartmill Inc.
$29,204,340
$1,028,069
58
61
Haylor, Freyer & Coon Inc.
$27,777,489
$3,522,967
$3,515,000
2016 Other than Full-Time P/C Premium Employees
$270,000,000
Main Office
$78,000,000
225
$217,000,000
$39,000,000
270
Saint Louis, Mo.
$372,000,000
$271,000,000
194
Salt Lake City, Utah
$297,333,000
$105,000,000
205
Fresno, Calif.
$244,194,770
$10,821,778
165
Tulsa, Okla.
$219,000,000
$81,000,000
171
Syracuse, N.Y.
ur na
$31,812,000
2016 Total P/C Premiums Written
Milwaukee, Wisc.
l
2017 2016 Rank Rank Agency Name
59
65
Insureon
$27,224,687
N/A
$254,921,972
$0
237
Chicago, Ill.
60
62
Bouchard Insurance
$26,770,711
$11,381,203
$254,973,501
$261,857,262
232
Clearwater, Fla.
130
New Berlin, Wisc.
61
66
HNI Risk Services
$25,885,758
$2,493,960
$325,000,000
$35,000,000
62
72
Scirocco Financial Group Inc.
$25,085,709
$2,843,589
$193,279,052
$41,327,310
108 Hasbrouck Heights, N.J.
63
Tolman & Wiker Insurance Services LLC
$24,516,170
$6,475,158
$218,816,406
$115,789,473
155
69
Wood Gutmann & Bogart Insurance Brokers
$23,801,554
$2,035,104
$227,483,675
$30,826,072
124
Tustin, Calif.
65
64
Bolton & Co.
$23,763,732
$19,200,823
$232,333,511
$384,016,860
175
Pasadena, Calif.
66
68
SullivanCurtisMonroe Insurance Services LLC
$23,625,000
$9,425,000
$258,715,000
$269,285,000
196
Irvine, Calif.
67
new
Shepherd Insurance
$23,428,616
$5,232,887
$179,346,830
$213,000,000
240
Carmel, Ind.
$6,215,000
$205,000,000
$270,000,000
225 Port Washington, Wisc.
$6,772,500
$188,000,000
$0
59
N/A
$151,380,000
$0
21
Denver, Colo.
$26,060,137
$168,000,000
$317,000,000
225
San Mateo, Calif. Salt Lake City, Utah
Jo
63 64
Ventura, Calif.
79
Ansay & Associates LLC
$22,474,000
76
Turner Surety and Insurance Brokerage
$22,375,800
70
91
Premier Group Insurance Inc.
$22,038,100
71
71
ABD Insurance and Financial Services
$21,832,166
72
81
The Buckner Co. Inc.
$21,637,793
$2,478,739
$170,515,779
$42,657,973
160
73
98
Sunstar Insurance Group LLC
$21,417,423
$1,713,385
$204,999,202
$48,301,580
148
Memphis, Tenn.
74
75
TIS Insurance Services Inc.
$21,265,298
$8,222,345
$151,878,653
$78,986,056
137
Knoxville, Tenn. Arcadia, Calif.
73
Arroyo Insurance Services Inc.
new
Baldwin Risk Partners
77
74
R&R Insurance Services Inc.
Paramus, N.J.
$21,258,620
$2,551,034
$174,790,260
$27,966,441
130
$21,200,000
$13,500,000
$243,000,000
$374,000,000
237
Tampa, Fla.
$21,122,000
$4,468,000
$19,305,000
$13,865,000
174
Waukesha, Wisc. Phoenix, Ariz.
ur an
75 76
ce
68 69
78
82
Lovitt & Touché
$20,982,963
$12,086,341
$196,085,633
$204,055,902
179
79
95
Eagan Insurance Agency LLC
$20,661,507
$1,124,823
$109,083,067
$12,498,037
88
Metairie, La.
80
92
Swingle Collins & Associates
$20,000,000
N/A
$138,000,000
$0
81
Dallas, Texas
81
70
Sihle Insurance Group Inc.
$19,392,383
$1,588,227
$170,804,452
$15,478,116
82
80
Associated Benefits and Risk Consulting
$19,151,800
$53,639,000
$157,900,000
$1,068,400,000
368
Minnetonka, Minn.
83
84
The Daniel and Henry Co.
$19,032,000
$5,279,000
$148,510,000
$56,351,000
178
St. Louis, Mo.
84
85
Tompkins Insurance Agencies Inc.
$18,873,000
$7,802,000
$273,167,000
$123,091,000
179
Batavia, N.Y.
85
83
Rogers & Gray Insurance
$18,691,700
$2,359,000
$129,800,000
$18,211,501
146
South Dennis, Mass.
86
77
John M Glover Agency
87
78
88
89
89
new
90
96
91
90
92
new
93
86
CHS Insurance Services LLC
94
87
Otterstedt Insurance Agency Inc.
95
97
The Advantage Group LLC
96
93
Cobbs Allen
114 Altamonte Springs, Fla.
N/A
$137,345,000
$10,000,000
175
Norwalk, Conn.
$18,495,000
$2,356,000
$148,037,000
$24,901,000
103
Houston, Texas
Armfield, Harrison & Thomas dba AHT Insurance JGS Insurance
$18,467,441
$14,472,069
$148,482,589
$0
187
Leesburg, Va.
$18,450,084
$406,254
$82,785,147
$2,391,856
74
Holmdel, N.J.
Foa & Son Corp.
$18,073,400
$1,833,100
$152,699,400
$35,626,300
115
New York, N.Y.
Associated Insurance Management Inc.
$18,008,879
N/A
$128,451,013
$0
75
Silver Spring, Md.
HomeServices Insurance
$18,000,000
N/A
$131,000,000
$0
150
Minneapolis, Minn.
$17,131,867
$1,792,115
$128,355,306
$29,086,734
94
$16,345,390
$704,721
$124,040,839
$24,012,000
88
Inver Grove Heights, Minn. Englewood Cliffs, N.J.
$16,157,425
$1,292,494
$102,011,170
$16,156,175
103
Edmonds, Wash.
$15,920,728
$7,183,147
$143,167,572
$82,653,592
133
Birmingham, Ala. Memphis, Tenn.
®
Ins
$18,601,967
Insgroup Inc.
97
99
Lipscomb & Pitts Insurance LLC
$15,340,365
$5,957,047
$138,167,000
$218,063,000
129
98
new
L/P Insurance Services Inc.
$15,180,440
$4,532,593
$115,927,390
$61,901,604
141
Reno, Nev.
