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March 18, 2019 â&#x20AC;˘ Vol. 97 No. 6

Contents

News & Markets

Emerging Economies to Take Larger Stake in Global Growth

9 Amazon, Berkshire,

JPMorgan Name New Health Care Organization

16 Commercial Insurance

Prices on the Rise in Q4

Groundwater Near Most Coal Plants Polluted

Wake-Up Call on Walking: Pedestrian Fatalities Continue to Rise

19 32 OSHA Scraps Obama

Idea Exchange

Special Report

Spotlight: Consumer Advocacy in an Age of Consumer Options

40 Special Report: Serving Up the Right Coverage

Spotlight: FDA Warns of Asbestos in Claire Cosmetics; Seeks New Rules on Talc

Top 25 Carriers: P/C Direct Premium Written Up 5.9%

Closer Look: Wading into Flood Waters

A Guide to Moral Disengagement

How Workersâ&#x20AC;&#x2122; Comp Brokers Can Increase Commissions

The Wedge: The 5-Step Evidence Based Hiring System

Progressive to Lead the Pack of Multiline Insurers

Minding Your Business: Pay for Performance

Closing Quote: Underwriting and Rating Tools Under Attack

Corporate Profiles 2019

Workplace Injury Reporting Rule

Truth-Tellers for Claims Adjusters

3 Claims Areas Where Property Insurers Disappoint Customers

Departments 6 Opening Note

4 | INSURANCE JOURNAL | MARCH 18, 2019

10 Declarations

10 Figures

12 People

14 Business Moves

64 My New Markets

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Opening Note Write the Editor: awells@insurancejournal.com

Teacher Knows Best

fter years of writing about the insurance industry, there’s one piece of advice I’ve learned from agents and brokers: Read the entire insurance policy. Donelan Andrews of Georgia did just that and it paid off. Andrews, who has been a teacher for 25 years, says she always reads every contract when she buys something, and she teaches her students to do the same. When Donelan bought a travel insurance policy recently from Squaremouth, little did she know she’d entered into a top-secret contest where her passion for reading would pay off to the tune of $30,000. Squaremouth, a travel insurance comparison shopping site, launched the Pays to Read contest on Feb. 11, 2019, with the aim of highlighting the importance of reading policy documents by rewarding the first person to find hidden text in their policy documentation within a year’s time. Whether a winner was named or not, Squaremouth planned to donate an additional $10,000 to Reading Is Fundamental, a children’s literacy charity. Much to Squaremouth’s surprise, Donelan claimed the prize in just 23 hours. To find the contest winner, Squaremouth hid the contest details on the last page of its policy documentation, explaining that the first person to read through their policy and discover the contest would win the $10,000 grand prize. When Donelan reached the hidden text, the following sentence caught her eye: “If you’ve read this far, then you are one of the very few Tin Leg customers to review all of their policy documentation.” She says it reminded her of a test question she used to ask students to teach them the importance of reading. “I used to put a question like that midway through my exams, saying ‘If you’re reading this, skip the next question.’ Right when I saw the wording, it reminded me of that and intrigued me to keep reading,” she told Squaremouth. To honor Donelan’s commitment to her schools, Squaremouth gave an additional $5,000 to each of the schools where she teaches in Georgia — Upson-Lee High School and Lamar County High School. The money will be used to buy new textbooks and contribute to each of the school’s work-based learning programs. Squaremouth also donated an additional $10,000 to a reading charity, in addition to the grand prize. Squaremouth said it chose Reading Is Fundamental because its mission aligns with the objective for Pays to Read. Reading Is Fundamental provides books and literacy resources to kids across the country. Lesson learned.

To find the contest winner, Squaremouth hid the contest details on the last page of its policy documentation.

Andrea Wells Editor-in-Chief 6 | INSURANCE JOURNAL | MARCH 18, 2019

Publisher Mark Wells | mwells@wellsmedia.com Chief Executive Officer Joshua Carlson | jcarlson@insurancejournal.com

ADMINISTRATION / CIRCULATION

Chief Financial Officer Mark Wooster | mwooster@wellsmedia.com Circulation Manager Elizabeth Duffy | eduffy@wellsmedia.com Staff Accountant Sarah Kersbergen | skersbergen@wellsmedia.com

EDITORIAL

Chief Content Officer Andrew Simpson | asimpson@insurancejournal.com Editor-in-Chief Andrea Wells | awells@insurancejournal.com East Editor Elizabeth Blosfield | eblosfield@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 & Contributors Contributors: Katherine Bowers, Jeffrey Brewer, Matthew Queen, Douglas Powell, Tom Super, Valerie Volcovici Columnists: Catherine Oak, Bill Schoeffler, Randy Schwantz

SALES / MARKETING

Chief Marketing Officer Julie Tinney | jtinney@insurancejournal.com West Sales Dena Kaplan | dkaplan@insurancejournal.com Romeo Valdez rvaldez@insurancejournal.com South Central Sales Mindy Trammell | mtrammell@insurancejournal.com Southeast and East Sales (except for NY, PA, CT) Howard Simkin | hsimkin@insurancejournal.com Midwest Sales Lisa Whalen | (800) 897-9965 x180 East Sales (NY, PA and CT only) Dave Molchan | (800) 897-9965 x145 Sales & Marketing Coordinator Ashley Berg | aberg@insurancejournal.com Advertising Coordinator Erin Burns | eburns@insurancejournal.com Insurance Markets Manager Kristine Honey | khoney@insurancejournal.com Senior Strategist Pam Simpson | psimpson@insurancejournal.com Social Media Manager Ly Short | Lshort@insurancejournal.com Marketing Administrator Gayle Wells | gwells@insurancejournal.com Marketing Director Derence Walk | dwalk@insurancejournal.com

DESIGN / WEB / VIDEO

V.P. of Design Guy Boccia | gboccia@insurancejournal.com V.P. of Technology Chris Thompson | cthompson@insurancejournal.com Ad Ops Specialist Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Terrance Woest | twoest@wellsmedia.com Web Developer Ryan Kleshinski | rkleshinski@wellsmedia.com New Media Producer Bobbie Dodge | bdodge@insurancejournal.com Videographer/Editor Ashley Waldrop | awaldrop@insurancejournal.com

ACADEMY OF INSURANCE

Director Patrick Wraight | pwraight@ijacademy.com Online Training Coordinator Nathan Granitz | ngranitz@ijacademy.com

SUBSCRIPTIONS:

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News & Markets

Emerging Economies to Take Larger Stake in Global Growth in 10 Years

merging markets will remain the growth engine of the global economy and insurance industry during the next decade, reflecting a continuing shift of economic power from west to east, according to Swiss Re Institute’s latest sigma report. Summarizing macroeconomic trends, the report notes that emerging market growth has moderated in recent years as economies mature and are more exposed to external cyclical factors. Nevertheless, projections still indicate that emerging economies together will account for 60 percent of global growth in 10-years’ time. “In this context, we expect quality rather than speed of growth to be a differentiating factor among the emerging markets themselves,” according to the report, The sigma report notes that the seven largest emerging markets will contribute up to 42 percent of global growth, with China on its own contributing 27 percent. Economic growth also will drive growth in the insurance sector, with the emerging markets’ share of global premiums forecast to increase by about 50 percent during the next 10 years, says the sigma report, titled “Emerging markets: The silver lining amid a challenging outlook.” “Our forecasts show that emerging Asia

will lead the charge for premium growth, expanding by three times the world average over the next two years, and China becoming the biggest insurance market in 15 years,” the report states. Indeed, emerging market premiums are expected to outpace advanced market premium growth by four times during the next decade. The report states that emerging markets’ growth is being driven by a group of industry-specific trends, including: Regulatory evolution. Growth-enabling regulation helps increase insurance penetration in emerging markets and create a social safety net, sigma states, pointing to governmental policies that promote insurance take-up, help build financial resilience of households and develop certain industries. For example, compulsory motor third-party liability (MTPL) insurance can protect drivers against liability claims for death or injury to individuals. In addition, international solvency standards are being adopted at different speeds by different emerging nations. They are designed to protect consumers, maintain financial stability and build trust in insurance companies. Improvements in market access. Trade barriers reduce competition in re/insurance markets, leading to less customer

choice, poorer service, higher premiums and less capacity over the long-term, sigma states. Such protectionism “reduces the growth of affordable risk cover, preventing insurance markets from realizing their full potential and making it difficult to close protection gaps.” Some markets have seen an increasing number of protectionist measures that have reduced market access in recent years, such as limits on foreign ownership of insurance companies. However, insurance markets are generally more open today than they were 10 years ago, sigma says, citing the example of emerging Asian governments that have undertaken additional deregulation and liberalization measures while seeking to improve consumer protection. Insurtech revolution. The use of technology in insurance can make products more affordable, business more profitable and new risk pools accessible, said the report, noting, however, that the adoption of tech is not uniform across emerging markets. China has become a major enabler of insurtech solutions. Yet adoption has been slower elsewhere, sigma said, citing regulatory barriers that are preventing insurers from using tech solutions to transform their business models. INSURANCEJOURNAL.COM

“Flexible regulation, like the stance taken in China, can give insurers the opportunity to increase their involvement in technology companies. It is a crucial step when trying to cater to the rising influence of millennials — a consumer base that is not only tech savvy, but is also willing to share data.” The report says other emerging markets could follow China’s lead. Growing use of mobile devices. Mobile devices are becoming the most important point of interaction for customers with their insurance providers. “The expansion of the internet and mobile phones is enabling insurers to distribute, underwrite and pay claims online, which in turn helps expand the reach of insurance and close existing protection gaps,” the report states. Urbanization and investment in infrastructure. Growing urban populations require substantial infrastructure investment to enable sustainable development. Globally, there is a need to invest US$69.4 trillion in infrastructure between 2017 and 2035, says sigma, quoting an October 2017 report from McKinsey Global Institute, titled, “Bridging infrastructure gaps has the world made progress?” These infrastructure investments will provide substantial insurance opportunities, generating cumulative construction insurance premium volumes from emerging markets of US$44 billion (in 2017 constant dollars) for the period 20172035, the report says (The report also cites expanding opportunities in personal lines and property catastrophe re/insurance as a result of infrastructure investments.) Wider financial inclusion. “Improving access to insurance is particularly valuable for people with low incomes, who often struggle to manage unforeseen financial shocks,” the report says, emphasizing this demographic is particularly vulnerable to shocks such as illness, incapacity to work, and the effects of natural catastrophes and extreme climate events, such as droughts. “For insurers, opening up a new risk pool of several billion customers on the cusp of transformative growth is an attractive proposition to embrace inclusive insurance of emerging consumers. It also helps close the protection gap for a large segment of the world’s population,” sigma notes. INSURANCEJOURNAL.COM

Amazon, Berkshire, JPMorgan Name Health Care Organization, Haven

he Boston-based health care organization founded by giant employers Amazon, Berkshire Hathaway and JPMorgan Chase have announced its name — Haven — and launched a new website at havenhealthcare.com. Haven will serve 1.2 million employees and families affiliated with Amazon, Berkshire Hathaway and JPMorgan Chase. Over time, its founders intend to share what it learns to help others. The three companies announced plans in January 2018 to create the organization, which they say is “free from profit-making incentives and constraints.” “We want to change the way people experience health care so that it is simpler, better and lower cost,” said Haven CEO Atul Gawande. “We’ll start small, learn from the experience of patients, and continue to expand to meet their needs.” Gawande became CEO in July 2018 and assembled a leadership team, including former Comcast executive Jack Stoddard as chief operating officer, Serkan Kutan as chief technology officer, Dana Safran as head of measurement, and others. Gawande is a surgeon, professor at

the Harvard T.H. Chan School of Public Health and Harvard Medical School, and a journalist who has written about rising health care spending.

Venture to Target Health Issues Using Data, Technology

Gawande said he has been meeting with Amazon, Berkshire Hathaway, and JPMorgan Chase employees to understand their health care experiences. In a letter posted on Haven’s website, he vowed the company will be an “advocate for the patient and an ally to anyone — clinicians, industry leaders, innovators, policymakers and others — who make patient care and cost better.” The website identifies areas where Haven hopes to improve on the health system, including the difficulty people have accessing care, navigating the complex system, and affording medical treatments and prescription drugs. “The good news is the best results are not the most complicated or expensive. The right care in the right place is often more effective and less costly than what we get today,” Gawande said. Haven is currently focused on recruiting software engineers, data scientists and clinicians to join its team.

MARCH 18, 2019 INSURANCE JOURNAL | 9

Figures

71%

The percentage of respondents to a Travelers Companies survey of 503 Minneapolis-area drivers that say they use a mobile device while driving. According to the survey results, 84 percent of millennials, 72 percent of Gen Xers and 62 percent of baby boomers are engaging in this behavior, the company said.

15 Months

The length of time the most recent toxic algae bloom – also known as red tide – plagued the coast of Florida, making it one of the five worse toxic algae events in the state’s recorded history. The bloom began in Nov. 2017 and appeared to have cleared by mid-February. It caused respiratory irritations in people and killed numerous sea turtles, manatees, dolphins and fish off the Florida coast.

Declarations Unknown Territory

“We’re getting into this sort of unknown territory. We typically in emergency management have some point of reference to work with. Two floods like this – it’s unheard of.’’

Randy Webster, emergency manager of South Carolina’s Horry County, on the two massive floods that have hit the state in the last three years. South Carolina Gov. Henry McMaster has created the South Carolina Floodwater Commission to come up with ways to better combat flooding from hurricanes, rising ocean levels and overrun rivers and creeks.

Colorado Gas Tilt

“Right now, oil and gas laws in Colorado tilt heavily toward the industry. We are going to correct that tilt so that health, safety, and environment are no longer ignored by state agencies.”

Colorado House Speaker KC Becker, a Democrat, and a cosponsor of a bill to prioritize health and safety over oil and gas development, believes the state’s priority should be to regulate drilling and production activities.

10 | INSURANCE JOURNAL | MARCH 18, 2019

INSURANCEJOURNAL.COM

5,000

$ Million

The number of weekly applications for medical marijuana cards received by the Oklahoma Medical Marijuana Authority in February, a significant increase from 1,200 applications received per week in September 2018. The increase caused the agency to temporarily close its customer service center to free up more staff to respond to the high volume of applications for medical marijuana cards.

The Vermont Agency of Transportation is getting more than this amount from the Federal Railroad Administration for safety upgrades along the route of the Amtrak Vermonter, addressing conditions that resulted in a 2015 derailment.

The Weight of Snow

“There are standards for how strong you need to build a house roof and there are no standards as to how strong you need to build a farm building in the state of Wisconsin.”

Brian Holmes, a retired agricultural engineer for University of Wisconsin-Extension, comments on reports that the buildup of snow from the unrelenting winter weather in 2019 is causing damage to farm buildings. Some farmers report watching their buildings buckle under the weight of snow.

INSURANCEJOURNAL.COM

Diversified Impact

“Insurance companies have a vast and diversified impact on the Texas economy that affects every business and family in the state.”

A quote from “Covering Texas: How the Insurance Industry Works for Texas,” a collaborative report jointly produced by various state and national insurance trade associations. The report shows insurers invested $472 billion in the Texas economy in 2017, in everything from homes to farms to municipal projects like water systems, roads and local schools.

MARCH 18, 2019 INSURANCE JOURNAL | 11

People National

Nashville-based auto insurer The General has appointed veteran insurance executive Tony DeSantis to president and CEO, joining Chief Operating Officer Steve Tjugum as the company’s top leaders. Elicia Azali has been named Marketing senior vice president for the insurer that offers non-standard auto insurance. DeSantis has served as president and CEO at AIG Direct, where he was for more than 20 years, and president and CEO of 21st Century Insurance, as well as president of personal insurance product lines at Farmers Insurance. Most recently since 2017, he served as CEO of Ironshore’s Syndicated Risk Services, a startup managing general agency. COO Tjugum moved to The General from American Family Insurance, the parent company of The General, where he worked for more than 30 years. Azali comes to The General from Nationwide Insurance, where she held leadership roles in marketing, advertising, product lines and innovation. Specialty insurer Tokio Marine HCC announced that Shilpa Strong has joined the company as business innovation officer. Strong has 20 years of industry experience, most recently as global head of Commercial Engagement at American International Group (AIG). She was at AIG for almost 13 years. She has also held positions at Savant Financial Technologies, Quanta Capital Holdings, Munich Re and Swiss Re. She is based in New York and reports to Executive Vice President Mark Callahan.

