Insurance Journal West 2018-10-01 by Insurance Journal

WEST REGION Fatal Crashes Rise on Oregon Roads Washington Workersâ&#x20AC;&#x2122; Comp Costs Pacific Health Care Acquisition Search

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Contents October 1, 2018 • Vol. 96 No. 19 • West

West W1 13% Percent Increase in Fatal Crashes on Oregon Roads

W1 13% PERCENT INCREASE IN FATAL

CRASHES ON OREGON ROADS

W4 Washington Employers May See Big Drop in Workers’ Comp Costs

National 8 Geopolitical Tensions Cause Rise in Political Risk Losses: Willis Towers Watson 10 Travelers Risk Index: Businesses Believe a Cyber Attack Is Inevitable

W4 EEOC Sues Del Taco in California for Sexual Harassment, Retaliation

12 Lawnmower Injuries Remain Source of Serious Injury and High Costs

W6 Netflix Sued by Montana Photographer Over Copyright Law, Storm Images

13 Restaurants Must Pay Minimum Wage for Work Unrelated to Serving

W6 Pacific Health Care in California Begins Strategic Acquisition Search

13 McDonald’s Workers Across U.S. Protest Against Sex Harassment

W6 Costs to Fight Wildfires in Utah Double This Year

18 Closer Look: Commercial Auto: Profitability Issues Remain, but There’s Light at the End of Tunnel

Idea Exchange

22 Closer Look: Workers’ Comp Premiums Up 0.4% in First Half of 2018

32 7 Red Flags to Spot Fraudulent Business Interruption Claims

24 Special Report: Best Agencies to Work For 2017 25 Overall Best Agency to Work For: The Horton Group 26 GOLD Best Agency to Work For – East: Tompkins Insurance Agencies 27 GOLD Best Agency to Work For – Midwest: Concklin Insurance Agency 28 GOLD Best Agency to Work For – South Central: SwingleCollins & Associates 29 GOLD Best Agency to Work For – Southeast: BKS-Partners 30 GOLD Best Agency to Work For – West: Morris & Garritano

33 Ask the Insurance Recruiter: Hiring Stereotypes 34 Insurance Is the New Kale? Not So Fast 36 The Competitive Advantage: Most of the Time, Nothing Goes Wrong

LAWNMOWER INJURIES REMAIN SOURCE OF SERIOUS INJURY AND HIGH COSTS

38 More Than a Manager: A Mentality to Ensure Enterprise Success 42 Closing Quote: For True Disruption, Embrace Innovation

Departments W2 People

11 Declarations

COMMERCIAL AUTO: PROFITABILITY ISSUES REMAIN, BUT THERE’S LIGHT AT THE END OF TUNNEL

4 | INSURANCE JOURNAL | WEST OCTOBER 1, 2018

11 Figures 14 Business Moves 21 MyNewMarkets INSURANCEJOURNAL.COM

Get to Know AmTrust. Visit d30.amtrustinsurance.com or call 888.714.4525 AmTrust AmTrust is is AmTrust AmTrust Financial Financial Services, Services, Inc., Inc., located located at at 59 59 Maiden Maiden Lane, Lane, New New York, York, NY NY 10038. 10038. Coverages Coverages are are provided provided by by its its property property and and casualty casualty insurance insurance company company affiliates. affiliates. Consult Consult the the applicable applicable policy policy for for specific specific terms, terms, conditions, conditions, limits limits and and exclusions exclusions to to coverage. coverage.

FSC “XV,” “XV,” Stable Stable Outlook Outlook FSC

OPENING NOTE

Write the Editor: awells@insurancejournal.com

Being Nice to Employees Pays Off

Publisher Mark Wells mwells@wellsmedia.com

EDITORIAL

SALES

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

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

East Editor Elizabeth Blosfield eblosfield@insurancejournal.com

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

Chief Content Officer Andrew Simpson asimpson@insurancejournal.com

Southeast Editor/MyNewMarkets Amy O’Connor aoconnor@insurancejournal.com South Central Editor/ Midwest Editor Stephanie K. Jones sjones@insurancejournal.com West Editor Don Jergler djergler@insurancejournal.com International Editor L.S. Howard lhoward@insurancejournal.com Columnists Chris Burand, Mary Newgard

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 Tiffany Couch, Nick Daugherty, Kristine Honey (619) 584-1100 X132 JoJo Harris, James MacPherson, khoney@insurancejournal.com Heath Ritenour, Mark Ruquet, Katherine Wellman 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 Nathan Granitz kdelamora@insurancejournal.com ngranitz@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 Ad Ops Specialist Jeff Cardrant jcardrant@insurancejournal.com Web Developer Terrance Woest twoest@wellsmedia.com

CIRCULATION

Circulation Manager Elizabeth Duffy eduffy@wellsmedia.com

ongratulations to this year’s Best Agencies to Work For! But what makes an employer a good place to work? Competitive salaries, employee benefits, training and education, resources, and other employee perks help. So does being nice to employees. New research from Binghamton University, State University at New York finds that showing compassion to employees almost always pays off. “Being benevolent is important because it can change the perception your followers have of you,” said Chou-Yu Tsai, an assistant professor of management at Binghamton University’s School of Management. “If you feel that your leader or boss actually cares about you, you may feel more serious about the work you do for them.” Tsai and his fellow researchers wanted to determine how both the presence and lack of benevolence affects the job performance of followers. They surveyed nearly 1,000 members of the Taiwanese military and almost 200 adults working full-time in the United States, and looked at the subordinate performance that resulted from three different leadership styles: Authoritarianism-dominant leadership: Leaders who assert absolute authority and control. Benevolence-dominant leadership: Leaders whose primary concern is the personal or familial well-being of subordinates. Classical paternalistic leadership: A leadership style that combines both authoritarianism and benevolence. The researchers found that authoritarianism-dominant leadership almost always had negative results on job performance, while benevolence-dominant leadership almost always had a positive impact on job performance. In other words, showing no compassion to your employees doesn’t bode well for their job performance, while showing compassion motivated them to be better workers. Tsai said his main takeaway for managers is to put just as much or even more of an emphaFOR QUESTIONS sis on the well-being of your employees as you REGARDING SUBSCRIPTIONS: Call: 855-814-9547 do on hitting targets and goals. “Make sure Outside the U.S., call 847-400-5951 or you may subscribe or change your address online at: you are focusing on their well-being and helpinsurancejournal.com/subscribe ing them find the support they need, while Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media also being clear about what your expectations 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 and priorities are.” per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this pub The study, “Benevolence-dominant, authorlication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended itarianism-dominant and classical paternalistic 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 leadership: Testing their relationships with Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. subordinate performance,” was published in Insurance Journal is a publication of Wells Media Group, Inc. POSTMASTER: Send change of address form to Insurance Journal, The Leadership Circulation Department, PO Box 708, Northbrook, IL 60065-9967 Quarterly. ARTICLE REPRINTS: For reprints of articles in this issue,

‘If you feel that your leader or boss actually cares about you, you may feel more serious about the work you do for them.’

Andrea Wells Editor-in-Chief

6 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

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

Geopolitical Tensions Cause Rise in Political Risk Losses: Willis Towers Watson Report

ncreasing geopolitical concerns are causing a rise in political risk exposures with 55 percent of global organizations with revenues greater than $1 billion experiencing at least one political risk loss exceeding a value of $100 million, according to a survey from Willis Towers Watson and Oxford Analytica. The most frequently reported political risk related loss was exchange transfer which affected nearly 60 percent of those experiencing losses, followed by political violence (48 percent) and import/export embargoes (40 percent), according to the report, titled “How are leading companies managing today’s political risks? 2018 Survey and Report.” The survey revealed that the political risk implications of emerging market economic crises are increasing, most notably in countries like Turkey and Argentina. In their annual Political Risk Survey, Willis Towers Watson and Oxford Analytica

conducted interviews with senior executives of 40 leading global firms across different industry sectors to determine their response to ongoing global political volatility. Other key survey findings include: • The key geopolitical threats were seen as U.S. sanctions policy, emerging market crises, protectionism/trade wars, and populism and nationalism. • While Russia and Vietnam were most frequently cited as countries where losses occurred, losses were recognized throughout Europe, Latin America, Asia Pacific, Africa and the Middle East. • Political risk levels increased for 60 percent of respondents since last year, and nearly 70 percent stated that they had scaled back operations in a country as a result of political risk concerns or losses. • More than 70 percent reported holding back from planned investment as a direct result of political risk concerns.

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• Larger companies were more likely to report using avoidance strategies. “It is clear from our findings that political risk has increased significantly, now becoming a reoccurring and material cost of doing business,” said Paul Davidson, chairman and chief executive officer, Willis Towers Watson Financial Solutions. “If these levels remain elevated, companies will fall under increasing pressure from shareholders for greater levels of transparency around the losses actually incurred,” said Davidson. “Companies will need the ability to monitor, quantify and manage these risks as well as develop strategies to mitigate them.” Simon Coote, deputy director, Oxford Analytica, said: “Companies typically grew up managing cyclical economic risks, not political. However, with the recognition of rising losses due to political risk, it can no longer be excluded from executive decision-making.” INSURANCEJOURNAL.COM

NATIONAL | News & Markets

Travelers Risk Index: Businesses Believe a Cyber Attack is Inevitable

yber risks are the No. 2 concern across all business sizes and industries, and the percentage of businesses reporting they have been the victim of a cyber attack has doubled, according to a new industry report by Travelers Cos. The latest results of the 2018 Travelers Risk Index shows that 52 percent of respondents believe that suffering a cyber attack is inevitable, yet a majority of those surveyed reported not taking adequate steps to protect themselves. Of more than 1,200 business leaders, representing a range of industries and company sizes, 91 percent reported being confident their companies have implemented best practices to avoid a cyber event. But despite their confidence, the same leaders also indicated that: • 55 percent have not completed a cyber risk assessment for their businesses;

• • •

62 percent have not developed a business continuity plan; 63 percent have not completed a cyber risk assessment on vendors who have access to their data; and 50 percent do not purchase cyber insurance.

“Cyber risks carry serious consequences for any business, threatening everything from revenue to operations,” said Tim Francis, Enterprise Cyber Lead at Travelers. “These findings reveal some surprising things about how companies view their cyber exposures, their relative confidence in dealing with them and the clear opportunity that exists for them to be better prepared for a cyber attack.” Other key findings from the 2018 Travelers Risk Index include: • The percentage of respondents who think the current business environment is more risky

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• • • •

continues to decrease. In 2018 it was 36 percent, compared to 41 percent in 2016 and 48 percent in 2014. Overall, the concern about cyber risk is second only to medical cost inflation, however, it is the top concern of large businesses and in sectors such as technology, banking and professional services. The percentage of businesses that have been the victim of a cyber attack has increased. In 2015, 10 percent of study participants said they had been a cyber victim; that number has doubled in 2018. Compared to last year’s survey, the three biggest cyber concerns remain the same: security breach, system glitch and unauthorized access to bank accounts. Three other cyber-related concerns — operational software systems being remotely hacked, not having the resources to recover from

a cyber event and cyber extortion — saw a jump of at least 5 percentage points from last year.

Over the past few years, multiple third-party reports have shown that small businesses suffer the majority of cyber attacks, yet these businesses are the most likely to report not having cyber insurance coverage. Although small businesses may be a frequent target, 74 percent of survey respondents from small businesses said they did not purchase cyber insurance. Three-fourths of businesses surveyed admitted that it is difficult to keep up with the ever-changing cyber landscape, evolving information and new digital developments. To assist businesses of all sizes, there are a range of coverage options, resources and services available to help businesses prepare and recover quickly if and when a cyber event occurs. INSURANCEJOURNAL.COM

West

13% Percent Increase in Fatal Crashes on Oregon Roads

he number of people killed in fatal crashes in Oregon has gone up by 13 percent from last year. The Oregonian/OregonLive reported that the total number of deaths on city streets, freeways and county highways was driven up this summer by one of the deadliest crashes in recent state history. INSURANCEJOURNAL.COM

Eight people died this August in a head-on crash in Harney County in southern Oregon. Several other multiple-vehicle crashes also took place this summer. Troy Costales with the stateâ&#x20AC;&#x2122;s transportation safety division says there were 12 more fatal crashes than last year

and the number of people killed has increased by 37. The fatality increase comes as more people are moving to Oregon while number of state troopers patrolling the highways remains lower than in 1980. Copyright 2018 Associated Press. All rights reserved. OCTOBER 1, 2018 INSURANCE JOURNAL | WEST | W1

WEST | PEOPLE

Josh Riley

Heather Beelar

Fauntelle Carrillo

San Francisco, Calif.-based Paladin Cyber has named Josh Riley head of insurance. He will lead efforts to develop solutions that combine risk management services with risk transfer to help clients manage complex cyber-related exposures. Riley most recently managed the product and underwriting team for the primary cyber offering of Markel Corp. Paladin Cyber is a cyber protection and remediation firm serving small and mid-sized businesses throughout the U.S. Portland, Ore.-based Elliott, Powell, Baden & Baker Insurance agency has named Heather Beelar the firm’s marketing manager. The new position will include identifying and analyzing market trends, and creating strategies to meet evolving needs. Beelar was previously the operations manager at Leonard Adams Insurance. She was a commercial accounts manager with Phoenix Surety and Insurance Services before that. Elliott, Powell, Baden & Baker is a privately owned insurance agency. San Diego, Calif.-based Cavignac & Associates has named Fauntelle Carrillo an account executive within its personal lines department. Carrillo is charged with maintaining existing client relationships, educating clients on preventative risk measures and recommending appropriate levels of insurance coverage. Carrillo was previously an account executive for SullivanCurtisMonroe Insurance Services. She was a senior underwriter for the AIG Private Client Group before that. Cavignac & Associates is a risk management and commercial insurance brokerage. Sandy, Utah-based WCF Insurance has appointed Kathryn Clark as senior vice president of safety and health. Clark will also take on the title and duties of WCF’s chief risk officer as of Jan. 1, 2019. Patrick Harris will be joining WCF as the vice president of risk management. Clark has worked at WCF for more than 21 years in various roles within the safety and health department. Most recently she was vice president of safety and health. Harris joins WCF Insurance from The Cincinnati Insurance Cos., where he was the senior regional director. He also spent time as a senior commer-