99
new
SouthGroup
$15,050,100
$1,160,600
$120,150,000
$12,300,000
142
Ridgeland, Miss.
MJ Insurance Inc.
$14,988,543
$12,559,598
$124,333,548
$681,219,102
124
Indianapolis, Ind.
100 100
Editor’s Note: * = Carrier Owned Agency; ** = Bank Owned Agency
28 | INSURANCE JOURNAL | NATIONAL AUGUST 7, 2017
INSURANCEJOURNAL.COM
l ur na
Insurance Journal’s Top 20 Agency Partnerships
(Ranked by 2016 Total P/C Revenue) Employee count for these groups does not necessarily include all affiliates responsible for total revenue.
1
2016 Total P/C Revenue
Agency
2016 Total Other 2016 Total P/C than P/C Revenue Premiums Written
2016 Other than P/C Premium
Full-Time Employees
Main Office
$6,610,000,000
N/A
14,314
Hampton, N.H.
$43,845,000
$401,476,000
$582,000,000
2,190
San Francisco, Calif.
N/A
$3,267,870,849
$971,497,250
3,314
Northumberland, Pa.
$31,432,330
$1,933,006,726
$324,126,976
10
Tucker, Ga.
N/A
$1,032,815
N/A
64
Allegany, N.Y.
Jo
2017 2016 Rank Rank
N/A
SIAA Inc.
$843,938,886
2
3
ISU Insurance Agency Network
$401,475,000
3
2
Keystone Insurers Group
$392,144,502
4
4
SecureRisk
$250,785,588
5
5
The Iroquois Group
$150,688,483
6
6
Combined Agents of America LLC
$97,748,334
$11,052,314
$744,083,729
$110,000,000
925
Austin, Texas
7
7
Renaissance Alliance Insurance Services LLC
$96,402,877
$1,373,444
$574,971,920
$1,496,335
96
Wellesley, Mass.
ce
1
$89,250,000
$73,047,000
$595,998,000
N/A
10
El Dorado Hills, Calif.
$88,000,000
$8,000,000
$451,000,000
$120,000,000
385
College Station, Texas
$84,498,750
$6,060,600
$675,990,000
$101,010,000
27
Fresno, Calif.
$67,151,000
$1,997,000
$568,000,000
$2,500,000
45
High Point, N.C.
$56,586,702
$4,548,954
$415,473,758
$97,245,916
486
Statesboro, Ga.
N/A
$426,000,000
N/A
428
Stuart, Fla.
$48,634,225
$1,030,603
$401,964,591
$7,748,193
235
Jacksonville, Fla.
9
Pacific Interstate Insurance Brokers
10
Insurors Group LLC
10
8
United Valley Insurance Services Inc.
11
11
Smart Choice
12
12
Georgia Agency Partners Inc.
13
14
GreatFlorida Insurance
$53,266,000
14
13
Brightway Insurance
ur an
8 9
15
15
United Agencies Inc.
$43,491,342
$10,108,342
$349,328,053
$206,714,564
292
Pasadena, Calif.
16
17
Networked Insurance Agents
$42,012,751
N/A
$233,110,416
N/A
113
Grass Valley, Calif.
$36,249,646
$8,335,435
$274,757,737
$90,083,357
274
Owasso, Okla.
$33,091,849
$588,666
$330,918,401
$2,063,301
23
Las Vegas, Nev.
$30,713,759
N/A
$242,492,735
N/A
251
Camp Hill, Pa.
$30,015,444
N/A
$300,154,442
$64,450,000
349
Fresno, Calif.
17
16
Bainswest Inc.
18
18
Fiesta Auto Insurance Center
19
19
The Insurance Alliance of Central Pennsylvania Inc.
20
20
PacWest Alliance Insurance Services Inc.
®
Ins
Editor’s Note: List includes aggregators, clusters, and franchise groups.
INSURANCEJOURNAL.COM
AUGUST 7, 2017 INSURANCE JOURNAL | NATIONAL | 29
Top 20 Banks in Insurance Brokerage Fee Income (2016/Nationally)
Website
Winston Salem, N.C.
https://www.bbt.com
$636,000,000
Citibank N.A.
Sioux Falls, S.D.
https://www.citibank.com
3
$114,848,000
BancorpSouth Bank
Tupelo, Miss.
https://www.bancorpsouthonline.com
4
$80,795,000
Associated Bank N.A.
Green Bay, Wisc.
https://www.associatedbank.com
5
$73,997,000
Eastern Bank
Boston, Mass.
https://www.easternbank.com
6
$60,654,000
Discover Bank
Greenwood, Del.
https://www.discovercard.com
7
$56,528,000
Towne Bank
Portsmouth, Va.
https://www.townebank.com
8
$47,326,000
Frost Bank
San Antonio, Texas
https://www.frostbank.com
9
$42,402,000
Manufacturers and Traders Trust Co.
Buffalo, N.Y.
https://www.mtb.com
10
$36,764,000
Trustmark National Bank
Jackson, Miss.
https://www.trustmark.com
11
$32,905,000
People's United Bank
Bridgeport, Conn.
https://www.peoples.com
12
$28,490,000
KeyBank N.A.
Cleveland, Ohio
https://www.key.com
13
$19,106,000
Valley National Bank
Passaic, N.J.
https://www.valleynationalbank.com
14
$16,958,000
Fifth Third Bank
Cincinnati, Ohio
https://www.53.com
15
$15,586,000
Univest Bank and Trust Co.
Souderton, Pa.
https://www.univest.net
16
$15,571,000
PNC Bank N.A.
Wilmington, Del.
https://www.pnc.com
17
$14,360,000
Arvest Bank
Fayetteville, Ark.
https://www.arvest.com
18
$14,040,000
Benchmark Bank
Plano, Texas
https://www.benchmarkbank.com
19
$13,960,000
The Adirondack Trust Co.
Saratgoa Springs, N.Y.
https://adirondacktrust.com
20
$13,846,000
Peoples Bank
Marietta, Ohio
https://www.peoplesbancorp.com
ur na
2
ce
$1,708,128,000
l
City, State
Branch Banking and Trust Co.
1
Jo
Rank
2016 Insurance Brokerage Fee Income Bank Holding Company Name
Note about this report: These rankings include commercial banks, savings banks and savings associations (a.k.a. thrifts) which are required to report line item fee income like insurance brokerage. Source: Michael White’s Bank Insurance Fee Income Report - 2016 Edition
Top 20 Bank Holding Companies in Insurance Brokerage Fee Income
Ins ur an
(2016/Nationally)
City, State
Website
1
$1,709,519,000 BB&T Corp.