East

Jimcor Agency Inc., a Montvale, N.J.based independent managing general agent and insurance wholesaler, has hired Kyle Lacertosa as a brokerage specialist writing both brokerage and binding business. Lacertosa works out of Jimcor’s Long Island office located in Plainview, N.Y. He began his insurance broker career at Risk Placement Services in 2014, in which he focused on all aspects of the New York construction market and casualty placements. At Jimcor, he will continue to expand his expertise in the N.Y. construc12 | INSURANCE JOURNAL | MARCH 18, 2019

tion markets and other hard-to-place risks. New York-headquartered JenCap Holdings LLC (JCH), a specialty insurance business, has promoted Mark P. Maher to chief operating officer and hired David Nielsen as corporate chief financial offi-

cer. Maher will work with the JenCap management team to manage carrier and broker relationships, and he will work with divisional business leaders to achieve a cross sale protocol and maintain service throughout the organization. Most recently, Maher was president of JenCap’s NIF Group, a managing general agency, program manager and wholesale insurance brokerage based in New York with offices in the Northeast and West. He has been with NIF for 30 years. Nielsen has spent his more than 30-year career in the financial services industry, serving as chief operating officer in Wells Fargo’s wholesale business, and more recently, as chief financial officer of CommunityOne Bancorp.

South Central

Global insurance broker Lockton Companies opened an office in the greater New Orleans area headed by Tim

Woodard. Danelle Heathman has

Tim Woodard

been appointed as a senior vice president, and Cheryl Cabrera will serve as a senior account manager. Heathman and Cabrera joined Lockton from a New Danelle Heathman Orleans broker where Cabrera was an assistant vice president and Heathman served as a senior vice president and the marine practice leader. Woodard reloCheryl Cabrera cated from Lockton’s Houston office. He previously served as a member of a New Orleans law firm where

he practiced marine and insurance law. Woodard, Heathman and Cabrera have more than 73 years of collective experience in the marine and energy industries, and the new office will work closely with Lockton’s global marine and energy practice. Michael Hubbell, who has served as vice president of Risk Management for TDECU – Your Credit Union, has been appointed as chief risk officer for the Lake Jackson, Texas-based credit union. In addition to 17 years of credit union experience in branch operations, lending operations, wholesale lending and information systems, Hubbell is a member of the Risk Insurance Management Society (RIMS) and has earned The Institutes’ ARM-E and AINS designations. RHSB (Roach

Howard Smith & Barton) hired Dennis Fowler as vice presi-

dent in its Fort Worth, Texas, Employee Benefits Practice Dennis Fowler group. Fowler has been an employee benefit consultant for more than four years with another Dallasarea broker. He has previous experience in sales management roles and in human capital management consulting. RHSB is an independent insurance brokerage firm providing business insurance and risk management to companies and personal insurance to individuals and families.

Midwest

United Group Alliance (UGA), an alliance of independent insurance agencies, hired Dianne Swanson as regional vice president for Ohio. Swanson will be responsible for membership serDianne Swanson vice and business development for all UGA member agencies in her territory of Central/Southeastern Ohio. She will work closely with Nicole Kaylor, UGA’s regional INSURANCEJOURNAL.COM

agency development field specialist. Most recently, she served as the regional brokerage consultant for Nationwide Brokerage Solutions. Indianapolis-based independent insurance broker, ONI Risk Partners (ONI), has welcomed back Andrea Fehrenbacher in a new role as managing director of placement and risk transfer. In this role, Fehrenbacher leads the ONI placement and risk transfer team across its Indiana, Kentucky and Illinois footprint. Fehrenbacher is a 20-year insurance industry veteran and previously worked for ONI for 14 years. Most recently, she was a commercial insurance advisor and insurance marketing manager. ONI Risk Partners is a member of Atlanta-based Prime Risk Partners.

UFG Insurance in Cedar Rapids, Iowa, appointed Jeanette Dostal as Midwest regional manager. Dostal will succeed current Midwest regional manager Corey Ruehle, who was appointed chief claims officer in January. Dostal is currently the underwriting manager of the Midwest region based in UFG’s Cedar Rapids headquarters. She joined UFG in 1996 in a commercial lines support role and has since held the positions of commercial lines underwriter and commercial underwriting supervisor. She was promoted to Midwest region underwriting manager in 2012 and named an assistance vice president in 2014.

Southeast

Willis Towers Watson has appointed Jonathan Oppenheim as regional Construction leader in its Southeast region, part of the company’s North American Construction business. Oppenheim, a 30-year industry veteran, joins the company from JLT Specialty U.S.A., where he most recently served as partner in its construction risk partners business. Based in Atlanta, Oppenheim will be responsible for business development and managing the company’s construction portfolio in the region. He will focus on delivering the company’s services and products to clients including INSURANCEJOURNAL.COM

contractors, project owners, developers, architects and engineers.

INSUREtrust has added Rachel Boyd as a Professional Lines account executive on Executive Vice President Christiaan Durdaller’s Rachel Boyd brokering team. Boyd has seven years of wholesale experience in management liability, allied healthcare, medical malpractice, cyber and miscellaneous professional liability. She began her career at Trilogy Risk Specialists handling its small professional lines accounts and has spent the last two years as an account manager at Brown and Riding, working on Allied Healthcare and D&O. Boyd will help INSUREtrust continue to grow its management liability and allied healthcare books of business. INSUREtrust, located in the Atlanta metro area, is a national insurance wholesaler covering commercial risks generated using the internet, such as privacy and security breaches. Metro Atlanta-based InsuranceHub’s Lee LeBaigue has transitioned from vice president of Sales to vice president of Technology. LeBaigue joined InsuranceHub in 2011 with a background in SEO and business management. He began managing online Lee LeBaigue lead acquisition and the sales process before spending the next several years selling personal and commercial insurance. In 2016, Lee was promoted to vice president of Sales. InsuranceHub has since brought on dedicated, full time staff members to a technology- and marketing-focused division, which is the department that LeBaigue has been tapped to lead. The Marketing Technology division at InsuranceHub is responsible for marketing, lead generation and application development. InsuranceHub is a technology-driven insurance agency.

West

Lakeport, Calif.-based Lincoln-Leavitt Insurance has added Tina Gordon and Maria Davis. Gordon will focus on commercial insurance for the construction, manufacturing, retail and wholesale industries. Davis is an account manager and will service client accounts. Prior to joining the agency, both Gordon and Davis worked for Northwest Insurance/George Petersen Insurance. Gordon has worked in the insurance industry since 1989. Davis has 25 years of insurance experience. Lincoln-Leavitt is part of Leavitt.

USG Insurance Services has named Jeremy Weyrauch as a producer and bro-

ker in its satellite Oregon City, Ore. branch. Weyrauch has 13 years of experience. He started in the industry at Travelers Insurance and moved to wholesale in 2017 with Scottish American. He then moved to RPS before joining USG. Stockton, Calif.based M.J. Hall

& Company Inc. announced that

Patrick Lo, senior

vice president and treasurer, retired on Patrick Lo March 1. He is succeeded by Art Terner. Terner was previously the firm’s chief accountant. He began his career in the insurance industry 30 years ago and worked Art Terner as chief financial officer for Financial Pacific Insurance and Aspire General before joining M.J. Hall. Mayer Brown has named Paul P. Chen a partner in the corporate and securities practice in Northern California. Chen focuses on complex transactions in the insurance, financial services and health care sectors, especially deals involving technology and innovation. Chen was most recently at DLA Piper in San Francisco and Silicon Valley, where he was head of U.S. transactions for the insurance sector in addition to serving as head of Asia Corporate. MARCH 18, 2019 INSURANCE JOURNAL | 13

Business Moves

National Aon, Willis Towers Watson

Aon Plc said it’s no longer pursuing a combination with rival insurance brokerage Willis Towers Watson Plc, a day after confirming that it was considering a merger. The company reported it was in the early stages of exploring an all-share tie-up with Willis Towers after Bloomberg reported the potential plans. The companies held preliminary talks and Aon was preparing to submit a bid in the coming weeks, people familiar with the matter had said, asking not to be identified as the details aren’t public. The potential combination with Willis could have been the industry’s largest-ever merger.

AmWINS Group, The Flood Insurance Agency

AmWINS Group Inc., a global distributor of specialty insurance products and services, has completed the acquisition of The Flood Insurance Agency (TFIA), a Florida-based managing general agency that specializes in private market flood insurance. The Flood Insurance Agency, operating as a program administrator for Lexington Insurance Co., provides access to Private Market Flood, an alternative to the National Flood Insurance Program. The addition of TFIA expands AmWINS’ capabilities for flood products in both personal and commercial lines. AmWINS Group Inc. is based in Charlotte, 14 | INSURANCE JOURNAL | MARCH 18, 2019

N.C., and operates through more than 115 offices globally and handles premium placements in excess of $15.3 billion dollars annually. The Flood Insurance Agency (TFIA), established in 1984 and located in Gainesville, Fla., specializes in the distribution of private flood insurance throughout the U.S.

East Brown & Brown, LRS&C

Brown & Brown Insurance Agency of Virginia Inc., a subsidiary of Brown & Brown Inc., has acquired substantially all of the assets of LRS&C. Brown & Brown Inc. is an insurance brokerage firm providing risk management to individuals and businesses. LRS&C traces its roots back to July 1917 in Virginia and Washington, D.C. The firm provides a variety of personal and business insurance products and services to clients in the Mid-Atlantic region of the U.S. Following the acquisition, the LRS&C team will join Brown & Brown’s existing Manassas, Va., office and will operate under the leadership of Brown & Brown Insurance Agency of Virginia President Bill Strachan.

XPT Group, SVA Underwriting Services

XPT Group LLC has acquired SVA Underwriting Services Inc., a trucking and transportation MGA and Lloyd’s Coverholder.

SVA Underwriting specializes in physical damage and cargo cover with the ability to underwrite, issue policies and endorsements and arrange for engineering and loss control. Founded in 2013 by industry veteran Steven Vallejo, SVA Underwriting is a New York City-based company. XPT is a new specialty insurance distribution company formed through a partnership of management executives and an institutional investor who backs early stage insurance distribution firms. It brings together underwriting and wholesale brokerage firms across many specialty lines through acquisitions and new product development. The transaction closed on January 17, 2019, and SVA Underwriting will continue to operate under its established brand name so client business will not be affected. XPT was represented in the acquisition by TAG Financial. Following the acquisition, XPT continues to develop its wholesale insurance broking and managing general agency platform through acquisitions and operational growth. This is XPT’s third investment preceded by Western Security Surplus and WE Love & Associates (WEL). In the future, SVA Underwriting and WEL will leverage their trucking and transportation strengths to build new products while opening new markets to better serve their retail network.

Midwest Stafford & Stafford Insurance, Leavitt Group

Harrisonville, Missouri-based Stafford & Stafford Insurance has affiliated with Leavitt Group, a network of insurance brokers whose collective strength allows members to provide national insurance products and risk management resources to their clients. Stafford & Stafford Insurance is a full-service agency located in the heart of Missouri. Darrin and Carol Stafford opened the agency in 2003. Darrin Stafford has worked in the industry since 1994. Carol Stafford started her insurance career at an INSURANCEJOURNAL.COM

agency in her hometown of Harrisonville in 1983. Josh Stafford manages the agency.

Hub International, Integrated Risk Solutions

Hub International Limited, a global insurance brokerage headquartered in Chicago, has acquired the assets of Integrated Risk Solutions Inc. Based in Waukesha, Wisconsin, Integrated Risk is a commercial insurance and employee benefits agency specializing in the areas of risk management consulting, commercial insurance brokerage, employee benefits, loss control engineering and claim management. Integrated Risk has advised on compliance and risk management issues for clients in the construction, manufacturing, transportation, hospitality, retail and public entity industries. Tom Precia, president, CEO and co-founder of Integrated Risk, and Pete Aisbet, executive vice president and co-founder of Integrated Risk, will join Hub Midwest and report to Lerone Sidberry, CEO of Hub Midwest. Precia will assume the role of CEO of Wisconsin operations.

South Central Ryan Specialty Group, Westphalen Insurance Services, Myron F. Steves & Co.

Chicago-based Ryan Specialty Group LLC has closed its acquisition of the assets and operations of Westphalen Insurance Services Inc, an independently owned wholesale insurance brokerage with offices in Edmond, Oklahoma. The Westphalen team is now a part of R-T Specialty LLC, the wholesale brokerage unit of Ryan Specialty Group, and has established RT Specialty’s presence in Oklahoma. This transaction was previously announced on Feb. 11, 2019. Founded in 1987, Westphalen is a longtime family run business which focuses on property and casualty, personal lines and transportation. Lead by Jeff Westphalen, the firm has binding authority commitments within each segment with ‘A’ rated XV carriers. INSURANCEJOURNAL.COM

Ryan Specialty Group also completed its acquisition of the assets and operations of Myron F. Steves & Co., an independently owned wholesale brokerage headquartered in Houston, Texas, with additional offices in Austin, Dallas and San Antonio. The Myron Steves team has become part of R-T Specialty, LLC (RT Specialty), the wholesale brokerage unit of Ryan Specialty Group, and expands the company’s presence in Texas, strengthening RT’s presence in Dallas and Houston and establishing offices in Austin and San Antonio. This transaction was previously announced on Feb. 14, 2019. Founded in 1955, Myron Steves' specialties include commercial property and casualty, professional liability, healthcare, transportation and personal lines.

Southeast Insurance Group, BLP Insurance Services

Insurance Group of St. Charles County has purchased BLP Insurance Services dba Pelt Risk Advisors, an Atlanta-based insurance company founded in 2010 by Byron Pelt. Insurance Group of St. Charles County, headquartered in St. Louis, Mo., is a member of Valley Insurance Agency Alliance (VIAA), a family of more than 120 independent insurance agencies in Missouri and Illinois. Founded in 1992, it is a full-service insurance agency that specializes in personal and business insurance. The company is owned by husband and wife Ben and Rhonda Fischer. BLP Insurance Services is an independently owned and locally operated insurance agency offering insurance products from a variety of carriers. It offers vehicle, property, business, health and life insurance in the Atlanta area. Founded in 2006, VIAA is the regional founding member for the Strategic Insurance Agency Alliance (SIAA).

Patriot Growth Insurance Services, Turner Insurance & Bonding Co.

Patriot Growth Insurance Services LLC, a national retail insurance agency, has added Turner Insurance & Bonding

Company to the Patriot platform. The addition of Turner deepens Patriot’s property and casualty insurance capabilities and further supports Patriot’s national expansion. Founded in 1934 and based in Alabama, Turner specializes in the construction industry, providing surety, insurance and risk management products to a diverse construction client base. Led by CEO David Durden, Turner has experience in the United States and abroad in various construction sectors including infrastructure, governmental and institutional. This partnership comes just weeks after Patriot announced the formation of its growth-focused national insurance services platform in collaboration with 17 independent insurance agencies and with TRUE Network Advisors. Founded in 2019, Patriot is a growth-focused national insurance services firm that partners with employee benefits and property & casualty agencies across the United States. Patriot’s collaborative model delivers resources and strategic support to its agencies. Patriot is backed by growth equity investor Summit Partners.

West Relation Insurance, Villane Ward

Relation Insurance Services has acquired Villane Ward Insurance Services Inc. in Fresno, Calif. Villane Ward is a privately owned and operated employee benefits brokerage that specializes in mid-market clients. Relation Insurance Services is a privately owned insurance brokerage that offers property/casualty, risk management, benefits, and TPA-consulting services.

InterWest, Placer Insurance Agency

InterWest Insurance Services has acquired Placer Insurance Agency in Roseville, Calif. Placer specializes in commercial, surety bonds, employee benefits and personal insurance programs. InterWest is a locally owned, regional insurance brokerage headquartered in Sacramento with 340 employees. MARCH 18, 2019 INSURANCE JOURNAL | 15

News & Markets U.S. Commercial Insurance Prices Inched Up in Q4

.S. commercial insurance carriers again earned price increases in the 2018 fourth quarter, but the growth was slight. Premiums during the quarter grew just

under 2 percent on average compared to the same period in 2017, according to Willis Towers Watson’s latest Commercial Lines Insurance Pricing Survey (CLIPS). Trends continued on a similar trajectory from the 2018 third quarter and earlier in the year, with some commercial insurance lines growing more than others. Pricing for commercial property, for example, went up more than 4 percent on average during the quarter and commercial auto prices increased at or near double digits for the fifth consecutive quarter, Willis Towers Watson said. Workers’ compensation was an exception once again, with “ongoing material price reductions” according to the CLIPS report.