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cial field underwriter for Allied Insurance. Insurance coverage in states other than Utah is provided by Advantage Workers Compensation Insurance Co., a wholly-owned subsidiary of WCF Mutual Insurance Co., doing business as WCF Insurance. JLT Specialty USA has named Samantha Levine senior vice president of JLT’s cyber and errors and omissions practice. Levine will be based in Denver, Colo., and will be responsible for advising JLT’s clients on complex areas of E&O and cyber risk. Levine comes to JLT from Aon, where she was vice president within the professional risk solutions team. JLT Specialty USA is the U.S. platform of the leading specialty business advisory firm Jardine Lloyd Thompson Group. CSAA Insurance Group has named Junna Ro vice president of corporate compliance and employment law. For the past six years, she has led the corporate compliance and ethics function for the company. In addition to maintaining oversight of regulatory compliance and ethics, Ro will now manage the employment law team. Ro joined the company in 2005 as senior counsel, and has served as lead attorney for the employment law team. CSAA Insurance Group, a AAA insurer, offers automobile, homeowners and other personal lines of insurance to AAA members through AAA clubs in 23 states and the District of Columbia. Woodruff Sawyer has named Matthew Parsons vice president and account executive in the firm’s San Francisco, Calif., construction practice. Parsons specializes in risk management and insurance coverage for mid-size and large U.S. construction companies, with a focus on advising general contractors, first-tiered subcontractors and heavy civil engineering contractors. He was previously regional vice president at Arch Insurance Group. He began his career at Liberty Mutual in 2007, where he was a construction underwriter before becoming underwriting manager for the construction team in San Francisco. Woodruff Sawyer is an active partner of Assurex Global and International Benefits Network. INSURANCEJOURNAL.COM

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WEST | News & Markets

Washington Employers May See Big Drop in Workers’ Comp Costs

he price of workers’ compensation insurance in Washington could drop significantly in 2019. The Washington Department of Labor & Industries in late September proposed a 5 percent decrease in the average premium employers pay for the coverage. If approved, the rate decrease from L&I would be the largest drop since 2007. The lower rate would mean employers would pay an average of about $58 less a year per employee for workers’ comp coverage. Employees would pay about $6 less a year for their share of the cost. The proposed decrease would mean Washington workers and employers, as a group,

pay $136 million less in premiums, according to L&I. L&I Director Joel Sacks said decreases in work-related injuries, along with L&I initiatives to improve outcomes for injured workers and reduce costs, have made the system healthier and are contributing to the proposed decrease. “We’ve seen a big drop in injuries at work in our state since 2012. And that’s great news because preventing injuries and making workplaces safe is our number one goal,”

Sacks said in a statement. The agency has established opioid prescription guidelines that have resulted in a 90 percent reduction in the number of workers receiving opioids at six to 12 weeks after injury, and the agency has been providing vocational support and assis-

tance earlier in injury claims, which has helped reduce long-term disability, according to L&I. In the last five years, these and other improvements have resulted in a more than $2 billion reduction in projected long-term costs for the workers’ compensation system, according to L&I. The public will have an opportunity to provide input about the rate proposal before a final decision is made in December.

EEOC Sues Del Taco in California for Sexual Harassment, Retaliation

Parents Appealing Rulings in Colorado Ski Resort Death Case

ast food chain Del Taco violated federal law when at least three male employees, including those in supervisory roles, sexually harassed and retaliated against a group of young female workers at a Rancho Cucamonga, Calif., Del Taco, the U.S. Equal Employment Opportunity Commission announced in a lawsuit filed last month. According to the EEOC, supervisory officials harassed female staff, most of them teenagers, with inappropriate sexual comments and unwanted physical touching. Some of the young women made formal complaints to

he parents of a teenager who was killed in a 2012 avalanche at a Vail Resort property are appealing a judge and jury’s decision in their son’s death case. Dr. Louise Ingalls and Dr. Steve Conlin, the parents of Taft Conlin, sued when the 13-year-old was swept away in an avalanche while skiing on an expert ski run in January 2012. The parents say judges in Broomfield and Eagle counties erred in several rulings. Court documents filed with the Colorado Court of Appeals say the parents plan to appeal those rulings and the jury’s verdict, which was based on those

management, human resources and the EEOC, but no corrective action was taken by the company. Instead, the company retaliated against those who complained by changing their schedules and reducing their working hours, the EEOC contends. According to the EEOC, these actions created a hostile work environment and the women felt they had no choice but to resign. According the company’s website, www.deltaco.com, the chain operates in 15 states and has 310 corporate locations, along with 241 franchise locations. The majority of its restaurants are in the West Coast states.

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judges’ ruling. Their appeal is based on five issues they found: moving the trial from Broomfield to Eagle County; pretrial orders by District Court Judge Fred Gannett; rulings during trial before the jury; erroneous jury instruction and an erroneous verdict form that resulted in a defense verdict. Copyright 2018 Associated Press. All rights reserved. INSURANCEJOURNAL.COM

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WEST | News & Markets

Netflix Sued by Montana Photographer Over Copyright Law, Storm Images

Montana photographer is suing Netflix, alleging the company violated copyright law by using one of his photos without permission to create storm images for the series “Stranger Things” and the movie “How It Ends.” The Great Falls Tribune reported Sean R. Heavey of Glasgow filed a lawsuit in U.S. District Court in Great Falls. A Netflix attorney has told Heavey in a letter that its images are different from the photo and that the company didn’t violate his copyright. The newspaper says the company didn’t respond to its request for com-

ment. Heavey says he took the photo in Montana in 2010 and registered his copyright that year. It shows a supercell storm cloud. His lawsuit asks for unspecified damages and legal costs. Copyright 2018 Associated Press. All rights reserved.

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W6 | INSURANCE JOURNAL | WEST OCTOBER 1, 2018

Costs to Fight Wildfires in Utah Double This Year

osts to fight wildfires in Utah are increasing by about $1 million a day right now and authorities expect the season to last throughout October. State Forester Brian Cottam says on average, there are roughly 1,100 fire starts in Utah that burn about 195 square miles and carry a price tag of $50 million. Cottam said during a late September meeting in Logan, that so far this year, there have been more than 1,200 fire starts, 383 square miles burned and a cost of $100 million. Cottam says the drought has had a strong impact on this year’s fire season. He says current conditions allow small fires to easily grow into large fires. Copyright 2018 Associated Press. All rights reserved.

Pacific Health Care in California Begins Strategic Acquisition Search

ewport Beach, Calif.-based Pacific Health Care Organization Inc. in late September announced the launch of a strategic acquisition search for an insurance company to add to its suite of comprehensive workers’ comp products and services. The acquisition strategy in the state of California for PHCO is to ensure it’s positioned to offer existing clients more comprehensive services, including better coverage, the company said. “We have demonstrated proven success in increasing margins and strengthening balance sheets,” Tom Kubota, PHCO’s board chairman and CEO, said in a statement. “Our plans for a strategic acquisition of an insurance company will help us realize our vision to shape an entirely new workers’ compensation industry — from insurance coverage and offerings to safety and wellness programs and beyond.” PHCO specializes in workers’ comp cost containment.

9/14/18 4:00 PM

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28.6%

The average dividend on premiums paid that eligible SAIF customers can expect to receive in 2017, Oregon’s not-for-profit workers’ compensation insurer announced in September.

$7 BILLION

The amount the National Flood Insurance Program expects to pay for claims related to floods from Hurricane Florence, according to the Associated Press. The amount is more than 10 times the $648.7 million paid after Hurricane Matthew in 2016. NFIP paid out $8.7 billion in flood insurance payments after Hurricane Harvey hit Texas last year.

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Opioid Suit

“While we cannot bring back the lives lost to opioid addiction, we can question whether Purdue has lived up to the decade-old promise they made to correct their behavior. The answer, unfortunately, is a resounding ‘no!”’ she said. — Oregon Attorney General Ellen Rosenblum charged in a

lawsuit that Purdue, the pharmaceutical company that makes OxyContin, has engaged in racketeering and misleading activity during the past decade.

No Issues Expected

“I do not expect any [insurer] issues as a result of this hurricane either financially or any problems with timely and sufficient claims payments. At [SC] DOI, it is part of our job to make sure companies fulfill their obligations, and I have no reason in the world to believe we will have any issues with that.”

$25 MILLION $1.5 MILLION

The amount the family of Francisco Reyes, who was killed in August in a shooting at a Ben E. Keith Co. food warehouse in the Houston area, is seeking from his employer. Reyes was an overnight manager at the warehouse when he was fatally shot by a coworker. The lawsuit alleges the company knew the warehouse could be the target of workplace violence but didn’t provide adequate security.

Declarations

— South Carolina Insurance Director Ray Farmer on insurers’

ability to respond to Hurricane Florence claims. The Category 1 storm hit the Carolinas on Sept. 14, causing severe flooding and destruction in the region.

Ruined Lives A Maine lobster wholesale company is suing one of its owners, claiming he embezzled roughly this amount worth of lobsters. Sea Salt, which is a Saco-based restaurant and wholesale lobster company, alleges Matthew Bellerose created a sham customer who received thousands of dollars’ worth of lobsters without being billed. The Portland Press Herald reported the lawsuit claims the lobsters were then resold.

$235 MILLION

The approximate amount of damage caused by August floods and storms in Wisconsin, as of mid-September. Gov. Scott Walker Tweeted on Sept. 18 that the preliminary damages are nearly $234 million. That amount includes $109 million in residential damages, $76 million to the public sector and more than $49 million for businesses.

“Vermont has suffered too long. Too many lives have been ruined.” — Attorney General T.J. Donovan commented on a lawsuit

Vermont filed Sept. 5 against drugmaker Purdue. The lawsuit alleges Purdue’s deceptive marketing of OxyContin and other prescription opioid painkillers helped lead to the drug crisis in Vermont and around the country. The lawsuit seeks civil penalties, fees and costs and damages — not a specific monetary amount — and calls for Purdue to change its practices.

Preventable Accidents

“These accidents are completely preventable when the people involved, from the workers to the regulators, follow well-established rules and perform their duties with a focus on safety.” — Robert Hall, the National Transportation Safety Board’s

director of the Office of Rail, Pipeline and Hazardous Materials, commented after the NTSB released its finding that a series of human errors led to a BNSF Railway train striking and killing two railroad workers in South Dakota last year, federal investigators said. Hall said the Jan. 17, 2017, accident near Edgemont was the 52nd fatal accident in the past 21 years involving railroad roadway worker safety. In all, 55 workers have been killed in these accidents.

Gender Discrimination Suit

“Gender equity is a pillar of the University of Louisiana at Lafayette’s core values.” — The University of Louisiana at Lafayette, in a statement

released after nine female athletes filed suit against the university alleging sex discrimination and inappropriate behavior by ULL President Joseph Savoie and Athletic Director Bryan Maggard. Both have denied the allegations, and ULL called the discrimination allegations “patently false and baseless.” Separately, four female professors have filed Equal Opportunity Employment Commission complaints against the university.

OCTOBER 1, 2018 INSURANCE JOURNAL | NATIONAL | 11

NATIONAL | News & Markets

Lawnmower Injuries Remain Source of Serious Injury and High Costs

awnmower injuries persists at a rate of close to 6,400 a year, most of them requiring surgery and hospitalization, and costing an average of $37,000 per patient. In what Johns Hopkins Medicine researchers call an unusually comprehensive analysis of nationwide data, they tracked eight years of data between 2006 and 2013. Their findings were reported in the September issue of Public Health Reports. Overall the new analysis showed that the most frequent injuries were to men (43,567 of 51,151, or 85.2 percent). Children up to age 4 were six times more likely to have a foot/toe or lower extremity injury and 1.7 times more likely to have an amputation than those age 15 and above. Conversely, older teens and

adults age 15 and above were 8.3 times more likely to have an injury to the hand or upper extremity. This, the researchers said, suggests that young children are more likely to get injured by running into the yard while a family member operates the lawnmower, or by getting their foot trapped in the machine while sitting in the operating member’s lap. The research also suggests the majority of teens and adults sustain injuries from sticking their hands into the mower to clear debris. The data did not reveal the type of mower that caused an individual injury; what mower designs were most likely associated with injuries; or whether those injured were to bystanders or the people mowing. Previous studies have generally collected data only on

12 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

certain types of injuries associated with consumer products without addressing issues of cost or national scope, said Dr. Deborah Schwengel, assistant professor of anesthesiology and critical care medicine at the Johns Hopkins University School of Medicine and the study’s senior author. Schwengel and her team drew on information gathered for the U.S. Nationwide Emergency Department Sample (NEDS), the largest emergency department database in the country. The researchers identified 14,878 lawnmower injuries during the eight-year period, which, when adapted to reflect national emergency room visit data, represented an estimated 51,151 injuries, and about 6,394 cases per year on average. Most of the injuries were lacerations (23,907 of 51,151, or 46.7 percent), fractures (11,433 or 22.4 percent) and amputations (11,013 or 21.5 percent). The most common injury locations were wrist or hand (33,477, or 65.4 percent) and

foot or toe (10,122 or 19.8 percent). Of the 51,151 cases, 43,567 (85.2 percent) were in men; 19,162 (37.5 percent) in the South; 33,886 (66.3 percent) occurred on a weekday; and 36,686 (81.7 percent), occurred between April and September. The treatment costs for emergency room charges averaged $2,482 per patient, and average inpatient charges totaled $36,987 per patient. “Understanding what types of injuries occur in certain groups should help engineers design safer lawnmowers, and policymakers create more appropriate prevention policies,” Schwengel said. An example of a better lawnmower design that could prevent injury, the researchers said, would be one that automatically stops when human flesh is detected near blades. Other authors on this paper were Daniel G. Hottinger, Isam Nasr, Joseph K. Canner and Rahul Koka of Johns Hopkins and Deepa Kattail of McMaster Children’s Hospital. INSURANCEJOURNAL.COM