Winston-Salem, N.C.
https://www.bbt.com
2
$898,000,000 Wells Fargo & Co.
San Francisco, Calif.
https://www.wellsfargo.com
3
$392,000,000 Citigroup Inc.
New York, N.Y.
https://www.citigroup.com
4
$256,000,000 Bank of America Corp.
Charlotte, N.C.
https://www.bankofamerica.com
5
$153,000,000 American Express Co.
New York, N.Y.
https://www.americanexpress.com
6
$141,842,000 Regions Financial Corp.
Birmingham, Ala.
https://www.regions.com
7
$116,282,000 BancorpSouth Inc.
Tupelo, Miss.
https://www.bancorpsouthonline.com
8
$80,795,000 Associated Banc-Corp
Green Bay, Wisc.
https://www.associatedbank.com
9
$77,728,000 First Command Financial Services Inc.
Fort Worth, Texas
https://www.firstcommandbank.com
10
$73,997,000 Eastern Bank Corp.
Boston, Mass.
https://www.easternbank.com
11
$71,000,000 Morgan Stanley
New York, N.Y.
https://www.morganstanley.com
12
$68,523,000 Stifel Financial Corp.
St. Louis, Mo.
https://www.stifelbank.com
13
$63,578,000 Huntington Bancshares Inc.
Columbus, Ohio
https://www.huntington.com
14
$60,654,000 Discover Financial Services
Riverwoods, Ill.
https://www.discovercard.com
15
$47,326,000 Cullen/Frost Bankers Inc.
San Antonio, Texas
https://www.frostbank.com
16
$42,402,000 M&T Bank Corp.
Buffalo, N.Y.
https://www.mtb.com
17
$42,000,000 Popular Inc.
San Juan, Puerto Rico
https://www.popular.com
18
$36,764,000 Trustmark Corp.
Jackson, Miss.
https://www.trustmark.com
19
$32,905,000 People's United Financial Inc.
Bridgeport, Conn.
https://www.peoples.com/portal/site/ peoples
20
$30,420,000 Lauritzen Corp.
Omaha, Neb.
https://www.firstnational.com
®
Rank
2016 Insurance Brokerage Fee Income Bank Name
About this report: With few exceptions, the Federal Reserve Board requires only what it defines as “large” bank holding companies (i.e., BHCs with consolidated assets in excess of $1 billion) to file line item fee income like insurance brokerage. Ranking excludes several traditional life insurers that do not engage in significant banking activities. Source: Michael White’s Bank Insurance Fee Income Report - 2016 Edition 30 | INSURANCE JOURNAL | NATIONAL AUGUST 7, 2017
INSURANCEJOURNAL.COM
News & Markets | NATIONAL unless you know what drives your company,” Markel said. “Companies in a growth mode have to determine what makes them tick; it’s critical. People drive the entire process of any organization and it’s critical to stick to your culture.”
‘People are the most important thing in any business. Everything boils down to people.’
‘Specialize and Diversify,’ Industry Veteran Markel Tells Super Regional Insurers By Andrea Wells
I
nsurance is a very simple business. “You take in some money, you spend some money and you lose some money, and God willing, you have some left at the end of the day,” according to Anthony (Tony) Markel, vice chairman of the board at Markel Corp., and a keynote speaker at the inaugural Super Regional Property/Casualty Insurer Conference 2017, sponsored by Demotech Inc. and Insurance Journal, in Lake Geneva, Wis., July 16-18. Markel told the story of the Markel Corp., a company he helped grow from a small long-haul trucking wholesale specialty agency with a net worth of about $6 million into a global holding company for insurance, reinsurance and investment operations with total revenue of more than $14 billion today. INSURANCEJOURNAL.COM
His main advice for super regional carriers: specialize but diversify, much like Markel has done over the years. He also urged them to take full advantage of new technology and analytics but not to forget people and relationships. When Markel and his cousins took over the wholesale insurance agency in the mid-1970s from his father and grandfather, the business was entirely dependent on long-haul trucking, which remains a difficult class of business. “Although we had a nice platform, we decided we needed to make changes,” he said. That change meant taking the firm into a risk-bearing role. In 1980, Markel started the firm’s first entry into the insurance company side by founding the Essex Insurance Co. In 1986, the company went public, opening the door to expansion and global opportunities in the London
market. In 2016, Markel was listed on the Fortune 500. The road to $14 billion in revenue wasn’t easy, Markel said, but the firm grew by staying true to certain principles. Markel told Super Regional P/C Insurer Conference attendees the firm’s success can be told through an old marketing concept known as the 5 Ps – product, price, place, promotion and, most important, people.
Smart People
Markel’s success has everything to do with its people, according to Markel. “Clearly people are the most important thing in any business," he said. "Everything boils down to people. Hire smart people, much smarter than you are." Also, critical to companies in a growth mode is hiring people that align with the company’s culture. “You can’t hire good people
Competitive salaries and good employee benefits are important, but one of the most overlooked compensation benefits, according to Markel, is incentives. “You want eye-catching incentives that focus on what performance you really want," he said. "…Give employees a piece of the action, and most importantly, base a majority of their incentive comp on their individual performance.” From a public company standpoint, the shareholder mentally goes along well with incentive compensation, he added. Results are quantifiable. “I hate incentive programs that are judgement (based) and subjective," he said. "That doesn’t focus on what to deliver. Tell them upfront: here’s what I expect and here’s what you are going to get.” People want to feel like they are part of the team; they want to feel important, Markel said.
Product
Insurance products are not “rocket science” but success comes with specialization. For Markel, success has come with one specialized product after
continued on page 32
AUGUST 7, 2017 INSURANCE JOURNAL | NATIONAL | 31
NATIONAL | News & Markets continued from page 31
another, he said. “We started off with a few fundamental products — one deal and product at a time — but they were all reasonably specialized," he said. "The last thing you want to do is get into a generalist mode. Specialize, but do diversify. If you are wed exclusively to one product and that product comes under attack, you are in trouble. Specialize, but diversify.” Products have a life span in insurance like every business. “What’s hot today will be less necessary tomorrow, so continually add to your product mix,” Markel advised the audience. Pay attention to what producers say, too. “Anyone who doesn’t pay attention and listen to their producers when developing new products is dooming themselves to mediocrity,” Markel said. Don’t overlook how to enhance products either. “Things change rapidly today. Competition comes in at the drop of a hat,” he said. What is an outstanding product today might be outdated in six months. Always be aware of what’s going on in the marketplace and respond accordingly to producers, he said. “You better know what’s going on in the marketplace and make conscious decisions on what you can do and what you can’t do," he explained.
