Insurance Journal West 2018-10-15 by Insurance Journal

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Contents October 15, 2018 • Vol. 96 No. 20 • West

West

National

W1 2018 Workers’ Comp-Related Bills Signed into Law in California

10 Fatal Car Crashes Fell 2% in 2017; 2018 Appears to Follow Trend

W2 SILVER Best Agency to Work For - West: EPG Insurance

12 One-Quarter of Americans Own a Side Business, But Most Go Uninsured

W4 Insurtech Jumpstart Rolls out Parametric Earthquake Product for Californians

18 P/C Direct Premium Written Up 6.1%

W1 2018 WORKERS’ COMP-RELATED BILLS

SIGNED INTO LAW IN CALIFORNIA

19 Monday Workers’ Comp Claims Not Changed by ACA: Report 20 M&A Review: Supply and Demand Keeping M&A Market Active

Idea Exchange

SPECIAL REPORT: THE 3 INGREDIENTS OF INSURTECH 24 Insurtech Pilots and Pivots: Learning by Doing and Undoing 28 Insurtech Partnerships: What Insurers Want and Get

32 Insurtech: A Role Model of Innovative Talent Success 36 Minding Your Business: Time to Revisit Independent Contractor vs. Employed Producer Status 38 Closing Quote: Is It Time to Start Planning for 2019?

28 INSURTECH PARTNERSHIPS: WHAT

30 Closer Look: Mixing Up Occupancy for Commercial and Residential Properties

INSURERS WANT AND GET

Departments W6 People 11 Declarations 11 Figures

30 MIXING UP OCCUPANCY FOR COMMERCIAL

AND RESIDENTIAL PROPERTIES

4 | INSURANCE JOURNAL | WEST OCTOBER 15, 2018

14 Business Moves 34 MyNewMarkets INSURANCEJOURNAL.COM

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OPENING NOTE

Write the Editor: awells@insurancejournal.com

#MeToo One Year Later

I Publisher Mark Wells mwells@wellsmedia.com

EDITORIAL

SALES

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

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

East Editor Elizabeth Blosfield eblosfield@insurancejournal.com

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

Chief Content Officer Andrew Simpson asimpson@insurancejournal.com

Southeast Editor/MyNewMarkets Amy O’Connor aoconnor@insurancejournal.com South Central Editor/ Midwest Editor Stephanie K. Jones sjones@insurancejournal.com West Editor Don Jergler djergler@insurancejournal.com International Editor L.S. Howard lhoward@insurancejournal.com Columnists Catherine Oak, Bill Schoeffler

Chief Marketing Officer Julie Tinney (800) 897-9965 X148 jtinney@insurancejournal.com

South Central Sales Mindy Trammell (800) 897-9965 X149 mtrammell@insurancejournal.com Southeast and East Sales (except for NY, PA and CT) Howard Simkin (800) 897-9965 X162 hsimkin@insurancejournal.com Midwest Sales Lisa Whalen (800) 897-9965 X180 lwhalen@insurancejournal.com East Sales (NY, PA and CT only) Dave Molchan (800) 897-9965 X145 dmolchan@insurancejournal.com Advertising Coordinator Erin Burns (619) 584-1100 X120 eburns@insurancejournal.com

Contributing Writers

Insurance Markets Manager Tony Cañas, Sarah Lucas, Douglas Kristine Honey (619) 584-1100 X132 Powell, Todd Waletzki khoney@insurancejournal.com IJ ACADEMY OF INSURANCE Director Patrick Wraight pwraight@ijacademy.com Associate Director Nathan Granitz 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

Social Media Manager Ly Short (619) 890-7735 Lshort@insurancejournal.com Classifieds, Jobs, Agencies Wanted/For Sale Sr. Sales & Marketing Coordinator Kelly De La Mora (800) 897-9965 X125 kdelamora@insurancejournal.com

DESIGN/WEB

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

New Media Producer Bobbie Dodge bdodge@insurancejournal.com

Ad Ops Specialist Jeff Cardrant jcardrant@insurancejournal.com

Videographer/Editor Ashley Waldrop awaldrop@insurancejournal.com

Web Developer Terrance Woest twoest@wellsmedia.com

CIRCULATION

Circulation Manager Elizabeth Duffy eduffy@wellsmedia.com

t’s been one year since news broke about Harvey Weinstein, sparking the #MeToo movement. Since that time, one-third of executives have altered their actions to avoid behaviors that could be perceived as sexual harassment, according to new data from the Society for Human Resource Management (SHRM). These changes in behavior have resulted as executives witness how sexual harassment affects staff and the company bottom line. They rate the biggest impacts as: • Decreased morale (cited by 23 percent); • Decreased engagement (23 percent); • Decreased productivity (18 percent); • Increased hostile work environment (15 percent); and • Increased turnover (13 percent). And while 72 percent of employees said they were satisfied with their company’s efforts to stop sexual harassment in the workplace, more than one-third still believe their workplace fosters sexual harassment. “The fact that some workplace cultures still foster sexual harassment says there is more work to be done,” said Johnny C. Taylor Jr., president and CEO of SHRM. “We need a rules-plus approach – organizations need policies and training, but it is the education piece that creates culture change.” Having a third of executives report changed behavior is significant, Taylor said. “Yet, we can’t let the pendulum swing too far. Organizations must be careful not to create a culture of ‘guilty until proven innocent’ and we cannot tolerate other unintended consequences.” One troubling trend, said Taylor, is that some executives report going as far as to not invite female colleagues on business trips, to evening networking events or into their inner circles to avoid any situation that could be perceived incorrectly, thus reducing the opportunity for women. Executives surveyed believe that the most FOR QUESTIONS effective ways to influence workplace culture REGARDING SUBSCRIPTIONS: to stop sexual harassment and foster a safe Call: 855-814-9547 Outside the U.S., call 847-400-5951 environment are: or you may subscribe or change your address online at: insurancejournal.com/subscribe • Enhancing HR’s ability to investigative alleInsurance Journal, The National Property/Casualty Magazine gations without retaliation (cited 45 percent), (ISSN: 00204714) is published semi-monthly by Wells Media Group, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at addi• Conducting independent reviews of all tional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all workplace misconduct investigations (44 perother countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended cent), and; to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals • Increasing diversity in leadership roles (39 for application to their particular situation. Copyright 2016 Wells Media Group, Inc. All Rights Reserved. Content may not be photopercent). copied, reproduced or redistributed without written permission.

‘Organizations must be careful not to create a culture of ‘guilty until proven innocent’ and we cannot tolerate other unintended consequences’

Insurance Journal is a publication of Wells Media Group, Inc.

Andrea Wells Editor-in-Chief

6 | INSURANCE JOURNAL | NATIONAL OCTOBER 15, 2018

POSTMASTER: Send change of address form to Insurance Journal, Circulation Department, PO Box 708, Northbrook, IL 60065-9967 ARTICLE REPRINTS: For reprints of articles in this issue, contact: Kelly De La Mora at 1-800-897-9965 ext. 125 or kdelamora@wellsmedia.com Visit insurancejournal.com/reprints/ for more information.

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National

Fatal Car Crashes Fell 2% in 2017; 2018 Appears to Follow Trend

inal U.S. highway fatality numbers for 2017 are down following two consecutive years of large increases. In addition, preliminary estimates for the first six months of 2018 appear to show that this downward trend continues into this year. The U.S. Department of Transportation’s National Highway Traffic Safety Administration reported that 37,133 people died in motor vehicle crashes in 2017, a decrease of almost 2 percent from 2016. The full 2017 Fatality Analysis Reporting System (FARS) data set reveals other numbers: • Pedestrian fatalities declined about 2

• • • •

percent, the first decline since 2013; For the second year in a row, more fatalities occurred in urban areas than rural areas; Combination trucks involved in fatal crashes increased 5.8 percent; Vehicle miles traveled (VMT) increased by 1.2 percent from 2016 to 2017; and The fatality rate per 100 million VMT decreased by 2.5 percent, from 1.19 in 2016 to 1.16 in 2017.

“Dangerous actions such as speeding, distracted driving, and driving under the influence are still putting many Americans, their families and those

10 | INSURANCE JOURNAL | NATIONAL OCTOBER 15, 2018

‘[W]e must address the emerging trend of drugimpaired driving…’ they share the road with at risk,” said NHTSA Deputy Administrator Heidi R. King. “Additionally, we must address the emerging trend of drug-impaired driving to ensure we are reducing traffic fatalities and keeping our roadways safe for the traveling public.” The 1.8-percent decrease from 2016 to 2017 compares to the 6.5 percent increase from 2015 to 2016 and the 8.4 percent increase from 2014 and 2015. INSURANCEJOURNAL.COM

West

2018 Workers’ Comp-Related Bills Signed into Law in California

he Workers’ Compensation Insurance Rating Bureau of California in early October issued a summary of legislation signed into law by Gov. Jerry Brown. The Legislature recessed for the year on Aug. 31, and Brown had until Sept. 30 to sign or veto any bill passed by the Legislature. Following is a summary of workers’ comp-related bills signed by Brown:

INSURANCEJOURNAL.COM

Assembly Bill 1749

This bill provides that a California employer may accept liability for an injury sustained by a peace officer not acting under the immediate direction of his or her employer while apprehending suspected law violators, protecting life or property, or preserving the peace outside of California. This bill specifically includes any claims for injuries sustained by peace officers during the Oct. 1, 2017 mass shooting in Las Vegas, Nev., if the employer determines providing

compensation serves public purposes.

Assembly Bill 2046

This bill authorizes, instead of requires, Fraud Assessment Commission funds appropriated but not expended in the fiscal year that have not been allocated to the district attorneys, to be applied to satisfy the immediately following fiscal year minimum total amount required or to augment funding in the immediate-

continued on page W12

OCTOBER 15, 2018 INSURANCE JOURNAL | WEST | W1

Special Report | Best Agency to Work For - SILVER

West

EPG Insurance Scottsdale, Ariz.

Doing the Right Thing By Don Jergler

oing the right thing was the key to unlocking employee happiness at EPG Insurance in Scottsdale, Ariz. EPG, which recently changed its name and branding to accommodate a shorter form of Eaton-Provident Group, was voted by its employees for the Best Agency to Work For – Silver award for the West region in Insurance Journal’s annual survey. It’s not the first time employees chose the firm as the best agency to work for. EPG earned the Gold award in 2016. The firm, which ended 2017 with roughly $3.8 million in revenue and has roughly 23 employees and counting, earned high praise from those who took the survey for charitable giving as well as how the employees themselves feel they have been treated. “I have been here for

16 years in October,” one employee wrote in the survey. “Throughout the years, we have grown by leaps and bounds professionally and technologically. Our agency takes pride in how it treats its employees, operates completely above board in all matters and is very community and charitable oriented.” “I will stay here until I retire since there isn’t any place else I would rather work,” the employee added. One of the charities employees called attention to is Free Wheelchair Mission, which solicits donations to build affordable wheelchairs and deliver them to those in need around the world. According to the World Health Organization, 70 million people are in need of a wheelchair but lack the resources to obtain one. Jeff Schmidt, principal of EPG, and the other leaders of the firm made a pledge to employees during their annu-

al state of agency meeting in March to donate the cost of a wheelchair to the charity for every new client signed. Employees were inspired by that pledge, according to Schmidt. “In the last six months, we’ve already donated 298 wheelchairs,” Schmidt said. Code Red, an initiative by the Phoenix Rescue Mission that helps homeless people survive the area’s sweltering summers, is another of the numerous charities supported by the agency that employees called out. “We have participated in Code Red through Phoenix Rescue Mission during the extreme heat of the summer,” one employee wrote. “So far, each year we have surpassed the previous years in collecting bottles of water and cash donations.” The working environment at EPG was also mentioned by several employees. EPG recently began allowing employees to work at home EPG was voted by its employees for the Best Agency to Work For – Silver award for the one or two days West region in Insurance Journal’s annual survey.

W2 | INSURANCE JOURNAL | WEST OCTOBER 15, 2018

a week, according to Schmidt. “Morale just went through the roof for whatever reason,” Schmidt said. “We saw productivity increase 10 to 15 percent when they’re working from home. Giving people that day one day a week or two days a week is just huge.” Of course, fair pay also played a part in keeping employees happy. “Salary reviews are given twice a year, and in most cases, people receive a pay increase,” one employee wrote. “We also pay all licensed employees 25 percent commission first year on anything they write (cross-sells included), so our pay tends to be above industry average.” Another wrote: “They treat everyone in the organization as a family and that shows throughout with compensation, work-life balance, and culture.” Schmidt summarized his feelings on the mindset that he now sees as pervasive throughout the firm and the morale building goals that he has for himself and employees going forward. “We believe in doing the right thing no matter what the consequences are, and I think our employees see that,” he said. “If you do right thing, everything tends to work out.” INSURANCEJOURNAL.COM

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Insurtech Jumpstart Rolls out Parametric Earthquake Product for Californians By Don Jergler

firm that wants to make a name for itself as the first parametric insurtech in the U.S. for earthquakes has officially launched in California, over a year after its anticipated original launch date. Jumpstart Insurance Solutions Inc., a licensed surplus lines insurance broker using Lloyd’s capacity, will offer earthquake insurance in California in the form of a parametric product, with payments linked to a formula and based on U.S. Geological Survey earthquake measurements. The firm announced its official launch earlier this month. Customers can sign up online for the product through Jumpstart’s website, and policies will be underwritten and administered by AmWINS Group Inc. It had looked like Jumpstart would launch much sooner. The firm first announced its plans to launch the parametric earthquake product via its website in August 2017, then it went quiet for nearly a year. Kate Stillwell, founder and CEO of Jumpstart, said the delay was to secure capacity. With that done, she has lofty goals for the new venture. “Our goal is within five years to double the amount of Californians that have some sort of earthquake protection,” Stillwell told Insurance Journal. Stillwell is a former structural engineer and earthquake risk consultant. From 2010 to 2012, she was an earthquake products manager for EQECAT Inc., a catastrophe risk modeling firm acquired by California-based data and analytics firm Corelogic in late 2013. According to the California Department

of Insurance, earthquake take-up has been on the rise, although the vast majority of homeowners in the state still don’t have it. The take-up rate was 10.7 percent last year and was up to 13.2 percent in the most recent CDI report. Jumpstart’s website promises customers “fast, simple payments” in lieu of the traditional claims handling process with the parametric product, which does not indemnify the pure loss but makes a payment upon the occurrence of a triggering event. Policyholders pay a monthly amount and are promised they will get paid a set amount automatically if there is an earthquake in their area. After an earthquake of a pre-specified intensity as measured by the USGS, Jumpstart will automatically send a text message to each customer in the impacted region. Customers must respond to

‘Our goal is within five years to double the amount of Californians that have some sort of earthquake protection.’

