Insurance Journal West 2018-04-02 by Insurance Journal

WEST REGION Pinnacol’s $50M in Dividends Montrose and Long-Tail Claims Chubb’s Darling Honored by IICF

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Contents April 2, 2018 • Vol. 96 No. 7 • West

West

National

W1 Court Rules Release Form Protected Alaska Rafting Company in Man’s Death

8 P/C Insurers Record $23.5B Underwriting Loss in 2017 10 Overall Rate of Uninsured Motorists Rising Nationwide: IRC

W6 Pinnacol Issues $50M in Dividends to Colorado Employers W6 Utah Subway Shop Suit Over Wrongly Accused Worker Dismissed W8 Chubb’s Darling Honored for Industry Leadership, Cystic Fibrosis Work

W1 MONTROSE AND HORIZONTAL OR VERTICAL

EXHAUSTION: IS THE LONG-TAIL (CLAIM) WAGGING THE DOG?

14 Non-Catastrophe Losses, Natural Disasters Take Toll on Lloyd’s Market 20 Special Report: Today’s Hot Markets 26 25 Things About Middle Market and Risk Management 30 Be Aware of Potential Liability Exposure from Practice Clinicians

Idea Exchange W2 Legal Action: Montrose and Horizontal or Vertical Exhaustion: Is the Long-Tail (Claim) Wagging the Dog? 34 The Competitive Advantage: Best Practices – Just Kidding! 38 The Key to Unlocking Creativity? Promoting an Innovative Culture

P/C INSURERS RECORD $23.5B IN UNDERWRITING LOSS IN 2017

40 The Wedge: Confused About What Motivates Salespeople? 42 Closing Quote: Agency E&O: To Win a Lawsuit or Prevent One?

Departments 11 Declarations 11 Figures

30 BE AWARE OF POTENTIAL LIABILITY

4 | INSURANCE JOURNAL | WEST APRIL 2, 2018

EXPOSURE FROM PRACTICE CLINICIANS

16 Business Moves 24 MyNewMarkets INSURANCEJOURNAL.COM

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Write the Editor: awells@insurancejournal.com

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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

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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, Randy Schwantz

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Contributing Writers

Insurance Markets Manager David Coons, Frederick J. Fisher, Kristine Honey (619) 584-1100 X132 Bridget Zaremba khoney@insurancejournal.com IJ ACADEMY OF INSURANCE Director Patrick Wraight pwraight@ijacademy.com Associate Director Barbara Whiffen bwhiffen@ijacademy.com

ADMINISTRATION

Chief Financial Officer Mark Wooster mwooster@wellsmedia.com

MARKETING

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NEW MEDIA

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Chief Technology Officer/ Chief Innovation Officer Joshua Carlson jcarlson@insurancejournal.com V.P. of Design Guy Boccia gboccia@insurancejournal.com Senior Web Developer Chris Thompson cthompson@insurancejournal.com

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Web Developer Jeff Cardrant jcardrant@insurancejournal.com

Videographer/Editor Ashley Waldrop awaldrop@insurancejournal.com

Web Developer Terrance Woest twoest@wellsmedia.com

CIRCULATION

Circulation Manager Elizabeth Duffy eduffy@wellsmedia.com

here will soon, within a few decades, be an important demographic turning point in U.S. history. By 2035, there will be 78.0 million people 65 years and older compared to 76.4 million under the age of 18, according to the U.S. Census Bureau’s 2017 National Population Projections. By 2030, all baby boomers will be older than age 65. This will mean that 1 in every 5 residents will be retirement age. “The aging of baby boomers means that within just a couple decades, older people are projected to outnumber children for the first time in U.S. history,” said Jonathan Vespa, a demographer with the U.S. Census Bureau. The 2030s are projected to be a transformative decade for the U.S. population on several measures. The population is expected to grow at a slower pace, age considerably and become more racially and ethnically diverse. Net international migration is projected to overtake natural increase in 2030 as the primary driver of population growth in the United States, another demographic first for the country. Although births are projected to be nearly four times larger than the level of net international migration in coming decades, a rising number of deaths will increasingly offset how much births are able to contribute to population growth. Between 2020 and 2050, the number of deaths is projected to rise substantially as the population ages and a significant share of the population, the baby boomers, age into older adulthood. As a result, the population will naturally grow very slowly, leaving net international migration to overtake natural increase as the leading cause of population growth, even as projected levels of migration remain relatively constant. By 2060, the United States is projected to grow by 78 million people, from about 326 million today to 404 million. The population is projected to cross the 400-million threshold in 2058. In coming years, the rate at which the U.S. population grows is expected to slow down. The population is projected to grow by an average of 2.3 million people per year until FOR QUESTIONS 2030. But that number is expected to decline REGARDING SUBSCRIPTIONS: Call: 855-814-9547 to an average of 1.8 million per year between Outside the U.S., call 847-400-5951 or you may subscribe or change your address online at: 2030 and 2040, and continue falling to 1.5 milinsurancejournal.com/subscribe lion per year from 2040 to 2060. Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media As the population ages, the ratio of older 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 adults to working-age adults is projected to per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this pubrise. By 2020, there will be about three-andlication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended a-half working-age adults for every retireto 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 ment-age person. By 2060, that ratio will fall Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. to just two-and-a-half working-age adults Insurance Journal is a publication of Wells Media Group, Inc. POSTMASTER: Send change of address form to Insurance Journal, for every retireCirculation Department, PO Box 708, Northbrook, IL 60065-9967 ment-age person. ARTICLE REPRINTS: For reprints of articles in this issue,

‘The aging of baby boomers means that within just a couple decades, older people are projected to outnumber children for the first time in U.S. history.’

Andrea Wells Editor-in-Chief

6 | INSURANCE JOURNAL | NATIONAL APRIL 2, 2018

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National

P/C Insurers Record $23.5B in Underwriting Loss in 2017

he U.S. property/casualty industry recorded a net underwriting loss of $23.5 billion for year-end 2017, according to preliminary results from A.M. Best. That was $18 billion bigger than the underwriting loss in 2016. The 2017 underwriting loss was mainly due to an estimated $52.9 billion paid out for catastrophes, more than double what P/C insurers handled the previous year, according to the A.M. Best analysts. The industry’s combined ratio for the year came in at 103.8, a three-point deterioration from 2016. The 103.8 ratio was the worst of the last five years. A.M. Best estimates the catastrophe losses account for 10.0 points on the P/C 8 | INSURANCE JOURNAL | NATIONAL APRIL 2, 2018

industry’s combined ratio, up from an estimated 4.9 catastrophe points the prior year. The $52.9 billion estimate of 2017 P/C industry catastrophe losses is a 109.8 percent increase over 2016 and dwarfs A.M. Best’s previous industry record for estimated insured losses of $41.9 billion recorded in 2011. The figure for 2011 included losses from the Tohoku earthquake and subsequent tsunami in Japan, an active tornado season in the U.S. and flooding in Thailand. For this Best’s Special Report, “First Look – 2017 Property/Casualty Results,” the analysts used data from companies’ 2017 annual statutory statements received as of Mar. 9, 2018, representing an estimated 96

percent of P/C net premiums written. Net income for the P/C industry was $40.8 billion, down 1.7 percent from 2016. The results were helped by a $5.6 billion jump in net investment income earned in 2017, though it was mostly offset by a $5.2 billion loss in other income. This reflected the impact of a retroactive reinsurance contract AIG and National Indemnity signed in early 2017, A.M. Best said. Despite the slight decline in net income, industry surplus grew 6.8 percent to $733.8 billion in 2017, driven by a $39.4 billion increase in unrealized capital gains, which was offset by a $17.5 billion decrease in other surplus gains and a $4.4 billion increase in stockholder dividends. INSURANCEJOURNAL.COM

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NATIONAL | News & Markets

Overall Rate of Uninsured Motorists Rising Nationwide: Insurance Research Council

early one in eight U.S. motorists is driving around uninsured and putting insured drivers at greater risk in the event of an auto accident, according to a study. The study, directed by the Insurance Research Council (IRC) and co-sponsored by The Hanover Insurance Group, found that 13 percent of all U.S. motorists were uninsured in 2015, up from 12.3 percent in 2010, following a seven-year decline from a high of 14.9 percent in 2003. When an uninsured driver is at fault in an accident, insured drivers or their insurance companies often are left to pay for the resulting physical damage and health costs. Similarly, an underinsured driver may not have high enough policy limits to cover all costs of damage. “The results of the survey sound an alarm,” said Daniel Halsey, president, personal lines, at The Hanover. “Uninsured motorists represent a significant risk to insured drivers.” Halsey said the average cost of an uninsured motorist claim is about $20,000, excluding any physical damage to the vehicle. Despite the fact that 49 states require car insurance, some drivers choose to drive without coverage. The number of uninsured motorists varies by state, ranging from a low of 4.5 percent of all drivers in Maine to a high of 26.7 percent in Florida, according to the Insurance Research Council. Mississippi, New Mexico, Michigan and Tennessee are with Florida in the top five states based on rate of uninsured motorists, while North Carolina, Massachusetts, 10 | INSURANCE JOURNAL | NATIONAL APRIL 2, 2018

New York, and Maine have the lowest rates. Despite the recent increase in the countrywide rate, several states experienced significant declines. Oklahoma’s UM rate in 2015 was 10.5 percent — 15.4 percentage points lower than in 2012. New Mexico’s fell from 29.8 percent in 2006 to 20.8 percent in 2015. However, twice as many states saw their UM rate increase as decrease from 2010 to 2015. “While some states saw significant drops in their uninsured motorists rates, overall, the rate is

increasing nationwide,” said Elizabeth A. Sprinkel, senior vice president, IRC. “This can mean added risk for all motorists.” The Hanover used the results to urge drivers to discuss uninsured/underinsured motorist coverage with their independent agents. Generally, it is a good idea for motorists to have the same amount of uninsured and underinsured motorist coverage as bodily injury coverage, according to the insurer. Th IRC study, Uninsured Motorists, 2017 Edition, examined data collected from 14 insurers representing approximately 60 percent of the private passenger auto insurance market in 2015. INSURANCEJOURNAL.COM

West

Court Rules Release Form Protected Alaska Rafting Company in Man’s Death

divided Alaska Supreme Court has sided with a river rafting company, deciding its release form protected it from liability in the 2013 death of a man on a rafting trip. The majority ruling, supported by three of the court’s five members, found the release form signed by Stephen Morton INSURANCEJOURNAL.COM

before his trip with NOVA River Runners was clear in outlining risks and effectively waived NOVA’s liability for negligence. Justices Daniel Winfree and Susan Carney dissented, saying none of the listed risks related to unskilled guides or negligence in screening other rafters. Morton’s widow challenged the validity

of the release and alleged the rafting company was negligent. The court decision does not say where Morton was from. Morton died after his raft capsized during a whitewater rafting trip near Hope. Copyright 2018 Associated Press. All rights reserved. APRIL 2, 2018 INSURANCE JOURNAL | WEST | W1

Idea Exchange

Legal Action

Montrose and Horizontal or Vertical Exhaustion: Is the Long-Tail (Claim) Wagging the Dog?