Place (Distribution)
While Markel Corp. began its roots as a wholesale insurance organization and continues to focus mainly on the wholesale market, Markel said in today’s world, diversifying is a must. “We started and continue to be very wholesale driven, but we also have retail chan-
nels and direct business,” he said. Sticking to one channel of distribution is no longer an efficient way to deliver every product, he added.
‘Anyone who doesn’t pay attention and listen to their producers when developing new products is dooming themselves to mediocrity.’ “Retailers themselves will admit they are not the proper way to distribute some products, and wholesalers are not the end all either,” Markel said. “You can’t be naively committed to one distribution system because clearly all products cannot be distributed by one distribution system.” The proper way: take a look at each product and be open about how it should be distributed, he said. When Markel broke the news that it would diversify its distribution channels, it had to be delivered to its traditional wholesale channel “very gently,” he said. “But realistically, wholesalers understand their role," he said. "They might not see it the
32 | INSURANCE JOURNAL | NATIONAL AUGUST 7, 2017
way we do and where they add value and where we add value, but frankly, these products didn’t fit into their mold.” He added it’s important to have a realistic conversation. “Sit down and talk.”
Price
A property/casualty insurer cannot be successful without producing an underwriting profit, Markel said. “It’s job number one, and everyone in the organization from the president to the switchboard operator has to know that underwriting profit is number one," he said. "You can’t invest funds with any degree of confidence if you are always facing the specter of underwriting losses.” Insurers have to be committed to making an underwriting profit, and it takes everyone in the organization to do it, Markel said. He advised tying underwriting profits to incentive programs when possible. Just as important to profitability for insurers is conservative reserving, he said. “If you don’t reserve adequately, you are doomed to bring on potential failure," he said. "For an underwriter, to bring on good risk when you have under-reserved puts you
in trouble.” For Markel, “if you see us taking any underwriting profit from long tail business I can assure you it will be from years three, four or five. … We will not take underwriting profit from current years because of the potential of losses.” Insurers must invest in technology tools as well, Markel said. “Make sure your underwriters have the tools necessary to do the job instead of being naïve,” he said. Markel’s success didn’t come from holding back on expenses. “We have never been a low expense writer," he said. "We have always spent more time pricing on loss ratio than expense ratio. We look to reduce expense as every organization should but it’s a heck of a lot easier to reduce an expense ratio than to reduce a loss ratio. We concentrate much more on loss ratio than expense.”
Promotion
According to Markel, communication and promotion are key and service “goes without saying.” It’s a competitive market, and there’s always someone “ready to eat your lunch,” Markel said. But at the end of the day, it boils down to people, relationships and understanding what people want. “You cannot over communicate – you can’t," he said. "You can’t provide your people, your clients and your distribution channel partners with too much information on what you are doing and what you want to accomplish." Share this arti-
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Workers’ Comp (www. LowRateWorkComp.com) serves Florida and throughout the USA. Eligible classes have one or more employees with $400/week minimum payroll. Pay as you go workers’ comp, payroll service, and employee leasing available. Available limits: As needed Carrier: Unable to disclose, admitted States: All states except Ohio Contact: Customer service at 850-625-5190
Coastal Homes
Market Detail Reliable
Insurance Managers Inc. (www. reliableins.net) can appoint agents to write home insurance right away. Online quote and bind online, with coverage available in all zip codes, no credit checks, homeowners, dwelling, mobile homes and flood. High commissions and no start up or monthly fees. Minimum Limit: 20,000 Available limits: Maximum $5 million Carrier: Unable to disclose,
admitted and nonadmitted available States: Texas only Contact: Ryan Nickels at 713227-7283 or e-mail: r.nickels@ reliableins.net
Local & Regional Trucking
Market Detail: IBI – Insurance
Brokers of Indiana (www.goibi. com) has access to write local and intermediate trucking that is domiciled in Indiana. No unit count restrictions and new ventures are acceptable. Auto liability, auto physical damage, general liability and trailer interchange can be packaged together with direct bill options. Commodity types can vary. Local delivery operations are acceptable. Available limits: As needed Carrier: Unable to disclose, admitted States: Indiana only Contact: Brian Collins at 317888-2593 or e-mail: bcollins@ goibi.com
Aircraft Hull and Liability
Market Detail: Plimsoll
Specialty Markets LLC (www. plimsollspecialty.com) offers hull and liability for airplanes
34 | INSURANCE JOURNAL | NATIONAL AUGUST 7, 2017
and helicopters of every type from large fleets of helicopters to regional airlines down to the light aircraft operated by the CEO of the key account. Available Limits: As Needed Carrier: Unable to Disclose States: All states Contact: Customer service at 770-933-6925
Transportation Insurance Program
Market Detail: Continental
Underwriters Inc. (www.contund.com) has rolled out of a new motor carrier program. The following commodities are acceptable for coverage: dry van; less than truckload (LTL); truckload carriers; refrigerated; intermodal; liquid and dry tanker operations; local cartage; and hardwood log haulers. Ineligible trucking operations that cannot be written in this program: hazardous materials; sand and gravel/in transit ready mix; wrecker/junk auto haulers; garbage haulers; cattle and livestock; house/ mobile homes. Target markets/ favorable characteristics local, regional and intermediate for hire motor carriers with: above average loss experience; satisfactory DOT/CSA ratings with
Insurance Professionals, also known as EIP, (www.execins. com) is a company providing primarily property and casualty insurance solutions to business owners and retail agents throughout Texas, Oklahoma, and other states. EIP’s main business is focused on commercial insurance products such as general liability, professional liability, inland marine, and many more lines of business. Available limits: As needed Carrier: Unable to disclose, non-admitted States: Calif., Okla., and Texas Contact: Customer service at 800-779-4095.
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NATIONAL | Spotlight | Homeowners & Condos
How Insurers Can Tap into New Revenue Streams by Using ‘Data Exhaust’ By L.S. Howard
T
he chief executive officer of Quandl is on a mission to let insurance companies know that their data is valuable and professional investors will pay them for it. But a lot of insurers are oblivious to that fact. “We’d like to unlock the value of that data by creating a new source of revenues for insurers,” said Tammer Kamel, CEO of Quandl, a Toronto-based data platform that gathers financial, economic and alternative data for investment professionals. “The revenue insurers can receive for data falls right to their bottom line. There is no cost to the insurance company. It’s just extra money for doing very little,” he said. For more than five years, Quandl has taken “data exhaust” from a variety of industries and sold it to investors who are looking for market signals on which to trade. The company focuses on alternative data sourced from “the wilderness” — in other words, data that Wall Street doesn’t normally see. “We find undiscovered data, package it
in a way that investors can use, and sell it to them to generate revenue for us and our data partners.” Insurance companies’ data definitely falls within “my definition of data from the wilderness,” Kamel affirmed.