W4 | INSURANCE JOURNAL | WEST OCTOBER 15, 2018

the text to confirm loss or damage, and a pre-defined payment amount will be automatically authorized for direct deposit into the customer bank accounts. Nothing further is needed than to reply to the text, according to Stillwell. Premiums are risk-based and are purely a reflection of the underlying probability of reaching the triggering shaking intensity at a given location. Premiums vary by ZIP code. Policies are currently only available through the Jumpstart website. Retail agents could, in principle, use the Jumpstart site on their clients’ behalf, but there is not yet a dedicated portal or channel for other agents or insurance companies to roll-in Jumpstart to other coverage. For now, people can go directly on the site and purchase the product, but plans are to bring agents into the loop. “We aren’t set up to partner with agents, but that is definitely in the works,”

continued on page W8

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Charles Hook

Crystal Viehman

Nicole Darlow

Jessica Dexter

Delaney O’Brien

Paul Broussard

Stone Creek Insurance Agency is expanding its Spokane, Wash. presence with the addition of four new employees. San Francisco Bay Area-based Stone Creek launched its Spokane office in February. Charles Hook has been named personal lines account manager. He has more than 10 years of insurance experience. Hook has worked in both sales and service for Liberty Mutual and Travelers. Crystal Viehman will help develop the small commercial department. She has prior experience as an underwriter assistant and as account manager at a general agency. Nicole Darlow will help build the service team with efficiency and procedures. Darlow comes to Stone Creek from Travelers, where she worked for the past three years in the service department. Jessica Dexter will join Darlow in supporting the service team and further developing the remote service program. She has been working in insurance for three years. She started working for Travelers in 2016. Stone Creek specializes in commercial and personal lines. Calabasas, Calif.-based Topa Insurance Group has named Delaney O’Brien director of marketing and communications. O’Brien will develop strategies to enhance Topa Insurance’s public image and cultivate relationships with members of the industry and the media. O’Brien started at Topa Insurance as a marketing representative in 2014 and was later promoted to corporate communications manager. Topa Insurance Co. is one of the wholly owned subsidiaries of Topa Insurance Group. San Diego, Calif.-based Cavignac & Associates has named Paul Broussard an account executive. Broussard will have dual roles serving both in Cavignac & Associates’ professional liability department and as a small business consultant for the firm. Broussard most recently was an account executive for Risk & Insurance Consultants Inc. He was a broker placement specialist for Arthur J. Gallagher Risk Management Services before that. Cavignac & Associates is a risk management and commercial insurance brokerage firm. QBE North America has promoted Toria Lessman to senior vice president, head of transactional liability, and Stacey Meade to senior vice president, head of

W6 | INSURANCE JOURNAL | WEST OCTOBER 15, 2018

financial institutions. Lessman joined QBE in 2011 in the policy regulatory and compliance practice. She was promoted and primarily focused on new product development across QBE North America’s transactional liability practice. Prior to QBE, Lessman worked as a regulatory and compliance attorney for Tressler LLP. Meade will oversee QBE’s financial institutions underwriting strategy and results for specialty and property/casualty products for financial institution customers. Meade most recently was vice president, underwriting leader in financial institutions at QBE. She previlusly spent 17 years at Chubb, where she held a variety of leadership roles. Alliant Insurance Services Inc. has named Daniel J. Guth a vice president in Orange County, Calif. Guth will provide workers’ compensation, risk management, and property/casualty solutions to clients. Guth was previously area vice president with Arthur J. Gallagher & Co. He was a workers’ comp consultant with Jardine Insurance Brokers before that. Newport Beach, Calif.-based Alliant provides property/casualty, workers’ comp, employee benefits, surety, and financial products and services. Everest Insurance has named Larry Collura director of marketing and distribution for the West region. He comes from Worldwide Facilities where he was most recently a business development manager in Phoenix, Ariz. He was also with Swett & Crawford as a business development manager, and AIU Holdings & Lexington Insurance Co. Everest Insurance refers to the primary insurance operations of Everest Re Group, Ltd., and its affiliated companies. Brown & Riding has added Harrison Scheider as an environmental specialty broker. Scheider works out of Brown & Riding’s Denver, Colo. office. He primarily handles accounts in Colorado, New Mexico, Wyoming, Wisconsin, and Florida, but is licensed and able to write business in all states. He has more than 15 years of experience, starting at a retail insurance agency. He has also worked as an environmental insurance consultant. Brown & Riding is a wholesale brokerage operating nationally. INSURANCEJOURNAL.COM

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WEST | News & Markets continued from page W4 Stillwell said. Claims payments come directly from Lloyd’s without coming back through Jumpstart. Stillwell doesn’t see her firm as being in direct competition with the California

Earthquake Authority. The CEA, a notfor-profit, publicly managed organization, insures the vast majority of the state’s earthquake risk for homeowners. “This is not a substitute for CEA,” Stillwell said. “There is no overlap in cov-

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erage.” Customers may choose both, while others could buy either the Jumpstart product or get a CEA policy, according to her. Glenn Pomeroy, CEO of the CEA, said the CEA board doesn’t have an official position on the product that Jumpstart is offering. Pomeroy said the primary goal of the CEA is to make earthquake insurance as affordable as possible for Californians, which he said the CEA has done in the past few years, including rolling out a greater variety of deductibles. The CEA reported in July that it ended its second quarter of 2017 with policies in force up nearly 5.4 percent from the same quarter a year ago. The CEA now has roughly 1 million policies in force. “We don’t view them as competitors,” Pomeroy said. Payments on the Jumpstart product from a triggering event can be used for anything that will help customers bounce back quickly, providing a financial jumpstart to begin the process of recovery – thus the firm’s name, Stillwell noted. The firm promises that for “a price of approximately one-tenth that of conventional earthquake insurance” Jumpstart provides a financial cushion in the event of a significant earthquake. What is considered significant? “The Napa Earthquake from four years ago would have triggered this level of shaking intensity,” Stillwell said. The 6.0 Napa quake, which struck on Aug. 24, 2014, is at about the threshold of being the smallest earthquake that would trigger a payout for Jumpstart customers. More precisely, claims payouts are determined based on the Modified Mercalli intensity scale, which measures the effect of an earthquake on the Earth’s surface. According to Stillwell, the Modified Mercalli Intensity value assigned to a

‘We aren’t set up to partner with agents, but that is definitely in the works.’

continued on page W10

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specific site after an earthquake has a more meaningful measure of severity to the nonscientist than the magnitude because intensity refers to the effects actually experienced at that location. With at least a peak ground velocity of 30 cm/sec, they can find a one-to-one correspondence with Modified Mercalli Intensity of VII-1/2, she said. A more general understanding of this is the “red zone” of a shakemap. VII-1/2 is where the orange-red color transitions to a yellow color on the standard shakemaps that are published by the USGS. Since Jumpstart is licensed as a surplus lines broker, the firm must follow surplus lines regulations, which include going through the declination process. The firm has a “semi-automated process” of taking customers to at least three admitted carriers and getting declinations before going to Lloyd’s for the coverage, according to Stillwell.

The Berkeley Angel Network is a group The biggest part of finally getting of angel investors who are alumni, facJumpstart off the ground was getting a ulty and former faculty of U.C. Berkeley. carrier to supply the capacity. “The deep pockets are the risk bearing The group has invested in a craft beer company, a business in capacity, and we cleared that the healthcare industry, a with Lloyds,” Stillwell said. biotech company and an She wouldn’t say how much environmentally friendly capacity Jumpstart has with product maker. Lloyd’s. Although Jumpstart’s “It is well enough to get us first offering will be for down the road toward making a earthquakes in California, big splash in the marketplace,” it has plans to roll out the she said. Kate Stillwell product in other states and Jumpstart’s operational funding comes from a group of undisclosed to expand to other types of natural disasters. private investors. “California is the biggest opportu According to CrunchBase, which nity here, and so we’re starting with tracks venture capital activity, Jumpstart received $400,000 in angel funding on California,” Stillwell said. “We’re looking at other states, and maybe other perils Sept. 1, 2016. within California. Anything where there’s The investors are listed as Berkeley big gap, or Jumpstart lends itself.” Angel Network and an undisclosed investor.

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WEST | News & Markets continued from page W1

ly following fiscal year. The bill also requires an authorized government agency that is provided with workers’ comp insurance fraud-related information to release or provide that information to an authorized government

agency, upon request, unless it would violate federal law or otherwise compromise an investigation. The bill also requires an authorized government agency that seeks to disclose information obtained from the Employment Development Department to

CONTRACTORS

any other governmental agency that is not authorized to receive that information to obtain EDD approval prior to disclosure.

Assembly Bill 2705

Licensed contractors are required to have a current and valid Certificate of Workers’ Compensation Insurance or Certification of Self-Insurance on file with the Contractors’ State License Board, and violation of this law is a misdemeanor that must be prosecuted within two years. This bill makes it a misdemeanor violation for an unlicensed contractor to fail to comply with workers’ compensation insurance requirements and makes that violation subject to the two-year statute of limitations.

Senate Bill 880

Sarah Marsh, AVP

Senate Bill 1086

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This bill authorizes an employer, with the written consent of the employee, to deposit disability indemnity payments for the employee in a prepaid card account until Jan. 1, 2023. The bill imposes certain conditions, such as allowing the employee reasonable access to in-network ATMs and allowing for withdrawal and purchases without incurring fees. The bill also requires employers to provide aggregated data on their prepaid account programs to the Commission on Health and Safety and Workers’ Compensation upon request and requires CHSWC to issue a report to the Legislature on or before Dec. 1, 2022, regarding payments made to those prepaid card accounts.

With respect to peace officers and active firefighting members, existing law extends the time period for commencing workers’ comp proceedings to collect death benefits from 240 weeks from the date of injury to no later than 420 weeks from the date of injury, not to exceed one year after the date of death. Pursuant to existing law, this extension of time pertains to injuries, including but not limited to cancer, tuberculosis or blood-borne infectious diseases and is only operative until Jan. 1, 2019. This bill removes the Jan. 1, 2019 date of repeal.

1/19/18 4:22 PM

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Figures

Declarations

$550

An Exciting Evolution

“This is an exciting evolution as it will allow me to focus solely on the needs of the portfolio as well as pursue my other entrepreneurial activities outside of the GIA.”

The amount a Los Angeles man has been fined for riding an electric scooter while intoxicated and knocking over a 64-yearold pedestrian. The proescution of Nicholas Kauffroath, 28, was the city's first motorized scooter DUI incident charged.

$15 MILLION

— Brian Hemesath, managing director of Des Moines, Iowa-

based Global Insurance Accelerator (GIA), announcing he is stepping down to become an alumni advocate and entrepreneur-in-residence at the organization. GIA, created in 2014, was the first insurtech accelerator focused solely on innovation for the insurance industry.

No Worse Time

“This hurricane couldn’t have come at a worse time.”

— North Carolina Farm Bureau President Larry Wooten com-

ments on the impact Hurricane Florence will have on farmers in the Carolinas. The Category 1 storm hit the state on Sept. 14 and caused flooding for at least 10 days. Billions of dollars in agricultural damage are expected, including losses to tobacco, cotton, corn, potato and peanut crops.

$1.5 MILLION

Old Pipes

“Although we’d like to replace all older pipelines immediately, just like with replacing older roads and bridges, replacing pipe takes time and resources.” — Texas-based Atmos Energy Corp. in response to a Dallas

The amount Galveston, Texas, was ordered to pay to a fired contractor that was overseeing federally funded housing recovery after Hurricane Ike hit in 2008. CDM Smith, d/b/a Camp Dresser & McKee, was fired in 2012 after city officials said the company misrepresented its disaster recovery expertise. Jurors found otherwise, awarding $8.5 million for failing to comply with the contract, $2.4 million in accrued interest, and $3.8 million for economic losses. An appeal is expected.