By JoLynn M. Pollard

and Peter J. Ryan

he California Supreme Court will again intervene in the protracted saga of insurance litigation stemming from the bodily injury, property damage, and Comprehensive Environmental Response, Compensation, and Liability Act actions against Montrose Chemical Corporation of California, this time to consider the sequence and extent to which excess insurers’ coverage obligations are triggered with respect to claims involving continuous property damage, or long-tail claims. On Nov. 29, 2017, the Supreme Court accepted Montrose’s petition for review of the Second District’s ruling, requiring horizontal exhaustion of all of the 26 years of underlying policies triggered by damages arising from Montrose’ s 35 years manufacW2 | INSURANCE JOURNAL | WEST APRIL 2, 2018

turing the chemical DDT in California. More than two decades ago in Montrose Chemical Corp. v. Admiral Ins. Co. (1995), the Supreme Court was first called upon to resolve coverage issues arising from these continuous property damage claims against Montrose. Admiral Insurance Co., the insurer for the final four years of the implicated general liability policies, had taken the position that there was no coverage under its policies because the continuous injury had commenced long before the policies were issued. The Supreme Court rejected this argument, finding that the standard CGL policy language required an insurer to defend and indemnify an insured with respect to actions for continuous or progressively deteriorating bodily injury and property damage that occurred during successive policy periods under a continuous-injury-trigger of coverage. The Supreme Court’s endorsement of the continuous-injury-trigger of coverage left open the question of how indemnity should be allocated among several years of insurance. Two years later, the Supreme Court addressed this issue in Aerojet-General Corp. v. Transport Indemnity Co. (1997). Aerojet considered contamination claims against an aerospace company for the discharge of hazardous substances over a 30-year time span. The trial and appellate courts had allocated defense costs on a pro-rata basis between the various insurers and the aerospace company itself for a period in which it was self-insured. The Supreme Court instead adopted an “all-sums” approach finding that — with regard to policies under which an insurer promises to pay all sums that the insured becomes legally obligated to pay as damages — the insurer is obligated to cover all specified harm caused by a triggering event within the policy period, even if some such harm occurs beyond that period. The all-sums approach made clear that

policy limits were available for the entirety of damages resulting from an occurrence under a continuous injury trigger of coverage; but courts over the ensuing years struggled with whether this approach permitted an insured to recover the limits of multiple policies across an array of policy periods. The Supreme Court took up this question in State of California v. Continental Ins. Co. (2012), as modified (Sept. 19, 2012), announcing the all-sums-with-stacking indemnity principle. According to this rule, the policy limits of policies — subject to a continuous injury trigger of coverage and all sums rule — can be stacked to form one “uber policy.” Analysis of the policies at issue in Continental was somewhat simpler than in most long-tail claims, as the insured was the State of California and as a result, all of the policies were provided on identical forms required by the state. The matter now before the Supreme Court stems from a question that the allsums-with-stacking indemnity principle left unanswered: in what order or sequence must an insured access policies written for different policy years in the context of a long-tail claims? Montrose advocates for a vertical exhaustion formula in which excess policies for any policy period are triggered when all underlying insurance for that particular policy period is exhausted. But the Second District Court of Appeal disagreed, finding in Montrose Chemical Corporation of California v. Superior Court (2017), as

continued on page W4

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modified (Sept. 8, 2017), that — for at least some of the excess policies containing an other-insurance provision — underlying insurance for all 26 years of implicated policies must be exhausted before excess coverage can be triggered — a horizontal exhaustion formula.

The Second District’s reliance on other-insurance provisions to require horizontal exhaustion of all underlying policies arguably runs up against the 2002 decision Dart Industries, Inc. v. Commercial Union Ins. Co. (2002). In Dart, the Supreme Court considered an insured’s action for declara-

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tory relief regarding the existence and terms of a primary policy that had been lost. The insurer argued that coverage under the lost policy was limited or precluded by an other-insurance clause. The Supreme Court refused to consider the effect of the other-insurance clause on the scope of the insured’s coverage, finding that other-insurance clauses affect the apportionment of liability among insurers when multiple triggered policies exist but that the clauses have “no bearing upon the insurers’ obligations to the policyholder.” The Second District distinguished Dart on the grounds that it applied to a primary policy and not an excess policy as was at issue here. But just a month later, in State of California v. Continental Insurance Company (2017), the Fourth District accepted the very interpretation of Dart rejected by the Second District. In a sequel to the 2012 Continental decision, the Fourth District affirmed the trial court’s ruling in favor of vertical exhaustion. In response to the insurer’s argument that its other-insurance clause mandated horizontal exhaustion the court cited Dart for the proposition that other-insurance clauses apply to contribution actions between insurers and not coverage litigation with an insured. The Continental 2017 court expressly rejected the argument that Dart is inapplicable because it did not involve any issue as to excess policies or exhaustion. It is difficult to predict what the Supreme Court will do with the Second District’s Montrose ruling. The Second Circuit kept its holding quite narrow because Montrose had requested a declaration in favor of vertical exhaustion with regard to all 26 years of policies and thus the only necessary finding was that at least some of the applicable policies are subject to horizontal exhaustion based on the policy language therein. But we can certainly expect guidance on the interpretation of Dart and the effect of other-insurance provisions on long tail claims going forward. Pollard is a shareholder and Ryan is an associate at Hunt Ortmann Palffy Nieves Darling & Mah Inc. Pollard: pollard@huntortmann.com, (626) 440-5200. Ryan: ryan@huntortmann.com, (626) 440-5200.

1/10/18 1:53 PM

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WEST | News & Markets

Pinnacol Issues $50M in Dividends to Colorado Employers

innacol Assurance is distributing $50 million in workers’ compensation dividend checks to its policyholders. Nearly 53,000 employers throughout

Colorado were to receive a dividend starting in late March. Check amounts are calculated based on the policyholder’s premium size and performance. The average

Personal Lines l Commercial Lines l Agri-business

2018 dividend check will be $944. Pinnacol policyholders have earned a dividend 10 times since 2005. Pinnacol has now returned nearly $606 million in total general dividends to Colorado businesses. Pinnacol provides workers’ comp insurance to 57,000 employers.

Utah Subway Shop Suit Over Wrongly Accused Worker Dismissed

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judge has dismissed a defamation lawsuit filed by owners of a Utah Subway shop where a worker was wrongly accused of drugging a police officer’s drink.

U.S. District Judge Dee Benson ruled that police in Layton did not implicate the store or imply it had been negligent. The Layton Subway shop’s owners said police waited two months to disavow the allegations despite knowing blood and urine tests showed the officer had no drugs in his system. The owners say they suffered $300,000 in losses after police claimed early tests showed THC and methamphetamine in the officer’s lemonade. Lawyer Robert Sykes, who represents the shop owners, said he disagrees with the judge’s decision and police officers’ comments were defamatory. Copyright 2018 Associated Press. All rights reserved.

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WEST | News & Markets

Chubb’s Darling Honored for Industry Leadership, Cystic Fibrosis Work ompassion and helping others were the key takeaways from a message that Jim Darling delivered to a group of several hundred insurance professionals gathered to honor him in Los Angeles, Calif., at a dinner ceremony in late March. Darling, regional executive officer for Chubb’s Pacific region, was recognized by the Insurance Industry Charitable Foundation’s Western division during its annual Horizon Award Gala at the Globe Theater, where a crowd of insurance professionals, community leaders and representatives from local nonprofits were gathered. Darling, the IICF’s 2018 Golden Horizon Award recipient, was recognized for his leadership and philanthropic commitment during a night that also raised money for the foundation’s charitable causes. Jon Axel, the IICF Western division chair and managing partner for the Liberty Company Insurance Brokers, introduced Darling. “We’re honoring a friend and a leader and a mentor in our industry,” he said. Axel talked about Darling’s 35-plus-year career in the industry and his work with the Cystic Fibrosis Foundation, including his efforts to help raise $1.5 million for that charity. Darling began his career with Chubb & Son as a summer intern in 1981, and eventually became an underwriter. Darling worked his way up the ranks, from senior vice president of worldwide marine and energy manager in 1995 to stints as a branch manager overseeing major cities. He is currently responsible for Chubb’s eight Pacific branches, which account for a reported $2.5 billion in premium. Darling has led several IICF committees and currently serves on its Western division executive committee. In a speech near the end of the event, he thanked his family for their support of him during his career, and for supporting his

charitable efforts. “I’m very proud of my family,” he said. He said insurance professionals are naturally supportive of the community, as they pay claims to help people rebuild and recover from disasters, and they take care of clients in need. “There is plenty of room for compassion in our business,” he addJim Darling, regional executive officer for Chubb’s Pacific region, was recognized by the Insurance Industry Charitable Foundation’s Western division ed. during its annual Horizon Award Gala at the Globe Theater in Los Angeles Darling also talked on March 16. Photo by Danielle Klebanow about his work with equipment for forensic investigations, and the Cystic Fibrosis Foundation, which he’s drones, he said. been involved with since 1988. “We could not do the work that we do At the time he began his work with the without the foundation,” he told the audifoundation, a child diagnosed with cystic ence. fibrosis, a progressive, genetic disease Jerry Pickett, the Horizon Award Gala that causes lung infections and limits the dinner chair and CEO of the Liberty ability to breathe over time, could expect Company Insurance Brokers, along with live to age 18 or 19. Today, thanks in part of other IICF board members, presented scientific research supported by that foundation, a child diagnosed with the disease Everett with a $15,000 check for the foundation. can expect to live to 47, he noted. The IICF Western Division also A $10,000 check was donated to the Cystic Fibrosis Foundation in his honor fol- announced $324,000 in grants for 42 charitable organizations at the gala, and a live lowing his speech. Another recipient of auction during the evening garnered thouIICF’s charitable efforts sands of dollars for items up for bid that is the Los Angeles Fire included Lakers, Kings and Angels tickets, Department Foundation. an exclusive wine tasting getaway, and a LAFD Deputy Chief stay in a beach front condo in Maui. The IICF Western division granted Graham Everett was at the event to talk $529,000 in 2017 in support of local nonabout how IICF funding for the foundation profit and charity organizations dedicated his improved conditions for firefighters. to addressing causes related to children at “We really don’t have a lot of money for risk, education and human services. necessities,” he said. The IICF is an insurance industry non The foundation has helped with the profit that helps communities and enrich purchased of light weight brush fire helmets for all LAFD firefighters, extractors to lives through grants, volunteer service and clean dangerous carcinogens off of equipleadership. The charity has contributed ment that has been exposed to flames and $28.7 million in community grants, along with more than 270,000 volunteer hours to smoke, custom flashlights, specialized chairs for carrying victims, veterinary charities. care for urban search and rescue canines,

W8 | INSURANCE JOURNAL | WEST APRIL 2, 2018

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By Don Jergler

‘We’re honoring a friend and a leader and a mentor in our industry.’

