WEST REGION Ax-Throwing Venue Serves Beer California Mudslide Claims $421M How Agencies Can Grow Their Book
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Contents April 16, 2018 • Vol. 96 No. 8 • West
West W1 Utah Ax-Throwing Venue Approved to Serve Beer?
W1 UTAH AX-THROWING VENUE APPROVED
TO SERVE BEER?
W6 California Mudslide Claims Top $421M
National 10 Dog-Related Losses Account for One-Third of Homeowners Liability Claims Costs 12 Rising Claims Frequency Hampers Results in D&O Sector 18 Special Report: Exclusive Survey Results on What Young Agents Want
Idea Exchange
24 Risk Managers on Cyber Exposures and Coverage Gaps
W8 Growth Matters: Three Ways Agencies Can Grow Their Book of Business 26 Fluid Work as a Reputation and Engagement Game Changer 30 The New Small Commercial: Why Carriers Need to Better Serve ‘Small Specialty’ 32 Insurtech and Technological Opportunities, Challenges in Surplus Lines 36 Minding Your Business: How to Hire the Right People
10 WHEN DOGS BITE: LOSSES ACCOUNT
FOR ONE-THIRD OF HOMEOWNERS LIABILITY CLAIMS COSTS
38 Closing Quote: Legalized Marijuana Looks Like Bad News for Highway Safety
Departments W2 People 11 Declarations 11 Figures
32 INSURTECH AND TECHNOLOGICAL
6 | INSURANCE JOURNAL | WEST APRIL 16, 2018
OPPORTUNITIES, CHALLENGES
14 Business Moves 28 MyNewMarkets INSURANCEJOURNAL.COM
UNMATCHED SOLUTIONS COME FROM UNMATCHED EXECUTION.
This is how we operate. RT ProExec risk professionals provide cutting-edge product knowledge in the fastest growing specialty areas in the insurance marketplace. We have deep Representations and Warranties Insurance expertise. When combining RT ProExec’s product intelligence with our innovative placement methods, our nonstop work ethic, and an unparalleled level of service, our retail partners and their clients win. Contact your RT ProExec specialist at www.rtspecialty.com.
www.rtspecialty.com R-T Specialty, LLC (RT), a subsidiary of Ryan Specialty Group, LLC, provides wholesale brokerage and other services to agents and brokers. RT is a Delaware limited liability company based in Illinois. As a wholesale broker, RT does not solicit insurance from the public. Some products may only be available in certain states, and some products may only be available from surplus lines insurers. In California: R-T Specialty Insurance Services, LLC License #0G97516. Š 2018 Ryan Specialty Group, LLC
OPENING NOTE
Write the Editor: awells@insurancejournal.com
What Young Agents Might Change
T
Publisher Mark Wells mwells@wellsmedia.com
EDITORIAL
SALES
Editor-in-Chief Andrea Wells awells@insurancejournal.com
West Sales Dena Kaplan (800) 897-9965 X115 dkaplan@insurancejournal.com
East Editor Elizabeth Blosfield eblosfield@insurancejournal.com
Romeo Valdez (800) 897-9965 X172 rvaldez@insurancejournal.com
Chief Content Officer Andrew Simpson asimpson@insurancejournal.com
Southeast Editor/MyNewMarkets Amy O’Connor aoconnor@insurancejournal.com South Central Editor/ Midwest Editor Stephanie K. Jones sjones@insurancejournal.com West Editor Don Jergler djergler@insurancejournal.com International Editor L.S. Howard lhoward@insurancejournal.com Columnists Catherine Oak, William Schoeffler
Chief Marketing Officer Julie Tinney (800) 897-9965 X148 jtinney@insurancejournal.com
South Central Sales Mindy Trammell (800) 897-9965 X149 mtrammell@insurancejournal.com Southeast and East Sales (except for NY, PA and CT) Howard Simkin (800) 897-9965 X162 hsimkin@insurancejournal.com Midwest Sales Lisa Whalen (800) 897-9965 X180 lwhalen@insurancejournal.com East Sales (NY, PA and CT only) Dave Molchan (800) 897-9965 X145 dmolchan@insurancejournal.com Advertising Coordinator Erin Burns (619) 584-1100 X120 eburns@insurancejournal.com
Contributing Writers
Insurance Markets Manager Alexandra Cavaliere, David Coons, Kristine Honey (619) 584-1100 X132 Michael Keane, Zachary Lerner, khoney@insurancejournal.com Matt Moore, Lindsey Tanner, Bruce Winterburn Social Media Manager Ly Short (619) 890-7735 IJ ACADEMY OF INSURANCE Lshort@insurancejournal.com Director Patrick Wraight Classifieds, Jobs, pwraight@ijacademy.com Agencies Wanted/For Sale Sr. Sales & Marketing Coordinator Associate Director Kelly De La Mora (800) 897-9965 X125 Barbara Whiffen kdelamora@insurancejournal.com bwhiffen@ijacademy.com
ADMINISTRATION
Chief Financial Officer Mark Wooster mwooster@wellsmedia.com
MARKETING
Marketing Director Derence Walk dwalk@insurancejournal.com Marketing Administrator Gayle Wells gwells@insurancejournal.com
NEW MEDIA
New Media Producer Bobbie Dodge bdodge@insurancejournal.com Videographer/Editor Ashley Waldrop awaldrop@insurancejournal.com
DESIGN/WEB
Chief Technology Officer/ Chief Innovation Officer Joshua Carlson jcarlson@insurancejournal.com V.P. of Design Guy Boccia gboccia@insurancejournal.com Senior Web Developer Chris Thompson cthompson@insurancejournal.com Web Developer Jeff Cardrant jcardrant@insurancejournal.com Web Developer Terrance Woest twoest@wellsmedia.com
CIRCULATION
Circulation Manager Elizabeth Duffy eduffy@wellsmedia.com
his issue of Insurance Journal features exclusive results from the 2018 Young Agents Survey where more than 500 young agents nationwide shared their views on the insurance industry and their experience as an agent. (See page 18 for the full report.) Overall, young agents seem happy with their career choice and the industry. Year after year young agents cite the freedom and challenges that come with the job of an independent agent as perks of the job. However, there are some things young agents would change about the insurance industry or their career if given the chance. When asked about what they would change about the industry, a number of young agents wrote in the survey that they would add more opportunities for women in leadership positions. Young agents responding to the survey also noted that if given the chance to change things they would include more young, diverse professionals across the industry. Several young agents said in the survey they would ask their carrier partners to listen to their pleas for better technology. Underwriting takes too long, several added. Several agents commented that younger professionals need better training and mentoring. One young agent wrote in the survey: “The independent agency channel is a challenging one. I think if there were a better IA road map, that carriers can share with their agents, it would help more people succeed.” Young agents want more support from the insurance companies they work with, not just their own agencies. “Unless you’re an employee of the insurance company, they expect you to perform/sell more and more, with less and less support,” one agent said in the survey. Better and easier lines of communication between agents and carriers was cited as something they would change as well. Likely the most common complaint of young agents in this year’s survey was the industry’s use of technology. As one agent stated in the survey: “I really want the industry to catch up with technology particularly on the carrier and agency management FOR QUESTIONS system side.” REGARDING SUBSCRIPTIONS: Call: 855-814-9547 Perhaps the one area that young agents Outside the U.S., call 847-400-5951 or you may subscribe or change your address online at: hope would change is the reputation and neginsurancejournal.com/subscribe ative “stigma” often placed on the insurance Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media industry itself. 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 One agent wrote in the survey: “I’d like to per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this pubsee the industry become more respected. To lication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended some we are just a little better than used car to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2016 Wells salesmen.” Media Group, Inc. All Rights Reserved. Content may not be photo-
‘I really want the industry to catch up with technology particularly on the carrier and agency management system side.’
copied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Media Group, Inc.
Andrea Wells Editor-in-Chief
8 | INSURANCE JOURNAL | NATIONAL APRIL 16, 2018
POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 708, Northbrook, IL 60065-9967 ARTICLE REPRINTS: For reprints of articles in this issue, contact: Kelly De La Mora at 1-800-897-9965 ext. 125 or kdelamora@wellsmedia.com Visit insurancejournal.com/reprints/ for more information.
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National
When Dogs Bite: Dog-Related Losses Account for One-Third of Homeowners Liability Claims Costs
D
og bites and other dog-related injuries accounted for more than one third of all homeowners liability claim dollars paid out in 2017, costing almost $700 million. That’s according to the Insurance Information Institute (I.I.I.) and State Farm, the largest writer of homeowners insurance in the United States. An analysis of homeowners insurance data by the I.I.I. found that the number of dog bite claims nationwide increased to 18,522 in 2017 compared to 18,122 in 2016, 10 | INSURANCE JOURNAL | NATIONAL APRIL 16, 2018
which was a 2.2 percent increase. The average cost per claim increased by 11.5 percent. The average cost paid out for dog bite claims was $37,051 in 2017 compared with $33,230 in 2016. “The increase in the 2017 average cost per claim could be attributed to an increase in severity of injuries,” said Kristin Palmer, chief communications officer with the I.I.I. “But the average cost per claim nationally has risen more than 90 percent from 2003 to 2017 due to increased medical costs as well as the size of settlements, judgments
and jury awards given to plaintiffs.” California continued to have the largest number of claims in the United States at 2,228 in 2017, an increase from 1,934 in 2016. The state with the second highest number of claims was Florida at 1,345. Florida had the highest average cost per claim at $44,700. The trend in higher costs per claim is attributable not only to dog bites but also to dogs knocking down children, cyclists, the elderly, etc., which can result in injuries that impact the potential severity of the losses. INSURANCEJOURNAL.COM
West
Utah Ax-Throwing Venue Approved to Serve Beer?