Restaurants | Spotlight | NATIONAL

Restaurants Must Pay Minimum Wage for Work Unrelated to Serving

estaurants must pay waiters and bartenders minimum wage when they are engaged in tasks such as cleaning toilets that are unrelated to their main jobs and do not offer tips, a divided U.S. appeals court ruled last month. At issue in the decision by an 11-judge panel of the 9th U.S. Circuit Court of Appeals was a federal law that allows an employer to pay workers who receive tips as little as $2.13 an hour as long as their tips earn them minimum wage. Employers can’t use that tip credit when the workers are engaged in unrelated tasks that don’t pay tips, the panel ruled in a 9-2 decision. Employers also can’t use the tip credit for tasks related to bartending or

serving such as preparing coffee if employees spend a substantial part of the work week on them. Judge Richard Paez said tips were intended as “a gift to the server, as opposed to a cost-saving benefit to the employer.” A broader use of the tip credit would allow employers to underpay bartenders and wait staff and put off hiring staff such as janitors who don’t receive tips and therefore must get paid minimum wage by employers, Paez said. The ruling upheld a U.S. Department of Labor regulation that limited employers’ use of the tip credit. It also revived lawsuits by 14 bartenders and servers accusing restaurant chains including P.F. Chang’s China Bistro and J. Alexander’s

of failing to pay minimum wage. Emails to attorneys for J. Alexander’s and P.F. Chang’s were not immediately returned. The broader impact of the ruling was not immediately clear. Seven states require that employers pay workers the

San Francisco; Los Angeles; St. Louis; Kansas City, Mo., and Durham, N.C. The targeted restaurants kept serving food, with organizers saying the goal was not to shut them down. Protesters demanded that McDonald’s require anti-harassment training for managers and employees. They also want a national committee formed to address sexual harassment, made up of workers, managers and leaders of national women’s groups. McDonald’s declined to comment on the protests, saying it stood by a statement issued defending its anti-harassment policies. The company also disclosed that it will turn to out-

side experts to help “evolve” those policies, including consultants from Seyfarth Shaw at Work, an employment law training firm. Protest organizers called on McDonald’s to drop Seyfarth Shaw, depicting it as an “anti-worker law firm.” They noted that it has defended the Weinstein Co. in a lawsuit over sexual harassment allegations against former Hollywood mogul Harvey Weinstein. At the New Orleans protest, McDonald’s employees arrived at a restaurant with red tape over their mouths emblazoned with the #MeToo phrase. They pulled off the tape to chant their slogans.

state minimum wage on top of any tips they receive, according to the labor department’s wage and hour division. Six of those states fall under the 9th Circuit’s jurisdiction: California, Alaska, Montana, Nevada, Oregon and Washington.

McDonald’s Workers Across U.S. Protest Against Sex Harassment By Janet McConnaughey

cDonald’s workers staged protests in several cities late last month in what organizers billed as the first multistate strike seeking to combat sexual harassment in the workplace. In Chicago, one of the targeted cities, several dozen protesters rallied in front of McDonald’s headquarters while a plane flew overhead with a banner reading, “McDonald’s: Stop Sexual Harassment.” In New Orleans, current and former employees chanted, “Hey, McDonald’s, you can’t hide – we can see your nasty side.” Other protests were held in INSURANCEJOURNAL.COM

Tanya Harrell, 22, fought back tears as she explained that workers wanted a more effective system for handling harassment complaints. She said managers had laughed off her complaint that a male co-worker had groped her, telling her she probably had given him “sex appeal.” She said she left McDonald’s for a while in 2017 and is now working at a different store. Harrell was among several protest organizers who filed complaints with the U.S. Equal Employment Opportunity Commission in May.

OCTOBER 1, 2018 INSURANCE JOURNAL | NATIONAL | 13

NATIONAL | Business Moves

Marsh & McLennan, JLT

Marsh & McLennan Inc. agreed to buy Jardine Lloyd Thompson for about $5.7 billion to expand its global offering of reinsurance and consulting services. New York-based Marsh said the purchase of JLT will strengthen its specialty risk broking, expand its global reinsurance network and enhance its position in Asia and Latin America. The companies estimate that Marsh & McLennan’s revenue will rise to about $17 billion as a result of the deal. JLT CEO Dominic Burke will join Marsh & McLennan as vice chairman and a member of the executive committee. JLT’s independent directors were advised by J.P. Morgan Cazenove and Simon Robertson Associates, and Marsh & McLennan was advised by Goldman Sachs Group Inc.

Beals Insurance Agency, Northern United Agents Alliance

Beals Insurance Agency LLC has joined the Northern United Agents Alliance as a

participating member. With offices in Bedford and Londonderry, N.H., Beals Insurance is a full-service independent insurance agency specializing in home, auto, commercial and life insurance. Headquartered in Concord, N.H., the NUAA is an alliance of independent insurance agents in New Hampshire, Massachusetts and Vermont dedicated to providing client service through the group’s relationships with its insurance carrier partners. The NUAA partnership was formed in 2011 by four independent insurance agencies and has grown to include 35 agencies.

Seeman Holtz, Ritman & Associates

Seeman Holtz Property & Casualty Inc. has acquired Noblesville, Indiana-based Ritman & Associates Inc., which specializes in professional liability insurance. Jennifer Ritman has built a boutique insurance agency specializing in all things property/ casualty with an emphasis on

14 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

professional liability insurance for attorneys. Ritman & Associates has been serving Indiana, Illinois, Ohio, Kentucky, Michigan, South Carolina, Wisconsin, Missouri, Arizona, Tennessee, Florida, Maryland, Alabama, Kansas, Mississippi and Virginia for nearly 30 years. Ritman and her team will be leading the lawyer and business division of Seeman Holtz. Florida-based Seeman Holtz Property & Casualty targets high-quality independent agencies for geographic expansion and continued growth throughout the United States.

Higginbotham, Hull Agency

Higginbotham and the Hull Agency have merged their insurance services operations in Fort Worth, Texas. The Hull Agency will partner with Higginbotham’s downtown offices to service more than 300 commercial and personal property/casualty clients and expand its services to include employee benefits. Higginbotham, headquartered in Fort Worth, is growing by uniting with other independent brokers that have strong reputations and a commitment to offering all-inclusive insur ance and financial services. The Hull Agency will use Higginbotham’s resources to begin offering employee benefit services to its clients. The Hull Agency is an independent commercial and personal property/casualty insurance brokerage firm in Benbrook, Texas. The family-owned and operated agency opened in 1976. It primarily serves small to midsize businesses and high

net-worth individuals. Brian Hull will continue serving his clients as a vice president at Higginbotham.

Holman, Murray Insurance Agency

Holman Insurance Services, a full-service brokerage offering personal and commercial insurance products headquartered in New Jersey, has acquired The Murray Insurance Agency, an independent insurance agency headquartered in Longwood, Florida, with offices in 11 other locations throughout the state. The commercial segment of Holman Insurance Services has operated in Florida since 2016, but the company wanted regional expertise as it introduced its lineup of personal coverage in Florida, according to President Steve Durdin. Holman Insurance Services will officially roll out its personal insurance division in Florida and continue to expand its platform of personal and commercial lines of products on a national level. Moving forward, Murray Insurance agency will operate under the Holman Insurance name. Holman Insurance Services, LLC is a wholly owned subsidiary of Holman Enterprises in Maple Shade, New Jersey. Holman Enterprises is a global organization that has provided automotive services for more than 90 years.

Hub, Harman Agency

Hub International Ltd. has acquired the assets of Harman Agency LLC. The terms of the deal were

continued on page 16

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Workers’ Compensation: – Excess – Large Deductible – Large Guaranteed Cost Commercial Auto Commercial General Liability Public Entity Liability: – Law Enforcement Liability – Public Officials Liability – Educators Legal Liability Cyber Risk Reinsurance Loss Portfolio Transfers Captive Services Self-Insurance Bonds

NATIONAL | Business Moves continued from page 14 not disclosed. Pepper Harman, owner of Harman Agency, will join Hub Northwest and report to Garth Hamilton, chief sales officer of Hub Northwest. Harman Agency has offices in Cottonwood and Orofino, Idaho, and specializes in crop, farm and ranch, and livestock insurance. Chicago, Illinois-based Hub is a global insurance broker providing property/casualty, life and health, employee benefits, investment and risk management products and services.

Worldwide Facilities, McClelland and Hine

Los Angeles-based Worldwide Facilities LLC announced plans to acquire managing general agent and excess and surplus lines broker, McClelland and Hine Inc. and McClelland & Hine Trucking Underwriters LLC (collectively, MHI), headquartered in San Antonio, Texas. MHI Principals Gill Hine and Amicia Hine and their team will join Worldwide Facilities. MHI began writing business in San Antonio in 1982 and later expanded to Houston, Dallas and Atlanta. Worldwide Facilities is a national wholesale insurance broker and managing general agent that has been in business since 1970. Its brokers and underwriters provide expertise in a wide range of specialty lines. Marsh, Berry & Company Inc. served as the financial advisor to MHI. The acquisition, which is subject to certain conditions, is expected to be completed

within the next 30 days.

Brown & Brown of Kentucky Inc., F&I Resources

Brown & Brown of Kentucky Inc., a subsidiary of Brown & Brown Inc., has acquired substantially all of the assets of F&I Resources, a Westborough, Mass.-based company specializing in helping automotive dealers form and manage reinsurance companies and drive performance. F&I Resources was founded in 1993 and provides F&I performance management for auto dealers in the Northeast and Mid-Atlantic states through F&I sales training and auto-related warranty products. Following the transaction, the F&I Resources team will become part of the Brown & Brown auto, RV and powersports practice, which operates under the leadership of Mike Neal, president of Brown & Brown of Kentucky Inc.

FBinsure, Jose S. Castelo Insurance Agency

FBinsure has acquired the Jose S. Castelo Insurance Agency, an independent agency located in New Bedford, Dartmouth, and Fall River, Mass. Established in 1981 by current President Jose S. Castelo, the agency provides personal and business insurance to nearly 5,000 clients while also offering real estate and mortgage services. Going forward, Castelo will maintain a role within the agency throughout the process to ensure a smooth transition to FBinsure. Following the acquisition, Castelo and his family will continue to own and operate ERA,

16 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

The Castelo Group Real Estate and Castle Mortgage Brokerage Inc. This serves as the fourth acquisition for FBinsure in the past four years. It now has 11 total locations throughout Bristol and Plymouth Counties, including its offices in Taunton, Attleboro, Middleboro, Dighton, Rehoboth, East Freetown and New Bedford.

Arthur J. Gallagher & Co., United Dealer Services LLC

Arthur J. Gallagher & Co. has acquired United Dealer Services LLC. Terms of the transaction were not disclosed. Based in Highland Mills, N.Y., United Dealer Services LLC is a retail insurance broker and program administrator. It provides a range of insurance coverages to franchised auto dealerships in New York, New Jersey, Connecticut, Rhode Island, Massachusetts, Michigan, Virginia, New Hampshire, Vermont, Maine and Pennsylvania. It is also a program administrator for franchised auto dealers in New York, New Jersey, Pennsylvania and Michigan. Principals Randolph T. and Dustin Winston will remain in their current location under the direction of Dan Tropp, head of Gallagher’s mid-Atlantic retail property and casualty brokerage operations. Arthur J. Gallagher & Co., a global insurance brokerage, risk management and consulting services firm, is headquartered in Rolling Meadows, Illinois.

USI Insurance Services, The Gaudreau Group

USI Insurance Services, an insurance brokerage and risk

management company headquartered in Valhalla, N.Y., has acquired Wilbraham, Mass.based The Gaudreau Group. Terms of the transaction were not disclosed. Founded in 1921, The Gaudreau Group is a commercial insurance, employee benefits, personal risk and financial services firm insuring more than 6,000 businesses and families across 14 states. Jules O. Gaudreau, president of The Gaudreau Group, is a third-generation member of the Gaudreau family to lead the company. Gaudreau will join USI’s New England regional management team as president of the company’s Springfield, Mass., office.

