Insurance Journal West 2019-05-20 by Insurance Journal

APPLIED PROTECTS THE TITANS OF INDUSTRY. ®

Accepting large workers’ compensation risks. Most classes. All states, all areas, including New York City, Boston, and Chicago. Few capacity and concentration restrictions. Simplified financial structure covers all exposures.

EXPECT THE WINNING DEAL ON LARGE WORKERS’ COMPENSATION. Call (877) 234-4450 or visit auw.com to get a quote.

May 20, 2019 • Vol. 97 No. 10

Contents

News & Markets

Cyber Prices Drop, While Demand, Supply, Awareness Continue to Grow: Marsh

18 What to Know About Cyber Defense Best Practices

Video Game Effort Could Help Regulate Future Drone Traffic

Idea Exchange

Special Report

Closer Look: Cyber Confusion: Creating a Sustainable Cyber Market Going Forward

Special Report: Connecting the Dots in Agency Technology

28 Scooter Accidents Leading to Big Ticket Claims at Disney Parks

Closer Look: Cyber Liability Policies – Who Needs Them?

Tech Talk: Why Agent Response Time Is More Critical Than Ever

Protecting Your Agency and Educating Your Clients on Cybersecurity

The Impact of State-Level Legalization of Marijuana on the Insurance Industry

Emphasizing Empathy During Technological Transformations

The Wedge: 3 Steps to Building an Agency Growth Machine

Minding Your Business: Value Added Services

Closing Quote: Change Is Coming

Departments 6 Opening Note 12 Declarations 4 | INSURANCE JOURNAL | MAY 20, 2019

12 Figures

14 Business Moves

16 People

46 My New Markets

INSURANCEJOURNAL.COM

Your business may face cyber threats. It takes a partner at the forefront of the cyber curve to help you prepare, respond and recover from the attacks. AIG canÂ help you navigateÂ this ever-evolving, 24/7 world. A world that never sleeps.

Learn more at AIG.com/cyberedge Insurance products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Such products and services may not be available in all jurisdictions, and coverage is subject to actual policy language. For additional information, please visit our website at www.AIG.com.

Opening Note Write the Editor: awells@insurancejournal.com

Flaws in Smart Home Security Devices

omeowners are purchasing smart home products at a record pace. Nearly 30 million smart home devices will be sold in 2019, according to the Consumer Technology Association, a 23 percent increase from last year. But a recent study says some devices may not be secure. Researchers at North Carolina State University have identified design flaws in “smart home” Internet-of-Things devices that allow third parties to prevent devices from sharing information. The flaws can be used to prevent security systems from signaling that there has been a break-in or uploading video of intruders. “IoT devices are becoming increasingly common, and there’s an expectation that they can contribute to our safety and security,” says William Enck, co-author of a paper on the discovery and an associate professor of computer science at North Carolina State. “But we’ve found that there are widespread flaws in the design of these devices that can prevent them from notifying homeowners about problems or performing other security functions.” The researchers have found that if third parties can hack a home’s router — or already know the password — they can upload network layer suppression malware to the router. The malware allows devices to upload their “heartbeat” signals, signifying that they are online and functional — but it blocks signals related to security, such as when a motion sensor is activated. These suppression attacks can be done on-site or remotely. “One reason these attacks are so problematic is that the system is telling homeowners that everything is OK, regardless of what’s actually happening in the home,” Enck says. These network layer suppression attacks are possible because, for many IoT devices, it’s easy to distinguish heartbeat signals from other signals. “One potential fix would be to make heartbeat signals indistinguishable from other signals, so malware couldn’t selectively allow heartbeat signals to pass through,” says TJ O’Connor, first author of the paper and a graduate student at North Carolina State. “Another approach would be to include more information in the heartbeat signal.” Enck says that no system is going to be perfect, but given the widespread adoption of IoT devices, it’s important to raise awareness of their potential flaws. The paper, “Blinded and Confused: Uncovering Systemic Flaws in Device Telemetry for Smart-Home Internet of Things,” was presented at the 12th ACM Conference on Security and Privacy in Wireless and Mobile Networks held May in Miami, Fla.

The flaws can be used to prevent security systems from signaling that there has been a break-in or uploading video of intruders.

Andrea Wells Editor-in-Chief 6 | INSURANCE JOURNAL | MAY 20, 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: Paloma Heras Ambros, Melissa Bond, David Coons, Bill Fahy, Gabrielle Russon, Christopher Sirota Columnists: Catherine Oak, Bill Schoeffler, Randy Schwantz, Tom Wetzel

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 Web Developer James Wagoner | jwagoner@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:

Call (855) 814-9547 or visit ijmag.com/subscribe Outside the US, call (847) 400-5951

Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media Group, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2019 Wells Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Media Group, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Dept, PO Box 708, Northbrook, IL 60065-9967 ARTICLE REPRINTS: Contact (800) 897-9965 x125 or visit insurancejournal.com/reprints

News & Markets Cyber Prices Drop, While Demand, Supply, Awareness Continue to Grow: Marsh

he message about the need to take cyber risk and insurance seriously is getting through to companies and boardrooms. “As risk awareness has grown, more organizations, particularly those focused on their business interruption risk, are turning to the cyber insurance market for protection,” according to Tom Reagan, U.S. Cyber Practice Leader for global insurance broker Marsh. In a new report on the cyber market, More Cyber Insurance Buyers as Awareness Grows, Marsh noted that cyber insurance pricing is competitive; average pricing for cyber insurance coverage fell by 0.6% in fourth quarter 2018. Insurers also continue to provide more coverage in exchange for premium, although this trend may not continue indefinitely. The estimated cyber insurance market increased to $1.8 billion in 2018, three times what it was in 2015, the report says. Reagan said Marsh’s experience shows that the overall number of U.S. purchasers has doubled over the past five years, while policy limits for existing buyers are also growing “as the economic impact of cyber 10 | INSURANCE JOURNAL | MAY 20, 2019

events becomes increasingly clear.” This client demand is being matched by “strong carrier appetite” for cyber risk, which Marsh expects to result in stable pricing and expanding coverage for 2019. Some findings from the Marsh report: • Over the past five years, the number of all Marsh U.S. clients buying cyber insurance has doubled to 38% in 2018 from 19% in 2014. That expansion is evidenced across all key industries, which saw an average standalone cyber insurance purchase growth rate of 15% since 2016. • In 2018, cyber insurance purchases grew the most among hospitality and gaming (67%) and education (34%) organizations. • Cyber policy limits grew in 2018, with average limits purchased by all companies rising 11% to $20.9 million. • Among companies with more than $1 billion in revenues, average limits purchased increased by more than 25% in 2018, to $62.4 million. According to the report, the leading buyers of cyber insurance in 2018 were organizations in industries that make significant use of personally identifiable

information (PII) and protected health information (PHI), primary sources of cyber risk for businesses. They include the education and healthcare industries, followed by hospitality and gaming. Other industries also have begun purchasing cyber as insurers have indicated they are no longer willing to provide coverage for business interruption caused by network intrusions. “Those losses are increasingly expected to be covered under cyber policies, which have expanded to respond to a wide variety of potential risks while still being competitively priced,” the Marsh analysis notes. Another key factor in the message getting through: the damage done by 2017 WannaCry and notPetya malware attacks, along with more recent ransomware incidents. These have “made clear that cyber threats have evolved from data breach and theft to now include business interruption and supply chain disruption” and more organizations including manufacturers, power and utilities companies are now purchasing cyber insurance. INSURANCEJOURNAL.COM

Letâ&#x20AC;&#x2122;s talk niches.

Special events and business services. Transportation and fuel.

Entertainment, education, and environment. They all need coverage they can count on. Philadelphia Insurance Companies provides protection for more than 120 niche, real-world industries, making it easy for you to handle complex risk. We know every niche business has some risk, and each

deserves exceptional protection and service.

got a niche?

Experience the PHLY difference.

Call 800.873.4552 or visit PHLY.com

AM Best A++ Rating

Wardâ&#x20AC;&#x2122;s Top 50 2001-2018

96% Claims Satisfaction

120+ Niche Industries

Philadelphia Insurance Companies is the marketing name for the property and casualty insurance operations of Philadelphia Consolidated Holding Corp., a member of Tokio Marine Group. All admitted coverages are written by Philadelphia Indemnity Insurance Company. Coverages are subject to actual policy language.

Figures

$615,640

The amount in penalties imposed by the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) on the San Angelo, Texas-based meat packing plant 7 S Packing LLC, operating as Texas Packing Company. OSHA said 7S Packing exposed workers to highly hazardous chemicals and committed other workplace safety violations.

The number of lawsuits filed in April against dozens of Indiana auto dealerships, accusing them of charging excessive fees to prepare sales-related documents. The suits allege that car dealerships demand fees, with some approaching $200 per business deal, as a way of extracting “additional profits from consumers in an unfair and prohibited manner.” The dealerships say they’re just doing what’s allowed under an agreement with the Indiana Attorney General’s Office.

Declarations At Wits End

“We are at our wits end … We are totally unprotected.” Mayor Rick Eberlin, mayor of Grafton, Ill., situated on the Mississippi River 40 miles north of St. Louis, said as the river’s rising waters were closing in on the town’s city hall. Flooding along that part of the Mississippi was expected to reach the second- or third-highest levels in early May. Grafton has no flood walls or levees.

12 | INSURANCE JOURNAL | MAY 20, 2019

Storage Tank Complaint

“Until something occurs or a complaint comes in, those things aren’t looked at.” Harris County Fire Marshal Laurie Christensen, speaking at a Texas Senate hearing, on a proposed bill that would strengthen state oversight of aboveground tanks that hold petroleum products and hazardous chemicals. The bill was filed after a leak at a Deer Park tank farm owned by Intercontinental Terminals Company sparked a fire in March that spread to almost a dozen more holding drums.

Wildfire Accountability

“This legal action is an important and essential step toward accountability and recovery.” Los Angeles County Supervisor Sheila Kuehl lauded a decision by her and fellow board members to sue Southern California Edison and parent company Edison International to recover more than $100 million in costs and damages from a winddriven wildfire that may have been sparked by one of the utility’s wires.

INSURANCEJOURNAL.COM

The number of tornadoes confirmed by the National Weather Service to have touched down in Mississippi on April 18. The figure ties the state’s one-day record previously set by an outbreak during Hurricane Rita in September 2005. The one-day total also exceeds Mississippi’s annual average of 43 tornadoes between 1991 through 2010.

Care Disrupted

“Imagine what the hospitals, who [sic] are the entities of last resort, have gone through as part of this crisis. Their day-today ability to treat people effectively has been completely disrupted by the whole spate of opioid issues that come through their doors every day.” Stephen B. Farmer, lawyer for nearly 30 hospitals in West Virginia and 10 affiliates in Kentucky that are suing opioid companies. The suit says the drug makers flooded the region with the painkillers, forcing medical centers to deal with the financial fallout. The hospitals are seeking monetary damages to cover the costs associated with treating people with opioid addictions, the Associated Press reported.

INSURANCEJOURNAL.COM

MAY 20, 2019 INSURANCE JOURNAL | 13

Business Moves healthcare and employee benefits risks. The company serves commercial companies, nonprofits, public entities and individuals.

Arthur J. Gallagher & Co., McLean Insurance Agency

National Ryan Specialty Group, Atlantic Specialty Lines

Ryan Specialty Group has agreed to acquire the assets and operations of Atlantic Specialty Lines, Inc. (ASL), a privately owned wholesale insurance brokerage headquartered in Richmond, Va., with additional locations in Illinois, Florida, Louisiana, New York, Pennsylvania and Texas. The ASL team will become part of RT Specialty, the wholesale brokerage unit of Ryan Specialty Group, and will expand RT Specialty’s footprint in the Mid-Atlantic and Southeast. Atlantic Specialty Lines was founded in 1996 and serves retail brokers and agents throughout the Southeast and MidAtlantic, focusing on general liability, commercial property, commercial package, professional liability and personal lines.

East The Hilb Group, Marsh-Kemp Insurance Agency

The Hilb Group LLC has acquired Massachusetts-based Marsh-Kemp Insurance Agency Inc. (MK). Established in 1912, MK provides clients with a personal and business insurance options. Agency Leader Thomas McLear will continue to lead MK’s associates out of the existing locations in Worcester and Auburn. 14 | INSURANCE JOURNAL | MAY 20, 2019

The Hilb Group is a middle-market insurance agency headquartered in Richmond, Va., and is a portfolio company of Boston-based private equity firm Abry Partners. The Hilb Group seeks to grow through targeted acquisitions in the middle-market insurance brokerage space. The company has 72 offices in 17 states.

Risk Strategies, Krauter & Company

Risk Strategies, a privately held, national insurance brokerage and risk management firm, has acquired Krauter & Company LLC, a specialty firm focused on the risk and insurance needs of private equity firms and their portfolio companies. Founded in 2004 and headquartered in New York, Krauter & Company counts more than 185 private equity firms and thousands of portfolio companies among its client base. The company designs and places tailored transactional risk products, such as reps and warranties coverage, and tax opinion insurance. In addition to working with private equity clients, Krauter & Company also engages with large, national companies across a variety of industries, including accounting, airlines, staffing and restaurants. Beyond its New York headquarters, Krauter & Company maintains eight offices throughout the U.S., including in Chicago, San Francisco, Los Angeles, Houston and Boston. Risk Strategies offers risk management advice, as well as insurance and reinsurance placement for property and casualty,

Arthur J. Gallagher & Co. has acquired Potomac Falls, Va.-based McLean Insurance Agency Inc. Established in 1971, McLean Insurance Agency offers retail property and casualty, life and employee benefits brokerage and consulting services to businesses and individuals throughout the eastern United States. Douglas B. Megill and his associates will continue to operate from their current location under the direction of Dan Tropp, head of Gallagher’s Mid-Atlantic retail property and casualty brokerage operations, and John Tournet, head of Gallagher’s Southeast employee benefits consulting and brokerage operations. Arthur J. Gallagher & Co., a global insurance brokerage, risk management and consulting services firm, is headquartered in Rolling Meadows, Ill. The company has operations in 35 countries and offers client service capabilities in more than 150 countries through a network of correspondent brokers and consultants.

Midwest Seeman Holtz, Schwarz Insurance Agency

Seeman Holtz Property & Casualty LLC has acquired Schwarz Insurance Agency Inc., headquartered in Prairie du Sac, Wis., with six other offices across the state. President and CEO Kathy Schwarz, an employee of the Schwarz Insurance Agency since 1987 and a co-owner since 1993, was named a partner and CEO of this Seeman Holtz Property & Casualty division. Schwarz Insurance Agency has been serving Wisconsin for almost a century. Family owned and operated, Schwarz Insurance is a full-service independent insurance agency administering more than $100 million in premiums for business, home, auto, health, life, employee beneINSURANCEJOURNAL.COM

fits and agribusiness. The agency is also a recognized leader in ACA compliance and education. Seeman Holtz Property & Casualty Inc. is based in Boca Raton, Fla.