Figures

Declarations

That’s how many Arizona counties were designated as primary natural disaster areas due to losses and damages caused by recent drought.

$190 MILLION

Autonomous Caution

“Unlike Arizona, California has taken a safety driven approach when developing autonomous vehicle regulations.” — Jim Frazier, a California Assemblyman, urged caution in his state following the death of a 49-year-old woman in Arizona after she was struck by a self-driving Uber Technologies SUV.

Too Dangerous

“They’ve pulled everybody out. It’s just too dangerous.”

— Mayor and Assistant Fire Chief Bob Cornett said the fire at

the 15,000-square-foot Tri-Chem Industries plant in Cresson, Texas, was being allowed to burn itself out before authorities search for a missing worker, Dylan Mitchell, who’s presumed dead. The chemical plant exploded and caught fire on March 15.

Missouri River Floods

“I hope this decision is the first step in a new direction for the Corps.” — U.S. Senator Roy Blunt of Missouri said in a statement after

a federal judge found the U.S. Army Corps of Engineers responsible for recurring flooding on the Missouri River that has led to damages estimated to exceed $300 million in Missouri, Kansas, Nebraska and Iowa.

Teachers and Firearms

“The majority of Alabama teachers do not want to be armed.” — Elizabeth White, Alabama teacher and volunteer with

Moms Demand Action for Gun Sense in America, responds to proposed legislation in Alabama that would allow teachers and school administrators who undergo police training to carry a handgun on school property.

The number of vehicles involved in a pileup in a snowstorm on a central Ohio highway on March 13. No one was seriously hurt but the crashes left vehicles crunched, tipped over and scattered at odd angles across lanes of Interstate 71. The pileup included 11 commercial vehicles.

The number of wrongful death lawsuits filed over a natural gas rig explosion in Oklahoma that killed five workers. The explosion occurred on Jan. 22. Rig owners and drillers Red Mountain Energy, Red Mountain Operating, Patterson-UTI Drilling and Patterson-UTI Energy were named in the lawsuits. INSURANCEJOURNAL.COM

The amount for which insurers may be on the hook to settle two lawsuits stemming from a 2013 buyout in which Dole Food chairman and CEO David Murdock took the company private. In a ruling, the judge said Delaware law allows a company to insure officers and directors from any liability – including for fraudulent acts. In 2015, a Delaware judge ordered Murdock and former Dole President and Chief Operating Officer C. Michael Carter to pay millions for misleading directors and shareholders in the $1.2 billion buyout, saying the men had acted in bad faith and engaged in fraud.

The percent increase in DUI offenses on college campuses between 2016 and 2017, according to the Tennessee Bureau of Investigation. The annual crime study details the volume and nature of crime on Tennessee’s college and university campuses and is used as a tool to assist authorities and raise awareness.

Uber Breach

“Instead of notifying impacted consumers of the breach within a reasonable amount of time, Uber hid the incident for over a year – and actually paid the hackers to delete the data and stay quiet.”

— Pennsylvania Attorney General Josh Shapiro, in a statement regarding his lawsuit against Uber, filed after ha ckers stole the names and driver’s license numbers of at least 13,500 Pennsylvania Uber drivers. The lawsuit accused Uber of violating a state law requiring it to notify victims of a data breach within a reasonable time frame.

InsuranceJournal.com

Poll

How would you rate your workload in 2017 compared to 5 years ago? Higher today than ever before Steadily increasing Increases only slightly each year Steadily decreasing Less today than ever before Same today compared to 5 years ago

38.8% 34.4% 11.9% 4.8% 3.2% 6.9%

Total responses: 951 Source: Insurance Journal’s 2018 Agency Salary Survey

APRIL 2, 2018 INSURANCE JOURNAL | NATIONAL | 11

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NATIONAL | News & Markets

Non-Catastrophe Losses, Natural Disasters Take Toll on Lloyd’s Market in 2017 By L.S. Howard

he Lloyd’s market’s pre-tax loss of £2 billion (US$2.8 billion) in 2017 was partly due to hurricanes and wildfires in the third and fourth quarters. But these losses were exacerbated by the continued deterioration in its attritional, or non-catastrophe losses – brought about primarily by price deterioration in a competitive marketplace. Lloyd’s of London’s pre-tax loss of £2 billion — its first in six years — resulted in a combined ratio of 114 percent, compared with a pre-tax profit of £2.1 billion ($3 billion at current exchange rates) in 2016 and a combined ratio of 97.9 percent. “It was a very difficult year, not just because of the major claims activity,” said Lloyd’s CFO John Parry in a press briefing to discuss the results. He noted that there are two addi-

tional drivers of this result: the difficult, competitive market conditions and excess capital. “The market needs to continue pay attention to all aspects of that combined ratio.” The market reported £4.5 billion ($6.4 billion) in major claims in 2017, more than double the level of 2016 (£2.1 billion) and more than double the long-term average, Parry said, noting that last year’s catastrophe claims added 18.5 percent to the combined ratio. Overall, the Lloyd’s market paid out £18.3 billion ($25.9 billion) in all claims (gross of reinsurance) during 2017, according to the Lloyd’s annual report. “The Lloyds market has met these substantial commitments without any significant impact on total resources, which remain strong at £27.6 billion [$39 billion],” said the report. The market’s large claims losses were exacerbated by the

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continued deterioration in Lloyd’s attritional loss ratio, Parry said, explaining that attritional losses are a sign of the “slow but steady decline in pricing across the book coming through.” The market’s attritional loss ratio was 58.9 percent in 2017, compared to 53.3 percent in 2016. Even without the major claims of 2017, the combined ratio would top 100, “so remedial action needs to be taken,” he added. One important remedial action is, of course, to assure that premium prices cover the cost of risk. The good news is that the market saw an average increase in pricing of about 2 percent during the fourth quarter of 2017 and, during the January 2018 renewals, an average increase of 3 percent, he affirmed. For the full year, however, premium prices declined just under 2 percent. The question is whether such upward pricing momentum will be maintained through the next important renewal dates of April 1, June 1 and July 1, he continued. After the third quarter losses, he said, the market “responded on a business-as-usual basis” and injected £3 billion [$4.2 billion] in new capital on Dec. 1, partly as a result of the storms, but also to be able to pursue additional business. Parry estimated that approximately £2 billion ($2.8 billion) of that amount was in response

to the storm losses with the remainder providing the capital for new opportunities. As a result of this recapitalization exercise, Parry said, capital and resources are at the same level now as they were prior to Hurricanes Harvey, Irma and Maria. “Lloyd’s operates a full distribution model so if [a syndicate is] in surplus, we release excess capital. When there are losses, you’re required to inject capital or scale back your business to match the capital you have,” he said. Syndicates that write U.S. windstorm carry capital for that exposure, he said, noting that losses were spread well across the market. “We didn’t see any syndicates with very large [claims] sizes disproportionate to what we were expecting,” he added. “So it fell within their capital and therefore they were given time to recapitalize when that money came in at the first of December. In fact, now at yearend we’re in a surplus of assets at member level, overall.” Further good news for the market came with its release of prior year reserves of approximately £700 million ($989.4 million), which reduced the combined ratio by 2.9 percent, he said. During 2017, Lloyd’s reported an investment return of 2.7 percent, compared to 2.2 percent in 2016. Gross written premiums during the year were £33.6 billion ($47.5 billion), compared with £29.9 billion($42.3 billion) in 2016. Parry noted that about half of the increase in gross written premiums was attributable to movements of foreign exchange. INSURANCEJOURNAL.COM

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NATIONAL | Business Moves

Alliant, Hecht & Hecht

Alliant Insurance Services Inc. has acquired Portland, Ore.-based Hecht & Hecht’s property/casualty insurance services. The deal will bring Hecht & Hecth’s P/C insurance services under the Alliant banner. Alliant previously acquired Hecht’s employee benefits arm in 2016. Hecht, along with the company’s management team and staff, will join Alliant and will continue to service clients from its headquarters in Portland. Terms of the deal were not disclosed. Hecht & Hecht offers personal and business insurance services. Newport Beach, Calif.-based Alliant provides P/C, workers’ compensation, employee benefits, surety and financial products and services.

Seeman Holtz Property & Casualty, Self Insurance

Seeman Holtz Property & Casualty Inc., headquartered in Boca Raton, Florida, has acquired a Sikeston, Missouri-

based agency, Tri-Star of Sikeston Inc., doing business as Self Insurance. Now led by Brian Self, the agency has served the insurance needs of Missouri customers for more than 90 years. Seeman Holtz said the acquisition expands its foothold across the nation and to the Midwest. The company targets high-quality independent agencies for geographic expansion and continued growth throughout the United States.