YES 73.45% (260 votes)

Willis Towers Watson determined that early reports of 2018 claim cost inflation showed higher cost increases than in 2017. “Price increases for the fourth quarter were primarily modest, yet sustaining the level reported throughout 2018,” said Jeffrey Carlson, director, Insurance Consulting and Technology, Willis Towers Watson. “Also, the uptick in carriers’ reported claim cost inflation for 2018 may be contributing to upward pressure on rates.” Willis Towers Watson’s survey involves data from 39 insurers representing approximately 20 percent of the U.S. commercial insurance market, excluding state workers’ compensation funds.

InsuranceJournal.com Poll InsuranceJournal.com Poll Dosupport you support legalization ofof Do you legalization recreational use of marijuana? recreational use of marijuana?

NO 22.88% (81 votes)

NOT SURE 3.67% (13 votes)

Total votes: 354

News & Markets Groundwater Near Most Coal Plants Polluted by Coal Ash

By Valerie Volcovici

ore than 90 percent of U.S. coal-fired power plants that are required to monitor groundwater near their coal ash dumps show unsafe levels of toxic metals, posing potential harm to drinking water, according to a study released by environmental groups. The groups, led by the Environmental Integrity Project and Earthjustice, said their findings show that stronger regulations are needed for coal ash. Data made public by power companies showed that of the 265 plants subject to monitoring requirements, 241 — or 91 percent — showed unsafe levels of one or more coal ash components in nearby groundwater when compared against U.S. Environmental Protection Agency (EPA) standards, noted the groups’ analysis. The report found 52 percent of those plants had unsafe levels of cancer-causing arsenic in nearby groundwater, while 60 percent showed unsafe levels of lithium, which can cause neurological damage. Using the industry’s own data, the report proves that coal plants are poison-

ing groundwater nearly everywhere they operate, said Lisa Evans, senior counsel with Earthjustice. The environmental groups reviewed data reported from 4,600 groundwater monitoring wells near coal ash dumps of two-thirds of the coal-fired power plants in the United States. Coal ash, which is the residue produced from burning coal in coal-fired plants, is stored at hundreds of power plants throughout the country. Spills in Tennessee and North Carolina leached sludge containing toxic materials into rivers in those states in the past decade. In response, the Obama administration in 2015 established minimum national standards for the disposal of coal ash, including a requirement that companies monitor groundwater and publish their data. According to the EPA’s website, coal ash contains contaminants like mercury, cadmium and arsenic, which without proper management, can pollute waterways, groundwater, drinking water and the air. Amid strong pressure from utility and coal companies, the EPA last July revised the 2015 rule to suspend groundwater

monitoring requirements at coal ash sites if it is determined there is no potential for pollutants to move into certain aquifers. The rule also extended the life of some coal ash ponds from early 2019 to late 2020. Because contaminated groundwater can potentially harm drinking water, the environmental groups’ report said the data shows that stronger regulations are needed for coal ash. The coal ash rule does not require tests of local drinking water. By weakening cleanup standards and pushing back ash pond closure deadlines, Trump’s EPA is endangering communities and ecosystems near these toxic waste sites, the report said. The EPA was not immediately available for comment by its administrator, Andrew Wheeler. Wheeler, who last summer was the EPA’s acting head and who was confirmed as the agency’s administrator by the Senate in February, said the EPA’s revised coal ash rules would save tens of millions of dollars in regulatory costs.

News & Markets

Wake-Up Call on Walking Pedestrian Fatalities Continue to Rise

new report projects that 6,227 pedestrian fatalities occurred in 2018, the highest number in nearly three decades. Pedestrians will account for 16 percent of all traffic deaths in 2018, compared to 12 percent in 2008. While advancements in motor vehicle safety and technology have increased survivability for vehicle occupants involved in crashes, pedestrians remain just as susceptible to sustaining serious or fatal injuries when struck by a motor vehicle, according to a recent report from the Governors Highway Safety

Association (GHSA). GHSA projects a four percent increase in the number of pedestrians killed based on reports from states of pedestrian fatalities for the first six months of 2018. Despite the overall rise, 23 states saw declines in pedestrian fatalities for the first half of 2018 compared to 2017. Six states reported double-digit declines and three reported consecutive years of declines. Additionally, sharp decreases in pedestrian fatalities in some cities suggest that state-level data may obscure local success stories, according to the report.

have risen 35 percent,” noted GHSA Executive Director Jonathan Adkins. “The alarm bells continue to sound on this issue; it’s clear we need to fortify our collective efforts to protect pedestrians and reverse the trend.” Report author Richard Retting said there are infrastructure, engineering and behavioral strategies that reduce pedestrian deaths. “Critical improvements to road and vehicle design are being made, but take significant time and resources to implement,” he noted.

From 2008-2017, pedestrian fatalities increased by 35%. When combined, all other traffic deaths decreased 6% over the same period.

Since 2013, pedestrian fatalities involving SUVs increased by 50%, compared to 30% for passenger cars. 2,500

+30%

An increase in walking appears to have increased exposure. One survey cited in the report estimated that the number of Americans walking to work has increased about four percent between 2007 and 2016. Most pedestrian fatalities take place on local roads, at night, away from intersections. Nighttime crashes account for more than 90 percent of the total increase in pedestrian deaths. “While we have made progress reducing fatalities among many other road users in the past decade, pedestrian deaths

35%

2,279

1,754 1,500

+50%

1,097

1,000 730 500 2013 2017 Passenger Cars

18 | INSURANCE JOURNAL | MARCH 18, 2019

2013

2017 SUVs

Source: NHTSA Fatality Analysis Reporting System

2,000

6% Source: NHTSA Fatality Analysis Reporting System

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News & Markets No Criminal Liability for Uber in Fatal 2018 Arizona Self-Driving Car Crash By David Shepardson

ber Technologies Inc. is not criminally liable in a March 2018 crash in Tempe, Ariz., in which one of the company’s self-driving cars struck

and killed a pedestrian, prosecutors said earlier this month. The Yavapai County Attorney said in a letter made public that there was no basis for criminal liability for Uber, but that the conduct of the back-up driver, Rafael

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Vasquez, should be referred to the police for additional investigation. Police said last year that Vasquez was streaming a television show on a phone until about the time of the crash and called the incident “entirely avoidable.” An Uber spokeswoman declined to comment. Vasquez, who could face charges of vehicular manslaughter, has not commented.

Yavapai County Attorney Sheila Sullivan Polk said its investigation concluded that “the collision video, as it displays, likely does not accurately depict the events that occurred.” She said expert analysis is needed to match what the person sitting in the driver’s seat of the vehicle would or should have seen that night given the vehicle’s speed, conditions and other relevant factors. The National Transportation Safety Board and National Highway Traffic Safety Administration are still investigating the fatal crash. The Uber car was in autonomous mode at the time of the crash, but the company requires a back-up driver inside to intervene when the system fails or a tricky situation occurs. The Tempe police report said Vasquez repeatedly looked down and not at the road, glancing up a half second before the car hit Elaine Herzberg, 49, who was crossing the street at night. Police obtained records from online steaming service Hulu showing Vasquez’s account was playing the TV talent show “The Voice” for about 42 minutes on the night of the crash, which “coincides with the approximate time of the collision.” Copyright 2019 Reuters. All rights reserved.

1/10/18 1:53 PM

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Dear Reader:

very business has a story to tell. For many corporations, small and large, that story ties closely to the personal lives of their founders. Throughout Insurance Journal’s history, we have come to know and appreciate many of the unique stories in our industry. And year after year, we have watched as our advertisers’ and readers’ companies have grown and changed.

As a leading industry news and information source, we are not able to profile all of the corporations that cross our path. Our position as journalists sometimes makes it difficult as well. Consequently, we have created this special supplement to allow our clients, and some of the corporations you may work with on a daily basis, to tell their story ... in their own words. We hope you find this supplement interesting and informative. Best wishes from all of us at Insurance Journal.

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MARCH 18, 2019 INSURANCE JOURNAL | 19

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News & Markets OSHA Scraps Obama Workplace Injury Reporting Rule; 6 States Sue By Elizabeth Blosfield

iting a concern over potential public disclosure of sensitive worker information, the Occupational Safety and Health Administration (OSHA) recently eliminated a requirement for businesses with 250 or more employees to electronically submit annual reports on every employee injury or illness. The move reverses a rule put in place by the Obama administration in 2016, and the change is being opposed in court by a handful of states that say: •The rollback is illegal and unjustified; •The data is needed to prevent work place injuries; •There is no privacy threat. While OSHA has now lifted the annual electronic reporting requirement for Form 300 (Log of Work-Related Injuries and Illnesses) and OSHA Form 301 (Injury and Illness Incident Report), businesses with 250 or more employees will still have to maintain the completed forms with the information on their sites and make them available for any OSHA inspectors. These business will also still be required to electronically submit information on the OSHA form (300A) that is a summary of work-related injuries and illnesses but that does not contain detailed logs. “By preventing routine government collection of information that may be quite sensitive, including descriptions of workers’ injuries and body parts affected, OSHA is avoiding the risk that such information might be publicly disclosed under the Freedom of Information Act,” the agency said. “This rule will better protect personally identifiable information or data that could be re-identified with a particular worker,” OSHA stated. OSHA said it also believes its new rule will allow it to “improve enforcement targeting and compliance assistance, protect worker privacy and safety, and decrease burden on employers.” Six state attorneys general maintain the

reversal of the reporting requirement lacks valid rationale and legal basis. They said the OSHA forms do not contain any personally identifiable information. They also maintain that when the 2016 rule was devised, privacy concerns were addressed, and OSHA took certain steps - such as declining to collect employee names or the names of their physicians - to reflect a need to protect privacy. The states want the court to vacate the new rule, as well as order OSHA to immediately implement all aspects of the 2016 rule and award the plaintiff states reasonable costs, including attorneys’ fees. New Jersey, Illinois, Maryland, Massachusetts, Minnesota and New York filed their lawsuit March 6 in the U.S. District Court for the District of Columbia. The complaint seeks an injunction against Secretary of Labor Alexander Acosta, Acting Assistant Secretary of Labor for OSHA Loren Sweatt, the U.S. Department of Labor and OSHA. The states’ complaint criticizes OSHA for an “about face” on what they see as “an essential tool” to track workplace hazards. The rule dismisses as “illogical” OSHA’s allegations that the reporting requirement could create privacy risks. “This rollback will make workplaces more dangerous and [will] result in more workers being hurt on the job,” Massachusetts Attorney General Maura Healey said in a press release issued by her office. The six states argue that their proprietary interests and quasi sovereign interests are directly harmed by the 2019 final rule.

Rule History

OSHA’s initial 2016 rule required all large employers to submit information annually from three different workplace injury and illness tracking forms that employers were already required to maintain. The administration at that time said this move was being taken to help OSHA and states better target their workplace

‘This rule will better protect personally identifiable information or data that could be re-identified with a particular worker.’

safety enforcement programs, encourage employers to abate these hazards, empower workers to identify risks and provide information to researchers who work on occupational safety and health, according to the complaint. Prior to the 2016 rule, employers were required to record and maintain all of the informa-

tion in the tracking forms and make them available to OSHA or state inspectors upon request. The 2016 rule instead required employers with 250 or more employees to file the forms with OSHA electronically. OSHA was supposed to begin collecting information on the Annual Summary Form 300A — which provides

a summary of work-related injuries and illnesses — on July 1, 2017. The more detailed information in Forms 300 and 301 — which respectively provide a log of work-related injuries and illnesses, and an injury and illness incident report — was to be collected on July 1, 2018. On July 30, 2018, however, OSHA proposed to amend the 2016 rule. On January 25, 2019, OSHA published a final rule, reversing its position regarding the benefits and risks of requiring large employers to electronically submit information from the tracking forms and contending that the costs of collecting the detailed information outweigh the benefits. However, in their complaint, the six state attorneys general argue that the information regarding workplace injuries and illnesses, and the events surrounding them, is necessary for policymakers, program developers and researchers in the states to understand the causes of workplace injuries and illnesses and to design their training, outreach and enforcement programs to improve workplace safety and health. The attorneys general maintain that by replacing the 2016 rule with the new rule, OSHA “did not even come close to justifying its views that the reporting of workplace injuries and illnesses has few benefits to states, workers, and researchers, or that it puts workers’ privacy at risk.” “Data on occupational injuries and fatalities is critical to ensuring healthy and safe workplaces,” said Jodi Sugerman-Brozan at the Massachusetts Coalition for Occupational Safety and Health. “If we don’t understand what is hurting, or worse, killing workers, we can’t take action to reduce those hazards.”

Claims Journal Truth-Tellers for Claims Adjusters

3-D Images, Surveillance Video Cameras Help Catch Fakes

Three-dimensional images allow people, perhaps jurors, to see disorders that otherwise would likely only be described in an IME’s narrative report. By Jim Sams

he physician couldn’t tell what was causing the smudge on a CT scan of his wife’s lungs, so he referred her to a pulmonologist. That would likely have meant a two-week delay. Instead of waiting, Corey Chernett, chief executive officer of Authentic4D, took his wife to a “sub-specialty” radiologist the next day. During a presentation at the Combined Claims Conference, Chernett showed the result on screen: A three-dimensional image that clearly showed a pear-shaped mass in his wife’s lung. Turns out, the mass was a non-malignant abscess. But

the speed at which the radiologist was able to produce a usable image allowed a speedy biopsy that put an end to his wife’s nagging cough. Chernett, his chief medical officer at Authentic4D and a claims manager for GEICO pitched the use of 3-D imaging instead of hiring independent medical examiners to hasten the resolution of injury claims. Specifically, Chernett said using highly specialized radiologists who have an extra year or two of training in specific fields, such as the musculoskeletal system or neurology, will allow claims adjusters to quickly and accurately identify legitimate claims that should be settled and claims that should be defended.

34 | INSURANCE JOURNAL | MARCH 18, 2019

Chernett said 3-D imaging is especially useful for identifying claimants who are exaggerating injuries. He said 70 percent of people are visual learners. Three-dimensional images allow people, perhaps jurors, to see disorders that otherwise would likely only be described in an IME’s narrative report. Typically, an Authentic4D radiologist will couple a video of 3-D image with a narrative and an affidavit that can be introduced as medical evidence for about $1,500, he said. For an extra charge, that report can include a voiceover by the radiologist. “Three-D images reinforce the strength of your position,” Chernett said. “This is the signal that you want to show

the other side, that you are prepared to take the case the distance.” Dr. James A. Shirley, Authentic4D’s chief medical officer, said a New York study including 153 patients who had received imaging showed radiologists disagreed on what those images showed in 40 percent of cases. Shirley said radiologists can be influenced by suggesting a certain injury exists, which is why Authentic4D insists on keeping its radiologists “blind” to whatever disorder is being asserted by claimants. “It’s very important that the doctor is unaware of the details of the case,” he said. The importance of images to claims professionals isn’t limitINSURANCEJOURNAL.COM

ed to injury claims. Later at the same conference, a security expert, an attorney and a city manager extolled the virtues of video surveillance as a means of managing risk. Seymour Everett, a partner with the Everett Dorey law firm in Irvine, Calif., said attorneys should ask if a video is available in every case. He said he encourages his clients to invest in robust surveillance systems. “What we tell our clients is you have to implement a public surveillance system because everybody else is doing it,” he said. He explained most people

can take videos on cell phones. More law enforcement agencies are equipping officers with body cameras. Some cities even mount cameras in heavily trafficked public areas. In fact, Chicago has an aggressive public surveillance system, Everrett said. Actor Jussie Smollet was arrested and accused of setting up a hoax attack on himself after Chicago police reviewed video taken from nearby surveillance cameras. Everett said there are a couple of legal issues to keep in mind when deciding whether to install public surveillance. Cameras should not be used

in areas where people have an expectation of privacy, such as within homes. Also, one should consider whether video surveillance would create a chilling effect on speech or conduct, he said. For claims handlers, finding out whether video exists is the important question. Often, videos can show up in unexpected places. For example, a plaintiff may remove videos from social media that don’t help his position, said Joe Dalu, president of Premier Group International and a former police officer. But similar footage might be found by checking social media accounts

of the plaintiff’s friends and family. Jim Vanderpool, city manager for Buena Park, California, said his municipality has installed video cameras in the entertainment district and equips its police officers with body cameras. He said the cameras on the streets make the public feel safer and the officers’ body cams have reduced personnel complaints. “When we get these complaints, we tell them we are happy to sit down with them and review the video with them,” he said.