D
espite safety concerns, a recreational ax-throwing venue in Salt Lake City, Utah, has been approved for a license to serve beer. The state liquor commission approved Social Axe Throwing’s request for a recreational beer license. The business asserted that it’s “substantially similar” to other recreational businesses that serve beer. Social Axe co-owner Mark Floyd said his company “is a recreational amenity almost identical to a bowling alley,” except cusINSURANCEJOURNAL.COM
tomers throw axes at a wooden target. But that nature of the business does have some members of the state commission worried. The commission asked the company to return in six months and report on any safety issues or underage drinking problems. “On one hand, we want to do what we can to allow people to engage in recreational activities,” Commissioner Thomas Jacobson said. But Social Axe is the first Utah busi-
ness of its kind to get a recreational beer license, making it “unknown territory,” he said. Floyd, who co-owns the business with his brother, Brayden, and Steve Lister, opened their first shop in Ogden in 2017. The two locations are among four ax-throwing venues along the Wasatch Front, including Axe Arena in Murray and True North Axe in Lehi. Copyright 2018 Associated Press. All rights reserved. APRIL 16, 2018 INSURANCE JOURNAL | WEST | W1
WEST | PEOPLE The members of the Surplus Line Association of California have elected Robert Gilbert of Markel
Robert Gilbert
Adam Bowermaster
Josh Pasek
Sharon Rogerson
Matt Cundith
West Insurance Services as the new chair of the SLA Board of Directors. Gilbert’s election was finalized after the SLA tallied ballots from members who were unable to attend their annual meetings in February. Also elected to leadership were Terri Moran of Cove Programs Insurance Services, who becomes vice chair, and Janet Beaver of Tokio Marine-HCC Casualty, who becomes secretary/treasurer. Gilbert takes over from Tom Ciardello of Worldwide Facilities LLC, who becomes vice chair, who completed his 2017 term as chair and was elected to a seat on the board. Completing the 13-member board are the following individuals who also served on the 2015 board: Tim Chaix, R.E. Chaix and Associates Rich Gobler, Burns & Wilcox Hank Haldeman, The Sullivan Group Cameron Kelly, Worldwide Facilities LLC Pam Quilici, Crouse & Associates Insurance Services of Northern California Inc. Les Ross, Wholesale Trading Co-Op Insurance Services, LLC Kathy Schroeder, Sierra Specialty Insurance Services Inc. Gerald Sullivan, The Sullivan Group John Washington, Arch Insurance Group Additionally, SLA members reelected the Honorable Harry Low, a former insurance commissioner and retired presiding justice of the California Court of Appeal, as mediator. All individuals elected to the 2018 board will serve until balloting is completed following the next SLA annual meeting in February 2019. The SLA operates as a self-governed private organization and serves as the statutory surplus line advisory organization to the California Department of Insurance. Cypress, Calif.-based Bowermaster and Associates Insurance Agency Inc. has named Adam Bowermaster president. Bowermaster has more than 20 years of experience. Mike Bowermaster, the firm’s previous president, will continue to serve as an advisor to the executive team. Bowermaster and Associates offers services including insurance and risk management, employee benefits, and personal and small business insurance.
W2 | INSURANCE JOURNAL | WEST APRIL 16, 2018
Woodruff-Sawyer & Co. has named Josh Pasek assistant vice president in the property/casualty practice of the firm’s Southern California office. Pasek will be responsible for developing risk management programs for clients, with a focus on industrial companies in the manufacturing and transportation sectors. He was previously a sales executive and producer for Moreton and Co. He was vice president of business development at Oeste Capital Management before that. San Francisco, Calif.-based Woodruff-Sawyer has offices throughout California, and in Oregon, Washington, Colorado, Hawaii and New England. Lockton has named Sharon Rogerson assistant vice president and account executive in the firm’s signature client group. The firm has also named Matt Cundith a producer in Lockton’s Los Angeles, Calif., office. Rogerson will be based out of Lockton’s Irvine, Calif., office. Her focus will be assisting high-net worth individuals and families. She was previously a senior account executive at Ericson Insurance Advisors. She was a personal lines customer service representative for Insurance Planning Co. before that. Cundith will work with clients throughout California and the U.S. Cundith comes to Lockton from Aon, where he consulted contractors, developers and Fortune 1000 firms on surety risks and solutions. Kansas City, Mo.-based Lockton is a global professional services firm. MJ Insurance has named Sean Evans an employee benefits consultant in its Phoenix, Ariz., office. Evans previously was a franchise owner and operator of Jimmy Johns – Cali Subs LLC in Santa Barbara, Calif. Indianapolis, Ind.-based MJ Insurance is a commercial insurance, risk management and employee benefits consulting agency. Pinnacol Assurance in Colorado has named Fiona Arnold, Brad Busse and Bill Lindsay to its board of directors for the term that began Jan. 1. All three were confirmed unanimously by the Colorado Senate after appointment by Gov. John Hickenlooper. Arnold is president of MAINSPRING Developers. She has held executive positions at Vail Resorts,
continued on page W4
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WEST | People continued from page W2
Western Gas Resources Inc. and Crown Media Holdings. Arnold previously served on Hickenlooper’s cabinet as executive director of the Colorado Office of Economic Development and International Trade. Busse started Busse Ventures in 2014 after 28 years with RBC Capital Markets. He has experience with mergers and acquisitions, equity and debt capital formation, and financial advisory engagements. Since 2000, he has served on commissions including the Colorado Commission on Early Childhood Leadership and the Colorado Commission on Science & Technology. Lindsay is an expert in health care and insurance. Before launching Lindsay3 Consulting, he was president of Lockton Cos.’ benefit group in Denver. He has served on several state commissions addressing healthcare. Hickenlooper also reappointed Joseph A. Hoff to another term as an employer farm
and ranch representative on the board. Pinnacol insures a reported 57,000 Colorado employers. Stone Creek Insurance Agency Inc. has opened a new office in the Paulsen building in downtown Spokane, Wash., and added several insurance professionals to staff the new location. Thomas Lynch has also been named vice president of operation for Stone Creek and will report directly to Michael Pallas, co-owner and head of operations. Stone Creek has named Desiree Carter a customer service representative in the Spokane office. She comes from Travelers Insurance, where she worked for two years in the service department. The firm has named Victoria VanChieri a personal lines customer service representative in the office. She specializes customer retention and
personal lines coverage maintenance. Brandon Reynolds has been named an account manager in the office. He previously worked for Travelers Insurance for as a coverage specialist. Stone Creek is an insurance brokerage that specializes in property/casualty coverage in Western U.S. and Florida. Burnham Benefits Insurance Services Inc. has named Mirna Medina an account executive in the Los Angeles, Calif., office. Medina was previously a senior client manager at Arthur J. Gallagher & Co. Before that, she was at Bolton & Co. She began her career as an analyst at EOI Service Co. Irvine, Calif.-based Burnham Benefits is an employee benefits consulting and brokerage firm with offices in Orange County, the San Francisco Bay Area, Los Angeles, San Luis Obispo, Santa Barbara, Sacramento and San Diego.
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WEST | News & Markets
California Mudslide Claims Top $421M
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nsurers have received more than 2,000 insurance claims totaling more than $421 million in losses from the deadly Montecito, Calif., mudslide that destroyed
or damaged more than 400 homes and businesses and killed 21 people, the California Department of Insurance reported earlier this month.
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The total number of claims included more than $387 million in residential property losses, more than $27.2 million in commercial property, and roughly $2.5 million in personal and commercial auto. “Over $421 million in insured losses represents more than property lost-behind these numbers are the tragic deaths of 21 people and thousands of residents traumatized by unfathomable loss,” Insurance Commissioner Dave Jones said in a statement. “Recovering and rebuilding lives, homes and neighborhoods will take time — and it will be difficult.”
Jones in January issued a formal notice to all property/casualty insurance companies reminding them of their duty to cover damages from the mudslides and debris flows if it is determined that the destruction of the hillsides and vegetation by the Thomas and other fires was the efficient proximate cause of the mudslides. Jones also stated in his notice that there was substantial evidence that the fires were the efficient proximate cause of the mudslides. The department issued a questionnaire in which all the insurers stated that they are recognizing the proximate cause doctrine. The department has not received reports of any denials of these claims due to exclusion for mudslides.
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Idea Exchange
Growth Matters
Three Ways Agencies Can Grow Their Book of Business
By Bruce Winterburn
I
n today’s commoditized market, growing the business isn’t just a recommendation — expanding a roster of high-value clients is a necessity for all agencies. But where to start? First and foremost, agencies must establish the correct tools and strategies to not only keep current customers happy, but cast a wider net into unchartered territory.
Diversify by Expanding Into Niche and Specialty Lines By expanding into new lines of business, agencies are able to gain more referrals, become more competitive, and enjoy better retention rates. Niche industries continue to grow exponentially, with specialty lines ranging from cyber security to student housing. Cyber insurance, in particular, is expected to grow to $20 billion in the next 10 years, according toAllianz Global. Student housing insurance could be particularly valuable, as the number of university-enrolled students will grow to a
projected 23 million in 2020, according to CCIM Institute. Additionally, it is projected seniors over the age of 60 will increase by 41 percent from 2010 to 2050, carving a new niche for adult day care center insurance, according to NonProfit Insurance Services. Overall, the value of specialty and niche lines is clear: 60 to 80 percent of revenue in an agency comes from five to 10 clearly distinct target markets.
Streamline Carrier Connectivity to Better Serve Customers
Streamlined connections with carriers give agencies the ability to build relationships and provide the best coverage options for customers. When producers don’t have to waste time logging into multiple carrier websites and entering duplicate information, agencies can instead focus time on providing the best possible customer experience. The ID Federation’s SignOn
save, on average, one hour per day by eliminating multiple data entry, password management, and other redundant tools.
Communicate with Customers on their Terms Consumer behavior has not only changed with the advent of technology, so too have their preferences when it comes to how they like to communicate. However, agencies can’t assume how to best engage with their customers — they need to talk to their customers through the channels they prefer and continually seek feedback on how to better improve. To no one’s surprise, text messaging is today’s most engaging form of agent/client communication, with a 98 percent open rate. Email, on the other hand, has only a 20 percent open rate, per Mobile
‘Overall, the value of specialty and niche lines is clear: 60 to 80 percent of revenue in an agency comes from five to 10 clearly distinct target markets.’ Once initiative helps eliminate this problem. By enabling one identity to replace multiple IDs and passwords, SignOn Once allows agents to make faster, easier, and more secure transactions and ultimately improve customer service. According to the Real Time/ Download campaign, agents who use connectivity tools
W8 | INSURANCE JOURNAL | WEST APRIL 16, 2018
Marketing Watch. Agents need to reach their agents where they are and texting is a fast, accessible way to speak with insureds effectively. Ultimately, insurance is an industry that thrives on relationships and an agency that operates under this mindset is one that will be successful. Technology shouldn’t be feared. Instead, agencies should focus on how technology can enable relationships — whether through eliminating non-value add tasks through automation, simplifying communication, or providing best-in-class customer service through the channels customers find most valuable. Recognizing the importance of staying competitive, embracing technological changes in the market, and diversifying into new lines will help agencies grow their book of business today and beyond. Winterburn is vice president of industry relations for Vertafore. Email: bwinterburn@vertafore.com; Phone; (720) 787-3950. INSURANCEJOURNAL.COM
Figures
$5.5 MILLION The amount pharmacy chain Walgreens Co. has agreed to pay to resolve allegations that it overcharged for prescriptions covered by the Massachusetts workers’ compensation system. State Attorney General Maura Healey said the overcharges occurred at pharmacies in Boston, Worcester, Springfield and New Bedford. The Deerfield, Ill.-based chain said in a statement while it is pleased to have resolved the matter, it does not admit wrongdoing.
The amount a Michigan priest is accused of embezzling from the Catholic Diocese of Lansing. Charged with six counts of embezzling from St. Martha Church in Okemos, Rev. Jonathan Wehrle now faces a civil lawsuit brought by Princeton Excess and Surplus Lines Insurance Corp., which insures the diocese. Princeton Excess says it has paid out about $2.5 million to the diocese so far.