Ryan Specialty Group, New Day Underwriting Managers

Ryan Specialty Group LLC has reached a definitive agreement to acquire the assets and operations of New Day Underwriting Managers LLC, a specialty intermediary with offices in Hamilton, N.J. New Day will become part of R-T Specialty LLC, the wholesale brokerage unit of RSG. Terms of the transaction were not disclosed. RT Specialty is a Delaware limited liability company based in Illinois. New Day was founded in

16 | INSURANCE JOURNAL | NATIONAL APRIL 2, 2018

2005 by CEO Jefferey S. Lejfer and is a specialist in environmental liability and construction-related professional liability insurance. Following the acquisition, Lejfer will continue leading the New Day team as it combines into RT Specialty. Jeff Slivka, president of New Day Underwriting Managers, will lead its environmental and construction professional liability practice group following the acquisition. Founded in 2010, RSG is an international specialty insurance organization which includes a wholesale brokerage firm and managing general underwriting companies designed specifically for brokers, agents and insurers.

Loan Protector Insurance, Willis Towers Watson

The CEO and managing partner of Solon, Ohio-based Loan Protector Insurance Services has purchased the company from insurance brokerage Willis Towers Watson. The buyout by Dennis Swit was financed by InsurBanc. The 150-employee business was acquired by Willis Towers Watson in 2008. Swit will continue as CEO, and the company will continue to operate under the Loan Protector brand. Swit positioned Loan Protector into an industry leader in lender-placed insurance and insurance tracking services for the mortgage servicing industry. Once given the opportunity to purchase the business, he approached multiple lending sources but only InsurBanc delivered a deal and structure that worked to get the deal done.

Swit now has full control and the flexibility to grow his company and make investments to benefit him and his stakeholders. He anticipates investing in new technology, including software and a web-based call center, as well as making some acquisitions in the future. InsurBanc is based in Farmington, Connecticut, and is a division of Connecticut Community Bank N.A.

TCOR Management, Legacy Insurors Group, MS&B Bonds and Insurance Services

New Braunfels, Texas-based TCOR Management announced a merger with Legacy Insurors Group LLC, and MS&B Bonds and Insurance Services LLC, effective March 1. The operations of these two entities will continue under TCOR management. Rowdy Nutt, previous principle of Legacy, will join TCOR as a partner, producer and manager of TCOR’s Tyler branch. Prior to starting Legacy in 2015, Nutt spent 15 years as a commercial lines producer at an independent agency in East Texas. Steve Smith, previous principle of MS&B, will join TCOR as a partner, producer and director of Surety Services, and will office at TCOR’s headquarters in New Braunfels. Prior to founding MS&B in 2014, Smith spent more than 20 years producing construction and commercial surety in the Houston, Austin and San Antonio markets. Smith’s commercial surety background ranges from national law firms to waste haulers to oil and gas clients. Rick Dudney, managing partner at TCOR Management,

continued on page 18

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quicker assessment cycle times. HVAC Forensics customers will have other benefits, including access to real-time HVAC market pricing verification and availability, technical professionals following the closing of the claim, and HVACi’s large loss team. Following the February 1, 2018, acquisition, all of Donan’s HVAC Forensics division will become part of the HVACi group of companies. All other lines of Donan Engineering’s business will remain within the Donan Engineering Company family.

HVACi, Donan Engineering

HVAC Investigators, a national provider of HVAC damage assessments for insurance claims, has acquired Donan Engineering’s HVAC Forensics division, based in Louisville, Ky. The consolidation of two brands is anticipated to benefit the customer bases of both organizations through larger service areas, increased technical expertise and quicker cycle times. Donan’s HVAC Forensics division previously served 23 states. Those customers will now have access to HVACi’s 800-plus network of technicians and national footprint to assign any HVAC or refrigeration claim, anywhere, to one service provider. HVACi’s large will 1 A&M technician IJ Personal network Umbrella.pdf also provide HVAC Forensics’ clients with

SouthPoint Risk Advisors, Consolidated, Southern

SouthPoint Risk Advisors, an independent insurance agency based in Nashville, has announced the acquisitions of two Tennessee agencies at the end of 2017. On Oct. 1, SouthPoint officially acquired Consolidated Insurance Services, located 12/28/15 10:22 AM in Knoxville. CIS provides auto, home,

business, liability and life insurance protection for thousands of individuals and families throughout the Knoxville region. Senior Partner Dennis W. Koontz, CIC, has been in the insurance business since 1975 and opened Consolidated Insurance Services in January 1990. His daughter, Erin Koontz Copeland, joined the team in 2009 in an accounting role. After becoming part of the Southpoint Risk Advisors team, Dennis is now the agency manager focusing on commercial and personal lines sales growth, while Erin oversees day-to-day tasks as office manager. On Dec. 1, SouthPoint acquired Southern Insurance, located in McMinnville. Southern Insurance has been serving the McMinnville/Warren county area since 1986 when it began as a cluster of the Tom Bragg Insurance Agency and Burrows, Keathley, and Helton Insurance. The agency serves small, main street businesses, manufacturing, and municipal accounts, as well as personal lines and life insurance. Senior Co-Partner Jay Bragg began working with his father in the insurance industry in 1977. Senior Co-Partner Boyd Ramsey began in the insurance industry in 1998 and joined the Southern Insurance team in 2004. With these two acquisitions, the SouthPoint team grows to 81 employees serving eight locations across Tennessee and Kentucky, including Nashville, Knoxville, Maryville, Clarksville, Russellville, Ashland City and McMinnville.

Hub, Spectra Management

Hub International Ltd. has acquired the assets of Sandy, Utah-based Spectra Management LLC. Terms of the deal were not disclosed. Brent Bennett, president and CEO of Spectra, will continue to lead Spectra operations. Spectra specializes in helping companies create employee benefits packages. Chicago, Ill.-based Hub is an insurance brokerage that provides property/casualty, life and health, employee benefits, investment and risk management products and services.

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NATIONAL | Special Report | Hot Markets

By Andrea Wells & Amy O’Connor Insurance Journal examined industries experiencing changes, challenges, expansions and growth in the past year. Here are five industry sectors and insurance markets that could offer opportunities for agents and brokers in the property/ casualty insurance industry in 2018.

Employer Liability and Harassment

From actors speaking out against Hollywood mogul Harvey Weinstein to thousands of others speaking out through

the social media movement #MeToo, sexual harassment allegations continue to emerge. Employers are asking their agents about coverage. The insurance industry expects to see an uptick in employment practices liability insurance (EPLI) claims and no industry or company is immune. While the initial wave of EPLI claims is likely to target high profile and

20 | INSURANCE JOURNAL | NATIONAL APRIL 2, 2018

large companies, that’s only the beginning. “We’ve seen a lot of headlines for particular industries (entertainment/media), but the truth is sexual harassment allegations can happen in any industry and in companies of all sizes,” said Patrick Mitchell, manage-

ment liability product head at Hiscox. The likelihood of an employer being hit by a discrimination charge of any kind is higher than employers may realize. In 2016, U.S. companies had at least a 10.5 percent chance of having an employment charge filed against them, according to The Hiscox Guide to Employment Lawsuits, which uses data from the Equal INSURANCEJOURNAL.COM

Employment Opportunity Commission (EEOC) and its state counterparts. Employment charges are often the first step toward employment suits. Employment discrimination charges can be based on race, sex, disability, age, national origin, religion, color and others in addition to sexual harassment. Most employers with at least 15 employees are covered by EEOC laws. EEOC data from 2017 show that retaliation is the most common discrimination charge filed followed by race and disability. The agency also received 6,696 sexual harassment charges and obtained $46.3 million in monetary benefits for victims of sexual harassment. This moment could be a turning point, not only in U.S. employment but also in employment-related insurance, believes Rick Betterley, president of Betterley Risk Consultants Inc., and author of The Betterley Report. The current scenario is similar to what happened in 1991 when Anita Hill accused Supreme Court nominee Clarence Thomas of sexual harassment when the two worked together, he said. EPLI has been a mature INSURANCEJOURNAL.COM

market for many years, with sales growing an average of 4.4 percent over the past four years in the U.S., according to Betterley’s Employment Practices Liability Insurance Market Survey 2017. In 2016, gross written premium for EPLI was $2.1 billion, according to MarketStance, which says that thus far EPLI growth has primarily been driven by modest employment growth and rate increases. The firm estimates a possible bump to $2.3 billion or more for 20172018. The spotlight on workplace sexual harassment complaints could cause the EPLI market, even the D&O market, to heat up. “Anytime there’s a major event in any line of insurance, it always raises awareness,” said Joe Kelly, vice president and employment practices liability practice leader at Sompo International, a Bermudabased global specialty insurer and reinsurer. “Major senior level execs and the boards are even being called out on what they are doing (to prevent such behavior) and they are asking (risk managers/brokers) what kind of EPLI coverage do we have?” These executives better have

EPLI coverage with adequate limits, Kelly said, noting that this type of questioning is going to drive more demand in the market and potentially higher limits. Small commercial accounts, while forecast to grow most rapidly over the next year, have the lowest take-up rates for EPLI coverage, according to Betterley’s EPLI Market Survey. Betterley will be watching to see if the market grows following the attention on sexual harassment in the workplace. “I think it (the recent attention on risk) will have an impact,” Betterley said. “I don’t know that I’ve seen it just yet.”