Hub International, First Western Insurance Agency

Chicago-based global insurance brokerage, Hub International Ltd. (Hub), has acquired the assets of First Western Insurance Agency Inc. in South Dakota. First Western Insurance Agency is an independent insurance agency with 10 locations throughout the Black Hills of South Dakota. The agency provides multiline insurance solutions, including personal, commercial and employee benefits products. First Western's focus on various industries, such as agribusiness, construction, healthcare and transportation, supports Hub’s Specialty practices by complementing and strengthening Hub’s existing capabilities. Kyle Prewitt, president of First Western Insurance Agency, will join Hub Mountain and report to Rene LeVeaux, president of Hub Mountain.

and South Carolina. Propel Advisory Group Inc. served as financial advisor for Lighthouse in the transaction. Lighthouse has operated in the Louisiana market for 11 years.

CRC Group Argenia

Parsippany, New Jersey-based CRC Group, a nationwide wholesale distributor of specialty insurance products, has acquired Argenia LLC, a Little Rock, Arkansas-based managing general agent (MGA) and surplus lines broker. Founded in 1976, Argenia operates in more than 10 states with numerous specialty programs. CRC Group said the addition of Argenia complements the group’s capabilities in Arkansas and the surrounding region. The acquisition also builds on a previous acquisition made in Arkansas by CRC Group last year. In the short-term, Argenia will continue to operate under the company’s current brand with the same underwriters and the same contact information. Over the coming months, CRC will work to fully integrate the operations.

South Central

Southeast

Lighthouse Property Insurance, Excalibur National Insurance

Ryan Specialty Group, International Specialty Insurance Services

Lighthouse Property Insurance Corp. has acquired Excalibur National Insurance Co., based in Louisiana. Excalibur is a Louisiana-domiciled property insurance carrier with approximately $20 million of mostly homeowners’ premium throughout southern Louisiana. The integration of the two companies will take several months. Excalibur will be a wholly owned subsidiary of Lighthouse and will continue to provide competitive product offerings to Louisiana homeowners. Combined, Lighthouse Property and Excalibur National write approximately $75 million in homeowners’ premium in Louisiana as part of a $265 million consolidated book, including affiliated carrier Prepared Insurance Company, across Florida, Texas, Louisiana, North Carolina INSURANCEJOURNAL.COM

Ryan Specialty Group, LLC, has acquired the assets and operations of International Specialty Insurance Services Inc. (ISI), an independently owned managing general underwriter with offices in Winston-Salem, N.C. ISI’s team is a part of RSG Underwriting Managers LLC, the managing general underwriting unit of Ryan Specialty Group. This transaction was previously announced on Feb. 12, 2019. ISI offers high-value disability and other related insurance products to athletes, entertainers, physicians and other high-earning professionals. The business was privately owned and led by Matthew Ferraro, Joseph Ferraro and Christopher Larcheveque, who will remain with the business under the new RSG ownership,

as will the whole team at ISI. Sherman & Company LLC acted as financial advisor to ISI. Founded in 2010, Ryan Specialty Group LLC is an international specialty insurance organization designed specifically for brokers, agents and insurers. Ryan Specialty includes a wholesale brokerage firm, RT Specialty, a well as a managing general underwriting division called RSG Underwriting Managers, which is comprised of highly specialized managing general underwriting companies.

West Alliant North County Insurance

Alliant Insurance Services Inc. has acquired Escondido, Calif.-based North County Insurance. Joseph Giamanco, president of North County Insurance, and the rest of the team will join Alliant and continue to service clients from its Escondido offices. North County Insurance provides commercial and personal insurance solutions. Newport Beach-based Alliant provides property and casualty, workers’ compensation, employee benefits, underwriting, surety, and financial products and services.

Alera Group, Shomer Insurance Agency

Alera Group, a national insurance firm, announced its acquisition of Shomer Insurance Agency, Inc. (Shomer). Terms of the transaction were not announced. Located in Los Angeles,Shomer offers insurance and risk management programs to clients throughout California. The firm specializes in serving nursing homes, home health, and assisted and independent living facilities. All Shomer employees will continue operating out of the firm’s existing locations under the name Shomer Insurance Agency, an Alera Group Company LLC. Deerfield, Ill.-based Alera Group offers employee benefits, property/casualty, risk management and wealth management. Shomer was advised on the transaction by Helfer & Associates LLC, located in Englewood, N.J. MAY 20, 2019 INSURANCE JOURNAL | 15

People National

Allianz Global Corporate & Specialty (AGCS) announced that Baptiste Ossena,

global product leader of Hull and Marine Liabilities (HML), is assuming additional responsibility as the North American regional head of HML. Relocating to New York from Paris, Ossena will work with direct report John Kiernan, the current head of HML in North America, who will take on the responsibility for large account management and portfolio steering across the business. Ossena has held his current global role since 2017. He also served as the regional head of Mediterranean Marine & Energy through January 2018, also based in Paris. Ossena first joined AGCS in 2010 as an internal audit manager and in 2012 moved to the Marine business.

East

XS Brokers, a Quincy, Mass.-based independent wholesale insurance underwriting brokerage service provider, has promoted Sean McVicker to division leader of Brokerage Casualty. Previously, McVicker served as assistant vice president at XS Brokers. In his new role, he will play a role in carrier management, national Sean McVicker client growth, enhancement of best practices and attraction and cultivation of talent. Pittsburgh, Penn.-based Ascinsure Specialty Risk LLC, an operating compa-

ny of Allied Insurance Brokers Inc., has promoted Steve Keinard as its assistant vice president and underwriting manager. Within this new role, Keinard will provide leadership, support and guidance to Ascinsure’s underwriting team. Joining Ascinsure as a senior underwriter in January 2018, Keinard was responsible for leading Ascinsure’s underwriting department by improving partner relationships, capitalizing on new business and renewal opportunities and increasing operational efficiency. He brought with him more than 30 years of insurance and underwriting 16 | INSURANCE JOURNAL | MAY 20, 2019

experience. Prior to Ascinsure, Keinard held senior positions with Travelers, Discover Re and Chubb.

PMC Insurance Group, a Bedford,

Mass.-headquartered, national workers’ compensation wholesaler, has hired Richard Skinner as assistant vice president for its staffing programs division, StaffPRO3. In his new role, Skinner will be responsible for growing new business nationwide. He Richard Skinner brings more than two decades of staffing services and insurance brokerage experience to PMC. He has worked in various roles focused on the staffing services industry including underwriting, risk control/risk management and business development. He previously worked as an assistant vice president for temporary staffing at Risk Placement Services.

South Central

NetVU, the Dallas-based Vertafore technology users network, named Linda Dodson executive director. Dodson’s career has included work in an insurance agency and with agency carriers. She began her insurance career with Rand Insurance Inc. in Riverside, Connecticut, in roles as producer, personal lines account Linda Dodson manager and operations manager. She also has worked with insurance carriers Chubb and Travelers. She joins NetVU from Dodson Experience Corp., a consultancy focused on insurance marketing, sales and user experience. Dodson succeeds Kitty Amber, who was named CEO in 2016. Ambers is now with AVYST, a Dallas sales and risk management company. The Independent Insurance Agents of Houston (IIAH) has named David Wuthrich as the group’s new executive director. In addition to owning his own

consulting firm, Wuthrich has also worked at Cadence Bank, Marsh, JP Morgan, Chase and Chubb. He has served on more than a dozen boards, including Men of Distinction, Houston Aggie Medical Society, Houston Arts Alliance, Houston Symphony, Family Services of Greater Houston, March of Dimes and Texas Bowl. Wuthrich takes over from former IIAH Executive Director Carole Shelton, who retired from her position effective March 15. Shelton had been with the organization for more than three decades.

BevCap Management in

McKinney, Texas, added Curtis Hoppe as director of Claims and Risk Management. Hoppe brings more than 24 Curtis Hoppe years of professional experience in auto liability, general liability and workers’ compensation claims management. Hoppe will be responsible for BevCap’s national accounts, middle market and alternative risk clients. He will also lead BevCap’s claim advocacy and consulting efforts for the multiple captive insurance companies BevCap manages. He joins the BevCap team from Sedgwick CMS in Irving, Texas, where he spent the last 12 years in a variety of claims management roles.

Midwest

Great American Insurance Group in Cincinnati, Ohio, hired Andrew Gristina

as divisional director in its Fidelity/ Crime Division. A fine art specialist, Gristina will oversee the management and underwriting of the Fidelity/Crime Division’s Fine Art Insurance Program. Gristina has 20 years of industry experience and is a member of the Inland Marine Underwriters Association Arts and Records Committee, an adjunct professor at Christie’s Education, and a member of the Appraisers Association of America industry advisory committee.

AmeriTrust Group Inc., headquartered in Southfield, Michigan, promoted Josh Crumley to chief of staff. Crumley will be INSURANCEJOURNAL.COM

responsible for identifying innovation and disruption opportunities, business development, business analytics and new product implemenJoshua Crumley tation. He will also serve as AmeriTrust’s primary liaison with the credit rating service, A.M. Best. Crumley has been with AmeriTrust for 13 years, having worked in a variety of roles including most recently as vice president of Operations and Analytics. He originally joined AmeriTrust as an actuarial analyst. Columbus, Ohio-based automobile insurance provider, Root Insurance, named Dave Luketic director of Government Affairs for the company. Luketic will be responsible for the strategic direction and management of the company’s government relationships, including political affairs and public policy with U.S. federal, state and local governments, as well as developing grassroot advocacy campaigns. He comes to Root after spending two years as the campaign manager for Ohio Gov. Mike DeWine.

Southeast

Worldwide Facilities has added Shane Holden to its Atlanta team as senior

vice president/Property broker. Holden brings 25 years of insurance and risk management experience to his position at Worldwide Facilities. With various positions in the insurance industry, his previous experience includes working as a retail broker, E&S broker and a risk manager. As a broker, Holden has experience in small E&S placements as well as complex, layered national property schedules and catastrophe business. His expertise includes traditional E&S insurance placements, captive and reinsurance programs, and the design and placement of risk purchasing groups. Worldwide Facilities is a national wholesale broker, managing general agent and program underwriter that has been in business since 1970. Baldwin Risk Partners (BRP), a TampaINSURANCEJOURNAL.COM

headquartered insurance distribution and consulting holding company, has appointed Dan Galbraith as chief operating officer. Galbraith joins BRP with more than 15 years of operational and sales experience across multiple business lines. He comes to BRP from Stericycle, where he served as senior vice president of Sales for its North America Compliance Services Businesses. Galbraith started his career at Cintas Corporation, where he held progressing operations and sales leadership roles across its business lines. In 2017, BRP partnered with firms across Florida in Bradenton, DeLand, Destin and Orlando. In 2018, BRP continued to partner with firms across Florida and expanded its footprint across the Southeast, including the Texas, Alabama and Georgia markets. Jacksonville, Fla.-based MedMal Direct Insurance Co. has appointed Dan Dupre as vice president of Claims. Dupre succeeds Tim Bone, MedMal Direct’s co-founder and chief claims officer, who retired on Jan. 1, 2019. Bone will continue to serve on the company’s board of directors. Dupre has more than 40 years of experience in casualty litigation management, including special expertise in physician and healthcare professional liability insurance. Prior to joining MedMal Direct, Dupre held claims leadership roles with NORCAL Mutual Insurance Co., Florida Doctors Insurance Co., Physicians Preferred Insurance Co. and First Professionals Insurance Co. (FPIC), among others. MedMal Direct Insurance Co. (MedMal Direct) is a multi-state medical professional liability insurance carrier that offers its policies directly to physicians and surgeons.

West

Strong Tower Insurance Group in Arizona has named

Aaron A. Anderson

vice president of personal lines. He was previously with American National as an agency development manager. He was a district sales

Aaron Anderson

manager for American Family Insurance before that. Strong Tower Insurance Group is an independent risk management brokerage specializing in workers’ compensation, commercial agriculture, construction, manufacturing and high net worth personal lines. San Diego, Calif.-based Cavignac & Associates has named Destiny Snelling an account manager within its commercial department. Snelling serves as the primary contact at the agency for her assigned clients, responsible for identifying their exposure to risk and recommending Destiny Snelling appropriate levels of coverage. She has 11 years of insurance industry experience. She previously worked as an account manager for commercial construction clients at Lockton Insurance Brokers LLC. She was with BB&T John Burnham Insurance Services before that. Cavignac & Associates is a San Diego-based risk management and insurance brokerage firm specializing in the design and construction industries.

Virtus has partnered with Erik Olson to

lead expansion in Colorado as president of Virtus Rocky Mountain. Olson joins Virtus from Moody Insurance Agency, where he opened its Fort Collins office. Virtus is a Kansas City, Mo.-based insurance brokerage and consulting firm.

Newfront Insurance in California has named Garett Kaneko head of carrier relations. Kaneko will manage external market relations and partner strategy as well as overall business and growth strategy for Newfront. Kaneko has more than 15 years of experience in the insurance industry. He was formerly senior vice president of sales and marketing at RIC and has previously worked at Liberty Mutual and Travelers. Newfront is a retail brokerage with expertise in commercial coverage across all industries. MAY 20, 2019 INSURANCE JOURNAL | 17

News & Markets What to Know About Cyber Defense Best Practices

ixty-one percent of firms surveyed for insurer Hiscox had a cyber attack in the past year, compared to 45% in 2018. Meanwhile, the median cost for cyber incidents losses soared from $229,000 to $369,000. While those numbers are of concern, of even more concern is the finding of how many firms are ill-prepared to handle the rising number of cyber incidents, according to the Hiscox Cyber Readiness Report 2019, which gauges how prepared businesses are to combat cyber attacks. For the report, Hiscox surveyed nearly 5,400 professionals from the U.S., UK, Germany, Belgium, France, Spain and the Netherlands who are responsible for their company’s cybersecurity. Thirty-nine percent of respondents were from organizations with fewer than 50 employees, 16% from firms employing 50-249 people, 16% from firms employing 250-999 personnel and the remaining 28% from enterprises with 1,000 or more employees.

management/board as compared to 85% percent of cyber experts. • Creating a well-defined strategy with

input from multiple stakeholders and determining a formal and adequate cyber budget: On average, cyber experts globally

devote 14.7% of their IT budget to cybersecurity, but cyber novices’ spend just 8.7% of their overall IT budget on cybersecurity. • Dedicating a cyber head tasked with

overseeing the strategy, supported by a team if necessary: Globally, 51% of ‘cyber

experts’ have a dedicated leader who oversees cybersecurity, compared to just 39% of cyber novices. • Regularly evaluating the supply chain:

Best Practices

To determine the respondents’ preparedness to handle cyber attacks, Hiscox evaluated the firms’ strategy (oversight and resourcing) and execution (technology and process) and ranked them as a cyber novice, cyber intermediate or cyber expert. Among the findings: 59% of cyber experts globally currently have cyber insurance, compared to only 37% of cyber novices. In the U.S. , only 11% of large and enterprise firms ranked as cyber experts, compared to 26% of large and enterprise firms last year, according to Hiscox. Twentyseven percent of U.S. respondents have no plans to purchase cyber insurance. The study identified cyber expert best practices that cyber novices lack. These include: • Securing executive buy-in: Only 54% of cyber novices globally believe cybersecurity is a top priority for their firm’s executive 18 | INSURANCE JOURNAL | MAY 20, 2019

• Insuring the business with a cyber policy: Globally, 59% of cyber experts have adopted cyber insurance, compared to only 37% of cyber novices. Even though many firms are falling short, there has been some progress. “The message that cyber risk is a real threat to businesses of all sizes is sinking in. Companies are increasingly aware of the risks and pouring more resources into cyber protection, and yet, there is still a tremendous gap between awareness of the issue and actually having an effective defense,” said Meghan Hannes, Cyber Product head for Hiscox in the U.S. Hannes said many businesses believe that increasing cyber-related spending fully protects a business, but it takes more than that. “Businesses must take a holistic approach, ensuring they can properly maximize their investment with appropriate internal protocols, staffing, and employee training, ultimately creating a human firewall as the first line of defense,” she said.