Morning News report claiming that Atmos has some of oldest pipes in the country, and that since 2006 more than two dozen homes in north and central Texas have blown up along a network of pipelines it operates. Atmos told federal regulators last year that it will need at least three more years to remove the 500 miles of cast iron pipes remaining in its network. Federal officials have urged the removal of cast iron pipes since the 1980s.

The amount that a 50-foot, custom-built yacht is likely worth after a total loss from when it was struck by a barge laden with sand and gravel in a Connecticut harbor. Capt. Eric Knott, Stamford’s harbormaster, said the barge hit the Sea Jay, a year-old catamaran built in South Africa that was preparing for a trip to French Polynesia. Knott said the barge broke off the back of one hull and severely damaged the back of the other. There also was internal and structural damage.

$2.9 MILLION $31 MILLION The amount for which the Roman Catholic Archdiocese of Chicago settled a lawsuit filed by a man who alleges he was abused as a boy by the disgraced former priest, Daniel McCormack. The man, now in his 20s, claims McCormack abused him twice when he attended St. Agatha’s Catholic Church.

The amount a Georgia jury awarded a boy over a botched circumcision he received as a newborn. The lawsuit filed by the boy’s family says he was 18 days old when part of his penis was severed during the procedure at Life Cycle Pediatrics in 2013. The damages awarded are to cover pain he suffers from and a lifetime of mental anguish.

Employee Misclassification

“When employers misclassify their workers as independent contractors, they cheat their employees of their wages and other important job protections.” — Massachusetts Attorney General Maura Healey, whose office

cited Watertown, Mass.-based medical transportation business, Quantum Transportation LLC for violating workers’ rights and state wage laws. Healey’s office had received complaints from workers alleging they were misclassified and not paid the appropriate overtime rate. The company and its managers, Andrey Borzy and Aliaksei Rudy, were hit with $460,945 in restitution and penalties were issued.

InsuranceJournal.com

Poll

How did you wind up with a career in insurance?

Hired from a non-financial industry 43.03% Recruited from school 32.12% Joined family business 13.33% Hired from another financial industry 10.91% Recruited after military service 0.61%

Total Votes: 164 INSURANCEJOURNAL.COM

OCTOBER 15, 2018 INSURANCE JOURNAL | NATIONAL | 11

NATIONAL | News & Markets percent) generate less than $5,000 of income in a typical year, followed by 18 percent who generate $5,000$10,000 and 18 percent who generate $10,000 to $30,000.

Protecting Income

Despite being in it for extra income, only 12 percent of those surveyed have purchased insurance for their side business and most don’t think they need it. The top three reasons cited for why they don’t purchase insurance include:

One-Quarter of Americans Own a Side Business, Most Go Uninsured: The Hartford

bout 57 million, or 25 percent, of Americans own a side business that is not their primary source of income. The majority of the owners of side businesses surveyed have full-time jobs. About half of side business owners surveyed dedicate on average 10 hours or fewer per week on their business (49 percent) and most are employed elsewhere full time (61 percent). About half of those with a full-time job (51 percent) said

they have used at least some of their vacation time or paid time off from their primary job to work on their side business. Baby Boomers (38 percent) and Gen X (33 percent) are more likely to own a side business than Millennials (26 percent). Regardless of age, 61 percent of survey respondents overall said the primary reason for starting a side business was financial, which is slightly higher for Millennials than Gen X and Baby Boomers. Many of those surveyed (43

• I don’t need business

insurance (44 percent) • My business is too small to warrant buying insurance (18 percent) • I am protected by my current home or auto insurance (11 percent) Although the small business owners surveyed are looking to make extra income, it is not enough to take their business full time. The survey found that only 27 percent of side business owners are somewhat/highly

Primary Reason for Starting a Side Business

Overall

Millennials

Gen X Baby Boomers

Financial

61 percent

72 percent

62 percent 56 percent

Make a change/lifestyle

16 percent

18 percent

20 percent 19 percent

Pursue a passion

9 percent

7 percent

8 percent 12 percent

12 | INSURANCE JOURNAL | NATIONAL OCTOBER 15, 2018

likely to say their business could become their full-time job or primary source of income. Thirty-three percent said it is highly unlikely. The greatest barriers to making their side business their primary source of income or full-time business are financial:

Top five barriers to making a side business their primary source of income or full-time business : • I don’t believe I can make a

living at this business (48 percent) • I can’t afford to give up my income from my full-time job (33 percent) • I don’t want to give up the benefits from my full-time job (27 percent) • I like my full-time job and don’t want to give it up (23 percent) • I don’t have the time to dedicate to the business (13 percent) The Hartford’s 2018 Side Business Survey was conducted online with an online research panel between May 7-15, 2018, using a nationally representative sample of 4,135 U.S. adults who were at least 18 years of age. The sample was screened to determine whether individuals currently have a side business. The 1,033 individuals who stated they have a side-business participated in a survey about their current side-business. Among the remaining 3,102 who do not currently have a side-business, 989 participated in a survey on future side-business intent. The margins of error are ±3.1 percentage points at the 95 percent confidence level for both samples. INSURANCEJOURNAL.COM

is something people tend to overlook. But not us. In fact, we focus on it. Because in a relationship business, like yours

ours, that

simple symbol stands for what is essential: the power of partnership. The value of the right combination. It stands for unparalleled expertise

flawless service.

thatâ&#x20AC;&#x2122;s what

we bring you.

burnsandwilcox.com

NATIONAL | Business Moves

Weinstein Insurance Services, NSI Insurance Group

NSI Insurance Group has expanded its South Florida operations through a merger with Weinstein Insurance Services, an independent agency in Coral Gables, Fla. Weinstein Insurance Services President Jay Weinstein and his team will join NSI Insurance Group’s Miami Lakes office, bringing more than 35 years of experience with commercial and personal lines. Terms of the transaction were not disclosed. NSI Insurance Group offers commercial and personal insurance as well as employee benefits throughout the United States and in 40 countries.

Alliant Insurance Services, Harbor Group Consulting, Imperium Consulting Group

Alliant Insurance Services has acquired Harbor Group Consulting, a national insurance advisory for commercial real estate loans. Miami-based Harbor Group will join Alliant’s growing real estate practice, adding new resources and

capabilities to Alliant’s risk and insurance platform. Founded in 1995, Harbor Group’s capabilities cover a range of financial transactions, including commercial real estate loans, mezzanine, and commercial mortgage backed securities. The 65-person Harbor Group team also has expertise advising on mergers and acquisitions, business development company (BDC) investments, and various other corporate finance transactions. The entire Harbor Group management team and staff will join Alliant and continue to service clients from its Miami headquarters. Terms of the agreement were not disclosed. In a separate announcment, Alliant Insurance launched Imperium Consulting Group, a specialized advisory business that works with clients to better manage commercial risks as well as resolve complex claims and disputes. Imperium is based out of Columbia, Md. Employing a multi-disciplined approach with engineers, forensic schedulers and accountants, it has

14 | INSURANCE JOURNAL | NATIONAL OCTOBER 15, 2018

expertise in construction, government contracts, FEMA and commercial contractual disputes. Imperium also provides insurance claims preparation services and recovery strategies related to property damage, business interruption, surety, subcontractor default, builders risk and delay-in-start-up. Colin A. Daigle joins Alliant to lead the new venture. Daigle, having worked at two global professional services firms, brings experience in contract and insurance claims, risk management and assessment, and overall project consulting. Before joining Alliant, he was on the management committee of a global financial services practice and was the leader of its construction consulting division for 16 years. Headquartered in Newport Beach, Calif., Alliant Insurance Services Inc. provides property/ casualty and employee benefits products and services to clients globally.

Alera Group, Champion Benefits, Burnham Benefit Advisors, VantagePoint Benefit Strategies

Alera Group, a national employee benefits, property and casualty, risk management and wealth management firm, has acquired Champion Benefits of Atlanta. The company provides integrated, strategic benefit plans for clients with a fully integrated team including healthcare consultants, pharmacists, nurses, analysts and wellness program development specialists. In a separate deal, Alera Group acquired Burnham Benefit Advisors and VantagePoint Benefit

Strategies. Burnham Benefit Advisors, located in Lake Placid, N.Y., is an employee benefits firm offering compliance assistance, wellness program management, human resources software, benefit technology management and an online marketplace. VantagePoint Benefit Strategies, located in Lester, Penn., is an employee benefits brokerage and human resources consultancy focused on assisting small and medium-sized employers. VantagePoint will join Alera Group through local firm Pentra. Based in Deerfield, Ill., Alera Group’s has more than 1,000 employees serving clients nationally.

EPIC Insurance Brokers and Consultants, Vanbridge LLC

EPIC Insurance Brokers and Consultants, a national retail insurance brokerage and employee benefits consulting firm, has acquired the assets, employees and operations of Vanbridge LLC, a specialty insurance intermediary, program management and risk advisory services business. Headquartered in New York, N.Y., Vanbridge provides products and services at the intersection of the insurance, private equity and hedge fund industries. Vanbridge focuses on alternative asset management, corporate and individual high net worth clients and solving risk-related issues utilizing insurance and alternative capital. The addition of Vanbridge to EPIC adds an additional 45

continued on page 16

INSURANCEJOURNAL.COM

Golden Bear: Protecting the Fruits of Labor Since 1978

The lemonade stand is symbolic of the American Dream. It reminds us that one good idea and a full measure of determination are basic ingredients in every successful business. Golden Bear values its insureds hard work and ingenuity.

A range of deductibles Low minimum premiums Rated A- (Excellent) by A.M. Best Company

We also get that businesses can’t grow without risk protection, and that’s our business. So whether your client has opened a tapas bar, or a trampoline park that inspires future Olympians, or manufactures nutraceuticals. . . or really does manufacture lemonade, Golden Bear Insurance Company provides General Liability insurance coverage that protects the fruits of your client’s labor.

Available in most states

Covering a variety of risks, including but not limited to:

Restaurants, Bars & Taverns

Office & Apartment Buildings

Trampoline Parks

Nutraceuticals

Manufacturing

Bowling Alleys

Fire Suppression Systems

For more information call (209) 948-8191 or visit www.goldenbear.com.

Mercantile & Importers

NATIONAL | Business Moves continued from page 14 team members to the firm. Upon joining EPIC, the business will operate as Vanbridge – an EPIC Company. Phil Moyles has been appointed executive vice president and will report to Peter Garvey, CEO of EPIC Insurance Brokers and Consultants. Moyles will also become a member of EPIC’s Executive Committee. He will continue to lead the Vanbridge operations as a part of EPIC.

Hylant, Haven Re

Toledo, Ohio-based privately held independent insurance brokerage, Hylant, has launched Haven Re, a primary casualty, heterogeneous group captive designed to provide well-performing middle-market businesses an attractive cost-saving option. Haven Re is ideal for middle-market businesses with a strong commitment to safety and loss control, conservative balance sheet and consistent cash flow. Kip Irle, senior vice president of Captives, led the Hylant team’s effort to design and structure Haven Re. He said a focus on “high-performing middle-market businesses and joining them together to realize premium savings with well-designed coverage was core” to the captive’s success. Member firms can select to insure one, two or all three primary casualty coverages via the Haven Re group captive: Automobile liability and physical damage; general liability including products and completed operations; workers’ compensation and employer’s liability. Hylant partnered with The Hartford, a premier “A” rated

insurance company to support Haven Re. A team within The Hartford will handle claim management and loss control for Haven Re members. Haven Re is domiciled onshore in Tennessee and available to all Hylant clients.

Risk Strategies, Select Insurance Markets, Preferred Personal Insurance Agency

Risk Strategies, a privately held, national insurance brokerage and risk management firm, has acquired Texas-based firms, Select Insurance Markets LLP (SIM) and Preferred Personal Insurance Agency LLP (PPIA). Terms of the deal were not disclosed. SIM, founded in 2001 by its principals Robert Cox and Elizabeth Kirby, markets personal lines standard insurance products in Texas. Founded in 2006, PPIA is a well-established full-service personal lines agency. Today, SIM and PPIA represent approximately $200 million in personal lines premiums. SIM provides access to national, regional and local insurance carriers for its agency partners. Operating as an extension of their sales and marketing teams, SIM educates and provides access and marketing guidance to accommodate insurance placements for its customers. PPIA was formed as an independent retail agency focused solely on personal lines insurance needs and helps deepen Risk Strategies’ national private client practice in the state. Headquartered in Dallas, PPIA also adds depth to Risk Strategies’ Dallas operation. Currently representing over two dozen insurance carri-

16 | INSURANCE JOURNAL | NATIONAL OCTOBER 15, 2018

ers, SIM traces its roots to FG Insurance, a widely respected insurance agency founded in 1967.

BKS-Partners, Montoya & Associates of Jacksonville

Baldwin Krystyn Sherman Partners, an insurance brokerage and risk management firm headquartered in Tampa, Fla., has partnered with Montoya & Associates of Jacksonville, Fla. The partnership finalized on Thursday, August 2, 2018. The advisors at Montoya & Associates will continue to conduct Wealth Management business under the Montoya Name in conjunction with Kestra Investment Services, LLC and Kestra Advisory Services, LLC. Employee Benefits, Private Risk Management, Commercial Risk and Retirement Plan Services will operate under the BKSPartners name in conjunction with Kestra Advisory Services, LLC. Montoya & Associates is provides clients with a holistic approach to the oversight of business and financial needs with a team of associates and staff who have been working for more than 30 years delivering employee benefits, risk protection, and financial services to clients. BKS-Partners has several locations throughout the Southeast representing over 250 employees. It has a nationwide network of clients and has been strategically expanding its footprint throughout the Southeast. The partnership with Montoya & Associates marks their first office in the Jacksonville market. The transition to the Baldwin Krystyn Sherman platform is in progress. MarshBerry is

the investment banking and consulting firm brokering the transaction on behalf of Montoya & Associates. Baldwin Krystyn Sherman Partners (BKS-Partners) offers commercial insurance and risk management, private insurance and risk management, employee benefits and benefit administration, asset and income protection, and risk mitigation products to clients.