Auto Data From the Wilderness
Just over a year ago, Quandl first opened its doors to insurance industry data, beginning with a partnership with a U.S. auto insurer. “The insurance company came to us and said, ‘We’re interested in learning how we can monetize our data through a partnership with you.’” The two companies sat down together to discuss some ideas and came up with a plan. Now, a year later, this company provides daily reports to Quandl about how many auto policies it has written. The reports are repackaged and sent to investors who can use it for trading. “This insurer is making money in an innovative way by taking their data exhaust and sending it through us and ultimately on to professional investors,” he explained. The insurer doesn’t provide information
36 | INSURANCE JOURNAL | NATIONAL AUGUST 7, 2017
about who is buying the cars. “They just report the number of policies written for various car manufacturers. That’s it — one number per day,” said Kamel, emphasizing that no customer information is revealed so the insurer’s business is not compromised in any way. “It turns out that this is very interesting information for Wall Street because it correlates with new car sales in general,” he said. “When people buy a new car, the next thing they do is buy an insurance policy.” This creates a window into how many new policies are being sold each day. This is powerful information for Wall Street, which typically gets such data on a monthly basis, Kamel explained. “That’s an example of an insurance company taking its data exhaust and turning it into more revenue for the firm. They don’t have to do anything other than give us access to the data, and we send them a check,” he said.
Economic Indicators
“Any unique data that professional investors can access has the potential of giving them an advantage vis-à-vis their peers and vis-à-vis the market as a whole,” Kamel added. “If you know something about a company, a part of the economy or a commodity that others don’t know, you can profit from that by trading on that information.” INSURANCEJOURNAL.COM
The number of new cars being sold in America is an important economic indicator as well as an indicator of the performance of auto or parts manufacturers, he said.
Homeowners Insurance
The housing market is another key economic indicator. “Insurers have a very good understanding of activity in the housing market because every house that is bought is ultimately insured, usually around the time that it changes ownership," he said.
tion about its insurance partners is ever revealed by Quandl. “The identity is protected so the information only can be used for its intended purpose and not to get an inside track on how any particular insurance company is doing," he stated.
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Do I need to sell my agency because everyone else is?”
‘Insurers have a very good understanding of activity in the housing market.’ As a result, Quandl is currently looking in the “wilderness” to find an insurer with homeowners insurance data to sell. But it doesn’t have to stop at homeowners, Kamel said. Anything that insurers cover provides interesting data for investors, he said, pointing to the example of coverage for luxury goods or commercial shipping. “There are probably things that could be done with their data that they haven’t even thought about," he said. And just because Quandl has one data partnership with an auto insurer doesn’t mean a second or third insurer couldn’t be introduced as partners. “More insurers provide more coverage, which increases the accuracy on anything you’re already tracking,” he said. “There is lots of room for growth.” The potential for profit is huge as each investor will pay up to $1 million to Quandl for a powerful data set, which Quandl shares with the data partner. The portion varies with every partner, Kamel said. While that may seem like a lot of money, Kamel explained that these investors manage billions of dollars, which means they need to make hundreds of millions of dollars in profits. “Spending $1 million to make $10 million can be a very sensible decision," he said. Kamel emphasized that no informa-
In line with this confidentiality, Quandl also doesn’t reveal how many insurers it works with, only that it’s “currently a small number.” Share this article with a col-
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AUGUST 7, 2017 INSURANCE JOURNAL | NATIONAL | 37
11/1/15 12:39 PM
NATIONAL | Closer Look | Recreation & Leisure
Risks Multiply When Recreation Turns to Adventure Ziplining and rock climbing replace sight-seeing and beachcombing By Andrea Wells
V
acationers and tourists are no longer content to sit and relax; they want adventure. The global adventure tourism market is forecast to grow by as much as 46 percent by 2020, according to the Global Adventure Tourism Market 2016-2020 report published October 2016 by SandlerResearch.org. In 2015, the adventure tourism industry generated revenue of $7.88 trillion. “Increased preference for adventure over other tourism activities will be a key driver for market growth,” the report said. Instead of staying at beach cottages or going sight-seeing, vacationers are increasingly opting to go skydiving or rock climbing, caving or deep-sea
diving and similar high risk activities. Insurers are having to keep up with the trend. “Campgrounds, RV parks, dude ranches, resort lodges — those are some areas where we’ve seen a shift going on,” says Doug Killeen, vice president of underwriting at Philadelphia Insurance Companies. “Those places are feeling the pressure to add many different services and a lot of those services are in the adventure realm.” Campgrounds used to be where vacationers would spend the night, perhaps swim in the camp’s pool or play a round of putt-putt golf. But times have changed. It’s no longer enough for a campground to offer traditional activities such as hiking or swimming, according to Krystal Allen, underwriting manager at Philadelphia Insurance Companies.
38 | INSURANCE JOURNAL | NATIONAL AUGUST 7, 2017
Many campgrounds are adding things like inflatables on a lake, jumping pillows and climbing walls, she said. Even upscale resort lodges are finding customers want white water rafting, mountain biking, ropes courses and ziplining.
Entertainment
“Now campgrounds are more geared to having entertainment for the children; they are more than just a place to stay and see the local sites,” she said. Parks are adapting to consumer demands as well. “It’s not just a swing set anymore. Parks are adding these large climbing apparatuses geared toward entertaining the children on premise,” she said. Leisure and recreation companies are finding that if they don’t want to go into riskier activities they must at least add more for their guests to do than in days gone by. “The common thing we see a lot is having to have a dozen activities to offer,” Killeen said. “It’s not all just high-thrill but places feel the need to offer a lot – ice skating, snow shoeing, dog sledding or snow mobiles.”
Specialized Adventures
One insurance specialist is betting his company’s future on the adventure trend. Isaac Allen, president and CEO of The Northman Co., a managing general underwriter and managing general agency, is focusing his firm on “insurance for the wild.” Allen founded his firm a little over three years ago looking to write a variety of risks including construction and energy. “We were touching everything at that point,” he said of his agency’s beginning. But it did not take long for him to refine the mission and take his own business on an adventure.