U.S. Findings

Only 18% of cyber novices strongly feel that they have good visibility into their suppliers’ security arrangements, compared to 34% of cyber experts globally. • Defining a process that spans from

when a cyber incident is detected to when it has been mitigated, and making sure employees are ready to learn, respond and make changes if an incident occurs:

85% of cyber experts have a clearly defined security strategy, compared to just 53% of cyber novices. • Conducting proactive testing through

simulated attacks and regular phishing experiments: 41% of cyber novices global-

ly have conducted phishing experiments to understand employee behavior and readiness for attacks, compared to 69% of cyber experts.

Some findings specific to the more than 1,000 U.S. firms surveyed include: • Leaky bucket budgets: 72% of firms plan to increase spending on cyber security in the coming year. However, increased spend without proper infrastructure and training is the equivalent of pouring water into a leaky bucket, according to Hiscox. Only 11% of respondents cited increased spending on employee training and culture changes as a result of a cyber security incident. • Attacks are on the rise: 53% of respondents reported an attack in the past 12 months, compared to 38% last year; 45% of companies reporting experiencing three or more attacks in the past year. • Unexpected risks in the supply chain: 56% of firms experienced cyber-related supply chain issues in the past year. However, only 7% cited increased evaluation of the supply chain as a result of a cyber security incident. INSURANCEJOURNAL.COM

Specialties Personal Article Floaters Unscheduled Personal Property Floaters Primary/Excess Flood Misc Earthquake Contact Your Monarch Underwriter

Submissions@ monarchexcess.com

Genette Nice Senior Underwriter

MonarchExcess.com

Burbank 818-249-0100 / Simi Valley 805-577-6800 / San Diego 619-521-2170 / Rancho Mirage 760-779-5555 San Marcos 760-891-2811 / Fresno 559-226-0200 / Arizona 877-406-8026 / Hawaii 818-425-9847 / Lic. #0L09546

News & Markets Amazon Cited in Idaho for Workplace Safety Violations

15 Calif. Chiropractors Charged in $6M Auto Insurance Scam

mazon has resolved the workplace violations cited against the online retail giant’s temporary distribution center in Idaho. The Occupational Safety and Health Administration cited the company’s modular distribution center in Nampa for four unsafe workplace conditions in March, with proposed penalties totaling $6,442. The federal agency said Amazon failed to log a nonlife threatening injury to an employee’s hand, created a tip-

ifteen Southern California chiropractors have been charged with a $6 million insurance and kickback scheme involving phony car crash medical claims. Los Angeles County prosecutors announced that the chiropractors are accused of filing fake auto collision medical claims with their patients’ insurance companies. Authorities say the companies were bilked out of about $500,000. Prosecutors say the alleged

ping hazard with uneven flooring material, didn’t cover up a 2-inch deep hole near a door and had an outlet box that wasn’t mounted to a surface. Amazon didn’t immediately respond for comment. The company has no prior OSHA citations in Nampa. Copyright 2019 Associated Press. All rights reserved.

ringleader, Yury Chernega of Studio City, received $6 million in illegal kickbacks to refer some patients to the other 14 chiropractors. He could face nearly 19 years in prison if convicted. Copyright 2019 Associated Press. All rights reserved.

California Workers’ Comp Rating Bureau Chief’s Message to Comp Community

he California workers’ compensation marketplace today remains generally healthy for insurers, employers and injured workers, the chief of the Workers’ Compensation Insurance Rating Bureau of California said in an open letter earlier this month. The WCIRB continues to experience the “overwhelmingly positive outcomes” from comprehensive system reforms passed with Senate Bill 863 in 2012 as well as more recent reforms, Bill Mudge, president and CEO of the rating bureau, said in his letter posted on the organization’s website. “These reforms fueled, in large measure, an environment of stable claims frequency and loss severity (in both indemnity and medical) and a broadly competitive market, with increased benefits for injured workers,” Mudge wrote. Mudge said a stable loss cost

Bill Mudge, president and CEO of the Workers’ Compensation Insurance Rating Bureau of California. environment coupled with the growing California economy has contributed to eight consecutive advisory pure premium rate reductions approved by the insurance commissioner from 2015 through 2019. “For insurers, the WCIRB is projecting through 2018 a sixth consecutive year of California

W2 | INSURANCE JOURNAL | WEST MAY 20, 2019

workers’ compensation industry accident year combined loss and expense ratios below 100 percent — the longest stretch of below 100 combined ratios over the past 40 years,” Mudge wrote. Mudge also outlined some challenges: Costs for claims handling and dispute resolution (i.e., frictional costs) are the highest across all states’ workers’ compensation systems, are greater today than the annual cost of paid indemnity benefits to injured workers and, in total, are more than double the cost to provide a dollar of benefits compared with the median state workers’ compensation system in the United States. Regional differences across California when examining claims frequency, cumulative trauma, permanent disability and frictional costs are key to

stakeholder understanding for sellers (insurers) and buyers (employers). Despite a single statewide workers’ comp system, cost drivers vary widely in California. The percent of claims involving cumulative trauma has significantly escalated in the past decade, accounting for more than 15 percent of indemnity claims, and is highly concentrated in Southern California — with the costs of cumulative trauma claims (both losses and frictional costs) being a uniquely California phenomenon when compared with other states. Duration of medical payments in California is prolonged compared with other states’ workers’ comp systems, causing future medical loss costs in California to be particularly susceptible to changes in medical inflation patterns. INSURANCEJOURNAL.COM

It could happen today. After a damaging earthquake, the dawn we woke up to today could look completely different come tomorrow. Your customers may need your help to recover if their world has been turned upside down by an earthquake. Home insurance does not cover shake damage, and limited government assistance is only for those who qualify. Help your customers protect their way of life with a CEA policy thatâ&#x20AC;&#x2122;s flexible and affordable.

Get marketing support at Portal.EarthquakeAuthority.com.

News & Markets NRA to Halt ‘Unlawful Solicitation’ of Carry Guard in California

he National Rifle Association has agreed to stop soliciting insurance in California without a license, and made changes to its website and member communication materials to address allegations in a 2018 cease and desist order issued by the California Department of Insurance, Insurance Commissioner Ricardo Lara announced in early May. The CDI issued the order in September 2018 in response to a consumer inquiry and subsequent department investigation. The investigation revealed the NRA was transacting or selling insurance without a license or certificate of authority issued by the insurance commissioner, which violated the California Insurance Code. According to the evidence cited in the department’s order, the NRA was soliciting sales of Carry Guard, a personal firearms liability insurance product providing coverage for bodily injury or property damage resulting from the legal use of a firearm in self-defense. The NRA

sponsored Carry Guard, and received a fee for the use of the NRA’s name and trademarks from the licensed broker responsible for selling the policy. The NRA used email marketing, featuring spokesperson Dana Loesch and NRA CEO Wayne LaPierre, to promote the product, explaining coverage details and articulating why the email target should buy the insurance coverage. In one 2017 marketing email, NRA CEO Wayne LaPierre asked the recipient to “sign up for NRA Carry Guard today!” and urged them to “close this critical gap in your insurance coverage today, and I look forward to hearing that you’ve secured this important protection for you and your family.” Because the NRA has never held a valid insurance license, the NRA’s marketing practices and messages are clear violations of California Insurance Code section 1631, as cited in the department’s Cease and Desist Order, according to the CDI.

Under the Stipulation and Waiver, the NRA notes substantial changes made to the Carry Guard website as well as direct mail and email materials to ensure they comply with the California Insurance Code and department requirements. The Stipulation and Waiver further notes that, other than a banner advertisement from a licensed broker indicating the availability of insurance coverage, which redirects consumers to the broker’s website, the NRA site contains only information regarding the non-insurance benefits of the Carry Guard program. The Carry Guard Personal Firearms Liability Including Self Defense Insurance Policy is administered by Lockton Affinity Series of Lockton Affinity LLC and underwritten by Illinois Union Insurance Co., a Chubb insurer.

“The NRA’s agreement to not sell insurance coverage affirms they will no longer violate California law by soliciting and negotiating insurance without a license,” Lara said in a statement. “Our laws are in place to protect consumers by ensuring that anyone offering insurance contracts has proper oversight by the Department of Insurance.”

Tentative Settlement Reached in Hawaii Brewery Lawsuit

he parent company of a Hawaii brewery has agreed on a tentative settlement with the plaintiffs in a lawsuit over allegations that the company’s packaging and advertising misleads customers. West Hawaii Today reported that Craft Brew Alliance Inc., which owns Kona Brewing Co., told investors that it expects to spend about

$4.7 million to settle the suit, though the company’s general counsel says the exact

W4 | INSURANCE JOURNAL | WEST MAY 20, 2019

figure will depend on the number of people who file claims in the case.

A federal judge in California has set a June hearing to consider preliminary approval of the class-action settlement between the plaintiffs and Portland-based Craft Brew Alliance. Lead attorneys for the plaintiffs in the case did not return a phone call from West Hawaii Today. Copyright 2019 Associated Press. All rights reserved. INSURANCEJOURNAL.COM

News & Markets Video Game Effort Could Help Regulate Future Drone Traffic

By Lindsay Whitehurst

rones ferrying medical supplies, packages and even pizza could one day be crisscrossing the skies above U.S. cities, and a team at the University of Utah is working with regulators to keep that future traffic in check using a video game. The simulation uses a 3-D model of Salt Lake City, similar to games like Sim City, and data about planned drone paths to determine potential problem areas. “You can play with all these variables and figure out a system that works,” said Mikaila Young, a producer on the game and graduate student at the Entertainment Arts and Engineering program. Young and her team are developing the game for the Utah Department of Transportation, which is working with the Federal Aviation Administration to prepare for the widespread use of commercial drones in the coming years. “Basically, it just says how many drones can you slam into this corridor or in this airspace before we start breaking that minimum separation distance?” said Jared Esselman, director of aeronautics at the state transportation department. The INSURANCEJOURNAL.COM

game also includes simulations for drones that could one day carry people. For now, U.S. law now requires most drones to fly within the line of sight of an operator and away from crowds. But companies and groups are already testing drone deliveries in a number of U.S. locations. A Google affiliate is expected to begin delivering goods in parts of Virginia this year after getting the first federal air-carrier certification drone this week, a “potentially game-changing moment in the drone-delivery world,” said Jia Xu, an engineer at the Rand Corp. think tank. The first regular commercial drone-delivery flight took blood samples on a short trip at a North Carolina hospital in March. In west Africa, meanwhile, a new drone service launched this month could eventually allow drones to ferry medical supplies to remote corners of Ghana. The U.S. government recently estimated that about 110,000 commercial drones were operating in the U.S., and that number is expected to grow to about 450,000 in 2022. Drones hold the promise of delivering medicine and food faster, especially to people who need help getting around, and possibly reducing traffic and emissions.

If current trials are successful, smallscale tests above urban areas could begin over the next two years, and they could scale up quickly in the two years after if they pass those tests and if it and makes business sense for companies, said Andrew Lohn, an information scientist at Rand Corp. Still, there are a number of hurdles to overcome before widespread drone deliveries are mainstream, said Ryan Calo, co-director of the Tech Policy Lab at the University of Washington. There’s the question of how to develop laws that protect safety and privacy when drones are flying over people. And there are still technical hurdles to overcome in building drones that can carry larger packages long distances without being too noisy. “The hurdles are not just regulatory. This stuff is very hard to do,” Calo said. Though simulations are a commonplace tool in the tech world, “I think the Utah project is important because it’s a step toward trying to validate that this stuff would work safely.”

Closer Look: Cyber

Cyber Confusion: What’s Needed to Create a Sustainable Cyber Market By Elizabeth Blosfield

here has been plenty of talk about how cyber continues to evolve in an ever-changing technology landscape, how cyber risks have become increasingly sophisticated and how the insurance industry needs to keep pace. Meanwhile, the question of how to transform cyber insurance into a more sustainable market remains. “Cyber is moving so fast that we’re on this cadence of we’re almost changing the

Steve Krusko

Bob Parisi

20 | INSURANCE JOURNAL | MAY 20, 2019

coverage on an annual basis,” said Bob Parisi, managing director and cyber product leader for Marsh. “Once you have one or two markets doing that, you feel like, ‘Well, I’m going to be left. The train has left the station.’” Parisi was among the panelists at the PLUS Cyber Symposium in New York last month addressing the sustainability issue. From Parisi’s perspective, the emphasis on change has led to division among brokers in terms of how cyber insurance is presented to clients and how policies are structured, creating a lack of consistency in the space. “You have 21 different legitimate cyber markets, and there are 22 different cyber forms on any given risk that a mid-sized to large client has, so a broker is getting five different options, five different policies, five different definitions of ‘claims,’ ‘computer system,’ ‘cyber event’ or ‘glitch’ that they have to explain to the client in a way

‘You’re comparing apples to oranges to pears. … It’s part of that lingering confusion that people associate with the cyber market.’ that the client can understand,” Parisi said. He added that standardization among terminologies and glossaries will be important for cyber insurance going forward. However, standardization is not something the cyber insurance space has its arms around yet. It’s not just brokers who are struggling, according to Gina Pilla, managing director and head of professional lines at Arch Reinsurance Company. “From my perspective, the only standard is that there really hasn’t been a standard,” Pilla said, explaining that a lack INSURANCEJOURNAL.COM

of standard language in cyber policies is something that reinsurers have been challenged with as well. “We would like to have a better understanding of what we’re actually covering when we reinsure someone who is ready for cyber.” Because cyber has quickly and continuously evolved, standard policy language has not been able to keep up, said Steve Krusko, chief underwriting officer at Berkley Cyber Risk Solutions. “Even policies written five years ago might not be clearly addressing some of the issues. I think sometimes clients just want clarity,” he said. “They want to know, ‘Could this one event or this one scenario be covered under our policy?’ Rather than hearing, ‘Well, you know, our definition of ‘computer system’ is this, so let’s just add it in there.'”

there?'” Krusko said. “So, they have this long list of endorsements, which technically are probably not even anything from a coverage standpoint that’s material. You see a lot of that going on.”