Brown & Brown, Vandroff Insurance Agency

Brown & Brown of Florida, Inc., a subsidiary of Brown & Brown, Inc., has acquired substantially all of the assets of Vandroff Insurance Agency, Inc., according to J. Scott Penny, chief acquisitions officer of Brown & Brown, Inc., and David Vandroff, the sole shareholder of Vandroff Insurance. Vandroff Insurance is a 120-year old family owned agency in Jacksonville, Fla., providing a variety of personal and business insurance products and services to clients in Jacksonville and Northern Florida with an annual revenue of approximately $1 million. David Vandroff and his team will join Brown & Brown’s Jacksonville office, led by Josh Becksmith and reporting to Michael Keeby, regional president of Brown & Brown Retail. Brown & Brown, Inc., through its subsidiaries, offers a range of insurance products and related services. Additionally, certain Brown & Brown subsidiaries of-fer a variety of risk management, third-party administration, and other services for business, public entity, individual, trade and professional association cli-ents nationwide. 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 FSC “XV,” “XV,” Stable Stable Outlook Outlook

NATIONAL | News & Markets

P/C Direct Premium Written Up 6.1 Percent

By Douglas A. Powell

irect premium written (DPW) for property/ casualty insurance companies continues to increase,

albeit gradually. At year-end 2017, more than $636 billion of DPW was reported, a record high for the industry. For 2017, total DPW for all P/C insurers aggregately increased 4.7 percent over 2016, an increase of $28.7 billion. Through the second quarter of 2018, the insurance industryâ&#x20AC;&#x2122;s growth trend has continued, as DPW for all P/C insurers aggregately increased 6.1 percent over 2017. For the six months ending June 30, 2018, P/C companies comprising the Top 25 insurers in terms of DPW growth increased their DPW $7.2 bil-

may have created unrealistic premium growth expectations for this current recovery. It is more realistic that expectations should relate to gradual, stable growth. There is always a fair amount of uncertainty in making projections based on first and second quarter data, but if the industry holds to its 10-year historical pattern, growth in 2018 would again result in the highest level of year-end DPW ever reported by the P/C industry.

lion, or 11.8 percent over the first six months of 2017. This continues the Top 25 insurersâ&#x20AC;&#x2122; impressive display of premium growth and financial stability. In contrast, the remainder of the industry reported an increase in DPW of $12.1 billion, or 4.7 percent year-over-year. Although the market continues to exhibit signs of firming and DPW continues to increase, property/casualty insurers should not expect a traditional hard market in the near future. More importantly, it is possible that the double-digit premium growth experienced in the historical hard market cycles

Powell is a senior financial analyst with Demotech Inc. Email: dpowell@ demotech.com.

Top 25 Property/Casualty Companies Based upon dollar amount of direct premium written (DPW) growth. Year-to-date results 2018 versus 2017.

Company Name

State Farm Mutual Automobile Insurance Co. GEICO General Insurance Co. Allstate Fire and Casualty Insurance Co. GEICO Casualty Co. Government Employees Insurance Co. Progressive County Mutual Insurance Co. Progressive Direct Insurance Co. Farmers Insurance Exchange USAA Casualty Insurance Co. USAA General Indemnity Co. GEICO Advantage Insurance Co. American Family Insurance Co. United Services Automobile Association Progressive Select Insurance Co. GEICO Indemnity Co. Indemnity Insurance Co. of North America Allstate Vehicle and Property Insurance Co. GEICO County Mutual Insurance Co. Progressive American Insurance Co. Ohio Security Insurance Co. Progressive Express Insurance Co. United Financial Casualty Co. Interinsurance Exchange of the Automobile Club Garrison Property and Casualty Insurance Co. Auto-Owners Insurance Co.

DPW 6/30/2018

$20,628,198,691 $5,130,982,381 $4,447,267,401 $2,437,402,450 $3,179,948,627 $1,469,190,800 $1,763,535,710 $2,457,862,642 $3,333,760,776 $2,161,601,040 $916,497,106 $892,344,133 $4,066,069,958 $1,122,022,397 $3,121,570,040 $667,413,090 $1,301,147,420 $1,027,994,440 $1,069,635,344 $1,195,201,486 $443,065,943 $886,237,463 $1,669,621,694 $1,160,761,780 $1,810,475,053

Top 25 P/C Companies by DPW Growth $68,359,807,865 All Other P/C Companies $268,232,948,197 Total $336,592,756,062

DPW 6/30/2017

$19,831,055,960 $4,661,208,619 $4,043,457,036 $2,096,015,446 $2,866,018,904 $1,157,723,108 $1,469,723,102 $2,168,403,214 $3,045,908,101 $1,886,597,185 $647,160,882 $623,087,556 $3,803,982,871 $863,238,101 $2,870,509,364 $421,519,494 $1,055,267,124 $797,234,705 $840,993,004 $977,508,984 $234,349,959 $688,766,669 $1,482,991,203 $983,917,274 $1,649,258,957

$61,165,896,822 $256,096,720,635 $317,262,617,457

$ Growth

$797,142,731 $469,773,762 $403,810,365 $341,387,004 $313,929,723 $311,467,692 $293,812,608 $289,459,428 $287,852,675 $275,003,855 $269,336,224 $269,256,577 $262,087,087 $258,784,296 $251,060,676 $245,893,596 $245,880,296 $230,759,735 $228,642,340 $217,692,502 $208,715,984 $197,470,794 $186,630,491 $176,844,506 $161,216,096

$7,193,911,043 $12,136,227,562 $19,330,138,605

% Growth

4.02% 10.08% 9.99% 16.29% 10.95% 26.90% 19.99% 13.35% 9.45% 14.58% 41.62% 43.21% 6.89% 29.98% 8.75% 58.34% 23.30% 28.95% 27.19% 22.27% 89.06% 28.67% 12.58% 17.97% 9.78%

11.76% 4.74% 6.09%

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

18 | INSURANCE JOURNAL | NATIONAL OCTOBER 15, 2018

INSURANCEJOURNAL.COM

News & Markets | NATIONAL

Monday Workers’ Comp Claims Not Changed by ACA: Report By Denise Johnson

onday morning claims – or claims of worker injuries thought to be unrelated to their jobs and likely happening on the weekend – have not been altered by the Affordable Care Act (ACA), according to new research from the National Council on Compensation Insurance (NCCI). Key findings suggest that the ACA has no real impact on the share of claims by day of the week. The brief, written by Chun Shyong, Barry Lipton, and John Robertson, found that: • The share of claims with Monday accident dates is slightly higher than the share of claims with accident dates on any other single day of the week, both before and after the ACA took effect. • There is no noticeable impact of the ACA on the share of claims by day. • The lack of impact holds even when it restricts the analysis to the states that had the largest decrease in those without health insurance prior to the ACA. INSURANCEJOURNAL.COM

The ACA became effective on Jan. 1, 2014, and offered healthcare coverage through state and federal insurance exchanges. An estimated eight million workers gained health insurance coverage as a result of the healthcare reform law. According to the brief’s authors, average lost-time claim frequency over the postACA period 2014 and 2015 was about 7 percent lower than average claim frequency over the pre-ACA period 2012 and 2013. The decline is seen as part of a long-term reduction that extended back several decades. As a result of the decrease in workers’ comp frequency, the authors state that: “It is not sufficient to only look at frequency declines for claims occurring on a given day of the week — say Monday — because all workdays are experiencing the decline.” They further note that if the ACA does have an effect, it might be evident

as a bigger decline on Mondays than on other days of the week. Claims referred to in the report include both medical only and lost time claims. Monday claims were generally higher than on any other day of the week, the report noted. This was true for both pre-ACA and post-ACA periods. While this could be due to non-related injuries that happened on the weekends, the authors speculate that it might also be due to workers adjusting to returning to work after the weekend. Another possibility “is that the distribution of claims by day of the week might simply reflect the numbers of people working different days of the week.” The authors explain Friday may have the lowest reported workers’ comp claims simply because more workers take time off on Fridays, as opposed to other days of the week. Of interest, the report found that Monday claim shares were not related to changes in the uninsured rate measured by state. To determine this, the authors divided the 38 NCCI states into three groups: • High change in uninsured rate: 10 states where the share of the population uninsured for healthcare dropped by more than 6

percent from 2013 to 2015. • Medium change in uninsured rate: 14 states where the share of the population uninsured for healthcare dropped by less than 6 percent but more than 3.6 percent. • Low change in uninsured rate: 14 states where the share of the population uninsured for healthcare dropped by less than 3.6 percent. The NCCI report also looked at the types of injuries claims on Mondays to see if certain injuries were more likely to be reported on that day of the week. The authors found that lower back injuries and strains represented a greater share of Monday claims, though there was no impact resulting from whether workers were uninsured or not. The report also noted a slightly higher number of lost time claims reported on Mondays. Certain industry groups may impact the types of claims made during the week. For example, the authors found that those working in the goods and services industries reported more injury claims on Sundays than on Mondays. Classes, too, can affect the distribution of claims by day of the week. The report found that clerical office employees – the largest classification – reported the most Monday claims and the most injury claims overall. In addition, restaurant and retail workers reported more claims on the weekend, than during the week.

OCTOBER 15, 2018 INSURANCE JOURNAL | NATIONAL | 19

NATIONAL | M&A Review

Supply and Demand Keeping M&A Market Active

By Sarah Lucas

n the first two quarters of 2018, we saw continued high levels of merger and acquisition (M&A) activity. There were 252 announced deals through June 30, 2018. Those deals were spread over a vast universe of buyers – 96 different buyers to be

exact. There were 62 buyers that reported only one deal in the period. This continues the trend we have seen over the last several years where buyers continue to flock to the industry, given the attractiveness of the strong profit margins and cash flow and generally high client retention rates in insurance brokerage firms. The top five buyers in 2018, year-to-date (YTD) June 30, 2018, were all private equity sponsored (PE) companies. Combined, these five firms completed 33 percent of the announced transactions. Alera Group Inc. was the top buyer, with 18 announced transactions. Alera was new on the scene on Jan. 1, 2017, and has quickly become a voracious acquirer. The firm’s PE sponsor

is Genstar Capital LLC. Acrisure LLC was the second most active acquirer with 17 announced deals. Acrisure is privately owned by its management group (majority of ownership) and also has PE backing by ABRY Partners LLC, VSS Fund Management LLC, and Genstar Capital LLC. The third most active acquirer, year-to-date, was AssuredPartners Inc., PE-backed by Apax Partners LLP. AssuredPartners closed and announced 16 deals between January and June 2018. BroadStreet Partners Inc. closed and announced 16 deals as well in the first six months of 2018, coming in tied for third with AssuredPartners. BroadStreet is backed by

Ontario Teachers’ Pension Plan, and Century Equity Partners, for a somewhat unique investor structure (as the pension plan is a longer-term investor than traditional PE). Hub International Limited was the fifth most active acquirer so far in 2018, with 15 announced transactions through June 30. Hub’s PE investor is Hellman & Friedman LLC. The next five most active acquirers were a mix of public and private companies. Arthur J. Gallagher & Co., a publicly traded company, announced 14 transactions through June. NFP Corp., PE-backed by Madison Dearborn Partners LLC and HPS Investment

continued on page 23

Announced Deals (U.S. Transactions)

Note: All transactions in this presentation are announced deals involving public companies, private equity backed brokers, private companies, banks, insurtech companies (2017-2018 only) as well as others including private equity groups, underwriters, specialty lenders, etc. All in scope prior years are static as of 12/31 of given year. YTD 2018 data is as of July 31, 2018. All targets are U.S. only. This data displays a snapshot at a particular point in time and has not been updated to reflect subsequent changes in prior years, if any. MarshBerry estimates that only 15%-30% of all transactions are actually made public. Past performance is not necessarily indicative of future results. Source: S&P Global Market Intelligence, Insurance Journal, and other publicly available sources

20 | INSURANCE JOURNAL | NATIONAL OCTOBER 15, 2018

INSURANCEJOURNAL.COM

Merger Announced and Acquisition Activity Date Buyer Announced Date

04/01/18 04/01/18 04/01/18 04/01/18 04/01/18 04/01/18 04/01/18 04/01/18 04/01/18 04/01/18 04/01/18 04/01/18 04/01/18 04/02/18 04/02/18 04/02/18 04/02/18 04/03/18 04/03/18 04/03/18 04/04/18 04/04/18 04/04/18 04/05/18 04/05/18 04/05/18 04/06/18 04/06/18 04/09/18 04/09/18 04/09/18 04/11/18 04/11/18 04/12/18 04/12/18 04/16/18 04/17/18 04/19/18 04/23/18 04/23/18 04/24/18 04/25/18 04/26/18 04/26/18 04/30/18 04/30/18 04/30/18 04/30/18 04/30/18 05/01/18 05/01/18 05/01/18 05/01/18 05/01/18 05/01/18 05/01/18 05/01/18 05/01/18 05/01/18 05/01/18