Sams is editor of Well's Media Group's ClaimsJournal.com.

3 Claims Areas Where Property Insurers Disappoint Customers

roperty insurers are falling short in some areas of the claims process even as they earn high marks for overall customer satisfaction, according to the J.D. Power 2019 U.S. Property Claims Satisfaction Study. J.D. Power said insurers continue to misfire in how they keep customers informed on the progress of a claim, the time to settle the claim and the fairness of the settlement. Consumers ranked each area among the lowest in a series of satisfaction. That becomes a competitive problem as customers demand more personalized coverage, according to the consumer insight, advisory and data/analytics firm. “Overall customer satisfaction remains high and the leading providers continue to outperform their peers by a comfortable margin,” David Pieffer, Property & Casualty Lead for J.D. Power Insurance Intelligence, said in prepared remarks. “There also are obviINSURANCEJOURNAL.COM

ous areas for improvement where insurers could do a better job of managing customer expectations. As the industry keeps shifting toward more personalized, usage-based and on-demand insurance options, the ability to communicate effectively and make claimants feel at ease along the way will be a key differentiator for top-performing insurers.” Among the study’s findings: Overall customer satisfaction among claimants whose claim length was as described was an average of 905 out of 1,000 points. When that claim took longer than expected, the number dipped to 754. When there is no claim deadline, satisfaction dips lower, to 753. The key message: Carriers and agents gain if they accurately set expectations for the length of an open claim. Concierge services can boost customer satisfaction, if provided at first notice of loss. J.D. Power found customer satisfaction jumped by 42

points when insurers make a hotel reservation for a claimant immediately after FNOL. Discussing repair options boosted customer satisfaction by 44 points, and notifying a repair company boosted the number by 38 points. Services that helped customers schedule an estimate hiked that number up 33 points. Claims service varies dramatically among insurers. J.D. Power found the gap in property claims satisfaction between the highest- and lowest- performing insurers is 76 points. The study measured satisfaction with the property claims experience among customers who have filed a claim for damages by examining five factors (listed in order of importance): settlement; claim servicing; first notice of loss; estimation process; and repair process. J.D. Power received responses from 6,374 homeowners insurance customers, between April and November 2018. MARCH 18, 2019 INSURANCE JOURNAL | 35

Spotlight: Consumer Protection

Consumer Advocacy in an Age of Consumer, Insurer Options Today’s Insurance Consumer Advocates Are Tackling Some New and Old Issues

ears ago, insurance consumer advocates in the states were most often focused on getting consumers access to insurance at fair prices. They still advocate on those issues, of course, but today some are looking beyond these traditional concerns.

Property/casualty insurance consumer advocates in some states are tackling data and technology, improved consumer education and even energy projects as they relate to insurance. In some cases, today’s challenges are the consequences of past success in creating more options for consumers and now wanting to make sure that they understand their choices. In others, they reflect efforts to protect consumers in an age of costly catastrophes and ubiquitous data use.

The use by property/casualty insurers of big data and the complex algorithms to set pricing, resolve claims, market their products and even combat fraud is an economic justice concern for longtime consumer advocate Birny Birnbaum. It’s one that insurance regulators have not yet successfully addressed, he says. Birnbaum, executive director of the Austin, Texas-based Center for Economic Justice, a non-profit dedicated to advo-

cating for low-income and minority consumers, says that to compound the problem, insurance regulators have not addressed the challenges that big data and complex algorithms pose in terms of consumer protection. “In the absence of meaningful data on who is writing what products in what locations at what prices, there is no meaningful way to evaluate insurance availability and affordability. However, we know that the growth of climate-change

driven weather-related events will tax public and private insurance mechanism,” Birnbaum says. Birnbaum has praise for Texas Insurance Commissioner Ken Sullivan’s “commitment and actions to improving consumer information and disclosure.” However, overall, he says, there is still a lot of work for states to do. “There is tremendous opportunity to improve consumer information about insurance products and insurer market performance to promote more competitive markets,” he said.

Policy Customization

One area of opportunity is improving consumers’ understanding of the insurance coverages they need and the coverages their policies provide, according to Melissa Hamilton, who is immersed in insurance consumer issues in Texas as public counsel with the Texas

Office of Public Insurance Counsel (OPIC), a state agency tasked with representing consumers in insurance matters. Over the years, the P/C insurance industry in Texas and other states has been granted more flexibility in writing policies, which in turn has led to more policy customization. Hamilton says this is presenting a challenge to consumers. “Consumers will most likely have to customize their policy through endorsements to best fit their insurance needs. They will also have to understand the many different coverages offered for one line of insurance,” Hamilton told Insurance Journal. As a result of the expanding variety of policy options available to consumers, OPIC has made consumer education as a primary focus. “The Texas insurance market is generally competitive at most price points for most lines of insurance,” Hamilton says. But with competition comes diversity of choices, and her concern is that some consumers may not be adept at shopping for the kinds of insurance most suitable to their needs at the price they can afford. “Many consumers shop based solely on price. Insurance ads and other marketing tools also tend to focus on price. While price is certainly an important consid-

eration, price is not the only, and potentially not the most important, consideration when shopping for insurance,” she says. To help consumers determine and select the kinds of insurance for their needs, Hamilton’s agency has developed resources such as shopping guides and insurance checklists for consumers to use when shopping for home and auto coverages. “When consumers have the right information and know what questions to ask, they can navigate the insurance marketplace more easily and hopefully make the market work for them,” she says. Insurers, too, can help potential policyholders by using plain language in insurance policies, Hamilton says. That’s an area of opportunity for insurance companies to not only enhance the consumer experience but also improve carrier efficiency and accuracy in policy writing. “Reducing technical and legal jargon, and long poli-

cy contracts with multiple endorsements, would significantly improve property and casualty insurance products,” Hamilton says. The Florida Association for Insurance Reform (FAIR) has a lot on its plate, including curbing costly abuse in the property insurance claims process and reducing inefficiencies in workers’ compensation, but this same issue of consumers’ awareness of their insurance needs is also a concern. FAIR President Jay Neal says there is an inverse relationship between the availability and affordability of insurance in Florida. “Broad coverage can be found in most lines of insurance but at higher actuarial indicated rates. Consequently, price sensitive insureds may opt for diminished coverages in exchange for reduced premiums. Greater education is needed to highlight the consumer risk exposures and the value of narrowing their insurance protection gaps,”

continued on page 38

MARCH 18, 2019 INSURANCE JOURNAL | 37

Spotlight: Consumer Protection continued from page 37 according to the Florida leader. At the same time, Neal believes the Florida insurance market in particular ranks high when it comes to competition and for its “innovative product offerings” including private flood coverage. In the area of data privacy, California consumer advocates are watching attempts to amend what is already the nation’s most far-reaching data privacy law that was passed in 2018 and is set to go into effect in 2020. The law currently enables a limited private right of action. But new proposals would give consumers even more power to sue corporations, including insurers, for mishandling personal data. Companies that collect personal information should be paying close attention, according to Anne Kelley, a partner with Newmeyer & Dillion, who practices in insurance coverage matters. “It would really open the doors for litigation under the CCPA,” Kelley told Insurance Journal. Pipelines Some advocates are trying to look ahead to the effects cer-

tain energy and climate-related developments might have on insurance. In Virginia, advocates are raising concerns about two interstate gas pipelines, one that is under construction and one that has yet to start construction. The Atlantic Coast Pipeline is aimed at strengthening the energy security of the Mid-Atlantic region, according to the project’s website. The Mountain Valley Pipeline will be a natural gas pipeline spanning approximately more than 300 miles from northwestern West Virginia to southern Virginia. “Since the high-pressure pipelines may go into service in 2019, the property insurance challenges will start to appear,” maintains Irene Leech, president of the Virginia Citizens Consumer Council. Specifically, Leech’s group is worried that after the pipelines are installed near homes in Virginia, they could impact the cost of homeowners’ insurance in those areas. However, a spokesperson for the Virginia State Corporation Commission’s Bureau of Insurance told Insurance Journal the pipelines themselves should not change

38 | INSURANCE JOURNAL | MARCH 18, 2019

Virginia’s risk assessment by insurance underwriters. The department noted that other natural gas and hazardous liquid pipelines already cross Virginia and are subject to “strict federal regulations regarding pipeline safety.” Leech said her group is also watching what is happening to the cost of homeowners’ insurance for Virginians on the coast. The state says the introduction of hurricane and wind deductibles has improved availability of insurance for coastal homes, although premiums reman priced based on the risk of being near the water.

Wildfires

For consumer advocates in California, one issue has clearly emerged as a priority. Increasingly severe California wildfires are a threat to the state as a whole. Back-to-back historic wildfire seasons have caused billions of dollars in insured losses. Consumer advocates note that homeowners’ insurance is now difficult to obtain in wildfire prone areas, and there’s an imminent threat of rate hikes. For Richard Holober, execu-

tive director of the Consumer Federation of California, this is his top priority for the year: “Making sure that insurance industry honors claims of victims of wildfires and that the Department of Insurance takes a long-term view in rate setting, instead of allowing the industry to raise homeowners’ rates unreasonably.” The fires could also cripple the state’s utility giants, whose practices and faulty equipment have been pointed to as potential causes of some of the massive blazes. Pacific Gas & Electric went into bankruptcy in the face of billions of dollars in potential labilities from those seeking compensation for the disasters. Holober wants to make sure PG&E doesn’t avoid its liabilities, adding that his other priority as a consumer advocate is “guarding against utility industry efforts to evade liability and shift costs, if held responsible for causing fires.”

TradItional Issue

There are, of course, state advocates still focusing on the age-old consumer issues, such as auto insurance pricing and availability. Liz Coyle, executive director of consumer group Georgia Watch, sees rising auto insurance rates as a concern and has called on the state legislature to repeal the 2008 “file-anduse” law and restore the commissioner’s authority to rein in excessive rate increases. “We support that idea,” Coyle said. “We also will call on Commissioner [Jim] Beck as we did his predecessor to address pricing disparities that cause lower income Georgians to pay more for their policies. In 2019, we’d like to see a lot INSURANCEJOURNAL.COM

more transparency in how auto insurance rates are set.”

Helping consumers understand their insurance options and insurers’ use of big data. Auto insurance is also a concern in Delaware, where both the Delaware Community Reinvestment Action Council (DCRAC) and the Consumer Federation of America (CFA) hope to see some changes in how auto insurance rates are determined. “Driving records, accidents, zip code, history, credit, make even the least expensive insurance too expensive,” DCRAC has complained. “You should not have to get a new job, get a master’s degree and buy a house, just to get a fair price for auto insurance,” CFA Director of Insurance Robert Hunter has said in arguing for changes. A 2017 law restricted the use of some rating criteria, but advocates are pushing or more. In Florida, FAIR wants to see the state’s personal injury protection (PIP) law replaced with mandatory bodily injury coverage. But first, Florida must legislate contractor controls and consumer protections to address assignment of benefits (AOB) abuses that are leading to higher property insurance rates for Florida residents, according to consumer and industry groups there.

Insurance Journal Editors Stephanie Jones, Elizabeth Blosfield, Amy O’Connor and Don Jergler contributed to this report.

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The National Association of Insurance Commissioners (NAIC) earlier this year named 34 representatives for 2019 under its Consumer Liaison Program that promotes consumer interaction with state insurance regulators at meetings and throughout the year. The 20 funded and 14 unfunded consumer representatives began their terms Jan. 1. NAIC-funded representatives are those who are reimbursed for airfare, lodging, and meal expenses associated with participation in and traveling to NAIC meetings. Organizations that receive significant funding from the insurance industry are not eligible to be an NAIC consumer liaison. "Our consumer liaison representatives are experts in their fields and provide regulators with important insights," said Eric Cioppa, NAIC president and Maine superintendent of insurance. "Their contributions help protect consumers, which is always one of our top priorities."

The 2019 Funded Consumer Liaison Representatives New funded representatives are noted with an asterisk. • Luc Athayde-Rizzaro: Policy Counsel, National Center for Transgender Equality* • Amy Bach: Executive Director, United Policyholders • Birny Birnbaum: Executive Director, Center for Economic Justice • Brendan M. Bridgeland: Director, Center for Insurance Research • Bonnie Burns: Training and Policy Specialist, California Health Advocates • Thomas M. Callahan: Executive Director, Massachusetts Affordable Housing Alliance • Laura Colbert: Executive Director, Georgians for a Healthy Future • Brenda J. Cude: Professor, Department of Financial Planning, Housing and Consumer

Economics, University of Georgia • Erica Eversman: President, Automotive Education & Policy Institute* • Justin Giovannelli: Associate Research Professor, Georgetown University Center on Health Insurance Reform* • Debra K. Judy: Policy Director, Colorado Consumer Health Initiative • Katherine (Katie) Keith: Consultant Advisor and Steering Committee Member, Out2Enroll • Karrol Kitt: Emeritis Associate Professor, The University of Texas at Austin School of Human Ecology Department of Human Development & Family Sciences • Peter R. Kochenburger: Associate Clinical Professor of Law, Executive Director, Insurance Law Center, University of Connecticut School of Law • Michelle Lilienfeld: Senior Attorney, National Health Law Program • Sarah Lueck: Senior Policy Analyst, Center on Budget and Policy Priorities • Claire McAndrew: Director of Campaign Strategy, Families USA • Brendan Riley: Health Policy Analyst, North Carolina Justice Center • Jackson Williams: Director of Government Affairs, Dialysis Patient Citizens • Silvia Yee: Senior Staff Attorney and Analyst, Disability Rights Education and Defense Fund

The 2019 Unfunded Consumer Representatives New representatives noted with an asterisk. • • • • •

Ashley Blackburn: Senior Policy Analyst, Community Catalyst Benjamin Chandhok: Senior Director of State Legislative Affairs, Arthritis Foundation* Lucy Culp: State and Community Advocacy Advisor, American Heart Association Deborah Darcy: Director of Government Relations, American Kidney Fund Eric Ellsworth: Director, Health Data Strategy, Consumers Checkbook/Center for the Study of

Services

• Marguerite Herman: Lobbyist, Wyoming High School Mock Trial/Healthy Wyoming • Anna Howard: Principal, Policy Development, Access to and Quality of Care, American Cancer

Society Cancer Action Network • Amy Killelea: Director, Health Systems Integration, National Alliance of State and Territorial AIDS Directors • Ken Klein: Professor of Law, California Western School of Law* • Carl Schmid: Deputy Executive Director, The AIDS Institute • Matthew Smith: Director of Government Affairs, Coalition Against Insurance Fraud • Andrew Sperling: Director of Legislative Advocacy, National Alliance on Mental Illness • Harold M. Ting: Consumer Advocate Volunteer, Chester County Department of Aging Services Apprise Program* • Lorri Shealy Unumb: Vice President, State Government Affairs, Autism Speaks

MARCH 18, 2019 INSURANCE JOURNAL | 39

Special Report: Restaurants & Bars

By Andrea Wells

40 | INSURANCE JOURNAL | MARCH 18, 2019

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t’s a good time to be in the restaurant industry. Restaurant sales in 2018 were projected to reach $825 billion — a 3.1 percent increase over 2017, according to the National Restaurant Association (NRA). Employment is up, too. The U.S. restaurant industry employs 15.1 million people, about one in 10 working Americans, and the industry’s workforce is expected to increase to 16.7 million people within the next decade. The NRA also reported in February that some 55 percent of restaurant operators made a capital expenditure on equipment, expansion or remodeling within the last three months, and 57 percent said they plan to make a capital expenditure within the next six months. That’s good news for insurance brokers serving up insurance for this diverse sector of the hospitality market. Specialists in this sector have their eye on a few key areas where exposures are changing. Here’s what they had to say.

Sexual Harassment

In the wake of the #MeToo movement, which brought issues surrounding sexual harassment to the forefront, restaurants have become more interested in buying appropriate insurance protection, says David DeLorenzo, CEO of the Ambassador Group Insurance and founder of the Bar & Restaurant Specialty Program based in Phoenix. It’s an area of risk in which his retail agency has seen the most interest from restaurant and bar owners in the past year or so, he says. Employment practices liability, especially INSURANCEJOURNAL.COM

stand-alone policies, have been the biggest growth area for his agency in the last five years. It’s not surprising given the rate of incidents. More sexual harassment claims in the U.S. are filed in the restaurant industry than in any other industry, according to the Harvard Business Review. Restaurants report that as much as 90 percent of women and 70 percent of men have experienced some form of sexual harassment. Over the last year, the #MeToo movement, which initially focused on the entertainment industry, CEOs and white-collar workers, began to highlight the challenges that low-wage, service workers faced. Last year, Walmart and McDonald’s were both hit with claims of workplace sexual harassment. And, in September, hundreds of McDonald’s workers protested conditions at the fast-food chain, demanding the company do more to protect its employees.