Building a Sustainable Market

As the insurance industry works toward transforming cyber insurance into a more sustainable market, Parisi said he believes

the key is to move away from the notion that cyber insurance is simply about price and focus on making the coverage feel more valuable to clients. “We have to get off of the cadence of, ‘We’ll just make it cheaper and people will buy it,’” he said. Parisi added that currently, a big uptick in cyber coverage has been seen outside

continued on page 22

Lingering Confusion

Beyond simply understanding a cyber policy’s language, determining how evolved a cyber policy is in terms of whether it approaches cyber as a property and casualty risk, or whether it is based on an errors and omissions form has been another challenge, Parisi added. “You’re comparing apples to oranges to pears,” he said. “It’s part of that lingering confusion that people associate with the cyber market.” With all of this in mind, panelists expressed frustration regarding how cyber policies can be structured with many endorsements, calling for more consistency and clarity. “A policy that’s issued with 37 endorsements — as a former claims person — that’s confusing,” Parisi said. “Now, I have to read the policy backward and see, for the thing I’m looking at, was there an endorsement that modified that particular portion of coverage?” Krusko added that he believes this difficulty is exacerbated by the ever-changing cyber market as well, leading some brokers to fear getting left behind. “Sometimes I feel like, is the broker asking for those 27 endorsements because they don’t want to get shut out by the competitor broker who has basically said, ‘Oh, you missed the ERP endorsement on INSURANCEJOURNAL.COM

Often overlooked, the solution to improved profits, performance and growth is in your OPERATIONS. ReSource Pro helps you discover ways your operations can reveal new pathways to profitable growth. Call us at 1.877.761.7276, email more@resourcepro.com or visit resourcepro.com to learn more.

RESOIJ012.indd 1

4/2/19 7:20 |AM MAY 20, 2019 INSURANCE JOURNAL 21

Closer Look: Cyber continued from page 21

of the privacy space on the industrial side. He explained that industrial clients are buying cyber coverage because it has started to adapt and respond to their business interruption exposures and their digital asset losses, filling the voids that property and casualty coverage has left behind by pulling out. “Clients will pay for [coverage] if it’s real,” Parisi said. “Now, when I go to a risk manager at a large manufacturing or industrial company, they say … ‘I get that’s valuable coverage. I’ll pay for that because it has value to me. I don’t view it as just dipping my toe in the water.’” However, Pilla raised concerns that while there is still a lack of understanding around cyber risks, the coverage is too broad. “We need to build sustainable product with cyber,” she said. “When I think about expanding coverage to include blanket contingent business interruption with a system failure trigger for a Fortune 1,000 company, I don’t even know what I’m reinsuring. So, if there is one of those systemic events, it could be a disaster and it’s not a sustainable product.”

Lack of Data

Krusko added that a

22 | INSURANCE JOURNAL | MAY 20, 2019

lack of data regarding cyber business interruption risk is another concern. “There isn’t a lot of data out there, and some of our carriers are going into it a little blind because they’re using rate plans that were basically designed to cover business interruption for a traditional cyber buyer — maybe it’s a retail or healthcare risk, or technology errors and omissions — and it’s a percentage of the liability premium,” Krusko said. “There runs the risk of, if we keep going down this particular path, we’re going to find the rates aren’t really adequate.” With pricing in mind, Pilla emphasized that underwriters can’t ignore the catastrophe element. “I get frustrated when people talk about how we have lower loss ratios, so we should be expanding coverage because we haven’t paid a lot of claims. But you have to think about the exposure you’re putting on your balance sheets,” Pilla said. “Exposure is there, and it’s very hard to measure it when we expand the forms in such a way that we don’t even know who we’re actually insuring.” Pilla pointed again to contingent business interruption as an example. “We’re providing product to anyone that company does business with, and we don’t even know who they are. So, we have to consider the exposure, not just the historical losses that we’ve paid when we’re talking about premium adequacy,” she said. Parisi believes a solution for cyber insurance is that sustainability can come as underwriters model how the property market has historically underwritten risk. “The property market is able to sustain bad hurricane years … To be sustainable, you have to underwrite to the risk,” he said. “So

go next door, ask the property guy for his rating model and start applying it. There are solutions here that can solve some of these problems.”

Focusing on Resilience

Another key for underwriters within cyber insurance, Parisi said, is to concentrate on resilience. “You want the company that is talking resilience, not the company that’s talking security,” he said. He added that as a former underwriter, he would find it concerning if a company today was still talking only about security and not resilience. “When we first started this back in the days of yore, it was, ‘How deep is the moat? How high is the wall?’ and that was it. That’s not what we’re talking about anymore,” he said. “It’s how can you function when bad things happen, and can you continue to deal with that and move forward? Because if all you do is just shut down, that’s a bad risk.” Indeed, Krusko added it’s difficult for underwriters to wrap their heads around cyber when looking at individual risk situations. Consequently, it’s important to focus on resiliency as a whole. “How well is the board involved? How well do they do business interruption, continuity plans, backup vendors and all of those things that are going on to make sure they’re resilient and prepared?” Krusko asked. “It’s not about if it will happen anymore, but when it will happen.” Parisi stated that while taking steps toward achieving greater sustainability in the cyber insurance space may seem daunting, it’s imperative and becoming more attainable as the cyber market continues to evolve, respond to losses and establish itself in the marketplace. “I do think that the cyber market has gotten past that hurdle of being able to show that it does respond to loss and that the coverage is there,” Parisi said. “Now, the coverage looks and feels the way the buyer thinks it is. The cyber market has gotten to the point where now it’s viewed as credible, because its language and cadence of discussion is credible.” INSURANCEJOURNAL.COM

NO ORGANIZATION IS IMMUNE TO CYBER CRIME. Cyber crime has evolved into one of the top threats to an organization’s reputation, cash flow and balance sheet. Every organization is at risk. Safety National’s cyber risk insurance solution equips policyholders with pre-incident readiness and post incident response services. This ensures that a cyber event will be managed properly from the very start.

LEARN MORE

SafetyNational.com | 888.995.5300 A MEMBER OF THE TOKIO MARINE GROUP

Special Report: Agency Technology

24 | INSURANCE JOURNAL | MAY 20, 2019

INSURANCEJOURNAL.COM

By Andrea Wells

o say the agency technology space is robust is an understatement. Right now, the industry is seeing an “onslaught of technology available to enable agents and brokers to better manage, not only their business, but also their customer base,” says Laird Rixford, CEO of Dallas-based Insurance Technologies Corp. (ITC). There are so many options for agencies today it’s almost too much. “They have all these different options, or the same options, and it’s almost overwhelming.” The next few years will bring big changes to the agency tech world, adds Ron Berg, executive director at the Agents Council for Technology (ACT). “There has never been a better time for our distribution channel because of the technology advances that our carriers are making and the investments by the technology vendors. Do we have a long way to go? Yes, but we’re seeing more willingness by independent agents to adopt technology advancements than ever before.” As more of them are embracing new technologies, agents are working through some challenges and overcoming barriers along the way. The first challenge is understanding today’s diverse technology landscape and keeping up with current trends. “Find

out where the biggest hits or highest value technology implementations are heading and then understand how to get started,” Berg said. Things like artificial intelligence, chatbots, and more common tools like mobile, e-signature, portals, apps for customers are important to understand. Agencies need to have a balanced view on common best practices and where to go for help, he said. Staying involved with ACT is one way to keep up-to-date, Berg says. “ACT helps by bringing together all the carriers, vendors, agents and brokers, to provide consensus on what the state of the industry is.”

Simplification

The first thing agencies should do when thinking about the future of agency tech is to keep it simple, said Jason Walker, managing partner at SmartHarbor, a Columbus, Ohio-based digital technology provider for independent insurance agents. “When you hear the buzz phrases like AI or artificial intelligence, or machine learning, let it go,” he said, and then simplify. “When I talk about artificial intelligence, what we’re looking at and where agencies are moving from a trend perspective is really towards automation,” he said. That’s not exactly artificial intelligence, he said. “Artificial intelligence is

‘All of these different systems need to work together so that then you start developing a singular set of data that can be grabbed by these neuro learning nets and applied to create insights that are applicable to the agency.’ INSURANCEJOURNAL.COM

‘There has never been a better time for our distribution channel because of the technology advances that our carriers are making and the investments by the technology vendors.’ usually something that is programmed to act like a human, whereas automation is more of … ‘Hi, my name’s Jason Walker,’ on a form, and then the form should respond by saying, ‘Hi Jason Walker, I’m X agency, how can I help you?’” This automation tool for “smart forms” is one area that more agencies are implementing today, Walker said. “These tools are more conversational and humanized and give the consumer the feeling that their issue is being treated right now.” Process automation is a huge focus area for ResourcePro clients, says Andy Niver, vice president, Innovation & Analytics at ResourcePro. The conversation usually begins with, “‘Hey, I want to automate stuff. How do I think about that?’” he said. “And really for us, when we go and look at these areas with our clients and their business, we really look at it from the perspective of what are they trying to do? What are they trying to achieve? How are they approaching this from an integration perspective into their operations?” Niver says any business or agency can automate a process, but to be able to do it in a way that makes sense to that particular business is critical. “It’s not as simple as just going and buying an automation piece of software. You can

create a robot, but then the question is how do you trigger the robot?” he said. “You need to have a workflow engine that kind of sits on top of your robot. This workflow engine which says,

robot A, go and start working. Robot A comes back, gives me information, now robot B, go and do something,” he said. “All of those different pieces to the puzzle are part of what we work out with our clients to automate and orchestrate within their operations, depending on how that process fits into their workflow.” Chat-enabled features are becoming more popular on agency websites, too, according to ACT’s Berg. “I’m seeing agencies become more willing to utilize components of artificial intelligence (AI), such as machine learning for chatbots,” he said. “That’s

continued on page 26

MAY 20, 2019 INSURANCE JOURNAL | 25

Special Report: Agency Technology continued from page 25 being used to create enhanced chat capabilities so that potential customers, or policyholders can visit an agency website and either obtain the information they need or be directed to the information they need via a database linked to a chat bot functionality.” ITC’s Rixford agrees that neural computer learning used in chatbots is beginning to take hold, but most agencies aren’t there yet due to its complexity and oftentimes how difficult it can be to integrate with various agency systems, such as automated marketing platforms, rating systems, agency management

systems and document management systems. That integration is a large hurdle for agencies right now, he said. “All of these different systems need to work together so that then you start developing a singular set of data that can be grabbed by these neuro learning nets and applied to create insights that are applicable to the agency,” Rixford said. ITC makes all of its

systems open via Application Programming Interface (API) so that anybody can integrate with their services, with

‘It’s not as simple as just going and buying an automation piece of software. You can create a robot, but then the question is, how do you trigger the robot?’ 26 | INSURANCE JOURNAL | MAY 20, 2019

permission, security approval and authentication. “That’s because we believe that while we might have the best rating system, we might not have the best management system (for a particular agency) and so we give agencies all the tools they need to interact with all of our services, whether it be our management, our marketing and our rating,” he said. That may not be the case in every tech situation. As agency technology continues to mature, the focus will be on continuing to simplify. That means agencies will operate through multiple mechanisms such as data prefill, data services, data analytics, and have interconnected systems, according to Rixford. “This is extremely important; where you will have disparate systems that all work together through back channel APIs and where you can choose the best of breed technology for your agency,” he said. “It’s about finding the right technology that meets the needs of your growing business.” It might be a comparative rater from one company and an agency management system from another company. Walker agrees that there’s plenty of room for growth when it comes to integration and connectivity among various agency technologies and products. “The challenges lies in the connection between each one of those,” he added.

Connecting the Dots

Beyond integration and connectivity, another challenge is access to the right data. Any kind of artificial intelligent-based model needs good data to feed it, said Jason

Kolb, founder and CEO of DAIS Technology Inc. “I think where agents kind of hurt a little bit more than carriers is just in having access to a lot of the data that you need to feed AI,” he said. But that is changing. “For example, some of the things that we’re doing is creating some new and unique data points, and then injecting those into agency workflows,” Kolb said. “We’re collecting data from producers, CSRs, and key basic principles on scoring how carriers and their products, their coverage quality, their value-adds, their speed and responsiveness, their pricing … then we’re using that, especially for volume and flow business, to do matching.” According to Kolb, AI can help produce better recommendations for the placement of business, helping to limit the need to “touch” small commercial accounts or scoring the strength of different applications. “We see a lot of information contained in an application, a submission, and helping agents and underwriters to understand the strength of the information, the quality of the information in there.” This is where AI can help, he said. “We’ve got some AI doing some interesting scoring based on the characteristics of the exposure data.” Another barrier to moving forward with AI-driven technologies, which is not unique to the agency side of the industry, is what Kolb referred to as a “push and pull” between technology and people. “Technology really augments people; it doesn’t replace them,” Kolb contends. But employees fear that they INSURANCEJOURNAL.COM

will be replaced. ACT’s Berg believes that while job loss may be a concern, it’s unfounded. “The core value of the independent agent distribution channel is that trusted advisor relationship and that part cannot be automated,” Berg said. “What AI, machine learning and chatbots do is provide more actionable insight, instant service capability to free up the independent agent to provide more superior services.” The biggest risk for independent agents, Kolb says, is that customer experience is suffering. “It’s hard for independent agents to keep up with some of the insurance acts out there and a big factor in that is the fact that it’s really difficult to use the data that the agents have,” he said. “They’ve got a lot of really great data, but they also need data from carriers and right now it’s extremely difficult for them to actually put that to use to create new and different customer experiences.” Kolb hopes to help change that through The Internet of Insurance, a DAIS Technology network of agents, carriers and technology companies that is promising to align incentives between agencies and carriers, allowing partners to both own a stake in and help guide the development of the network. “What we’re excited about is capturing the knowledge and the expertise of the individuals, whether it’s an underwriter or a CSR or a producer, and then creating a learning system so you can start to progressively automate the low-hanging fruit,” Kolb said. “You see that a lot in the carrier world in terms of progressively autoINSURANCEJOURNAL.COM

mating quotes, especially small premium business, but it’s happening on the agency side as well for processing.” Agencies have moved processing work from higher cost centers to lower cost centers, such as moving tasks from a producer to a CSR, for example, or from a CSR to an offshore organization. But the next step is to completely automate. “The way that you do that is by observing the interactions and collecting data around how those producers and CSRs work, and then feeding that to an AI so that it can do the work,” he said. That is what’s happening now. “It’s not a big bang,” Kolb said. “It’s more of an ‘eat the elephant one bite at a time’ type of a thing where you’re taking the highest cost, most time-consuming tasks, and delegating them to an AI, in this case.” Mike Ansay, CEO of Ansay & Associates in Port Washington, Wis., with more than 300 employees, has taken note of Kolb’s Internet of Insurance. “It’s a platform strategy which changes dynamically how we do business internally and externally with the customer,” Ansay explained. His organization has been working to bring the product to independent agents. Ansay says the insurance industry, like many others, is looked upon as a business model that could be disrupted by fintech. “As agency owners, we have the most important thing, and that’s the relationships,” he said. “But how do we remain relevant to a changing technology environment where customer relationships are at the forefront of the relationship?”

‘I think where agents kind of hurt a little bit more than carriers is just in having access to a lot of the data that you need to feed AI.’