Buyer

April - June 2018 Seller Seller

Acrisure LLC Undisclosed Insurance Agency Acrisure LLC Undisclosed Insurance Agency Acrisure LLC Undisclosed Insurance Agency Acrisure LLC Undisclosed Insurance Agency Acrisure LLC Undisclosed Insurance Agency Acrisure LLC Undisclosed Insurance Agency Dean & Draper Insurance Agency, LP Texas Printers Insurance Agency/Soules Insurance Agency, LP NFP Corp. Hyde Agency Inc. World Insurance Associates LLC Cailor Fleming & Associates Inc. BroadStreet Partners Inc. Undisclosed Independent Agency BroadStreet Partners Inc. Undisclosed Independent Agency BroadStreet Partners Inc. Book of business BroadStreet Partners Inc. Undisclosed Certain Insurance Assets AssuredPartners Inc. AgentLink Inc. NFP Corp. Western Risk Insurance Agency Inc. Worldwide Facilities Inc. Tennant Risk Services Insurance Agency LLC White Mountains Insurance Group, Ltd. NSM Insurance Group Aquiline Holdings LLC InsurMark Inc. AssuredPartners Inc. Insurance Associates of Magee Inc. Prime Risk Partners Inc. Rosenthal Insurance Group Inc. Acentria Insurance Koski & Co Alera Group Inc. Rich & Cartmill Insurance of Colorado LLC Alliant Insurance Services Dumortier Risk Management Inc. Hub International Limited Saffe's Houston operations Seeman Holtz Property and Casualty Inc. Federal Employee Insurance business Acrisure LLC Undisclosed Insurance Agency BB&T Corporation Regions Insurance Group Inc. Digital Insurance Inc. Providence Insurance Group Inc. Arthur J. Gallagher & Co. Integrity Transportation Insurance Agency LLC BroadStreet Partners Inc. Bailey Agencies Inc. Worldwide Facilities Inc. Gerald J. Sullivan & Associates Inc. Brown & Brown Inc. Manning & Nozick Insurance Agency LTC Financial Partners LLC Smith Companies, Limited Alliant Insurance Services Crystal & Company Hub International Limited Norman Spencer Agency marine and crane business BenefitMall Slattery GA Leavitt Group Enterprises Inc. PFG Holding Inc. dba HBT Insurance AssuredPartners Inc. RDD Holdings Inc. dba the Elan Group Midland Commerce Insurance LLC Dublin Agency Inc. AssuredPartners Inc. The Elan Group Hub International Limited BK-JET Group LLC Higginbotham & Associates Inc. Butler Carson Tate Insurance Agency LLC Alera Group Inc. Tippett Moorhead Financial Partners LLC Seeman Holtz Property and Casualty Inc. Elton Porter Marine Insurance Agency Inc. Investor Group Independent Insurance Group Peter C. Foy & Associates Insurance Services LLC Clark & Associates of Nevada Inc. Peter C. Foy & Associates Insurance Services LLC R. L. Milsner Inc. Insurance Brokerage Peter C. Foy & Associates Insurance Services LLC Senex Insurance Services Inc. Peter C. Foy & Associates Insurance Services LLC Stratton Agency Acrisure LLC Undisclosed insurance agency Acrisure LLC Undisclosed Insurance Agency Alera Group Inc. Benefit Plan Strategies Inc. Alera Group Inc. Courtney Group, Ltd. Alera Group Inc. Dickerson Employee Benefits Inc. Alera Group Inc. Strategic Employee Benefit Services of Pittsburgh Inc. AssuredPartners Inc. Cornerstone Insurance Group LLC Bryn Mawr Bank Corporation Domenick & Company Inc. Hilb Group LLC Allen C. Bentson Agency Inc. NFP Corp. Low & Johnson Inc. BroadStreet Partners Inc. Certain insurance assets

Source: S&P Global Market Intelligence, Insurance Journal, other publicly available sources and MarshBerry proprietary databases Disclosure: All deal count metrics are inclusive of completed deals with U.S. targets only.

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chart continued on page 22 OCTOBER 15, 2018 INSURANCE JOURNAL | NATIONAL | 21

NATIONAL | M&A Review chart continued from page 21

Merger Announced and Acquisition Activity Date Buyer Announced Date

05/01/18 05/02/18 05/02/18 05/02/18 05/03/18 05/03/18 05/03/18 05/03/18 05/04/18 05/04/18 05/07/18 05/08/18 05/08/18 05/08/18 05/08/18 05/09/18 05/10/18 05/10/18 05/14/18 05/14/18 05/14/18 05/14/18 05/14/18 05/15/18 05/15/18 05/15/18 05/16/18 05/17/18 05/21/18 05/22/18 05/22/18 05/23/18 05/29/18 05/30/18 05/31/18 06/01/18 06/01/18 06/01/18 06/01/18 06/01/18 06/01/18 06/01/18 06/01/18 06/01/18 06/01/18 06/01/18 06/01/18 06/01/18 06/01/18 06/01/18 06/04/18 06/04/18 06/04/18 06/04/18 06/05/18 06/05/18

Buyer

BroadStreet Partners Inc. Hub International Limited Associated Banc-Corp Brown & Brown Inc. Alliant Insurance Services AssuredPartners Inc. Mark Edward Partners LLC Salem Five Bancorp Cochrane & Company Hub International Limited Webber & Grinnell Insurance Agency Inc. Hub International Limited Integrity Marketing Group LLC Prime Risk Partners Inc. USI Holdings Corporation Arthur J. Gallagher & Co. Seeman Holtz Property and Casualty Inc. Arthur J. Gallagher & Co. AssuredPartners Inc. Baldwin Risk Partners CPro Associates Inc. Seeman Holtz Property and Casualty Inc. NFP Corp. Evans Bancorp Inc. BroadStreet Partners Inc. TowneBank Risk Strategies Company LLC Insurance Group of St. Charles County LLC RightSure Insurance Group Integrity Marketing Group LLC Risk Strategies Company LLC INSURICA Insurance Management Network Arthur J. Gallagher & Co. SUNZ HOLDINGS LLC Worldwide Facilities Inc. BroadStreet Partners Inc. Acrisure LLC Acrisure LLC Acrisure LLC Acrisure LLC Ample Insurance Company LLC Ample Insurance Company LLC Ample Insurance Company LLC Ample Insurance Company LLC Eastern Bank Corporation Hilb Group LLC Hilb Group LLC INSURICA Insurance Management Network Marsh & McLennan Companies Inc. NFP Corp. Darr Schackow Insurance Agency LLC Hub International Limited Risk Strategies Company LLC Sun Life Financial Inc. Hub International Limited Integrity Marketing Group LLC

April - June 2018 Seller Seller

Certain insurance assets Kelly King Insurance Services Anderson Insurance & Investment Agency Servco Pacific Insurance - Hawaii and Pacific Northwest Engel Agency Inc. National Insurance Services of Wisconsin Inc. Kaplow Insurance Agency LLC Fabri & Rourke Insurance Agency Inc. Heritage General Agency Easy Truck Insurance Services Inc. Ross Insurance Agency Inc. Barnett Corporate Insurers LLC GoldenCare USA Inc. Roblin Insurance Agency Inc. CHS Insurance Services LLC A.J. Amer Agency Inc. Affiliated Insurance Managers - book of business Pronto Holdco LLC Peoples Insurance Agency Limited Town & Country Insurance Agency Inc. Pan-American Benefits Solutions Inc. - book of business First Choice Insurance Agency Inc. 1st Community Insurance Services Inc. Richardson & Stout Inc. G.M. Abodeely Insurance Agency Inc. Michael R. Bare, L.L.C. Costello Benefits Group Insurance Brokerage Inc. Insurance of Ellisville LLC ETNA INSURANCE AGENCY Inc. Senior Market division of Cornerstone Broker Insurance Services Agency Inc. Corporate Benefit Audits Inc. Zodrow and Neighbors Insurance LLC Thomas Costello Insurance Agency Inc. Risk Management America LLC RIC Insurance General Agency Inc. Certain insurance assets Undisclosed insurance agency Undisclosed insurance agency TCE Insurance Services Inc. Undisclosed Insurance Agency C & S Insurance Agency Inc. Don Wells Insurance Agency Inc. Insurance Today Group Inc. Townsend Insurance Group R.L. Tennant Insurance Agency Inc. BAR Insurance Brokerage Inc. Undisclosed Insurance Agency Employer Solutions Group Bleakley Insurance Services Inc. Commerce Insurance Group LLC Frani Schmidt Insurance Agency Professional Program Insurance Brokerage Cincinnati Intermediaries LLC Maxwell Health Flather & Perkins Inc. Agent Service Connection Inc.

All transactions in this presentation are announced deals involving public companies, private equity backed brokers, private companies, banks, insurtech companies (2017 only) as well as others including private equity groups, underwriters, specialty lenders, etc. All targets are U.S. only. This data displays a snapshot at a point in time and has not been updated to reflect subsequent changes in prior years, if any. MarshBerry estimates that only 15-30 percent of all transactions are made public. Past performance is not necessarily indicative of future results. Source: S&P Global Market Intelligence, Insurance Journal, and other publicly available sources The data and stats noted above are from S&P Global Market Intelligence as of Jan. 7, 2018. Such data and stats may have changed since the publication of this article. Marsh, Berry & Co. Inc. and MarshBerry Capital Inc. do not provide tax or legal advice. These professionals should be consulted separately before implementing changes to tax or legal matters. Securities offered through MarshBerry Capital Inc., member FINRA, SIPC, and an affiliate of Marsh, Berry & Co. Inc. 28601 Chagrin Blvd., Suite 400, Woodmere, Ohio 44122 (440-354-3230)

22 | INSURANCE JOURNAL | NATIONAL OCTOBER 15, 2018

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Merger Announced and Acquisition Activity Date Buyer Announced Date

06/05/18 06/06/18 06/11/18 06/14/18 06/18/18 06/18/18 06/18/18 06/19/18 06/19/18 06/19/18 06/19/18 06/21/18 06/21/18 06/21/18 06/22/18 06/25/18 06/25/18 06/26/18 06/27/18 06/27/18 06/29/18 06/29/18 06/30/18

Buyer

Shoreline Financial Group LLC Verona Insurance Agency Inc. Arthur J. Gallagher & Co. AssuredPartners Inc. Brown & Brown Inc. Combined Agents of America LLC Kaplansky Insurance Agency Inc. Alera Group Inc. Associated Agencies Inc. AssuredPartners Inc. Brown & Brown Inc. Arthur J. Gallagher & Co. Arthur J. Gallagher & Co. Digital Insurance Inc. Arthur J. Gallagher & Co. Marsh & McLennan Companies Inc. Alera Group Inc. Long Arc Capital LP Effective Coverage LLC Partners Group, LTD. NFP Corp. TrueNorth Companies LLC Alera Group Inc.

April - June 2018 Seller Seller

Abrens Insurance Every Day Insurance H.R. Keller & Co. Inc. Bell Insurance Group Inc. C & C Risk Services LLC GM Peters Agency Inc. Kelleher & Mackey Insurance Agency Kaercher Insurance Agency Inc. Barry Spitzer & Associates Main Street Insurance Inc. Loving and Etheredge dba Arkansas Insurance Facilities Binney, Chase & Van Horne Inc. Marchetti, Robertson & Brickell Insurance and Bonding Agency Inc. i2i Benefits and Insurance Services LLC Dicentra Pension Services LLC Wortham Insurance Mike Menath Insurance Inc. Renaissance Alliance Insurance Services LLC Bungalow Insurance LLC Mcdonald Insurance Group Inc. Aquesta Insurance Services Inc. Gateway Insurance Services Inc. Insurance Alliance of Central Pennsylvania Inc.

Footnotes: All data as reported by S&P Global Market Intelligence on August 2, 2018.Securities offered through MarshBerry Capital, Inc., Member FINRA and SIPC and an affiliate of Marsh, Berry & Company, Inc. 28601 Chagrin Blvd., Suite 400, Woodmere, Ohio 44122 440.354.3230 Disclosure: All deal count metrics are inclusive of completed deals with U.S. targets only. Scorecard year-to-date totals may change from month to month should an acquirer notify MarshBerry or the public of a prior acquisition. Please feel free to send any announcements to M&A@MarshBerry.com.Source: S&P Global Market Intelligence, other publicly available sources and MarshBerry Opinion & Experience

continued from page 21

Partners LLC, announced 12 transactions. Brown & Brown Inc. (publicly traded) and Seeman Holtz Property & Casualty Inc. (backed by investor Hudson Structured Capital Management) each reported six transactions closed year to date through June 30. Integrity Marketing Group LLC, also private equity backed (by HGGC, LLC), announced five transactions closed through June. The top 10 acquirers, combined, accounted for nearly 50 percent of the announced transactions through June.

Private Equity Dominates

We are seeing that the buyer pool continues to be dominated by PE-backed buyers. Some 54 percent of announced deals through June 30, 2018, YTD were completed by PE sponsored firms, compared with 52 percent for the same time period in 2017. The next largest category of buyers is independently owned brokers, which completed 25 percent of the announced deals INSURANCEJOURNAL.COM

through YTD June 30, 2018, compared with 28 percent for the same time period in 2017. YTD June 30, 2018, there were nearly 50 independent brokers making and announcing acquisitions. The publicly traded brokers comprised 9 percent of deal activity through June 2018, compared to 8 percent for the same period in 2017. Banks and others accounted for approximately 12 percent of the deal count through YTD June 30, 2018. The â&#x20AC;&#x153;otherâ&#x20AC;? category includes insurance companies, private equity groups, specialty lenders, and insurtech.