The number of repeatedly flooded homes in Galveston County, Texas, in line to be elevated under a proposal by consultants hired to facilitate disaster recovery planning for the county. Galveston County officials expect to receive some of the $500 million in hazard mitigation funds to be released by the Texas Department of Emergency Management. In addition to that funding, homeowners likely would be required to cover part of the cost of the program. INSURANCEJOURNAL.COM
Hazing Deaths
“We’re on the precipice of losing the Greek system if this type of hazing keeps happening. I want to save the Greek system. When you have four of these events happen nationwide in one year, it is significant,” — Florida State President John Thrasher, who lifted
a ban on alcohol and social functions by fraternities, sororities and student organizations months after the death of a fraternity pledge at an off-campus party.
ADA Suit
“A good-faith dialog with an employee enables an employer to identify possible reasonable accommodations and prevents the employer from violating the ADA.”
$5 MILLION
200
Declarations
$16 MILLION
— Anna Park, regional attorney for the U.S. Equal
Employment Opportunity Commission’s Los Angeles District, explained an EEOC lawsuit against a large Southern California hospitality company for allegedly violating federal law by denying a reasonable accommodation to an employee with asthma.
Selfish Greed
“We will not allow individuals to manipulate and undermine the insurance system to satisfy their selfish greed.”
— New Jersey Attorney General Gurbir S. Grewal
commenting on charges against a Jersey City, N.J., woman for stealing more than $46,000 by collecting her mother’s workers’ comp dependency benefits for nearly three years after she died. Wanda Berry was indicted on charges of second-degree insurance fraud and third-degree theft by deception in an indictment issued by a state grand jury in Trenton, N.J.
Very Edgy The amount Monroe County officials in the Florida Keys are looking to be reimbursed for expenses related to Hurricane Irma. FEMA has approved about $3.9 million in expenses so far. The Florida Keys sustained the heaviest damage when Hurricane Irma struck the region as a Category 4 last fall.
$240 MILLION How much University of Montana researchers say the 2017 fire season likely cost the state in visitor spending. The Institute for Tourism and Recreation Research said that 12.5 million out-ofstaters visited Montana last year and spent $3.36 billion.
“We’re going to have to go through another hurricane season, maybe two. … That makes us very, very edgy.” — Albert Naquin, chief of the Biloxi-Chitimacha-
Choctaw Indians, whose tribe has had its home on Louisiana’s Isle de Jean for more than 170 years. The island has lost 98 percent of its land area since 1955 as sea levels rise due to climate change. The state plans to spend $11.7 million to move island residents to a 515-acre tract of high land, but ground-breaking is not expected to occur until next year.
Down the Rabbit Hole
“The further we go down this rabbit hole, the more chance there is for even more obnoxious legislation moving forward.”
— Democratic Rep. Brett Parker, an Overland Park,
Kan., school teacher, commented on proposed legislation in Kansas that would punish schools that refuse to allow teachers to carry guns. Rep. Blake Carpenter, a conservative Derby Republican who helped write the legislation that holds schools liable, said he is confident armed and trained teachers will save lives.
APRIL 16, 2018 INSURANCE JOURNAL | NATIONAL | 11
NATIONAL | News & Markets
Rising Claims Frequency Hampers Results in Directors & Officers Liability Insurance Sector
T
he underwriting performance in the U.S. directors and officers (D&O) liability insurance market deteriorated significantly in 2017. Competitive pricing and an increasing number of lawsuits have hurt the line’s profitability, according to a new A.M. Best special report. A.M Best’s Special Report, titled, “Quick Look: D&O 2017 Year-End Results,” states that the main driver of the worsening claims frequency trend is the increase in federal securities class action litigation, as filings in 2017 increased year over year by a reported 52 percent. Although the average size of
settlements declined to $18.2 million from $72.0 million in 2016, the negative effects of increased litigation will continue to outweigh the positive effects of decreasing average settlements for most insurers. In addition, while year-over-year direct premiums written in the D&O sector remained relatively flat, the 2017 direct loss and defense and cost containment (DCC) ratio rose to 77.2 from 65.6. The 11.6 point deterioration is the largest experienced since the D&O sup-
U.S. Directors & Officers Liability ‒ Top 15 D&O Insurers and Direct Loss & DCC Ratios Ranked by Monoline Direct Premiums Written
12 | INSURANCE JOURNAL | NATIONAL APRIL 16, 2018
plement was first filed in 2011. According to A.M. Best, 12 of the top 15 D&O insurers reported increases in 2017 year-end direct loss and DCC ratios. “W.R. Berkley, Liberty Mutual, and Nationwide reported the largest increases in their direct loss and DCC ratios; CNA, Alleghany, and Tokio Marine reported declines,” the report said. AIG, Chubb, and XL Catlin remained the leaders by market share, but each had year-over-year decreases in direct premium written. A.M. Best said that some companies have been showing underwriting discipline and are seeking rate increases. However, pricing remains soft compared with claims trends, and loss and DCC ratios will remain heightened while competitors continue looking to bump up their market share. “Overall, the market share of the top 15 declined 1.6 percent, with their direct premium written down 1.8 percent compared to a total industry direct premium written increase of 0.2 percent,” the report said. “Companies that are focused on underwriting and pricing discipline are reportedly walking away from accounts if they are unable to get their desired rate increases,” the report said. “As long as competition prevents companies from implementing meaningful rate increases, profitability for D&O will continue to decline,” the report concluded.
INSURANCEJOURNAL.COM
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NATIONAL | Business Moves Group has continued to grow organically and through acquisitions since its formation in December 2016.
White Mountains, NSM
Hub International Ltd., Rubino Enterprises Inc., Leitao Insurance Agency
Hub International Ltd., a global insurance brokerage, has acquired the assets from Rubino Enterprises Inc., formerly known as TYG Insurance Agency Inc. Based in Arlington, Mass., TYG Insurance provides commercial and personal insurance. The TYG Insurance business will join Hub New England following the acquisition. Maurice Rubino, principal of TYG Insurance, will report to Charles Brophy, CEO of Hub New England. In a separate transaction, Hub acquired the assets of Leitao Insurance Agency Inc. Located in Ludlow, Mass., Leitao is a multiline insurance brokerage firm providing personal and commercial lines products. Terms of both acquisitions were not disclosed. Headquartered in Chicago, Hub provides property and casualty, life and health, employee benefits, investment and risk management products
and services from offices located throughout North America.
Alera Group, Benefit Planning Services, IMG Benefits Group
Alera Group, a national employee benefits, property and casualty, risk management and wealth management firm, has acquired Benefit Planning Services (BPS), located in Norwalk, Conn. BPS has focused on providing benefits solutions since 1980. It offers a variety of services from group health insurance to executive benefits packages. In a separate transaction, Alera Group announced it also acquired IMG Benefits Group LLC in Houston. IMG Benefits Group creates tailored employee benefit programs. The firm has been built on five pillars: helping clients stay informed, providing client support, assisting in the implementation process, serving as an advocate and being a strategic benefits resource. Terms of both transactions were not announced. Based in Deerfield, Ill., Alera
14 | INSURANCE JOURNAL | NATIONAL APRIL 16, 2018
Bermuda-based insurance holding company White Mountains Insurance Group is acquiring a majority equity stake in NSM Insurance Group, a specialty insurance program administrator. The transaction values NSM at approximately $388 million, according to the announcement. White Mountains said it intends to fund the acquisition through a combination of cash and new debt issued by NSM. Pennsylvania-based NSM places in excess of $500 million in premiums annually through about 6,000 brokerage firms and 100 insurance carriers. Its specialty insurance niches include collector cars, nonprofit organizations, sports and wellness centers, specialty real estate and pet insurance. In the past 12 years, NSM has completed more than 18 transactions and launched eight new programs. The transaction is expected to close by the end of the second quarter of 2018. NSM partnered with private equity firm ABRY Partners in 2012 to help fund its acquisition strategy. In 2015, American International Group Inc. acquired a controlling stake in NSM from ABRY and NSM management. Last year, NSM, ABRY Partners and AIG entered into a joint partnership that allowed NSM to continue to seek new acquisitions. AIG contributed its controlling equity ownership of NSM into the joint
venture, which was majority-owned by ABRY. Merger & Acquisition Services acted as financial advisor to White Mountains, while Cravath, Swaine & Moore LLP provided legal advice. Latham & Watkins LLP acted as legal advisor to selling equity holders and NSM, and McDonald Hopkins LLC acted as legal advisor to NSM management.
Optisure Risk Partners, Masiello Insurance Agency
Optisure Risk Partners of Manchester, N.H., has merged with Masiello Insurance Agency of Keene, N.H. Founded in 2015, Optisure is a provider of risk management and insurance, with more than $175 million in insurance premiums placed nationally by more than 70 employees and 10 locations in six states. Optisure’s regional agencies provide the resources and expertise of a national firm while operating locally with global capabilities. It works to address the full spectrum of risk management, employee benefits and property/casualty insurance needs of consumers and businesses. Following this merger, Masiello Insurance will remain under the local management of its president, Donna Croteau, who will report directly to Optisure CEO Peter R. Milnes and work in collaboration with Optisure’s leadership team. The Masiello Family, owners of the agency for more than 50 years, have elected to retain an ownership interest in the organization. As part of this transaction, Masiello Real Estate, Better
continued on page 16
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D30.amtrustinsurance.com AmTrust is AmTrust Financial Services, Inc., located at 59 Maiden Lane, New York, NY 10038. Coverages are provided by its property and casualty insurance company affiliates. In TX, coverage is provided by AmTrust Insurance Company of Kansas, Inc.; AmTrust International Underwriters Designated Activity Company; Associated Industries Insurance Company, Inc.; First Nonprofit Insurance Company; Milwaukee Casualty Insurance Company; Republic Underwriters Insurance Company; Republic-Vanguard Insurance Company; Security National Insurance Company; Southern County Mutual Insurance Company; Southern Insurance Company; Technology Insurance Company, Inc.; or Wesco Insurance Company. In WA, coverage is provided by AmTrust Insurance Company of Kansas, Inc.; AmTrust International Underwriters Designated Activity Company; Associated Industries Insurance Company, Inc.; Developers Surety and Indemnity Company; Milwaukee Casualty Insurance Company; Security National Insurance Company; or Wesco Insurance Company. Consult the applicable policy for specific terms, conditions, limits and exclusions to coverage.
NATIONAL | Business Moves continued from page 14
Homes and Gardens, continues its relationship with Masiello Insurance Agency and has entered into a long-term agreement with Optisure to continue to offer insurance services to its real estate clients. Optisure will join Masiello Insurance in its membership with Satellite Agency Network Group Inc. (SAN). SAN, also a Masiello family owned business, is the largest network of insurance agencies in the Northeast and the founding member of SIAA Inc., the largest alliance of insurance agencies in the U.S.