‘More restaurateurs, big and small, are buying stand-alone employment practice policies because they can get a lot more coverage and third-party coverage.’ There are several reasons that make restaurant employees particularly vulnerable to sexual harassment, according to an article in the Harvard Business Review co-authored by Stefanie K. Johnson, an associate professor of management and entrepreneurship at University of Colorado’s Leeds

School of Business. First, restaurants and bars as an industry have men in a majority of management positions and higher paying roles. Second, restaurants encourage a “customer is always right” etiquette, and many employees rely on customers for their pay (tips). Third, the restaurant industry is a “looks” industry, where women often must rely on their physical appearance as part of the overall service experience. DeLorenzo says the heightened attention of sexual harassment issues in restaurants is convincing owners to buy better coverage. Where they may have settled for small “throw-in” EPLI coverage on a traditional businessowners policy, more are buying standalone EPLI policies today, he said. “More restaurateurs, big and small, are buying stand-alone employment practice policies because they can get a lot more coverage and third-party coverage,” he said. Standalone has become much more affordable, too. “It’s not a lot, depending on the risk.” It’s an area of risk that has become almost more important than general liability in his view. “As a restaurateur and entrepreneur, you are almost more prone to experience a threat in employment practices — somebody feels like they were discriminated against or unjustly fired — than [to experience a threat] in general liability nowadays.”

Wage and Hour

Another employment practices-related hot button exposure that has received significant uptick in recent years is wage and hour allegations,

DeLorenzo added. In 2018, the U.S. Department of Labor (DOL) recovered more than $304 million in back wages, with food service ranking number one for the highest number of violations per industry. Wage and hour claims can be triggered by any number of complaints, including pay discrepancies and employee misclassifications. Workers can file a lawsuit when they are just a minute late for a meal or rest break, or if their overtime was miscalculated even slightly. More hospitality employers are being investigated for Fair Labor Standards Act (FLSA) compliance, Robert Fiorito, vice president of HUB International Northeast, said in a recent article on TotalFoodService.com. Since the FSLA requires employers to pay non-exempt employees wages that are at least equal to the federal minimum wage rate, restaurants and bars that employ many workers that rely on wages paid by tips are particularly at risk for noncompliance. “Restaurant employers who pay their tipped employees the tipped minimum wage without ensuring that the standard minimum wage is met when adding in the tip credit may find themselves subject to a claim and violation,” Fiorito wrote. In response, insurers are making changes to coverages, DeLorenzo says. “I see many carriers adding a wage and hour sublimit onto their EPLI policies ranging from $100,000 to $250,000 depending on the risk, the state and the carrier,” he said. However, even with the sublimit, most of the time,

continued on page 42

MARCH 18, 2019 INSURANCE JOURNAL | 41

Special Report: Restaurants & Bars continued from page 41

unless specified otherwise, this amount will only cover defense costs in the event of a claim, such as an allegation that an employee wasn’t paid for overtime work or not given proper tips. “So, if you have a lawsuit against you, and you end up losing and you owe that person or people in a class action, it’s coming out of your pocket,” DeLorenzo said. “The only aspect that will be covered even with a wage and hour endorsement will be the sublimit for defense coverage,” Fiorito told Insurance Journal in an email. “At this point, that’s the only coverage available for wage and hour claims.”

Cyber

New technologies are helping restaurant and bar owners streamline operations, attract customers and reduce costs, but those tools often come with added cyber risk, the experts say. Innovations such as point-of-sale (POS) systems on tabletops, new cloud-based technologies and an ever-increasing number of third parties that interact with customers are increasing risk and creating security gaps, causing shifts in cyber risk exposures. In 2018, several large restaurants experienced data compromises, including Dunkin’ Donuts parent company Dunkin’ Brands Inc., as well as Panera Bread and Cheddar’s Scratch Kitchen. In addition, third party vendors in the food and beverage sector were subject to nearly 10 percent of all data compromises in 2017, according to Trustwave’s Global Security Report, meaning many restaurants’ supply chains are vulnerable to interference.

Data breaches are not only harmful to a restaurant’s operations and reputation but are also increasingly financially damaging. The U.S. Securities and Exchange Commission (SEC) recently reported the average cost of a cyber data breach is $7.5 million — a figure that will grow as businesses’ reliance on data intensifies. “Many small businesses, restaurants, and/or hospitality single-location businesses are under the impression that stand-alone cyber is expensive and that they can’t afford it,” says Elizabeth Babington, senior vice president, at Distinguished Programs. That’s not true, she said. “It’s actually inexpensive and quite affordable.” Small businesses, including restaurants and bars, can purchase “very robust coverage” for $1,000 or less. Babington says restaurant and bar owners, and sometimes their insurance agents, believe that “add on” coverage under general liability policies is enough. “A retail agent that may not be that familiar with the cyber coverage, or know how to find the right coverage, might be under the wrong assumption and say, ‘Oh, you have it,’ because it’s added onto a property policy or added on a teeny bit of coverage to a GL policy, which is just generally only notification,” she said. However, the cost to send out notifications and the expense to set up customers with a credit monitoring agency is burdensome. “People think that’s what cyber coverage is, but the needs are much broader and more comprehensive.” The biggest coverage restaurants miss when they

42 | INSURANCE JOURNAL | MARCH 18, 2019

do not purchase a stand-alone cyber policy and instead rely on add-on coverage through general liability or property policies is first party coverage, says Chris Larson, underwriter at Distinguished Programs, “so they may have protection of their customers’ data that could be stolen.” However, “those business owners could have a substantial loss if their computer systems are down or their data’s destroyed or lost,” she said. “They’re not usually getting coverages for those type of losses by having a tacked-on cyber coverage through another policy.” That’s the biggest gap in coverage by covering cyber exposures through other policies, she added. Larson said, overall, restaurants are lacking when it comes to covering their cyber exposures. There’s an opportunity in the market for agents and brokers.

Food Safety

A single foodborne illness outbreak could cost a restaurant millions of dollars in lost revenue, fines, lawsuits, legal fees, insurance premium increases, inspection costs and staff retraining. “Even a small outbreak

involving five to 10 people can have large ramifications for a restaurant,” says Sarah M. Bartsch, research associate at the Global Obesity Prevention Center and lead author of the study “Estimated Cost to a Restaurant of a Foodborne Illness Outbreak” from researchers at the Johns Hopkins Bloomberg School of Public Health. The findings, published online in the journal Public Health Reports, are based on computer simulations that suggest a foodborne illness outbreak can have large, reverberating consequences regardless of the size of the restaurant and outbreak. According to the model, a fast food restaurant could incur anywhere from $4,000 for a single outbreak in which five people get sick (when there is no loss in revenue, and no lawsuits, legal fees, or fines are incurred) to $1.9 million for a single outbreak in which 250 people get sick (when restaurants lose revenue and incur lawsuits, legal fees and fines). While food safety doesn’t generate huge volumes of claims, the claims that do occur can be devastating to the reputation of the restaurant groups, Rooney Gleason,

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president of Argo Insurance – Grocery and Retail and head of U.S. Digital Business Development, told Insurance Journal. That’s one reason why Argo Group invested in the development of Argo Risk Tech, a one-year old, custom-tailored app to help clients reduce the frequency and severity of customer and employee accidents and claims. This includes more common slip-and-fall risk management as well as food safety risk management. “We took the last 18 months to really figure out how to make the technology effective for the restaurants,” he said. That meant automating simple tasks and procedures that could lead to claims. For example, food safety issues often stem from temperature control. So, through the Argo Risk Tech app, restaurant managers can check temperatures inside refrigerated cases via a Bluetooth thermometer and sensors inside the cases. The information links to a phone via Bluetooth. “Most fast casual, emerging-type restaurant chains that we go to love it right out of the gate simply because they’re already using iPads for ordering, or they’re using Square to take their point of sale,” he said. “With every foodborne illness outbreak or closing down of a Chipotle, it becomes more and more urgent that our restaurant clients come up with a process and procedure that they can follow.” Gleason says by using sensor-based location beacons, QR codes and the Argo Risk Tech mobile app, restaurant managers can keep tabs on refrigerated store walks and critical safety checks. INSURANCEJOURNAL.COM

One of the difficulties, particularly with restaurants, is when management discovers that employees may not be conducting safety checks the way they say they are doing, Gleason said. With an app and sensors, there’s no guesswork. “They’re either executing proper policies and procedures, or they are not,” he said. “The good operators understand immediately and make adjustments to their policies and procedures to get better compliance, and also reinforce what operating procedures they want to happen at the restaurant level.” Then with that data, Argo is able to spend additional time training and retraining, and working with corporate staff at these restaurant chains to get the compliance rates up in each location, which will reduce the amount of risk. “This is the beginning for restaurants of a shift in how they address risk,” Gleason said. It’s not just the foodborne illness that makes nightly news that the industry should think about. It’s how the industry and its restaurant clientele resolve the issues. “Argo Risk Tech and Argo Insurance is trying to change the equation and get these owners to look at this risk, not just simply as an insurance transaction, but a way of improving their overall operation,” he said.

Shift Drinks and Axes

Liquor liability is always a concern in any establishment, but for restaurants, the traditional “shift drink” — serving an employee who just finished their work shift a drink or two — creates additional liability concerns. Hospitality attorney Lee N. Jacobs, senior associate attorney at Helbraun & Levey LLP, which focuses on the legal and licensing needs of New York City’s bars, restaurants and hotels, says restaurant owners everywhere have been flooded with complaints, investigations, lawsuits and big settlement pay-outs, mostly on the basis of workplace harassment. How the industry thinks about shift drinks must change, he said in a recent article. Paul Martinez, program manager for Brewery PAK Insurance Program, says his program, which writes craft breweries in 42 states, has seen some claims involving shift drinks in recent years. “We’ve had some claims involving shift beers and even beers at festivals where employees are leaving inebriated and causing accidents,” Martinez said. “Some of them are even causing accidents in company vehicles, which is another exposure.” Injuries to the employee and other patrons of the establishment could impact several liability areas, he says.

“Let’s say you have somebody who has a little bit too much to drink after his shift, and he’s technically not on the clock, but everybody knows he’s an employee there, and he starts an altercation, and he gets hurt ... that’s workers’ compensation coverage for his injuries,” he said. But the establishment could also be on the hook for any injuries to the customer if the altercation involved a patron rather than another employee, he explained. “Now you’re going to have to pay their medical bills and probably give them some good faith money, so they don’t come back and sue you,” he said. “That’s really the biggest concern.” Breweries have to be even more conscientious than restaurants because they manufacture the beer, he noted. “Breweries are in much more of a spotlight.” And then there’s always the ax throwers, Martinez added. Believe it or not, it’s a new trend in breweries and other bar establishments. The trend involves the establishment pairing alcohol with hurling large, deadly weapons at designated targets, and they’re opening up everywhere. “I’ve already had a couple clients come to me and say, ‘Oh were having ax throwing and it’s going to be great,’” he said. “I don’t want to combine beer and ax throwing — that can’t be good.” Needless to say, Martinez plans to exclude coverage for ax throwing.

MARCH 18, 2019 INSURANCE JOURNAL | 43

Spotlight: Manufacturing

FDA Warns of Asbestos

ers’ sources for talc and what steps they take to test the raw material or their finished products. The agency did not name specific companies. “We also want to know how many cosmetics products contain talc and whether manufacturers have received adverse event reports associated with talc-containing products,” the

framework that the FDA has been operating under for more than 80 years when it comes to cosmetics,” they said in the statement. The FDA said the new rules for cosmetics manufacturers may require companies to report adverse events, provide access to consumer complaints during routine inspections and disclose known allergens on a product’s label. In the meantime, U.S. regulators are asking cosmetics firms to voluntarily register their products and a list of ingredients, including talc,

FDA said. In a joint statement, FDA Commissioner Scott Gottlieb, who separately announced his resignation, and the director of the agency’s Center for Food Safety and Applied Nutrition, Susan Mayne, said federal rules have not keep pace with the cosmetic industry’s substantial growth and a global supply chain. “To significantly shift the safety paradigm of cosmetics in the U.S., we would need to work with stakeholders, including Congress, to modernize the outdated regulatory

with the FDA. Asbestos is a mineral often found near talc, a common ingredient in many cosmetics, and if steps are not taken to purify raw talc sufficiently the talc put in consumer products may be contaminated with asbestos, the FDA said. Talc may be used in cosmetics, for example, to prevent caking or to make facial makeup opaque. In 2017, the FDA said it

Claire Cosmetics Under Fire; Seeks New Rules on Talc

he U.S. Food and Drug Administration called on Congress to modernize rules for cosmetics safety after it issued an alert warning consumers not to use three cosmetics products sold by Claire’s Stores Inc. because they tested positive for asbestos, a known carcinogen. The FDA said it would work with Congress to update the regulatory framework that the agency has been operating under for more than 80 years for cosmetics. It said there are currently no legal requirements for any cosmetic manufacturer selling goods to American consumers to test their products for safety. In its safety alert, the FDA identified the products as Claire’s eye shadows, contour palette and compact powder and cited the talc used in the products. Claire’s disputed the FDA test results, saying they “show significant errors” and have “mischaracterized fibers in the products as asbestos.” The retailer, which emerged from bankruptcy in October, said, “There is no evidence that any products sold by Claire’s are unsafe.” However, out of an abundance of caution, it said it removed the three products in question from stores as well as “any remaining talc based cosmetic products.” The FDA has come under intensifying pressure from lawmakers and consumer advocates to investigate possible

asbestos contamination of talc following a report published by Reuters on Dec. 14 about talc in Johnson & Johnson powders. The Reuters report detailed that J&J knew that the talc in its raw and finished powders sometimes tested positive for small amounts of asbestos from the 1970s into the early 2000s. J&J did not disclose its test results to regulators or consumers. The alleged presence of asbestos in talc products is at issue in thousands of lawsuits filed against J&J. Last month, J&J said it had received federal subpoenas for the first time related to the asbestos litigation and said it is cooperating with the inquiries. J&J and its talc supplier, Imerys Talc America, have said numerous studies and tests by regulators worldwide have shown their talc to be safe and asbestos-free. In response to the FDA’s call this month for new rules, J&J said it supports the agency’s efforts to “reaffirm the safety of cosmetic talc products.” The company said it has backed previous legislative efforts to modernize FDA’s regulatory authority over cosmetics. J&J also reiterated that “for decades global independent laboratories and health authorities have tested Johnson’s Baby Powder and have never found asbestos.”

‘Shift the Safety Paradigm’

The FDA said it would investigate cosmetics manufactur-

44 | INSURANCE JOURNAL | MARCH 18, 2019

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became aware of reports of asbestos contamination in several cosmetics sold by Claire’s and another retailer, Justice, which is owned by Ascena Retail Group Inc. The two retailers subsequently removed certain products, such as glitter creams, eye shadows and make-up sets. The FDA then ordered independent tests and the results received in late February confirmed asbestos in three Claire’s products and one INSURANCEJOURNAL.COM

from Justice. The Justice product had already been recalled from the market. In a statement, Justice said it “quickly and responsibly issued a voluntary recall in 2017 out of an abundance of caution.” The FDA said Claire’s had refused to comply with its request to recall the products that tested positive for asbestos. The FDA said it does not have the authority to mandate a recall, so it issued the safety alert. Claire’s, based in the Chicago suburb of Hoffman Estates, operates 2,471 stores in North America and Europe. The warning pertains to: Claire’s Eye Shadows – Batch

No/Lot No: 08/17; Claire’s Compact Powder – Batch No/ Lot No: 07/15; and Claire’s Contour Palette – Batch No/Lot No: 04/17.

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Spotlight: Top 25 P/C Carriers P/C Direct Premium Written Up 5.9 Percent

irect premium written (DPW) for property/

casualty insurance companies continues to increase, By Douglas A. Powell albeit gradually. At year-end 2017, over $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 third quarter of 2018, the insurance industryâ&#x20AC;&#x2122;s growth trend has continued, as DPW for all P/C insurers aggregately increased 5.9 percent over 2017. For the nine months ending Sept. 30, 2018, P/C companies comprising the Top 25 insurers in terms of DPW growth increased their DPW $10.4 billion, or 11.2 percent over the first nine 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 $18 billion,

or 4.6 percent year over year. Although the market continues to exhibit signs of firming and DPW continues to increase, P/C insurers should not expect a traditional hard market in the near future.