By Geography

In terms of geography, deal activity was concentrated in California, Texas, Massachusetts, New York and New Jersey. These five seller states comprised nearly half of the deal activity through June. The majority of selling firms continue to be property and casualty (P/C) brokers. In 52 percent of the announced transactions through June 2018, the selling firm was a

P/C firm. In roughly 25 percent of deals, the seller was an employee benefit and consulting (EB) firm and 23 percent were multi-line firms (brokers that write both P/C and EB). Those figures compare with the following 2017 figures for the same time period: 53 percent of selling firms were P/C firms, only 18 percent were EB, and 29 percent were multi-line. So, through YTD June 30,2018, there has been a pro rata uptick in the share of selling firms that were EB only. Deal activity remains at a high level compared with longer term historical levels. We continue to see a steady stream of owners looking to sell well-performing insurance operations, and that combined with a steady influx of new buyers, as well as proven acquirers, continues to make for an active M&A market in the insurance distribution space. Lucas is senior vice president at MarshBerry & Co. Email: Sarah.Lucas@MarshBerry.com. Phone: 616.723.8375.

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NATIONAL | Special Report | Insurtech

The 3 Ingredients of Insurtech: Pilots, Pivots, Partnerships

Insurtech Pilots and Pivots: Learning by Doing and Undoing “If you can't admit a failure, you're not an entrepreneur. You are not a good business person. There's nothing brilliant about what you are doing.” —Mark Cuban By Andrew G. Simpson

nsurtechs are great for the industry because it needs to change to be competitive, but insurtechs are only going to be able to help change the industry if they themselves make money. “At the end of the day this is about capitalism. They’re starting a new venture; this is not a hobby,” according to one insurtech cheerleader. That advocate, Brian Hemesath, managing director of the Global Insurance Accelerator in Des Moines, Iowa, a platform for financing, support and mentoring of insurtechs, moderated a panel of insurtech entrepreneurs at the Super Regional Conference, sponsored by Wells Media Group and Demotech Inc. The financial success of many insurtechs obviously hinges in part on getting insur-

ers to sign up for pilots so startups can test how their technologies work and demonstrate the benefits they offer end customers, agents and carriers. There are internal issues within some carriers that impede working with insurtechs, according to Joe Schneider, managing director of KPMG Corporate Finance.

“What I have found is sometimes carriers underestimate the relevance of the startup in the sense of it’s maybe earlier stage and doesn’t have a balance sheet, but the reality is you could have a substantial ROI working on this niche of claims,” he told Super Regional conference attendees. Sometimes early impressions can leave a “bad taste in the mouth” for one or both parties. Success stories are helping insiders look like heroes for recommending that a company

bring in outsiders. “Insurers can’t be great at everything,” Schneider said. “In many ways, you’re saying, ‘We weren’t really great here. Do we look bad now because of that, because someone else is doing it way better than we ever could have?’” Lessons have been learned. “I am seeing more carriers being open to the flow of traffic as well as the partnership in a much more serious, earnest approach than, for example, two or three years ago, which is

great,” he said. An outside perspective is particularly helpful when it comes to customer experience. “Having the insurtechs come and challenge us and our mindset, and how we approach that, really makes a big difference,” said Bobbie Collies, leader for sales and marketing at Integrity Insurance, a division of Grange Mutual. A different mindset is helpful even when it carries consumer expectations that seem unfair. Consumers are often interacting with their insurer because something bad happened to them, yet this consumer experience is being compared to Google, Amazon and other online services. “Those are totally, totally different businesses being compared to you, but consumers don’t know the difference. That’s tough; that’s not an easy spot today,”

Schneider said. The level of acceptance can vary within individual carriers, where there may be “big pockets” that are closed to innovation, according Dan Reed, managing director of American Family Ventures, the early-stage venture capital arm of American Family Insurance. Reed recalls resistance to one proposal out of fear it would mean laying off adjusters, even though that was not a likely effect. “Over time, those pockets have become fewer and fewer. I think people see some of the successes that are happening with other people within the company or maybe even within the industry,” he said. “They’re more receptive. Now, it just becomes a matter of how you get faster.” The “speed of insurance” is an issue whenever startups and

insurance carriers meet. “There’s something to be said for moving with urgency and moving like you’re trying to get results out of something,” Reed said. He said that some insurtech pilots do not cost a lot and can be cancelled if they don’t work out. “That’s the type of decision that you should be able to make pretty quickly, and you should be able to do something lightweight, something that maybe doesn’t touch the core systems, just to see if there’s something here,” he told the insurer executives. Collies said that there are opportunities for carriers with legacy systems to experiment, citing her own company’s work with insurtech Ask Kodiak, which Integrity was able to pilot completely outside of its legacy systems, with the ability

to integrate later. “It was very easy to play with that and show the value to the management team and senior leaders as well as all associates within the company,” she said. KPMG’s Schneider believes insurtech pilots can also inject flexibility. “The future is to-be-determined,” he said. “The more flexibility you have in your legacy systems as well as the fact that you can pull out cost, that means you’ve got extra capital to pull in other ways. I think that’s huge.”

When and How to Pilot

Ideally, pilots should be undertaken as a way to solve a known problem, according to Chris Cheatham, CEO of RiskGenius, which uses artificial intelligence to review and organize policy language. “A lot of times we see companies or innovation people get

continued on page 26

NATIONAL | Special Report | Insurtech continued from page 25 excited about our technology or other technologies and they want to figure out how to pilot it,” he said. “The problem is if you approach a pilot to figure out if you have a problem to solve within your organization, you’re probably going to fail; whereas, if you know you have a problem and you’re seeing if

the technology can solve that problem, that’s the better recipe for success.” Ben Clarke is co-founder and chief technology officer of Bold Penguin, which offers real time commercial risk analysis and rating on behalf of brokers and carriers. Clarke takes a high-level approach to pilots, utilizing a concept in chemistry called “activation energy,” which he defines as the minimum amount of energy that it takes for a reaction to occur. Clarke elaborates: “You put two chemicals together and you think something’s going to happen and when it doesn’t, you misinterpret why those chemicals can’t react. But real-

ly what’s happened is you haven’t added enough energy yet. Activation energy specifically is tricky because nothing happens often until you get to that activation potential. So you think, ‘We’ll dip our toe into this’ — I hear this all the time — ‘We’ll dip our toe in, and as we start to see results, we’ll grow it.’ Well, activation energy would suggest that’s not actually how it’s going to work. Until you reach a critical mass from everyone of your resources, time, energy, you should not expect anything to happen.” Clarke advised insurers and insurtechs to proceed with pilots with this concept in mind. “How much energy do we think this is going to take? How much time do we think this is going to take to see any appreciable outcome whatsoever? And would we be willing to accept the reality, the possibility, that nothing will happen in the interim?” This approach can test the commitment of all parties to a pilot. “So, it won’t be that we sort of dip our toe in and then we start to see some linear results and we can say, ‘Oh OK, it’s starting to work and let’s do more of it.’ But what if it took a year, what if it took two years, what if it took $5 million or 50 people? Do you know that at the beginning, and are you willing to make those investments and put those resources in place in order to get the reaction? Or should you consider a different path altogether?”

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The back-and-forth with carriers that comes with working on pilots is valuable for both sides, believes Jim Gardner, founder and CEO of ViewSpection, which digitizes loss control with self-service property inspections. Eventually the engagement builds trust. “Technically, we can deliver an inspection, but the most important part is it becomes a connection,” said Gardner, who has 33 years of experience as a loss control specialist and still runs a traditional claims service in addition to ViewSpection. “By the time we get through, we’re able to start looking into that customer journey and do some of the uncomfortable things. That is, for them to let us talk to a policyholder and ask, ‘What stopped you from completing this app?’ At the beginning, there’s a reluctance. ‘No, you can’t touch the policyholder; we don’t want to upset them.’ What they learn is that they are currently upsetting their customers, but they don’t know why.” Brad Weisberg has a lot of piloting experience as the founder and CEO of Snapsheet, a tech-enabled outsourced claims service. Snapsheet has raised more than $50 million in funding and today has 70 carrier partners and more than 500 employees. “Some [pilots have been] more successful than others. I think one of the key learnings that we’ve gone through is just early on finding someone internally who is innovative, who thinks more like an insurtech, who has the autonomy to go through the organization and make introductions and bring people together,” he said.

It’s also important to set expectations early on. “Get those KPIs [key performance indicators], even put them in a contract, so that way we all know what we’re marching towards because inevitably something will go wrong,” Weisberg said. ViewSpection’s Gardner said no pilot is ever perfect and often the parties will run into what he calls “the concrete layer” where a carrier is protecting its “kingdoms” and doesn’t want to change. This is why it is important to find “the person internally that understands that if there is a hiccup along the way, it’s okay.” Hemesath urged carrier executives to seize the opportunity themselves or find someone in their company to be the champion for insurtech partnerships. Hemesath kidded that a surefire way for a carrier to get rid of insurtechs is to introduce them to the procurement office, or the company’s lawyers. He was only half-kidding. “Please don’t do that. These are small companies with limited budgets. Some of them are not profitable yet,” the incubator leader said. “But in all seriousness, if you see something you like in the industry — whether it’s these folks or someone else — don’t take them through procurement; they will not survive. A lot of these will die on the vine waiting for that process to get approval.”

Pivoting to Profit

Some startups do die on the vine. While most start out to solve a specific problem, some soon hit a roadblock, find out that the problem doesn’t exist or learn there is no market for INSURANCEJOURNAL.COM

what they are doing. “What you’ll see is the startup shuts down, or they’ll go through a pivot,” Hemesath explains. Pivot is the term in the insurtech world for changing direction after a wrong turn or failure. Snapsheet has been built on the lessons of Weisberg’s first launch, which was called Body Shop Bids. “I started the company in 2012 when I got in a car wreck and just went through a really painful claims experience, and I thought to myself there’s got to be a better way to go through this process and to actually inject technology throughout the process,” he said. After his car wreck, he took his car to three body shops and got three different estimates for the same dent. “It made absolutely no sense to me,” he recalls. Body Shop Bids was a business-to-consumer (B2C) product that allowed people to

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take photos of their damaged cars and submit them to body shops for quotes. Weisberg walked the streets of Chicago to get body shops to sign up, and he put flyers on cars with dents. The idea made some sense, and he raised a few million dollars in venture capital. But he came to realize the “cost to acquire a customer was more than the lifetime value.” Customers get into a car wreck once every seven to 10 years. “There’s no repeat business,” he said. From going to insurance and body shop conferences, he learned carriers with legacy systems were struggling to create a better claims experience. “I was looking in the mirror, and I’m like, ‘I can keep going down this path of Body Shop Bids and go on and essentially spend all my money and go out of business, or I could take this platform that I’d built for consumers and turn it into something for insurers to use.’” In 2012, he transformed his company from a B2C to a busi-

ness-to-business (B2B) entity and changed the name to Snapsheet. “There’s a lot more to it, but you have to be nimble in an early stage business and you have to, what we say, ‘fail fast.’ It’s okay to not always be right as long as you learn from it and make that pivot.” “Fail fast — it’s not something the industry typically embraces,” Hemesath said. “It’s not something any enterprise level businesses embraces.” But it is something insurtechs have to embrace and carriers might want to as well. “It’s about learning, it’s about adjusting, pivoting,” Hemesath said, crediting Weisberg for not shutting down but embracing failure and learning from it. RiskGenius CEO Cheatham started out on a different path also. He used to be a surety claim attorney determined to clean up messy claim documents. He started a business scanning documents at construction sites and copying and uploading electronic data. “Horrible business model,” he admits. “I realized that when I had contractors about to go bankrupt and ripping laptops

out of our hands as we’re sitting there scanning their document because they’re mad at the surety.” While he was working the Panama Canal $800 million performance bond claim, underwriters started paying attention and soon began asking if they could use his software for policy review. “I said, ‘Sure, what’s policy review?’ It’s kind of a reflex of mine as to say, ‘Yeah we can do that’ and then try to figure it out.” He said he came to realize thousands of people in India, China and Manila are manually checking insurance policies. “As we were exploring the industry, we figured out that not a lot of people knew what is in their insurance policies,” Cheatham said. “That’s just not the buyers of insurance; that’s actually the underwriters and the brokers as well.” A carrier called seeking help in reviewing 100,000 commercial general liability forms to see how many times they contained the word environment. His company helped another carrier go through hundreds of thousands of policies to find silent cyber exposures. It is currently working with a large broker to automatically check 35,000 policies, comparing limits, deductibles and premiums. Like Weisberg, Cheatham had to sway his investors to switch gears. “I had convinced a bunch of people to pay for a scanning company. Then I came back around a few years later, and I was like, ‘Hey, we’re going to do artificial intelligence on insurance policies. How’s that sound?’ It was painful. It’s part of the journey. You just do it, and you hope your gut is right.”