‘Campgrounds, RV parks, dude ranches, resort lodges — those are some areas where we’ve seen a shift going on.’ For Allen, targeting adventure comes naturally. He competed in college football and rugby and calls himself a lifelong outdoorsman. Those he hired were also into sports. “Our entire team is from the sports and entertainment world,” he said. He came to realize that many
INSURANCEJOURNAL.COM
of his Northman’s clients were from sports and entertainment as well. “As we started to examine our client base we noticed that the biggest impact was going to be made in the sports and entertainment industries,” he said. He was also motivated by personal relationships. “I have a lot of buddies that travel for sport and compete for prizes. At the same time they were having a real difficult time finding life (insurance) programs that would actually cover them for their events or for a lot of the back country things they do. That’s how it started,” he said. The sport and adventure industry has changed and for the past year Northman has been trying to educate insurance markets on that change, according to Allen. Both the London and Bermuda markets compete in this space. “They are recognizing that the industry has matured and it’s a global. This was an industry where guys were living in the back of their trucks five years ago. Now they are getting sponsored for hundreds of thousands of dollars if not millions a year.” Large companies are moving into this space as well – from energy bars, to health food companies and equipment gear. “We’ve had to educate these markets and bring them up-to-speed on the maturity and risk management and risk mitigation sophistication of the industry today,” he said. Part of that
INSURANCEJOURNAL.COM
education has come from collecting and analyzing industry data. “Our data show not only are loss ratios better today than five to eight years ago, but also that the adventure sport industry is growing in size,” he added. And these adventure seekers are looking for the best coverage too.
‘This market has a client demographic that is begging for accurate coverage.’ “This market has a client demographic that is begging for accurate coverage. They want it and they don’t even have discrepancies with paying a higher premium if it’s the best coverage, if they know that if something goes wrong they are covered. That’s their biggest issue.” In the sports sector, in particular, Allen said there has been “massive gaps” in data. “There wasn’t a lot of statistics of actual loss runs and especially a lack of attention on risk management and mitigation. We recognize that as differentiators and that’s what we’ve built our team around.” Northman is ready to embark on a whole new adventure in expansion. Allen said the firm is in its last round of securing $100 million funding to acquire similar businesses. “I can’t name funders at this point but we are about three weeks away from having that completely done and able to announce,” he said. In preparation, Allen has
brought on board some heavy-hitters in the adventure sports and events world: • Chris Davenport, a twotime World Champion skier widely regarded as one of the premier big mountain skiers in the world today, joined Northman to lead the adventure sport division. Davenport is also a team member of the Kastle Ski Co. • Tim Cadiente, a former marketing guru with Oakley, is leading the Northman entertainment division and serving as chief creative officer. • Tad Pilati, joined Northman as chief marketing officer, from Beats by Dre. Allen thinks the adventure world will continue to grow for a few philosophical reasons. “I look at the way we function as society now; it is so safe. We sit in an office, then we go home to a really nice place where we have food and hot water, we make pretty good money and have health care. Life is very safe.” But he maintains humans are meant to have a dose of adrenaline. “When you get into sport and you get into those adventure experiences where it makes you completely focused with a clear mind, for me it’s my purest form of meditation. I go into sport and I think about nothing except my mind and body connection, whether it’s trail running or rugby; there’s nothing going on in my head except for survival and execution of my body and muscle memory. It forces you back into primitive survival mode.”
AUGUST 7, 2017 INSURANCE JOURNAL | NATIONAL | 39
Idea Exchange
Claims
How to Catch Commercial Auto Use Fraud
By Alex Young
P
ulling the wool over the insurance company’s eyes seems like a victimless crime. After all, if a few dollars are saved by saying a car is a personal vehicle instead of the commercial work truck it really is, who really gets hurt? The answers is — everyone. Because the truth is, smallstakes scams like this can collectively cost a company — and other policyholders — a lot of money. Insurance fraud is on the rise — a study from the Coalition Against Insurance Fraud (CAIF) found that more than 60 percent of insurers say fraud rose from 2013 to 2016. Carriers are fighting back: 76 percent of insurers use technology to detect false claims — a steep increase from CAIF’s 2014 and 2012 studies. But when it comes to auto insurance, in particular, the strategy of waiting until claims departments catch fraud has two gaping flaws: Not all fraud is caught when processing a claim and even if it is caught at the time of a claim, auto insurance carriers may still lose big. Nowhere is this strategy more of a mistake than when a carrier insures what it believes to be a personal vehicle that is being used for commercial purposes.
their books, which leads them to discount premiums on the front end and rely on claims to catch fraud on the back end. The 2016 CAIF study found 90 percent of the insurers using anti-fraud technology are employing it during claims. Methods include automated red flags/business rules tied to existing claims systems, which “help insurers tag honest claims for payments and isolate suspect ones for routing to anti-fraud departments” — but hoping fraud will be caught at the time of a claim is the wrong approach, for several reasons. The potential for commercial use fraud begins at underwriting, when a driver may not directly misrepresent his intentions to use a vehicle commercially, but certainly will not volunteer the information, and may never be asked either way. Additionally, through what’s called “adverse selection,” a savvy insurance agent looking to bring in more business may insure a high-risk driver — or someone the agent knows will use a vehicle for commercial use without buying a policy for such — under a carrier with a hole in its risk profiling. If a carrier does not inspect the driver closely during underwriting in order to take in more revenue in the short term, this creates a higher risk in the long term. When it comes to commercial use, if carriers take a risk at underwriting and then wait for claims to find fraud, they’ve already lost money. The carrier would have been charging a lower premium, because personal vehicle insurance is always less expensive than commercial
insurance — sometimes up to 100 percent less expensive — so the carrier has been losing out on potential revenue for the life of the policy. Verisk estimates that personal lines automobile insurers incur $29 billion in annual losses due to premium leakage. The carrier also may believe it can simply void a policy at the time of a claim if there is commercial use fraud, but that isn’t true across the board. A policy cannot always be voided. Even if the claims team does catch it, the cost to fight fraud at claims may far exceed the cost to prevent that fraud in the first place. Further, even if the fraud is discovered at claims and the carrier can in fact void the insured’s policy, the carrier may still be on the hook for third-party claims, if the vehicle it was insuring caused bodily injury to passengers or other drivers. These costs can be devastating: Picture a landscaping crew driving to a jobsite in a truck with an extended cab, seating five people. The driver, who is insured under a personal auto policy and not a commercial one, gets into an accident, and all parties are seriously injured. Although the carrier may be able to void the driver’s policy for
Waiting Until Claims to Catch Fraud
Most auto insurance carriers correctly assume they have some level of fraud on 40 | INSURANCE JOURNAL | NATIONAL AUGUST 7, 2017
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use misrepresentation, the carrier may still be responsible for the medical expenses of the four passengers.