Cyber

Cyber insurance continues to be one of the hottest markets with data breaches an ever-increasing threat to businesses of all shapes and sizes. The insurance industry has not been deterred by major hacks – like the NotPetya, WannaCry and Equifax breaches that occurred in 2017 and exposed data of millions of people – and continues to invest in this growing market. Verisk Analytics predicts the commercial cyber liability market will reach $6.2 billion written premium by 2020, a huge jump from the $2.5 billion estimated to have been written in 2016. “Cyber liability risk is rapidly permeating every business that has any dependence on digital technology, which means very few enterprises are exempt,” said Maroun Mourad, president

of commercial lines at Verisk’s ISO business. Buyers of cyber coverage, such as risk managers, say convincing their chief information officers or CEOs to obtain the cover is also not as big of a challenge as it used to be in the late ‘90s and early 2000s. “I have become our CIO’s best friend because I am protecting what he is protecting,” said Jimmy Kirtland, vice president with financial services company Voya Financial, on a panel at a recent Advisen Cyber Risk Conference in San Francisco. But buyers contend the one-size-fits-all cyber policies offered by many insurers do not adequately address their exposures, or the insureds don’t fully grasp the extent of their exposures. According to a recent J.D. Power/RIMS Large Commercial Study survey of more than 1,200 risk professionals, respondents were least satisfied with the industry’s response to cyber insurance. Customers also have a low level of satisfaction related to cyber products, generally viewing them as a specialty line and expecting carriers to have the expertise and capability to handle this line of business. The survey demonstrates an opportunity for agents and brokers to specialize in the cyber market while underscoring the need to educate clients on what their cyber exposures are and what policies respond best.

continued on page 22

APRIL 2, 2018 INSURANCE JOURNAL | NATIONAL | 21

NATIONAL | Special Report | Hot Markets continued from page 21 Christaan Durdaller, executive vice president and Cyber & Tech team lead for Atlantabased INSUREtrust, said there are in excess of 120 different players in the cyber market, which can be a challenge for agents and brokers. “I think there’s still a lot of difference in each policy form and what it is designed to cover. It’s important to dig into the policy and understand what it covers,” Durdaller said. “Each policy varies carrier by carrier and it’s important buyers understand that.” An important feature of cyber policies that has become increasingly popular in the last 18 months is post-breach response services, including crisis response and credit monitoring. Many insurers are now emphasizing the importance of pre-breach risk management in their offerings, as well. At the end of last year, AIG launched a new cyber benchmarking model that quantifies and scores client cyber risk. AIG cyber clients who provide the required information can receive a report detailing security scores, peer benchmarking and key risk mitigation controls to help quantify cyber risk. Beazley also enhanced its breach response coverage for small to mid-sized policyholders with an assessment of external and internal vulnerabilities, recommendations for improvement across networks, application servers and databases, as well as consultation services to help improve or implement response plans and other policies and procedures. QBE added data breach planning services to its cyber policies that includes a checklist with best practices for a

company to follow in the event of a breach. The product also gives businesses the option to take a pre-breach cyber risk self-assessment to determine their current level of protection and what should be done to strengthen it. And just at the end of March, XL partnered with network modeling and risk scoring platform RedSeal to help underwriters more thoroughly evaluate a client’s cyber risk over time and help the client improve their cybersecurity and potentially their insurance terms.

Drones

In a few short years drones will power the biggest growth in aviation insurance in 50 years. By 2024, the commercial drone/unmanned aerial vehicle market is expected to reach $17 billion, according to Global Market Insights. “The commercial drone space has greatly expanded from the hobbyist sector,” said Kathleen Swain, senior director of UAS programs at Aircraft Owners and Pilots Association (AOPA), an association of pilots and aviation enthusiasts. Swain, on a recent drone insurance webinar hosted by Insurance Journal, said commercial drone operators need not only general liability coverages but also coverages tailored to address privacy and data concerns. Traditional aviation insurance policies are unlikely to address all elements of emerging risks from the rapidly increasing use of drones. As a result, general liability underwriters will have an important role to play in providing cover, said the International

22 | INSURANCE JOURNAL | NATIONAL APRIL 2, 2018

Underwriting Association (IUA), in its report titled “Unmanned Aerial Vehicles (UAVs) – Opportunities and challenges for general liability insurers.” In the past, the general liability market has typically excluded liabilities arising from the use of any aircraft. However, demand for coverage is growing, prompting insurers to respond with specific policy extensions or endorsements, according to the IUA that represents insurance and reinsurance companies operating in or through London. “While the policy forms issued by aviation carriers typically follow a standard aircraft hull and liability program, there are many additional coverage features and coverage items that are specific to the unmanned sector and that address the needs of drone users, such as coverage for payload items, things like cameras and sensors,” said Chris Proudlove, senior vice president of UAS risks at Global Aerospace, also a panelist on IJ’s webinar. “These are items that easily can be several multiples of the value of the actual drone itself. Coverage for these types of items becomes very important.” Proudlove says the U.S. currently has the biggest market share for drone insurance but trying to determine the premium volume is very hard. He estimates that if the aviation market is one percent of all

property/casualty premium, then drones probably represent 0.1 percent of the overall aviation premium. “We’re talking very, very small premium numbers right now,” Proudlove said. While the size of the drone insurance market is difficult to quantify, insurance industry and aviation specialists expect to see significant growth. Another webinar panelist, Shan Rogers, senior vice president and director of RT Specialty Aviation LLC, thinks the market will only need a few years to develop. “What you’re going to find is this will be the biggest growth in aviation in 50 years,” he said, noting that there are many ways businesses can utilize drones instead of people to do jobs.

Flood

While Congress has again reauthorized the National Flood Insurance Program, this time until the end of July, lawmakers have not advanced any reforms for the program. Meanwhile, the private market is taking a more proactive approach in the flood insurance space. According to 2017 statutory insurance filings compiled by S&P Global Market Intelligence, the U.S. private flood market wrote $623.8 million in premium last year – a 51.2 percent over 2016. Private flood premiums grew by at least double-digits in every state but Maine last year, INSURANCEJOURNAL.COM

with Florida leading the pack at $36.7 million written, followed by California at $23.2 million, and Texas at $21.7 million. Florida has been the most aggressive state in the private flood insurance market so far as it also faces considerable risk to flooding because of the state’s proximity to sea level and its risk of hurricanes. The state enacted legislation in 2014 to streamline the process for private insurance carriers to write flood insurance in Florida. Today, nearly a dozen companies hold a flood certification from the Florida Office of Insurance Regulation and several other private insurers offer some form of flood insurance as well. Whether the private flood market continues to develop will depend largely on profitability. Marsh estimates the private flood insurance market could potentially be worth $40 billion in new business to private insurers nationwide. A recent study by Carrier Management revealed that thousands residing in high risk areas along lakes and rivers across the country remain uninsured. While participation by private insurers along coast areas is active and growing, inland areas remain underserved. Examples include Georgia, Tennessee and West Virginia, where a combined 75,000 residential homes in high risk areas were not covered by NFIP in 2017, and participation by private insurers remains low. The Great Lake region exhibits similar market characteristics, where over 60,000 homes lack coverage on high risk, inland properties. Some insurers companies are taking a cautious approach. INSURANCEJOURNAL.COM

“I describe it as we are putting our big toe in the market, not even our feet yet. You need to go slowly,” said Bob Ritchie, CEO of Florida-based American Integrity, which began writing flood coverage in Florida last year. Another new entrant to the flood space, Neptune Flood, is being more aggressive. The digital startup private flood insurance provider launched in January in Florida, Virginia and Texas but plans to open up across more than a dozen states in early 2018 and deploy a direct to consumer platform by summer. Data analytics firm Verisk launched a new personal lines flood program through its ISO subsidiary that is designed to make flood coverage widely available to homeowners nationwide. “The floods of recent years have highlighted the inadequacy or complete lack of coverage for many Americans, including those who didn’t think they were at risk for flooding,” said Neil Spector, president of ISO. The program is currently being filed state-by-state.

Outdoor Recreation

The outdoor recreation market, which comprises industries involved in activities such as bicycling, boating, hiking, ski-

ing and hunting, as well as agritourism and outdoor festivals, is currently growing at a faster pace than the national GDP and poised for future growth, according to the Bureau of Economic Analysis (BEA). The Outdoor Industry Association says the outdoor recreation economy generates $887 billion in consumer spending. One sector, boating, is headed for another record year. At the close of 2017, new boat sales and recreational boating expenditures marked a sixth consecutive year of growth. According to the National Marine Manufacturers Association, which tracks marine vessel buying trends, that growth is expected to continue through 2018, and possibly beyond. Some of the new boat buying is due to damages resulting from the 2017 hurricane season. The Boat Owners Association of The United States (BoatUS), a national advocacy, services and safety group for recreational boaters, estimated that more than 63,000 recreational boats were damaged or destroyed as a result of both Hurricane Harvey and Hurricane Irma. Todd Shasha, managing director of personal insurance, boat and yacht, at Travelers, expects a lot of new boats in

the market to replace the ones that were damaged in 2017. Shasha advises agents to keep an eye on this opportunity. Another outdoor recreation sector, camping, is gearing up for summer. The recreational vehicle (RV) market is expected to grow again in 2018, according to the Recreation Vehicle Industry Association (RVIA). Since the “Great Recession,” when the market bottomed in 2009, the RV industry has come roaring back with shipments up more than 189 percent. RV shipments are expected to total 479,700 in 2017, an 11.38 percent gain over 2016, and are forecast to increase to 491,200 by 2019, representing the ninth consecutive year of gains, the longest ever recorded. The outdoor industry also sees opportunity in the aging of America. While participation in outdoor activities is highest among kids and young adults, 50 percent of those 51-55 years of age and 45 percent of those ages 56-60 still participate, according to the OIA. Outdoor companies are serving the growing senior market by designing products — lighter, more comfortable, warmer and more durable — that make the outdoors more accessible for people of all ages — from college students to 50-plus empty nesters, the OIA reports. Kayak and canoe makers were among the first to cater to older customers for whom seating and other comfort features are more important than Share this article speed.

with a colleague. IJMAG.COM/42HT APRIL 2, 2018 INSURANCE JOURNAL | NATIONAL | 23

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Armored Car Services

Market Detail: Brownyard Programs (www.brownyardprograms.com) is focused exclusively on the insurance needs of the private security industry. Brownyard offers E&O, CGL, umbrella, assault & battery, excess liability, blanket additional insureds. They are the oldest name in the business and along with one of the oldest markets in the industry, Crum & Forster, they know the security industry like no other. Providing general/professional liability, follow-form excess, workers’ compensation, auto, property, and fidelity insurance to more than 1,000 private security guard, private investigation, suppression, and alarm companies from coast to coast. Available limits: As needed Carrier: Unable to disclose, admitted and non-admitted available States: All states. Contact: Customer service at 800-665-7304

Workers' Comp for Nonprofits

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agencies, offered on a monoline basis or in conjunction with package coverage. Available limits: As needed Carrier: Unable to disclose, admitted States: All states Contact: Frank Tarantino at 415-536-4037 or e-mail: frank_ tarantino@charityfirst.com

Natural Products and Dietary Supplements

Market Detail: Citadel Insurance Services (www.citadelus.com) covers manufacturers, importers, and distributors of dietary supplements and herbal product manufacturers, importers, and distributors of cosmetics, contract manufacturers and formulators. Coverage highlights include: general liability and products and completed operations; ISO occurrence GL with claims made (not claims made and reported); products liability; zero deductible available for prem/ops and products liability; best in class insurance carrier (A Plus 15 rating); superior policy wording; ISO forms; definition of “bodily injury”; definition of “damages”; claim reporting requirements; change reporting duties; no

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mold exclusion on products; minimum premiums starting at $2,000; includes additional insured endorsement for vendors; includes waiver of subrogation endorsement; includes primary and non-contributory wording; includes identity theft coverage; includes punitive damages where allowed by law; includes medical payments; includes damage to rented premises; includes TRIA (terrorism coverage); flexible financing available; industry’s most aggressive rating factors; and rapid quoting. Available coverage options: hired and non-owned auto; voluntary products withdrawal coverage; employee benefits liability; stop gap liability; property in your care, and others. Available limits: Minimum $1 million; maximum $1 million Carrier: Unable to disclose, exclusive program, non-admitted States: All states Contact: David Johnson at 877247-4468 or e-mail: djohnson@ citadelus.com

Architects, Engineers & Surveyors

Market Detail: Victor O. Schinnerer & Co.’s (www.