Top 25 insurers increased their DPW 11.2% over the first nine months of 2017. More importantly, it is possible that the double-digit premium growth experienced in the historical hard market cycles 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 third 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. 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. National Fire & Marine Insurance Co. Progressive County Mutual Insurance Co. GEICO Casualty Co. Government Employees Insurance Co. Progressive Direct Insurance Co. USAA Casualty Insurance Co. USAA General Indemnity Co. Progressive Select Insurance Co. Progressive Express Insurance Co. American Family Insurance Co. GEICO Advantage Insurance Co. Allstate Vehicle and Property Insurance Co. United Services Automobile Association GEICO Indemnity Co. Farmers Insurance Exchange Progressive American Insurance Co. GEICO County Mutual Insurance Co. Ohio Security Insurance Co. United Financial Casualty Co. Indemnity Insurance Co. of North America Garrison Property and Casualty Insurance Co. Interinsurance Exchange of the Automobile Club

DPW 9/30/2018

$30,988,092,327 $7,854,245,559 $6,781,085,498 $1,460,444,315 $2,291,205,276 $3,743,044,280 $4,866,085,986 $2,710,578,592 $5,202,532,648 $3,351,360,554 $1,749,302,868 $741,525,197 $1,381,389,470 $1,428,365,272 $2,091,950,794 $6,368,190,121 $4,718,534,666 $3,661,256,287 $1,634,465,130 $1,591,487,168 $1,765,193,366 $1,355,619,425 $964,539,662 $1,813,511,620 $2,539,642,846

Top 25 P/C Companies by DPW Growth $103,053,648,927 All Other P/C Companies $407,751,069,710 Total $510,804,718,637

DPW 9/30/2017

$30,243,219,130 $7,194,045,728 $6,158,917,349 $854,676,965 $1,804,011,405 $3,259,499,147 $4,424,077,546 $2,269,818,715 $4,783,511,267 $2,959,514,121 $1,358,050,878 $350,328,741 $991,295,053 $1,040,491,691 $1,709,361,639 $5,992,379,044 $4,376,436,643 $3,324,698,295 $1,304,986,722 $1,275,939,672 $1,457,372,359 $1,047,852,916 $685,361,155 $1,547,490,072 $2,281,356,159

$92,694,692,412 $389,753,373,850 $482,448,066,262

$ Growth

$744,873,197 $660,199,831 $622,168,149 $605,767,350 $487,193,871 $483,545,133 $442,008,440 $440,759,877 $419,021,381 $391,846,433 $391,251,990 $391,196,456 $390,094,417 $387,873,581 $382,589,155 $375,811,077 $342,098,023 $336,557,992 $329,478,408 $315,547,496 $307,821,007 $307,766,509 $279,178,507 $266,021,548 $258,286,687

$10,358,956,515 $17,997,695,860 $28,356,652,375

% Growth

2.46% 9.18% 10.10% 70.88% 27.01% 14.83% 9.99% 19.42% 8.76% 13.24% 28.81% 111.67% 39.35% 37.28% 22.38% 6.27% 7.82% 10.12% 25.25% 24.73% 21.12% 29.37% 40.73% 17.19% 11.32%

11.18% 4.62% 5.88%

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.

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MARCH 18, 2019 INSURANCE JOURNAL | 47

Closer Look: Flood

Wading into

Flood Waters Agents Should Place Added Focus on Coverage Differences in Expanding Private Flood Market By Patrick Wraight

t has been a long-held insurance axiom that flood is not considered an insurable peril due to its potentially catastrophic nature. Here is what the report, “Affordability of National Flood Insurance Program Premiums: Report 1” (National Research Council, 2015) says about flood insurance: “Flood insurance was offered by private insurers between 1895 and 1927, but losses incurred from the 1927 Mississippi River floods and additional flood losses in 1928 led insurers to stop offering flood policies.” The matter of providing flood insurance wouldn’t be mandated until the National Flood Insurance Act of 1968 created the National Flood Insurance Program (NFIP). Since then, few private insurers have dipped their feet into the flood waters, continuing to state that flood is so potentially catastrophic an exposure that they consider it uninsurable. These days, more and more private insurers are wading into the waters. Some insurers have actually dived in to become private flood insurers. This exposure is no longer considered uninsurable. To be more accurate, it’s actually

48 | INSURANCE JOURNAL | MARCH 18, 2019

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considered misunderstood by many in the industry and many more consumers. Until flood becomes a routinely covered loss exposure, many customers will continue to have policies written by the NFIP. Because there are consumers that have NFIP policies covering their risk of flood loss, it would be good to know some of the key differences between the NFIP policy and the ISO HO-3 policy. Of course, look at the actual policies that you’re dealing with because (as we all know) different insurers will make different changes to policies. Both the ISO HO 03 and the NFIP Standard Flood Insurance Policy provide coverage for property removed to protect it from loss or damage. Let’s compare how they do it.

household perform. If you move insured property to a location other than the described location that contains the property, in order to protect it from flood or the imminent danger of flood, we will cover such property while at that location for a period of 45 consecutive days from the date you begin to move it there. The personal property that is moved must be placed in a fully enclosed building or otherwise reasonably protected from the elements. Any property removed, including a movable home, described in (the policy) must be placed above ground level or outside of the special flood hazard area. This coverage does not increase the Coverage A or Coverage B limit of liability.

We insure covered property against direct loss from any cause while being removed from a premises endangered by a Peril Insured Against and for no more than 30 days while removed. This coverage does not change the limit of liability that applies to the property being removed.

The differences between these two are vast. The first item you must notice is that the HO-3 provides coverage for the property while being moved, not just at the final location. The SFIP only provides coverage once the property arrives at another location. Consider all that could go wrong while moving personal property from the dwelling to another location. It’s possible that it could be damaged en route because when you’re packing a vehicle in a hurry, sometimes you aren’t as careful as you ought to be. Another difference includes the requirement in the SFIP that the property be stored in a “fully enclosed building or otherwise reasonably protected from the elements.” The HO-3 doesn’t specify where the property must be. It simply

HO-3 Property Removed

SFIP Property Removed to Safety

We will pay up to $1,000 for the reasonable expenses you incur to move insured property to a place other than the described location that contains the property in order to protect it from flood or the imminent danger of flood. Reasonable expenses include the value of work, at the federal minimum wage, you or a member of your INSURANCEJOURNAL.COM

Differences

tells us that the property must be removed to protect it. The SFIP requirement means that if the insured takes their property out of their house to protect it, they have to find a building to put it in. Because the policy reads, “or otherwise reasonably protected from the elements,” we might get away with the interpretation that leaving the property in a vehicle and parking that vehicle in a fully enclosed garage would be enough. On the other hand, leaving the property in a vehicle and parking that vehicle under a carport might not be good enough. Does that mean that parking a vehicle in a parking garage that’s not fully enclosed is excluded? The SFIP only provides coverage for one peril - flood. The property removed coverage on the HO-3 gives us coverage for direct physical damage to property. This means that the HO-3 expands coverage when the insured makes the attempt to protect their property. The SFIP provides coverage at a new location, but that’s it. These aren’t all of the differences, of course, but they illustrate that these policies are different, with different requirements and different coverage details. Our job is to make sure that we’re providing customers with the coverage that they need and that they understand the coverage (especially the coverage gaps) that come along with the policies that they get. Wraight, CIC, CRM, CISR, AU, AINS, is the director of Insurance Journal’s Academy of Insurance. Email: pwraight@ijacademy.com. Website: www.IJAcademy.com.

MARCH 18, 2019 INSURANCE JOURNAL | 49

Idea Exchange: Ethics

A Guide to Moral Disengagement How People Rationalize Bad Choices By Katherine Bowers

hen a reward is tempting enough, people will break their own moral codes to gain the desired prize. Afterward, they’ll tell

you exactly how they were justified: “It wasn’t as if anyone was harmed,” “I was only borrowing …,” “My boss told me to” or “It’s our customers’ responsibility to read the fine print.”

It’s a rationalizing process called “moral disengagement” that Darden Professors Sean Martin and Jim Detert have studied. People are self-interested, but we don’t like to face that about ourselves because we also have a strong need to see ourselves as good people, they argue, so we unintentionally, and quite effortlessly, use a series of cognitive maneuvers to justify self-interested choices that don’t align with who we say we want to be or what we want others to think about us. Moral disengagement can accompany small transgressions — pocketing extra change given in error at a coffee bar (“It was the cashier’s fault”) — and major scandals, such as those that have happened when employees at major U.S., European and Japanese automakers rationalized away behaviors that led to false advertising about fuel efficiency or potential risks to consumer safety. In a series of experiments, Detert, Martin and their colleagues found that the more tempting the potential personal gain is, the more likely people are to break their own internal standards (their conscience) by utilizing morally disengaged thinking to distort the ethical consequences of a behavior. Martin says companies should be aware of this universal human tendency and learn how to challenge moral disengagement before it leads to bad decisions or creates an unethical culture.

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Listen for Cues

When people are about to do something wrong because they’re morally disengaging, their language often changes. Euphemisms replace plain-spoken language. For example, Wells Fargo employees opening fake banking accounts called it “gaming” rather than “fraud.” When people pirate music or break licenses on software they may call it “file sharing” instead of “stealing.” When they’re about to distort some accounting or sales numbers, employees may say “Everyone does it” (diffusion of responsibility) or “It’s no big deal” (distortion of consequences). In a letter to employees, United Airlines CEO Oscar Munoz reportedly victim-blamed passenger David Dao, who was dragged out of his paid-for seat on an overbooked United flight, by calling him “disruptive and belligerent.” That’s an example of attribution of blame. Here are eight common moral disengagement strategies and what they sound like: • Moral justification. (“This is actually the morally right thing to do; we’re actually helping them by doing this.”) • Euphemistic labeling. (“I’m just ‘borrowing’ this.” “It’s ‘collateral damage.’”) • Advantageous comparison. (“Doing A, is not as bad as doing B.” “It’s not like I’m doing B.”) • Displacement of responsibility. (“My

‘Requiring employees to analyze potential harm to stakeholders in any new project, product or decision may keep the ‘do no harm’ standard in the forefront.’ INSURANCEJOURNAL.COM

boss told me to do it.” “I’m just following orders.”)

• Diffusion of responsibility.

(“Everyone’s doing it.” “It’s a group decision.” “This is just a small part of a bigger system.”) • Distortion of consequences. (“This is a victimless crime.” “No harm done.” “It’s no big deal.”) • Attribution of blame. (“They brought it on themselves.” “Buyer beware.”) Dehumanization. (“They’re a bunch of dogs.” “They’re like robots.”)

A Moral Guide

Martin has handed out a laminated list of these rationalizations to his leadership students in the past. They refer to it in class, using it to challenge each other and launch critical discussions. Former students have even taken it to work, hanging it on their office walls to remind themselves. “These phrases are verbal indicators that something is triggering our moral circuitry, even if we’re not aware of it at the time,” Martin says. “When we learn to stop and identify the mental gymnastics, it gives us an opportunity to step back and ask ‘Why do we feel the need to use these phrases — what’s underlying this? Is this statement in line with what we believe to be right? Are these choices aligned with who we say we want to be and the values we claim to hold?’” Using this guide is “not about determining who is good or bad, or condemning a person who uses this framing,” Martin emphasizes. Everyone falls prey to these rationalizations at one time or another. “It’s just part of being a human being,” Martin notes. But being aware of what they sound like — and when we might be particularly susceptible because we have a lot to gain (or lose) — helps “remove [self-interested] bias from decision-making so that individuals and companies

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Idea Exchange: Ethics continued from page 51 make decisions that are tightly aligned with their values and with public trust.” Says Detert, “Because it’s very hard to consistently catch ourselves from morally disengaging, people who really want to avoid these cognitive traps create systems that involve others — lists of common rationalizations on office walls, a trusted co-worker who confronts them when they hear a rationalization, a group decision-making process that includes at least one person who has no self-interest in the decision (and is thus less likely to morally disengage about it).”

Staying Centered

This work highlights other ways companies can reduce self-interest in decision-making. In experiments, Detert, Martin and their colleagues showed that when participants were aware of people who would be harmed by their choices, they were less likely to make a self-interested choice. For organizations, this means regularly reminding workers of the connections between their actions and the impact on customers’ lives, communities in which they operate, and other countries where they source and sell. “Requiring employees to analyze potential harm to stakeholders in any new project, product or decision may keep the ‘do no harm’ standard in the forefront,” and thereby reduce moral disengagement, they wrote in a Journal of Business Ethics article. They also found that conscientious workers — those who described themselves as always prepared, detail-oriented and diligent — were less likely to be influenced by personal gain and thus less likely to make self-interested choices. Conscientiousness isn’t a flashy trait, they note, but something companies should consider as they hire and promote. Finally, Martin says companies need to scrutinize the goals they set. When unachievably high goals are combined with tempting rewards or threats (e.g., getting a huge bonus for a sales goals — or losing a job for missing them), it’s far more likely that unethical behavior will occur. Bowers is with the news department of the University of Virginia Darden School of Business. 52 | INSURANCE JOURNAL | MARCH 18, 2019

What Others Said: Reader Comments

Hang that laminated list on the wall in your office at your job, and your next job, and your next job…

I once worked in an agency where there was a broker who pre-stamped on every single Acord application “No known losses.” Fortunately, I didn’t work with him. If your ethics are not tied to a moral rock like religion that you believe in, they are worthless. I took ethics in law school, as required. If you didn’t have a moral bedrock, taking that required ethics course was like a guide to all of the scams you could work as a lawyer. Funny things brokers say when there is no competition from other brokers: “I will shop hard for you this year.” “Contingent commissions only account for 1% of the premium (heh heh, 10% of agency income).” “The incumbent carrier was the most competitive again.” “You shouldn’t shop your insurance every year.” “I have access to nearly every insurance company.” Funny things brokers say to prospective accounts: “Access is only a starting point, relationships are what matter and my relationships with the most competitive insurers are the BEST!” “If you don’t shop, you leave money on the table.” “Our agency

services are the best!” Easiest place to reveal someone’s character is on the golf course in a competitive event. It doesn’t take long at our club to reveal the cheaters. Fortunately, there are not many. If you bring a ‘straight shooter’ in from another industry to the insurance industry it can be very traumatic/shocking for them to discover how the new business numbers and retention percentages are actually met; it often has nothing to do with taking that gulp and asking for a sale, it has to do with fudging numbers. They don’t want nice people, they want people who make their numbers, no matter the cost. There really should be some disclosure to the unknowing! Ethics should be something parents pass on to their children, no classes should be necessary, but alas we are human. Human nature likes to give sin different titles, but it’s all sin in the long run. If one cares about what God thinks of us he will probably be less prone to justifying dishonesty. The end doesn’t justify the means.

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Idea Exchange: Workers' Compensation

How Workers’ Comp Brokers Can

Increase Commissions by 81%

orkers’ compensation brokers frequently overlook a risk-free method to nearly double their commisBy Matthew Queen sions while improving their client’s overall financial position. The use of a captive insurance company to finance a large deductible program is one of the most underutilized tools in the broker’s arsenal, and an understanding of this technique will bring an edge to the market. Large deductible policies differ from guaranteed cost in that they let employers retain a portion of their risk while lowering their overall cost of risk. Insurance carriers operating above the attachments point frequently offer excess coverage (state laws require variations on this approach, such as in monopolistic states requiring buybacks, but the general strategy is valid in all 50 states). Large deductibles are deductibles or self-insured retentions of $100,000 or more. For most insureds, 80 percent of the workers' comp losses occur within the deductible layer. Losses are paid as they are incurred. Companies deduct these 54 | INSURANCE JOURNAL | MARCH 18, 2019

losses as they flow through the company. Most companies do not reserve anything for these losses, which sometimes creates cash flow crunches. Using a captive to finance the large deductible allows the carrier to pay monthly premiums into a wholly-owned captive. These premiums are deducted from gross operating income in advance of claims. This creates a tax swing in favor of the insured. Claims within the deductible are paid out of the captive.

Assume a client’s standard premium is $800,000. If the client elects to take a $250,000 self-insured retention or large deductible, then the client is likely to experience a 45 percent credit. This reduces the $800,000 premium by 45 percent to $440,000. The client’s self-insured retention covers the majority of losses with the $440,000 financing an excess layer with an A-rated workers’ comp carrier.