Independent agents must address connectivity and integration, he says. “We currently have connectivity in how we conduct business and how we do business, but the ability to be digitized and connect differently is really going to be the next level of opportunity for the independent agent,” Ansay says. He believes what Kolb has to offer will give the agents different approaches in that connectivity and allow for more value-adds to deliver a better customer experience. One of the key elements Ansay says the platform will offer agents is single entry to multi-carriers. That’s something that's been in the works for 35 years, and they have

done it, he said. Ansay says that right now the platform has secured 50 carriers in the process. “I believe that as more agents join, it will become a two-phased marketplace that will bring value to everybody that is engaged in it,” he said. “It really revolutionizes how we’re going to do business.” He said so far the Internet of Insurance has partnered with state Big I associations in New York, Wisconsin, Minnesota, Tennessee and Louisiana — with more on the way.

MAY 20, 2019 INSURANCE JOURNAL | 27

Spotlight: Amusement Parks Scooter Accidents Leading to Big Ticket Claims By Gabrielle Russon

arly at the Magic Kingdom entrance, it’s another day of fun about to begin as “Yo Ho, Yo Ho, A Pirate’s Life For Me!” blasts on the speakers and the first electric scooters are lined up to go. But by the time the park opens at 9 a.m., half of the scooters available for the day are already rented to anyone at least 18 willing to pay $50 per day. Other park-goers roll in through the turnstiles on motorized scooters they’ve rented outside the parks or own themselves. “Will the scooters run out?” asks a woman who looks worried. They are usually gone by 11 a.m., a Disney employee tells her with an apologetic smile. Scooters are as visible at Disney parks as Mickey Mouse ears, and they provide a lifeline

for people, some with hidden disabilities, who can’t walk the grounds. But amid growing Disney crowds, the vehicles have brought on a rise of civil lawsuits filed by people complaining about being run over or drivers saying they were injured. Disney recently banned oversized strollers, but when it comes to scooters, the theme park is limited how it can regulate because of federal law governing rights for people with disabilities. Scooters receive the same protections under the law as wheelchairs, said Kenneth Shiotani, a senior staff attorney at the National Disability Rights Network. That means Disney – or any other business – can’t ban them, although theme parks could add rules like a speed limit or forbid them on a nar-

row path, if there’s documented danger, Shiotani said. He added any rule would likely require the U.S. Department of Justice’s approval. “People need to realize ‘disability’ is broadly defined,” Shiotani said, adding anyone who can walk only a few steps or even a few blocks is protected under the Americans with Disabilities Act. Disney rents scooters, and outside companies cater to tourists by dropping rentable ones at their hotels. The devices, which have three and four wheels, typically travel a few miles per hour. “We expect guests to operate (scooters) with safety and courtesy in mind by being responsible and respectful of other guests while enjoying our parks,” said Disney spokeswoman Erica Ettori. The scooters’ popularity comes as baby boomers – Americans born between 1946 and 1964 – are aging fast and enduring health problems. By 2029, more than 20 percent of the total U.S. population will be over the age of 65, according to the U.S. Census Bureau. It’s a generation that has “been raised going to the Disney theme parks. They’re not going to give it up,” said theme park blogger and historian Jim Hill. “They are the ones who are renting these things

because they don’t want to slow down.”

The Mouse Goes to Court

In 2018, at least 11 lawsuits were filed that allege injuries caused by scooters at Disney, the most in the past five years, according to an Orlando Sentinel analysis of Orange Circuit litigation. Typically, there were about two to three lawsuits filed every year from 2014 to 2017. So far in 2019, at least four lawsuits mentioning Disney scooters have already been filed in Orange County. Disney declined to comment but said the number of lawsuits is small compared with the millions of people who visit the theme parks every year.

Other Times, Scooter Drivers are the Ones Suing

Eugene Teto, 62, said he felt like he was driving his scooter blind as he went backwards down the ramp to get off the Monorail. Still, he was following Disney protocol as theme park workers directed him, the Connecticut man said in court documents. The lawsuit called the policy “harebrained.” Susan Purcell, who has asthma, sat on her scooter she’d brought from home while on a Disney bus. The bus driver hit the accelerator at a yellow light and made a sharp turn, which tipped over her scooter and slammed her onto the bus floor, her lawsuit says. The other major theme parks aren’t immune to similar litigation, either. SeaWorld Orlando was sued in March by a mother who says her son was run over by a scooter while walking in the

at Disney Parks park last year. However, neither Universal or SeaWorld appears to have faced growing litigation like Disney had in 2018. Out of the new lawsuits filed in 2018 and 2019, the majority are still pending, including Teto’s and Purcell’s. But not all. One woman who sued last year after she said she was run over by a scooter at Hollywood Studios voluntarily dismissed her lawsuit in December. The woman and Disney were required to pay their own attorney fees, according to court documents. Other cases have ended in settlements over the years, including a man who settled with Disney in October after he said he broke his femur when a scooter crashed into him and pinned him against the large stones inside the Splash Mountain queue in 2013. Settlement amounts are not disclosed in court documents. The cases have mounted as Disney’s attendance keeps rising and likely isn’t going to drop off anytime soon with Star Wars: Galaxy’s Edge opening this year and Walt Disney World’s 50th celebration approaching in 2021. After Pandora opened at Animal Kingdom in May 2017, attendance at the park jumped nearly 15 percent to an estimated 12.5 million that year. Nearly 20.5 million people walked through Magic Kingdom in 2017, too, according to the latest estimates available from a Themed Entertainment Association/AECOM report.

How Trouble Starts

What annoys Craig Belke is

the Disney darters who jump in front of him as he carefully edges his scooter along, trying to keep a gap between himself and the person ahead of him. Then the insult worsens. The person who cut him off turns around and lectures him about being more careful. “It’s like, are you kidding me? She ran in front of me, and then she’s yelling at me?” Belke said. Run-ins with scooters often happen because pedestrians are in full vacation mode and sucked into the bustling atmosphere of a theme park. They just aren’t paying attention, Belke said. He calls himself a good driver, although he’s witnessed some not-so-good ones, too. “Some people have no idea what they’re doing with the scooters,” Belke said. One New York woman said “two very young children” were at the wheel of a scooter that ran over her foot at the Magic Kingdom, according to a 2016 lawsuit that was later voluntarily dismissed in August 2017. For Belke, his scooter is a godsend. He used to be “in terrible agony” from his back pain by the third day of his family Disney vacation. Belke, 64, has worked physical jobs for decades on a volunteer fire department and with machinery at a school district in New Jersey. He hated the idea of using a wheelchair, forcing his wife to push him around, making him feel helpless. He gave in. He rented a scooter. That was three years ago. Now, he won’t go to a

theme park without one. “It turned out to be one of the best trips I’ve ever had. I wasn’t in pain anymore,” Belke said.

Judgment Zone

Amanda Koolis noticed the dirty looks when she visited Disneyland in February. “I can’t tell you how many glares I get,” said Koolis, 31, a freelancer who has moved regularly with her military husband but calls Destin in the Florida Panhandle her home right now. But the people judging her don’t know she has multiple sclerosis. The autoimmune disease is making her body essentially attacking itself, causing sharp shooting pains and even partial paralysis. Just like anything in life, there are people who may abuse the system and rent scooters simply because they don’t feel like walking around, Koolis admits. On the other hand, what about others like her? Her disability isn’t visible to the outside world and without scooters, the theme parks would be off limits. Koolis feels the Disney magic of being in a fantasy world, away from the stress of her health problems even if it’s just for a few hours. “Having access to something like Disney is huge,” Koolis said.

A Never-Ending Battle

How can scooters exist more harmoniously amid the growing crowds at Disney? Attorney David Heil argues scooter drivers need more instruction before they are “turned loose” at the wheel in the parks.

A Disney spokeswoman said park employees give instructions to scooter drivers, and the four outside scooter vendors that work closely with Disney provide written instructions for drivers. Hill, the Disney historian, dismisses the idea of scooter lanes, saying it would open up Disney to bad publicity and more lawsuits over separate but equal access. Already, Hill said Disney is taking steps to alleviate the situation to free up space. At Epcot, Disney plans to relocate the tiles of guests’ faces that are posted on granite monoliths, which will widen the paths at the front of the park, Hill said. Disney also spreads out attendance throughout the year by charging more for the busiest days during holidays and school breaks, a company spokeswoman said about the company’s attempts to ease congestion. Still, the situation has no easy answers, said George Pugliese, 56, a Disney devotee from Kissimmee who bought a scooter after having surgery on both knees. He said he felt trapped one night after the fireworks and had to pull his scooter to the side and wait for the crowds to thin. People like him will always need scooters. Others will always complain about them — until the day they become unable to walk and need to rent one themselves, he said. “It’s going to be a never-ending battle,” Pugliese said. “There is no solution.”

MAY 20, 2019 INSURANCE JOURNAL | 29

Closer Look: Cyber Cyber Liability Policies –

Who Needs Them?

By Patrick Wraight

yber insurance appears to still be a mystery, although the first cyber liability policies appeared 20 years ago. What is covered? What is excluded? Why does the customer need it? Does the customer need it? All of these questions and more come to mind when we consider cyber liability. One of the struggles comes from the fact that the policy forms are different from each other, and we don’t really know what’s in the forms. They look so different and don't have the names that we’re used to. Let’s look at a few coverages in a cyber liability policy that you should verify for your customer. As you know, you need to look at the policies that you’re dealing with to find out what’s covered for your customer. This might give you some direction as you have conversations centered on your cyber liability policies.

Privacy Regulatory Claims Coverage

“We” shall pay on “Your” behalf “Regulatory Fines,” “Consumer Redress Funds” and “Claim Expenses” that “You” become legally obligated to pay in excess of the applicable retention resulting from a “Regulatory Claim” first made against “You” and reported to “Us” during the “Policy Period” or “Extended Reporting Period,” arising out of a “Privacy Wrongful Act” occurring after the “Retroactive Date” and before the end of the “Policy Period.” Can you imagine getting a call from a customer saying that not only did they suffer a data breach, but now a regulatory body called them, and they plan to levy some fines or penalties against them? This coverage is designed to pick up these expenses. You see several defined terms here (because you already expect that every word in an insurance policy in quotation marks is defined in the policy). These defined terms will help us to understand what is covered by this coverage. This 30 | INSURANCE JOURNAL | MAY 20, 2019

coverage applies to three distinct areas of financial responsibility. “Regulatory Fines” means fines, penalties or sanctions awarded for a violation of any “Privacy Regulation”. “Consumer Redress Funds” means any sums of money “You” are legally required to deposit in a fund for the payment of consumers due to a settlement of, or an adverse judgment in, a “Regulatory Claim.” “Claims Expenses” means … We didn’t give the whole definition for claims expenses because it’s more important to realize that this is included in the coverage. Watch this language. In case you missed it as quoted, go back and read it. The paragraph listed “regulatory fines,” “consumer redress funds” and “claims expenses” within this coverage. Expenses are within the policy limits. That means that every dollar spent in investigation, adjusting, settling or defense comes out of what’s available to indemnify the customer. These other two items that are covered here are meant to provide funds when a regulator deems the customer to have violated any regulation ‘… requiring “You” to limit or control the collection, use of, or access to, “Private Information” …’ this coverage picks up the costs as defined in the policy. You’ll notice that the costs include the fees,

fines or penalties that the regulator assess. You’ve likely noticed that there isn’t mention of which regulator had to levy the fines. There aren’t those kinds of boundaries online. Your customers could have customers all over the world. This means

INSURANCEJOURNAL.COM

that the regulator might not even be local to the insured. They also include any sums that a settlement or judgment requires to be set aside for the satisfaction of injuries to the affected consumers. Why not simply pay the consumers affected by the breach? In these cases, the insured may not know immediately who was affected. You’ve seen stories where millions of users’ data was compromised. Those companies didn’t know whose data was compromised or what the impact of the compromise was. In truth, the injured parties may not know there is an issue for months or years down the road. Let’s look at one more critical coverage in this policy.

Cyber Extortion

“We” shall reimburse “You” for the “Cyber-Extortion Expenses and Cyber-Extortion Payments” that “You” actually pay in excess of the applicable retention directly resulting from a “Cyber-Extortion Threat” that “You” first receive and report to “Us” as soon as practicable during the “Policy Period.” We live in a time when someone can email your company and infect your entire network with ransomware. If you’re not aware, ransomware is a nasty little bit of computer magic that is described in the policy. “Cyber-Extortion Threat” means a credible threat or connected series of threats made by someone other than a member of the “Control Group.” To introduce “Malicious Code” into “Your” “Computer System,” To interrupt “Your” “Computer System” or interrupt access to “Your” “Computer System,” such as through a “Denial of Service Attack.” To corrupt, damage or destroy

INSURANCEJOURNAL.COM

“Your” “Computer System;” or To disseminate, divulge or improperly utilize any “Private Information” on “Your” “Computer Systems” taken as a result of a “Network Disruption.” You’ll note that the only notice requirement is to let the company know as soon as practicable. They recognize that the need for coverage may be identified in short order before the event occurs. The insured might be contacted about a possible event and have only a short time before it occurs. Of course, you see that this definition is full of defined terms in the policy. Without diving into all of the specifics of this policy, you can see that the intent is to provide coverage when something bad is getting ready to happen (or already happened) to an insured’s computer system. It’s also important to note that the payment is for “cyber-extortion expenses” and “cyber-extortion payments” that have been incurred. We would learn in the

definitions of those phrases that the company maintains the right to approve the expenses before they are incurred. Paying attention to those kinds of details is the difference between a claim being fully paid quickly and fully denied quickly. There are more coverages within this policy, including security breach response, security liability, privacy liability and business income. We come back to one of the original questions. Who needs a cyber policy? The answer simply is anyone that has a cyber exposure. Who has a cyber exposure? Any organization that has computers connected to the internet and to each other. This particular policy also includes coverage if the company’s employee’s data is compromised. What company today doesn’t have some employee data on their network? Wraight is the director of Insurance Journal’s Academy of Insurance. Email: pwraight@ijacademy.com. Website: IJAcademy.com

MAY 20, 2019 INSURANCE JOURNAL | 31

Idea Exchange: Tech Talk Why Agent Response Time Is More Critical Than Ever By Tom Wetzel

wo years ago, I wrote a column on “speed-to-value,” in which the time agents took to respond to and resolve inquiries/requests from policyholders and prospects had become an important factor in customer satisfaction. What a difference two years makes. Today, many studies show that consumers consider timeliness to be not just one factor but indeed the most important differentiator — above efficiency, professionalism and knowledge. With increasing pressure from insurtechs coupled with skyrocketing consumer expectations, response time today must now be measured in minutes, not hours or days. The fact is, neither carriers nor agents live in a vacuum and must compare their performance to services outside our industry, not just peers. Insurance consumers certainly do. All of this emphasis on speed does not mean taking shortcuts in the risk management process. As Bill Wilson of Insurance Commentary said in a previous column, “Consumers need to understand that, from a service standpoint, their insurance programs are not like buying consumer goods on Amazon. They are creating and modifying complex legal contracts.” “It’s important to be responsive, but when most of your assets and potentially a big chunk of your income are on the line, some steps in the process must be deliberate and thorough no matter how long they