Large Limit Non-CAT Property

Market Detail: Gridiron Insurance Underwriters (www. gridironins.com) coverage excludes wind in tier 1 coastal areas. Earthquake is also excluded in quake prone areas. Target occupancies are: retail, offices, warehouses, educational facilities, churches, municipalities and medical facilities. Minimum occupancy is 50 percent and there are minimum square footage valuation requirements. Available limits: Minimum $2.5 million; maximum $50 million Carrier: Lloyd’s of London States: Ala, Calif., Colo., Fla., Ga., La., Miss., N.C., N.J., N.Y., Ore., Pa., S.C., Texas, Va., and Wash. Contact: Customer service at 954-473-3653 This section brought to you by Insurance Journal’s sister website: www.mynewmarkets.com

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NATIONAL | Spotlight | Risk Management

25 Things About Middle Market and Risk Management –1– American Express and Dun & Bradstreet report there are 180,000 middle market companies with annual revenues between $10 million and $1 billion that employ 53 million workers. From 2011 to 2017, the average middle market firm grew from 265 employees to 293 employees and increased sales from $47.5 million to $51.6 million.

–2– Over the past two years, half of middle market businesses have experienced some type of business disruption — whether it was strategic, operational or digital, according to Risk & Resilience in the Middle Market, a report from the National Center for the Middle Market (NCMM).

8.8 percent of their annual revenue. Operational events may include natural disasters, fires, port closures, strikes, supply chain and facility shut-downs, product recalls and health or safety issues. Operational disruptions like natural disasters can have broad impact and often affect employees. (NCMM)

–5– Seventeen percent of middle market firms experience digital disruptions including cyber breaches and system problems that expose company and customer information to risk or interrupt the company’s ability to conduct business. The businesses that experienced these saw a drop of 11.7 percent of their annual revenue. (NCMM)

–3– From industry mergers and startups to new regulations and changing economic conditions, strategic disruptions are almost a fact of life in business. The dynamics of a market segment or business can be transformed in a flash. Strategic disruptions may be harder to prevent and manage than other disruptions.

–4– Operational disruptions affect more than 20 percent of middle market businesses. These firms said these operational disruptions cost them

Nearly half expect to be hacked yet nearly all (93 percent) report confidence in their ability to protect customer data. “There’s almost a rationalization going on; they are trying to convince themselves that they are a little more protected from a data breach than they really are,” says Daimon Geopfert of RSM US. About half carry cyber insurance, the survey said.

–7– A Deloitte survey found that 55 percent of middle market buyers rate risk management services as a key factor influencing their insurance purchasing and renewal decision making. Risk management ranked second, after price.

–8– The Deloitte survey also found that crisis management/ recovery and cybersecurity are among the most popular risk management services with middle market buyers. They particularly value risk management services that are tailored to their industry.

–9–

–6– Middle market companies may not be taking cyber risk seriously enough, according to the first quarter U.S. Middle Market Leadership Council Survey by RSM and the Chamber of Commerce.

26 | INSURANCE JOURNAL | NATIONAL APRIL 2, 2018

Middle market firms often do not have people on staff with the skills or time for risk management. In fact, many are stretched to find the people they need for their core business operations. Nearly four in 10 middle market executives report a lack of talent impedes their companies’ ability to grow. (NCMM)

– 10 – American Express and Dun & Bradstreet (Amex DNB) examined the four largest middle market industries to see where

growth in number, revenue, and employment is strongest. Within business services, legal services has driven growth in overall number (284 percent), revenue (432 percent), and employment (471 percent) since 2011. These increases outpace gains among subcategories within manufacturing, wholesale trade, and retail.

– 11 – Nearly six in 10 middle market businesses are in one of four industry sectors. Manufacturers and wholesalers are more likely to belong to the middle market segment of the economy compared to businesses in general − 18 percent of middle market firms are in the manufacturing sector compared to 3.2 percent of all firms, and 17 percent of wholesalers are middle market firms compared to 3.6 percent of all firms. (Amex DNB)

– 12 – The other two top sectors for middle market enterprises are business services (where 27 percent of all firms, yet just 11 percent of middle market enterprises, are located) and retail trade (12 percent of all firms, 11 percent of middle market firms). (Amex DNB)

– 13 – Other high growth industries for the middle market include natural resources, insurance and transportation. Combined, these three industries represent 6.8 percent of all middle market firms. (Amex DNB)

– 14 – While still small, the number of middle market firms that

continued on page 28 INSURANCEJOURNAL.COM

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NATIONAL | Spotlight | Risk Management continued from page 26 export goods or services has more than quadrupled in the past six years. (Amex DNB)

– 15 – Between 2011 and 2016, strongest overall growth was seen in wholesale trade of durable products and in legal services. Other strong middle market performers in recent years have included eating and drinking places, rubber and plastic product manufacturing, and building and garden supply stores. (Amex DNB)

– 16 – Within manufacturing, middle market firms are likely to be producing industrial/commercial machinery and computer equipment or fabricated metal products. Within service industries, they are more likely to be found in engineering or management consulting. Within retail, they operate auto dealerships. (Amex DNB)

– 17 – There have been changes.

Younger middle market firms − those in business for less than a decade − are increasingly operating in business services, while the newer companies in manufacturing are making very different products (computer products) than their more established middle market counterparts. (Amex DNB)

– 18 – Younger middle market firms are more likely than more established middle market firms to be found in electronic component or chemical product manufacturing. Conversely, the most established middle market firms are much more likely than their younger peers to be automotive dealers or metals products fabricators. (Amex DNB)

– 19 – Within the manufacturing sector, the greatest specialization is in: 1) industrial and commercial machinery and computer equipment, home to 15 percent of middle market

28 | INSURANCE JOURNAL | NATIONAL APRIL 2, 2018

manufacturers, and 2) fabricated metal products, where 14 percent of middle market manufacturers are located. (Amex DNB)

– 20 – Middle market business services providers are significantly more likely than average to be providing engineering or management consulting services. One quarter (25 percent) are found in engineering, accounting, research and management, and 6 percent provide legal services. (Amex DNB)

– 21 – Automobiles dominate middle market retail. Fully, 57 percent of middle market retailers are either automobile dealers or gasoline service stations. No other type of retail establishment comes close to that share among middle market firms. (Amex DNB)

– 22 – The importance of risk management for middle market clients has not been lost on insurance agencies. Insurance agencies find that providing middle market clients with risk management services can be the difference between getting and losing an account. However, offering risk services is not a guarantee of a sale by any means. “It is critical for us to provide to an existing client or while trying to attract a new client. Very much could be the difference,” one agent told Insurance Journal. “Simply negotiating the premiums and handling day-to-day service is not enough to help clients get value from their broker,” said another. And a

third agent cautioned, “Many middle market companies looking to gain a competitive edge, improve margins and protect their assets are realizing that good risk management can help them achieve those objectives. It is still a tough sell though.”

– 23 – According to preliminary research by Insurance Journal, agencies either use internal risk management services or a combination of internal and external services to tailor a program to a client’s needs. The risk management fees agencies charge vary and while agencies try to turn a profit, some agencies price these services just enough to cover their costs.

– 24 – Among the industries Insurance Journal agents are targeting with risk management services are construction, healthcare, service industries, restaurants, real estate, staffing and manufacturing.

– 25 – Some risk management services agents and their partners provide are industry-specific best practices advice, loss analysis, loss prevention, financial analytics, process evaluations, OSHA guidance, workplace safety and training, claim management, disaster recovery, business continuity, property inspections, equipment inspections, workflow analysis, cyber security tools, telematics, risk information sharing, risk management analytics, employee screening, environmental impact assessments, alternative risk financing, safety communications and more. INSURANCEJOURNAL.COM

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NATIONAL | Spotlight | Medical Liability

Be Aware of Potential Liability Exposure from Practice Clinicians (NPs) and physician assistants (PAs), offer skilled work in a variety of settings, they are also prone to increasing risk for both supervising physicians and institutions. This risk highlights the need for liability insurance for all members of a medical team, including APCs. But why does the risk exist in the first place?

Laws and Regulations

By Bridget Zaremba

ully licensed physicians are not the only medical professionals offering healthcare to a growing patient pool. Indeed, it would be unrealistic to expect all medical institutions to pay for physicians to fill every position in a hospital or clinic. This is one of many factors that necessitates the use of advanced practice clinicians (APCs), whose combined medical expertise provides value to medical institutions and their patients at a lower cost. While APCs, including nurse practitioners 30 | INSURANCE JOURNAL | NATIONAL APRIL 2, 2018

Every state in America has a different approach to laws and regulations surrounding what APCs can and can’t do. The legal scope of an APC’s duties can alter, as in any other regulated profession, depending on even minor legislative tweaks. Furthermore, the interpretation of laws can vary

depending on whom you ask. For instance, a regulation that uses the phrase “in collaboration with a supervising physician” may, in practice, mean “under the supervision of a supervising physician.” In half of the 42 states that allow NPs to prescribe medications, those NPs must do so under the supervision of a licensed physician. But this regulation may not be fully understood or adhered to and can be interpreted in a variety of different ways. Healthcare entities failing to utilize the skills of APCs within the scope of these oftentimes opaque legal definitions can open them up to litigation. This litigation doesn’t just extend to the APCs themselves; it often targets the supervising physician in charge of the APC and the entity for which he or she works.