Salem Five, Cape Ann Insurance
Salem Five has acquired Cape Ann Insurance, headquartered in Gloucester, Mass. The acquisition will help Salem Five better serve the insurance needs of its customers in the region, Salem Five President and CEO Ping Yin Chai said in a company press release. Additionally, Salem Five Insurance will offer Cape Ann customers access to a wider range of products and
carriers while maintaining the personalized service and relationships of an independent agency. Salem Five will also work to grow its commercial customer base on Cape Ann following the acquisition. Founded in 1984 by Charles Nahatis and Robert Kiley, Cape Ann Insurance focuses primarily on personal insurance. Salem Five Insurance offers customers a range of personal and commercial insurance options through access to all of the major regional and national carriers. Salem Five Bancorp is the parent bank holding company of Salem Five, a mutual institution founded in 1855. Salem Five has 34 retail branches in Essex, Middlesex, Norfolk and Suffolk counties in Massachusetts, and in New Hampshire. Divisions include Salem Five Mortgage Company, Salem Five Financial and Salem Five Insurance Agency.
Stone Point Capital, Genex Services
Genex Services, a Wayne, Pa.-based provider of cost
16 | INSURANCE JOURNAL | NATIONAL APRIL 16, 2018
containment services to the workers’ compensation, disability and auto industries, announced that funds managed by private equity firm Stone Point Capital LLC have acquired a majority interest in Genex from funds advised by Apax Partners, a global private equity firm. Financial terms of the transaction were not disclosed. This acquisition renews a partnership that will support the continued enhancement and expansion of Genex’s services, according to Genex President and CEO Peter Madeja. SunTrust Robinson Humphrey served as the exclusive strategic and financial advisor to Genex. Founded in 1978, Genex serves as a cost containment and disability management provider. It has more than 2,900 employees and 41 service locations throughout North America. The company serves underwriters in workers’ compensation, automobile, disability insurance and third-party administrators. Stone Point is a financial services-focused private equity firm based in Greenwich, Conn. The firm has raised and managed seven private equity funds — the Trident Funds — with aggregate committed capital of approximately $19 billion. Stone Point targets investments in the global financial services industry, including investments in companies that provide outsourced services to financial institutions, banks and depository institutions, asset management firms, insurance and reinsurance companies, insurance distribution
and other insurance-related businesses, specialty lending and other credit opportunities, mortgage services companies and employee benefits, and healthcare companies. Apax Partners is a global private equity advisory firm. Apax Partners’ Main Buyout Funds invest in companies across four global sectors of technology and telecommunications, services, healthcare and consumer. These funds provide long-term equity financing to build and strengthen companies.
Key Insurance & Benefits Services Inc., USI Insurance Services
KeyBank has entered into a definitive agreement to sell Key Insurance & Benefits Services Inc. to USI Insurance Services. KeyBank acquired Key Insurance & Benefits Services Inc. as part of its 2016 merger with First Niagara Financial Group. Key Insurance & Benefits Services Inc., with a division headquarters in Buffalo, N.Y., has 350 teammates working in eight offices in upstate New York, Pennsylvania and Connecticut. USI is a privately held insurance brokerage headquartered in Valhalla, N.Y., with more than 6,000 associates in more than 150 offices. The transaction is subject to regulatory approvals and other customary closing conditions. It is expected to close in the second quarter of 2018. Morgan Stanley & Co. LLC is acting as financial advisor to KeyBank in connection with the transaction. INSURANCEJOURNAL.COM
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NATIONAL | Special Report | Young Agents Survey
18 | INSURANCE JOURNAL | NATIONAL APRIL 16, 2018
INSURANCEJOURNAL.COM
Profile of Young Agents What Young Agents Earn Under $30,000
9.2%
$31,000 to $50,000
24.9%
$51,000 to $75,000
24.3%
$76,000 to $100,000
15.3%
$101,000 to $125,000
6.7%
$126,000 to $150,000
6.7%
More than $150,000
Y
oung agents want change. They want more diversity in the agency sales ranks. They want better paths to grow in their careers. They want other agents to adhere to professional standards and ethics. They want faster and better technology in their agencies and in the insurance companies they use. Most of all, today’s young agents want to see more young professionals like themselves in the independent agency system. That’s according to Insurance Journal’s 2018 Young Agents Survey, which asks young agents for their opinions on the industry, their agencies and their career as an independent agent. “I would like to see the younger generation get more interested and involved in the industry,” said one young agent participating in the survey. Young agents responding to the survey said they would like to see younger professionals in INSURANCEJOURNAL.COM
person but 13.7% are not sure they would while 6.7% wouldn’t recommend being an agent.
Experience 26.6% have less than three years in insurance; 22.2% have three to five years; 23.0% have six to 10 years; 20.3% have 11 to 15 years; 7.8% have more than 15 years. Education 65.6% have a college degree; 8.3% have a master’s, doctorate or other advanced degree; 63.0% have completed or are working on an insurance
13.0%
By Andrea Wells
Older Side of Young 62.0% are 31 to 40 years old; 38.0% are 30 and under. Career Choice 80.9% consider insurance to be a permanent career choice; 16.1% are unsure; 79.4% would recommend career choice to another young
designation. 63.2% have an insurance agent mentor.
leadership roles, too. “While it is not an issue at the agency that I work for, I do see some hesitance with carriers and agencies in promoting younger, hungry individuals,” one young agent wrote in the survey. Other agents agreed saying that more young leaders are needed throughout the industry. “Leadership needs to become younger,” one young agent said. “There is a large gap between generations, and I see hesitation to give the millennial generation leadership opportunities.” Other survey respondents added that in some instances, younger generations are unfairly stereotyped. “I would love to see the industry embrace millennials,” another young agent said. “I always hear from hiring managers and agency owners that they want to hire younger people, followed quickly by a complaint about how terrible they all are.”
Family Affairs 61.1% work in family-owned agencies. 24.2% are members of the family that own the agency. Size 53.5% work for agencies generating $1 million to $25 million in
P/C premium volume; 27.6% work for agencies generating more than $50 million in P/C premium; 88.3% are privately held.
Employment Status 89.2% are independent agents; 8.6% presently are sole owners of an agency; 15.7% share ownership with partner(s) Ownership Dreams 75.7% do not presently own an agency; of these, 51.7% would like to own someday and 24.2% of those feel very confident ownership dreams will come true – but 34.3% don’t believe it will happen.
Book of Business 68.4% target mostly commercial lines; 31.6% target mostly personal lines; Gender ID 60.7% Male 39.3% Female What Young Agents Do 63.4% attend local business or community meetings. 65.3% volunteer in my community. 15.9% get involved in local politics. 76.6% use Facebook. 83.3% use LinkedIn. 30.8% use Twitter. 13.8% write a blog. 59.6% utilize insurance coverage or other checklists. 69.2% take insurance courses on the internet.
continued on page 20 APRIL 16, 2018 INSURANCE JOURNAL | NATIONAL | 19
NATIONAL | Special Report | Young Agents Survey continued from page 19
quite as evenly balanced. According to the IJ survey, only 8.3 percent of young agents rate the P/C industry as “excellent” when it comes to attractiveness for young people. However, a whopping 68.1 percent rated the industry as “fair” or “poor” in this critical area.
Ethnic Background 3.8% 4.8%
3.6%
0.2% 1.2%
White/Caucasian Hispanic/Latino Asian
84.7%
Black Native American Other
Young agents also maintain a desire for better and more efficient technology that will make their job easier. They believe that the insurance industry falls behind when it comes to its use of technology. “I would like to see more focus on technology, as the
industry is very poor at moving in the right direction when it comes to that,” one agent wrote. Young agents are split on how they rate the property/ casualty industry’s use of technology overall. The exclusive survey
Young Agents’ Outlook on Their Career
35.8%
Ryan Thomson, executive vice president and an agency owner for the Louisiana-based Thomson Smith & Leach Insurance Group, agreed with the survey’s findings stating that industry’s slow-pace in advancing technology is one thing that frustrates him about the insurance business. Thomson’s father purchased the agency in 1973 after a career in banking. After college, Thomson wanted noth-
Independent Agents’ Ability to Grow Personal Lines Market Share
2.5%
Very Optimistic 51.4%
Lagging Behind
revealed that slightly more than half of respondents (51.1 percent) rate the industry as “excellent” or “good” in terms of its use of technology while nearly the same number of young agents (48.9 percent) rated the P/C industry as “fair” or “poor” in this critical area. However, according to the survey, when it comes to career attractiveness to younger professionals, the results weren’t
Outlook on the Future of the Independent Agency System
3.9% 9.0%
Ryan Thomson Thomson Smith & Leach Insurance Group
Very Optimistic
19.0%
Optimistic
36.9%
Cautious
Optimistic
41.6%
Not Optimistic
Agency’s Ability to Attract Quality Talent
Cautious 42.0%
3.7% 11.6%
Very Optimistic
Very Optimistic
21.1%
Optimistic 28.3%
60.3%
Believes 2018 Income Will Be Greater Than 2017
Cautious 38.4%
Optimistic
32.8%
23.8%
Not Optimistic
20 | INSURANCE JOURNAL | NATIONAL APRIL 16, 2018
41.1%
Optimistic Cautious
48.1%
Not Optimistic
Independent Agency Channel’s Ability to Advance in Technology Use 4.5%
Very Optimistic Optimistic
18.3%
26.9%
Cautious
Cautious
Very Optimistic
33.7%
2.3%
Very Optimistic 57.0%
Not Optimistic
Outlook on U.S. Economy in 2018
5.8%
29.3%
14.5%
Optimistic
28.9%
Cautious Not Optimistic
8.0%
Not Optimistic
Independent Agents’ Ability to Grow Commercial Lines Market Share
3.9% 7.6%
Very Optimistic
23.4% 24.9%
Cautious
Not Optimistic
Young Agents’ Outlook on Keeping Current Job
Optimistic
9.7%
Not Optimistic
50.3%
Very Optimistic Optimistic Cautious Not Optimistic
INSURANCEJOURNAL.COM
What Young Agents Think ing to do with the insurance industry and took a job with Rubbermaid as a salesman. After five months, he called his dad to ask to interview for a job at the agency. “I came crawling back and started out with nothing. I mean literally nothing. I still keep in my top desk drawer the list I made on the first day of the 15 people I could call that had a house or were going to look at buying a house and owned an auto.” Since then, Thomas, 37, says it’s been a great ride as the agency has grown from a small six-person shop in 2003 to a strong mid-sized agency employing nearly 50 people. Now, Thomson says there’s not much he doesn’t love about the insurance world, except its technology. “We are lagging and missing the boat on technology adaptation and being able to serve our clients better, quicker and easier,” he said. Lagging carrier tech capabilities make agencies less efficient, he says, and make processes and procedures more difficult than they need to be. In some cases, there’s little communication between his agency’s system and the carriers’ systems. “It’s a frustration from an operations and easeof-doing business standpoint more than anything.” Thomson says his agency has three employees just to check for errors when a policy is issued, especially through surplus lines markets. “In south Louisiana, we have to deal a lot with [wholesale] brokers. … That’s probably most of my frustration, more than the direct bill, Progressive, types,” he said. Thomson believes technology hurdles reflect the indusINSURANCEJOURNAL.COM
Basically True
Basically False
As a younger agent, I have to work harder to gain the confidence of clients.
70.1%
23.9%
I fear that my career will be hurt by a merger or sale of my agency.