AssuredPartners, Roemer, Sunforest Transportation Insurance

AssuredPartners Inc. has acquired Roemer Insurance in conjunction with Sunforest Transportation Insurance Group, both located in Toledo, Ohio. The company was founded in 1934 by Wellington F. Roemer and has maintained a focus on servicing the trucking industry while over the years branching into additional lines of coverage. The team of 26 will remain under the current organizational structure under the leadership of President and CEO Rocky Roemer, COO Michael Lawrence and STIG President Dennis Schwartz. Roemer Insurance currently reports annualized revenues of $4 million. AssuredPartners is headquartered in Lake Mary, Florida. INSURANCEJOURNAL.COM

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NATIONAL | Closer Look | Commercial Auto

Commercial Auto: Profitability Issues Remain, but There’s Light at the End of Tunnel By Mark E. Ruquet

espite insurers’ best efforts to increase rates to compensate for losses, commercial auto continues to be an unprofitable line. In less than a decade, despite continued increases in premiums, two major carriers have exited the business. The line’s poor performance is said to be the result of years of underpricing for frequency and severity. But some believe there is more to it than inadequate underwriting. The answer to a return to profitability, they say, lies in the combination of continued rate increases, recognizing the drivers of severity and

advances in technology. The National Association of Insurance Commissioners’ 2017 First-Half Results report for the U.S. property/casualty insurance industry notes that despite years of premium increases, the commercial auto pure direct loss ratio deteriorated two points from the previous year to 66.4 percent. The Council of Insurance Agents & Brokers (CIAB) in its first-quarter 2018 broker survey said premium increased for the 27th consecutive quarter by an average of 7.7 percent. Some brokers noted increases as high as 30 percent on some accounts. Others said some carriers were pulling out of monoline auto altogether. A

18 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

report from Conning said the combined ratio rose 20 points from the period 2007 through 2016 to 112 percent, with some slight improvement estimated by 2019. The CIAB report says that brokers expect the upward trend in both costs and claim numbers to continue “due to distracted driving and increasingly expensive vehicle repairs.” One broker reportedly said that placing certain types of risks was difficult and that placements could only be made through programs. In Conning’s report, “2017: Commercial Automobile Insurance–Fix Me, Please,” the consulting firm said, “Among the major commercial lines of insurance, commercial automobile has had the poorest underwriting results in recent years.” The 2015 combined ratio was 108.8 percent, 15 points worse than commercial lines

overall. The turn to unprofitability was abrupt, the report notes, after several years of below-100 combined ratios in 2003 through 2010. The report says that the deterioration is “not due simply to one or two isolated factors” but “numerous trends that converged all at once, catching the industry off guard after complacency from an extended period of favorable results.” There is a substantial gap between outperformers and underperformers of as much as 30 points on the combined ratio The top quintile of performers exhibited a combined ratio of 88.8 percent, while the combined ratio for the bottom quintile was 118.4 percent. Last year, Fitch Ratings reported the segment had a combined ratio of 110.4 percent for 2016, a 15-year high, producing six consecutive years of underwriting loss and a profit drag for U.S. P/C insurers. INSURANCEJOURNAL.COM

James Auden, managing director of Fitch Ratings, said the agency just released its 2017 report, showing that the combined ratio worsened for the seventh straight year of underwriting loss, but noting there are indicators of a turnaround. “We think there is some moderate improvement going forward in 2018,” Auden said. “There is a lot of talk about utilizing technology and analytics in pricing and risk selection, which has taken a long time to implement, but we have not seen the results yet. However, we should see the results down the road.” Auden said getting a handle on claims is a major problem for many underwriters. Tremendous price increases have not made a dent in underwriting losses. Part of the problem is the risks they write. Progressive, for example, is the largest writer of commercial

auto, but its risks are primarily small businesses and vary from livery companies to contractors with a small fleet of trucks. Other insurers deal with larger fleets and long-haul truckers, subjecting them to bouts of higher frequency. Progressive, he noted, is profitable because of its risks and sophisticated pricing — a carryover from its personal lines model. He also cited GEICO as another company that is successful in writing commercial auto for many of the same reasons as Progressive. To deal with the issue of underwriting and selection, Auden said some carriers need to shrink their book of business, but this would be a problem for those offering commercial auto as part of their commercial package. For them, Auden explained, the company will have to make its evaluation of the risk based on the overall profitability of the risk.

Factors Delivering Poor Results

‘We thought the world was round and auto insurers were insuring for normal cases. But once litigation funders got involved, what was a $30,000 to $40,000 settlement is now $1 million.’ - Robert D. Woods, Energi INSURANCEJOURNAL.COM

Generally, experts say there are several factors pointing to commercial auto’s poor results. The improved economy produced more vehicles on the road, and that increased the frequency of accidents. A tight labor market translates into trucking companies hiring less experienced drivers. Other contributing factors for higher losses are the increased use of in-vehicle technology, which can lead to more distraction for drivers and higher

repair cost because vehicles have become more sophisticated. The most significant driver of underwriting loss is claim severity, Auden noted. Indications are that more bodily injury claims are being litigated, and settlement verdicts are higher, hitting seven figures in more cases That is not changing. What some say is contributing to claim severity is the growth of third-party litigation funding — also known as litigation finance — - James Auden, Fitch impacting commercial auto suits. Essentially, United States in the mid-tothe practice involves a late 1990s, becoming a growth third-party financier providing money to an attorney to industry for investment firms finance a suit in exchange for and hedge funds seeking new a portion of the settlement. investment vehicles. Some estimates value the industry well The bet is there will be a subnorth of $1 billion, with dozens stantial recovery providing a of firms specializing in the field large return to the investor. The downside is if the case is and continued growth on the horizon. lost at trial, then the investor also loses. What the providers The funding falls into two of litigation financing cannot distinct practices. Litigation do is violate the rule of chamfunding is typically put into perty. Defined by Webster’s, place at the outset to cover champerty is “a proceeding by fees and costs in exchange for which a person not a party in a a percentage of the recovery. suit bargains to aid in or carry The other practice is legal on its prosecution or defense in funding, which amounts to a consideration of a share of the loan for the personal use of the matter in suit.” The legal opinplaintiff. This practice is often ion is that the financing is percriticized for usury rates and missible so long as the investor leaving plaintiffs without benefit to the settlement. is not involved in the litigation. In its “2017 Litigation Litigation financing began Finance Survey,” Burford in Australia and moved to the United Kingdom as a way to Capital (considered the top third-party litigation funder provide funds where plaintiffs in the United States) said 36 did not have the resources to percent of U.S. law firms used finance their own litigation. continued on page 20 The practice spread to the

‘Commercial auto is pretty far from an underwriting profit. There will not be a return to profitability in the immediate term.’

OCTOBER 1, 2018 INSURANCE JOURNAL | NATIONAL | 19

NATIONAL | Closer Look | Commercial Auto continued from page 19 litigation finance in 2017 compared to 28 percent in 2016 — an increase of 414 percent since 2013, when only 7 percent of law firms used the mechanism. The survey noted that “close to 8 in 10 U.S. lawyers say they are aware of litigation funding,” and half of U.S. lawyers who have not used it “expect to do so within two years.” Proponents of litigation funding say that because litigation is so costly, the practice allows plaintiffs who could not otherwise afford it to be placed on an equal footing with deep-pocket defendants. However, those in commercial auto insurance see a much less benign practice driving settlement costs and negatively affecting reserves. John J. Ferrante, general counsel and vice president of litigation management for Massachusetts-based Energi Insurance Services, said the influence of litigation funding causes claims that would normally settle in a five-figure range to settle at seven figures. The investors are seeking a return, Ferrante said, and the influence of that money makes it more difficult to reach a reasonable settlement. Medical bills and lost earnings are the main drivers of a claim’s value, and the financing allows plaintiffs to pursue unnecessary procedures to increase costs. The increased numbers drive value and increase settlements. Ferrante shared a recent case in which two accident victims, hit by a distracted driver, had two very different outcomes. Neither was injured seriously, and the passenger settled for $45,000. The driver, however, had multiple medical procedures and ended up

with $400,000 in medical bills. A finance company paid the plaintiff $180,000 and secured an agreement to pursue a verdict of $7 million-plus. Under the agreement, if the plaintiff won, she would have received 20 percent of the settlement, her attorney one-third, and the remaining 50 percent would have gone to the financier. “The returns were enormous,” Ferrante said, but in this case the defense won, in part because the third-party financier was revealed to the court, and the finance company took the loss. Still, the insurer incurred significant expenses for the cost of defense. Such examples of abuse and inappropriate activity drive reserve deficiencies for insurers, and their defense is all the more complicated because plaintiffs are not required to reveal the involvement of third-party financiers. Added to the mix of investors, Ferrante said, is a rise in GoFundMe pages where plaintiffs or attorneys can pursue investors to support litigation.

20 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

Said Robert D. Woods, senior vice president of claims for Energi: “We thought the world was round and auto insurers were insuring for normal cases, but once litigation funders got involved, what was a $30,000 to $40,000 settlement is now $1 million. Insurers were caught off-guard because they were not prepared.” The best defense against this practice is disclosure, Ferrante said, adding “daylight is often the best disinfectant against such practices.” Energi pushes for disclosure as part of its support services, but others, he said, do not. “We know what to do and look for.” Ferrante is not alone in calling for disclosure of litigation funding. A paper published by the Vanderbilt Law Review on the subject said that there is a place for the practice and disclosure is a better solution than an outright ban. Continuation “would allow the benefits of litigation funding to be realized because individual consumers could choose whether or not to employ the service. Thus,

financier mandatory information disclosure is the ideal approach for addressing litigation funding’s potential adverse effects on settlement.” Wisconsin has adopted a provision requiring the disclosure of litigation funding arrangements, said Kevin M. LaCroix, author of “The D&O Diary” blog. “The state’s action is just the latest step in what seems to be a general move toward requiring disclosure,” he said. He noted that in California, disclosure of third-party funding is required in class action lawsuits and there is a proposal pending to revise the Federal Rules of Civil Procedure to require disclosure. Another defense against litigation is technology, said Justin P. Russo, senior vice president of risk management for Energi. He noted that a dashboard video camera can tell a different tale from a plaintiff’s claim and quickly alter the outcome of a case. Other technology, such as telematics, can tell the vehicle’s speed, how the driver maneuvered and how quickly the driver stopped, revealing a picture that could significantly affect a case. Technology, such as collision avoidance systems, also can help to avoid the accident in the first place. While underwriters strive to bring commercial auto back into the black, the expectation is that it will take time. “Commercial auto is pretty far from an underwriting profit,” observed Fitch Ratings’ Auden. “There will not be a return to profitability in the immediate term.” Ruquet is an award-winning insurance journalist and freelance writer based in New York. INSURANCEJOURNAL.COM

NATIONAL | MyNewMarkets

ROV AUV Insurance Coverage

Market Detail: Accessible Marine Insurance (AMI) (ami-ins.com) works with clients providing ROV inspection services. The limits of insurance can vary depending on the customer’s requirements, but start at $1 million for general liability limits. A typical equipment policy may not cover equipment once it hits the water, therefore it is important to secure a contractor’s equipment policy for waterborne exposures with limits equal to the value of the ROV. Also, a general liability policy may not cover wet operations such as ROV inspection work. Quotes for workers compensation with a USL&H endorsement are also available, although it may not be required if the water is not navigable. Available limits: As needed Carrier: Unable to disclose States: All states Contact: Customer service at 504-486-5411

Real Estate Investor Insurance

Market Detail: Prospect General (www. prospectgeneral.com) has creINSURANCEJOURNAL.COM

ated a single policy coverage option for clients who own portfolios of real estate investment properties. The coverage has been designed to allow for the addition and deletion of properties throughout the entirety of the policy term with applicable prorated accounting ramifications measured to the day of the change. Coverage focuses on one-to four-unit dwellings, but small apartments and light commercial will be reviewed. Restaurants or bars/taverns will not be covered. Prospect has built the product in partnership with Lloyd’s of London, whose various insurance syndicates have long supported the real estate investor space. Coverage features include: one policy, one payment for the entire rental portfolio; nationwide in scope; portfolios can be a mix of homes, condos and/ or apartment units; built for buy-and-hold and/or fix-andflip portfolios; multiple named insureds OK (individuals, LLCs, trusts, LPs, etc.); few restrictions; AirBnb and vacation rentals OK; no brush restrictions; no year build or roof age restrictions. Available limits: Minimum

$10,000, maximum $2 million Carrier: Lloyd’s States: All states Contact: Jorge Martinez at 619-597-1274 or email: jlm@ prospectgeneral.com

Temporary Staffing Liability Coverage Solutions

Market Detail: Temp Staff Risk Services (www.tempstaff riskservices.com) temporary staffing liability coverages protect clients, employees and the company. Not all staffing liability programs are the same, so it is important to consider the differences when selecting a liability insurance partner: Zurich, Everest, Philadelphia, One Beacon, Arch and others available. Available limits: As needed Carrier: Zurich, Everest, Philadelphia, One Beacon, Arch States: All states Contact: Rob Schild at 1-800245-6899, ext. 15045 or email: rob.schild@ tempstaffriskservices.com

Farm & Ranch Owners Market Detail: Gabor

Insurance Services, Inc. (www. gaborinsurance.com) has been offering coverage in Florida for

more than six decades. Gabor Insurance Services Inc. operates solely as a property and casualty wholesaler and is not affiliated with any retail insurance agency. Commercial coverage includes property, liability, garage, BOP, inland marine, and other miscellaneous. Personal coverage includes homeowners/dwellings; farms & ranch owners; online umbrella; inland marine; and other miscellaneous. Available limits: As needed Carrier: Unable to disclose States: Fla. only Contact: Customer service at 786-924-7055

Hard-to-Place Products Accounts

Market Detail: USG Insurance Services, Inc. (www.usgins. com) offers product recall, discontinued operations, domstic and foreign, reverse flow, sporting gear/helmets, auto parts, chemicals, toys, food, pharmaceutical and medical coverage. USG works with more than 260 carriers in all states, to place these accounts. Available limits: As needed Carrier: Unable to disclose, admitted and nonadmitted available States: All states except Alaska and Hawaii Contact: 1-800-886-3897

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OCTOBER 1, 2018 INSURANCE JOURNAL | NATIONAL | 21