Understanding Liability Concerns

Between 1991 and 2007, APCs were 12 times less likely than physicians to be the target of malpractice litigation, which APC advocates cite as a reason for their continued and increased employment. Even so, the fact remains that a mistake by an APC could leave supervising physicians and healthcare entities liable. As the scope of an APC’s practice expands, so too does the risk that the APC might incur. In some states, APCs are now allowed to assist in major surgery, conduct a minor surgery, diagnose patients and prescribe medications. Over the past 10 years, the number of APCs endowed with these responsibilities has also increased. While the support of APCs has been invaluable for many healthcare entities, it cannot rid the profession of malpractice suits. The fact that more APCs are involved in major medical procedures means that preparing for potential liability issues is more important than ever for all parties involved.

How to Mitigate Risk

First and foremost, insurance coverage is vital to the risk mitigation effort. But coverage of select members

continued on Page 32

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NATIONAL | Spotlight | Medical Liability continued from page 30 of the medical team may not be enough. It is true that supervising physicians and healthcare entities bear the brunt of malpractice suits even if the care in question was administered by an APC. Allegations can range from “failure to accurately diag-

nose” to “failure to follow collaborative or standard of care arrangements,” but it is the higher-ups that receive the most blame. That is not to say, however, that APCs are never the target of litigation. In some

(usually rural) areas in the United States, APCs represent the only medical professional available within a reasonable distance, meaning that the right coverage is essential even for APCs. It is also important to remember that not all insurance carriers are the same. APCs, physicians and healthcare entities should seek out those carriers with extensive knowledge of liability exposures in healthcare.

Healthcare entities failing to utilize the skills of advanced practice clinicians within the scope of oftentimes opaque legal definitions can open them up to litigation. Among other things, the insurance carrier should understand the complexities of state law, especially when it comes to the scope of an APC’s practice. All APCs on a healthcare entity’s insurance coverage should be listed. General insurance carriers may not fully comprehend these complexities, leading to gaps in liability coverage. Knowledgeable insurance brokers can help find the robust coverage required to stave off risk. Instituting quality compliance practices can also help avoid risk.

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Conclusion

Conning analysis of distribution costs concludes that

While APCs unquestionably provide value from a medical perspective, one must not lose sight of the legal risks that may be lurking in the background. Errors in the medical field are natural, but as the stakes of those errors become increasingly higher for APCs, it is important to have the right coverage to protect them and the other members of their medical team from risk. The best way to obtain that coverage is to find an insurance carrier (usually through a knowledgeable broker) that specializes Share this article in liability exposure.

wholesale distribution does not increase the cost of the transaction to the insured. Count on WSIA members to create expertly tailored insurance solutions. Find a WSIA member at wsia.org

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32 | INSURANCE JOURNAL | NATIONAL APRIL 2, 2018

with a colleague. IJMAG.COM/42NU Zaremba is assistant vice president, healthcare claims lead for QBE North America.

10/24/17 8/14/17 7:42 3:36 PM

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Idea Exchange

The Competitive Advantage

Best Practices – Just Kidding!

By Chris Burand

lmost 30 years ago, I sat in a large carrier meeting, in an upscale hotel meeting room. The company had brought 20 or so people together from their offices around the country in multiple divisions to discuss “The Next Big Thing.” The speaker spoke as an apostle, delivering the message from the Ivory Tower. His sermon was absolutely one of the stupidest management sermons I have ever heard. He said that the carrier now had a full and complete understanding of what Dr. Edward Deming meant, what Six Sigma meant, and the company was going to quit measuring performance. Absolute proof of complete egotistic ignorance. I honestly doubt he’d ever even read Dr. Deming’s books. Dr. Deming wrote extensively regarding the need to carefully and constantly measure every meaningful performance metric available. Following World War II, he tried to teach U.S. manufacturers the importance of this, but they ignored him. He went to Japan where the auto industry drank up his message and developed a successful culture around quality performance. The U.S. auto industry felt the pain of their egotistic approach. Companies fell apart and only by grace have others with the same level of ignorance not fallen by the wayside too, including many agencies. The confusion between the speaker and 34 | INSURANCE JOURNAL | NATIONAL APRIL 2, 2018

Dr. Deming’s message regarding measuring everything has to do with progress. He emphasized measuring progress whereas most corporate cultures think of measuring against some kind of industry benchmarks. It is a total ego centric approach: "I just need to be better than average" versus "I am never perfect and therefore, I need to keep progressing." My competition is myself. I have the ability to continually improve. If a person plateaus at sales that are three times the industry average, then against the benchmark, they are stellar. But do they have room to improve? Absolutely.

Different Perspectives

Measuring oneself against best practice metrics is just silly from a different perspective too. Different companies and different agencies have different practices, different priorities, different settings, and lots of different factors that are not automatically interchangeable and do not get entered in the algorithm measuring performance. Therefore, what works for one will not work for another, and the comparisons are not close to apples-to-apples. Do not get me wrong, I understand how seductive aspiring to outperforming one’s peers can be. All the way through youth sports, kids are taught to just beat the other team. People grow up being cheered for having competitive personalities. The aspect I love most about the X Games is their emphasis on always progressing, because in today’s ultracompetitive world, simply being better and then resting on one’s laurels is suicide. Focusing instead on just being better each and every day is a far more successful culture. Progression is so simple, so logical and so incomprehensible though to the insurance industry. Here is a simple example of just how badly the industry has abused the

entire concept of “Best Practices.” Agencies purchase best practice metrics, but where are the “practices?” Metrics are not practices! To take a set of metrics and apply them presumes all agencies have exactly the same practices — the same percentage of personal lines, commercial lines, surety and benefits, the same socio demographics and the same everything — and therefore, all agencies should be able to achieve the same metrics. Practices are not metrics and metrics are not practices. Do not be fooled.

Continual Progress

In my 30 years in the industry, the industry has made almost no real progress in understanding the basic concept of continual progress. The simplistic, almost religious, need to find meaning in excessively basic, one dimensional numbers floating free of any tether to practices keeps agencies and companies from achieving their full potential. It keeps them from delivering higher quality consumer experiences. A simple agency example is the agency that advertises their best practices award or their top 50 position but has disappeared hundreds of thousands of trust monies and no one has called them out yet. Surely, best practices does not include failing a fiduciary responsibility, does it? Practice vs. metric. They are not the same. A less nefarious example is the revenue per person metric. Take two agencies: One

continued on page 36 INSURANCEJOURNAL.COM

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continued from page 34 does a lousy job of reviewing renewals and one demands all renewals be remarketed. In best practice metrics, the former will be a celebrated hero and the latter will be a goat. Neither has quality practices but only one metric is being used. The entire scene is a comedy. This comedy explains why, when actually tested, revenue per person proves to be meaningless. I have tested the correlation between revenue per person and the publicly traded brokers’ results for the last 10 years. In statistical terms, the correlation is that of a blindfolded man throwing darts while standing on a revolving platform. The darts land randomly, and so is the correlation between profitability and revenue per person. I have tested different sets of publicly available benchmarks. I have tested my own private database. Revenue per person is not correlated with profitability. Doesn’t it make more sense to first create actual best practices in the sense

of high quality procedures specific to the organization? Next, doesn’t it make sense to use metrics that consider multiple perspectives instead of one (revenues per person is a one-dimensional perspective)? In other words, tie practices to the metrics, then measure progress and improvement.

Fast Growth

A large percentage of agencies I have met or with whom I’ve consulted that achieved fast growth did so by questionable means, including cheating (customers not really getting the coverages they thought they were getting, though cheating might be too harsh a word), fraud, rebating and other unsavory practices. While not unethical, many also made no profit. Why measure growth without also measuring profit and vice versa? At least make benchmarks multi-dimensional. Doesn’t it make sense to use benchmarks that show an agency it has to sacrifice

article with a colleague. IJMAG.COM/42CO 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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profit for growth and vice versa (which is generally quite true), rather than blindly thinking the agency can have it all? Metrics tied to practices tied to consistent progress is what matters. Doing so prevents stagnation. Doing so when everyone else focuses on useless metrics means you will eventually outperform everyone without them having a clue what you are doing. Doing so creates flexibility in a fast changing marketplace where profit compression is coming hard and soon. We have built three-dimensional practices and metrics with which an agency can implant upon their unique characteristics. Contact me, and we can begin the path of continuous improvement. Share this

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Human Resources

The Key to Unlocking Creativity? Promoting an Innovative Culture

By David E. Coons

he insurance industry stands amid an increasingly fast-paced, ever-changing business world. Insurance companies are now face-to-face with constantly evolving marketplace conditions — including climate concerns, technology risks, compliance demands and globalization. Organizations that fail to keep up with today’s rapid innovations risk falling behind. As a result, insurers have embraced an “innovate or die” business mantra. In order to support this emerging reality, organizations are increasingly focused on developing a company culture that promotes and embraces evolution and innovation. Creating a culture that fosters creative thought and adapts to change not only ensures future success, but also plays a key role in recruiting talent.

organization’s human capital provides a unique source of ideas that should be utilized. A truly innovative culture continually fosters these ideas and insights. No input is too big or too small. Organizations should encourage their employees to present new ideas — to use their own intuition and creativity to brainstorm ways to improve the company, product line or services. This can include everything from suggestion boxes to think tanks and opportunities for individuals to collaborate and be creative. Develop a workspace that fosters brainstorming and idea sharing. Promote an “open door” policy for employees to share their ideas with management. At The Jacobson Group, our casual dress code, flexible scheduling, open floor plan, internship program and emerging talent service offering have all stemmed from employee provided insights.

Building an Innovative Culture

A key element of a truly innovative culture is the promotion of creativity. An

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Establishing a culture of innovation must go beyond just window dressing. The key is to truly live and believe in the culture. This means the ideas and insights shared by employees must be addressed. Feedback and input is critical to ensuring employees continue to share their ideas. If they feel their ideas aren’t being acknowledged or reviewed, professionals become less and less likely to share.

A culture of innovation must be embraced from the top down. This doesn’t necessarily mean all ideas need to be implemented, but rather that management should provide some feedback to acknowledge their consideration. Inaction and lack of input can stifle creativity and make employees feel unappreciated. A culture of innovation must be embraced from the top

down. It requires alignment across all levels and departments. It needs to permeate throughout an organization’s core values and mission in order to succeed.