32 | INSURANCE JOURNAL | MAY 20, 2019

take,” Wilson added. In today’s digital marketplace, however, adhering to the insurance process does not excuse the absolute need to find ways to do it faster. This revelation was hammered home in a just-released study from Celent called “Navigating the Pace of Change in P&C Insurance” that measures the industry’s readiness for technological change. The study, commissioned by Duck Creek Technologies, said that the P&C industry is “undergoing only moderate acceleration of change, despite consumers’ expectations of radical improvements.” Among the study’s key takeaways: • Speed to market is imperative for success but insufficient on its own. Leading firms go beyond upgrading transactional systems and are accelerating their abilities to keep pace with customer expectations, technology innovation and increased data. • Progress against the most consequential driver, customer expectations, is slow. In fact, the pace of individual firms meeting customer expectations scored lowest among the six drivers. • Increasingly, customers want the personalization and ease delivered by other industries such as online retail. Insurers report that they are finding it difficult to address their expectations at speed. • Insurers spend 64% of their customer engagement benchmarking efforts comparing themselves against other insurers, and less than 10% against digital retailers. This allocation creates an echo chamber effect

that will impede progress on the customer expectations driver. Central to speeding the insurance process, of course, lies in the adept use of technology. For agents, finding ways to do it faster must now be a top priority. The big fixes from carriers and agency management systems take time (maddeningly so) so agents must start making smaller fixes on their own in a two-step process. The first step should include a website upgrade to a true conversational search engine and adding secure messaging and artificial intelligence tools (bots) to your website (see last column for tips) to give staff more time to interact with clients and prospects. The second step involves a thorough reexamination of procedures to look for ways to cut the time to perform even the smallest of tasks. The Celent study cited earlier also addressed one other huge challenge facing the industry — the looming talent shortage, and attracting and retaining the best and brightest of the next generation. The good news for agents is that making full use of the latest digital tools including AI and messaging will help attract Millennial employees and allow them to thrive in the agency setting. The bottom line is agents cannot be satisfied with the status quo and must take greater charge of their futures. Longtime insurance communicator, Wetzel heads his own insurance marketing firm that specializes in website design and social media programs for agents through its Social Media Content Roadmap. Website: www.wetzelandassociates. com. Email: twetzel@wetzelandassociates.com. INSURANCEJOURNAL.COM

TechTalk Sponsor

WHAT’S YOUR CODE TO UNLOCK SUCCESS

Websites | Marketing | Rating | Management

Find your agency’s combination at GetITC.com UUDDLRLRBA

Idea Exchange: Cyber Protecting Your Agency and Educating Your Clients On

Cybersecurity

t’s no secret that having the right technology is critical to being a successful independent agent. But as independent agents By Bill Fahy embrace technology, they must also be aware of the risks for cyberattacks and know how to protect their business. Taking the necessary steps to be cybersecure gives agents another clear advantage — they are then better able to educate their small business clients on how to purchase the best cyber insurance while meeting the ever-growing list of compliance regulations and requirements which differ from state-to-state, but are becoming more stringent in all states. And now agents must be aware of a new emerging risk: the compliance requirements being imposed upon them via their carrier and brokerage contracts due to their status as an affiliate of the carrier or brokerage.

Every Business Is a Target

When it comes to cybersecurity, there’s much for agents to take in. A recent McKinsey article warns: “While awareness is building, so is confusion. Executives are overwhelmed by the challenge [to defend themselves from cyberattacks]. Only 16% say their companies are well prepared to deal with cyber risk.” The report found that businesses are “at risk of collateral damage from untar-

geted malware and attacks on widely used software and critical infrastructure. And despite all the new defenses, companies still need about 99 days, on average, to detect a covert attack. Imagine the damage an undetected attacker could do in that time.” Cyberattacks touch businesses of all sizes and are now prevalent in small and medium sized businesses (SMBs), which often are not as proactive or well protected as larger businesses. Criminals know they are easy targets. According to a Hiscox 2018 Cyber Report, 47% of small businesses suffered at least one cyberattack in the past 12 months, and 44% of those suffered

two to four attacks. Spam, ransomware and phishing are currently the most common forms of cybercrime that small businesses face, and according to Inc. Magazine, “60% of small businesses fold within six months of a cyberattack.” These statistics not only show that independent agents need to protect their own business, but also that there is a growing market in commercial lines for agents, especially those who are educated on the risks associated with technology and systems, cybersecurity strategies and coverages available.

Agency Protection

Independent agents who don’t have a cybersecurity strategy for their agency should invest in it now — before selling cyber protection policies to others. It is vital to protect clients as well as your own business. This includes building a strategy around protecting agency data other than a basic firewall. It’s necessary to define agency data and prioritize the most classified information to be protected first, in addition to identifying where the agency is vulnerable before criminals do. Along with building a strategy, training employees at all levels is essential. Employees, not systems, remain one of the greatest risks for businesses today. For example, phony emails that trick employees into compromising passwords and/or private information is a common entry point for hackers, who may gain access to agency funds as well as customer data. The IIABA’s ACT Agency Cyber Guide includes several tips for agencies to protect themselves and meet growing compliance regulations: • Perform an in-depth risk assessment — what needs to be protected and why? • Test and assess the vulnerability of your system.

Announcing the

• • • •

Develop internal and external written security policies, for staff and thirdparty service providers — educate every one on these policies and procedures in the event of a cyberattack. Have an incident response plan — make sure everyone is on the same page and assign someone to be in charge of cyber attack responses. Conduct staff training and teach staff how to be vigilant. Implement Multi-Factor Authentication where needed so only permitted staff has access to critical files.

The Right Cyber Policy

Look for a policy that provides coverage against cyber extortion and offers proper limits to cover the myriad of postbreach response expenses, including legal fees, notification costs and reputational repair. Solid, comprehensive cyber-related policies cover (and should be in place for agents and their clients): • Data breach response and liability, including expenses and legal liability arising from a data breach. • Computer attacks, such as a virus or other malware or denial-of-service attack that cause damage to data and systems. • Network security liability, with defense and liability coverage for third-party lawsuits alleging damage due to inadequately securing a computer system. • Media liability, including legal defense costs and damages for claims asserting copyright infringement and negligent publication of media while publishing content online. • Funds transfer fraud, including losses from the transfer of funds as a result of fraudulent instructions from a person purporting to be a vendor, client or authorized employee. • Cyber extortion, including “settlement” of an extortion threat against a company’s network, as well as the cost of hiring a security firm. • Regulatory fines and penalties. According to RPS Executive Lines INSURANCEJOURNAL.COM

Producer Adam Connor, “the average policy cost is roughly $2,900 annually. The cost of a standard Personally Identifiable Information (PII) attack without any coverage can reach over $232,000 and will grow significantly higher if the company is caught up in a lawsuit as a result of the breach. Just tallying the cost of a forensics investigation, security remediation, and a breach coach to give legal advice can total close to $170,000.” Risk Placement Services Inc. (RPS), for example, has comprehensive coverage plans offering up to $1 million of protection against a multitude of data breach risks, with higher limits available to qualified agencies. (Note: RPS is a strategic partner of SIAA and writes many cyber policies for and with SIAA member agencies.)

INSURING CANNABIS eNewsletter Need a full view what’s happening with cannabis risks on state, national, and international levels? Wish you had the time to sort through what’s most important? Yes? Then we’ve got an inbox resource for you! You’ll get: News and Features Insurance Issues, Markets, and Coverages

Selling Cyber Coverage

Cyber risk and data breach coverage is a fast-growing niche in commercial lines and should be considered by independent agents looking to expand their books of business. Selling the right coverage — to small and medium-size businesses like themselves — means agents need to be educated. Well-educated independent agents will develop proactive cybersecurity strategies and invest in cyber coverage for their own agencies. They stay informed of the regulatory requirements in their state, and also continue to review their carrier and brokerage contracts for the compliance standards they are required to uphold. Then, they will be able to provide the best information to their clients to prevent devastating losses and write a cyber policy tailored to their needs. Ongoing cybersecurity means staying in the loop about risk management and training to keep both staff and clients informed, and being aware of an ever-changing threat that can negatively impact agencies and small businesses for years to come. Fahy is president of SIAA MarketFinder. SIAA is the largest alliance of independent insurance agencies in the country. Email: billf@siaa.net.

Regulations, Political, and Legal Developments Latest Research And More! Our editors share what readers need to know, as only Insurance Journal can.

A special thank you to our newsletter launch partner:

SUBSCRIBE TODAY! ijmag.com/cannabis MAY 20, 2019 INSURANCE JOURNAL | 35

IJHOUSE16671.indd 1

4/17/19 11:31 AM

Idea Exchange: Marijuana The Impact Of

State-Level Legalization of Marijuana on the Insurance Industry

he changing legal status of marijuana in the U.S. is prompting insurers to begin offering coverages, despite having extremely limited loss data to inform them. While marijuana remains illegal at the By Paloma Heras Ambros federal level, action is being taken on the state level to change laws on its consumption. More than half of U.S. states and the District of Columbia & Christopher Sirota have legalized the use of medical marijuana and many of those now also allow the use of recreational marijuana. The growth of this industry has led to the development of a nascent insurance industry to support it. However, these carriers often find themselves faced with tough choices to make on appropriate premiums to charge and coverage limits to offer because the risks associated with businesses related to this industry are still being defined. Many insurers are asking if it’s possible to quantify potential cannabis liability insurance losses? Enter liability accumulation modeling. Liability accumulation models can help insurers quantify the potential liability impacts of events on a supply chain. Each liability event is different. While historical data can be used as a guide, the ever-changing landscape of economic, legal and regulatory factors can dramatically affect how liabilities will trigger and spread. A liability loss model enables companies to explore a casualty portfolio against its supply chains, and can help insurers understand the potential for claims and losses and how those losses could spread.

These models make it possible to quantify and manage risk by looking forward while being informed by realistic past events, and to enable real-time stress testing of scenarios to see how the far-reaching consequences of long-term liability events could unfold over time.

An Analytical Approach to Understanding Marijuana Risk

Marijuana is currently listed as a Schedule I drug under the Controlled Substances Act of 1970, a federal U.S. drug policy. Schedule I drugs have “no currently accepted medical use and a high potential for abuse” and are considered “the most dangerous drugs … with potentially severe psychological or physical dependence.” However, 34 states have legalized medical marijuana and 10 of those have legalized recreational marijuana. And some carriers are providing insurance in states where marijuana is permitted. California, for example, has now approved six insurers to sell cannabis-related insurance products. In addition, some U.S. litigation has found certain marijuana-related claims to be insurable. Overall, the size of the potential market is growing. About 20 percent of the U.S. population lives in a state where marijuana is regulated, and sales are expected to increase from $13.7 billion in 2019 to $23.4 billion in 2025. However, this rapid growth in market size and activity

has engendered some concern, in part, because of the still limited scientific evidence available regarding potential benefits and harmful effects.

What Do We Know About Potential Health-Related Harmful Effects?

Although a 2017 report from the National Academies notes more research is needed to better associate cannabis use with various maladies and injuries — as well as whatever possible health benefits of marijuana — it does include the following potential harmful effects:

But wait, we have Another announcement! • Cancer: While there is some evidence

that smoking cannabis does not increase the chance for lung, head and neck cancers, there is some limited evidence that cannabis may increase the chance for a type of testicular cancer.

• Heart attack, stroke and diabetes:

There is limited evidence indicating an association between cannabis use and these conditions. • Respiratory disease: There is some evidence suggesting smoking cannabis regularly may be associated with increased episodes of chronic bronchitis, chronic cough and increased phlegm. • Mental health: There is some evidence that cannabis use may increase the risk of schizophrenia, social anxiety disorders and, to a lesser extent, depression. In addition, heavy use of cannabis may also be linked to suicidal thoughts, and daily use to an increase in symptoms for users with bipolar disorder. • Substance abuse: There is moderate evidence linking cannabis use with abuse of alcohol, tobacco, and other illicit drugs. • Cognitive domains: Learning, memory and attention impairments are associated with cannabis use, but there is limited evidence linking the continued impairment of these domains after stopping cannabis use. • Pregnancy: There is some evidence that lower birth weight is linked to smoking cannabis during pregnancy.

Are There Other Concerns? • Injury and death: With cannabis use

there may be an increased risk of a motor vehicle accident. • Accidents in the workplace: States have generally included provisions in their medical marijuana statutes that accommodate existing employer drugfree workplace — including those that prohibit on-the-job intoxication. • Infrastructure accidents: The risk of explosions may be high for growers, for example, because of the frequent use of

CO2 to increase crop yield in greenhouses. There is also the risk of explosion for manufacturers during the processing of cannabis oils, which may include the use of butane gas. • Product contamination: There have been concerns expressed about product contamination, mostly related to pesticides and other chemical crop treatments.

Announcing the

INSURING

CYBER eNewsletter

• Child intoxication and other risks:

There is not enough research to quantify these.

‘General liability, including product liability, may potentially be impacted by claims, lawsuits and other issues related to commercially sold marijuana.’ General liability, including product liability, may potentially be impacted by claims, lawsuits and other issues related to commercially sold marijuana. In addition, such activity could potentially impact professional liability for medical services. There may also be potential impacts on directors and officers (D&O) liability policies, but coverage implications for the industry will need to be monitored. In these changing times, insurers need to be proactive and know how much liability accumulation risk is on their books. Liability risk management tools enable companies to understand their potential risk by simulating how future liability events might unfold and spread through supply chains to ultimately affect their cedents. By providing a consistent approach to estimating liability event losses, these tools help insurers and reinsurers alike make informed decisions in everything from setting their policy conditions and limits to building their overall portfolio in this new but rapidly growing market. Heras Ambrosis a data scientist at catastrophe modeling firm AIR Worldwide and Sirota is Emerging Issues product development lead at ISO.

If the latest developments in cyber insurance are important to you, (and why wouldn’t they be?!) then you’ll want to subscribe right away. You’ll learn about: New Markets The Latest Breaches Cybersecurity New Technologies And More!