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NATIONAL | Special Report | Insurtech

The 3 Ingredients of Insurtech: Pilots, Pivots, Partnerships

Insurtech Partnerships: What Insurers Want and Get

By Andrew G. Simpson

emember the scene in the 1989 movie When Harry Met Sally? During lunch with Harry at a deli, Sally very publicly fakes a wild orgasm. A nearby patron, when asked what she’d like to order, signals in Sally’s direction and tells the waitress, “I’ll have what she’s having.”

That was 30 years ago (when some insurtech entrepreneurs were still in grade school) but today’s insurance executives are like the unnamed customer. They see what other carriers are doing with insurtechs and want some of what they’re having. What carriers want is a date that will lead to a mutually beneficial relationship and they are even willing to pay

28 | INSURANCE JOURNAL | NATIONAL OCTOBER 15, 2018

for it, according to speakers at the Property/Casualty Insurers Super Regional Conference. Carriers want to solve problems. They want to improve the experiences of their customers, both agents and end users. They want to understand change that is happening. They want to move faster. They want a more innovative company culture. They want to save

money and make money. What carriers do not want and are not expecting is to transform their entire business or the industry overnight. This is good because contrary to public relations messaging from a few, most insurtechs aren’t promising to do that. Insurtechs, too, are looking to solve problems, improve customers’ experience, build INSURANCEJOURNAL.COM

relationships, foster an innovative culture, help change the industry over time, and save and make money. And have some fun. Dan Reed has as much insurtech fun as anyone in the insurance industry as managing director of American Family Ventures, the early-stage venture capital arm of American Family Insurance that started investing in 2010. “We look for strategic options. The strategic options, essentially, are a way for us to transform our business over the long term in response to the great uncertainties of our industry,” he said. AmFam organizes its investments around three themes: innovation, advanced analytics and connectivity. Its current and evolving portfolio includes CoverHound, hometap, Bunker, Wireless Registry and LeaseLock. “By making these investments, we do seek a financial return with the investment, but really we look for opportunities to work together, reconnaissance on how the world is changing,” Reed said. Integrity Insurance takes an operational approach, according to Bobbie Collies, leader for sales and marketing. Integrity and its parent, Grange Mutual, look to insurtech for help in three areas: keeping the company relevant in the marketplace, differentiating itself and achieving greater “speed to market and speed to value.” Her company starts by asking what problem it wants to solve. Brent Hammer, innovation leader at Grange Mutual, talks about checkers and chess, according to Collies. “Is it a checkers problem or a chess INSURANCEJOURNAL.COM

problem? If it’s checkers, it’s something that we can probably solve internally… If it’s chess, we just don’t have the expertise, so we are looking for insurtechs to come in and help us with the chess game.” Grange Mutual has its own incubator for its agents and associates and has been involved in two Ohio-based tech accelerators and venture capital initiatives for startups, Finrech71 and Rev1. Among its various tech-inspired features, Grange has an Amazon Alexa voice service, a ridesharing gap coverage, and a mobile app for policyholders. A special platform that gathers feedback from agents and policyholders has led to modifications in the processing of debit and credit endorsements, consolidated payments for personal and commercial lines, and simplified claims processes that include Pix It now, which uses text messaging to submit photos of damage.

Claim Benefits

While much of the insurtech buzz has been around distribution, there may be more happening in business operations, according to Joe Schneider, managing director for KPMG Corporate Finance. “There are a lot of interesting partnership opportunities for carriers on the claim side of things. They’re these little niches that you never ever would have thought of,” he said, citing startups using artificial intelligence to review policy language and virtual claims estimates. Reed has seen some of the insurtech claims activity. For example, his firm sponsored the Stanford Data Science initiative involving machine

learning technology. The model searched claims data around the polar vortex event and uncovered more than $100 million in claims eligible to be reimbursed by reinsurance. “It took like a month. It was unbelievable. It made us think, it’s almost difficult for a carrier our size to overinvest in the next generation of analytics. I think there’s real return that we have there,” Reed said. Insurers see the need to better understand customers. Carriers have information on their customers, but it is often housed in separate systems that do not talk to one another, so the insurer does not get to know its customers holistically, according to Schneider. “[Some of the machine learning and other things help people have a more holistic understanding of, at the end of the day, who’s the buyer, who’s the user of this product,” he said. Collies said startups and technology can help carriers and agents understand their customers’ journey from the first time they engage to when they get a policy, when they’re paying a bill or engaging with the carrier on a claim. The challenge, Collies said, is, “How do we bring that all together so they’re having the best customer experience possible, and how can insurtech support that?” Integrity focuses on the company’s independent agents as the customer. “How can we make those customer experiences even better, so they can focus on the end user, the policyholder in different ways than they have in the past,” Collies said. She thinks there is more work to do in distribution. “I think that there’s a lot of

people trying to disrupt the distribution channel for independent agents,” she said. “I don’t think anyone has quite got it right yet.” But there are now more insurtechs focusing on the experience between carriers and the independent agency force, looking at “ways we can better communicate and make that a more efficient and effective and a lower cost model, so that we can compete with those that are trying to do direct to consumer.” Some benefits from insurtech partnerships are less measurable than others. “[T]hose initial strategic options sometimes pan out, but oftentimes, just taking action, just getting out of the building and engaging with the innovation in the world around us leads to opportunities that we really hadn’t planned for,” Am Fam’s Reed said. “I think that’s been important for us.” According to Schneider, there is value in just talking with insurtechs. “If nothing else, you’re a little bit smarter about what’s happening out there to the best-case scenario where all of a sudden you may have intangible ROI and a niche of this type of claim or something like that,” he said. AmFam’s Reed also welcomes what he calls the “cultural” effect. “It takes a long time but it’s starting to feel profound at our company where the entire executive suite is talking in a knowledgeable way about innovation, where the executive team down to the directors get together, and they talk about who can move the ball forward,” he said.

OCTOBER 15, 2018 INSURANCE JOURNAL | NATIONAL | 29

NATIONAL | Closer Look | Commercial Property

Mixing Up Occupancy for Commercial and Residential Properties By Patrick Wraight

here is a trend in residential construction to build condominium communities that go beyond the traditional amenities we’re used to. We are accustomed to work out rooms, pools, game rooms and the like in communities. What we see today also includes space set aside for retail, business, cafes and restaurants. When we insure a building, we want to know a few details, such as how the building was built (construction), what’s going on in the building (occupancy), how the building is protected from fire (protection) and what is going on around

the building (exposure). These four elements make up the key details of property underwriting. While the 30th floor restaurant, 1st floor gift shop and 2nd floor office space might be convenient for residents, they muddy the underwriting and policy issuance for the building. If it is a strictly residential condominium, the underwriting is simple. How many units? How many units are currently occupied? How many units are for sale? What’s the average time a unit is listed before it’s sold? Once we mix the occupancy between residential and commercial, we introduce unknown quantities to the underwriting. How many units

30 | INSURANCE JOURNAL | NATIONAL OCTOBER 15, 2018

are used for residential purposes and how many are used for commercial? Of the residential units, how many are used for short-term rentals? Where are the commercial units located in the building? What are the commercial occupancies? Is there a restaurant? Does the association run the restaurant, or is it operated by an individual unit owner?

Mixed Occupancies

Let’s consider two possible occupancies: a themed bar and a restaurant. These two occupancies, while different, have similarities. It is those similarities we need to key in on and consider how their unit policies might be amended to account

for the exposures related to them. The biggest similarity is they both cook and serve food. The bar may not be serving food at the level the restaurant is, but with a themed bar, you may have some light fare. Condominium associations, whether residential or commercial, find coverage on the ISO CP 00 17 (Condominium Association Coverage Form). It doesn’t matter if the condominium is purely residential, purely commercial, or any mix of both. That form doesn’t speak to that. Residential unit owners will find coverage on the ISO HO 00 06 (Homeowners 6 – Unit Owners’ Form). Commercial unit owners find coverage on the ISO CP 00 18 (Condominium Commercial Unit-Owners Coverage Form). That was the simple part of this. Let us consider that the restaurant owner may own the unit the restaurant is in. A restaurant, or sports bar serving food, has increased risk of fire because of a kitchen. How might an underwriter handle this increased risk of loss due to fire? What gets difficult is that it is possible, even likely, the unit owner and the association have gone to two different agents who are working with two different insurers. Even if both submissions go to the same insurer, there is no reason to believe both submissions will end up with the same underwriter. These factors make it difficult to know what will happen. Here’s one solution. The association policy should be amended to include a powerful endorsement, CP 04 11 (Protective Safeguards), or an alternative that works in INSURANCEJOURNAL.COM

a similar way. In this example, we are looking at CP 04 11 10 12 (Protective Safeguards). Many underwriters will require a building have a sprinkler system, monitored alarm systems, or other protective system. This endorsement makes that requirement part of the policy. It allows the underwriter to select the safeguards she believes will best protect the building. In our case, she selected the following. • “P-1” Automatic Sprinkler System, including related supervisory services. • “P-2” Automatic Fire Alarm, protecting the entire building. Before we move into the rest of the form, we should look at the restaurant unit owner and the policy his underwriter is considering. This underwriter is adding endorsement CP 04 11 10 12 to the unit owners’ policy.

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He is also requiring safeguards for the restaurant risk. • “P-5” Automatic Commercial Cooking Exhaust and Extinguishing System installed on cooking appliances and having the following components: hood; grease removal device; duct system; and wet chemical fire extinguishing equipment.

When you mix residential and commercial occupancies, you increase the risk, and that increased risk will need to be dealt with. Two policies that both include the identical form, except each form creates different requirements. The rest of the form creates the reason the

underwriters both chose to add to their customers’ policies. We will not pay for loss or damage caused by or resulting from fire if, prior to the fire, you: 1. Knew of any suspension or impairment in any safeguard listed in the schedule above and failed to notify us of that fact; or 2. Failed to maintain any protective safeguard listed in the schedule above, and over which you had control, in complete working order. If part of an Automatic Sprinkler System or Automatic Commercial Cooking Exhaust and Extinguishing System is shut off due to breakage, leakage, freezing conditions or opening of sprinkler heads, notification to us will not be necessary if you can restore full protection within 48

hours. Now consider the requirement that has just been laid upon these two customers. Both are compelled to maintain their required protective safeguards because if they do not, and a fire breaks out, there will be no coverage for that fire. The largest risk to the building and the unit becomes excluded from the insurance policy. When you mix residential and commercial occupancies, you increase the risk, and that increased risk will need to be dealt with. Other issues can come up with mixed occupancies: uninsured units, business liability issues, short-term rentals, and more. Wraight is the director of Insurance Journal’s Academy of Insurance. Phone: 800.897.9965 ext. 130. Email: pwraight@ijacademy.com

OCTOBER 15, 2018 INSURANCE JOURNAL | NATIONAL | 31

Idea Exchange

Talent

Insurtech: A Role Model of Innovative Talent Success

By Tony Cañas

everal years ago, technology announced its intent to rock the insurance industry. Some dismissed the challenge and saw the rise of insurtech as a minor disrupter. But times have changed. Funding is pouring in for major companies with revolutionary ideas and the sector reached $2.1 billion in financial volume last year. Insurtech is clearly here to stay. The insurance industry is still in the early stages of digital transformation. Technology is driving business initiatives and agendas at an unprecedented pace. According to a PwC survey, 85 percent of insurance CEOs are concerned about the pace of technological change. In this age of disruption and transformation, the industry must adopt an “innovate or die” mantra or risk being left behind. Insurance organizations should prioritize attracting and retaining the innovative minds necessary to reimagine their business models, rewrite their operations and redefine their workforces. There’s no one better to emulate when it comes to recruiting and engaging creative professionals than the very insurtech partners who are disrupting the insurance industry.

Attracting Innovative Talent

Insurers, long perceived as technologically behind, are now tasked with driving

modernization within their workplaces to mitigate evolving risks and remain competitive. Many leaders agree that recruiting innovative professionals is a high priority. Innovation is the very foundation of insurtech, and the insurance industry can undoubtedly take a page from their books. What appeals to candidates about the insurtech sector is its use of up-to-date technology, disruptive nature and creativity. Insurers must commit to leaving their outdated legacy systems behind and move closer to end-to-end modernization. Innovators cannot realize their full potential without modern digital platforms and equipment. Embracing the very advancements insurtech promises demonstrates that the insurance industry values innovation and a modern work environment. Adopting the latest equipment and software trends is equally crucial to attracting Millennials and Generation Z, which is now more important than ever as the talent crisis continues to intensify. Having had cutting-edge technology at their fingertips since their teenage and even pre-teen years, emerging professionals are less inclined to tolerate outdated equipment and software, especially when they didn’t grow up wanting to work in insurance. The lack of emerging talent interested in insurance careers is complicating recruitment strategies. It is no secret that many young professionals do not consider insurance a desirable career path, and it is not because the industry doesn’t offer opportunities that align with their interests. It is because the industry doesn’t share its story in a way that resonates with them. It is crucial that insurance organizations

promote their innovation initiatives to these generations. Organizations must openly tell the stories of their own modernization projects to illustrate their visions for the future and appeal to innovative and forward-thinking minds. Drawing correlations between the industry and other items on emerging professionals’ career wish lists is also important. These generations are in search of secured career growth and benefits. Gen Zers, in particular, prefer financial promise and job security over mission-driven adventures. Insurance offers all of that and more. The industry provides a stable, financially-rewarding work environment and profes-

Organizations need to revisit their missions and goals, define a culture that supports innovation and then weave it into their corporate DNAs.