NATIONAL | Closer Look | Top Workers’ Comp Writers

Workers’ Comp Premiums Up 0.4% in First Half of 2018 By Steven J. Groeschen

orkers’ comp insurers reported a 0.4 percent increase in direct written premiums (DWP) during the first six months of 2018 versus the same period in 2017. Workers’ comp DWP have increased for eight straight years, according to a review by Demotech Inc. of second quarter 2018 data, as recently reported by insurers to the National Association of Insurance Commissioners. DWP at midyear 2018 of $27.9 billion is at an all-time high from the midyear 2010 low of $18.8 billion. However, the premium growth rate has consistently slowed over this period, from a 9.5 percent increase in 2011 to a 0.4 percent increase in 2018. The growth in payroll from an improved economy has more than offset the rate decreases in many states. The top 25 workers’ comp insurers show a much higher growth rate in DWP than all others. The top 25, ranked by the highest dollar amount of DWP growth, reported an 18.5 percent premium increase during the first six months of 2018 versus the same period in 2017. DWP for all other workers’ comp insurers decreased by 2.8 percent. Six of the insurers in this year’s top 25 were also in last year’s top 25. Notably, AmTrust NGH Group, which consistently had three or more insurers in the top 25, has no insurers in

this year’s top 25. Insurer groups having three insurers in the top 25 include BCBS of Michigan Group and Berkshire Hathaway Group. For Berkshire Hathaway, NorGUARD Insurance Co. and Redwood Fire and Casualty Insurance Co. were in last year’s top 25. Texas Mutual Insurance Co. returns to the top 25 this year. Texas Mutual had consistently been in the top 25 for years 2015 and prior. ClearPath Mutual Insurance Co. formed in 2017 to assume all of the assets and liabilities of The Kentucky Workers’ Compensation Fund. KESA was a self-insured workers’ com fund for 38 years with nearly $60 million in annual written premiums. According to ClearPath, the mutual company structure will allow more

22 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

organizational and financial flexibility, as well as greater opportunities for growth inside of Kentucky and other states in the future. Several of the top 25 insurers specialize in fronting arrangements or program business. These include Benchmark Insurance Co., Falls Lake Fire and Casualty Co., and Safety First Insurance Co. Two of the top 25 insurers wrote more than 90 percent of their workers’ comp premium in California: Falls Lake Fire and Casualty Company and Oak River Insurance Co. Premium growth from these insurers is notable because the Workers’ Compensation Insurance Rating Bureau of California reported the industry average charged rate has decreased by about 6 percent during the first six months of 2018 versus the same period in 2017. The National Council on Compensation Insurance reported that workers’ comp

continues to have a net combined ratio lower than many other lines of business. NCCI expects that the final 2017 net combined ratio will be the lowest in more than half a century. However, competition rises during periods of great profitability. Demotech expects that rate decreases will more than offset the expected payroll growth in the next year and that industry DWP will be lower in 2019 than 2018. The gig economy may generate some unexpected premium growth. Workers’ comp law does not cover many freelancers as they are classified as independent contractors. Challenges to labor laws and uncertainty about the Affordable Care Act may lead certain states to mandate comp coverage for some of these freelancers. Groeschen is chief consulting actuary and risk analyst with Demotech Inc., a Columbus, Ohio-based financial analysis firm. Website: www.demotech.

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Industry Workersâ&#x20AC;&#x2122; Compensation Direct Premium Written (DPW) Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

DPW Through 6/30 $19,757,576,556 $18,814,735,112 $20,618,828,533 $22,484,181,779 $24,324,470,907 $25,587,654,011 $26,871,226,504 $27,471,995,741 $27,750,183,279 $27,851,664,718

Growth (Loss) ($2,507,506,796) ($942,841,444) $1,804,093,421 $1,865,353,246 $1,840,289,128 $1,263,183,104 $1,283,572,493 $600,769,237 $278,187,538 $101,481,439

% Change -11.3% -4.8% 9.6% 9.0% 8.2% 5.2% 5.0% 2.2% 1.0% 0.4%

DPW Through 12/31 $37,065,799,775 $36,269,774,642 $39,743,363,214 $43,755,244,979 $46,981,116,563 $49,245,124,906 $51,241,191,346 $52,253,269,883 $52,414,653,131 --

Growth (Loss) ($4,284,868,333) ($796,025,133) $3,473,588,572 $4,011,881,765 $3,225,871,584 $2,264,008,343 $1,996,066,440 $1,012,078,537 $161,383,248 --

% Change -10.4% -2.1% 9.6% 10.1% 7.4% 4.8% 4.1% 2.0% 0.3% --

Data Source: The National Association of Insurance Commissioners (NAIC), Kansas City, Mo., by permission. Information derived from an S&P Global Market Intelligence product. The NAIC and S&P Global Market Intelligence do not endorse any analysis or conclusion based upon the use of this data. This exhibit is based upon the initial reporting of second quarter 2018 data, estimated to be more than 95 percent of the companies that report quarterly. It excludes several large state funds (e.g. California, New York, Pennsylvania) which have not always reported second quarter data.

Top 25 Property/Casualty Companies

Based Upon Dollar Amount of Direct Premium Written (DPW) Growth Rank Company Name Group Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

National Union Fire Ins Co. P&C Insurance Co. of Hartford Texas Mutual Insurance Co. Ohio Security Insurance Co. ACE American Insurance Co. Redwood Fire & Casualty Ins Co. Ins Co. of the State of PA Bridgefield Casualty Ins Co. Sompo Japan Insurance Co of America ClearPath Mutual Insurance Co. Accident Fund National Ins Co. Accident Fund Ins Co. of America Hartford Underwriters Ins Co. Falls Lake Fire & Casualty Co. Safety First Insurance Co. Indem Ins Co. of North America Everest National Insurance Co. Greenwich Insurance Co. United Wisconsin Insurance Co. Benchmark Insurance Co. Employers Preferred Ins Co. NorGUARD Insurance Co. Phoenix Insurance Co. Oak River Insurance Co. Liberty Insurance Corp.

American International Group Hartford Fire & Cas Group N/A Liberty Mutual Group Chubb Ltd Group Berkshire Hathaway Group American International Group American Financial Group Sompo Group N/A BCBS of Michigan Group BCBS of Michigan Group Hartford Fire & Cas Group James River Group Tokio Marine Holdings Inc Group Chubb Ltd Group Everest Reins Holdings Group XL America Group BCBS of Michigan Group Benchmark Holding Group Employers Holdings Group Berkshire Hathaway Group Travelers Group Berkshire Hathaway Group Liberty Mutual Group

Top 25 All others Total

Year to Date Year to Date 6/30/2018 6/30/2017 $277,262,247 $171,381,585 $544,846,942 $159,327,392 $394,422,951 $204,775,548 $201,361,224 $176,230,147 $86,032,399 $30,688,253 $121,560,294 $293,938,405 $243,581,101 $102,664,120 $28,762,305 $201,265,152 $256,600,616 $30,909,236 $108,742,037 $119,391,534 $215,937,440 $320,509,289 $253,242,789 $76,451,574 $296,049,685

$212,014,602 $117,979,616 $497,248,073 $120,197,752 $357,261,637 $171,037,976 $169,887,721 $144,833,667 $54,856,403 $0 $91,227,595 $265,626,410 $216,114,603 $75,221,496 $1,808,041 $175,346,146 $231,094,409 $6,501,124 $85,010,179 $96,035,484 $194,096,363 $298,724,293 $232,015,861 $56,107,089 $276,552,835

Growth (Loss) $65,247,645 $53,401,969 $47,598,869 $39,129,640 $37,161,314 $33,737,572 $31,473,503 $31,396,480 $31,175,996 $30,688,253 $30,332,699 $28,311,995 $27,466,498 $27,442,624 $26,954,264 $25,919,006 $25,506,207 $24,408,112 $23,731,858 $23,356,050 $21,841,077 $21,784,996 $21,226,928 $20,344,485 $19,496,850

% Change 30.8% 45.3% 9.6% 32.6% 10.4% 19.7% 18.5% 21.7% 56.8% --33.2% 10.7% 12.7% 36.5% 1490.8% 14.8% 11.0% 375.4% 27.9% 24.3% 11.3% 7.3% 9.1% 36.3% 7.0%

$4,915,934,265 $4,146,799,375 $769,134,890 18.5% $22,935,730,453 $23,603,383,904 ($667,653,451) -2.8% $27,851,664,718 $27,750,183,279 $101,481,439 0.4%

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OCTOBER 1, 2018 INSURANCE JOURNAL | NATIONAL | 23

NATIONAL | Special Report | Best Agencies to Work For

2018 Winners OVERALL

The Horton Group, Orland Park, Ill.

EAST

Gold - Tompkins Insurance Agencies, Batavia, N.Y. Silver – Rogers & Gray Insurance Agency, South Dennis, Mass. Bronze – Marshall & Sterling, Poughkeepsie, N.Y.

MIDWEST

Gold – Concklin Insurance Agency, Lombard, Ill. Silver – Gibson, South Bend, Ind. Bronze – The Bulow Group, Tinley Park, Ill.

SOUTH CENTRAL

Gold – SwingleCollins & Associates, Dallas, Texas Silver – Bryan Insurance Agency, Graham, Texas Bronze – Porrier Group, Lafayette, La.

SOUTHEAST

Gold – BKS-Partners, Tampa, Fla. Silver – Jones Insurance Agency, Garner, N.C. Bronze – Harbour Insurance Agency, Port St. Lucie, Fla.

WEST

Gold – Morris & Garritano, San Luis Obispo, Calif. Silver – Eaton-Provident Group, Scottsdale, Ariz. Bronze – North Town Insurance, Spokane, Wash.

he votes were tallied and the results are in for the 2018 Best Independent Insurance Agency to Work For survey by Insurance Journal. Employees of the Best Agencies to Work For in 2018 highlight the importance of competitive salaries, employee benefits, training and education, resources, and other employee perks as drivers of satisfaction in the workplace.

But it’s not all about compensation and benefits. Happiness in the workplace has a lot to do with people, relationships and culture. Employees of the winning agencies cite high personal job satisfaction; rate their relationships with their immediate boss or supervisor as positive; and express a high opinion of their agency’s owner or principals and their agency’s reputation in the community. Many employees are grateful the best agency owners support local charities and the community. Employees are grateful for the opportunities their agencies provide for them to participate in community service. Employees take pride in working for agencies that are

24 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

respected and hold strong values and ethics. Employees also appreciate the generosity of their agency owners in sharing revenues in the form of bonuses and trips. The best agencies also provide ways to help their employees grow — by giving them the tools and technology they need, and supporting them with education, training, annual and performance reviews and, in some cases, mentors. The survey results clearly show employees value this support. As expected, the winning agencies score high for overall employee benefits including wellness programs and for working conditions including flex-time and alternative

schedules that allow employees to work from home. The best agencies to work for also provide employees with a strong sense of work-life balance, and deliver a workplace environment where employees feel supported wholeheartedly by management and their peers. Many of the employees say they feel like family in their agencies. Insurance Journal wishes to thank the more than 2,000 customer service representatives, account executives, producers, managers and other agency staff who took the time to nominate their independent insurance agency in this year’s survey. INSURANCEJOURNAL.COM

NATIONAL | Special Report | Best Agency to Work For

Overall

The Horton Group Orland Park, Illinois

Start With Good Intentions By Andrea Wells

mployee-focused. Employee-owned. And family. Those are the qualities employees value most at Orland Park, Ill.-based The Horton Group — winner of Insurance Journal’s Best Agencies to Work For Overall 2018 Award. “Horton cares about worklife balance. They give so much back to their employees by providing work at home, Friday breakfasts and flex time. If you work hard, you are recognized for that hard work,” one employee wrote. “The Horton Group is the best agency to work for because we are like one, big family,” another employee said. That’s not always an easy culture to create in an organization with more than 400

employees with 12 offices located in five states. “I work with employees who work in remote offices and still have that connection with them.” Employees in every office receive free breakfasts on Friday, and employees gather at the agency’s corporate headquarters annually for the “Hortonpalooza,” a day of camaraderie, food and live music. Glenn Horton, CEO and chairman, believes his family agency’s commitment to the independent agency channel and internal ownership is one reason why The Horton Group is a best place to work. “With the number of firms acquired over the past several years, this is becoming very unique, especially since we have many ways for an employee to become an owner,” Horton said.

The Horton Group was founded in 1971 as a small, eight-person family owned insurance agency specializing in auto and home insurance for individuals. Today, the agency writes more than $72.4 million in revenue with more than 400 employees, specializing in construction, municipalities, transportation, manufacturing, nonprofits, education and hospitality. Clear, open and transparent communication with employees is critical when creating a good place to work environment, Horton said. “We share everything, including financial information.” Sometimes that means sacrificing short-term profits to support better long-term

Glenn Horton believes to become a Best Place to Work, start with good intention. “You have to care,” he said. INSURANCEJOURNAL.COM

employee experiences, he said. That’s OK. “We perform very well financially, but make employee experience an equal priority to financial results.” The Horton Group invests in its people, too. The agency is committed to providing internal advancement opportunities for employees and invests in training and development resources. “I started as an intern with Horton 17 years ago … They always supported my development and presented opportunities to move up in the firm,” one employee said. Horton’s advice: “Try to create an environment where the interests of the company and its employees are aligned.” Then, make sure it is more than just rhetoric. “In this type of business, our employees are by far our most important assets. Our most important assets go home every night and they don’t have to come back.” Make sure they want to come back, he said. “Being good for our employees and creating an excellent employee experience is as important as any financial or business metric,” Horton said. “To be considered a great place to work you have to start with intention. You have to care. Then you have to be willing to support your intention in many areas, including compensation, training, benefits, culture and quality of leadership.”