A special thank you to our newsletter launch partner:

SUBSCRIBE TODAY! ijmag.com/cyber MAY 20, 2019 INSURANCE JOURNAL | 37

IJHOUSE16672.indd 1

4/17/19 11:23 AM

Emphasizing Empathy During Technological Transformations

By David E. Coons

Modernization enables departments to optimize the capabilities of ... humans and machines, yet many workers are anxious about what it means for their jobs.

he insurance industry is undergoing a technological transformation. Insurers are moving data to the cloud, using artificial intelligence and beginning to prepare for a potential blockchain economy. Products and services are requiring increased technology integration to remain relevant. User experience is becoming central to business strategies as the industry works to keep up with customer demands and expectations. To stay competitive, organizations must lean in to new opportunities and engage and develop the talent necessary to make modernization successful. According to Accenture, committing to artificial intelligence and collaboration between humans and machines could mean a 38% revenue increase for companies in just a few years. Additionally, the World Economic Forum estimates 58 million net new jobs will be created by 2022 as a result of technological advancements. Modernization initiatives are inevitable and beneficial for the growth of the industry. However, whether organizations are implementing automation within existing processes or overhauling the way entire departments operate, employee retention is often a challenge. Insurance organizations are tasked with keeping employees engaged, productive and appropriately skilled during transition. Modernization enables departments to optimize the capabilities of both humans and machines, yet many workers are anxious about what it means for their jobs and their professional futures. These feelings of uncertainty can lead to lack of motivation and a lower quality of work. In pursuing innovation and technological transformation, leaders must exercise INSURANCEJOURNAL.COM

Know what else you should check out? empathy to improve organizational strength and win employee loyalty. Empathy has become an important leadership trait that is vital when employees are experiencing change and uncertainty. Businessolver’s 2019 State of Workplace Empathy study found 93% of individuals are likely to stay with an empathetic employer and 91% of CEOs believe empathy affects an organization’s financial performance. Leadership must be empathetic toward employee concerns and try to understand how new technology may be interpreted. By stepping into employees’ shoes, companies are able to develop communications plans that consider a variety of perspectives, concerns and potential assumptions. There are a number of ways leaders can exercise empathy to clearly communicate changes and successfully pursue new technology and automation initiatives: Be open and transparent. Open and transparent communication is key in easing employees’ fears and creating a universal understanding throughout departments. Share as much information as you can about what modernization initiatives will look like, what parts of employees’ jobs will be augmented by new technology and which areas will remain unaffected. Employees are often comfortable with their roles and may be hesitant to embrace change, especially if they are unclear on how their positions will be affected. Focus on the benefits. Highlight the expected business outcomes and benefits of new technology rather than focus on the specific implementation processes. If mundane and laborious procedures are being automated, let employees know the more exciting and challenging areas they will have time to focus on, such as client interactions and strategies. If employees’ day-to-day work will change, share what they can expect, as well as how the organization will help them be successful. Encourage dialogue. Let employees know you value their opinions and feedback. Ask how they feel about the changes and listen with an empathetic ear. INSURANCEJOURNAL.COM

Proactively uncover their fears and hesitations while granting permission to vent their concerns and share their suggestions.

Involve employees in the process.

Consider involving employees in the implementation and training processes. By creating task groups and appointing project ambassadors within departments, employees are empowered and can become advocates for new technology. It’s likely the rest of the department will feel more comfortable knowing their peers are embracing transformation. These ambassadors can also help address and alleviate their colleagues’ concerns. Train for future roles. Ensure employees are prepared and trained to work alongside new technology and successfully perform in redefined roles. Drastic changes to positions may mean offering internal mobility and providing assistance transitioning into new work realities. As employees and technology work closely together, human skills are important. Individuals may require coaching on critical thinking, decision-making and soft skills. This can be integrated into career development programs. Expect turnover. Some turnover may be inevitable when going through times of transformation. Individuals might understand new technology and how their roles will be affected, yet still decide to move on. This may be best for both employee and employer. It provides an opportunity to bring in fresh talent with new skill sets and perspectives to augment staff. Modernization requires participation from all levels of the organization. Insurers must clearly communicate changes to ensure employee buy-in and effectively use the capabilities of automation and other new technologies. By taking an empathetic approach, leaders can best understand, motivate and retain their workforces to come out ahead in the evolving technology landscape. Coons is senior vice president of The Jacobson Group,. Phone: 800-466-1578. Email: dcoons@ jacobsononline.com

WORKERS’ COMP eNewsletter

This newsletter is for the $35 billion workers’ compensation industry and the professionals who are shaping the new world of workers’ compensation. People like you. Here’s what you get: Receive our focused, Workers’ Compensation newsletter every other week. The latest news, research, trends, people, events and innovations in workers’ comp. Indispensable information for professionals who are shaping the new world of workers’ compensation.

SUBSCRIBE TODAY! ijmag.com/workers-comp MAY 20, 2019 INSURANCE JOURNAL | 39

IJHOUSE16673.indd 1

4/17/19 11:25 AM

Idea Exchange: The Wedge

3 STEPS to Building an Agency Growth Machine H

ow much did your agency grow last year? How about in the past five years? If your answer is anything less than By Randy Schwantz 10%, then this article is for you. In it, I want to share with you three keys to organic growth that I’ve discovered as I’ve helped agencies grow during the past 25 years. This is based on real people and situations, like Jon Sharp from Hardenbergh Insurance Agency, who said, “The most tangible result to the agency has been the bottom line. Before, we averaged 3.3% growth year over year. Now, we are realizing extraordinary growth. My definition of extraordinary growth is 60% organically over the past four years. That equates to organic growth of 15% year over year.” During those four years, Jon did an excellent job implementing the following three steps that I’m about to share with you. If you ask him about it, he’ll tell you that it was hard, but worth it. So although these “steps to growth” may seem simple (they are), it doesn’t mean they’re easy to do. If they were, then every agency would be growing 15% or more every year. Most are not. That’s because they never really took the first step, which we’ll get into now.

Step 1: Commit to Growth

Is there anything in your life that you’ve 40 | INSURANCE JOURNAL | MAY 20, 2019

truly committed to that you don’t have? Really, think about it. For most of us the answer is no. If we wanted something bad enough, we found a way to get it. However, half-hearted commitments almost always fail, especially when you’re trying to accomplish something hard. Take dieting for example. There are many people who say to themselves, “You

know, I should probably try to start eating better. Maybe I’ll try this new diet for a while and see how it goes”.

Then a few weeks later, it gets tough. The desire for sweets and carbs intensifies, and the idea of sticking to the diet feels like too much work. So they cave and revert back to unhealthy eating. However, if you went to the doctor tomorrow and he said, “Listen, I need to have a serious talk with you. We got your blood work back and if you don’t make some big changes to your diet you’re not going to live much longer. You need to avoid sugar and refined carbs from now on.” Now, how committed would you be to your diet? Would you grab some soda and brownies in the break room tomorrow when you got a craving for sweets, or would you resist the temptation and stick to your plan? If your life depended on it, you’d stick to the plan. Some people call this the “gun to the head” approach. Others say, “half measures availed us nothing.”

The point is, it’s a universal truth, a law of life that you can harness to accomplish amazing things, like growing your agency 10%,15%, or 20% year over year. So when people ask, “Why aren’t more agencies growing at a faster pace?” The only plausible answer is simple. They just never committed.

Step 2: Motivate Your Producers to Two Times Growth

Once you truly commit to growing your agency, the next step is to make a plan how to do it. Because we’re talking about how to grow organically versus growing via acquisitions, your plan must include a way to get your producers to sell more. If you can get them to do a better job at prospecting, selling and retaining business, your agency will grow. The more they grow their books and personal income, the more your agency’s value will increase. For the past 20-plus years I’ve used a simple, yet highly effective, strategy to do this. I teach owners how to sit down with each of their producers and help them set some long-term personal income goals. I have them essentially play the role of a financial advisor and ask them what kind of future they want 10, 20 and 30 years from now. Then, they write down how much money they should be saving each year to hit those goals. Once they see how much they’re underfunding their future, it should light a fire under them. With this new-found motivation, you can then lay out a plan to help your producers double their book of business in three years or less, with half the accounts they have now. Of course, you’ll need a plan how to do that, which is a subject for another time. But imagine how much your agency would grow if all of your producers doubled their books in the next three to four years? What if even half of them did this? Would that be more growth than you’re seeing now? The point is, you need a path and plan to get your producers where they want to INSURANCEJOURNAL.COM

be so your agency can experience extraordinary growth.

Step 3: Train Your Producers to Increase Their Confidence

Confidence is a self-fulfilling prophecy. Those without it often fail. And those with it succeed. This is something many agency owners overlook, because most of them have a high degree of confidence already. If that’s you, think about it. You probably never considered the effect of feeling confident — it wasn’t really a choice. You just did what you did and you did it well, and your proof is in the pudding. You have nice cars, a nice house, great vacations and a high net-worth to prove it. To some degree, you don’t really understand those who don’t have confidence like you do. And you get frustrated. From your perspective, everything they need is out there. It’s theirs for the taking and they just need to go get it (like you did). However, the reality is the average producer is not like you. They do not have your innate capability, drive or level of confidence. Generally, they won’t develop it on their own. If their environment is not designed to intentionally develop them, they will drive in third gear, rather than fifth. They will get by, but never unlock their full potential. If you don’t train them, you’ll never move the average person to above average. You’ll never help them improve enough to develop a superior level of confidence. Without confident producers who can set new business appointments with relative ease, know how to engage a new prospect, build rapport, find pain, get commitment and close the agent of record/broker of record (AOR/BOR) … then you’ll never build the sales team of your dreams. Where does that confidence come from? It comes from training. Where does the training come from? It comes from having a clearly defined process. It’s up to you, the leader, to install or create processes everyone can follow.

Easier Said Than Done

The steps to growing your agency are INSURANCEJOURNAL.COM

The steps to growing your agency are simple but actually doing them is the hard part.

simple, but actually doing them is the hard part. Like we talked about earlier, none of this will work unless you take the first step, which is to truly commit! If growing your agency is not important to you in this season of your life, then do yourself and those around you a massive favor, and just be honest and admit it. You may be content where you’re at. However, if you’re halfway committed, you’re going to be miserable. Either decide you’re going to do this or let it go and

focus your time and energy in other areas of your life. But if you’re serious about growth, do what you need to do to motivate your producers to reach their next level of success. Invest in them so they can become confident people who won’t let any obstacles stand in their way. Schwantz is the author of five books, including Agency Growth Machine: Transform Producer Potential Into Agency Growth & Profit. Email: randy@ thewedge.net. Website: www.thewedge.net MAY 20, 2019 INSURANCE JOURNAL | 41

Idea Exchange: Minding Your Business Why Agencies

Should Ramp Up Value-Added Services

et’s face it, insurance is a commodity. The insurance consumer will not see any significant value difference between By Catherine Oak insurance companies and insurance agencies. Products, price and service are roughly the same. Consumers have new options to access insurand Bill Schoeffler ance through, as insurtech and fintech (technology-related companies) drive channel distribution into new, non-traditional companies. Direct writers rely heavily on clever marketing to promote their brand presence. Local, independent agencies no longer have a captive audience. To differentiate from others, salespeople are forced to sell on rapport, relationships and sales skills. Hackneyed pitches such as, “we have the best service” or “this policy has broader coverage” get bandied about. Price sensitivity is often handled by adjusting or justifying limits and deductibles.

How to Differentiate

How can the insurance industry in general, and a local insurance agency specifically, standout and be perceived as offering an excellent quality service to the consumer? The answer is to provide the client with additional services and products that they cannot get from the rest of the insurance industry or other agencies in town: Services and products that the consumer needs and

desires, or new ones that they don’t yet know that they “need.” These additional services are called “value-added services” and as the name describes, are valuable to the client. Value-added services (referred to as “VAS” in this article) are add-ons to the core services of a business. They have unique characteristics and provide benefits to the client that core services cannot. VAS can be stand-alone products, although they are usually connected to the core service and intended to enhance them. Increasing customer expectations are the initial driver in the offering and creation of VAS. The major players in the insurance industry react to meet these consumer demands. Insurtech and fintech companies develop new and innovative VAS, which creates new services that the customer did not have before. But what can the local, independent agency do?

Anticipate and Collaborate

Incorporating VAS into an agency will require a re-think on the core beliefs and behaviors of an agency. It requires understanding the current client’s needs and then filling in those gaps. It is equally important to anticipate future needs and develop or seek out VAS that will be attractive to the customer. VAS should be looked at as a way to collaborate and engage the customer. This with strengthen existing relationships, improve retention and foster new client acquisitions. VAS can be anything that insurance customers might want or need. There are two ways to categorize VAS. First, VAS can be in the form of advice and

Firms that offer value added services will stand out from the competition.

42 | INSURANCE JOURNAL | MAY 20, 2019

assistance. These VAS typically provide information to prevent or mitigate risk, as well as let the customer better manage their property and lifestyle. Some ideas include risk management services, human resources services, attorney services, financial management services, estate planning, business consulting, disaster planning, identity theft protection, COBRA administration, loss control, workers’ compensation claims management, security protection, etc. Second, VAS can be a self-service tool, where the client has the tools to better manage the account and the insured risk on their own time. Consumers like the immediate access, and the agency usually has less service work to perform. SelfINSURANCEJOURNAL.COM

service tools are generally in collaboration with the insurance company or some other third party. Some carriers allow customers to have limited but direct access to their account online. Thirdparty vendors have created client portals that enable customers to access information and make limited changes to their accounts. These include CSR24, Zywave, CertificatesNow, etc.

Next Steps

There needs to be a realistic assessment on what can be offered by the agency based on staff, time and money limitations. Otherwise, these services are often outsourced for a fee. A smaller agency in a rural area might not be able to provide INSURANCEJOURNAL.COM

the same exotic services a larger agency or regional broker offers to its high-end clients. However, that same small agency can put together an impressive package of VAS and products that will differentiate it from its competitors. Putting together a customized package of VAS can be rewarding and can be incredibly time-consuming if it becomes too elaborate. If the agency is large, it might make sense to have a full-time employee who can research, analyze and create a series of VAS for the agency. In a small- to medium-sized agency, the owners with administrative staff will have to do this and decide what can be offered cost-effectively for the firm and its clients. Some agencies provide

these services for only accounts over a specific size. Some agencies will pay for these services for their clients, and some charge the client for the use of these services.

Baby Steps

There are some very simple VAS that can be done quickly with minimal cost. One client had these two thoughts: 1) Send out an email to clients with a checklist for disaster preparation, especially just before a pending event such as a tornado or hurricane. 2) Videotape or photograph a clientâ&#x20AC;&#x2122;s possessions (personal and business) for claims purposes on a bi-annual basis, and store the videos at

continued on page 44

MAY 20, 2019 INSURANCE JOURNAL | 43

Idea Exchange: Minding Your Business continued from page 43 the agency. Some agencies are also offering drone service to look over prospect’s properties for hazards an underwriter may be skeptical about, especially with all of the wildfires in certain areas. Education is an easy VAS. Some agencies offer public workshops on insurance-related topics. Training can be customized for a specific client as well, such as risk management, loss control, employee benefits compliance, etc. There are a plethora of sources to create an educational VAS. Internal risk management services and products can be developed from sources, such as IRMI and RIMS. Advisen (advisen.com) provides its members with a variety of resources related to insurance products and industry-specific news and data. Imagine being able to show clients how their insurance portfolio compares to peers through the use of industry-specific benchmarking. Or, periodically send clients important industry news related to insurance. How about being able to compare policy coverage forms between companies in proposals?

VAS Outsourcing

There are shortcuts that can be used in place of creating customized VAS. Research what VAS insurance companies might offer. Many companies will put together a package of VAS for their key agents and VIP policyholders. For example, some companies offer VAS for highend personal lines clients, such as appraisal services, home monitoring, identity fraud mitigation, background checks on domestic employees. Chubb’s private fire prevention services recently made the news during the California wildfires. Health insurers offer telemedicine, health screening and education on preventive health care. Life companies offer estate planning and retirement planning services. Work with other local professionals to develop VAS packages to offer clients. Coordinate 44 | INSURANCE JOURNAL | MAY 20, 2019

with local CPAs, attorneys and payroll service-providers to offer their services at a discount to clients. Hire a consultant that can develop a business disaster plan and sell that service to clients. Some companies pre-package a set of VAS that the typical insurance customer might desire. One such company is BizAssure (bizassure.com). Members can offer to their clients legal, HR, claims and accounting services. They can pay the BizAssure fee themselves or charge the clients that need and use the services available. This type of arrangement can put the small agency ahead of its larger competitors in the eyes of the consumer. These organizations charge a membership fee for the offerings.

and products provided by their broker/ agent.