31.1%
51.7%
I wish I could specialize more than I am now permitted to do.
28.5%
59.2%
I have one or more areas of specialization
74.9%
16.7%
Much of my production supports older producers in the agency.
35.2%
52.7%
During my career, I have worked for more than one agency.
41.9%
56.9%
While in my present position, I have been offered a job with another agency.
65.2%
31.4%
Success in this business is mostly about building relationships.
94.1%
3.6%
Success with 40 and younger clientele is built first by relationships online.
28.0%
52.8%
Efficiency and effectiveness are more important than relationships to succeed in this business.
28.7%
56.4%
I propose new ideas but our firm rarely seems to get to them.
26.2%
57.6%
The agency ranks could use more women and minorities.
38.1%
33.4%
I wish my agency would expand into new markets.
34.6%
45.3%
I think my compensation is fair.
68.1%
22.7%
I think my agency's management is fair.
74.2%
17.0%
I believe advancement is based on relationships more than performance.
31.3%
55.5%
I would like to increase the time I spend on sales versus servicing or administrative tasks.
63.2%
22.3%
Insurtech will have an overall positive effect on the insurance industry.
34.4%
12.8%
The industry has been too slow to adopt new technology.
64.7%
21.4%
In 25 years, the independent agency system will be stronger than it is now.
54.6%
21.8%
try’s slow-to-change mindset. “Technology is something we have to embrace, as an industry,” he said. “We can’t stick our head in the sand; we just can’t. It’s amazing still today [the number of] policies we issue in somebody else’s system that have errors.” He believes some of those errors could be overcome with better technology aimed at improving communi-
cation among agencies, carriers and wholesale partners.
Agencies Embracing Tech
While critical of the overall industry, young agents have a different view of their own agency’s use of technology. According to the Young Agents Survey, 73.8 percent of young agents rate their agency as
“excellent” or “good” in terms of technology use. Thirty-two-year-old Laura Locke Baskind, JD, who serves as the director of agency operations at Dallas-based Independent Insurance Group Inc. (IIG), says her agency’s commitment to technology and its quickness to adapt has been
continued on page 22
APRIL 16, 2018 INSURANCE JOURNAL | NATIONAL | 21
NATIONAL | Special Report | Young Agents Survey continued from page 21
Laura Locke Baskind Independent Insurance Group Inc. beneficial not only in efficiency but also in attracting talent. “The ownership of our agency has been wonderful in terms of bringing in young talent, foreseeing the need for younger talent, [and] creating an environment that’s very adaptive and open to technology,” she said. “I now have an in-house IT manager, and we
are doing our own coding, and building out our own management services, own agency app, so that we can automate things on our own to make sure that we’re the most efficient that we can be,” she said. The agency went through a complete overhaul of its agency management software last year. She knows IIG is not alone in this tech-forward agency mindset. Other agencies are taking great strides to push forward technology that enables agencies to be more competitive, serve customers better, and attract new employees. “I think that that is how we will attract top talent, and the younger generation,” she said. Like Thomson, Locke Baskind grew up in her father’s agency but took a different
path before joining the insurance world. She went to law school and practiced at a large, international law firm before joining the agency. She also worked for Uber Technologies. She admits her father had been “grooming” her for the agency world since she was 14 years old. She started off in sales for the agency, then moved to an account executive role before landing into operations when someone retired. “For me, it is a much better fit in terms of my skillset, and what I’m good at,” she said. “I love to really dig in and solve problems.” Danric Jaime, an associate in Lockton’s San Francisco office, agrees that while the industry has been “pretty slow” to adapt new technologies over the past 10 years, there are some
Young Agent Opinions on Current Employer Excellent
Good
Fair
Poor
Quality of agency technology in general
25.1%
51.2%
19.3%
4.4%
Quality of agency management system
27.5%
47.0%
18.8%
6.8%
Quality of laptops, phones and other devices
33.7%
43.9%
18.4%
4.1%
Mobile technology capabilities for customers and employees
18.6%
37.3%
25.6%
18.5%
Quality of rating and quoting system(s)
19.9%
49.5%
23.4%
7.2%
Quality of management
41.1%
38.3%
14.6%
6.0%
Use of social media
14.3%
30.6%
31.1%
24.0%
Use of technology tools to help with sales, marketing and prospecting
17.6%
32.4%
32.2%
17.8%
Agency website capabilities
19.0%
34.8%
31.1%
15.1%
Employee compensation and benefits
28.2%
41.4%
22.1%
8.3%
Opportunities for advancement
30.0%
36.0%
22.2%
11.8%
Administrative support
25.2%
43.7%
20.8%
10.3%
Opportunities for educational improvement
44.5%
33.5%
14.7%
7.4%
Telecommuting/flexibility with work-life balance
39.5%
29.6%
18.4%
12.6%
22 | INSURANCE JOURNAL | NATIONAL APRIL 16, 2018
Danric Jaime Lockton agencies such as Lockton pushing forward. That has helped Jaime, age 35, find his niche in the agency channel. Jaime, while not a sales producer, has been involved on the tech-side of sales by helping Lockton producers solve technology issues in the employee benefits sector. He doesn’t sell policies to consumers, but instead sells a Locktonsponsored employee benefits app to Lockton producers and their customers. “Our Lockton employees will put me in front of a client, I’ll talk through the app, do a demo. If they like it, great,” he said. But Jaime also must sell the app to Lockton employees. “Lockton employees may not have heard about the app or maybe they’ve heard about it but have questions.” If Jaime were to give advice to other young people considering a career in the independent agency channel he would tell them there are many areas young professionals could consider in the agency world, not just sales. Thus, they need to be more inquisitive. “Make sure you ask as many questions as you can and then really just try to find a mentor that you can trust and help guide you,” he said. There’s a lot to consider in the insurance world. “A mentor, and it INSURANCEJOURNAL.COM
doesn’t necessarily have to be your boss, is someone you can lean on and ask advice.”
What Young Agents Think About the P/C Industry Excellent
Good
Fair
Poor
Customer service
20.4%
63.8%
15.2%
0.6%
Public image
11.6%
38.2%
36.1%
14.1%
Treatment of employees
20.4%
58.0%
20.2%
1.4%
Professionalism
28.9%
54.3%
16.0%
0.8%
Ethics
26.4%
49.5%
20.6%
3.5%
Career attractiveness to young professionals
8.3%
23.7%
38.0%
30.1%
Use of technology
10.3%
40.8%
36.9%
12.0%
Marketing and advertising
11.8%
48.2%
30.0%
10.1%
Career Choice
Despite the many opportunities in the agency world and insurance overall, many young professionals still shy away from it as a career to enter, but after they do, they end up staying. Flexibility, freedom and work/life balance are key benefits that young agents cite every year in IJ’s Young Agent Survey. According to the 2018 survey, a large majority of respondents rate their own agency’s telecommuting, flexibility and work/life balance as either “excellent” (39.5 percent) or “good” (29.6 percent). Dreams of becoming a business owner is partly why Locke Baskind joined her father’s agency, but that’s not the only reason, she said. The demanding work schedule she faced working as an attorney in a global law firm helped her understand what makes a career as an independent agent a good choice. “The work/life balance that insurance provides, the ability to make more money, to have
Adriana Solomon Lockton more control over the money that I can make, and the ability to know that my weekends, my INSURANCEJOURNAL.COM
holidays and my vacations … to know that this is a place, and an industry, that values your personal time was very appealing for me,” she said. The stability of the insurance industry is also a key factor in why young agents choose a career in insurance. Some 78.5 percent of survey respondents view the future of the independent agency system as “very optimistic” or “optimistic” while the clear majority (92.1 percent) view the outlook for the future of their own agency as either “excellent” or “good.” Other young agents cite the challenge that insurance delivers as a reason they like being an insurance agent. What 23-year old Adriana Solomon, associate account manager with global client services at Lockton, likes the most about her job is how dynamic her day-to-day job duties are. “No day is the same, no client’s the same, so it’s constantly challenging and really encourages me to grow,” she said. As a native Spanish speaker and an international business major in college, Solomon fit right into Lockton’s global busi-
TJ Simmons Shield Insurance Agency ness culture. “I’m given opportunities that probably most 23-year-olds don’t get. I get to travel, I’ve been to Canada, I’m going to Mexico to visit a client next month ... I get to go to client meetings and sit at the big kid’s table,” she said. “I’m sitting with the CFOs of major, multi-national companies and CEOs of Lockton offices.” The graying of the current agency workforce is another reason young professionals should consider insurance, says TJ Simmons, a producer at Shield Insurance Agency based in Hudsonville, Mich. A third-generation insurance agent, Simmons decided to accept a position at his father’s agency while still in his junior year at college. Now, at 20 years
old, this young professional says insurance is “not a bad gig at all.” There is plenty of money to be made and he’s ready for the challenge. He says other young people looking for a career should take note. “Sometimes the industry doesn’t do a good job at attracting young people because it seems boring, but I think that young people need to realize that it’s a young game.” The aging of the industry is opening huge opportunities ahead for young agents. “All of those older agents are going to retire someday soon and so there will be a lot of policies and customers that are going to need a new agent,” Simmons said. “That’s where us young guys can come in.”
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About the Survey: Insurance Journal’s Young Agents Survey 2018 polled 536 young agents nationwide on their opinions about the industry, their agency, and how they feel about being an insurance agent.
APRIL 16, 2018 INSURANCE JOURNAL | NATIONAL | 23
NATIONAL | News & Markets
What Cyber Exposures and Coverage Gaps Keep Risk Managers Up at Night By Amy O’Connor
R
isk managers are very concerned about the cyber risks facing their companies and are heavily investing in protection against cyber attacks with the blessings of their boards and CEOs, a major shift from even just 10 years ago when convincing a company to worry about cyber was a big challenge for risk managers. However, the new challenges for them include getting the right coverage from the insurance market and ensuring their companies have enough coverage in the event of a major breach, three risk managers on a recent panel at Advisen’s Cyber Risk Conference in San Francisco said. Jimmy Kirtland, vice president of Voya Financial, said in the early 2000s, convincing CEOs or CIOs to consider cyber
insurance or put proper cyber controls in place was a battle, but that is no longer the case. “I have become our CIO’s best friend because I am protecting what he is protecting,” he said. The cyber insurance buying process between risk managers and the industry has also improved as the cyber market has matured. “The quality of the questions and the quality of the discussions between the insurers and the insured are much better,” said Katherine Fithen, managing principal consultant for Secureworks. “We know better what to talk about; we know better how to articulate what our data is, where it is, and how it’s protected.”
