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June 17, 2019 • Vol. 97 No. 12

Contents

News & Markets

Commercial Insurance Prices Up Again in Q1; Auto, D&O Lead the Pack

10 Growth in Construction, Freight Has Been Good News for Inland Marine Insurance

Future Focused? Research Finds Agents Split on Succession Planning: Channel Harvest

What Might Happen If Congress Fails to Renew Terrorism Reinsurance Program

Special Report

Agency Spotlight: Bulow Group

Idea Exchange

How Insurtech Will Revolutionize Inland Marine by Cutting Costs

Special Report: 5 Trends to Watch in Construction Insurance

Top 25 P/C Carriers: Demotech

Spotlight: Comparing Coverage: Umbrella and Excess Liability

Ask the Insurance Recruiter: Young Account Managers

Claims and Technology at Every Point

Minding Your Business: Extreme Ownership of the Agency

30 32 32

Roost Gathering Data as it Awaits Insurance Industry Transformation

Spotlight: Early Cannabis Insurance Claims Experience Differs from Expectations

40 42

Tech Talk: It’s Time to Redefine Agency Customer Experience

Workers’ Comp: Delivering for Our Neighbors

48 50 Closing Quote: Career

The Wedge: ‘Film Don’t Lie’

Sense: Reverse, Prioritize, Partner, Attack

Departments 6 Opening Note 12 Declarations 12 Figures 14 People 16 Business Moves 44 My New Markets 4 | INSURANCE JOURNAL | JUNE 17, 2019

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Opening Note Write the Editor: awells@insurancejournal.com

Are Older Workers Hindering the Younger Generation?

s it a bad thing that a larger number of older Americans continue to work past the age of 65? Well some younger Americans think so. A recent poll by The Associated Press-NORC Center for Public Affairs Research found that workers under the age of 50 were significantly more likely to view America’s aging workforce as a negative development when compared with their older counterparts. About 4 in 10 respondents ages 18 to 49 and 44% of the youngest respondents ages 18 to 29 said they consider the trend to be a bad thing for American workers. Just 14% of those age 60 and over said the same. An aging population, elevated health care costs and lingering financial uncertainty following the Great Recession all are believed to be contributing to America’s steadily graying workforce. Nearly 20% of Americans over the age of 65 were employed or actively looking for work last year, up from less than 12% two decades prior, according to the Bureau of Labor Statistics. Older workers also face added discrimination. Some 58% of Americans age 50 and older say older workers face discrimination in the workplace, and 75% consider their own age to be a detriment when looking for a job, according to the survey. “As more and more workers in the United States continue to put off retiring past the traditional age of 65, they report feeling the consequences of age bias in both their current positions and as they look for jobs,” said Trevor Tompson, director of The AP-NORC Center. “What’s interesting is at the same time, 45 percent of Americans say the trend of working longer is beneficial to the national economy, and 39 percent say it’s good for workers in general.” Other findings: • Women age 50 and older are especially inclined to regard their age as a hindrance when job seeking. 79% of women and 70 percent of men age 50 and older say their age hampers their job search. • While about half of all adults say older workers frequently face age discrimination at work, only about a fifth say younger workers experience age discrimination. • Younger workers are more likely to request accommodations like flextime or working remotely than are older workers. 54% percent of workers under age 50 have requested flexible hours. Working women age 18 to 29 are most likely to ask for flextime. • 33% of all workers say the working longer trend is good for their career, and 46% regard it as a positive for their workplace culture. • 53% of Americans age 50 and older say that people staying in the workforce past 65 is a plus for the national economy, and 50% say it is good for American workers in general. Younger Americans are less positive about this trend: 38% consider it good for the economy, and 30% say it is good for American workers. This survey, funded by the Alfred P. Sloan Foundation, was conducted by The Associated Press-NORC Center for Public Affairs Research. Editor-in-Chief

Nearly 20% of Americans over the age of 65 were employed or actively looking for work last year

Andrea Wells

6 | INSURANCE JOURNAL | JUNE 17, 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: Bill Donnell, Dave Higley, Bryan Jackson, Douglas A. Powell, William Schoeffler Columnists: Mary Newgard, Catherine Oak, 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

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News & Markets Commercial Insurance Prices Up Again in Q1; Auto, D&O Lead the Pack

ommercial insurance prices in the U.S. increased in the first quarter about 2%, according to insurance broker and advisor Willis Towers Watson. The company’s Commercial Lines Insurance Pricing Survey (CLIPS) survey compared carriers’ prices charged on policies underwritten during the first quarter of 2019 to those charged for the same coverage during the same quarter in 2018. Price changes for most lines were similar to or slightly above those reported last quarter. Four standard lines indicated material price increases: commercial auto, commercial property, excess/umbrella liability, and directors and officers liability. 8 | INSURANCE JOURNAL | JUNE 17, 2019

Towers Watson said the outlier in the survey results continues to be commercial auto, where significant price increases were again reported — in the double digits for the fourth consecutive quarter. Price changes were positive and of reasonably similar magnitude across all account sizes. “Overall, price changes were consistent with recent surveys, with the exception of directors and officers liability, where data now indicate an uptick of price increases into the mid-single digits,” said Jeffrey Carlson, director, Insurance Consulting and Technology, Willis Towers Watson. Carlson also said that while estimates of 2018 claim cost inflation are still elevated

compared to the recent past, they have moderated somewhat from estimates provided in the last survey, as the data continue to mature. “There is a clear trend across most lines of business and most geographies that insurers are taking steps to return to underwriting profitability. We are seeing price firming almost universally. While capital remains plentiful, insurers are demonstrating their long-sought pricing discipline as they exercise more judicious deployment of capacity,” wrote Joseph C. Peiser, head of Broking for North America, in Willis Towers Watson’s Marketplace Realities commentary on the first quarter. INSURANCEJOURNAL.COM

News & Markets Growth in Construction, Freight Is Good News for Inland Marine Market

he inland marine insurance segment has grown steadily in the past decade in tandem with increases in construction spending and the transport of goods, with direct premiums written nearly doubling to $24.5 billion in 2018 from $13.3 billion in 2009, according to a new A.M. Best special report. The segment historically has been one of the most profitable and consistent property/casualty lines of business, according to Best’s report titled “Economic Growth and Specialization Bolstering Inland Marine Expansion,” and ongoing growth in the construction and freight industries is increasing demand for inland marine coverage, as evidenced by year-over-year premium growth that has exceeded 8% in three of the last five years. The amount of goods being shipped is tied directly to the vibrancy of the inland marine market. A second major component of the inland marine line is property under construction and the equipment used for it. Total construction spending in the United 10 | INSURANCE JOURNAL | JUNE 17, 2019

States has been rising steadily since the first quarter of 2011, according to Federal Reserve economic data, reflecting the cost of not just new construction, but also renovations for residential and nonresidential building. Ongoing construction industry growth especially will benefit those inland marine insurers writing construction and contractor coverages (e.g., builder’s risk, contractors equipment and installation floaters), A.M. Best says. A.M. Best analysts found that the property/casualty industry has been more successful underwriting and pricing risks in the marine segment — with a 20-percentage-point advantage in the loss and loss-adjustment expenses ratio — than in its overall portfolio. These results are due mainly to the specialization of inland marine underwriters — those whose inland marine coverage represents their core business. Since 2012, the highest combined ratio in the inland marine segment has been 89.9 (in 2017), which is indicative of strong profitability.

Adverse loss experience, which has arisen from catastrophic fires in major metropolitan areas and water damage claims, is one issue affecting the market. A downside to the growth in the number of larger construction projects during the economic expansion of the last decade has been the proliferation of these types of losses, and companies underwriting builder’s risk exposures have felt the impact acutely. In addition, the favorable segment results have led to the entry of new players looking to gain a foothold in the market. This has intensified competition and caused rates to decline, which could constrict profit margins over the long term. The report predicts that technology is likely to help bring down high expense ratios in the inland marine segment and make it possible for insurers to provide coverage for a larger number of risks — specifically more of the smaller, one-off inland marine exposures for which the expense of underwriting has traditionally outweighed the potential benefits of building a portfolio. INSURANCEJOURNAL.COM

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Figures

$10 million

$2.8 million

The amount the Guilford County school system in North Carolina has settled with its insurer, Travelers, over damage to three elementary schools from a 2018 tornado. The school system was not expecting to get enough money from the insurer to replace all three schools due to their condition before the twister struck. The company said it was pleased with the settlement.

The amount of a settlement that Oklahoma Heart Hospital has agreed to pay in a whistleblower lawsuit, in which a former nurse alleged the hospital made false Medicaid claims. The hospital admitted no wrongdoing but agreed to settle with Jennifferr Baird, the state of Oklahoma and the federal government.

Declarations Coffee Relief

“Everybody feels a little healthier now. This is a big relief.” — Chuck Jones of Jones Coffee Roasters in Pasadena, Calif., expressed relief now that the state has decided coffee doesn’t need a cancer warning. Dozens of coffee roasters and retailers, including Starbucks Corp., were accused in a lawsuit of violating a state law that requires warning labels on toxic substances.

12 | INSURANCE JOURNAL | JUNE 17, 2019

Community Investment

“We know there’s going to be more of this — more severe, more devastating … We need to invest in communities now.” — Democratic presidential candidate Beto O’Rourke, upon touring an Oklahoma home damaged by floodwaters in late May. The former Texas congressman said if he is elected, his plan would include federal grants to invest in communities before disasters strike, because the planet is warming and fires, storms and floods are expected to get worse.

Michigan’s Dangerous Roads

“We can’t waste time. Our roads are downright dangerous … I’m going to continue to push the gas tax, and if someone has an alternative way of doing that, I’m eager to have that conversation.” — Gov. Gretchen Whitmer said talks with Michigan’s Republican-led legislature on her proposed fuel tax increase can “start in earnest” following the enactment of a bipartisan auto insurance overhaul. She said there is no reason why a road-funding deal cannot be struck within a month. Her 45-cents-a-gallon tax hike, the centerpiece of her budget proposal, has languished in the Capitol for three months.

INSURANCEJOURNAL.COM

The number of insurtech startups in which State Auto Labs, the innovation arm of the State Automobile Mutual Insurance Co., has invested in the 18 months since launching its $25 million corporate venture fund. The company also has ushered into operation more than 15 new insurance industry-targeted technologies.

No Planting This Year

“I’ve farmed for 33 years, and I’ve never not made a crop. I’m not going to plant an acre this year.” — Mississippi farmer Clay Adcock on how longstanding floodwaters in the southern Mississippi Delta are affecting his livelihood. The floodwaters have lingered in the region for the past four months; at least 500 homes have been damaged in the area.

Prioritizing Profits

“Simply put, they put profit over patients.” — New York Attorney General Letitia James said regarding the billionaire owners of Purdue Pharma LP, who were sued by New York state for allegedly triggering a U.S. addiction epidemic with their marketing of the Oxycontin painkiller just two days after the company agreed to pay $270 million to settle similar claims by Oklahoma, Bloomberg reported.

People National

Pioneer Underwriters, the underwriting group within Minova Insurance Holdings, has appointed Nick Greggains CEO of Pioneer’s U.S. operation, effective March 25. Greggains succeeds previous U.S. CEO Gene Hinman, who will serve as president of Pioneer US until his retirement at the end of 2019. Greggains was U.S. chief underwriting officer at Catlin between 2007 and 2015 before the merger with XL. He subsequently became director of underwriting of XL Catlin Americas from May 2015 until June 2016, and CEO of XL Catlin Canada from June 2016 until April 2018, according to his LinkedIn profile. Greggains will be based in New York and will report to Andrew McMellin, Pioneer Group CEO.

American International Group has hired Rich Baich as senior vice president and chief information security officer, effective April 22. In this role, Baich will lead the firm’s global cybersecurity risk Rich Baich management program and help drive the information security strategy for the company. He will report to John Repko, chief information officer. Baich joined AIG from Wells Fargo & Co., where he served as chief information security officer since 2012. He was previously a principal at Deloitte & Touche, where he led the Global Cyber Threat and Vulnerability Management practice. Baich’s other security leadership roles include serving as naval information warfare officer for the National Security Agency, senior director for professional services at Network Associates (now McAfee), and, after 9/11, special assistant to the deputy director for the National Infrastructure Protection Center at the Federal Bureau of Investigation.

East

Portland, Maine-headquartered workers’ compensation specialist The MEMIC Group has appointed Beth Austerman 14 | INSURANCE JOURNAL | JUNE 17, 2019

to senior production underwriter to support continued growth in the central and western New York markets. Prior to MEMIC, she held Beth Austerman a variety of middlemarket underwriting roles at The Hartford. Most recently, she was responsible for an $11 million territory, with special emphasis on the hospitality industry. Everest Insurance has hired Kathleen Boland to its Marketing & Distribution team as director, focusing on the MidAtlantic region. In this role, Boland will be based out of the Everest Insurance Philadelphia office and report to Matt Murray, East region leader of marketing and distribution. Boland most recently held the role of business development leader at Zurich North America. She previously held leadership positions at AIG and Chartis. EPIC Insurance Brokers has hired John Sames to its Northeast region leadership team as director of operations and sales. Sames will be based in EPIC’s Pearl River, N.Y., office and report to Northeast region President Tom O’Neil. In his new role, Sames’ primary responsibilities will be to support organic revenue growth within the former Capacity Group of Companies — acquired by EPIC in March 2017 — by developing, implementing and managing a number of operating and new business development initiatives. Prior to joining EPIC, Sames served as a regional leader for Marsh & McLennan Agency. His previous experience also includes leadership roles within Aon’s Financial Service Group, as well as at USI Insurance Services.