Commercial Use Detection
Some carriers try to head off commercial use fraud during underwriting by looking for red flags, which might include type of vehicle (Ford Econoline, Ford Sprinter, F150, etc.), whether the vehicle has ever had a commercial plate attached to its vehicle identification number (VIN), or whether the listed driver has ever held or currently holds a professional tradesman license (plumber, contractor, etc.). To find these red flags, most carriers must go to a third-party service that would run license plates or identification information through a filter. These data analytics tools do work in some cases, but certainly not all: Some contractors or professional tradesmen are not licensed, which means they would never be flagged by any system. Additionally, not every vehicle being used for business will have a commercial plate tied to it. A vehicle like a Ford F150 can certainly function as both a heavy-duty work truck and a way to tool around town. No insurance carrier ever sends an inspector to assess a vehicle before writing a policy anymore — but without a commercial plate or tradesman license tied to a vehicle or driver, how would a personal lines auto insurer ever know if it was being used commercially?
Value of a Photo
There is one method that walks the line between analytics and analog: determining commercial use by parsing actual photographs of the vehicle being insured, while it’s on the road or driving around town. A picture of a vehicle is the best evidence of commercial use a carrier can have when it comes to certain definitive attributes — e.g., commercial-grade ladder racks and tool boxes, lifts, heavy-duty trailer hooks, business signage, etc. While not all commercial use can be determined with a photo, a photo showing those characteristics of commercial use is near definitive proof — much more so
than a driver with a commercial license or commercial plates. A photo of the driver’s vehicle with “Bob’s Roofing” painted on the side and a commercial-grade ladder rack on top makes it clear. With the photographic evidence that
continued on page 42
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some new tools and services can provide, a carrier’s agents are better armed with definitive evidence of commercial use, and can either adjust the policy to reflect a commercial rate or get the policy off the
7/18/17 1:19 PM
AUGUST 7, 2017 INSURANCE JOURNAL | NATIONAL | 41
Idea Exchange
Claims
continued from page 41 books. With all states allowing carriers a 30-day window to update a policy or withdraw a quote, carriers can insure now and check photos of vehicle sightings later for any policy flagged during analysis.
Nothing Soft About This Fraud
Carriers may consider commercial use misrepresentation “soft” fraud — but there’s nothing soft about it. In its 2016 report, Verisk estimated 8 percent of all
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policies have some level of ownership misrepresentation, and a loss ratio of more than double other policies studied — making it critical that carriers have a way to contain fraud well before claims. Verisk recommends a couple of ways to lower the risk of fraud and/or misrepresentation, including “prevent and contain premium leakage across the policy life cycle with quality data assets,” and “verify previously unknowable underwriting information with the help of dependable partners.” With a data asset like a photograph, carriers have a clean way of assessing commercial use at or immediately after underwriting, using information that may previously have been unknowable, such as whether the vehicle has a commercial-grade ladder rack — as opposed to data analytics tools, which tend to be more of an indicator; they provide a lead, but not real proof.
‘The potential for commercial use fraud begins at underwriting.’ Automated systems and data analytics can be a complicated way of tracking down misrepresentation, whereas photos of vehicle sightings are decidedly straightforward. Of course, a driver could argue that a commercial-grade toolbox doesn’t necessarily mean commercial use, or that signage for Bob’s Roofing on the side of a truck might just mean Bob was the previous vehicle owner and not the current one — but with access to vehicle photos, a carrier or agent can make that decision themselves and greatly increase the odds of detecting commercial use well before a claim ever arises. Share this article
with a colleague. CNA is a registered trademark of CNA Financial Corporation. The information contained in this document is for general information only and is not legal advice. It is intended to provide a general overview of the services and products offered. Only the policy can provide the actual terms, coverages, amounts, conditions and exclusions. All coverages are not available in all states. This document is not intended to be advertising or solicitation in states where the local regulations prohibit such usage. Ian H. Graham Insurance is the brand name for the brokerage and program administration operations of Affinity Insurance Services, Inc.; (TX 13695); (AR 100106022); in CA & MN, AIS Affinity Insurance Agency, Inc. (CA 0795465); in OK, AIS Affinity Insurance Services Inc.; in CA, Aon Affinity Insurance Services, Inc., (CA 0G94493), Aon Direct Insurance Administrators and Berkely Insurance Agency and in NY, AIS Affinity Insurance Agency. E-12670-517
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IJMAG.COM/807HO Alex Young is vice president and general manager, insurance, for DRN. Young can be reached at ayoung@ drndata.com. INSURANCEJOURNAL.COM
Idea Exchange
The Competitive Advantage
On the Other Side of the Desk only wanted the financials if audited and yet most of their prospects won’t have audited financials. One has to wonder if they really want the business or not. Alternatively, do they know what they’re doing? Other questions were so terribly designed, a truly proper answer could not be proffered.
App Designs
By Chris Burand
I
t is always interesting to be on the other side of a desk. I’m always consulting and writing on “all things” insurance but I’m not always buying insurance. This year I purchased a couple of new policies causing me to complete new applications. It was an experience that once again further convinces me the industry must purposely want a poor reputation. At the very least, it creates opportunities for new competitors. For example, some questions on the applications were just ludicrous. For example, one question was, “Is the risk subject to a catastrophe?” If catastrophe is not an exposure, most people really do not need insurance! Of course, my account is subject to catastrophe. Every risk has a catastrophe exposure. Maybe it would have helped to define catastrophe, but the application did not do so (Understand, the question had nothing to do with living on a coast.) What an absolutely, nonsensical, stupid question. Other questions were so poorly written that I had no idea what was being asked. I have made a living in this industry for 30 years, and if the questions made no sense to me, I cannot imagine what normal people would think. One question requested audited financials. The vast majority of businesses do not have audited financials. The company
I know the people who design applications try hard, and they are probably smart, but if I, someone with decades of experience working at fairly high levels within the industry, cannot understand the application’s questions, why should anyone expect regular consumers to understand or even answer the questions correctly? Anyone with such expectations is thinking unreasonably. I think what happens is the carrier or the firm designing the application is just too close to the situation. I will offer to be that outside purveyor to fix this because it needs fixing. For example, one question asked if I wanted a specific coverage. The application did not offer a place to answer the question though. There was not a box or a place to circle “yes” or “no.” The application must have had 40 other “yes/no” options, but nothing for this optional coverage. Moreover, I would not have been applying for that coverage if not for that specific option. The policy was otherwise of minimal value. On the other hand, some of the “yes/no” questions could not be answered honestly and/or cor-
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rectly with a “yes/no” response. The situation was like a deposition or trial when an attorney asks for a “yes/no” response and neither “yes” nor “no” is a correct answer. In those situations, the attorney is usually attempting to create a trap. So when I, and other people, see such a question, it seems like a trap or incompetence because maybe the carrier does not really understand what they are asking, or they are asking the question in such a way they know the answer will be wrong and then can deny the claim. Either way, distrust is created. The industry’s reputation is tarnished. A liability exposure is created too. The problem with poorly worded questions, poorly designed questions, and poorly designed applications is these situations give companies more potential outs for paying claims. They can
advise a question was answered improperly and therefore, deny coverage. I am sure (not really) this never happens, but to insureds, they see it as a trap.