Innovation in Recruitment

Today’s top-level talent wants to work at organizations that are involved with emerging trends. Fortunately, growing disruption and advancements have put the industry at the forefront of change. Attracting and retaining talented professionals requires companies to highlight and promote their innovative cultures. Organizations need to position themselves as thought leaders and innovators. They should advance their acceptance and encouragement of new thoughts and ideas. Showcase employee contributions and insights. Highlight the ways the company is “walking the innovative talk” by valuing the ideas and input from employees. This can be a critical factor in setting an organization apart from its competition. Faced with a rapidly evolving business world, today’s cutting-edge insurance organizations understand that innovation is key. At the core of this need for innovation is the development and promotion of a creative culture. Coons is a senior vice president at The Jacobson Group, a provider of talent to the insurance industry. Phone: 800-466-1578. Email: dcoons@ jacobsononline.com. INSURANCEJOURNAL.COM

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Paradox: Confused About What Motivates Salespeople? Favre’s dad was a high school football coach. He was a hard man to please. He told Brett: “You play even if you’re hurt: I don’t want to see you coming off that field.” Brett didn’t let him down. He played 17 seasons; never missed a game and currently he holds virtually every passing record in the NFL. He was as motivated as they come; externally (to gain recognition by pleasing his dad), internally (to achieve).

You Want Producers with GRIT

By Randy Schwantz

hen Brett Favre was inducted into the NFL Hall of Fame, he looked up at the sky and said: “Dad, I hope I made you proud.”

As you hire salespeople, you are looking for the same kind of GRIT that Favre had: “You don’t come off the field unless you’re so hurt you have to crawl off on your belly,” said his dad Irving Favre. But, pleasing his dad wasn’t the only

motivation that drove Brett. He had a fire burning in his belly. He was a gun-slinger. He wanted to get the ball down the field, and he didn’t really care how he got it done; run or throw. He was achievement oriented (Intensity/Drive).

Two Sources of Motivation

As you interview producers, you’re looking for what motivates them. As you know, motivation comes from two sources, internal and external. Internal motivation is known as Intensity/Drive. It’s that insatiable desire to make something happen, to achieve. External motivation is a Drive for Public Recognition. They want to be noticed and will do whatever it takes to be seen and recognized for what they’ve accomplished.

Leader’s Role in Motivation

If you are fortunate enough to have hired motivated producers, then your next step is to have a strategic way to keep that motivation burning hot; that’s the role of leadership. Producers with strong Intensity/Drive, believe they are going to win. To keep them motivated, you need to give them daily activities, so they can get short-term wins. If it were basketball, you would show them the stats after every game. Then set a goal for the next game to improve on specifics, such as turnover ratio, free-throws made, points scored by the person you are guarding. The point is, winning the game (a long-term result) or winning the conference championship (longer-term result) doesn’t provide enough wins to keep their fire burning, to keep the energy turned up.

Daily Activity Goals for Internally Motivated Producers

If this were a salesperson, you’d have daily activity goals. You’d set a clear number of dials to be made and number of appointments set. When they go on sales calls, you’d set goals with them on how many pains they can find with the pros40 | INSURANCE JOURNAL | NATIONAL APRIL 2, 2018

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have the attributes of a High-Activity Salesperson. The GPI (Grit Personality Inventory) was designed for hiring producers. To give it a test drive, go here: http://thewedge.net/ Share this article with a colij-gpi.

league. IJMAG.COM/42SA Schwantz is founder of The Wedge Group. Phone: 214-446-3209. Website: www.thewedge.net. Email: randy@thewedge.net.

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pect. The point here is this: They need a lot of quick wins to stay motivated, so hold them accountable to activity, not results (they’ll get the results).

Recognize the Externally Motivated

If you have someone that is externally motivated, then they have a Drive for Public Recognition. They can be rewarded by contests, trophies or recognition in front of their peers. If they score low on Drive for Public Recognition, then you need to recognize them on a more personal level, one-to-one, not in front of peers.

Build a High-Growth Agency

If you want to build a High-Growth Agency, it’s imperative to hire HighActivity Salespeople. In all my conversations with agency owners, seldom do I hear: “We have a team of amazing prospectors. We just need help closing the deal.” Instead, they generally ask: “What can you do to help us fill up the pipeline?” So, be careful going into your next interview. Don’t buy into your candidate’s pitch about how motivated they are.

Two Things

To protect yourself as an agency owner, you need to do two things: 1) Change your interview process and 2) Change your personality test (or at least become a student INSURANCEJOURNAL.COM

of what it’s telling you). Evidence Based Hiring: There was more than enough evidence to put OJ Simpson behind bars, but the jury was sympathetic to who OJ was and the lawyers played to that sentiment. Before you make an offer, you need evidence, not just hearsay. You need evidence that your producer candidate has the traits you are looking for. If you haven’t developed your Evidence Based Hiring process, then it’s time to consider building that skill. Personality Test: There are thousands of personality tests. There are only a few that were designed to hire salespeople. The first thing you should be concerned about is the producer’s ability to “game” the test. If you don’t have reliable answers, you don’t have a reliable hiring process. The second thing you should be concerned about is just accepting that your producer candidate hit the 777 that someone told you was acceptable. If hiring new producers was a low risk adventure, it probably wouldn’t matter whether or not you understood what the profile was telling you about them. But, it is high risk. When interviewing for these traits, be cautious. Your candidates will tell you that goal achievement is a big deal to them, mostly because they’ve been coached to say that. You need to find ways to verify and validate, or you’ll be holding the bag on a salary for someone that doesn’t

Abram Interstate www.abraminterstate.com W6 Anderson & Murison www.andersonmurison.com 18 Aon Programs www.aon.com 7 Applied Underwriters www.auw.com 2, 3, 44 Aspen Insurance www.aspen-insurance.com 35 Atlas General Ins. Services www.atlas.us.com 36 Brecht & Associates www.brechtassoc.com SC2 Frenkel & Company www.cosmeticinsurance.com 40 Golden Bear Insurance Company www.goldenbear.com 37 Great American Insurance Group www.gaig.com 29 Louisiana Commerce & Trade Assoc. www.lctacomp.com SC5, S5 M.J. Hall & Company www.mjhallandcompany.com W3, W4 Monarch E&S Insurance Services www.monarchexcess.com W5 Nationwide E&S www.wearenownationwide.com 5 Nautilus Insurance Company www.nautilusinsgroup.com 27 Pacific Gateway Insurance Services www.pgiainsurance.com W7 PersonalUmbrella.Com www.personalumbrella.com 43 Philadelphia Insurance Companies www.phly.com 25 Regions Bank www.regions.com 9 Ryan Specialty Group www.ryansg.com 12, 13 Ryan Turner Specialty www.ryansg.com 17 Safeco Insurance www.safecoagentsnews.com 19 Safety National www.safetynational.com 31 St. Johns Insurance Company www.stjohnsinsurance.com S5 Starr Companies www.starrcompanies.com 33 Summit www.summitholdings.com SC4, S3, M5 Texas Mutual www.texasmutual.com SC3 The Institutes www.theinstitutes.org 15 United Fire Group www.ufgsolutions.com E5 WSIA- Wholesale & Specialty Ins. Assoc. www.wsia.org 32

APRIL 2, 2018 INSURANCE JOURNAL | NATIONAL | 41

Closing Quote Agency E&O: To Win a Lawsuit or Prevent One?

By Frederick J. Fisher

nsurance agents and brokers have long been targets of error and omission lawsuits. It’s also true that most of them have sought advice of counsel as to how to win a lawsuit. They will often be told that the duty of an insurance agent or broker is to simply be an order taker: they should utilize their best due diligence to obtain the coverage requested. To avoid enhanced standards of care, they probably will also be told not to offer advice, nor provide risk management advisory services or analysis, nor make representations or promises they can’t keep. The standard of care in most states is that agents and brokers are not obliged to make recommendations or provide advice. While this is true, is this really the best course of action? Will it allow you to win or prevent a lawsuit? Is this advice from counsel even practical? The fact is, if all you did was obtain the coverage requested, and offered no advice or counsel, chances are that a claim

against your client that might otherwise have been covered is going to be denied. Thus, there is a high probability of being sued anyway. Most insurance agents or brokers know more about insurance than the average consumer. So how can the consumer ask you to obtain the appropriate coverage? How could they even understand or read an insurance policy to determine whether that which has been provided or been quoted will meet their expectations? Many attorneys can’t understand insurance policies! Insurance is far more complex than it was when I started my career in 1975. Most policies were written on an occurrence basis and, more often than not, they were written using ISO standardized forms, which everybody knew and had studied in order to even obtain a license. Those days are long gone! Many “new” coverages are now necessities that previously didn’t exist. In addition, today, many policies are written on a “claims made” basis, as opposed to an occurrence basis, adding to the complexity. Such complex coverage triggers include claims made forms, or claims made and reported forms, some with prior act limitations, prior pending and continuity limitations and reporting requirements.

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So how do you avoid litigation and still provide your clients with what they need? That’s the dilemma facing the insurance agent or broker who could win a lawsuit by giving no advice but can avoid a lawsuit by doing so. How many times have we heard from an aggrieved policyholder that his agent “promised him the best coverage” or the most “complete coverage” available? How often have we heard customers say that they wanted to be covered for “everything” and weren’t? Then how should you deal with such situations especially when a client says, “I want to be covered for all my exposures and I want the best policy possible?” That needs to be addressed and answered. Most lawsuits against insurance agents and brokers arise from inadequate training, lack of uniform policies and procedures, lack of consistency, time constraints, and a failure to communicate. It boils down to providing reasonable finan-

cial security and explaining the coverages and exclusions to your customer. Providing financial security is key. You can only do that by really delving into the insured’s needs and explaining how you can or can’t satisfy them. If you do everything possible to avoid what can go wrong, you won’t be sued. This includes delinquency on premium payments, making sure all contingencies are obtained prior to binding, or even asking the pertinent questions when you hear the usual, “It’s simply a name change nothing else has changed.” Businesses don’t change names; they change structure. Failure to delve into that could give rise to insuring an entity that no longer exists while not insuring the one that does. When we don’t give advice, we may win a lawsuit. But what’s better, fighting it out, or not having a lawsuit at all? Fisher, J.D., CCP, is president of Fisher Consulting Group Inc. INSURANCEJOURNAL.COM

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