South Central

Giddings, Texasbased independent insurance agency, The Nitsche Group, appointed Joe Casanova as insurance sales producer

Joe Casanova

for the central Texas region. As insurance sales producer, he will partner with clients to develop strategic commercial coverage, comprehensive surety bonds and proactive risk management programs. Casanova began his insurance career at Federated Insurance Co., where he worked as a commercial and life insurance producer. He later transitioned to Chromcak Insurance Agency and then to Marsh and McLennan Agency.

Lindsey Burton has been installed as president of the Austin Association of Insurance Professionals. Burton, who works at Specialty Insurance Managers Inc., was installed in May. Officers and directors installed were: Presidentelect Robby Moore with PLUS Inc.; Vice President Ronda Brown with Texas Associates Insurors; Recording Secretary Laura Farmer with Service Lloyds; and Treasurer Tamra Johnson with Marsh|Wortham. AAIP directors are: Amy Gayhart, Marsh|Wortham; Marjolyn Varano, Service Lloyds; Jill Duggan-Hale, Insurance Council of Texas; and Danny Journeay, Specialty Insurance Managers.

Midwest

The American Society of Safety Professionals (ASSP),

based in Park Ridge, Ill., has named Chris Ballman director of professional developChris Ballman ment. Ballman will oversee the Society’s comprehensive educational offerings. He will also provide leadership oversight of ASSP’s largest annual event, a Professional Development Conference and Exhibition. Prior to joining ASSP, Ballman spent six years as senior director of education and learning services at the Chicago office of SmithBucklin. Lisle, Ill.-based national not-forprofit insurance advisory organization, American

Joseph Jonas INSURANCEJOURNAL.COM

Association of Insurance Services (AAIS), has named Joseph Jonas as its new com-

mercial lines product manager. Jonas is responsible for AAIS forms, manual rules and rating information in the standard commercial property, casualty and niche specialty markets, including AAIS’s CannaBOP program, now approved in California and Colorado. Before joining AAIS, Jonas was director of Wholesale & Consulting at Insureon. He also has served as vice president at GCG Financial Inc. and as an account executive at Hub International. Jonas also previously held several positions at Liberty Mutual.

Cannasure Insurance Services, a Cleveland, Ohio-based managing general agent and wholesale insurance broker for the cannabis and hemp industries, hired Jenna Keesey as a senior underwriter in its managing general agent practice. She will play a role in the ongoing growth and profit performance of the underwriting practice, assisting in the development of products, programs and service offerings for the cannabis and hemp industries. Keesey will be based in the Cleveland corporate office and report to Kieran J. O’Rourke, director of Underwriting of Cannasure’s MGA unit.

Southeast

Jackson Sumner & Associates (JSA) has hired Kimberly M. Bull as North Carolina marketing representative. Most recently, she served as specialty underwriter for a large transportation underKimberly Bull writing company. Bull first began in the insurance industry working in her father’s Nationwide agency. Bull will support retail agents throughout North Carolina and Tennessee in her new role. She will report to Joi Neike, director of business Scott Banks development. In INSURANCEJOURNAL.COM

addition, JSA announced Scott Banks will move into a newly created marketing role as agency relations coordinator. His duties will include CRM management, agency reporting and key account management. Banks will remain at the company’s office in Boone, N.C. SUNZ Holdings, LLC, based in Bradenton, Fla., has appointed John Sells to the position of chief information officer. Sells will be in John Sells charge of IT initiatives and enterprise systems with a focus on digital transformation and deep usage of data analytics. Sells came to SUNZ in 2016. Prior to his role as chief information officer, Sells served as chief data officer. Sells has experience in project management, including scheduling, budgeting and risk management of major organizational programs. Cobbs Allen of Birmingham, Ala., has added Chris Jacks to the Teneo Cobbs Allen team. Most recently, Jacks served as CEO of Jacks Consulting Group, a company he founded that specialized in large merger and acquisition transaction consulting, as well as complex financial management products. Prior to that, he spent more than 15 years at Allianz Risk Transfer as the head of corporate solutions and reinsurance. Teneo Cobbs Allen, announced in 2017, is a strategic partnership between Teneo’s Capital Advisory division and Cobbs Allen. Jacks joins Teneo Cobbs Allen associates Ranjini Pillay, senior managing director; Michelle Lam; and Sasson Posner.

West

Brown & Riding’s environmental practice group has added Tricia Katz to its

team of environmental-focused insurance brokers. Katz works out of Denver. She specializes in assisting contracting risks with the placement of environmental products, as well as stand-alone contractors pollution liability. She will focus on the Rocky Mountain states and Northern

California. She was previously a senior environmental underwriter at Rivington Partners. She was a senior underwriter with Colony Specialty Insurance Co. before that. Brown & Riding is a national brokerage headquartered in Los Angeles. Fidelis Group Holdings LLC has named Peter Knowles senior vice president of

West Coast operations. Knowles will also be a senior underwriter within the group’s brown water hull and liabilities product lines, and will be based in its Seattle office. Knowles has more than 30 years of experience in the marine industry, most recently as president of KALM Seas Insurance Inc. He was previously national hull and liability manager of XL Catlin, and regional manager of RLI Marine. Covington, La.based Fidelis Group Holdings is a provider of primary, excess, ocean cargo and inland marine insurance. Portland, Ore.based Fournier Group has named Jana Solis vice president and risk management and hospitality team Jana Solis leader. Prior to joining Fournier Group, Solis was global lodging and leisure practice leader for Novitas Risk & Insurance Services and was managing director and global hospitality and gaming practice leader for insurance brokerage firms Marsh, Willis and HUB International. She also held leadership roles at Wausau Insurance Cos., Red Lion Hotels, Double Tree Hotels & Resorts and Promus Hotels.

Newfront Insurance in San Francisco, has named Mike Daoussis as a principal

and head of program innovation. Daoussis will focus on building programs for Newfront in his new role. He has more than 43 years of experience in the insurance industry, including the past eight years as vice president at USI. He previously worked at Willis Towers Watson, Lockton Insurance Brokers and Guy Carpenter & Co. Newfront is a retail insurance brokerage. JUNE 17, 2019 INSURANCE JOURNAL | 15

Business Moves

National Ryan Specialty, Atlantic Specialty

Ryan Specialty Group has acquired the assets and operations of Atlantic Specialty Lines Inc. The ASL team is now a part of R-T Specialty, the wholesale brokerage unit of Ryan Specialty Group. The deal expands RT Specialty’s footprint in the Mid-Atlantic and Southeast. ASL is headquartered in Richmond, Va., and has additional locations in Illinois, Florida, Louisiana, New York, Pennsylvania and Texas. Atlantic Specialty Lines was founded in 1996 to serve retail brokers and agents in the Southeast and Mid-Atlantic focusing on general liability, commercial property, commercial package, professional liability and personal lines.

East Cross Insurance, DiMatteo Insurance

Cross Insurance, a subsidiary of Cross Financial Corp. based in Bangor, Maine, has partnered with DiMatteo Insurance of Shelton, Conn. The DiMatteo family owned agency handles all lines of business including employee benefits. Kim DiMatteo started working in the family insurance business in 1991 and was recently named branch manager of DiMatteo Insurance. She specializes in commercial, specifically construction, contractors and real estate. 16 | INSURANCE JOURNAL | JUNE 17, 2019

Previously referred to as DiMatteo Group, the business has spun off into three divisions: DiMatteo Insurance, which is overseen by Kim DiMatteo; DiMatteo Group-Financial LLC, headed by Kim’s husband, John DiMatteo; and DiMatteo Group-Tax and Accounting, managed by Rosemarie Esposito. Other family members involved in the business include Loretta Lesko, who is a partner in the tax business and a training supervisor in the insurance division. Her husband, Robert Lesko, specializes in insurance sales and is a partner in the tax division. A total of 25 employees from all of the divisions will remain at the Shelton location following the partnership. Since its founding in 1954, Cross Insurance has grown through the acquisition of more than 100 insurance agencies throughout New England. The company has 800 employees operating out of Maine, New Hampshire, Rhode Island, Massachusetts and Connecticut.

World Insurance Associates, Professional Insurance Associates

World Insurance Associates LLC, an independent insurance agency headquartered in Tinton Falls, N.J., merged with Professional Insurance Associates Inc. of Carlstadt, N.J. Professional Insurance Associates has served commercial and personal lines clients, as well as public entities, for more than 60 years. In addition to benefits and financial services, the company specializes in providing its contractor clients with a range of contract surety bonding services.

PIA President James V. Gardella and his team will continue to support clients from the same location in Carlstadt, N.J. World Insurance Associates LLC offers personal and business insurance in 50 states. The company specializes in transportation, hospitality, self-storage facilities, construction (surety), manufacturers and law firms. World Insurance also provides group benefits and property and casualty insurance to companies in a variety of industries and insurance for coastal properties and high net worth clients. The company also acquired LampeBatkin Associates LLC of Greenwich, Conn., on April 1, 2019. Lampe-Batkin Associates LLC is a family run insurance agency that serves the communities of Connecticut and New York. Hy Lampe founded the agency in the 1950s, and his son-in-law, Steve Batkin, now runs the business. It provides personal and business insurance, including life insurance and coverage for high net worth individuals. Batkin will continue to run the business at its location in Greenwich, Conn., following the acquisition.

Starkweather & Shepley Insurance Brokerage, The Wilson Agency

Starkweather & Shepley Insurance Brokerage Inc. has acquired The Wilson Agency Inc. of Shelton, Conn. The Wilson Agency is a third-generation, family owned and operated agency serving Fairfield County and the Naugatuck Valley for more than 65 years. Founded in 1953 by Charles Wilson Sr., Wilson Agency Inc. has been located in the city of Shelton since 1966. Current agency principals Charlie Wilson Jr., Thomas Wilson and James Wilson, along with Personal Lines Associate Diane Lucas, will continue to service clients from S&S’ 375 Bridgeport Avenue location. S&S is an independent agency headquartered in East Providence, R.I., providing commercial and personal insurance, health and employee benefits, surety bonding and risk management services nationally and internationally through its partnership with Assurex Global.

continued on page 18 INSURANCEJOURNAL.COM

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Business Moves continued from page 16

Midwest Arthur J. Gallagher, Cairnstone Financial

Arthur J. Gallagher & Co. has acquired Cairnstone Financial LLC. Founded in 2010, Zionsville, Ind.-based Cairnstone Financial is a benefits consultant offering group health, life, wellness, retirement, disability and dental coverages and services to middle-market clients across the Midwestern United States. Mark Shrack and his associates will continue to operate from their current location under the direction of John Neumaier, head of Gallagher’s Great Lakes region 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, Illinois.

Sovos, Eagle Technology Management

Global tax software provider Sovos is acquiring Iowa-based Eagle Technology Management, which provides statutory financial reporting and insurance premium tax software to insurers and unclaimed property reporting products and services to U.S. financial institutions, corporations and insurance companies. ETM customers include more than 1,500 U.S. insurance companies. Nearly 5,000 customers have adopted ETM’s unclaimed property platform, as U.S. businesses are subject to unclaimed property audits by 53 reporting jurisdictions. Sovos is owned by Hg, the Londonbased private equity investor focused on software and service businesses.

South Central Risk Strategies, MainStreet Consulting Group

Boston-based insurance brokerage and risk management firm Risk Strategies has acquired MainStreet Consulting Group, a brokerage headquartered in Conroe, Texas, just north of Houston. Established in 2003, MainStreet 18 | INSURANCE JOURNAL | JUNE 17, 2019

Consulting Group is focused on placing a wide variety of coverage types for commercial clients. In its commercial business, MainStreet services clients in several industries, from manufacturing to construction. While many are well-represented in Risk Strategies’ client base, a number represent new fields for the company, including the energy industry. In addition to commercial property/ casualty, MainStreet helps commercial clients develop alternatively funded employee benefits programs. The company also has an active practice providing personal lines clients with insurance placement and risk management advisory services.

INSURICA, First Texas Insurance Services

INSURICA has acquired First Texas Insurance Services, based in Arlington, Texas. The effective date for the deal is June 1, 2019. Trey Dacy and Bob Walch, principals at First Texas Insurance Services, and their team will join INSURICA. A third partner, Gary McNeil, along with his account team, joined INSURICA on January 1. First Texas’ office is located next to INSURICA’s in Arlington. Plans are to combine the two offices in a single location in the future. INSURICA has 30 offices throughout Oklahoma, Texas, Arkansas, Colorado, Arizona and California.

CoVerica, Agape Healthcare Partners

Dallas-based CoVerica has expanded its presence in the medical professions arena with the acquisition of Agape Healthcare Partners L.P., an independent insurance agency headquartered in North Texas. Agape specializes in risk assessment, compliance strategies, corporate liability, commercial property and employment practices liability for physicians, medical groups and hospitals across the U.S.

Southeast National General, Insurtech Syndeste

Personal lines insurer National General Holdings Corp. (NGHC) will begin offering private flood insurance in Florida later this

summer after its acquisition of Syndeste LLC, an insurance technology company. National General will initially launch the product in the third quarter for its residential and commercial consumers, starting in Florida. It will expand the product throughout the United States with New Jersey planned as the second state. The company plans to offer multiple admitted and nonadmitted private flood insurance products based on Syndeste’s underwriting technology and by partnering with reinsurers. Syndeste specializes in targeting consumers seeking flood coverage and leveraging hyper-local risk data to underwrite flood insurance. Its data and analytics provide insurance agents with educational and marketing tools. National General previously only offered flood coverage through the federal National Flood Insurance Program. Syndeste is an insurance technology company focused on the flood insurance market. Its platform, Beyond Floods, provides pricing, underwriting and marketing tools for all U.S. states and territories. National General Holdings Corp., headquartered in New York, is a specialty personal lines insurance holding company.