Not Rocket Science
I am not writing about rocket science. The consumer understands a well-designed application is not rocket science, so they see a stupid question or a trap and think the worst. Especially when the consumer asks their CPCU agent about the question and even the agent cannot answer. These situations create multiple problems for agents. It causes them to take more time writing new accounts because they have to explain more. It creates significant E&O exposures because people hurry or give poor advice to get through the questions and hope the underwriter does not follow up. It helps rush the industry to a commodity because agents oversimplify to get through the process without the client’s eyes glazing over. For example, asking questions like: “Are you in compliance with [name the regulation or law]?” That is a legal question. I may think I am in compliance, but I have not read the 500 pages of applicable regulations specific to whatever category. I have not gone to law school to know how to interpret those 500 pages. I am not an attorney, and I do not have a law license required to offer a legal opinion, but that is what the question requires - a legal opinion offered by people without law degrees. It makes no sense. A common and specific example of this is the often-asked question, “Are you in compliance holding PII data securely?” Not only are those regulations complex, but multiple definitions of PII information exist. Sometimes, the policy (which is almost never provided with the application) gives a definition. The application never gives a definition. That definition may not be the same in the rules. Sometimes different government entities use different definitions. When the application asks if the applicant is compliINSURANCEJOURNAL.COM
ant with PII security, to which definition of PII data are they referring? Then, I came to the part that required signatures in multiple places that were not materially significant sections. The application was designed with signature boxes almost randomly. I am sure you’ve seen these situations, and one has to wonder, “Why does a person need to sign here?” If you are wondering, the insured is wondering, and if they are wondering, trust is wavering. This leads to the point where electronic signatures are not allowed. I am completing an application electronically, so I expect to sign it electronically. Why kill trees to print an electronic application so I can manually sign, scan and email it? I understand the fear of an electronic signature not being upheld, though the impression I get is many agencies and carriers have not thought it through or examined the legal strength of electronic signatures in specific situations. They want to be “safe.”
Poorly designed applications create frictional costs for carriers. Every call an agent makes to an underwriter asking for more information or an explanation is a cost. A good application saves everyone money and frustration. Poor reputations cost companies, because it costs more to convince people to purchase insurance. Poor reputations and questionable applications increase exposures and lawsuits. Most of this can be avoided if an organization takes time upfront to think about what the questions mean from the consumer’s perspective. Maybe the best way to do this is to get outside help from someone not so close to the forest they cannot see the trees. Share this article with a
colleague. IJMAG.COM/807BU Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-485-3868. E-mail: chris@burand-associates.com
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Closing Quote Insurers Respond to Rising Claims Abuse
By Logan McFaddin &
William Stander
W
henever severe weather strikes and there is property damage, insurers are among the first responders to help throughout the recovery process. However, in too many cases, some shady contractors, public adjusters and lawyers seeking to prey on the misfortune of others and profit from the insurance payouts are not far behind. This is a growing problem across the country, and homeowners need to be aware of those looking to take advantage of them following a weather event. Even though state and local officials have little tolerance for scams and attempt to crack down on the criminals, it can be difficult to stop those who are determined to abuse
and misuse the insurance and legal system with excessive claims and litigation. States like Colorado, Texas and Florida – with extreme exposure to catastrophic weather events – are well aware of the need to take steps to mitigate losses, but making progress is challenging because these states are also plagued by contractors and lawyers who abuse the legal system. The abuses drive up not only the rate of disputed claims and court action, but costs. One of the abuses growing at an alarming rate involves the assignment of benefits (AOB). Lawyers and local contractors often work together to encourage homeowners to sign away their insurance rights and sign over control of their insurance policy. Many of the contractors involved in this abuse inflate claims costs and when an insurance company doesn’t immediately pay the claim, lawyers are quick to file a lawsuit. This leaves homeowners suffering through unnecessary litigation when they simply wanted to get the repairs made and move on with their lives. This major influx of AOB claims and lawsuits is hurting homeowners and potentially driving up insurance costs for everyone. Assignment of benefits reforms are needed to protect policyholders from dishonest companies and individuals looking to take advantage of people in a desperate situation. Florida is ground zero for this type of abuse. The Wall
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‘It’s not just homeowners who are the victims.’ Street Journal editorial board even recently weighed in on AOB abuse in Florida, calling it a “man-made fiscal hurricane.” In a detailed analysis of this get-rich-quick scheme where lawyers file inflated claims to try to secure settlement paydays, Citizens Property Insurance concluded that AOB abuse could soon impact property insurance rates for homeowners across the state by as much as 10 percent per year. It’s not just homeowners who are the victims. In both Florida and Arizona, auto glass repair schemes are becoming another example of AOB abuse. Some auto glass repair shops try to convince unsuspecting consumers to sign over their insurance benefits. These shops aren’t affiliated with the insurance companies. They may inflate the glass claim and then turn around and sue the insurance company, often without the policyholder’s knowledge. According to the Florida Department of Financial Services, in 2006, approximately 400 auto glass AOB lawsuits were filed against
auto insurers. In 2016, nearly 20,000 lawsuits were filed. Consumers must be aware of the type of fraudsters out there, which is why some companies have developed preferred contractor managed repair networks to provide their customers with the option to use contractors that have been pre-vetted for quality work and customer service. These types of programs help curb the abuse, but unfortunately, they cannot eliminate it from occurring. It’s crucial we continue to educate homeowners about the importance of talking with their insurance company or agent before signing any documents related to damage repairs. We also need to help policymakers focus on the importance of maintaining a healthy business climate and competitive insurance market. McFaddin is the regional manager for the Property Casualty Insurers Association of America (PCIAA). Stander is executive director of the Florida Property & Casualty Association (FPCA). INSURANCEJOURNAL.COM
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