Standard Premium: $800,000 Deductible: $250,000

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Large Deductible Credit: Excess Premium: 8% Commission:

45% $440,000 $35,200

The estimated premium savings to the insured with a large deductible program are significant. If we assume losses of $200,000 for the policy period, the insured may deduct $200,000 of claims against gross operating income to pay for losses as they arise. This results in a total expenditure of the large deductible program of $640,000. Assuming an 8 percent broker commission, the broker should enjoy an annual fee of about $35,000 for placing this risk with a carrier. Unfortunately, most brokers stop their analysis at this point. The reality is that most clients that are a good fit for a large deductible workers’ comp program are also a great fit for a captive to finance the

self-insured layer. This strategy has significant financial advantages to the insured and increases the broker’s commission. The following example illustrates how the financials work:

Estimated Premium: $360,000 Incurred Losses: $200,000 Dividend: $160,000 8% Commission: $28,800

In this situation, the insured established a protected cell company to finance the workers’ comp large deductible and pays $360,000 of premium into its own captive insurance company to finance the deductible. The $360,000 is deductible before losses are incurred. This minimizes the potential for cash crunches when large losses occur. If the insured’s actual losses amount to $200,000 over the policy period, then the

captive will have an additional $160,000 of potential dividend to distribute to the captive owners. Because the captive writes less than $2.3 million in gross written premium, it qualifies for the 831(b) election, which excludes the $160,000 as taxable underwriting profit to the captive. The captive does not pay any taxes on the dividend. With the use of the captive, the insured created a $360,000 tax deduction with tax-free profits remaining in the captive. The owners can choose to distribute these dividends back to the owners or invest the profits. The total spent under the captive program is $440,000 for excess coverage plus $360,000 for deductible layer premium minus $160,000 in the return of premium minus gross income taxes avoided. Assuming a 21 percent tax rate, the captive saved $25,200 in income taxes. This results in total costs of $614,800. Losses in the workers’ compensation line are generally paid out over a five-year period. This means that the balance of the $614,800 of assets will be invested in lowrisk investments and accumulating interest until the losses are paid in settlements. Over 60 months, the captive removes hundreds of thousands of taxable income from the insured, invests it conservatively and distributes the dividends at a later date. This creates cash flow flexibility. Meanwhile, the insured wrote an additional $360,000 of premium. Assuming an 8 percent commission fee to the workers’ comp broker, this results in a $28,000 commission. This is a net commission increase of approximately 81 percent to the broker. The captive-financed large deductible program provides a savings of $185,200 from the initial guaranteed cost program, which is about a 23 percent premium reduction to the insured. With the captive insurance company in place, the underwriting profit of $160,000 can be reinvested into the captive to expand reserves, invested into private equity opportunities or distributed to high-performing employees of the insured. Queen serves as general counsel for Venture Captive Management.

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MARCH 18, 2019 INSURANCE JOURNAL | 55

Idea Exchange: The Wedge

The 5-Step Evidence Based Hiring System How to Improve Producer Hiring Results A

s an agency owner, the success of your business is directly tied to your hiring process. Each bad hire can By Randy Schwantz easily cost $100,000 to $200,000. However, good producers can add $1 million of annual revenue (which nets most owners around $150,000 to $250,000 in profit). There’s a lot of money to be gained — or lost — in your hiring process. Not only that, but good producer hiring practices can solve some of your pressing problems. The reality is most agencies still use an old hiring process that causes them costly hiring mistakes. This old way of hiring doesn’t work, because it relies on opinions and unscientific methods. It’s the approach that says: “He seems like a good guy. Let’s give him a shot!” It should be no surprise that agencies who operate like this have a failure rate of more than 50 percent for new producer hires. The good news is there is a proven hiring method. It’s known as the Evidence Based Hiring System. It’s a formula that, when done properly, will help reduce your 50 percent failure rate to 20 percent or less. In other words, you’ll start hiring the right people eight out of 10 times versus four out of 10. The Evidence Based Hiring System consists of five steps: A pre-employment assessment followed by four structured 56 | INSURANCE JOURNAL | MARCH 18, 2019

interviews. These interviews are designed to accomplish specific objectives to help weed out people who will never become Million Dollar Producers. I’ve written a book about this hiring system, titled: GRIT: Find, Hire, Develop Real Producers. In this article, I want to summarize some of the main points. However, let’s first look at an example of what happened to one agency after they adopted this Evidence Based Hiring System.

From $4 Million to $140 Million

A while back, I had the opportunity to help an agency in Fort Worth, Texas, implement the hiring system I just mentioned. At the time, they were struggling to hire good producers and admitted their hiring process was not effective. More than half of the time, they’d hire someone

and end up firing him or her six months later, so they realized they needed help. I trained the agency owner and the management team on the Evidence Based Hiring System, and they started using this system to find and hire new producers. The results? In the first 10 years, the agency hired 34 producers, and 29 of them made it. Those 29 produced $17.5 million of annual renewable revenue. And 13 are Million Dollar Producers today. In that same 10-year period, the agency grew from $4 million to $30 million in revenue, mostly organic. Over the next 10 years, it went from $30 million to $140 million in revenue. And even though it has become the acquirer, it still maintains that same organic growth culture and still uses the Evidence Based Hiring System. That’s one of hundreds of stories I have

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about the power of adopting this hiring system. So now, let’s get into the step-bystep process of how this works.

The 5-Step Evidence Based Hiring System Choose Good Cop/Bad Cop Roles

To properly execute this hiring system, you’ll need at least two people: A good cop and a bad cop. The good cop’s role is to find and recruit producers into the system. They should be able to tell your agency’s success stories in a way that gets your candidate drooling to get in. They say things like, “I’d hire you on the spot if I could, but I can’t. We have a process, and I’d like to get you in it.” The bad cop has one purpose: To discover the truth about whether this person can be a Million Dollar Producer or not. They will be doing the interviews (interrogation), assigning homework and everything else in their power to determine the truth about the candidate. The bad cop says things like, “My role is to keep you out. This is a great firm, and while you may be a great salesperson, we don’t want someone coming in and screwing up our culture. Here’s the criteria I use in my selection process. …” Once you have decided who will play each role, you’re ready to proceed.

If you don’t find out what drives them, you are missing a golden opportunity to validate your decision; and a bigger opportunity to leverage their desires once hired. Step 1: Pre-Interview Assessment.

Before you invest your time into doing the four interviews, you’ll want to screen potential producers with a good pre-employment assessment. I recommend the GRIT Personality Inventory, because it’s focused solely on sales people. The assessment helps determine if they have “fire in the belly.” However, no matter how good the assessment is, there are some things you can only discover in the interview process.

Step 2: Book Summary Interview. One

of the first homework assignments you’ll give the potential hire is reading the book, The Wedge: How to Stop Selling and Start Winning, and then writing an executive summary of it. There are five reasons to do this: 1. Follow through. This will help determine if they can follow through with an assignment in a timely manner (make

sure not to assign a deadline). If not, it’s a bad sign of what they would be like if you hired them. 2. Comprehension. You want to know if they understand the concept: “Someone has to lose for you to win.” There is an incumbent; they have the relationship. This can’t be just a nice guy or better price contest. Either of those, and you’ll get rolled. If they understand that, they are good. If not, you have to find out why not? Did they not read it? Does it not make sense to them? 3. Synthesis. Synthesis is defined as “combining elements of separate materials into a single or whole unified entity.” You want them to synthesize ideas to form a theory or system. You want to see if they can take the new information they’ve learned in The Wedge and apply it to some other parts of their lives. For example, they might have had a situation in the past where there was an incumbent. It could have been a prospect or even a boyfriend/girlfriend. You want them thinking about proactive services in a new way. 4. Intelligence. Being able to comprehend then transform the information into something usable is a sign of intelligence. You want to know you have an intelligent person that learns quickly and can adapt to the situation. And you want someone who can take in a lot of information and clearly summarize what they learned in writing. Writing is a form of intelligence; it is a black and white representation of how they think.

5. Pre-indoctrination to this way of selling. As a secondary benefit, you’ve

already started indoctrinating your new producer into The Wedge selling techniques. If you do end up hiring this candidate and you adopt The Wedge selling process as your primary way of training, you are two steps ahead. You now share a common vocabulary to carry you through the rest of the interview process.

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Idea Exchange: The Wedge continued from page 57

The good cop’s role is to find and recruit producers into the system. Step 3: The Book Review Interview. In this interview, you’ll review the executive summary of The Wedge with your candidate with the preceding five points in mind. You’ll read what they wrote and ask questions to discover their level of understanding. Why did they include what they did? Why did they leave out what they left out? This book summary interview will give you insight into how this person thinks. At the end of this interview, give them their second assignment. Start out by asking, “If you got this job, what would you have to sell and how would you sell it?” Tell them, “That’s what I want you to find out.” Then have them interview some of your producers. Step 4: Differentiation and Goals Interview. In this interview, ask them

what they found out during the homework activity and how they would sell themselves and the agency to prospects. In most cases, they’ll give the typical answers: Our people, our markets, our reputation, etc. That’s when you ask, “Do you think the other agencies you’d be competing against also have these things?” They’ll say, “Yes.” Ask them to go back and find concrete differentiators. In the second part of this interview, ask about their personal goals. Ask about their current income and explain how many accounts, and what size, they’d need to write to make that much money at your agency. Then you can start forecasting potential income levels based on how much business they write. Remember, you’re looking for people who can become Million Dollar Producers. If they don’t have the drive to make $250,000 to $300,000 a year, they probably aren’t motivated enough. At the end of this interview, you’ll ask them to develop a prospect list to see if they have a natural market. Do they have relationships with business owners that match the accounts you can write? If not, they will be starting 58 | INSURANCE JOURNAL | MARCH 18, 2019

from scratch. That’s not bad; it’s just risky.

Step 5: Final Interview. In this final interview, you will review their outstanding homework assignments. Start with the differentiation list, then review their prospect list. End by reviewing their income goals again. This is the time to dig deep. Connect each goal to their family when possible. You want to understand what drives their desire to make money. If you don’t find what drives them, you are missing a golden opportunity to validate your decision and a bigger opportunity to leverage their desires once hired.

The bad cop has one purpose: To discover the truth about whether this person can be a Million Dollar Producer or not. Decision Time

If all goes well after you finish the interview process, your agency is ready to make an offer. If it doesn’t go well, and you are not certain about hiring them, you have two choices: • You can be candid and tell them your reservations about hiring them. Thank them for their hard work and tell them

this doesn’t appear to be the right fit. • Make up an excuse for why you can’t hire them now and postpone the decision. If you decide to make an offer, confirm everything you have discovered: Are they driven, resilient, can they deal with rejection, are they good at relationships, are they smart, coachable? If they have come this far, they want this job. Don’t give away the farm, but don’t be cheap. Offer a salary that is enough to get by, but not much more. If they start negotiating too hard with you, help them to the door in a polite way.

To Go Deeper on This Topic

Hopefully you can see how this process can help you double the success rate of new producer hires. It can help you hire more Million Dollar Producers and ultimately transform your agency. Remember, as an agency owner, the success of your business is tied to your hiring process. I hope this summary of the Evidence Based Hiring System was helpful. If you’re interested in learning more, grab a copy of my book: GRIT: Find, Hire, Develop Real Producers. Schwantz is founder of The Wedge Group. Email: randy@thewedge.net. Phone: 214-446-3209. Website: www.thewedge.net. INSURANCEJOURNAL.COM

Idea Exchange: Distribution

Progressive Looks to Lead the Pack of Multiline Insurers

ith much of the property/casualty insurance industry’s attention focused on external threats from insurtechs and digital native companies, perhaps the greatest disruption is coming from within. Following the past decade of impressive By Tom Super growth driven by direct-to-consumer providers, Progressive heads into 2019 with wind in its sales and shows no signs of slowing. The company’s recent Q3 earnings showed an 18 percent year-over-year gain in net written premium, with personal auto policies in force (PIF) up 15 percent, and total personal lines PIF up 11 percent year-over-year. Progressive’s commercial lines business turned in equally impressive numbers. Growth in both direct and agency channels fueled these gains. Progressive’s resurgence in the agency channel has been one of the company’s highlights. January marked the 38th consecutive month in which Progressive’s agency channel PIF has achieved year-over year increases, while its direct business continues to realINSURANCEJOURNAL.COM

ize double-digit, year-over year growth. That’s not all. In the recently released J.D. Power 2019 Independent Agent Study, Progressive ranked second overall in terms of agent satisfaction and highest in overall independent agent relationship volumes. The carrier is not only taking the largest share of the independent agent market, but also succeeding in meeting the expectations of those agents. Over a 15-year period, publicly traded insurance carriers broadly tracked the S&P 500, with the exception of Progressive (PRG) and GEICO (BERK). During the past two years, Progressive has accelerated its pace. Highlighting the company’s steady premium growth and higher investment income, Progressive’s top line has been witnessing a substantial rise in the past several years. As a result, the street has rewarded its stock price — up 100 percent in the past two years prior to the recent Q4 market correction.

Stock Performance – Progressive vs. Peer Group – 2 year Progressive is showing no signs of rest-

ing on its laurels. Lost among the industry’s headlines, Progressive introduced three new offerings that take direct aim at perennial multiline insurance leaders, such as State Farm and Allstate. Progressive’s new offerings target a market underserved relative to its digital expectations. The company has embraced

a “build it and they will come” capability model that is designed to deliver an enhanced digital experience that attracts and retains the lucrative multiline insurance consumer.

Multiline Bundling

For consumers seeking to quote and buy home and auto at the same time, Progressive launched a multi-product quoting solution. While possible, the option of bundling home and auto bundling was not always clear. Customers typically needed to enter informa-

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Idea Exchange: Distribution continued from page 59

tion separately for each quote. With Progressive’s new functionality, online quotes come bundled with pre-populated fields and discounts received are made clear throughout. This integrated experience simplifies the process and makes multi-product bundling easier and faster. We expect this technology to spread rapidly throughout the industry.

Home Quote Explorer

Progressive designed its HomeQuote Explorer to make the shopping and buying of homeowners policies intuitive and simple. This includes pre-fill, which personalizes customers’ online shopping experiences, as well as clear visuals and concise language to customize coverage options. Using Progressive’s online auto quoting model, customers are directed to a rate comparison tool at the point of purchase.

IA Portfolio Quoting

Progressive improved its agency plat-

form to allow agents to quote and bind multiple products, including homeowners, special lines and auto. This makes it easier for agents to bundle quotes and view a customer at a portfolio versus product level. According to the aforementioned J.D. Power Independent Agent Study, insurers’ inability to provide bundled solutions is a drag on overall agent satisfaction. Carriers that are often able to provide bundled solutions to their customers generate a 160-point gain (on a 1,000-point scale) in overall customer satisfaction over carriers that make the process unnecessarily difficult. Gains in satisfaction translate to a larger number of customer referrals and increased agent brand engagement. With the combination of online bundling, enhanced home quote generation tools and agent portfolio management, Progressive is moving into 2019 with capabilities meant to attract and retain the lucrative multiline consumer market.

In what has become an intense battle to win the highly prized multiline consumer

With the combination of online bundling, enhanced home quote generation tools, and agent portfolio management, Progressive is moving confidently into 2019 with capabilities meant to attract and retain the lucrative multi-line consumer market. segment, Progressive has clearly made its presence known. The big question of 2019 is whether competitors can be as progressive as … Progressive. Super is a director in the property and casualty insurance practice at J.D. Power. Email Thomas. super@jdpa.com

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Idea Exchange: Minding Your Business

Pay for Performance Why Agencies Should Rethink Compensation

he single largest expense in an insurance agency is compensation. Salaries, commissions, payroll taxes and benefits By Catherine Oak usually total between 50 percent to 75 percent of revenue, with most firms having an expense ratio around 65 percent. What do agency owners and managers do to Bill Schoeffler control this expense? The answer too often is not much. It is just accepted as the way business is done. When the personnel expenses are broken down, on average, the overall expense ratio for owners and producers is around 30 percent to 35 percent of revenue, office staff around 20 percent to 25 percent and payroll taxes and benefits cost around 12 percent to 16 percent of revenue. Of course, agencies are all structured differently, so these numbers are industry INSURANCEJOURNAL.COM

averages and not meant to be how any one specific agency should be managed. Like it or not, compensation is used as a measure of the worth of the employee to the company. It is also used to motivate employees. Yes, it should not be the only way. Employees need to have â&#x20AC;&#x153;meaningfulâ&#x20AC;? work and need to be respected by the owners or their superiors. However, an insurance agency is still a business and compensation should be tied to productivity and overall worth of that person to the company. The standard compensation model does work for most agencies, but is it always the best approach? If an agency wants to stand out from the crowd, then it will need to do something different. Since personnel expense is about two-thirds of all expenses in an agency, then revising this one area can have the most impact on the success of the firm. Compensation needs to be tied to an employeeâ&#x20AC;&#x2122;s contribution to the agency.