West Capital Insurance Group, Auto-Owners

Capital Insurance Group is now a member of the Auto-Owners Insurance group of companies after regulatory approvals were cleared and closing documents were signed in late May. CIG in February entered into an agreement to be acquired by Lansing, Mich. based Auto-Owners Insurance. CIG is a leading regional property/casualty insurer that provides a range of customized coverage for commercial, personal, and agricultural lines in California, Washington, Oregon, Nevada, and Arizona. Auto-Owners operates solely through independent agencies and also owns a life insurance company, an excess and surplus lines company, and is affiliated with Concord General Mutual Insurance Co. in the Northeastern U.S. INSURANCEJOURNAL.COM

News & Markets Washington Proposes Changes to Safety Rules for Refinery Workers

ashington state officials are working to revise regulations that aim to keep oil refinery workers safe. The state Department of Labor and Industries has developed a new set of rules that include updates to equipment safety standards. Sally Buckingham of the

state Division of Occupational Safety and Health says the rules address process safety management to safeguard workers against injury from toxic or hazardous chemicals. Refineries would require refineries to assess how corrosion, cracking and other degradation could damage equipment.

Buckingham says the current rules were created in 1992 and are now outdated. She says the agency aims to enact the new standards by the end of the year. A public comment period on the changes is scheduled to open up this summer.

Washington Supreme Court Rules Against Florist in Gay Wedding Case

florist who refused to provide floral arrangements for the wedding of a same-sex couple violated the state’s consumer protection and anti-discrimination laws, Washington’s Supreme Court has ruled. The ruling issued in early June came nearly a year after the U.S. Supreme Court ruled in favor of Colorado baker Jack Phillips, who refused to make a wedding cake for a gay couple citing religious opposition. The court in its ruling noted that it was tasked with decid-

ing whether the Washington courts violated the U.S. Constitution’s guaranty of religious neutrality in the prior adjudication of the case. “We have fully reviewed the record with this issue in mind, and we have considered substantial new briefing devoted to this topic,” the ruling stated. “We now hold that the answer to the Supreme Court’s question is no; the adjudicatory bodies that considered this case did not act with religious animus when they ruled that the florist and her corpora-

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tion violated the Washington Law Against Discrimination (WLAD), chapter 49.60 RCW, by declining to sell wedding flowers to a gay couple, and they did not act with religious animus when they ruled that such discrimination is not privileged or excused by the United States Constitution or the Washington Constitution.” The state bars discrimination in “public . . . accommodations” on the basis of sexual orientation, the court found. Barronelle Stutzman, who owns and operates Arlene’s

Flowers Inc., refused to sell wedding flowers in 2013 to Robert Ingersoll because his betrothed, Curt Freed, is a man. The state and the couple sued, each alleging violations of the WLAD and the Consumer Protection Act. Stutzman defended on the grounds that the WLAD and CPA do not apply to her conduct and that if they do, those statutes violate her state and federal constitutional rights to free speech, free exercise of religion, and free association. A superior court ruled in favor of the state and the couple, and the Supreme Court in an earlier opinion reviewed the case and affirmed the lower court’s rulings. The U.S. Supreme Court then granted a petition from the defendant and remanded it to the state Supreme Court. The court in its decision in June rejected the defendant’s suggestion that the permanent injunction requires them to “personally attend and participate in same-sex weddings.” The case is State of Washington and Robert Ingersoll and Curt Freed Vs. Arlene’s Flowers Inc. INSURANCEJOURNAL.COM

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News & Markets Company Settles for $6M with Nevada Dispensary Co-Owner

cannabis company paid a $6.3 million settlement to a Nevada dispensary co-owner who claimed the company skimmed millions of dollars from dispensary profits, according financial documents.

California-based Terra Tech reached a settlement with Heidi Loeb Hegerich, a co-owner of the Blum dispensary in Reno. Loeb Hegerich filed a lawsuit in November accusing the company of taking advantage of her and funneling the skimmed funds to the company’s other ventures. The lawsuit also made claims of fraud, conspiracy and elder abuse. In a statement last year, the company said the claims were meritless and its shareholders were the real victims because they

might have “suffered losses from their investment in the company as a result of her spurious accusations.” The company did not admit to any liability or responsibility in the settlement, it said in fillings to the U.S. Securities and Exchange Commission. “She’s very happy to have the situation behind her, and to move on to the next phase of her life,” said Mark Simons, an attorney for Loeb Hegerich. Loeb Hegerich and Terra Tech executives opened the Reno dispensary in January 2017. Her license is to be transferred to Terra Tech as part of the settlement, according to the company’s filings. Copyright 2019 Associated Press. All rights reserved.

Wells Fargo Settling California Car Loan Suit for $385M

ells Fargo has agreed to pay at least $385 million to settle a California lawsuit alleging it signed up thousands of auto loan customers for costly car insurance without their consent, resulting in many having their vehicles repossessed. The bank filed the agreement in early June in a federal court in Santa Ana. It still needs a judge’s approval. Another defendant, National General Insurance, agreed to pay $7.5 million, the New York Post reported. San Francisco-based Wells Fargo has confirmed the agreement and called it “an important step in making things right.” The bank’s statement said that it will be sending checks to affected customers. The 2017 class-action lawsuit alleged that for more than a decade, Wells Fargo tacked on insurance to customers’ car loans that they didn’t need because they had private insurance. Some 25,000 car owners couldn’t meet the additional fees and had their vehicles repossessed, the suit alleged. The bank acknowledged in 2017 that $80 million in unnecessary insurance charges had been added to 800,000 auto W4 | INSURANCE JOURNAL | WEST JUNE 17, 2019

loans. It’s one in a series of scandals involving the banking giant, starting in 2016 with the uncovering of millions of fake checking accounts its employees opened to meet sales quotas. That led to the resignation of CEO John Stumpf. Last year, the Federal Reserve capped the size of Wells Fargo’s assets, and Stumpf’s replacement, Tim Sloan stepped down in March. New improprieties had come to light on his watch, including the auto loan issues. Federal regulators who lost patience with Wells Fargo’s continued bad behavior inflicted harsh punishments. Wells had to pay a $1 billion fine last year to the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency. But more importantly,

the Federal Reserve stepped in and handcuffed Wells’ ability to grow its business until the bank could prove that it had gotten its house in order. Despite the restrictions, Wells Fargo reported in March that it earned $5.86 billion and profits rose by 14 percent from a year earlier, helped by higher interest rates. Copyright 2019 Associated Press. All rights reserved.

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CHANGE IS HARD. CHANGE IS GOOD. The road to change is often long and not always easy to follow. But we’ve started down that road and have a clear vision of where we’re going. We hope you notice the big changes happening at State Fund and, better yet, let us show you where we’re headed. It’s a good thing.

News & Markets California Surplus Lines Stamping Fee Goes to 0.25% in 2020

he Surplus Line Association of California board has voted to adjust the stamping fee to 0.25%, effective Jan. 1, 2020, the group announced earlier this month. The stamping fee has been set at 0.2% for seven years, the longest recorded period of time that the SLA has gone without changing the stamping fee, according to the group. The stamping fee is the primary source of revenue for the SLA, a non-profit association. The revenues fund all SLA operations, including a data analysis department that reviews roughly 800,000 surplus lines filings annually on behalf of the California Department of Insurance. The SLA is responsible for reviewing every surplus lines policy filed in the state to ensure compliance with laws and regulations. It also reviews out-of-state insurers for solvency, and helps brokers comply with laws and regulations. “We did not take this action lightly,” Robert Gilbert, chair of the SLA board, said in a statement. “We know that a change in the stamping fee is a cost and an inconvenience for policyholders, as well as our members and their employ-

ees who file surplus lines policies with the SLA. In fact, our members have told us that they prefer no change at all, whether it is an increase or a decrease, because the clerical adjustments create extra work and system changes can be confusing. That is why we kept the stamping fee constant for seven years.” But the increasing costs associated with a rapidly growing marketplace, as well as the need to address a large pension liability, made it necessary to raise the stamping fee, according to Gilbert’s statement. In 2012, the last year the SLA changed the stamping fee, the association reviewed and processed 471,319 policies. By 2018, that number had increased to 687,194. In 2019, the SLA processed 325,952 policies in just the first four months of the year, according to the group. “The share of commercial insurance premiums going into surplus lines in California has risen from about 7% a decade ago to approximately 18% today, and this has fueled a dramatic growth in policies for us to analyze,” Benjamin J. McKay, the SLA’s CEO and executive director, said in a statement. “To keep up with the marketplace growth, we have had to significantly increase hiring in our department that reviews these policies

and ensures they are in compliance with all the pertinent laws and regulations governing surplus lines in California.” Also playing into the board’s decision was the need to retire the SLA’s pension liability. The SLA phased out its pension in 2011 in favor of a 401(k) program, but employees covered under the pension plan prior to then are eligible for lifelong benefits upon retirement. The SLA has received estimates indicating that annuitizing the pension and taking it off the books will cost roughly $15 million. With the carrying costs of the pension quadrupling from about $140,000 to $560,000 a year, maintaining the pension has become a significant annual material cost to the SLA, the group said. “Fiscal responsibility dictates that eliminating this liability is the smart thing to do,” McKay added The 0.25% stamping fee amounts to $1 in revenue for the SLA for every $400 it processes in premiums. The group noted that this is below the midpoint (0.3%) of the SLA’s stamping fee variance since 1977, and very close to the mean (0.24%) during that time. The lowest stamping fee for the SLA over the last 42 years was 0.1% over a four-year period from Jan. 1, 1987, to Dec. 31, 1990, while the highest was 0.5% over a two-year period from Jan. 1, 1994, to Dec. 31, 1995, the group’s records show. The SLA operates as a self-governed private organization.

Hammer Sparks Led to California’s Mendocino Blaze

alifornia fire officials say sparks from a hammer driving a metal stake into the ground ignited a 2018 blaze in Northern California that killed a firefighter and became the largest wildland fire in state history. The California Department of Forestry and Fire Protection said that the blaze started July 17, 2018, in Mendocino County and quickly spread, aided by tinder dry vegetation, strong winds and hot temperaW6 | INSURANCE JOURNAL | WEST JUNE 17, 2019

tures. It spread to Colusa, Glenn and Lake counties. The blaze burned a total of 640 square miles (1,660 square kilometers), much of it in the Mendocino National Forest, making it the largest wildland fire, or fire

on undeveloped land, in state history. It also destroyed 280 structures and killed a firefighter from Utah. Cal Fire did not identify the person who ignited the blaze. It says no charges will be filed. Copyright 2019 Associated Press. All rights reserved. INSURANCEJOURNAL.COM

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News & Markets Future Focused? Research Finds Agents Split on Succession Planning: Channel Harvest

s succession planning a priority for independent agencies? How prepared are they for transition of ownership? The latest Channel Harvest Research survey, “Agent Voices 2019,” reveals nearly half of agency principals do not anticipate changing ownership while the other half is expecting to sell or turn over the reins at some point. The research was cosponsored by Insurance Journal. “Despite a steady stream of discussion about perpetuation, true succession planning takes a back seat for nearly half of agencies surveyed,” says Josh Miller, research director at Channel Harvest. “About 45% of respondents told us they do not have a succession plan in place.” Of those agencies that have recently sold or plan to sell, the survey shows a preference to pass the agency to a family member, selling out to other principals or making producers part owners. Nearly eight in 10 respondents fell into this group, while 15% said they have an external succession plan, which calls for them to sell to another agency or an aggregator. Agencies that have thought less about succession planning tend to have a different view, with only 30% preferring to transition to someone in house and 27% hoping to sell to an outside party. “Internal and external succession are fairly evenly preferred among those agencies that do not have a plan, but perhaps more telling, the largest percentage (44%) aren’t sure what strategy they prefer,” says Miller. This year’s Channel Harvest survey goes into detail on succession planning, asking principals what they feel are the greatest challenges to a successful transition and areas where they feel they need help, such as finding and developing future leaders, incorporation and financial/tax issues. Details are available in the written report, which is available for purchase. The 12th annual Channel Harvest survey was in the field from January 7 to March 31 and completed by nearly 7,000 respondents in every agency role – from INSURANCEJOURNAL.COM

principals to producers to CSRs. Each year, Channel Harvest partners with carriers to pulse agents on company performance and other important issues. This year’s carrier panel included Allstate, Amerisure, Encompass, Foremost, Hanover, Kemper, Liberty Mutual, Nationwide, Penn

National, Progressive and Safeco.