Steep Learning Curve
But as the cyber market has evolved and more coverages and competition have developed, so have the threats to
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businesses. Companies that are newcomers to buying cyber insurance often face a steep learning curve in trying to figure out what coverages they need and how much they should buy. David Little, senior vice president of Global Risk Management at the Las Vegas Sands Corp., said his company was a latecomer to the cyber market, buying its first cyber policy back in 2012. It wasn’t until it had a significant loss a year later that the company realized the amount of coverage it had was considerably less than what it needed. “That was a wake-up call for everyone… we realized we needed to get smart about this,” Little said. “Since that time we’ve realized we didn’t really understand this risk and how it applied to us. Now there’s a lot more work done to understand that this is a big issue for us, and we need to do what we need to do to take care of that.” Little said part of that work includes visiting the London insurance market, which he did recently, to learn about the cyber coverages currently available, as well as what risks are on the horizon that the company should be preparing for.
‘One of the most important things I did was that I interviewed a lot of brokers and I found someone that really matched my perspective of what I thought the future was going to be.’
He said the relationship with his broker and cyber underwriters has been critical. “One of the most important things I did was that I interviewed a lot of brokers and I found someone that really matched my perspective of what I thought the future was going to be. That has made a tremendous amount of difference for us because they have been a partner with us in all of this also,” he said.
Policy Differences
Christaan Durdaller, executive vice president and Cyber & Tech team lead for Atlantabased INSUREtrust, and moderator of the Advisen risk manager panel, said there are more than 120 different players in the cyber market and that is a challenge for agents and brokers, and their customers. “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.” He said with such a knowledge gap in the cyber market and misinformation about where coverage like business interruption responds, as well as emerging risks such as reputational threat, having a relationship with a knowledgeable cyber broker has become essential for risk managers. Fithen said protecting her company from cyber risk is a team effort across the board – from the internal operations to its insurance underwriters – and that’s the way it must be. “It is a team effort now, I think we’ve really grown and INSURANCEJOURNAL.COM
learned to understand that,” she said. “We’re learning to talk to each other in languages that each company can understand so we can partner with each other and really get a handle on this.” The risk managers agreed that the insurance industry also plays a vital role in helping them determine what their cyber exposures are, including when it comes to outside risks like vendors.
Supply Chain Impact
Durdaller said many companies are unaware of the data a vendor they contract with could have access to – either related to the company or its 1-Pg Ad Resized.pdf
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customers – and the impact of a supply chain-related breach. When asked about what future cyber concerns keep them up a night, Kirtland said vendors getting into the company network and “causing chaos” is one of his main concerns, along with the ever-changing nature of cyber risk. “What keeps me up at night is the stuff we’re not prepared for, that we don’t even know is out there,” he said. Little said his biggest concern is the “incongruous nature” of cyber exposures and how it overlays with his company’s cyber insurance programs. “I’m just never sure I have 3/27/18
the coverage that I need, that always concerns me,” he said. “[And] with the advent of artificial intelligence, how it’s being put into so many different things, I think there might be a loss that I just can’t envision right now.” The risk managers’ opinions differ on whether the insurance industry is offering the right cyber coverages and limits to respond to companies’ needs, or if they are holding back for fear of large claims. Kirtland said considering that every insurance company writing cyber is likely to get hit with a large claim at some point, he thinks the industry is doing a good job at keeping up
with the risk and hitting their “sweet spot” in the market. But Little said he worries that many in the insurance industry don’t understand the true risk, especially to the industry itself. He said there is a lot of room for improvement, particularly on the claims side. “I don’t think they understand the aggregation, I don’t think they understand the totality of the risk. I think there’s a lot of just getting money and premium in the door,” he said. “I’m disappointed, I think there’s a lot of capital out there that’s gonna get hit.”
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Idea Exchange
Human Resources
Fluid Work as a Retention and Engagement Game-Changer
By David E. Coons
A
s young professionals play an increasingly important role within the workplace, forward-thinking companies are turning their attention toward attracting and retaining this critical talent. While healthy snacks, happy hours and ping pong tables are emerging as potential incentives, what really motivates and drives today’s young professionals? A flexible, fluid work environment may be the key perk many young professionals are looking for in their next role. Shifting away from the traditional in-office, 9-to-5 workday is a good place to start for organizations looking to introduce fluid work. Insurance organizations may consider flexible start and end times, remote work options, or even walking or off-location meetings for a change of scenery during the day. Some companies have moved to a paid time off (PTO) program that encompasses vacation days, sick leave and even holidays, enabling employees to use their time off how they want. Other companies have instituted an unlimited PTO program allowing employees to take time when they need it as long as their personal production goals are met. Options like these could be instrumental in attracting new talent to the insurance industry. It is important to keep in mind that one size does not fit all. Not every professional
wants the same thing. Companies should avoid alienating employees by assuming, for example, that everyone wants to work remotely. There are a number of reasons that young professionals may prefer working in the traditional office environment. Some employees may prefer the social aspect of in-person team interactions, or perhaps the office is a place where they go to be around adults while their young kids are at school. Others may be motivated by the buzz and energy of the office or are more comfortable with face-to-face meetings. Others may struggle with maintaining work/life balance and prefer to keep their home and work lives separate. In addition, some employees lack the capacity to create an effective home office environment. Working remotely is not right for everyone. Fortunately, it does not have to be an all-ornothing scenario.
tial to success. Measuring performance as often as every week keeps employees aligned with their team, connected to company leadership and, ultimately, held accountable for the continued quality of their work. In addition, this regular communication feeds into young professionals’ craving for frequent, specific feedback. While aligned in-office days are always the recommended choice for one-on-one employee/manager meetings, tools like Skype and WebEx
Ease into Flexible Work Arrangements
Developing a fluid work ment environtakes time. It is best ping off the to avoid “ripBand-Aid.” Instead, incorporate measured milestones and seek employee and manager feedback while transitioning to a flexible workplace. This transitional period may include occasional, planned remote days. Remote days would then increase as employees demonstrate their ability to meet their performance metrics offsite. Others can experiment with alternative work hours to see if that is a realistic situation. This measured introduction allows teams to learn together how to best work within a flexible, fluid arrangement. As companies incorporate remote and flexible work, regular performance management and clear metrics will be essen-
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can also facilitate this interaction through visual, not just auditory, discussions.
Enjoy the Benefits of Remote Work and Fluid Schedules
The insurance industry continues to face a competitive labor market. Fortunately, fluid work can help better position the industry as an attractive place to work. Leveraging modern work arrangements and accommodating a range of work preferences will help many insurance organizations attract new talent and retain young professionals.
It is important to keep in mind that one size does not fit all. Not every professional wants the same thing. Providing remote or flexible work options has the potential to vastly widen the talent pool — opening the field up to non-local professionals. Potential candidates no longer have to relocate for a job if they can work from home all or most days of the week. With flexible start and end times, working parents can schedule their jobs around childcare needs. Alternatively, they can adjust their schedules to work longer days in a four-day week and have an extra day at home with their children. This expanded talent pool is especially critical as more and more insurance employees reach retirement age. Attracting a broader scope of talent through flexible work could slow the impact of the aging workforce and make the industry more competitive in the job market. Offering alternative work environments can greatly improve employee satisfaction and even performance. With consistent performance measurement, many young professionals thrive in a remote or fluid
work environment. For forward-thinking insurance organizations trying to accommodate a modern workplace and remain attractive to top talent, a flexible and fluid workplace strategy might be a game-changer.
“
Share this article with a colleague. IJMAG.COM/416RT Coons is senior vice president of The Jacobson Group, a provider of talent to the insurance industry. Phone: 800-466-1578. Email: dcoons@jacobsononline.com.
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Vacant Dwellings
Market Detail: Myron Steves
(www.myronsteves.com) offers TDP-1 and TDP-3; insure total values up to $1 million; three-, six- and 12-month policies (terms renewable); add up to $500,000 liability coverage; all fire protection classes eligible; renovation endorsement available; one-to-four family dwellings and condos; model homes; course of construction available. Coverages, exclusions differ by carrier and by state. Available limits: As needed Carrier: Unable to disclose States: Texas only Contact: Claudia May at 713351-8227 or email: cmay@ myronsteves.com
Household Goods Movers - Cargo
Market Detail: TCB Insurance
Programs (www.tcbinspro.com) specializes in moving companies. Coverage for household goods, movers, motor truck cargo in most states with a $50,000 maximum limit. No appointment required. Available limits: Minimum $5,000, maximum $50,000 Carrier: Unable to disclose, nonadmitted States: All states
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Market Detail: Shield Commercial Insurance Services (www.shieldins.net) offers general liability coverage for contractors and artisans. Pricing is competitive, especially on roofers and general contractors. New ventures and paper contractors written, and premiums start at $500. An online rater allows multiple risks per day to be written. No minimum production quota to retain an appointment. Retail products are not available to the public — risks only accepted from a large network of appointed brokers. Available limits: Minimum $500,000, maximum $2 million Carrier: Unable to disclose States: Ala., Ariz., Calif., Colo., Fla., Ga., Kan., La., N.C., Neb., N.M., Nev., N.Y., Okla., Ore., S.C., Texas, Wash., and Wyo. Contact: Robert Anderson at 760-345-9029 or email: randerson@shieldins.net
Aviation Insurance Market Detail: Plimsoll
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Specialty Markets LLC (www. plimsollspecialty.com) is a wholesale aviation insurance broker that can place everything, including an airline to light aircraft, an airport to a baggage handler and major airframe manufacturer to a small, noncritical component manufacturer. Expertise in workers’ comp for aviation-related businesses, including competitive group dividend programs. Available limits: Minimum $1 million; maximum $2 billion Carrier: Unable to disclose States: All states Contact: Michael Clark at 770298-2806 or email: mclark@ plimsollspecialty.com
Saddle Animal Liability
Market Detail: Wildlife Insurance Underwriters LLC (www.insurewildlife.com) is a national firm specializing in placement of animal mortality coverages, rod and hunt clubs, hunting leases, ranches and farms. Coverages vary between admitted and nonadmitted. Available limits: As needed Carrier: Unable to disclose States: All states Contact: Customer service at 866-386-4136
Market Detail: Ck Specialty Insurance Associates Inc. (www.ckspecialty.com) offers coverage for standing crops located in buildings. Available limits: Maximum $350,000 Carrier: Various, nonadmitted States: Ariz., Calif., Colo., Nev., Ore., and Wash. Contact: Justin Connors at 800-411-0083 or email: justin@ ckspecialty.com
Cyber Insurance
Market Detail: Cover Agency (www.covermultistate.com) offers first-party cyber insurance, including standard business interruption plus contingent business interruption. Coverage available when database or software at a remote premises goes down. Crime insurance, standard third-party liability coverages and extensions of coverage available. Available limits: Maximum $15 million Carrier: Unable to disclose, admitted and nonadmitted available States: Conn., Ga., Ill., Ind., Kan., Ky., Md., Mo., N.C., N.J., N.Y., Ohio, R.I., Utah, and Va. Contact: Priscilla Li: 718-5912400; pli.coveragency@gmail. com This section brought to you by Insurance Journal’s sister website: www.mynewmarkets.com
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Idea Exchange
Small Business
The New Small Commercial: Why Carriers Need to Better Serve ‘Small Specialty’
By Michael R. Keane
T
he evolution of the small businesses is creating a service challenge for independent agents and an opportunity for carriers to provide efficient and effective solutions for their agent partners by expanding their service center capabilities. While there was a time when most small businesses were well protected by a BOP, those days are gone. Increasingly, small businesses require specialized coverages, such as errors and omissions, marine, fidelity and crime, directors and officers, cyber, and employment practices or fiduciary liability. These new risks are forming a new market segment — small specialty — and all indications are that the segment will only continue to grow moving forward as customers’ needs become increasingly complex. Unfortunately, while carriers have become adept at managing BOP-focused small commercial business in service centers, they generally have not been able to serve the small specialty market in those same centers. Consequently, agents are forced to do one of two things – split the servicing of their small business accounts, placing BOP business in a service center and retaining servicing responsibilities for small specialty, or retain servicing responsibilities for the full account. In general, neither is a good solution. Both preclude
agents from fully capitalizing on the benefits service centers offer. With the shift to a more account-focused approach to insurance, service centers must be equipped to manage these more complex, robust policies. The industry sells agents on service centers with extended hours, increased agency efficiency and a reduction in expenses. Are agents truly getting what they were sold if only half of an account is serviced in a service center? Likely, the answer is no. To get the full benefit, a customer’s whole account needs to be placed in the service center. It’s time for the industry to respond to this unmet need, adapting their service centers to accommodate the evolving needs of modern small businesses.