OCTOBER 1, 2018 INSURANCE JOURNAL | NATIONAL | 25

NATIONAL | Special Report | Best Agency to Work For

East

Tompkins Insurance Agencies Batavia, New York

Doing Insurance The Tompkins Way By Elizabeth Blosfield

n the home page of the Tompkins Insurance Agencies website, a slogan reads: “The way insurance should be done.” According to CEO and President David Boyce, this commitment means always being there for customers when they need assistance. “Significant storms in March of 2017 had our people taking 1,000-plus claims a day,” he told Insurance Journal. “We extended our hours and efforts significantly, worked weekends and saw staff volunteering to do whatever it took to deliver on the promise that we sell to our clients, which is to be there when they need us most.” Batavia, N.Y.-based Tompkins Insurance Agencies — winner of Insurance Journal’s 2018 Best Agencies to Work For East Region Gold Award — touts its 24/7 customer service as one way it is able to go above and beyond in serving its community. “Every day, not just in words

but in action, our team delivers on our core values of commitment to customer, to community and to employee,” one employee wrote in an anonymous survey. Boyce, who initially entered the insurance industry by following in his father’s footsteps, said he believes Tompkins Insurance Agencies is able to continuously deliver on its customer service values because of its people and its culture. “While I’m extremely proud of this nomination, I’m not surprised,” he said. “Although I’m the leader, I know we are who we are only because of our employees.” Employees who nominated the agency expressed similar thoughts when asked why they feel Tompkins is a great place to work. “Tompkins is not just a job, but a culture,” one employee wrote in the survey. “I have never worked for another company where the employees are happier to be a part of something bigger and something special.”

To illustrate this, employees expressed in the survey that every year, they are recognized for milestone anniversaries at an offsite location with lunch, personalized speeches and a gift. “I am always amazed at how many employees celebrate 20, 25, 30 and even 40 years at the company,” an employee wrote. Other employees pointed to the fact that the work environment at Tompkins Insurance feels like a family. “One thing I noticed when I was hired were the two welcome cards I received …” an employee wrote in the survey. “This was a nice touch and showed that they care for their employees. Within my first two months of hire, I have the opportunity to help out with three charity programs representing Tompkins. This is a

L to R: Jessica Maguire-Tomidy, VP, Operations Manager; Don Herman, CFO; David Boyce, President, CEO; Sue Winkelman, VP, Human Resources Manager; Tim Spezzano, SVP, Personal Lines Manager. 26 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

testimony to their community involvement.” Boyce echoed these thoughts, stating he believes the agency is different because it lives its values through a work environment that drives employee growth. "I truly believe this is a great place to work and will continue to be a great place to work, because of our people and our culture," he said, adding Tompkins Insurance aims to enable employees to be committed to the communities where they live and work, and to the customers they serve. “This is validated by the number of new employees that are referred to work for our agency by our existing team, and the fact that we have a number of examples of multiple family members working for our company,” he said. Indeed, employees made it clear in the survey that Tompkins’ commitment to serving its community by offering 24/7 customer service and participating in charitable initiatives, as well as serving its employees by creating a family like work environment, has not gone unnoticed. “As I walk into our building, I look up to our symbol on the exterior and am thankful and proud to work here at Tompkins,” one employee said. “It’s just a great place to be.” INSURANCEJOURNAL.COM

NATIONAL | Special Report | Best Agency to Work For

Midwest

Concklin Insurance Agency Lombard, Illinois

A Place of Respect and Gratitude

By Stephanie K. Jones

hat makes a workplace a great? Its employees, according to the president and cofounder of the Illinois agency Insurance Journal has named as the Gold Best Agency to Work For in the Midwest. Acknowledging “how lucky we are to have the wonderful employees we do,” President Craig Concklin said the agency “strives to be an employer our staff can be proud of. Being nominated for this award shows me that our management team is succeeding in this goal. Our mission is to treat each employee with respect and understanding. We trust our staff to be capable professionals who can work with autonomy. We don’t micromanage, but instead offer an open door to anyone who needs assistance or has questions. Everyone’s opinions are valued.”

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Management also lets employees know when they are on the right track. “If someone is going above and beyond they deserve to have that effort acknowledged and appreciated,” he said. It’s an operational approach that Concklin’s employees praised over and over again in responses submitted to Insurance Journal’s 2018 Best Agencies to Work For survey. IJ’s “Best Agencies” awards are employee-driven, based on rankings and comments by survey respondents, and Concklin employees were effective advocates for their agency. Concklin does have a specialty in hospitality businesses, including pizza delivery, but employees say it really delivers on the goal of treating everyone fairly and creating an atmosphere that is harmonious and pleasant. They appreciate that theirs is a work environment where

opinions are valued, that they have access to tools that allow them to grow professionally, that individuals are given leeway to perform their jobs in the way that best suits them, and that team members support and help each other out. Throughout the survey, employees praised everything including performance reviews the agency’s “easy-going, pleasant environment,” the clearly communicated vision and goals set by management. One employee wrote: “The performance review is first completed by the employee and then discussed with the employer based on the employee’s performance

questionnaire. It’s a very fair, low-stress process.” Another employee said, “Everyone here is very supportive and helpful to each other. When you ask for something they deliver ... sometimes, even if you don’t ask they figure out what you need and provide a solution.” The “agency is wonderful to its employees and the knowledge the owner and producers have is incredible They treat everyone like a family member, pay very well and are more flexible than any other agency I have worked for,” wrote another employee. Craig Concklin, who started the firm with his father in 1993, sad, “it’s always been a family company.” While working relationships at the agency may be family like, he recognizes employees also live in a world beyond the workplace. “We understand our staff has lives and families outside the office, and sometimes these lives intrude upon the work day. Therefore, we attempt to be as flexible with staff hours as we can be.” As to advice he might give other employers striving to make their agencies a best place to work, Craig Concklin offered: “Be grateful for your staff and let your gratitude show.”

OCTOBER 1, 2018 INSURANCE JOURNAL | NATIONAL | 27

NATIONAL | Special Report | Best Agency to Work For

Southeast

BKS-PARTNERS Tampa, Florida

Commitment to Company Culture By Amy O’Connor

or the founders of Tampa, Fla.-based BKSPartners, being nominated as Insurance Journal’s Best Agency to Work For by their employees is not only an “incredible honor” but also motivation to keep improving. “It’s such an incredible honor because to think that what we do and how we try to interact and engage with colleagues is meaningful – and it also puts a lot of pressure on us to continue to raise the bar, challenge ourselves, and to not be satisfied with the status quo,” Founding Partner Elizabeth Krystyn said. “[We] spend nights and weekends thinking of different ways that we can engage with people and help them develop their passions and interests and help them achieve their career goals.” When the three founding partners – Krystyn, Laura Sherman and Lowry Baldwin – came together in 2006 to start BKS-Partners, creating and maintaining the right company culture was the ultimate priority, and that is still the case. The company, which primarily focuses on employee

benefits, commercial and high net worth insurance, never wavers from its internal guide deemed the “Azimuth.” Krystyn described the Azimuth as their “culture document that describes how we want to work with each other, our clients, our insurance company partners and the community.” “We put culture front and center,” said Sherman. Sherman said that means employees, who are referred to as “colleagues” at BKS, not only share in the successes of the whole firm, but consistently work hard to keep improving themselves and the company. That can also include letting BKS leadership know what can be done better. “We give them the forum to tell us when we aren’t getting it right and we are very nimble, we can adapt and we can change,” said Sherman. “I think that’s probably one of the reasons that our colleagues are not only as forgiving, but also as passionate, because they know that they are stewards of the culture as well.” Employees who nominated the agency, selected as the Gold winner for 2018, described multiple attributes about the

28 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

company’s culture that make it a “Best Agency to Work For,” saying: “The leaders of the agency encourage idea sharing and community as important aspects of our culture.” “The culture and support to be your best is unparalleled! If you work hard, you will be rewarded and lifted further. If you stumble and fall, you rise as a team and grow.” “[BKS has a] culture of success and accountability.” “Our vivacious and embracing culture accompanied with our strong client focus is what sets us apart.” “Our culture is supportive, collaborative, and full of positive energy.” “[BKS-Partners has a] collegial culture that emphasizes working across company divisions.” That commitment to culture has been a driving force behind the firm’s dramatic growth over the last 12 years, Sherman and Krystyn said. With more than 250 colleagues now working at BKS in multiple states,

Sherman said as the company has grown they have made sure to add leadership who are aligned with its culture. “It’s inevitable that I won’t be walking the floor and see everybody every single day … and we aren’t as involved in all the day-to-day decisions,” Sherman said. “[Colleagues] have definitely embraced and trust the leadership we have brought in. But it’s also about how you keep that intimacy and knowledge of everyone.” But it’s not just about company growth at BKS – personal growth is a major focus as well. A new career path program, PTO to do community service, and the Passion Project contest where colleagues can win money for a cause they are passionate about, are other opportunities employees love. “The culture at Baldwin Krystyn Sherman Partners is a culture all organizations should strive for!” One respondent said. “The partners and all levels of leadership engage on multiple levels with all employees and the entire organization collaborates as a team on a regular basis. All employees work very hard and all are happy to do so because of the culture and appreciation received. BKS Rocks!!” INSURANCEJOURNAL.COM

NATIONAL | Special Report | Best Agency to Work For

South Central The Sky Is the Limit By Stephanie K. Jones

he opportunities are limitless. That seems to be the consensus among employees at SwingleCollins & Associates (SCA), judging from their responses to Insurance Journal’s 2018 Best Agencies to Work For survey. Employees of the Dallasbased firm who commented on this year’s survey enthusiastically used phrases like, “truly a wonderful place to work!!!,” “WIN, WIN for all!,” “I truly enjoy waking up to go to work every morning,” and, yes, “the sky is the limit!” IJ’s “Best Agencies” awards are employee-driven, based on rankings and comments by respondents to a series of questions. A plethora of comments similar to those indicated above, along with a high ranking on the grading scale IJ uses in its selection of top agencies to work for across the nation propelled SCA into the Gold spot in the South Central Region. There’s apparently a lot to

like at SwingleCollins: focus on education; management’s overwhelming respect for both employees and customers; possibilities for growth and development; fair and generous compensation structure; and even $2 jeans day — where employees pay $2 for the privilege of wearing jeans at work that day. (The money goes into a pot and is donated at the end of the year to a charity.) On the survey, several employees mentioned their appreciation of the agency’s emphasis on education. “Producers teach weekly classes on various insurance topics to the staff and newer producers. There are also many CE opportunities in the office, and we are all encouraged to obtain accreditations,” wrote one employee. Another said there’s a strong focus on what the writer believes “to be most important in our industry. We are constantly challenged to master coverage at every level.” Still another praised the agency for “hiring great people and creating a program to mentor these young producers,

SwingleCollins team at a 2018 employee appreciation event. INSURANCEJOURNAL.COM

SWINGLECOLLINS & ASSOCIATES DALLAS, TX

to help them overcome the hurdles most new producers face. This has created a vibrant learning opportunity for new and old producers that our agency has fully committed to.” Caroline Jernigan, director of Talent at SwingleCollins, said the agency actively seeks to create a culture in which employees are engaged and eager to come to work. Management encourages “input from employees on virtually any topic that can make us a better place to work, whether operationally or culturally,” she said. SCA’s employees are very much aware of the lengths to which the agency goes to let them know just how essential they are. “Everything is open door. From your supervisor to the CEO, they want to know any

concern you might have and help resolve any issue that may come about from time to time,” said one employee. "Amazing company, amazing CEO and management,” wrote another. SCA’s management cares about its people and encourages “us to strive for a higher level of success,” wrote an employee. “We dig into coverage and sell on value, rather than ‘quoting’ business. We have a team environment in which experienced producers are more than willing to help, and we all celebrate each other’s successes.” Jernigan said it’s “an honor to work with a truly amazing group of talented professionals that are committed to working together to serve our clients’ risk management needs. We have assembled a very special group of people who continually raise the bar and make this a great place to work.” She recommends other agency owners and managers who want to create an attractive and effective working environment to make “your people the foundation of what you do. Focus on hiring the best people that you can, then invest in their success by providing them the tools, education and environment they need to be the best that they can be.”