For more information and to purchase the report as well as the data containing all responses, contact Ellen Wallace, Channel Harvest’s director of industry relations, at ellen@channelharvest.com. JUNE 17, 2019 INSURANCE JOURNAL | 19

AGENCY

Spotlight

Insurance First and Always

By Stephanie K. Jones

Tom Bulow, The Bulow Group

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here’s one thing that Mike Bulow has never thought about, and that’s what he would do for employment if he wasn’t in the insurance business. Career-wise, insurance is “the only thing I’ve ever done,” said Bulow, who, with his brother, Tom Bulow, co-owns The Bulow Group in Tinley Park, Ill. It’s “fascinating to me that it’s something that you have to have to operate a business. Really, the world doesn’t work without it.” Plus, he said, he likes “the fact that you’re selling yourself, not a product. You’re selling yourself and what you can deliver on service, what you can deliver on your way of doing business, whatever that may be.” The Bulow Group, which was named one of Insurance Journal’s Best Agencies to Work For in the Midwest in 2018, has been growing at a “pretty good clip,” having added seven new employees in recent months. The company also has opened a new location in Chicago, about 30 miles from its headquarters. The long-term goal is to become a national broker and expand the firm’s footprint across the U.S. One of the trademarks of The Bulow Group is its culture of caring, and that starts at the top, Bulow said. He and his brother, Tom, “care about people both in and out of the office … We care about them both personally and professionally.” On a personal level, Bulow said, “I make what’s important to other people important to me. Whether that is personal or professional. Whatever their passions are, whatever makes them tick. I make what’s INSURANCEJOURNAL.COM

important to them important to me. That’s kind of the ethos we have in the agency.” He said three driving forces — or hashtags, in social media terms — characterize the agency: innovate, donate and deliver. Innovate — to keep the enterprise moving forward with products, technology and the agency’s way of doing business. Donate and give back — with time, resources — whatever that may be. Deliver — on what you say you’re going to do. “Do it. Deliver on superior results, deliver on customer service that’s unparalleled.” Bulow said he received a couple of great pieces of advice as a young agent that still resonate with him. One: “Always do what’s right for the client. Period.” Another: “Bad news doesn’t age well.” If something goes wrong, address it, even if it stings. “Sleeping on it doesn’t do any good … bad news just doesn’t age well. I’ve remembered that since the beginning.” To those who are just starting their career in insurance, he would say: “Don’t get too high or too low when it comes to sales, when it comes to service. Just do what’s right for the client. And communication is key. “Communication is key for all facets, whether it’s sales, service, carrier relationships — that’s probably the biggest takeaway. ... Keep the client, the other party, informed at all times. I feel like that’s a huge component of what makes us successful,” Bulow said. Beyond work, bicycling is one of Bulow’s passions. In fact, after his family, INSURANCEJOURNAL.COM

his Peloton (a type of training bicycle used indoors that can be connected to the internet) is one thing he wouldn’t want to do without. Weather permitting, he and his family “go on bike rides almost every day. Admittedly, sometimes that might be to get ice cream, but we’re doing it,” he said. And what might he do if he weren’t in insurance? A pro golfer would be great, Bulow said,

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or maybe a professional traveler, “if there is such a thing.”

We Want You!

We’d love to hear from your agency! To be considered for this Agency Profile series, send your agency’s story to awells@insurancejournal.com.

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JUNE 17, 2019 INSURANCE JOURNAL | 21

News & Markets What Might Happen If Congress Fails to Renew Terrorism Reinsurance Program

he long-term viability of the U.S. property terrorism insurance market is back in the spotlight as Congress looks at renewing the federal reinsurance backstop, the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), which is set to expire in Dec. 31, 2020. Global insurance broker Marsh’s 2019 Terrorism Risk Insurance Report concludes that the property terrorism insurance market remains strong with sufficient capacity to respond to today’s main terrorist threats in part due to TRIPRA. It also matters that there have not been many claims. According to the report, although there have been no certified terrorism losses in the U.S. since the original federal terrorism

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reinsurance program (TRIA) was passed following the Sept. 11, 2001 attacks, this federal program and similar programs in other countries are still “crucial to the continued health and stability of the property terrorism insurance market.” Marsh analysts suggest that if it appears Congress will not renew TRIPRA before it expires, there could be various market effects. Some insurers may insert sunset clauses in renewal policies while others may increase prices or limit their writings, perhaps to preferred locations. Some insurers will have to purchase additional private reinsurance, and the influx of new buyers simultaneously into the reinsurance market could affect pricing. Reinsurers are also likely be selective in providing additional capital, which

could pose a capacity problem for some businesses in high-profile cities and for employers with significant workers’ compensation accumulations, according to the report. “The existence of government backstops, like TRIPRA, has played an important role in ensuring the continued stability and health of the global property terrorism insurance market,” said Tarique Nageer, Terrorism Placement Advisory leader for Marsh. “All eyes are on the Congressional schedule” as the 2020 deadline nears. “In the meantime, U.S. businesses and organizations are advised to work with their brokers as soon as possible to map out a strategy to mitigate potential disruption,” he said. The percentage of U.S. companies purchasing terrorism coverage embedded in property policies under TRIPRA remained consistent at 62% in 2018, the report says. Educational, media, financial institutions, and real estate organizations had the highest terrorism insurance take-up rates by industry in 2018. According to the report, the predom-

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inant terrorism threat globally remains from “extremists focused on inflicting mass casualties in unsophisticated attacks on crowded public spaces rather than large-scale property damage.” Over the past few years, the global property terrorism insurance market has responded by expanding coverage, most notably in the development of coverage for active assailant events and non-damage business interruption, Marsh said. “The market for property terrorism insurance remains competitive for most buyers, due in recent years to a steady decline in the number of global terrorist

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incidents and minimal insurance claims,” the report says. From May 2018 through May 2019, terrorism risk ratings fell across 116 countries, most notably in Egypt, Turkey and Spain. During that period, risk ratings fell in 116 countries, while increasing in only 34. Little improvement, however, occurred in the world’s riskiest states for terrorism, including Afghanistan, Yemen and Iraq. The number of lives lost to acts of terrorism and politically or ideologically motivated violence fell again in 2018, the report adds, citing Jane’s Terrorism and Insurgency Centre data. Despite the trend of decreasing risk, Marsh cautions that new threats will arise. The report points to events that will likely affect terrorism risks in 2019, including the territorial defeat of First, Islamic State (IS) that the report warns will likely bring new threats both in the Middle East and in Western states. Religious extremism is expected to remain the dominant terrorism threat globally, but the threat from the “extreme right-wing groups” is also expected to rise in Western states, most likely in the form of “low-capability attacks that “generate little property damage, but pose significant risks to people.” The report says that attacks by lone wolves and small groups are happening more often, and there is rising concern over terrorist incidents occurring in or near workplaces.

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Special Report: Construction

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INSURANCEJOURNAL.COM

By Andrea Wells

onstruction insurance specialists say their insurance market is strong with plenty of capacity and underwriters competing for the best accounts. According to specialists interviewed by Insurance Journal for their assessment of the market, the boom in the construction business has allowed underwriters to refine their appetites and be more selective and focus on profitable accounts. At the same time that the overall market is healthy, conditions can be tough in certain geographic regions and for riskier projects with large fleets, wildfire or difficult builder’s risk exposures. Some believe the soft market cycle in construction insurance is over. They see more business making its way to the surplus lines market.

Building Business

While overall total construction starts fell 8% from January-April 2019, the 12-month moving total for construction starts from April 2018 to April 2019 remained the same, according to Dodge Data & Analytics’ most recent report on U.S. construction activity. Also, Dodge Data & Analytics reporting in May on major sectors said that nonresidential building rose 4%, commercial building 9%, and manufacturing building 7%, while institutional building remained unchanged, the report revealed in May. Residential building held steady with the previous period, with single family housing unchanged and multifamily housing up 1%. The insurance market overall for construction has had only slight rate increases, says Brian McDonnell, managing principal, national construction specialty practice for EPIC Insurance Brokers & Consultants based in San Francisco. That’s been the case except in certain geographic areas including New York, where the labor market is a nightmare, and in states with high wildfire risks such as California. “But in general, it’s only problematic areas seeing rate increases,” he said. Contractors appear to be keeping busy. “We’re still seeing a number of projects in INSURANCEJOURNAL.COM

the planning stages, big projects and other projects in general across the board,” said McDonnell. Katie Davies, president and CEO of Technical Risk Underwriters (TRU), confirms that construction activity has been brisk, with the number of building permits issued in 2018 and 2019 trending toward a five-year high. “We are seeing the majority of our risks in the southeast and southwest of the country, though we expect more 2019 projects to start in the northern states as summer begins,” Davies said.

‘Insurance carriers are paying more attention to underwriting and selecting accounts they want to do business with and being very competitive on those.’ Not every coverage area is stable, however. “Auto continues to be a huge underperforming line for carriers,” he said. The rise in building activity over the past five years has added to the difficulty in construction auto as contractors have been bringing on more inexperienced workers and drivers. Heavy, large fleets are extremely challenging for contractors today, McDonnell said. Some construction underwriters are feeling the effects of inexperienced workers and a shortage of construction labor in general. Rate pressure is being felt in general liability and excess liability. Here are five trends to watch in construction, according to insurance specialists.

More Selective

The growth in the construction sector is leading to new opportunities for insurance underwriters. Those opportunities are also making it possible for carriers to have their pick of accounts and be more selective on best-of-class business, said Brian F. Cooper, managing director, National Construction Practice, for Gallagher Construction Services in San Francisco. “Insurance carriers are paying more attention to underwriting and selecting

accounts they want to do business with and being very competitive on those,” he said. Other accounts with riskier profiles might get passed by. “They’re either not providing quotes on those, or the quotes are reflective of higher rates,” Cooper said. “They’re really paying more attention to the actual underwriting of premiere accounts rather than chasing premium dollars like has been the case the past several years.” For insurance agents and brokers, that means being prepared for heightened scrutiny when it comes to new business and renewals, says Bill Creedon, North America Industry Leader, Construction, for Willis Towers Watson in Denver. “It’s taking a lot more strategy going in from brokers, clients, everybody, and looking at things far earlier,” Creedon said. For higher risk accounts, such as construction firms with large fleets, unique general liability exposures, wildfire exposures, or those risks in catastrophe prone regions, underwriting may take more creativity, he said. Contractors are facing broadening contractual requirements and an increasingly discerning underwriting community, Creedon added. Standard market construction carriers have their pick of preferred business today and he’s seeing more business make its way to the surplus lines market. “They’re starting to drive more business into the wholesale market, which is seeing quite an influx,” he said. “It’s an incredibly fast-changing environment.” As with any market cycle, when the transition begins from soft to hard market, underwriters dig deeper as pressures from management and reinsurers increase, Erik Davis, managing director, Construction Specialty Practice, for RT Specialty, told Insurance Journal. Davis said it’s no longer a construction insurance market where carriers are taking anything and everything. “The focus now is on profitable underwriting across the board,” he said. In general, the insurance industry has been writing construction business at a loss for the past decade or even longer, Davis said. But with the uptick in con-

continued on page 26

JUNE 17, 2019 INSURANCE JOURNAL | 25

Special Report: Construction

continued from page 25 struction business, underwriters have been inundated with submissions. They are looking for better information to “sell” the account and requiring thorough underwriting information to underwrite the tougher classes and risks. “It’s important to provide thorough submissions and think about ways you can help your underwriters do their jobs effectively and efficiently,” Davis added. “Like it or not, brokers are ‘ranked’ by underwriters, and as they become busier and busier, it’s imperative you do all you can to get your deal to the top of their stack to get looked at.” Davis concurs that more construction business is being pushed out of the standard lines market into surplus lines this year. Year-to-date submission flow of construction business is up 32% for RT Specialty over the same period in 2019, Davis said. This uptick is driven by certain pockets of the standard lines market exiting the construction business, or by handing out large increases in premium on renewals. That is pushing contractors to “shop” more than in prior years. Also, there continues to be growth in new construction starts in geographies that are primarily surplus lines-focused areas such as New York, West Coast residential, energy business, airports, and others typically served by excess and surplus lines writers, Davis said. 26 | INSURANCE JOURNAL | JUNE 17, 2019

TRU’s Davies is also seeing an increase in submissions. “As an E&S MGU with a wholesale only distribution, we are seeing increases in submissions and bound business,” Davies said. “This is due to contraction in capacity in the construction insurance market coupled with a continued increase in new projects that need insurance.”

‘Like it or not, brokers are ‘ranked’ by underwriters, and as they become busier and busier, it’s imperative you do all you can to get your deal to the top of their stack to get looked at.’ Builder's Risk

In some sectors of construction, builder’s risk is experiencing volatility. “We are seeing this increase in the frame builder’s risk space specifically,” TRU’s Davies said. “Due to the cost benefits of frame construction, developers continue to look at this method of building as a cost-effective solution to multifamily living projects where the site allows for this type of construction,” Davies told Insurance Journal. While fires can occur on any construction project, wood frame projects are particularly vulnerable. “With more

wood frame structures being built, we have noticed an increase in fire losses during the course of construction,” said Jay Hurin, Technical Director for Travelers Inland Marine Risk Control. “These structures are particularly susceptible to fires.” Insurance rates have “gone through the roof” and the capacity has shrunk dramatically for projects with wood frame construction, according to Gallagher’s Cooper. Wildfire risk and arson are leading that trend. The cost of insuring frame construction is so expensive that it’s pushing some contractors to consider different building materials, he said. “The property area is probably the most challenging right now,” he said. “When people are designing new projects or retrofitting, they really are looking at what would impact the sustainability [of the building] and also impact resiliency to whatever that environment is, geographically.” Contractors are also putting more consideration into the cost of insuring the materials. Cooper thinks they were thinking of building with wood because it’s cheaper than concrete. But now, they’re having second thoughts, saying, “Well, the difference in cost after taking insurance into consideration and sustainability into consideration” maybe isn’t cost-effective, he said. Even though the actual hard costs of wood versus steel might save money, the “soft costs” such as the cost of insurINSURANCEJOURNAL.COM

ance might end up making the project more expensive. “So might as well build it with steel.” The London market has picked up some of the slack in the wood frame builder’s risk market but that is starting to change, according to Cooper. “They’re starting to tighten up quite a bit in that area,” he said. “I would suspect that over the next several years, the type of construction and the different types of wood products, laminates, etc.” will become more of a hurdle in the underwriting community. “They are looking at that more and taking that into consideration when providing capacity or pricing on the property side of the risk.” Willis Towers Watson’s “Insurance Marketplace Realities 2019 Spring Update” reported that the North American builder’s risk market is starting to see a firming price trend. “The shift can be attributed to poor loss experience globally, coupled with a fixed/operational property market that is quickly hardening,” the report said. “This loss experience, in concert with a decade of eroding marketing conditions, has reduced builder’s risk capacity in the London marketplace.” Creedon says while overall builder’s risk is experiencing an increase in rate in some areas, most changes to the line have come in terms and conditions, not price. Security and monitoring technology are helping to manage the risks for some projects. “Carriers are placing a lot of emphasis on security at the job site, when the workers aren’t working,” Creedon said. “They want to know what the security is on the job site? Does the project have cameras? Do you have 24-7 surveillance, live people on the site?” he said. “Security is a huge factor in the underwriting process on projects INSURANCEJOURNAL.COM INSURANCEJOURNAL.COM

for the builder’s risk, particularly if they’re in an urban area that is susceptible to arson.”