specialty accounts and improve the service experience for agents.” Small commercial service centers that serve both BOP and specialty lines offer significant advantages. They can help agencies provide an all-in-one experience, while improving their economics and saving valuable staff time. As exposures evolve and grow in complexity, carrier service centers that can effectively serve
Changing Tides
The good news for agents is that the shift is beginning. To better serve the needs of small businesses with specialty risks, select carriers have expanded their service center capabilities, and agents are beginning to place more specialty business in customer service centers. As we thought through the changing small business environment, it was clear an innovative, collaborative partnership with our specialty team would be the best solution for our agents and customers. A colleague of mine, Bryan Salvatore, who has spent his career in the specialty insurance business and heads The Hanover’s specialty division, believes the industry is at a crossroad, with top carriers rethinking their service center models in order to best serve their agent partners. “Agents tell us the industry has done a good job servicing core commercial lines, but it needs to do more to service the smaller, specialty lines,” Salvatore said. “The more carriers work to stitch core lines together with specialty lines, the easier it is for agents to place business. With an all-lines customer service center, carriers are better equipped to serve these small
30 | INSURANCE JOURNAL | NATIONAL APRIL 16, 2018
all lines of risk for small businesses are well positioned to help their agent partners.
The Unrealized Benefits
Not only should a small commercial service center be able to manage specialty lines, but they also should be able to offer a sales advantage for agents. The best service centers are staffed with licensed professionals, ready to offer advice and suggestions to customers, helping to round out accounts and recommend needed coverage enhancements. When we look at our small commercial INSURANCEJOURNAL.COM
book of business, we often will identify customers whose businesses and risks may have evolved and would now benefit from specialty coverages. In this respect, service centers can offer significant value for agents. Service centers that can effectively service BOPs and also understand specialty lines offer a competitive advantage to agents. With a broader view of small business customers and their needs, service centers are well positioned to identify gaps in customers’ coverages and provide valued counsel. Additionally, the best centers help agents
efficiency of their operations, better servicing their clients and generating critical growth.
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Keane is president of core commercial at The Hanover Insurance Group Inc., the holding company for several property and casualty insurance companies, which together constitute one of the largest insurance businesses in the United States. Website: www.hanover.com.
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attract new customers. A service center that has broad expertise in a variety of coverages can help an agency expand their customer base, offering the ability to provide counsel and offer policies to agencies’ prospects, meaning added time, revenue, and value for the agency. Carriers are beginning to build out their service centers and leading agents are taking advantage of those that are able to manage all aspects of their small business accounts, including those with specialty exposures. By placing total accounts into service centers, agents are improving the
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APRIL 16, 2018 INSURANCE JOURNAL | NATIONAL | 31
Idea Exchange
Surplus Lines
Insurtech and Technological Opportunities, Challenges
By Zachary Lerner and
Alexandra Cavaliere
O
ver the last year or so, the insurance industry has seen technological advances driving new products
32 | INSURANCE JOURNAL | NATIONAL APRIL 16, 2018
and distribution means to market. We have seen “insurtech” blossom from a term to describe the intersection between disruptive technology and traditional insurance products and marketplaces into a fullfledged movement to revolutionize the way insurance coverage is marketed, sold and provided, with industry-wide conferences taking the country by storm. In 2017, insurtech carrier, venture capital funded start-ups such as Slice and Lemonade made headlines on a regular basis for their innovative use of technology within the insurance industry through online and app-based distribution of coverage. While a number of admitted insurance products are currently offered through insurtech companies, the surplus lines insurance market, as evidenced by its significant growth in 2017, has ample incentive and opportunity to similarly expand and evolve with improved technology as well, according to the Surplus Lines Stamping Office of Texas’ eNews, 2017 Record Breaking Year in Surplus Lines Market. However, the meaningful deployment of new technology poses unique challenges for the surplus lines market that are not always the same as those in the admitted insurance market. While surplus lines insurers are afforded great flexibility to adapt to the changing marketplace, they
are also constrained by certain procedural obligations and restrictions not applicable to admitted insurers, such as having to comply with the diligent search requirement and prohibitions on advertising and direct contact with insurance customers. This article discusses some of the challenges and opportunities that insurtech advances pose for surplus lines.
Diligent Search Requirement
In most U.S. jurisdictions, to place insurance coverage on a surplus lines basis, the surplus lines insurance broker must conduct a “diligent search” of the admitted insurance market to determine if comparable coverage is available through an authorized insurer, i.e., establish admitted market unavailability for the desired insurance product. The diligent search requirements vary among jurisdictions, but commonly include the broker’s filing of an affidavit confirming that declinations have been obtained from three separate and unaffiliated admitted insurers. See, e.g., Cal. Ins. Code § 1763(b). Generally, the diligent search is not satisfied simply because no admitted insurer offers the same insurance coverage at the premium rate offered by the surplus lines insurer; rather, the coverage must actually be different somehow in scope or substance from those kinds
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of coverages available in the admitted insurance market. See, e.g., Or. Rev. Stat. § 735.410 and Cal. Code Regs. tit. 10, § 2138. The emergence of delivery platforms whereby consumers can bind coverage directly through online applications with the click of a button (or a tap of their smartphone) has transformed the delivery process of a variety of products. However, the surplus lines insurance industry faces the unique challenge of satisfying the diligent search requirement in connection with this mode of policy delivery. Unless the insured requesting coverage meets an “exempt commercial purchaser,” “industrial insured” or other state-recognized exemption from the diligent search requirement, a surplus lines broker is still required to survey the admitted market before placing coverage each time an insured requests non-admitted coverage. This, of course, poses a substantial challenge to the offering of such products as the process will be naturally disrupted until the broker obtains satisfactory declinations. Make no mistake, this is not an issue of formality over substance. A number of surplus lines associations across the country have been raising concerns with insurtech companies and other market participants
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regarding proper compliance with the diligent search requirement. Daniel Maher, executive director of the Excess Lines Association of New York notes that “this is a really fundamental issue. Our technology is moving ahead at an incredible pace... we have met with insurtech companies, and they understand they have regulatory barriers and want to figure out how to do this the right way.” In addition, the Washington Surplus Lines Association has stressed the importance of satisfying the diligent search requirement and that the emergence of online and app-based delivery products will not obfuscate the need for brokers to obtain their proper declinations. Several states are helping to ease the burden of satisfying the diligent research requirement as to new platform-based products. For example, 16 states currently maintain export lists that allow for certain identified coverages to be exported to the surplus lines market without the need for a diligent search. California has also recently amended its insurance laws to exempt certain surplus lines policies from the diligent search requirement if the insurance commissioner determines that “there is not a reasonable or adequate market among admitted insurers or that the type of coverage is for new,
innovative products for which a reasonable or adequate market among admitted insurers has not had time to develop.” Cal. Ins. Code §§ 1763.1. Some states have recently gone so far as to eliminate the diligent search requirement altogether. See, e.g., La. Rev. Stat. Ann. § 22:432 (“Surplus lines insurance . . . may be procured without regard to the availability of coverage from authorized insurers.”)
The meaningful deployment of new technology poses unique challenges for the surplus lines market that are not always the same as those in the admitted insurance market. Another avenue that surplus lines insurers and brokers often explore is to establish risk purchasing groups under the Liability Risk Retention Act of 1986. A risk purchasing group allows the grouping of members to collectively purchase commercial liability coverage and to avoid state laws restricting the ability to procure group coverage. New York, in particular, allows for a single affidavit to be executed and filed by a surplus lines broker on behalf of all members
continued on page 34
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Idea Exchange
Surplus Lines
continued from page 33 of a purchasing group in New York where coverage is procured for such members during a 30-day period. N.Y. Comp. Codes R. & Regs. tit. 11, § 301.6. This benefits insurtech companies that offer insurance
products to New York risk purchasing groups as brokers can fulfill the diligent search before the binding of coverage for members in any given month, allowing for instantaneous and seamless issuance of policies.