Producers

Producer compensation is one area where agencies show variety and custom-

ization. Paying producers on commissions is the most common approach, a fixed salary is the method used by a minority, while others use a combination. It is important to understand the strengths and weakness of the various methods and then synthesize a compensation plan that meets the needs and expectations of the agency and the producers. Some agencies will often pay higher commission for new business to encourage sales, while others pay the same whether the account is new or renewal. Some pay no commissions for small accounts or certain types of business (such as personal lines), while others pay commissions for all accounts and lines. Some agencies have compensation plans that pay more commission or bonuses too, if the producer exceeds their goal, while others might reduce commissions if the goal is not reached. For agencies that pay producers on commission, the industry average is around 40 percent for new business and 30 percent for renewal. Independent contractors can earn another 10 percent in commission

continued on page 62 MARCH 18, 2019 INSURANCE JOURNAL | 61

Idea Exchange: Minding Your Business continued from page 61 points since the agency does not pay for payroll taxes and benefits. Producer compensation for writing employee benefits coverages tends to be similar to commercial lines.

The standard compensation model does work for most agencies, but is it always the best approach? Who Makes the Best Salesperson?

The typical personality type for good sales people is that they see the connection between risk and reward. They like getting paid when they have wins. That is why paying most producers on a commission basis makes sense. However, there are situations when a commission-based compensation plan is not the best approach. Salaries are often used for new producers. This allows time to build a book of business while still earning a living. Typically, the salary is reduced over time as the producer generates enough in sales to replace the salary with commissions. Small personal lines agencies often have the role of an agent that does both sales and service. Many of these agencies pay the agent a salary and then pay either a commission or fixed dollar amount for new business sales. A creative method some agencies use is to establish a monthly “salary” for the producers based on a percentage of their book of business so the producer gets a steady income. The salary is then trued up periodically (monthly, quarterly or annually) to match current production. This is a nice hybrid approach, providing the producer with a known monthly income while still based on performance (a commission percentage of

62 | INSURANCE JOURNAL | MARCH 18, 2019

their book of business). It also gives them regular rewards for new business over their draw. Agency owners and managers need to explore their options for a good producer compensation plan. The personality of the producers and the goals of the agency will determine the best approach.

Service Staff

Customer service reps, account managers, claims and administrative staff are paid on a fixed salary in the majority of agencies. Some firms will add a small commission or flat dollar bonus if the staff member helps generate new business. Some agencies will pay bonuses or offer perks to the office staff if the agency or department hits goals, such as new sales or account retention. This general type of compensation plan works but can limit the agency to fall into the realm of an “average” agency. What happens too often with people on a fixed salary is they don’t see the connection between their performance and their compensation. This is because there really is no connection other than they can get fired for bad performance. A better approach is to create a system that ties a portion of the employee’s salary to their performance results. Paying commission for new business might seem like it falls in this category, but employees see the occasional commissions as a bonus rather than a part of their regular compensation. The stereotypical personality that

works in customer service prefers a fixed salary to a risky one, such as commission expense. So, it is important to keep this in mind when designing a new compensation plan. A more robust performance-based compensation plan would tie 10 percent to 20 percent of their salary to a set of metrics that are meaningful to the position and to the overall agency results. The approach is that if the employee does a certain set of tasks, then their overall job will be done properly, and the business will be going in the right direction. This business model requires the designing and tracking of certain Key Performance Indicators (KPIs), which eventually indicate the overall health and direction of the firm. What gets measured gets done. A benchmark is set for these KPIs with an allocation of the compensation the employee can earn. In many cases, it is best to have a sliding scale and not an “all or nothing”

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approach. This way, the employee can still earn decent compensation even if they miss the mark in an area or two, like getting only 85 percent of their quotes done on time. Tracking employee performance will add some complexity to handling the payroll. Depending on the KPI, it might be calculated from the agency management system, an Excel spreadsheet or even can be self-reported. The upside of regularly tracking employee performance is it also tracks the key measurements that drive the business, which helps management make better decisions. Tom Baker from Catalyst Insurance Systems has created a software system called Symphony where employees enter their KPI results and the system compiles the data and then calculates employee compensation. Once it is set up, management just monitors the overall results.

Compensation needs to become a tool to drive productivity and agency performance.

a profit margin of around 15 percent to 25 percent. This can be paid out to the owners annually or semi-annually. The profits can also be allocated based on criteria such as sales, book of business, management and equity. This sort of owner compensation plan will pay owners for their contribution to the business. Owners that are Retired In Place (RIP) will see their compensation diminish, while those active in sales and management will be appropriately rewarded. Oak & Associates has developed a worksheet that helps in the creation of such a compensation plan for the owners, which we sell for a nominal fee. Contact us if you would like to re-design your compensation plan for the owners, producers or staff.

Summary

The old business model treats employees as an expense on the P&L statement. Compensation needs to become a tool

to drive productivity and agency performance. It is time to explore new options for compensation and develop a new model that moves the agency in the direction of the vision set by management. This includes creating a compensation system that aligns the employees’ performance and goals along with those of the business. Performance-based compensation systems will create a new culture for the business. Employees will gain a new sense of control and empowerment, as they can directly see how their work impacts the success of the business and their fellow workers. 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.

Owners

Agency owners need to look at their role as having two positions — one as an employee and one as an investor in the business. From this perspective, there should be two compensation plans. First, the owner should pay themselves as a producer and also as a business manager. The producer compensation should be the same as the other producers in the agency. Next, the agency should set aside a management fee that can be split amongst the agency owners that handle the management of the various aspects of the firm. This fee amount can typically range between 3 percent and 7 percent of revenues. It caps at about $250,000, as the the larger agency likely has a good middle management team. Second, as an owner, there should be a return on investment or a dividend. If the owner sets up their monthly compensation as an employee (i.e. producer and manager), then, assuming the agency is in good shape financially, there should be

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MARCH 18, 2019 INSURANCE JOURNAL | 63

My New Markets Auto Service and Repair

Market Detail: Anderson & Murison Inc.’s

(www.andersonmurison.com) garage package offers general liability and property coverage for businesses in the automotive industry. A&M has in-house binding authority with multiple A+ Rated markets. Available limits: Maximum $10 million Carrier: Various, non-admitted States: All states except Alaska and Fla. Contact: Commercial underwriting at 800-234-6977, ext. 220 or e-mail: commercial@amqts.com

Limousine and Sedan Services

Market Detail: National Indemnity Co.

(www.nationalindemnity.com) offers coverage for stretched and super-stretched limousines, stretched SUVs, executive transport autos, airport transportation vehicles, among others. Coverages include: liability; physical damage; uninsured motorist coverage (UM) and underinsured motorist coverage (UIM); and medical payments. Higher liability limits available than many insurers. Many businesses require federal or state authority to operate. National Indemnity can make a required governmental filing upon request. Available limits: As needed Carrier: Unable to disclose, admitted and non-admitted available States: All states except Mass., N.J., and N.Y. Contact: Customer service at 402-9163000

Outfitters & Guided Trail Rides

Market Detail: Allen Financial Insurance/ The Equestrian Group (www.eqgroup. com) is an insurance provider for guided trail rides, outfitters, trail guides and dude ranches. Underwriting specialists have created insurance programs in use by commercial equine operations throughout the U.S. Limits include: occurrence of $100,000 - $1 million; general aggregate of $200,000 - $2 million; aggregate products/ operations of $200,000 - $2 million; personal/advertising injury of $100,000 - $1 million; medical of $5,000; and fire legal liability of $50,000. Available limits: As needed 64 | INSURANCE JOURNAL | MARCH 18, 2019

Carrier: Unable to disclose, admitted and non-admitted available States: All states except Alaska and Hawaii Contact: Judi Petersen at 800-874-9191 or e-mail: jpetersen@eqgroup.com

Long Term Care Professional and General Liability

Market Detail: Magnolia LTC Management Services (www. magnolialtc.com) is the program manager and responsible for the daily operations of Continuing Care Risk Retention Group (CCRRG). CCRRG is a mutual insurance company that offers professional liability and general liability insurance for LTC facilities. This is a member-owned program. New brokers welcome – submissions can be considered while broker agreement is completed – no previous book of business required for initial appointment. Policy highlights include general and professional liability package policy with two GL & PL policy form options available. Claims made and claims paid coverage options. Standard liability limits of $1 million/$3 million; $2 million/$4 million limits available subject to underwriting approval; lower limits may be available upon request. Other features include: deductible and SIR options available; per location aggregate (subject to underwriting approval); prior acts available; competitive rates; new ventures considered with appropriate prior experience; accounts with a “shock loss” considered with acceptable documentation; sexual misconduct coverage with no-sublimit; no joint and several liability; defense outside the limits – subject to U/W approval; risk management service provided with on-site risk assessment visit(s). Program includes exclusive access to Magnolia Analysis Risk System, which offers tools and helpful information for LTC facilities, including 53 hours of approved continuing education for employees’ licensure requirements. HUD and Fannie Mae approved carrier. Available limits: As needed Carrier: Continuing Care, a Mutual Insurance Company States: All states except Alaska, Fla.,

Miss., Ala., and Ark. Contact: Steve Ottenbrite at 707571-7430 or e-mail: sottenbrite@ magnolialtc.com

Commercial General Liability

Market Detail: NBIS (www.nbis.com) is the insurance provider of a policy including loss prevention, risk management support, claims service, competitive rates and custom coverage. Programs include coverage for concrete pumping, crane & rigging, specialized transport and equipment dealers. Available limits: Maximum $3 million Carrier: Unable to disclose States: All states Contact: Customer service, 410-863-4894

Contractors General Liability

Market Detail: Westcap Insurance Services LLC (www.westcapins.com) offers residential, commercial and industrial general contractors and subcontractors coverage. Policy structure is occurrence-based, primary general liability. Premiums starting at $2,500; $4,000 in California. Deductibles ranging from $1,000 to $25,000. Eligible classes include: remodelers; demolition; roofing; plumbing; concrete including foundation work; rough framing; structural steel; custom home builders; excavation/grading. Policy features include: 100 percent sub costs acceptable; new condo/townhouse work; blanket and scheduled “Your Work” AI’s; blanket PPA ($5 million cap); blanket and scheduled waiver of subrogation; earth movement sub-limit options; EIFS buy-back options; scheduled past projects options; no work height limitation; no INSURANCEJOURNAL.COM

tract limitation and no overspray exclusion. Available limits: Minimum $300,000, maximum $1 million Carrier: Unable to disclose, admitted States: Ariz., Calif., Minn., Nev., Ore., and Texas Contact: Erik Fulton at 805-688-7034 or e-mail: efulton@treancorp.com

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March 18, 2019

Manufacturers Alliance Insurance Company 380 Sentry Parkway Blue Bell, PA 19422

Pennsylvania Manufactuersâ&#x20AC;&#x2122; Association Insurance Company 380 Sentry Parkway Blue Bell, PA 19422-0754

The above company has made application to the Division of Insurance to obtain a Foreign Company License to transact Property and Casualty Insurance in the Commonwealth of Massachusetts. Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty Insurance in the Commonwealth of Massachusetts. Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

March 18, 2019

Patriot Life Insurance Company 1 Mutual Avenue Frankenmuth, MI 48787-0000

Pennsylvania Manufacturers Indemnity Company 380 Sentry Parkway Blue Bell, PA 19422

The above company has made application to the Division of Insurance to obtain a Foreign Company License to transact Life, Accident and Health Insurance in the Commonwealth of Massachusetts. Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

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March 18, 2019 Athene Annuity and Life Company 7700 Mills Civic Parkway West Des Moines, IA 50266-3862 The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Variable Life or Variable Annuities in the Commonwealth of Massachusetts. Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 02118-6200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

Advertisers Index Applied Underwriters www.auw.com 2, 3, 68 Berkley Luxury Group www.berkleyluxurygroup.com E2, M1 Brecht & Associates www.brechtassoc.com SC2 Brighthouse Financial www.brighthousefinancialpro.com 7 ePay Policy www.epaypolicy.com 30, 31 EZLynx www.ezlynx.com 24, 25 Financial Times Live live.ft.com/FTIIS 63 Golden Bear Insurance www.goldenbear.com 67 Hudson Insurance Company www.hudsoninsgroup.com 5 JM Wilson www.jmwilson.com S2, M2 Leavitt Group Enterprises, Inc www.leavitt.com 20, 21 Louisiana Commerce & Trade Assoc. www.lctacomp.com SC3, S3 M.J. Hall & Company www.mjhallandcompany.com W4 Midlands Management Corporation www.midlandsmgmt.com SC2 Monarch E&S Insurance Services www.monarchexcess.com W1 PSIC - Pacific Specialty Insurance Co. www.wwfi.com W2, W3 SIAA www.siaa.net 26, 27 SIS Wholesale www.sisinsure.com 22, 23 Texas Mutual www.texasmutual.com SC1 Worldwide Facilities www.wwfi.com 28, 29

MARCH 18, 2019 INSURANCE JOURNAL | 65

Closing Quote Underwriting and Rating Tools Under Attack in State Legislatures

By Jeffrey Brewer

‘Insurance is about matching risk with price so that safer drivers do not subsidize riskier drivers.’

alifornia, a bellwether state in many ways, rang in 2019 with a regulation banning the use of gender in auto insurance underwriting and rating. Prior to this regulation, insurers used gender in California for more than 30 years because it is predictive of future loss and insurance claims. Young male drivers typically drive faster than young female drivers, causing more losses, and insurers showed regulators the data to demonstrate this risk. Nevertheless, as Insurance Commissioner Dave Jones left office, he issued the ban on gender, and since January, 12 other states have introduced or considered legislation that would restrict or ban a range of rating factors. So far this year, legislation to ban the use of gender has been considered in Connecticut, New Mexico, Texas and Virginia. Bans on the use of credit have been introduced in Connecticut, Indiana, Maryland, New Jersey, Oregon, Rhode Island and West Virginia. Despite having studied the use of education and occupation, Maryland and

66 | INSURANCE JOURNAL | MARCH 18, 2019

New Jersey are again considering legislative bans on these factors. The use of ZIP codes and geographic territories are under attack in Illinois and Maryland. Marital status as a rating factor is also being debated in Maryland, and nearly all non-driving factors are being scrutinized as part of the discussion around no-fault reform in Michigan.

Matching Risk

Insurance is about matching risk with price so safer drivers do not subsidize riskier drivers. However, these bills would eliminate many tools used to price insurance accurately and ensure consumers get the best rates. They would have the unintended consequence of making it difficult for insurers to develop a more complete picture of a drivers’ risk or accurately price policies. The insurance industry has studied the data for years, and it shows many factors commonly used are more reflective of driver safety than one’s driving record. That is because driving records can be wiped of injurious car accidents and safety violations through the completion of easy driver safety courses. Drivers with the financial resources can hire an attorney and have items removed from their record. Rather than forcing insurers to solely rely on state motor vehicle records, which are plagued by omissions and unreported events, insurers should be able to continue using the variety of factors that accurately predict the likelihood of an accident or a claim.

When insurers use these tools to underwrite risks, consumers benefit with lower rates, more choices and greater market stability. This is why nearly all state insurance departments across the country have approved the use of the factors these bills would eliminate or restrict.

Limiting Choice

This is not the right time for regulators to limit choice and competition. Instead, the industry wants to work with lawmakers and commissioners to increase consumer options and lower costs. The way to make the insurance marketplace affordable and work better for all drivers is to encourage consumers to shop around for the policy that fits their specific needs and price range. We should work together to combat distracted driving and other safety hazards contributing to rising collision and fatality rates. When purchasing insurance coverage, consumers simply want a fair price that relates to the likelihood they will have an accident or file a claim. The restrictions on riskbased insurance pricing being advanced across the country would unfairly create lower rates for some riskier drivers while increasing the rates for those with a record of safety. This is the wrong direction for consumers and the insurance marketplace. Brewer is vice president of the American Property Casualty Insurance Association, which represents home, auto and business insurers. INSURANCEJOURNAL.COM

Cheers!

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