Continuing Labor Woes

A shortage of construction workers is the most challenging issue for contractors, the experts say. Some 80% of construction firms report they are having a hard time filling hourly positions that represent the bulk of the construction workforce, according to the Associated General Contractors of America (AGC). “Labor shortages in the construction industry remain significant and widespread,” said Ken Simonson, AGC’s chief economist, in May. William Blanchard, managing director

at Fort Worth-based insurance agency Higginbotham, says the lack of skilled labor has put tremendous pressure on some of his construction clients. “I hear from a lot of contractors that they can’t find qualified people,” he said. “That just leads to inexperienced workers, and that can lead to workers’ comp claims, auto claims, because there’s just a lot new folks out there doing tasks they haven’t done in the past.” That also leads to potentially faulty workmanship claims, according to Matt Hammer, partner at Baldwin Krystyn Sherman Partners in Tampa, Fla. Hammer says he’s seeing a number of general liability carriers pull out of the market in the residential construction space as a result of claims caused by untrained and unskilled workers being thrust into construction jobs. There is such a demand for labor that “you might have the entry level person that’s taking on more responsibility, doesn’t do quality work on a project, and then a claim surfaces in a year or two, or even right on the job site,” he said. “We’re seeing a number of changes with regards to general liability and excess liability because of that,” he said. “The number of carriers is dwindling, and the rates are increasing,” he said. “Some of the more specialized programs, project specific and wrap ups, the number of carriers that have historically offered those programs, especially those that are coming off multiple year rolling programs, the renewals have been difficult because the carrier capacity is drying up.” Creedon agrees that labor is the number one issue for construction firms. “The construction industry - it’s an intersection of a generation that is timing out, getting close to retirement in the very near future, and it’s difficult to bring young people into the industry.”

JUNE JUNE 17, 17, 2019 2019 INSURANCE INSURANCE JOURNAL JOURNAL || 27 27

Special Report: Construction continued from page 27 Changing Appetites

More construction business also means a changing carrier appetite for certain classes of business.

‘There’s not a whole lot of options, so auto is by far in the most disarray out of all of the coverage lines for both the general contractors and the subcontractors.’ While multi-family construction, apartments and condos, has been a popular real estate development focus for many years, the recent construction boom is leading carriers to change their perspective on the desirability of multi-family, according to Hammer. “So, there’s some carriers that will now classify multi-family more as residential and less as commercial, and therefore restricting their appetite for such developments,” he said. “Plus, I think carriers are being more sensitive to the ‘jack

28 | INSURANCE JOURNAL | JUNE 17, 2019

of all trades’ contractor, too,” he said. Hammer still sees competitive options for the general contractors that are doing primarily commercial construction, but the environment is less robust for multi-family and/or residential. The good news, “We’re seeing companies like Zurich pick up the pieces where some regional players like Westfield have changed their perspective in Florida,” he said. “You see the business going towards those carriers that are stable and committed to the business.” But he agrees with others that carriers are more selective when it comes to underwriting. “So while a company like Zurich may be more willing to take on a particular risk like multi-family with a contractor that’s been in the business of developing multi-family and has a long track record of successful performance, they are less likely to take on someone who has no track record with multi-family and now has five projects planned in the coming year,” he explained.

Today’s environment is more selective, underwriting is coming into play, contractor expertise definitely is being evaluated more, and restrictions on multi-family have surfaced, he added.

Auto Again

Hammer and others agree the most difficult insurance line for construction today is commercial auto. “Hands down, across the board, for organizations that have large fleets, especially in the subcontract world, auto is difficult, Hammer said. “Auto rates are increasing pretty much at a minimum of 20% in most of our southeast renewals,” he said, even on accounts with no claims. “There’s not a whole lot of options, so auto is by far in the most disarray out of all of the coverage lines for both the general contractors and the subcontractors.” Auto liability remains the most challenging line in primary casualty for construction, says Creedon. Underwriting results have been sharply deteriorating since 2015, and while there is indication that repeated auto rate increases year after year are having an impact on carrier profitability and rate strategy, he doesn’t expect underwriters to scale back on rate any time soon. Constructions with the scale and ability to take on larger retentions are making changes, according to McDonnell. “Some are maybe putting the first $5 million of their auto exposure into a captive, hoping that they can manage that as opposed to paying market rates,” he said. Hammer says many of his larger clients are turning to alternative risk financing as well, such to weather the storm of difficult auto market conditions. “We’re seeing a number of different insureds going to the alternative risk financing route to better finance the risk associated with auto and also they’re incorporating the general liability, and workers’ comp, and property in certain cases.” Despite the challenges, construction business is good, Blanchard said. “The forecast is saying it’s going to be robust for some time,” he said. “We’re in a good spot.” INSURANCEJOURNAL.COM

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Spotlight: Umbrella Comparing Coverage:

Umbrella and Excess Liability By Patrick Wraight

iability insurance protects the customer when something happens to someone else. Customers have liability exposures if they do something, sell something, have a place, go to a place or hire someone, among other activities. Liability policies provide money for damages, which is the money that gets paid out to those who are injured in some way and for the expenses associated with the claim (investigation, legal representation, other expenses). Liability insurance is designed to protect a customer’s assets from being taken from them due to a judgment. If there is a judgment that is rendered against a customer that isn’t covered by the liability policy or exceeds the policy’s limits, what happens? The customer may be required to liquidate assets to raise the money to pay the judgment. That’s what makes umbrella and excess insurance a necessity for many customers. Umbrella and excess insurance policies are designed to be additional layers of coverage above primary insurance policies, such as a commercial general liability policy or a 30 | INSURANCE JOURNAL | JUNE 17, 2019

business auto policy. However similar they are, umbrella and excess policies are not the same. We will focus on only two coverage forms in this comparison, the ISO CU 00 01 04 13 Commercial Liability Umbrella Coverage Form and the ISO CX 00 01 04 13 Commercial Excess Liability Coverage Form. It’s likely that you'll see other forms, but this comparison should give you a few points to look for as you’re looking at policy forms, comparing coverages, and helping customers to make informed decisions. A commercial umbrella liability policy is designed to provide two types of coverage. The first is coverage above other insurance policies, referred to in this coverage form as “underlying insurance.” “Underlying insurance” means any policies of insurance listed in the Declarations under the Schedule of “underlying insurance.” It also provides coverage for liability exposures for which there is no “underlying insurance.” Let’s look at some of the insuring agreement for Coverage A on the CU 00 01. We will pay on behalf of the insured the “ultimate net loss” in excess of the “retained limit” because of “bodily injury” or “property damage” to which this insurance applies. INSURANCEJOURNAL.COM

We will have the right and duty to defend the insured against any “suit” seeking damages for such “bodily injury” or “property damage” when the “underlying insurance” does not provide coverage or the limits of “underlying insurance” have been exhausted. This part of the insuring agreement adds two more terms that we don’t see in the commercial general liability policy. These terms will help us to understand what this policy is covering. Let’s look at their meanings now. “Ultimate net loss” means the total sum, after reduction for recoveries or salvages collectible, that the insured becomes legally obligated to pay as damages by reason of settlement or judgments or any arbitration or other alternate dispute method entered into with our consent or the “underlying insurer’s” consent. “Retained limit” means the available limits of “underlying insurance” scheduled in the declarations or the “self-insured retention,” whichever applies. That definition adds one more term that we need to become familiar with. “Self-insured retention” means the dollar amount listed in the declarations that will be paid by the insured before this insurance becomes applicable only with respect to “occurrences” or offenses not covered by the “underlying insurance.” The “self-insured retention” does not apply to “occurrences” or offenses which would have been covered by “underlying insurance” but for the exhaustion INSURANCEJOURNAL.COM

of applicable limits. This policy is designed to be similar to the underlying commercial general liability (CGL) policy. There are coverages A and B that mirror the ISO CGL policy. So, when a loss is covered on an underlying policy, the loss can be covered by this policy. However, because of what we have just read, we also know that some losses that might not be covered by underlying insurance can be covered here. Of course, we haven’t fully examined this 18-page coverage form. There are exclusions, conditions and definitions that we haven’t looked at and they should be for a full comparison. Setting aside the umbrella policy, let’s look at a few items in the excess policy to find out why it’s different. We note that the first difference is in the insuring agreement. The umbrella policy included insuring agreements for coverages A and B, like the CGL policy did. This policy only has one insuring agreement. We will pay on behalf of the insured the “ultimate net loss” in excess of the “retained limit” because of “injury or damage” to which insurance provided under this Coverage Part applies. We will have the right and duty to defend the insured against any suit seeking damages for such “injury or damage” when the applicable limits of “controlling underlying insurance” have been exhausted in accordance with the provisions of such “controlling underlying insurance.” Again, we’ve found terms that we need to define so that

we can understand what’s actually being covered here. There are four; let’s take a look. “Ultimate net loss” means the total sum, after reduction for recoveries, or salvages collectible, that the insured becomes legally obligated to pay as damages by reason of: a. Settlements, judgments, binding arbitration; or b. Other binding alternate dispute resolution proceeding entered into with our consent. “Ultimate net loss” includes defense expenses if the “controlling underlying insurance” specifies that limits are reduced by defense expenses. In this definition, we discover that there are many different types of insurance policies that could be covered here, including some that include defense costs in the limit of insurance (like cyber liability). “Retained limit” means the available limits of “controlling underlying insurance” applicable to the claim. Notice that there is no mention of self-insured retention. This shows that there is not coverage if there is no underlying policy. “Injury or damage” means any injury or damage, covered in the applicable “controlling underlying insurance” arising from an “event.” Here we see a broader term than bodily injury, property damage, or personal and advertising injury. These terms are defined in many policies. The term “injury or damage” creates this broad definition meant to work with any definition of damage that exists on an underlying policy. “Controlling underlying insurance” means any policy

of insurance or self-insurance listed in the declarations under the schedule of “controlling underlying insurance.” Adding the word controlling is important. It is telling us that the underlying insurance controls how coverage applies. If we dug deeper into this excess policy, we would discover a statement to the effect that coverage is never broader than the underlying policy. If you read this coverage form, you would find it is only five pages long and has a limited exclusion section and a limited conditions section.

Umbrella and excess insurance policies are designed to be additional layers of coverage above primary insurance policies ... However similar they are, umbrella and excess policies are not the same things. The difference between these umbrella and excess coverage forms is that the umbrella can be used to cover some losses for which there is no insurance. The excess form then only covers losses that are covered by the other insurance policies that exist as primary insurance. Of course, you need to read the entire policies to find the other ways that they might be similar (but still different) and to discover which one is the best coverage for your customers. Wraight is the director of Insurance Journal’s Academy of Insurance.

JUNE 17, 2019 INSURANCE JOURNAL | 31

Claims Journal

A Place for Technology

at Every Point in the Claims Process By Jim Sams

he digital transformation of the insurance industry isn’t just for insurtech startups any more. At Allstate, 60 percent of claims are now filed with a cell phone application that allows policyholders to take photos of the damage, Chief Claims Officer Ken Rosen said. Farmers Insurance is beta testing a product that uses high-resolution photos to create “a shell” of a repair estimate that can be fine-tuned by a claims adjuster, Senior Vice President Frank Carni said. And CSAA Insurance recently announced that it has penned a deal with Owl Cameras Inc. that will allow it to place in policyholders’ vehicles video cameras that will record any crashes and jump start the claims process. Consumers are demanding this movement toward high-speed claims resolution and improved customer service, said Andreas Kleiner, chief executive officer and president of American Modern Insurance Group during the opening day of Insurance Nexus’ Connected Claims USA Summit. “It’s right here, right now,” Kleiner said during his opening keynote address. “Amazon has changed the rules. The entire insurance value chain will be disrupted. What was truly advanced three years ago has become table stakes.” One of the latest advances comes to the industry through Owlcam, the product of a Silicon Valley startup that sells smart video cameras for cars. When a crash or break-in occurs, Owlcam instantly sends a video clip to the driver’s cell phone, which can be shared with the insurer and police. The Owlcam app also allows the policyholder to file a first notice of loss that includes the videoclip. Owl Cameras was launched in Palo Alto, Calif., in March 2018, according to a press release from CSAA. In 2019, the 32 | INSURANCE JOURNAL | JUNE 17, 2019

company added new features and began selling the product through major retailers and through business-to-business fleet sales. During the conference, Cal Hankins, CSAA’s vice president of claims, showed a video of 17-yearold driver named Ana who collided with a minivan when the other vehicle cut into her lane and abruptly stopped. Hankins said without an Owlcam in the car, Ana would likely have been found responsible

for the accident because of her inexperience as a driver and the lack of evidence proving that the other vehicle darted in front of her car.