OCTOBER 1, 2018 INSURANCE JOURNAL | NATIONAL | 29

NATIONAL | Special Report | Best Agency to Work For

West

Morris & Garritano San Luis Obispo, California

Everyone Has a Voice Another wrote: “Morris & Garritano is a very hard-working, smart and fun community. From the top to the newest employee, everyone here is aware of the culture and strives to live it every day. Our leadership understands that the most valuable part of the company is the employees. If you treat your employees well and acknowledge their contributions, then they will always work to better the organization.” CEO Brendan Morris, the third generation of Morris’s to lead the firm, stressed the importance of instilling values like respect and camaraderie over tossing out motivational catchphrases to employees. “We really wanted to make it simple and live by our core values,” Morris said. “Having a good culture has been like a buzz word you heard for a long time, but it’s not just words here.” One of the firm’s values is passion. “Whether it’s passion for

our clients, passion for veryone has a voice at our employ“ the table, and everyone ees, passion is respected.” for building relationships, That employee comment may best sum up the feelings we really have that,” he of the workforce at San Luis said. “We’re passionate about Obispo, Calif.-based Morris & remaning independent, pasGarritano. sionate about creating opportu Giving employees a voice nities, about having fun, about makes them feel heard, but learning.” benefits like work-life flexibility, fair compensation and room Morris & Garritano has for growth, are attributes that offices in San Luis Obispo and Santa Maria, with producers earned the firm the gratitude of in Santa Cruz and Fresno. The numerous employees who voted it the Best Agency to Work firm was founded in 1885 by For – Gold award for the West Archibald McAlister in San Luis region in Insurance Journal’s Obispo as Lands, Loans, Rents annual survey. & Insurance. McAlister later The 133-year-old indepenbecame mayor of the city. dent agency, which employs In 1948, Brendan’s grandfa123 and had a reported revenue ther, Harry Morris, who worked of $18.5 million in 2017, scored for The Hartford, came to the firm. His father, Greg, who also among the top agencies. “Morris & Garritano is like worked for The Hartford, came to the firm in 1964 and worked my second family. We are true there for 50 years. to our mission statement and Brendan, who earned a we live our core values daily. degree in finance from Santa We work hard and play hard,” Clara University, joined the wrote one employee. firm in 1994. His sister Kerry, who is now COO, joined in early 2002. Morris said the firm has grown organically and through acquisitions, with two agency acquisitions and two producer acquisitions in the past four years. The employees at San Luis Obispo, Calif.-based Morris & Garritano voted it the best One employee agency to work for. summed up his

By Don Jergler

30 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

feelings about the firm, saying the culture allows employees to have strong growth goals along with a fun work environment. “The agency provides support to allow individuals opportunities to work remotely and provides flexible work schedules along with strong benefits packages,” the employee wrote. “Additionally, the growth of the agency has brought a diversity of employees from different demographics together.” Another wrote that Morris & Garritano takes care of employees, which fosters an atmosphere of happiness. “People are unusually happy all the time and pass that positivity to our clients,” the employee wrote. “The culture around the office is upbeat and professional. It’s easy to do a good job when it is rare that someone in our area hasn’t heard of the agency. Most of the people I talk to tell me their parents or grandparents had their insurance with us, and it was only natural for them to give us a call. I have 100 percent faith that we provide superior coverage and service to every client. Prior to working here, I never would have imagined that a commercial insurance job could be so fun. I am proud to tell people where I work!” INSURANCEJOURNAL.COM

Congratulations to Insurance Journalâ&#x20AC;&#x2122;s 2018 Best Agencies to Work For

Overall Winner

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Morris & Garritano

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South Central Winners

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Idea Exchange

Fraud

7 Red Flags to Spot Fraudulent Business Interruption Claims

By Tiffany Couch

nsurance is the safety net that protects individuals and companies in case of damage, theft, injury, illness or loss. Fire, floods, earthquakes, tornadoes and freak accidents can quickly decimate a thriving business. When disaster strikes, business owners turn to their agent or broker to help pick up the pieces. While the majority of business interruption claims are paid on legitimate loss, an estimated $80 billion in fraudulent claims are made every year in the U.S. When a business experiences a loss that temporarily disrupts its operations, it can file a business interruption claim, also known as a business income loss claim. The claim will compensate business owners for lost revenue and property damage sustained during the company’s closure. Agents and brokers should approach every business interruption claim with a degree of caution. Even the most seasoned agent can be caught off-guard by a well-put-together claim. That’s why it is so important to thoroughly investigate every claim to ensure its legitimacy. Claimants who intentionally manipulate their business’s financial statements to create a false picture of company health are committing fraud. Three examples of business interruption claim fraud are: Padding the claim. A 2013 survey by the Insurance Research Council showed

24 percent of respondents believed it to be acceptable to pad a claim to make up for deductibles. Overstating expenses may seem like an easy way to increase the payout, but it’s still fraud. Overstating revenues. Falsifying revenues, blaming reduced revenues on nonevent factors or exaggerating legitimate revenues result in claims overpayment.

Understating direct or variable costs.

Incorrectly categorizing or deferring expenses associated with sales, (like costs of goods sold and variable costs) show increased lost profits and result in the overpayment. Expenses should be scrutinized to ensure saved costs are appropriately reduced from lost sales. Although most policyholders are honest, the fact is fraudulent claims will be submitted to insurers at some point. Here are seven red flags of fraudulent business interruption claims. 1. The policyholder is overly aggressive about settling the claim quickly. 2. The insured’s federal tax returns show the company had been suffering financial loss or generating little revenue, yet the claim reports an excessive loss. 3. The claim’s losses include large, expensive items, yet the insured cannot produce hard evidence, or produces receipts with no store logo, no

32 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

sales tax figures or no date. 4. The claim was made shortly after the policy was activated, after an increase in the amount of coverage was added or shortly before the policy is to end. 5. The policyholder previously posed hypothetical questions to the agent about losses similar to the one being investigated. 6. The claimant’s financial records contain irregular or questionable information, such as out-of-sequence receipts and checks, and no source documents. 7. The claimant refuses to provide substantive evidence to support the claim (copies of their accounting soft ware, bank statements, customer invoic- es or vendor bills). Many carriers have special investigation units or outsource forensic accounting services to analyze these claims and can take an investigation to the next level. Bottom line: If a claim has the hallmarks of potential fraud, escalate the investigation. Doing so helps mitigate loss, prosecute fraudsters and disrupt illicit payouts. Couch is CEO and founder of Acuity Forensics, a forensic accounting firm. She is also the author of The Thief in Your Company, a book that explores the financial and emotional impact of fraud on organizations of all sizes. Email: tcouch@acuityforensics.com. Phone: 360-573-5158. INSURANCEJOURNAL.COM

Idea Exchange

Q&A

Ask the Insurance Recruiter

Unfortunately, I lost my job as a commercial account manager when my agency cut my position along with several others. I’m 60 days into my search and struggling to find a job. During interviews, when the reason why my job ended is brought up, it seems employers think there’s more to the story. I assume they believe it’s my fault that I was the person chosen to be downsized. That’s not true and super frustrating. What more can I do? — Ann in Chicago.

Dear Ann, what a tough experience to go through. I’m so sorry that you lost your job. I know it’s not easy, but I want you to be a ‘glass half-full’ person. After 12 years working in insurance recruiting, I can tell you with total certainty you will find a job sooner rather that later. U.S. unemployment is less than 4 percent; there are a lot of agency service job opens and very few experienced candidates. The work you’re putting in will pay off. Don’t be surprised at the end of your search if you have multiple offers. It’s the classic, “When it rains it pours.” I’ve seen it a million times. Your concern is an issue of company stereotyping. I’ve heard, “Agencies don’t lay off top performers,” many, many times. There’s no factual basis for this type of broad statement, so take heart, I’m equally as frustrated as you! Let’s use this column to shine a light on these issues.

Hiring Stereotypes That Hurt Insurance Agencies

gency Hiring Stereotypes:

TRUE OR FALSE

Agencies don’t downsize their

best account managers. FALSE: Here’s a great example

of what can happen in the industry. I worked with a commercial account manager who experienced this during their first 30 days in a new job. Day 1: Started. Day 15: Boss who did the hiring was laid off. Day 30: INSURANCEJOURNAL.COM

New boss was laid off. Day 31: The account manager was told they would have to relocate out of state to keep their job. Day 32: Laid off.

Alternative employment arrangements can prevent a layoff. TRUE: Contingent workers

represent one-third of the U.S. workforce (Bureau of Labor Statistics, June, 2018). Commonly known as “con-

tract employment,” agencies have a lot of options for retaining talent on a trimmeddown budget. This includes self-employed/independent contractors, on-call workers, temporary help workers and consultants.

I can’t verify that downsizing wasn’t performance related. FALSE: Here is your best oppor-

tunity to lean into references. Many employers pro-offer letters of recommendation and will serve as references. Account managers have a wealth of quality references to call upon beyond the employer — clients, underwriters, ven-

By Mary Newgard Capstone Search Group dors, managers, producers and coworkers. Plus, volume tends to be a characteristic of layoffs. It’s easy to find out through the grapevine what happened at another agency in town.

Why I Don’t Work There Anymore? Tips for explaining job changes on your resume

I Was Fired for Cause: Be forthright and transparent. Practice your message without sounding rehearsed. Most importantly, clearly state what you’ve learned and how you will move forward. I Was Recruited: No one ever faulted a person for being career-oriented. You seized a great opportunity. You pushed forward, grew and diversified your skills. It made personal, professional and financial sense. I Was Laid Off/Reorganized/Downsized: Agency M&A activity is no secret. Business won or lost during different times of the year also leads to tough decisions. Acknowledge the difficulty but also the promise in entering a new chapter of your career. I Relocated: Personal relationships, internal transfers or dependent care responsibilities. All three are common reasons for spurring a job change based on address. Talk about your commitment to an area. Emphasize stability moving forward.

Newgard is partner and senior search consultant for Capstone Search Group, a national recruiting firm dedicated to the insurance industry. For questions and comments, email: asktherecruiter@csgrecruiting.com.

OCTOBER 1, 2018 INSURANCE JOURNAL | NATIONAL | 33

Idea Exchange

Agency Management

Insurance Is the New Kale? Not So Fast Should insurance companies utilize social media to attract millennials? Marisa Lagos, Rollins College: “I

By Heath Ritenour

n industry publication recently published an article that said insurance is “the new kale” because the one-time ignored garnish today is sought after as a healthy must-have in the form of everything from salads to snacks. The suggestion is that the insurance industry needs to reveal its superpowers and embrace digital processes like social media to attract millennials. The story was emailed to our summer intern class, and their well-thought-out responses may surprise agencies looking to attract younger people. Several talented students participated in a nine-week internship program across various regions in the country. During that time, they had the opportunity to meet with team members at every level, focus on professional development and explore all aspects of our company culture. We use our internship program as an opportunity to identify sharp minds and set them on the path for a successful career after their graduation — potentially with us. Talent shortages exist at all levels in the industry. According to the Pew Research Center, 10,000 baby boomers are turning 65 every day and are retiring. To make up for the impending gap, the industry must search constantly for the best talent among younger generations. But is embracing social media the answer? Here’s what our interns said:

don’t think that social media alone will help attract younger employees. It is necessary for a company, but more has to be done if you want to be seen as a desirable company and industry to work in. When using social media, posts should focus on your employees and clients as people. For example, show how you protect and support your clients and how you’re involved beyond helping when something goes wrong.” Jacob McKay, Liberty University: “I think that whether or not a company uses technology is pointless in attracting good, young talent. I look at the lack of use in technology as opportunity; that’s what drives me personally. Good, young talent will bring that aspect along through being hired.” Stephanie Zhang, Emory University: “The company website is important, but social media like Facebook, Instagram and LinkedIn are equally important because they demonstrate the nontransactional part of a business. They show the culture and values of the company.”

What advice would you give companies to attract talent? Cara Johnson, University of Central Florida: “Focus on human connection. Not only do we need to attract the right people to work in the industry, but we also need to grow the human connections we make with clients. I believe this is the aspect of insurance that needs more focus on technology, rather than using it to draw young people for work, because keeping clients happy is what drives the company forward and sets

34 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

the company apart.”

McKay: “When it comes to looking for a

job, I think most of the people insurance companies are trying to attract are ‘driven’ young people, not just young people in general. I think technology is very important, and it is an aspect that will help attract more young people, but I think it’s important who you attract. I want to see a company that sees potential in me and has a plan for me to use my skills and assets to the best of my ability.” Zhang: “The insurance industry is a fairly old one, which is what makes it so hard to change the misconception of it being boring. Leaders need to let college students and younger generations know that the insurance industry is not all about knocking on doors and selling insurance. It’s also very much about building trust and authentic relationships with people.”

Do you think insurance is like kale? Johnson: “Kale is a fad that was brought

to light because of some well-known fitness and health advocates who have built up their social media presence, but the insurance industry is not that simple. While kale is not necessary and many people (including me) maintain my well-being without eating any, most people do actually need insurance to fulfill their need to feel secure and prepared for the unexpected. This has always been the case.” Lagos: “Insurance is not kale because it is INSURANCEJOURNAL.COM

needed by people. While kale is nice and it is good for you, it is not necessary for you to have a safe and successful life. Daniel Arth, University of Georgia: “I think one hidden gem that most people see as a negative is that the insurance industry is old-fashioned. By that I mean that we prefer face-to-face interactions if we can, or talking to people over the phone and getting to know our clients personally rather than doing everything just to increase our popularity. Embracing the old and being adaptable to new trends, I think, is how the insurance industry will become the ‘new kale’ but also keep its moral values.”