32 | INSURANCE JOURNAL | NATIONAL OCTOBER 15, 2018

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sional growth opportunities for its workforce.

Retaining Talent with Innovative Cultures The small, nimble and flexible business models of insurtech startups offer an environment that is conducive to creativity and innovation. Wanting to infuse the same ideals into their own organizations, insurance organizations can look to insurtech for inspiration. The startups define output by results and productivity rather than set hours and brick and mortar offices. They welcome casual dress codes, operate within flat corporate structures and encourage friendly competition to jumpstart creativity. Some insurtech leaders even host competitive events for their employees, such as in-house hackathons and code wars. These cultural elements set the stage for a creative, collaborative environment that fuels innovation and disruption. It is no secret the insurance industry has historically maintained a conservative workplace culture. Amid a candidate’s market and a fierce war for talent, retention has become increasingly difficult for today’s insurance firms as employee loyalty continues to wane. Promoting an innovative, analytical and digital corporate culture, much like that of its insurtech partners, is vital to engaging and retaining the talent needed to drive future success. Innovative minds also value continuous learning. Revisit training budgets and consider encouraging and sponsoring employees to attend industry, function-specific, technology, or analytics events. Participating employees appreciate their employers’ investment in their future and empowering employees with knowledge provides a diversity of perspectives from which to launch continued innovation. Purposeful culture is not only key to improving retention, but also a catalyst to improving employer brand and increasing productivity. Incorporating modern benefits, such as flexible work hours and remote working opportunities, is just a start. Redefining corporate culture runs deeper than that. Organizations need to revisit their missions and goals, define a

culture that supports innovation and then weave it into their corporate DNAs. The industry’s insurtech partners are more than a tool for realizing innovation and modernization. They are a source of inspiration for recruitment and retention techniques that will attract the innovative

We’re now

Cañas is a property and casualty client advisor with The Jacobson Group, a provider of talent to the insurance industry. Phone: 800-466-1578. Email: tcanas@ jacobsononline.com.

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NATIONAL | MyNewMarkets liability insurance for independent agents nationwide. PSIC’s unit-owners (condo / townhome) insurance starts with a comprehensive HO-6 policy and supports Preferred Tier coverage and options. Available limits: As needed Carrier: Pacific Specialty Insurance Co. States: Ariz., Calif., Conn., Ga., Nev., and Texas Contact: Customer service at 800-303-5000

Solar Extended Warranty OEM, VAR & Servicer Solution

Market Detail: Personal Safeguards Group LLC (www. personalsafeguardsgroup.com) provides an insured method for a Solar Manfacturer, VAR & Servicer to add a service contract to the purchaser of their solar panel, inverters and solar trackers. This product may also be available to existing customers who are out of the initial factory warranty period. Available limits: As needed Carrier: Unable to disclose States: All states Contact: Michael Forsch at 847-275-8497 or e-mail: mike@ personalsafeguards.com

Dwelling Fire (TDP-1)

Market Detail: National Lloyds Insurance Co. (www.nationallloydsinsurance.com) dwelling fire coverage protects the home and personal property for owners, renters or seasonal occupants. Owners, landlords and tenants liability is also available as optional coverage. Available limits: Minimum $500,000, maximum $5 million Carrier: Unable to disclose, admitted States: Ariz., Colo., Ga., La.,

Mo., Nev., Okla., Tenn., and Texas Contact: Customer service 800-749-6419

Errors & Omissions

Market Detail: First Choice Insurance Intermediaries Inc. (www.firstchoiceii.com) offers small business coverage through Hiscox featuring three exclusive products, all tailored to the risks in the client’s industry: professional liability insurance; general liability insurance; and business owner’s policy (BOP). Program highlights include: instant quote and bind in less than 15 minutes; all coverage is tailored to the specific risks in the client’s industry; receive policy documents via e-mail usually within one hour of purchase (during our operating hours). Hiscox licensed agents are ready to answer questions and to service the client’s policy. Each quote can be saved individually until ready to present to the client. To become appointed, please scan/email to info@firstchoiceii.com or fax 866-884-4796 the following paperwork: completed IRS Form - W9; copy of state license(s); current proof of

34 | INSURANCE JOURNAL | NATIONAL OCTOBER 15, 2018

errors & omissions certificate; and completed producer appointment form. Available limits: Minimum $500,000, maximum $3 million Carrier: Hiscox States: Calif., Conn., Dela., Fla., Ga., Ks., La., Mass., Md., Mich., Mo., N.C., N.J., N.M., Nev., N.Y., Ohio, Ore., Pa., S.C., Tenn., Texas, Va., and Wash. Contact: Customer service at 866-821-9572

Used Car Dealers

Market Detail: Jacobs & Associates (www.jacobsnow. org) is a general agent and excess & surplus broker in the state of Ohio operating on an admitted and non-admitted basis. Looking to discuss marketing, new products, and ideas to help in the coming year with all Ohio partners. Available limits: As needed Carrier: Unable to disclose States: Ohio only Contact: Customer service at 440-625-2690

Unit-Owners / Condo Insurance (HO-6)

Market Detail: Pacific Specialty Insurance Company (PSIC) (www.pacificspecialty.com) writes residential property and

Trampoline Parks

Market Detail: Evolution Insurance Brokers (www. eibdirect.com) takes a partnership approach working directly with clients or agents. In some cases, facilities do not have coverage for the participants. Evolution will review current policies to determine if coverage is excluded or included. Insurance and claims management for amusement facilities has been provided for 25+ years. Coverage includes: commercial liability, premises liability, property, renters legal liability, non-owned auto, sexual abuse and molestation. Available limits: As needed Carrier: Unable to disclose States: All states except Alaska, Calif., N.H., N.Y., W.Va., Contact: Barbara Malkowski at 800-456-4576 or e-mail: barbaram@eibdirect.com This section brought to you by Insurance Journal’s sister website: www.mynewmarkets.com

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Idea Exchange

Minding Your Business

Time to Revisit Independent Contractor vs. Employed Producer Status

By Catherine Oak and

works out of his or her home. The independent contractor producer typically enjoys a higher level of gross pay since they pay their own business expenses, health insurance and payroll taxes. Independent contractor producers are often paid 10-to-20 percentage points higher than an employee producer to cover those expenses. The flexibility that comes with independent contractor status is also an attractive feature. Independent contractor producers usually own their book of business, which is much less common for employed producers.

Who is an Independent Contractor?

Employers have historically relied on the IRS criteria to determine if a producer can be hired as an independent contractor or

Bill Schoeffler

nsurance agencies across the country hire some or all producers as independent contractors instead of as employees. The mixed use of employees and independent contractors in insurance is common in other industries as well. The ramification of this hiring decision not only affects the business and the person hired, but it also has tax and regulatory consequences. Incorrect classification of an employee as an independent contractor can result in costly tax and legal consequences to the business. Businesses consider hiring independent contractors for several reasons. There is a reduced cost in expenses, such as payroll taxes, health insurance and other benefits, workersâ&#x20AC;&#x2122; compensation insurance, and other overhead, especially if the producer 36 | INSURANCE JOURNAL | NATIONAL OCTOBER 15, 2018

employee. The 20-point IRS checklist looks at factors such as: Does the person have to pay business or travel expenses? Can the business fire them or is there a contract? Does the business set work hours? Does the person work for more than one firm? Keep in mind that these questions act as a guide only. The importance of each factor is ultimately based on the individual circumstance. Issues involving the classification of independent contractor producers typically do not come up as a stand-alone issue. Questions can arise in conjunction with other problems such as a tax audit, or if a person is injured on the job. Some independent contractors might raise the question themselves as part of a dispute that they might have with the agency. States are now acting on this question as well. Recent state Supreme Court rulings in New Jersey and California have really limited the definition of an independent contractor. Massachusetts and Illinois have also cracked down on its use. The states are trying to shore up their unemployment insurance coffers. Big labor is also pushing for the limitation of independent contractors to boost their ranks. These moves might be a reaction to the boom in the gig economy, which thrives on independent contractors. The recent 2018 California Supreme Court ruling in the Dynamex case created what is called an ABC test. Under the ABC test, workers are presumed to be employees and hiring businesses can designate a worker as independent contractors only if it can show all of the following: A) â&#x20AC;&#x153;that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work; and B) â&#x20AC;&#x153;that the worker performs work that is outINSURANCEJOURNAL.COM

negatively impact the bottom line. The producer compensation can be adjusted to account for payroll taxes, insurance and other expenses. Not to mention it could help avoid potential future penalties and costs associated with a ruling against the agency for misclassification. The convenience of hiring producers as independent contractors can be attractive to the business and the producer. However, incorrect use of that relationship can have dire consequences on the business. Choose wisely. Oak is the founder of Oak & Associates and Schoeffler is an associate of the firm. The firm has offices in Bend, Ore., and Sonoma, Calif., and specializes in financial and management consulting for independent insurance agencies, including valuations, mergers acquisitions, clusters, sales and marketing planning as well as perpetuation planning. Phone: 707-9356565. Email: catoak@gmail.com.

side the usual course of the hiring entity’s business; and C) “that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”

Now is the time for agencies to revisit the status of independent contractor relationships. If the hiring business fails to prove any one of the three elements, the workers are deemed to be employees entitled to wage laws and reimbursement for business expenses. The business will also then need to pay for payroll taxes, unemployment insurance, workers’ comp, etc. Right now, the court ruling in California is specifically for the trucking industry. However, it could soon bleed over to other industries, such as ride share services (e.g., Uber and Lyft), beauty salons, real estate and insurance agencies. Many other states INSURANCEJOURNAL.COM

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are looking at adopting similar rules as well.

What to Do?

Now is the time for agencies to revisit the status of independent contractor relationships. It is imperative that agency owners understand the current rules and regulations for an independent contractor relationship. Aside from federal law, rules will also vary from state to state and are subject to periodic changes. Because of the complexity of the law, it is wise to utilize an employment professional as a guide through the decision process. Even if both the business and the individual desire the relationship to be that of independent contractor, and have a written agreement stating the relationship, it still may not matter. The actual circumstances in the relationship determine the status. Regardless if a misclassification is intentional, financial penalties and other costs can create a burden on the business. Upon a closer examination of the situation, if the agency needs to revise the status of an employee, it still might not

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OCTOBER 15, 2018 INSURANCE JOURNAL | NATIONAL | 37

Closing Quote Is It Time to Start Planning for 2019? accomplishments. It’s hard

By Todd Waletzki

re you ready? 2019 is right around the corner. A new year is a good time to introduce change and new goals at your company, because it feels like a fresh start for employees. Regardless of what was accomplished in 2018, you can always set higher goals for you and your business. Here’s how to introduce effective change and set goals for your business and employees: Open your doors to communication. Talk with your customers about upcoming company changes that may affect them, consider ideas and suggestions from your employees and ask how you can improve the health of your business. As it’s been said before, communication is key. It makes your customers satisfied, employees happy and business successful. Create SMART goals. Make sure all goals are specific, measurable, achievable, relevant and time-bound objectives you wish to achieve. Break it down by tasks and

for an employee to meet goals when they aren’t sure how to get there. Communicate specific tasks that need to be completed and what it will look like when these tasks are accomplished. Also, check-in regularly and make sure benchmarks are being met. Align employee goals with company goals. While personal development is great, goals should align with company goals. Goals should develop employees for mutual continued success. Find out whom and what is succeeding. Is your competition ahead of you in your market? Are you getting a return on your investments, campaigns and strategies? Take the time to find out what is working and consider altering your approach. Get in tune with the economy. The status of our economy is important, but it’s also important to look ahead and listen to economic professionals who predict changes. This allows you to prepare as much ahead of time as possible. Spend time focusing on changes in government regulations, taxes and health care. Be open to opportunities

and more ways of thinking.

When faced with a challenge, ask your employees for their input. You may hear things you hadn’t thought of yourself, and quite possibly the perfect solution. Also, if someone brings a new idea or concern to your attention, be willing to make

38 | INSURANCE JOURNAL | NATIONAL OCTOBER 15, 2018

changes. The more you listen to your employees and customers, the more positive and productive your work environment will become. Get your finances in check. Use the new year as an opportunity for a fresh start. Meet with your tax advisor and financial consultants to learn how to best organize your money. This is the best time of year to focus on a less financially stressful year. Check and verify company data. A successful and stressfree new year relies on having accurate data. So, between now and the end of the year, your payroll department should be checking employee and employer data for accuracy such as Social Security numbers and employee benefits information. Good practices throughout the year guarantee that none of the data you will need to process year-end paperwork is missing. Keep learning. Educational workshops, webinars and publications will keep you up-todate on all the modern tech-

nology, advertising techniques, focus groups and products. It’s also important to pay attention to the news and ever-changing economy. When you understand what is going on around you and what may affect your business, you can better prepare for changes and challenges. The key to keeping up with your competitors, technology, and customers’ expectations is to grow and learn. A new year offers an opportunity to evaluate the past year. Look back on what has happened and adjust your company’s course. Did you learn any lessons? How have your strengths, weaknesses, opportunities and threats evolved within the past year? How does your strategy need to adjust in 2019? The turn of the year offers the perfect opportunity to set the company’s course for the next 12 months. Applying these tips will help you achieve your vision and mission. Waletzki is president of Payroll Sales and Operations at Dallas-based BenefitMall. INSURANCEJOURNAL.COM

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