Roost Gathering Data as it Awaits Insurance Industry Transformation By Jim Sams

or years, insurance industry observers have been predicting that home telematics products would transform the insurance industry by forcing carriers to take on the role of damage preventer instead of just claims payer. Insurers are still experimenting. But one company — a Silicon Valley startup launched in 2014 — is working to make sure it will be the leading smart home product supplier to insurance carriers when that transformation happens. In the past month, Roost Home Telematics of Sunnyvale, Calif., has entered into partnerships with Centauri Insurance, Duck Creek Technologies and Farmers Protective Mutual Insurance Co. to place its water-leak detectors into policyholders’ homes. In the past year, Roost has signed up USAA, Armed Forces Insurance, Gulf Stream Property and Casualty Insurance, and CFM Insurance,

to name just a few. “I think without a doubt, we have deployed more than anybody out there,” said Roost Marketing Director David Henry. “We have been strong advocates of the industry. We don’t sell to consumers any more. We sell just to insurance companies.” All told, some 25 carriers and claims organizations have entered into agreements with Roost. Henry says Roost has installed its devices in “hundreds of thousands” of homes through agreements with insurers and is collecting data to provide insight on how well the technology controls losses and improves customer service. In 2017, Roost contracted with Willis Towers Watson to analyze data from its sensors that provide metrics to instruct insurers on how well the devices perform at loss control and improving customer satisfaction and retention. Willis operates a similar data analytics program with automobile telematics called DriveAbility.

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Another video displayed a thief stealing a Porsche. The owner of the car used the Owlcam app to take a high-resolution videotape of the criminal, which he shared with police. The car was recovered within hours, according to the video. Hankins said video cameras are becoming ubiquitous in automobiles. Tesla puts six cameras in its vehicles. Volvo is experimenting with a video system to deter drunken driving. “It means we are going to get a mountain of crash videos real soon,” Hankins said. “We are already getting some, but it’s going to become much more prevalent. The good news is that our customers love videos. They love to show us their side of the story.” Carni, the Farmers executive mentioned earlier, said while automation of the industry will reduce the number of workers needed to handle claims, it will also allow those workers to focus on work

that isn’t repetitive and requires critical thought. Carni, as did other speakers at the conference, emphasized that the “human touch” will always be required in the claims process. “Employees want to do high-value work,” Carni said. “They want to be rewarded for critical thought.” Carni said video-estimating technology has enabled Farmers to adjudicate claims using only photos in 95% of total-loss auto claims. The carrier is now hoping to expand its photo-estimating capabilities in property claims through a system undergoing testing. Allstate has also moved most of its claims adjusting in the auto space to a virtual process, said Rosen, the chief claims officer. He said initial photo estimates often require a supplemental report once an auto body shop starts repairs, but in those cases Allstate uses

a “virtual assist” system that refers supplemental reports to the next available claims adjuster. No time is spent playing telephone tag, he said. There seems to be a place for technology at every point in the claims process. Daniel Regan, vice president of financial services for SAP Ariba, pitched his company’s ability to automate interactions with vendors. Regan said SAP’s network allows insurers to monitor the work done by vendors to ensure quality and “digitize payments” to reduce tensions. Deva Annamalai, an innovation strategist for FiServ, told insurers not to forget about payments. He said his company has a developed a solution that can send electronic payments through consumer’s debit cards. “Having to mail checks after building these fantastic claims systems, that’s going to be a failure at the end of the day,” he said.

Henry said Roost hopes an independent analysis will boost its customers’ confidence in the collected data. Roost launched five years ago with the launch of its Smart Battery, a lithium battery equipped with a chip that can transmit alerts directly to cell phones. Later, it added a water-leak and freeze detector, a Smart Smoke Alarm and garage door sensors. Initially, Roost sold all of its products directly to consumers. “We learned very quickly that the retail game is a very expensive game,” Henry said. Henry said Roost recognized that less capital would be needed to market to insurers than consumers. He said data collection will drive value. As of now, insurers have not collected enough data to price insurance policies that include home telematics and have no clue as to their impact on losses. But the information is coming. “Things are going in the right direction,” he said. “We will have that statistically relevant data here in the near future.” Henry said Roost does not have any

serious competitors in the insurance space. “Our main competitor is general apathy,” he said. "The slowness of insurance companies to react to new things.” Floridabased Centauri Insurance recently announced it has teamed up with Roost. Chief Marketing Officer Felicia Cox said the carrier will distribute Roost water-leak detectors to 2,500 policyholders. She said the carrier will target consumers who have properties with previous water damage and whose owners have demonstrated technical savviness by using the carrier’s Internet portal. Centauri customers enrolled in the pilot will also have access to weather alerts provided by The Weather Channel. Cox said Centauri has been issuing water-detection devices to “high-value”

customers, meaning with property values of more than $1 million, since its inception in 2011. The Roost partnership will allow the carrier to find out if its customers are actually interacting with the technology. Centauri expects demand for smart home devices to grow as consumers become more familiar with the technology, Cox said. “This is going to play a tremendous role in the industry,” she said. “These devices are going to allow us to have more peace of mind, from the policyholder’s perspective.”

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JUNE 17, 2019 INSURANCE JOURNAL | 33

Spotlight: Cannabis

Early Cannabis Insurance Claims Experience Differs from Expectations By Don Jergler

t’s still early, but claims experience thus far in the cannabis insurance market is encouraging, according to one leading writer. “So far, we’re optimistic that we’re going to see that our experience is going to be better than our other lines of

business,” said John Donahue, president and CEO of Topa Insurance Co., which offers cannabis products in more than a dozen states. Donahue made the comments during an hour-long Insurance Journal webinar, Cannabis & Insurance, What You Need to Know About the Budding Business,

which aired live on May 15. The webinar can be viewed on InsuranceJournal.com’s Research and Trends section. The webinar, which was sponsored by Cannasure Insurance Services, also featured two other panelists with experience in the area: Chris Boden, cannabis practice group team leader for

InsuranceJournal.com Poll What do you see ahead for the cannabis industry? Check as many as apply. A fast-growing and expanding business. (97 votes)

Decriminalization at the federal level within five years.

26.48%

(85 votes)

Wide acceptance of medical use of marijuana. (85 votes) Worsening insurance claims experience. (35 votes) Backlash against legalization of recreational marijuana as more risks become known. (15 votes) Other:

(4 votes)

Total Votes: 321

34 | INSURANCE JOURNAL | JUNE 17, 2019

10.9% 4.67% 1.25%

30.22%

Crouse and Associates, and Ian Stewart, a partner in Wilson Elser and chair of the firm’s cannabis law practice team. Donahue acknowledged new ventures generally have a worse loss history than existing long-term businesses. “And so, we tend to be very conservative around our pricing, and our philosophy, and the underwriting, but it’s really early in the game. We’ve seen some property losses,” Donahue said. When the cannabis industry was just getting started with adult-use being legalized only in a few states like California and Colorado, Stewart said the belief was that most of the claims insurers would see would concern product liability, bodily injury, failure to warn, manufacturing defect, in which people would consume a cannabis product and be injured in some way, or injure others, and sue. “And certainly, there’s a few of those suits, but they are not nearly as prevalent in terms of the number and severity that INSURANCEJOURNAL.COM

I think people expected two years ago, which I think is good news for the industry,” Stewart said. He believes mislabeling claims, false advertising claims and consumer class actions alleging deceptive business practices, in terms of what’s on the label, such as health claims, will become more common as the industry grows.

Reinsurance Challenge

Panelists discussed other challenges the business faces, including finding reinsurance. “That’s probably one of our biggest challenges,” Donahue said. “We’re a small company, we need reinsurers to provide capacity, and some of the reinsurers have said, ‘Hey, this seems like it makes sense. We’re part of it.’ Others have taken more, wait and see (approach), and others have just out and out said, ‘We’re not going to do it until the federal rules are worked out.’” Donahue said Topa has worked to educate the reinsurance market on the cannabis market, including basics like risks, coverages and exclusions. The carrier has also tried to stamp out the idea that cannabis operators are unprofessional people in a business populated by stoners. “There’s this idea that, maybe, you’re insuring this group of these dudes, and they’re in flip-flops. But really, what we’ve tried to do is insure people that are true professionals that really take this business very serious. And when we bring the reinsurers out, they see that, in reality, these people are very serious about the business they’re in,” Donahue said. “They’ve invested a lot of their own personal money, INSURANCEJOURNAL.COM

because they can’t get the bank loans in most cases, so these are entrepreneurs that are really focused on it.”

Marketing Cannabis Insurance

Boden discussed how insurance products are being marketed. “When I started, I got introduced, it was a client of mine, and he said, ‘Hey, I’m opening a dispensary up. Can you get insurance?’” he said. “And, this was in 2010, and I was always under the thought, ‘Hey, yes. There’s got to be insurance somewhere, no matter how difficult it is, we can do it.’” That single retail location it found insurance for, he said, “blew up to be a fully integrated $1.5 million in premium. I mean, just blew up, and by that happening, they just started introducing me to their people.” He offered two ways to market cannabis business insurance products: Go to local organizations, such as grower’s associations in local counties, where brokers can get “intimate time” with cultivators and operators. Second, start telling people what you do. “You’ll be surprised,” Boden said. “You’re at a mixer, or you’re at a dinner, whatever, and they ask you ‘What you do?’ Tell them you do cannabis insurance, and … every single time, without fail, they will say, ‘Oh, I know a guy who does this. I should introduce you.’ And, that has opened a lot of doors just by talking about it. And it’s simple as that.” Boden also offered tips for insurance applications, including asking would-be insureds detailed questions, especially about their cannabis license

information. “I think that’s a very important part from the get-go. Get their license info, get their permit info, make sure they’re legit, because you’ll put in a ton of time, and you get the basics, the square feeds and all that good stuff, and then you find out they don’t have a license, or they haven’t been approved, they don’t have a (conditional use permit) and that … you kind of wasted your time with that one,” he said.

Market Outlook

Market data show the cannabis industry is growing. Spending on legal cannabis is expected to reach $57 billion worldwide by 2027, and spending in North America alone is forecast to reach $47.3 billion in the next decade, according to Arcview market Research and BDS Analytics. BDS also expects growth in the CBD-infused beverage market, pushing up sales in the overall edibles market. “By 2022, the U.S. edibles market is projected to reach $3.4 billion, with cannabis beverage sales expanding roughly tenfold, to $374 million,” BDS states its Top 10 Trends in Cannabis for 2019 report released earlier this year. Many expect the market to explode if banking legislation passes, enabling cannabis operators to do business with banks, including making deposits, getting loans and taking care of other transactions like federally legal businesses do. Because cannabis is still considered a Schedule I drug by the federal government, federally insured banks are unable to do business with companies for fear of being shut down.

Cannabis Industry Resources

Interested in getting into the budding cannabis insurance business? Following are a few resources (pro and con) for keeping up on cannabis industry news including laws, regulations, events, risks and opportunities.

California Cannabis Industry Association California Growers Association Cannabis Business Executive Cannabis Business Times Citizens Against Legalizing Marijuana Hemp Industries Association Marijuana Business Association Marijuana Business Daily Marijuana Policy Project Marijuana Retail Report National Association of Cannabis Businesses National Cannabis Industry Association National Hemp Association NORML Project CBD Smart Approaches to Marijuana The Secure and Fair Enforcement (SAFE) Banking Act, which was introduced in March 2019 to protect banks and their employees from liability for federal prosecution when dealing with cannabis companies, is making its way through Congress. The bill, which has attracted 175 co-sponsors from both parties so far, is also supported by the banking sector, the National Association of Attorneys General and Treasury Secretary Steven Mnuchin. Earlier this month, the attorneys general of 38 states sent a letter to Congressional leaders to support the act.

JUNE 17, 2019 INSURANCE JOURNAL | 35

Idea Exchange: Inland Marine

How Insurtech Will Revolutionize Inland Marine by Cutting Costs

nsurtech advances will soon drive down unacceptably high expense ratios in the inland marine sector, making it possible to insure even difficult-to-place, small or one-off inland marine risks at the best possible rates. By Dave Higley Carriers and brokers are building internet-based underwriting tools that can make this a reality by combining big data, instant analytics and the artificial intelligence of powerful algorithms. Insurtech advances will soon mean that policies for many smaller inland marine risks will be obtainable with a few clicks, through internet-based quote-and-bind systems fueled by the science of predictive analytics. Artificial intelligence (AI) built into insurtech tools will allow cover to be rated, quoted and bound in a matter of minutes. The tools will remove several percentage pointsâ&#x20AC;&#x2122; worth of expenses for

insurers and brokers, making small risks more attractive to insurance markets and consumers. Early adopters will be the biggest beneficiaries, with room in the market for early followers. However, buyers will benefit most.

Creating Accurate Risk Profiles

Many inland marine classes, such as construction and transportation, have access to a wealth of available data, including equipment valuation, operator experience and property statistics. Systems can automatically extract and analyze this information to create extremely accurate risk profiles. Further analysis, informed by high-level underwriting expertise encapsulated in algorithms, then delivers risk-based rates for each risk presented to the system. There remains, of course, a vital role for underwriters, who can adjust the algorithms and the prices they yield using their own expertise and judgment to suit different risk appetites and more complex risks. For qualifying risks, the insurtech

technology then delivers quotations and can bind the risks through an intuitive, real-time portal that delivers documentation and links to back-office systems. And where a risk cannot be handled by the technology, an underwriter can make a risk decision. Such insurtech platforms have been available for years in the areas of consumer home, contents and auto cover, but are only just coming online for inland marine. They allow the carrier to evaluate the risk and place a fair price on the insurance â&#x20AC;&#x201D; and maybe to offer additional, related products. These placement systems will be useful not only to small operators and midsize entities, but also to large corporations. Think of a company with a million-dollar annual premium spend that discovers from its insurer and broker that its property insurance will not cover an equipment loss related to a one-off construction project, for example, or a small array of solar panels, or any of a number of other specialist risks. A minor installation floater would be required but could be very difficult to obtain due to the modest premium it would attract. Insurtech easily allows such cover to be bought separately. In only minutes, quoteand-bind platforms will create an appropriate policy for the specific risk. This will provide consumers and brokers with tools to engage in real-time transactions.