What are millennials looking for in an employer? Victoria Cascaes, IOA Intern Mentor:

“Millennials are looking for insurance benefits, the ability to work from home, flexible hours, and paid time off in addition to being paid wages that are competitive. We want to be able to live comfortable lives, and we want to be able to have lives outside of the office. We want to have our lives inside the office be as meaningful as possible. That doesn’t mean we’re expecting to get paid to play video games and beer pong; we are much more intelligent and responsible than the media gives our generation credit for. We understand that work is just that, work. It’s not always going to be fun and exciting. Some days it will be mind-numbing and annoying. But we want to work for a company that makes those days worth it.” The term “war for talent” was coined by McKinsey & Co.’s Steven Hankin in 1997. Today, there is a constant battle to recruit and retain talented employees. It’s striking how much of a productivity boost a business receives from top talent. A recent McKinsey study found that in jobs with low complexity, high performers are 50 percent more productive, and in very highly complex jobs, they are 800 percent more productive. Because business leaders know that talent is valuable but difficult to obtain, you may think they would be expert at finding their next recruits. However, they often

don’t understand the demographic groups they are catering to. When recruiting top millennial talent, social media may be an obvious resource. However, it should not be the lead recruiting tool. Instead, talk to millennials and

Ritenour is CEO of Insurance Office of America and serves as president of The IOA Foundation. Website: www.ioausa.com

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OCTOBER 1, 2018 INSURANCE JOURNAL | NATIONAL | 35

Idea Exchange

The Competitive Advantage

Most of the Time, Nothing Goes Wrong and This Is a Big Problem

By Chris Burand

n Ernest Hemingway’s “The Sun Also Rises,” a character, Mike, was asked how he went bankrupt. “Two ways,” Mike said, “Gradually and then suddenly.” Every agency owner with whom I’ve worked and whose agency went insolvent described their demise similarly. Likewise, insurance company CEOs whose companies went south always say they thought they were OK until the last second. These are not uncommon responses. While it may be great news for society, a decrease in insurance claims is a problem for the industry. The number of all claims filed runs about 52 million annually with considerable consistency. Some years the number is around 49 million and some cat years the number is around 54 million But basically the number of claims filed deviates less than 5 percent off average any given year per A.M. Best data. This means, given how much our economy has grown since 1998 when I began tracking this, on a per capita basis, including businesses, claims frequency has decreased materially. On a GDP basis, claims have decreased materially as well. In 1999, claims frequency was at 0.424 claims per $100,000 GDP (using A.M. Best data for claims and the U.S. Governments Bureau of Economic Analysis chained, seasonal GDP data). In 2014, the last, most fully developed year of claim data, the frequency decreased all

the way to 0.314 claims per $100,000 of GDP. That is a huge 25 percent decrease in claims frequency! Because of this trend, selling insurance is likely to become more difficult since humans base decisions on the probability of events happening frequently. In our world, consumers/businesses make decisions based on the frequency of claims they have incurred or have seen others incur. If claims frequency decreases, as it has and will further with all the new technology that will reduce auto claims frequency, property water damage claims, and even workers’ comp claims, insurance buyers will have more difficulty processing the need for insurance. The human brain is not designed to anticipate and evaluate less frequent but more severe events. An example is the common belief that “this will never happen to me.” Take life insurance. Death is the most severe event and is certain but usually distant, which is why people are sold life insurance rather than buying it. Property/casualty insurance, on the other hand, has historically been bought, not necessarily sold.

willing to take a chance. Another example involves insurance applications and even certain insurance companies, that do not provide nearly the amount, kind or quality of coverage that I think insureds minimally need. Compare what they are getting versus what the consumer thinks they are getting and the difference is material. In both these scenarios, a software licensing agreement is usually signed (clicked on). From various perspectives, the user agrees to become their own insurance company for any gaps and sometimes entire events. No one reads these agreements, and few people likely understand

Convergence

This convergence of realities, the way the brain works versus the world becoming a safer place, will make P/C insurance more difficult to sell, especially the correct insurance versus a commodity solution. The attitude is, “What difference does quality make when I’ll never have a claim?” For instance, when it comes to software service applications, a major question exists whether various “sharing” companies have the correct insurance in place for all parties involved. No one ever checks because the odds of it ever being important are minute (0.314 claims per $100,000 of GDP is minute). But when it is important, it is very important. We just can’t process the importance at that moment, so we are

36 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

the potential severity of their consent. Furthermore, what difference does it make if nothing goes wrong? Odds are extremely high nothing will go wrong, so why not self-insure, even if unknowingly, if hardly anything ever goes wrong? Think about it this way: most P/C insurance is forcibly purchased. The state and/or the bank forces people/businesses to purchase insurance. These “sharing” entities remove the force. No forced purchase, a tiny chance of something going wrong, and ignorance means people will buy less insurance. INSURANCEJOURNAL.COM

These applications identify humans’ inability to process severity and create a cost savings (no insurance) immediately, which consumers can process quickly. This is an ingenuous way get wealthy. It is so easy because most of the time nothing goes wrong, making it easier to tell consumers not to worry, leaving out the issue of severity of when something does go wrong.

No Free Lunch

For those readers with a conscious and understanding of severity, you recognize the human and societal issues. You know that no free lunch exists. Those entities taking advantage of human decision making will win until, maybe, enough (frequency) severe events occur for which inadequate coverage is available, before this mismatch is adequately addressed. Save a few dollars but put your entire wealth on the line based on the improbable

DIRECT

but not impossible possibility of a catastrophic event.

For those readers with a conscious and understanding of severity, you recognize the human and societal issues. You know that no free lunch exists. For example, someone needs $1 million limits on a general liability policy for one year but the policy they purchase is a new forms that only lasts a day or a week or a month. The consumer does not understand they need the policy for a year, so the cost savings is enticing. Or they purchase a seven-day policy because the insured only thinks they have a seven-day exposure when their severity exposure is longer. Most of the time, nothing goes

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wrong so who cares? But the one time, and severity is about that one time, a tragedy occurs and the damage done that a non-existent insurance policy cannot fix may wreck lives forever. Critics may say insurers have always taken advantage of the human mind knowing severity was rare. Insurance is based on this reality. That is true. However, pricing historically addressed the probability knowing severity would eventually occur — the big hail storm, the fire, the tornado or the awful wreck. Insurance was a collective good based on the law of large numbers. The new model preaches the big claim will never happen, but if it does, it is someone else’s problem. For those concerned, find a way to help your clients understand the importance of severity. Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-485-3868. E-mail: chris@burand-associates.com.

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OCTOBER 1, 2018 INSURANCE JOURNAL | NATIONAL | 37

Idea Exchange

Human Resources

More Than a Manager: A Mentality to Ensure Enterprise Success

By JoJo Harris

oday’s passive candidate-driven market requires insurance organizations to reevaluate the ways they manage their workforces. Impending mass retirements and a lack of emerging professionals joining the industry are making it increasingly difficult for employers to find the right candidates. A low unemployment rate and a shrinking talent pool further compound the issue, forcing recruiters to attract passive job seekers and employers to step up their retention efforts. Truth be told, employer loyalty is waning. Although the insurance industry was initially isolated from this trend, career employees have become few and far between. According to the Bureau of Labor Statistics, 1.2 percent of finance and insurance industry employees voluntarily left their jobs in June. You’ve likely heard the adage that people don’t leave their jobs, they leave their managers. Improving employee-manager relationships is an opportunity to better engage and retain employees. Engaged employees are 59 percent less likely to switch jobs in the next 12 months, according to a Gallup survey. What can leaders do to strengthen relationships with their teams?

ments that challenge us and allow us to develop ourselves. But not every manager is intentional about supporting the desire for professional development. According to Alight Solutions, 78 percent of employees expect their managers to talk to them about career and learning opportunities, but only 37 percent say their managers actually do. If given the promise of career development, employees can easily be tempted to leave their current roles. Organizations that make this a priority are more likely to not only retain current employees, but also attract other talented individuals. Nurturing and supporting employees through career development opportunities can also create a depth of talent for future openings. It is important that managers view employees beyond the frame of their job titles and responsibilities. Managers should step outside their role as a supervisor and serve as a mentor to support their employees’ career ambitions and goals. While managers are responsible for increasing performance levels and revenues, they

also have an obligation to their employees. Helping employees remove obstacles, develop their skill sets and prepare for their futures transcends the traditional employee-manager relationship. This takes intentionality and transparency, and often generates loyalty from both sides. Employers should set the stage for managers and employees to come together and communicate transparently. It is important for managers to understand their employees’ desired career paths. Ask your employees: what do you want to achieve in your role, what career goals do you have, what can I do to help you get there? Managers can find ways to satisfy both organizational demands, while giving individuals exposure to their career interests and important learning experiences. Employees who recognize their leaders’ efforts and commitment to them are more likely to reciprocate the sentiments.

Focus on Communication

The best relationships come from meaningful, transparent conversations.

Support Professional Growth

Humans have an innate desire to grow. We are continuously looking for environ38 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

INSURANCEJOURNAL.COM

Organizations can benefit from establishing weekly or biweekly one-on-one meetings between managers and employees for performance reviews, career development and exchange of ideas. These standing meetings are a platform for trust, allowing employees to speak freely and managers to recognize them for progress and provide them with chances to fail safely. Constant and honest feedback during these meetings is critical to springboard valuable employee-manager relationships. Managers should provide honest and regular feedback on what it will take for employees to get to their future desired state and provide suggestions on how to progress. Meanwhile, managers must not be afraid to ask for employeesâ&#x20AC;&#x2122; input as well: what do you like or dislike about my management style, how can we better communicate, and what can I be doing

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OCTOBER 1, 2018 INSURANCE JOURNAL | NATIONAL | 39

Idea Exchange

Human Resources

continued from page 39 differently to support you in meeting your goals or career development milestones? These conversations cannot be purely lip service though. Managers must incorporate the feedback, as appropriate, into their own style and approach. Leaders should also encourage employees to present new ideas, no matter how big or small. Instead of making independent decisions, managers should solicit suggestions and solutions from their teams. This not only serves as a good learning experience and valuable exposure for team members, but also supports a culture of collaboration. Diverse perspectives and varied ideas are the foundation of innovation. Collaboration between employees from all levels and functional areas not only improves business outcomes, but

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also makes employees feel more invested in the company and its mission.

Truth be told, employer loyalty is waning. However, again, management cannot let suggestions fall on deaf ears. Leaders must acknowledge employee suggestions by providing feedback or asking clarifying questions. If team members feel their ideas are not taken seriously, they become less inclined to share their thoughts, which can stifle company innovation and make employees feel unappreciated.

Motivate and Advocate

Managers should actively represent their employees’ interests and speak on their behalves. Some employees may desire better work-life balance to devote more time to their families. Others may want to dress down for work or have access to better health benefits. These preferences and interests, if shared among all levels, provide direction on how insurers can improve their workplace culture or benefits to drive better performance, increase engagement and reduce turnover rates. It is also important to uncover how employees like to be motivated and to individualize that approach for each team member. Traditional approaches to motivation often fall short. According to a Gallup survey, only 2 in 10 employees strongly agree their performance is managed to motivate them for outstanding work. Celebrating wins – both big and small – in the way that resonates best with each individual employee is the foundation for continued success. Some employees want a cheerleader to encourage them every step of the way. Others are motivated by the idea of public recognition at the end of a project. Leaders can provide perspec-

40 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

tive and focus, thereby inspiring action. This type of leadership also creates an environment of trust, driving team members to stay interactive, solve problems faster and push one another to innovate. Employees also want to understand how their work is contributing to their organization’s mission and vision. Sharing the vision provides an opportunity for leaders to illustrate correlations between individual and company goals and to motivate teams toward greater success. Currently, only 40 percent of employees feel aware of their organizations’ goals, strategies and tactics, according to the Blackhawk Network. Connecting individual work to company goals motivates employees to outperform because they recognize the impact they have on enterprise success. Managers today are no longer just supervisors. They are mentors, advocates and cheerleaders who listen to their employees, care for them and support them. Strong employee-manager relationships serve as a platform for personal and enterprise success. Strengthening these interpersonal relationships increases loyalty and improves retention. Employee-first mentality is a recipe for a fruitful workforce and ultimately continued business success. Harris is senior vice president of human resources of The Jacobson Group, a provider of talent to the insurance industry. Phone: 800-466-1578. Email: jharris@ jacobsononline.com. INSURANCEJOURNAL.COM

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Closing Quote For True Disruption, Embrace Innovation Smartphone Telematics

By Katherine Wellman

he auto insurance industry is in the midst of major disruption powered by technology and vibrant new players. Disruption gives way to fresh ideas that can have both profound and positive impacts on our lives and businesses. But, through the noise, we need to ask ourselves: what will actually make a difference in the long-run? A few weeks ago, we saw Root Insurance become a unicorn with its latest round of funding and a $1 billion valuation. This proves what we have seen over the past several years: that smartphone telematics, big data and analytics are the future of insurance. While we are eager to see how insurance startups like Root, Lemonade and MetroMile will advance the industry, it’s important to not get lost in the hype. Real change in the industry will take more than startups — it will take a systemic shift in how the big players do business and how they use technology to make it happen.

A technology that is leading change in the insurance industry today — and powering models like usage-based insurance (UBI) and behavior-based insurance (BBI) — is smartphone telematics. Of the top 10 largest U.S. insurance providers, nine are using or at least testing some form of smartphone-based telematics program. The various use cases include building better risk and pricing models, offering behavior-based discounts and rewards, and providing feedback and gamification to motivate customers to become better drivers. With the top three auto insurance providers making up 40.8 percent of market share, and the top 10 taking 72.3 percent, it’s up to them to engrain smartphone telematics into the core of the industry. In a survey conducted last year, 73 percent of driving consumers said that they would prefer rates be based on their driving behaviors, but only 22 percent have been offered a smartphone telematics program from their insurance providers. The foundation is set to mainstream smartphone telematics adoption. So, what needs to happen?

Powering new thinking

Insurance companies are facing tighter margins, higher and more frequent claims costs, and low customer engagement. Smartphone telematics is a logical and vetted option.

42 | INSURANCE JOURNAL | NATIONAL OCTOBER 1, 2018

Solutions affect the bottom line by driving better measurement of risk and superior pricing models, as well as improved behavior and subsequently lower claims costs. Smartphone telematics also provide a regular touchpoint with customers, which drives greater retention and engagement. The potential hard benefits and measurable improvements like these are one of the bigger factors driving outside investments in this technology.

Top Barriers

Some of the top barriers of telematics adoption for insurance providers lie in incorporating telematics data into actuarial scoring models, integrating the technology with claims processes and achieving sustained customer retention and engagement with the programs. There’s also the task of rolling out the program externally to the thousands of independent agents working on an insurer’s behalf. As the industry evolves in its

use of data-producing technologies like smartphone telematics and artificial intelligence (AI), we’re going to see more disruption. AI-powered claims automation enables insurance companies to collect and analyze telematics data and photos of damaged vehicles to help determine crash severity, total loss and repair estimates. This information can be transferred to an insurance company, automate parts of the claims process, and decrease processing time, costs and resources for the insurer and the consumer. Insurance industry startups are inspiring the industry to push forward with innovation. As smartphone telematics and AI capabilities become more widely adopted, we’re going to see faster change that will strengthen the industry and produce safer roads, better drivers and more transparency and trust between insurance carriers and consumers. Wellman is vice president of product of Cambridge Mobile Telematics. INSURANCEJOURNAL.COM

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