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CNA is a registered trademark of CNA Financial Corporation. The information contained in this document is for general information only and is not legal advice. It is intended to provide a general overview of the services and products offered. Only the policy can provide the actual terms, coverages, amounts, conditions and exclusions. All coverages are not available in all states. This document is not intended to be advertising or solicitation in states where the local regulations prohibit such usage. Ian H. Graham Insurance is the brand name for the brokerage and program administration operations of Affinity Insurance Services, Inc.; (TX 13695); (AR 100106022); in CA & MN, AIS Affinity Insurance Agency, Inc. (CA 0795465); in OK, AIS Affinity Insurance Services Inc.; in CA, Aon Affinity Insurance Services, Inc., (CA 0G94493), Aon Direct Insurance Administrators and Berkely Insurance Agency and in NY, AIS Affinity Insurance Agency. E-12669-517
Advertising by Surplus Lines Insurers and Brokers
As technology advances, we are seeing more creative and digital methods of advertising. However, websites and web-based applications increasingly bring insurance participants closer than ever, which can have the consequence of impermissibly drawing attention to an unauthorized insurer. Advertising restrictions on surplus insurers vary among jurisdictions. For example, in California, an eligible surplus lines insurer may advertise in the state, provided that its unlicensed status is disclosed, and that the advertisement is not misleading, does not contain information about premiums or rates and, if the advertisement is made in any medium of general circulation, no specific product is mentioned. Cal Ins. Code § 703.1(a). New York expressly prohibits any person from calling attention to a surplus lines insurer by advertisement or public announcement in the state but does recognize exceptions if a disclaimer is made that the insurer is not licensed in the state, does not solicit business in New York, and such advertisement is in a national publication not aimed at New York residents. N.Y. O.G.C. Opin. No. 2003-19. With the offering of on-demand and other web-based products, additional advertising risks present themselves in ways that would have been unimaginable even a few years ago. For example, a website maintained by a surplus lines insurance company may be considered an advertisement and could potentially violate applicable law if not structured properly. Surplus lines brokers must also be cautious of advertising standards as well. Many states prohibit a broker from identifying the actual names of unauthorized insurers in their advertisements. However, brokers are often allowed to advertise that specific kinds of insurance products are available in the nonadmitted market generally. Information on a broker’s website or application that can lead an insured to conclude that a particular unauthorized
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How to Hire the Right People
By Catherine Oak and
William Schoeffler
A
new book called “Start with Why” by Simon Sinek covered this topic and gave us inspiration for this
article. In the book, Southwest Airlines founder Herb Kelleher talked about how his hiring practices of not hiring “for skills [but hiring] for attitude. You can always teach skills. One needs to hire attitudes that fit the firm’s culture.” Kelleher made Southwest Airlines such a success that no one, including United’s Ted, has been able to copy. Owners need to figure out if people will fit the culture first. The best employees aren’t in it just for the money, but because they believe that they can personally succeed and make an impact. To find the next great producer, agency owners should look for people with that drive to “win” because the insurance knowledge can be taught. Professions such as teaching and coaching will provide much better and hungry salespersons for
an insurance agency, than just paying a higher commission split to another agency’s disgruntled producer. Per Sinek, “Great companies do not hire skilled people and motivate them, they hire already motivated people and inspire them. Unless management gives motivated people something to believe in, something bigger than their job to work toward, they will motivate themselves to find a new job.” Then, owners will only have those less motivated individuals left. A firm’s employees need to feel they belong and are important to the organization. If they do, then they will guarantee the company’s success and will also do the job for themselves. When we help agencies with improving productivity and profitability, we speak to those on the front lines, in the desks without their managers there. We ask them how they could improve their productivity or make their jobs better? What do they need to do a better job, what training, what tools, what assistance or support from management is needed? Owners should look to the employees every day. The employees often are frustrated when we are hired to ask those questions, when they have been telling management all along what needs to be
36 | INSURANCE JOURNAL | NATIONAL APRIL 16, 2018
done. One of the questions we ask is, “Does management ask your input when making changes in the operation?” Most often we hear “no” and this causes morale problems. Those on the phones with the firm’s customers every day know what customers want and what is wrong with the organization. They just need to be asked and then given the tools to make the work flow go more smoothly and help the customers with their needs. The key is not to tell employees to do their jobs but to remind them why the company was founded and look for ways to bring that cause to life, while performing their job. If owners do this, those employees will do more and make the company Share this article with a colbetter.
league. IJMAG.COM/416PE Oak is the founder of the consulting firm, Oak & Associates, based in Northern California. Schoeffler is a financial analyst and junior consultant for the firm. The firm specializes in financial and management consulting for independent insurance agencies, including valuations, mergers acquisitions, clusters, sales and marketing planning as well as perpetuation planning. Phone: 707-935-6565. Email: catoak@gmail.com.
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Idea Exchange continued from page 34 insurer is offering products through such broker could trip advertising prohibitions. Therefore, as product offerings become increasingly seamless and have the (often unintentional) consequence of blurring the lines between the surplus lines broker and carrier, market participants should expect heightened scrutiny by state insurance regulators.
New Tech-Based Products
The challenges the surplus lines insurance industry now face with the emergence of insurtech start-ups may also lead to the greatest production of premiums for the nonadmitted market than has been seen in prior years. With new, innovative products and services developed in Silicon Valley, companies are looking for increasingly complex and tailored insurance policies to cover their unique needs. Surplus lines insurers are often in the best position to cover these new risks, just as they were when cybersecurity and liability risks were only viewed as emerging risks for a few types of industries, and states are beginning to recognize this reality. For example, Transportation Network Companies (TNCs) like Uber and Lyft generally must satisfy minimum levels of automobile financial responsibility requirements applicable to the TNCs and their drivers. Typically, in the personal automobile space, such requirements may only be satisfied through “authorized” insurers in the state. Given the complex insurance needs of TNCs and the relatively new and evolving nature of the industry, satisfying such financial responsibility requirements through the admitted market can be difficult. Most state legislatures have addressed this concern in the last few years by expressly allowing surplus lines insurers to be issuers of TNC insurance policies. Of course, products are evolving faster than legislatures can sometimes react, and TNCs have been expanding beyond passenger transportation and into the product and food delivery space. As such, it remains to be seen if the states will interpret or expand their TNC laws to allow surplus lines insurers to adequately cover INSURANCEJOURNAL.COM
Surplus Lines such services as well. We have also seen an explosion in the personal and commercial drone market in recent years, and insurance products to address risks that drones present are quickly entering the marketplace. We have seen challenges with respect to the issuance of “on-demand” drone insurance whereby coverage may be turned “on” and “off” by the consumer, which may impact whether adequate notice of cancellation and nonrenewal are given under applicable law. With respect to placement of drone insurance in the surplus lines market, some states, such as Alaska, have placed drone coverage on their export lists. In addition, in states that allow drone coverage to be freely exported, whether drone coverage is classified as an “aircraft” risk versus another line of insurance can impact whether coverage is seen as exempt from the surplus lines laws altogether. For example, some states exempt “insurance of aircraft” from the surplus lines laws (which would arguably exempt drone coverage as well), whereas a number of other states exempt common carrier aircrafts only. See, e.g., Ark. Code Ann. § 23-65-302, and Nev. Rev. Stat. § 685A.020.
Broker Role in the Tech Era
The advancement of technological products will in many ways enhance rather than replace the role of the surplus lines broker. Brokers may be in the best position to help understand, craft and tailor offerings to potential insureds and adequately protect their interests as both insurance and non-insurance products become increasingly advanced and complex. Surplus lines brokers will likely find themselves offering a multitude of services both related and unrelated to the procurement of insurance and will wish to be compensated accordingly. As such, renewed attention will undoubtedly be given by state legislatures to the broker fee laws in various jurisdictions and their applicability to the surplus lines market. Ultimately, we see the next generation of innovation as a rising tide that will lift all ships and benefit consumers, surplus lines brokers and their carriers alike.
Conclusion
As new technologies continue to emerge and develop, they create greater opportunities for the surplus lines market to expand and offer novel products to fill consumer needs. However, challenges in complying with surplus lines requirements are substantial. As states adopt statutes and regulations in response, brokers and carriers alike must be keenly aware of their Share this legal duties and restrictions.
article with a colleague. IJMAG.COM/416NY Lerner is an associate in the New York office of Locke Lord LLP and is a member of the Insurance and Reinsurance Department. Cavaliere is an associate in the Hartford office of Locke Lord LLP, where she concentrates on corporate, insurance and reinsurance law.
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Access Home Insurance www.accesshomeinsurance.com SC5; S5 AmTrust www.amtrustgroup.com 15 Aon Affinity www.affinityhcp.com 31, 34 Applied Underwriters www.auw.com 4, 5, 40 Aspera Insurance Services www.asperains.com W4 AssuredPartners, Inc. www.assuredpartners.com 17 Burns & Wilcox Ltd. www.burnsandwilcox.com 3 California Earthquake Authority mvp.earthquakeauthority.com W7 IICF www.iicf.org 29 InsurBanc www.insurbanc.com 27 Lighthouse Holdings, LLC www.lighthousepropertyins.com SC6; S5 M.J. Hall & Company www.mjhallandcompany.com W6 Midlands Management Corporation www.midlandsmgmt.com SC2 Monarch E&S Insurance Services www.monarchexcess.com W5 Negley Associates www.jjnegley.com 25 PersonalUmbrella.Com www.personalumbrella.com 39 Philadelphia Insurance Companies www.phly.com 9 Ryan Specialty Group www.ryansg.com 7 Sentry Insurance www.sentry.com 2 Smart Choice Agents Program www.smartchoiceagents.com 13 State Compensation Insurance Fund www.statefundca.com W3 Summit www.summitholdings.com SC4; S3 Texas Mutual www.texasmutual.com SC3 United Fire Group www.ufgsolutions.com E5
APRIL 16, 2018 INSURANCE JOURNAL | NATIONAL | 37
Closing Quote Legalized Marijuana Looks Like Bad News for Highway Safety ‘[E]arly evidence suggests that marijuana is leading to higher collision claim frequencies in states with recreational use.”
By Matt Moore
T
his past January, adults in California could line up for the first time to legally buy marijuana for personal, nonmedical use. That is when the nation’s largest state joined seven other states and Washington, D.C., in allowing recreational sales of pot. While much is known about how alcohol impairs drivers, comparatively little is understood about marijuana’s effect on highway safety. Still, as the number of collisions has gone up nationally in recent years, evidence from insurance claims data in three Western states points to marijuana as a contributor to higher crash risk. More drivers admit to using marijuana, and it is showing up more frequently among people involved in crashes. Although there is evidence from simulator and on-road studies that marijuana can degrade some aspects of driving performance, researchers have not been able to definitively connect marijuana use with crashes that cause
injury or death. However, early evidence suggests that marijuana is leading to higher collision claim frequencies in states with recreational use. In November 2012, ballot initiatives to legalize recreational marijuana sales passed overwhelmingly in Washington state and Colorado. Voters in Oregon followed suit in 2014. In 2017, the Highway Loss Data Institute published the first study of how legalized marijuana may be affecting crashes reported to insurers in those three states. Using HLDI data, which is collected from companies representing roughly 85 percent of the private passenger vehicle insurance market, researchers can look at many crashes over time and analyze how risk is changing in the states that legalized recreational marijuana sales compared with nearby states where the law did not change. The study found that legalized sales in Colorado, Oregon and Washington resulted in
38 | INSURANCE JOURNAL | NATIONAL APRIL 16, 2018
collision claim frequencies that were about 3 percent higher than would have been expected without legalization. Looking at each state individually, HLDI found that the size of the effect varied. Colorado saw an estimated 14 percent increase in claim frequency compared with nearby control states. Washington’s estimated claim frequency increase was 6 percent, and Oregon’s was 4 percent higher. When states legalize marijuana, it may make pot more socially acceptable. National survey data show that people view driving after using marijuana less negatively than driving after consuming alcohol. The Insurance Institute for Highway Safety recently completed an analysis of roadside survey data gathered over time in Washington. Drivers surveyed in the daytime in the state were more likely to test positive for marijuana after legalized sales of the drug than before. Moreover, drivers who tested positive for marijuana
a year after legalization were more likely to admit that they had used the drug recently and less likely to say marijuana impairs driving. HLDI is continuing to monitor insurance claims data in states that have legalized recreational sales and will be updating results for Colorado, Washington and Oregon soon. The ongoing analyses indicate the overall effect on collision claims is worsening. Now that California is in the mix, researchers will have a much larger dataset to analyze. While it is too soon to draw a definitive conclusion, the evidence so far should give states pause on public policy that allows recreational use of the drug. Lawmakers may look favorably on the tax revenue generated by legalized marijuana, but early signals on crash risk are flashing red that this is bad news for highway safety. Moore is senior vice president of the Highway Loss Data Institute. INSURANCEJOURNAL.COM
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