Fast, Less Labor-Intensive

Data is crucial, and today it is abundant. For example, an underwriter may know that new builds by a national franchise hotel chain are all five stories tall, take eight months to build and are worth $8 million. They can apply this knowledge, alongside the experience of the contractor and the equipment involved in the project to gain a very accurate picture of the risk and provide the best feasible price to cover the project. It may incorporate psychographic information, which human underwriters would require days to compile. Even when conventional underwriters have all that information at their fingertips, if cover is needed on Monday to satisfy a lender, 36 | INSURANCE JOURNAL | JUNE 17, 2019

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and the presentation is ready on Friday afternoon, they will struggle to deliver the cover through conventional means. An online quote-and-bind system will create the required insurance almost instantly. Retail brokers will no longer need to contact 10 markets and repeat the same risk details multiple times for a paltry premium. Complex inland marine coverage — including insurance for items as diverse as shipboard cargo and construction equipment — will, of course, always require the focused attention of a qualified underwriter, but online systems will quickly assemble and deliver the relevant data. Among those addressing the need for insurtech solutions in the inland marine space are larger brokers, who possess a wealth of data and are seeking to enhance the customer experience. Their systems typically will allow interested underwriters to “plug in” to gain automatic access to the risks they have to place. Another model gaining traction is the carrier portal, which is designed to receive information that fits a predetermined underwriting box. This model requires understanding the nuances of each system and may also mean additional manpower to find the right solution. Insurtech solutions will reduce the requisite keystrokes and will be able to identify a fast, accurate and appropriate risk solution. For carriers investing in this space, it’s possible to create a more efficient way to handle risks

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with common characteristics. And insurtech systems generate data that simplifies the process of making adjustments based on performance. The low level of underwriting touch required by an insurtech system capitalizes on the ability to put informed rules and abundant data together, which allows unparalleled speed to market. Carriers may wish to deliver the solution through managing general underwriters or create package solutions for specific types of clients, such as artisan contractors or retailers. Once the rules are developed, any such risk can be assessed swiftly through the platform, without active underwriting. The carrier may, of course, adjust the code at any time to reflect changed risk appetite, the market environment or other variables.

Fair Price, Tailored Coverage

For the end customer, a great advantage of the system is that it generates a fair price and coverage tailored to the risk needs, based on all the available information. Inland marine has been a challenging line for smaller, low-complexity risk, not because of losses but because of underwriting expense associated with the size of the risk. One potential benefit of an inland marine insurtech platform is increasing the number of potential insureds who will be able to transfer risk at a fair price. Insurtech platforms capitalize on the “science” of underwriting that can be prescriptive to smaller, low-complexity

Many inland marine classes, such as construction and transportation, have access to a wealth of available data, including equipment valuation, operator experience and property statistics. lines of insurance while leaving room for the “art,” or judgment, that comes from an underwriter’s expertise and is needed for larger or more complex lines of insurance. For most risks, the AI systems do all the work, eliminating much of the underwriting and placement expenses. That makes smaller inland marine risks (those with premiums below $10,000) much better value for everyone in the chain — from the insured (who will receive a more commensurate price) to the retail broker (who can place and bind the risk in minutes, for very low cost) to the MGUs and insurers (who can offer the cover at lower rates and still see a decrease in underwriting expenses). Insurtech has arrived for inland marine lines, making it possible to provide cost-efficient, quality coverage to a large group of buyers — and helping businesses and consumers optimally manage their risk.

This article first appeared in Insurance Journal’s sister publication, Carrier Management. Higley is senior vice president, head of inland marine, at Argo Group. He is based in Richmond, Va.

JUNE 17, 2019 INSURANCE JOURNAL | 37

Spotlight: Top 25 P/C Carriers P/C Direct Premium Written Up 4.2% in Q1: Demotech

irect premium written (DPW) for property/casualty insurance companies continues to increase, albeit gradually. At yearend 2018, total DPW By Douglas A. Powell for all P/C insurers aggregately increased approximately 4% from 2017, an increase of $33.3 billion. For year-end 2018, nearly $670 billion of DPW was reported, which was a record-high for the industry. Through the first quarter of 2019, the insurance industry’s growth trend has continued, as DPW for all P/C insurers aggregately increased approxi-

mately 4.2% over 2018. For the three months ended March 31, 2019, P/C companies comprising the top 25 insurers in terms of DPW growth increased their DPW 13.3%, or $2.9 billion, over the first three months of 2018. This continues the top 25 insurers’ impressive display of premium growth and financial stability. The top 25 accounted for 42% of the growth in the P/C insurance industry’s DPW. In contrast, the remainder of the industry reported an increase in DPW of approximately 2.8 percent, or $3.9 billion, year-over-year. Although the market continues to exhibit signs of firming and DPW continues to increase, P/C insurers should not expect a traditional hard market in the

near future. More importantly, it is possible that the double-digit premium growth experienced in the historical hard market cycles may have created unrealistic premium growth expectations for this current recovery. It is more realistic that expectations should relate to gradual, stable growth. There is always a fair amount of uncertainty in making projections based on first-quarter data, but if the industry continues to hold to its 10-year historical pattern, growth in 2019 would again result in the highest level of year-end DPW reported by the P/C industry. Powell is a senior financial analyst with Demotech Inc. Email: dpowell@demotech.com.

Top 25 Property/Casualty Companies Based upon dollar amount of direct premium written (DPW) growth.

Company Name

XL Specialty Insurance Co. American Bankers Insurance Co. of Florida Allstate Fire and Casualty Insurance Co. Progressive County Mutual Insurance Co. United Financial Casualty Co. Progressive Direct Insurance Co. GEICO Casualty Co. Allstate Vehicle and Property Insurance Co. Progressive Select Insurance Co. USAA Casualty Insurance Co. GEICO General Insurance Co. United Services Automobile Association Zurich American Insurance Co. Ohio Security Insurance Co. Auto-Owners Insurance Co. Travelers Personal Insurance Co. GEICO Advantage Insurance Co. American Family Insurance Co. Root Insurance Co. USAA General Indemnity Co. Farmers Insurance Exchange Arch Insurance Co. National Fire & Marine Insurance Co. Allianz Global Risks US Insurance Co. Progressive Northern Insurance Co.

DPW 3/31/2019

$617,766,973 $1,199,456,915 $2,396,663,425 $931,207,398 $591,940,813 $1,024,014,782 $1,396,747,978 $666,576,718 $687,383,042 $1,728,912,066 $2,749,018,295 $2,060,043,132 $1,414,250,569 $674,397,336 $929,692,704 $170,150,436 $554,749,006 $501,544,855 $88,672,001 $1,155,075,808 $1,346,637,929 $593,172,285 $337,020,081 $476,128,633 $504,599,200

Top 25 P/C Companies by DPW Growth $24,795,822,380 All Other P/C Companies $147,101,267,117 Total $171,897,089,497

DPW 3/31/2018

$388,484,002 $989,370,627 $2,193,999,305 $740,813,186 $402,282,759 $890,274,367 $1,268,294,049 $546,517,607 $575,397,014 $1,619,308,188 $2,639,423,535 $1,958,544,042 $1,316,422,855 $582,189,701 $837,636,782 $79,102,367 $468,246,724 $418,610,121 $7,902,502 $1,075,592,606 $1,269,318,753 $516,758,868 $262,451,361 $404,367,221 $434,770,260

$ Growth

$229,282,971 $210,086,288 $202,664,120 $190,394,212 $189,658,054 $133,740,415 $128,453,929 $120,059,111 $111,986,028 $109,603,878 $109,594,760 $101,499,090 $97,827,714 $92,207,635 $92,055,922 $91,048,069 $86,502,282 $82,934,734 $80,769,499 $79,483,202 $77,319,176 $76,413,417 $74,568,720 $71,761,412 $69,828,940

$21,886,078,802 $2,909,743,578 $143,159,052,356 $3,942,214,761 $165,045,131,158 $6,851,958,339

% Growth

59.02% 21.23% 9.24% 25.70% 47.15% 15.02% 10.13% 21.97% 19.46% 6.77% 4.15% 5.18% 7.43% 15.84% 10.99% 115.10% 18.47% 19.81% 1,022.08% 7.39% 6.09% 14.79% 28.41% 17.75% 16.06%

13.29% 2.75% 4.15%

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

38 | INSURANCE JOURNAL | JUNE 17, 2019

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Idea Exchange: Ask the Insurance Recruiter A Clear Path For Agencies Hiring Young Account Managers

s a recruiting partner to insurance agencies, so much of my role is about sourcing account manager candidates that I believe a bigger piece of the hiring puzzle is overlooked. What happens to agencies once they onboard millennials? What is needed to train, manage and retain young customer service representatives (CSRs) and account managers? Agencies carry a sizeable burden for developing the insurance industry’s next generation. Here’s how client service directors tackle these challenges.

Menda Speckels, commercial team leader, Higginbotham & Associates. “Millennials need a clear path with defined expectations. They ask three questions: 1. What’s my role?; 2. Where’s my career path?; 3. How do I get there?” Speckels described a communication balancing act. CSRs want to address the next step in their career quickly, highlighting the importance of on-the-job learning. Higginbotham U was started

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for this reason. Designed for employees with little to no insurance experience, it's coursework that teaches the basics to become an account manager. Speckels said it's less of the “learn it yourself” model she grew up in but has been effective with employees.

Stephanie Zsittnik, vice president, Employee Benefits, Cross Insurance. “It seems every agency is so desperate for talent, they’ll overpay, especially at junior levels. Given my recent experience hiring people in the 22–28-year-old range, I would guesstimate the average tenure is 18 months. Benefits analysts are particularly interested in growth, and quick!”

Zsittnik spoke to the competitive nature of the Boston market (which isn’t unlike many other insurance markets fighting for talent) where she’s seen $15,000–$20,000 raises to recruit analysts with just a few years of experience. She’s had to change her expectations about job tenure when reviewing resumes. She’s pleased with a solid two years in a job

for a junior support role. Zsittnik’s advice to retaining young staff, “Keep them engaged. Provide professional development opportunities, external and internal. As managers, we can only control so much, but it’s important to compensate fairly and provide opportunities. Stay true to yourself and your business values. If someone is interested in moving to a firm that will pay them 20% – 30% more with minimal experience, let them go. Focus on the long-game.”

Julie Stannard, director of client services, Ironwood Insurance Services. “I think millennials get a specific reputation for wanting to be promoted quickly and to be paid very well. In some cases that’s true, but it hasn’t been my overall experience. Every situation is more about the person than a sweeping generalization. I find many young people to be humble. Coming out of college, their attitude is one of a desire and a willingness to learn.”

Retention being a critical piece of the process, Stannard runs toward, not away from, conversations with employees about compensation. Her mantra is, “It’s a candidate’s market. There are tons of opportunities out there. If you want to be with Ironwood, and earning more money is a goal, then I will work with an employee to create a plan that’s realistic.” She offers more advice for hiring young service talent: • Start people out as interns. Hiring them upon graduation has a huge

By Mary Newgard • • •

impact on retention. Lean into recruiting tools. Find profile assessments that work based on personality and aptitude. Be transparent in the interview process. Stannard describes her environment as service-intensive, where the answer isn’t always obvious or easy to get to. The agency’s strong culture, despite challenging roles, is endearing to young people. They want to learn a lot and have fun. Onboarding is more than just paperwork. She recommends a 30-day review that continues consistently for the first 12 months. Her biggest questions are, “Does the job align with your expectations? and “What has been your experience?” This way, employee’s perceptions, which are the reality, give a glimpse into their happiness and longevity.

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

JUNE 17, 2019 INSURANCE JOURNAL | 39

Idea Exchange: Minding Your Business

Extreme Ownership of the Agency

n May, one of our agency clients, Milestone Risk Management & Insurance Services in Irvine, Calif., (Ron & John Hoefer) spon-

By Catherine Oak and

sored an incredible Leadership Summit at the Hyatt in Huntington Beach, Calif. We attended the event along with 564 insurance clients, prospects and William Schoeffler insurance company representatives. The all-day event featured Navy SEAL Jocko Willink and two of his fel-low seals, Mike Sarraille and Andrew Paul, who commanded Unit Bruiser during the battle of Ramadi, Iraq, and helped bring stability to the violent, war-torn city after 9/11. We found Jocko's, who authors the books “Extreme Ownership, Discipline Equals Freedom” and some children’s books like “The Way of the Warrior Kid,” ideas to be a unique way to look at leadership principles that are directly transferable to the business world.

What is Extreme Ownership?

Extreme Ownership is taking complete responsibility for everything that happens in your organization, regardless of the circumstances. His strategies give the simple tools needed to be able to effectively lead 40 | INSURANCE JOURNAL | JUNE 17, 2019

a winning team. Great leaders own everything in their world that affects the mission. Every success, every failure, every problem and every solution. One must check their ego. Acknowledge failures and setbacks; analyze and develop solutions. One must not accept excuses and should find a way to win. Leaders must lead in the absence of orders. They figure out what needs to be done and they do it!

Key Lessons Learned

2. Simple – anything in life has inherent layers of complexities. Simplifying

as much as possible is crucial to success. Everyone on the firm’s team must know and understand his or her role in the mission and what to do in the event of likely contingencies. When initially laying out a firm’s plan, one must build it in a way that can be effectively briefed to the lowest common denominator. Employees all need to know the strategic mission so that they can make better decisions at their level of how to execute that vision.