Wrap Up

VAS are increasingly important to the insurance industry. Keep in mind there are at least three benefits to the agency. First, the client will become more of an advocate of the agency and less likely to move to another agent/broker. Second, agencies that have VAS will have a market advantage and attract new clients. Finally, if the agency offers these additional services and products for a fee, the agency will bring in a new income stream. Start small and methodically add services and products. Keep the main focus on insurance products. Add value to that service before adding VAS. Don’t get bogged down handling the details of the value-added services — they should be mostly outsourced. This approach often does not require a significant commitment from the agency.

Value added services can be anything that insurance customers might want or need.

Free or Fee

Because these are add-ons to primary insurance services offered for a commission, they should meet the definition of what agencies can charge a fee for by law. Therefore, VAS can be sold to the client for a price as long as they are separately disclosed on the client invoice. Don’t be surprised when they don’t blink at paying a fee for the VAS. Clients will love the ease of getting great additional services

Oak is the founder of the consulting firm, Oak & Associates, based in Northern California and Central Oregon. Schoeffler is an associate of the firm. Oak & Associates. Phone: 707-936-6565. Email: catoak@ gmail.com.

INSURANCEJOURNAL.COM

Attention: Agency Owners Serious About Growth...

FREE Book! Agency Growth Machine “Not only has our agency seen extraordinary growth, but our producers are getting results they never believed possible.” - Jon Sharp, Hardenbergh Insurance Group (Went from 3.3% to 15.0% agency growth year over year...60% over 4 years!)

Normally $39.95

FREE

In Agency Growth Machine, You’ll Discover... y y y y y

The 3 Challenges Every Owner MUST Overcome To Grow Their Agency! How To Motivate the Bottom 80% of Producers To Rise Up or Fall Out! How To Hire Top Producers & Build a Profit-Producing Army Of Agents! The 5 Step Process To Extraordinary, Predictable Growth! The Ultimate Growth Solution for Your Agency!

If you want to grow your insurance agency fast, this will be the most important book you’ll ever read. And by the way, for a limited time you really can get this book, which normally sells for $39.95, for free if you just cover $7.95 for shipping. The Agency Growth System I outline in this book is working for hundreds of agencies, and it will work for you too. You won’t find any fluff or filler content in this book -- just battle-tested strategies & tactics that are working in 2019. At 168 pages you can easily read it in a day or two. After you’re done you’ll have a clear, step-by-step blueprint on how to turn a stagnant agency into a revenue generating machine!

(You Just Pay Shipping)

What Other Agency Owners Say... “We’ve grown the value of our agency from $8 million to over $20 million in less than 4 years. That’s not BS.” - Joseph Padula, The Hilb Group

“Our culture is totally different. Insurance is fun again and our future is bright. We are winning now and enjoying it!” - John Marchetti, Marchetti, Robertson & Brickell Insurance

“We used Randy’s uncommon methods to go from $4 million to $30 million in revenue in 10 years.” -Rusty Reid, Higginbotham, Fort Worth, TX

To Claim Your Free $39.95 Book for Just $7.95 Shipping Visit:

www.FreeAGMBook.com * Hurry, This FREE Offer Won’t Last long - We Only Have 162 Copies On Hand!

My New Markets Sports Accident Concussion Loss of Scholarship

Market Detail: Sportify Insurance by Risk

Strategies (www.sportifyinsurance.com) offers athletes protection from a sports participation accident concussion disablement that results in: athlete’s loss of a scholarship offer/ verbal commitment status during their high school recruitment; permanent withdrawal, after medical review, from participating (under athletic scholarship) in their covered sport; due to concussion diagnosis; After 6-month elimination period, protection pays the lump sum benefit to the college institution listed in the athlete application/where athlete is enrolled. Coverage available to: A) parents of high school athletic scholarship recruits b) college athletic scholarship athletes c) colleges & universities seeking to protect their financial exposure of covering tuition for athletic scholarship continuance. Sixteen covered male and female sports. Other conditions, terms and limitations apply. Available limits: Minimum $50,000, maximum $250,000 Carrier: Lloyd’s of London States: Calif., Colo., Fla., Ga., Nev., N.J., N.Y., Ohio, Okla., Pa., Texas, and Va. Contact: Steven Mace at 713-332-6390 or e-mail: steven.mace@riskostrategies.com

Shared Mobility

Market Detail: Williams and Stazzone (www.wsins.com) Insurance offer coverage options for the shared mobility space, including: car subscriptions, platform/appbased opportunities; peer-to-peer; ridesharing services; autonomous vehicles; and gig jobs. W&S has an internal research and development team that is operating outside the typical parameters of the commercial insurance industry in order to fully embrace what it calls the Evolution of Mobility. Available limits: As needed Carrier: Various, admitted and non-admitted available States: All states Contact: Vincent Stazzone at 800-8681235 or e-mail: info@wsins.com

46 | INSURANCE JOURNAL | MAY 20, 2019

Workers' Comp for Self-Storage

Market Detail: MiniCo Insurance (www.

minicoinsurance.com) offers a workers’ compensation insurance program for self-storage businesses that provides coverage for lost wages and medical treatment resulting from an employee’s work-related injury or illness, as well as services needed to help an employee recover and return to work. MiniCo’s workers' compensation insurance program is provided by Liberty Mutual Insurance. MiniCo Insurance Agency has 45 years of experience as a managing general agency offering property and casualty insurance products for a variety of industries and exposures. MiniCo also provides marketing support to independent agents. Other features: policy designed for self-storage risks; no appointment needed for a quote; no supporting MiniCo accounts required; and customer service and claims handling. Available limits: As needed Carrier: Liberty Mutual States: All states Contact: Rob Novak at 800-447-8383 or e-mail: robert.novak@minico.com

Class A Office Buildings

Market Detail: Berkley Luxury Group Real Estate Specialists (www.berkleyluxurygroup.com), a division of Berkley Luxury Group, writes Class A Office Buildings, defined as luxury properties that attract premier tenants and are professionally managed and well maintained. The buildings feature first class tenant improvements and betterments, state of the art infrastructure and technology, five stories or more (50,000 square feet or larger) and limited mercantile up to 25 percent. Available limits: As needed Carrier: Unable to disclose, admitted States: D.C., Ill., Md., Mass., Minn., N.J., N.Y., Pa., and Va. Contact: Debra Merlo at 201-518-2545 or e-mail: dmerlo@berkleyluxurygroup.com

Excess Liability for Construction Risks

Market Detail: Golden Insurance Co.,

RRG’s (www.golden-insurance.com) excess liability coverage on a claims-made

basis is available over any insurer where the limits are at least $1 million. The underlying insurer can be any licensed insurer including RRGs, unrated insurers, or a captive. Instant Quotes available with 24-hour quote approval. Minimum premiums start at $2,000; 50 percent minimum earned; 50 percent down and the remaining balance in 30 days. Available limits: Minimum $1 million, maximum $2 million Carrier: Golden Insurance Co., an RRG States: All states except Dela., Maine, Minn., N.H., R.I., Vt., and Wisc. Contact: Richard Poling at 888-654-6565 or e-mail: RPoling@strucsure.com

Outdoor Shooting Ranges

Market Detail: Joseph Chiarello & Co. Inc. (www.guninsurance.com) offers property and commercial general liability insurance for firearms retailers, wholesalers, ranges, trap and skeet fields, sporting clays, clubs, gunsmiths, ammunition manufacturers, reloaders, instructors, firearms manufacturers and importers. Company has more than 40 years of experience insuring the firearms industry and is endorsed by the National Shooting Sports Foundation Available limits:

Minimum $1,000, maximum $10 million Carrier: Granite State Insurance States: All states Contact: Joseph Chiarello at 908-352-4444 or e-mail: info@jcinsco.com

This section brought to you by Insurance Journal's sister website:

Need a Market? Find It. FAST INSURANCEJOURNAL.COM

We Upgraded the Search Engine at MyNewMarkets.com The next-gen tech is super advanced and crazy fast. So naturally, we sent a magazine ad via snail mail to tell you about it. ( Ironic print ad aside, itâ&#x20AC;&#x2122;s awesome. Go try it out. )

Research & Trends Center Powered by Insurance Journal

Search dozens of topics and trends like cyber risk, technology, energy, financial management, marketing, sales, and many more. Access hundreds of high-quality whitepapers, webinars, reports, articles, and other resources. The majority are absolutely free.

Featured content: â&#x20AC;&#x153;Better Data, Better Relationshipsâ&#x20AC;?

insurancejournal.com/research

Classifieds May 20, 2019

May 20, 2019

Clermont Insurance Company 301 Route 17 North, Suite 900 Rutherford, NJ 07070

Lemonade Insurance Company 5 Crosby Street, Floor 3 New York, NY 10013

Service American Indemnity Company 201 Robert S. Kerr Ave. Suite 600 Oklahoma City, OK 73102

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.

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.

May 20, 2019

Union Insurance Company 11201 Douglas Avenue Urbandale, IA 50322

Midwest Employers Casualty Company 1209 Orange Street Wilmington, DE 19801

The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Life, Accident and Health Insurance in the Commonwealth of Massachusetts.

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.

INSURANCEJOURNAL.COM

Advertisers Index AIG https://www.aig.com/business 5 Applied Underwriters www.auw.com 2, 3, 52 California Earthquake Authority mvp.earthquakeauthority.com W3 Exdion www.exdiopod.com 7 EZLynx 8, 9 www.ezlynx.com Florida Surplus Lines Association www.myfsla.com S1 Frenkel & Company www.cosmeticinsurance.com 31 IICF www.iicf.org 51 Insurance Technologies Corp. www.getitc.com 33 JM Wilson www.jmwilson.com S2, M2 Monarch E&S Insurance Services www.monarchexcess.com W1 Philadelphia Insurance Companies www.phly.com 11 ReSource Pro www.resourcepro.com 21 Safety National www.safetynational.com 23 Texas Mutual www.texasmutual.com SC2

MAY 20, 2019 INSURANCE JOURNAL | 49

Closing Quote Change Is Coming: It’s Time to Be a Creator, Not a Reactor

By Melissa Bond

‘You must be the change you want to see in the world.’ — Mahatma Gandhi

ne of our responsibilities as insurance professionals is to lead change. Yes, however reluctant, everyone in the independent agent insurance business is 100% responsible for creating change. If we sit back waiting for others to make change happen, we’re not likely to get the change we need. You and I can and must take a proactive approach to business relationships. We need to create positive change for our customers, our firms, the industry at large, and (last but not least) ourselves. But how? Here are two ways to start.

1. Recognize your comfort zone and challenge it.

Colleagues and friends say that I’m outgoing, and that’s easy to see. Many who know me think that it’d be easy for me to reach out and communicate in any setting. That is not the case. For example, when my colleagues asked me to conduct Facebook Live videos for a “Member Tip Monday” feature, my first thought was: “No. Not me. Someone else is better at it.” But I realized that even though I was uncomfortable with the idea of the video, I was very passionate about the subject matter. So I had to step

out of my comfort zone and face a camera from my home office every Monday. It wasn’t so bad, and I am still alive! (Check out the video archive on the NetVU Facebook page sometime.) Somewhere along the way, I learned that speaking in public, regardless of the setting, is a natural fear for most everyone — me included. Making cold calls, dealing with conflicts, small talk, resolving open questions — those are among the tasks I struggle with. A tiptoe outside my comfort zone in these cases typically results in success, however. I’ve also learned other behaviors that weren’t easy to come by. But more importantly, I learned that when I give energy, I get more in return. (That sounds more like me, right?)

2. Tap into user groups as prime change catalysts.

Any insurance firm that uses a management system or technology solution has a built-in ally for proactive change: its user group. In fact, just about any software you use that’s been updated in the last five years will have users like you who are solving or have solved the very problems you want to solve. And vice versa. Technology providers partner with viable, valuable user groups not only to offer support, but also to collaborate on improvements. Sometimes it takes looking to find the group, and it takes courage to stick your toe in the water and then eventually

wade in. But you must get out there and share. As technology users, regardless of our skill or experience level, we need a way to connect informally with business partners from all points in our industry. In some cases, a user actually can get in touch with technology product managers, developers, and peer experts through tools such as online communities and user group social media sites. Communication is key to all relationships, and user groups are the connection to communicate. I’m always amazed by the selflessness of users who log on, often 24/7, to help others in the industry. More experienced users are so giving of their time and expertise in an effort to help newer users and give them tips, tricks, and workflow suggestions to more fully utilize their technology investments. Actively engaging in your user group will not only help your own firm, but will allow you to help lead the industry change process. The collective voice of active users resonates when product managers and developers review and prioritize product enhancements. Collaborating as a group, users can lead improvements to the products they use every day to make them more valuable. Check with your management system vendor to connect with your user group today. Bond is member relations manager of NetVU, the Network of Vertafore Users. INSURANCEJOURNAL.COM

IICF Women in Insurance Global Conference June 12–14, 2019, New York City Sheraton New York Times Square Hotel

SINCE 2013

Gender Equity in a Changing World – What You Do Matters! Rewriting the Rules on Leadership, Diversity and Innovation Dynamic speakers and engaging panel discussions!

Gisselle Acevedo

Barbara Bufkin

Ed Dandridge

Wade Davis

Julian Enoizi

President and CEO Ackerman Institute for the Family

Executive Head of Business Development Assurant

Global Chief Marketing and Communications Officer, AIG

Former NFL Player, Corporate Inclusion Advisor and Educator

CEO Pool Reinsurance

Lori Goltermann

Tangy Morgan

Susan Rivera

Rekha Schipper

Kate White

CEO U.S. Retail Aon, US

Senior Advisor Bank of England

CEO Tokio Marine, HCC

President & CEO Tangram Insurance Services

NY Times Bestselling Author; Former Media Executive

Register Today at: womensconference.iicf.org/registration Insurance Industry Charitable Foundation (IICF) invites you to join the conversation and explore the global impact of today’s most innovative diversity, inclusion and leadership topics. As an action-driven platform, this conference empowers attendees to implement ideas and solutions in their own professional lives.

Join us for the only Women in Insurance Conference that Gives Back 100% of IICF conference proceeds support the IICF Early Literacy Initiative for children in underserved communities

Diamond Presenting Sponsors

Everest Re Group, Ltd.

www.womensconference.iicf.org

#IICFdiversity

Expect big things in workers’ compensation. Most classes approved, nationwide. It pays to get a quote from Applied.® For information call (877) 234-4450 or visit auw.com/us. Follow us at bigdoghq.com. ©2019 Applied Underwriters, Inc., a Berkshire Hathaway company. Rated A+ (Superior) by A.M. Best. Insurance plans protected U.S. Patent No. 7,908,157.