When Jocko left Ramadi in much better shape than when Unit Bruiser arrived, there were three key lessons learned that can be applied in any business: 1. Have humility, which means check one’s ego! 2. Take ownership in the problems and solutions up and down the chain; and 3. Teamwork.

3. Prioritize and execute. Leaders must recognize the situation they are in, analyze the issue and respond. In this age of distraction with thousands of pieces of information flying through, taking time to become clear on priorities is the only way to win. Focus on your most important task. Then move on to the next priority and execute.

Laws of Combat & Running a Business 1. Cover and Move – is teamwork.

4. Decentralized command – simply put, everyone leads. Leaders at every

Every member of the team in a firm needs to work together and be mutually supporting of one another for the singular purpose of mission accomplishment. Teams within the group, elements and departments work together and support each other. They do not compete against each other or operate independently. Employees need to be rewarded and recognized for their cross-department communications beyond just their individual sales goal.

John Hoefer, Catherine Oak and Ron Hoefer. INSURANCEJOURNAL.COM

level are given clearly delineated responsibility and the ability to execute. Everyone must understand what they are doing and, most importantly, why they are doing it. Give employees the goal of their position first and only suggest ways of achieving it after.

there is no relationship. Sales teams can lose if operations can’t deliver, or if sales can’t sell the product. Each side must know that without the other, or they don’t exist. Do whatever you can to support them. Tell people thank you. Take care of each other.

mission? Otherwise, they don’t understand or know the consequences of not getting to the why.

Summary

William Schoeffler Know the Dichotomies of Training vs. Experience and Jocko Willink Leadership Make training realistic 1. Decentralized and repetitive, so that peoCommand … extreme ownership. Find ple don’t even have to think. Everyone in

the balance between these by being a leader and knowing when to follow. Despite Jocko’s rank, he follows the person with the best plan even if it is not his. 2. Aggressive, but not overaggressive. One needs to assess the value of the operation and know it may not be the correct amount of risk to take! 3. Humble, not passive. There is always bureaucracy and paperwork. Deal with the small things and then have respect for a “no” on the big things the boss asks you. 4. Discipline equals freedom. There should be discussions ahead of time on all strategic moves and operating procedures for everything. That way, when something needs to be done, everyone knows what to do, and there is trust that it will be done correctly. The key is to balance all of these things in an organization. Leadership is the most important thing in any team, and it dictates success or failure.

an organization should role play being the boss, the client and then the staff. That way, they can also see each other’s perspectives.

Creating Urgency in Organization

People need to know why they are A&M IJ Personal Umbrella.pdf 1 doing something and what is the goal or

These keys to extreme ownership and leadership were an inspiration on the battlefield and can also be so in running an insurance agency or any business. Please share these concepts with everyone in the organization, and it will help the firm reach its goals and improve communication. The owners will feel they are not alone in the process of making the firm a great place to work and a growing, exceptional entity that others will be proud to work for.

Oak is the founder of Oak & Associates, and Schoeffler is a financial analyst and junior consultant at the firm. The firm has offices in Bend, Ore., and Sonoma, Calif., and specializes in financial and management consulting for independent agencies. Phone: 7075/29/19 9:25 AM catoak@gmail.com. 935-6565. Email:

Do Self and Team Assessments

People are their own harshest critics. What standards do you set for yourself? Success or failure rests with the team. Take blame; it is your fault. Be blunt and be brutal. Let people debrief themselves. Establish a culture of assessment - of the team and self. When companies stop debriefing, such as when they are winning too much, they become complacent. Keep debriefing.

Sales Teams vs. Administrative Teams

There needs to be communication, or ANDERS16804.indd 1

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JUNE 17, 2019 INSURANCE JOURNAL | 41

Idea Exchange: Tech Talk It’s Time to Redefine Agency Customer Experience By Tom Wetzel

he term customer experience has become a catch-all, almost cliché phrase, even if its critical importance is undeniable. For agents, customer experience cannot be an abstract or ill-defined term if the goal is to have more than marginal progress in achieving optimization. Customer experience must be broken down into its component parts, tied to specific and measurable operations and given adequate financial and management support. A J.D. Power Shopping study in 2018 showed that the insurance customer is more likely to look to their agent for help than a company’s call center or website. The study also found that representation by a local agent has increased in importance over the past five years (45 percent) compared to other touch points, and “reliance on agents” was especially true among first-time shoppers. As comforting as these facts may be, agents cannot take these customers for granted. Today’s consumers also rate timeliness to be the most important factor in their buying decision — more important than efficiency, professionalism and knowledge. This means that delivering the best possible customer experience must start with fast response times and convenience. Start with these three steps.

Step One

Agents need to reexamine the tasks they perform for both policyholders and prospects and ask themselves, “How can we deliver these tasks more quickly and with less stress to the customer?” These tasks can include: • Delivering a quote; • Providing proof of insurance; • In auto insurance, adding or removing drivers and vehicles; • Billing options including payment plans, account balances, payment status; • Making alterations in coverages, deductibles and endorsements. In his new book, “The End of Insurance As We Know It, How Millennials, Insurtech and Venture Capital Will Disrupt the Ecosystem,” Rob Galbraith argues that insurance is too expensive and too complicated. He says these features are flaws that need to be corrected. The book is a great read and packed with spot-on insights by someone who clearly understands insurance and the world it must live in now.

Step Two

Be available whenever the policyholder or prospect needs help. That means staying open over the lunch hour, enabling emails on the website and responding to them immediately, adding 24/7 secure messaging and adding a bot (the costs are coming down fast) to address simple questions anytime, day or night. A phone answering service or designating a staff member to take calls at night 42 | INSURANCE JOURNAL | JUNE 17, 2019

or over weekends makes customers work too hard.

Step Three

Don’t survey clients; talk to them. Customer surveys can be useful but just asking if they are satisfied with an agency’s customer service usually does not provide critical details or context. For example, several studies reported limited interest by agents in portals for clients. Many agents said simply that clients were not asking for them. Clients usually expressed interest in such a portal but they were never asked. The J.D. Power study acknowledged a strong need for agents to build and maintain a personal connection with clients but that strong and steady connection requires a robust digital component in many forms. Agents must create a customer experience to match consumer expectations. Longtime communicator Wetzel heads his own insurance marketing firm that specializes in website design, messaging and social media programs for agents through its Social Media Content Roadmap. Website: www.wetzelandassociates.com. Email: twetzel@wetzelandassociates.com. INSURANCEJOURNAL.COM

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My New Markets FedEx Contractor Program

Market Detail: Avant Brokerage (www.

avantbrokerage.com) is seeking agents in the Western U.S. writing coverage for FedEx Ground independent contractors. Program features include: limited distribution channel, meets all FedEx lease requirements; competitive pricing; A-rated paper. Coverage available includes: vehicle physical damage; non-trucking liability; workers' compensation; and occupational accident. Available limits: Minimum $1,000, maximum $1 million Carrier: Unable to disclose, admitted States: Ariz., Colo., Idaho, Iowa, Kan., Minn., Mo., Mont., Neb., Nev., N.M., N.D., Okla., Ore., S.D., Texas, Utah, Wash., Wis., and Wyo. Contact: Canien Williams at 816-251-1612 or email: cwilliams@avantbrokerage.com

Family Entertainment Center (FEC) Insurance Program

Market Detail: The McGowan Companies’ (www.mcgowancompanies.com) Family Entertainment Center (FEC) Insurance Program includes coverage for: arcades; mini golf courses; go-karts; kiddie rides; laser-tag; bumper boats; bowling; paintball; water parks; arcades; miniature golf courses; laser-tag; batting cages; driving ranges; trampoline centers (within a family entertainment center– $75,000 mp per location); and regional amusement parks. Ineligible classes include: inflatable facilities; exercise gyms; coin-operated rides; ski-resorts; and inflatable rentals. Products/limits: property up to $50 million TIV; general liability $1 million/$2 million; excess liability up to $25 million. Available limits: $1 million, $50 million Carrier: Unable to disclose, admitted States: All states 44 | INSURANCE JOURNAL | JUNE 17, 2019

Contact: Suzanne Young at 800-545-1538

or email: syoung@mcgowancompanies. com

Stevedoring/Marine Cargo Handling Facilities

Market Detail: The American Equity Underwriters, Inc. (AEU) (www.amequity. com) is the program administrator of the American Longshore Mutual Association Ltd (ALMA), a group self-insurance fund authorized by the U.S. Department of Labor to provide USL&H coverage for the liabilities of its members under the United States Longshore & Harbor Workers’ Compensation Act. Shipbuilders, ship repairers, marine terminal operators, stevedores, marine contractors and other waterfront employers may apply for ALMA membership through their insurance broker. Coverage includes: United States Longshore & Harbor Workers’ Compensation Act; Defense Base Act; Outer Continental Shelf Lands Act; Nonappropriated Fund Instrumentalities Act. Plans include: first dollar; single and multi-year programs; loss-sensitive plans;

deductible; and excess over qualified self-insurance. Limits: Federal Acts – statutory; Employer’s liability is $1 million. Target classes: A minimum of 10% of the company’s payroll must be USL&H exposure (unless incidental-only); ship builders; stevedores; terminal operators; barge repairers; marine construction; ship repairers; steamship agents; luxury yacht builders; coal docks; and offshore industries. Other preferred classes may also have USL&H (possibly incidental-only) exposure, including: heating and A/C contractors; engine repair; fire extinguisher servicing; sheet metal work; architects and engineers; refrigeration repair; pest control; carpentry; electricians; welders; painters; wallboard installation; communications repair; crane installations and repair; and concrete/cement work. Available limits: Minimum $10,000 Carrier: American Longshore Mutual Association States: All states Contact: Marketing Department at 251690-4230 or aeu.marketing@amequity. com

Church & Religious Institutions

Market Detail: Promont Insurance Advisors (www.promontadvisors.com) coverage includes: property; general liability; sexual misconduct; D&O and EPLI; H/ NO; and cyber. Classes include: churches; church-owned properties; vacant church buildings; schools; camps; church-owned daycares and synagogues. Additional coverages available, including: counselors liability; directors & officers liability; employee benefits; employment practices liability; equipment breakdown; hired & non-owned auto; property enhancement; continued on page 49

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Idea Exchange: Workers' Compensation ‘I believe that the path to achieving stability is built on a foundation of transparency and trust.’

Workers’ Comp: Delivering for Our Neighbors

very year, there are more than 2 million workplace injuries in the United States. Behind each of those claims is a firefighter, a construction worker or a mechanic. They’re our moms, dads, sisters, brothers, and By Bill Donnell neighbors. One of them is Travis Wall, a parking enforcement staffer at UCLA. He doesn’t remember the moment that a car slammed into him at 35–40 miles per hour. But after two weeks in a coma, three years of rehabilitation, a dozen surgeries, and countless tears and hugs, Wall has returned to work. It feels “triumphant,” he said. “I’m a proud man. I take pride in being a good husband, a good father, and a good provider. I was able to get back to work and feel good about myself.” Wall’s story is a powerful example of how workers’ compensation delivers. Our system exists to help people recover. From my perspective at NCCI, the U.S. workers’ compensation system is healthy and performing well. For example: • The frequency of claims — from devastating incidents like Wall’s to more routine injuries — continues its steady drop as workers and workplaces INSURANCEJOURNAL.COM

• •

become safer Insurers have enjoyed seven straight years of positive financial performance, an unprecedented record New technology is providing everyone in the system with access to more robust and timely information to provide better decision making on treatments, claims, and safety.

But for both workers’ comp insurers and regulators, concerns remain. After seven straight years of strong performance, people frequently ask me, “Are we in for a big swing in the other direction?” While I can’t predict the future, here are a couple of important observations about what’s happening with the cycle. First, more timely data and advanced analytics are enabling shorter feedback loops for underwriters. This may be moderating the peaks and valleys in workers’ compensation. A recent A.M. Best report says it clearly: “Technology has played a key role in diminishing the amplitude of market cycles.” Second, during my nearly 40 years in insurance, I’ve observed that strong core functions — underwriting, claims, reserving, analytics — make all the difference. For insurers, strong core functions mean a

more robust bottom line and a sustainable business. From the regulators’ perspective, insurers with strong core functions create a stable and solvent marketplace. The regulatory landscape always has a big effect on the workers’ compensation world, and this year is no different. Issues such as marijuana, opioids, opt-out, post-traumatic stress disorder (PTSD), and insurtech innovations contribute to the regulatory discussion. The desire for stability connects all the players in the system. I believe that the path to achieving stability is built on a foundation of transparency and trust. Our role at NCCI is to share information, provide transparency, and support open dialogue. That way, we can all work together to reduce uncertainty. It is a difficult task, but the health of our workers' compensation system depends on it. People such as Travis Wall, his wife, and their three sons deserve it, and that’s why we must keep delivering for our neighbors. Donnell is president and CEO of NCCI. Founded in 1923, NCCI fosters a healthy workers’ compensation system by gathering data, analyzing industry trends, and providing objective insurance rate and loss cost recommendations. Website: ncci.com. JUNE 17, 2019 INSURANCE JOURNAL | 45

Idea Exchange: The Wedge

‘Film Don’t Lie’

spent 30 years in Dallas, listening to talk radio - specifically, sports radio. On Monday afternoon, there was a segment by one of By Randy Schwantz the big-time local sport’s radio personalities called “Film Don’t Lie.” This radio host had been around Dallas a long time and had written and talked about Roger Staubach, Tony Dorsett, Troy Aikman, Emmitt Smith, Michael Irvin, Tony Romo, Dez Bryant and more. The message was simple and direct: If you screwed up, it’s on film. You can’t excuse your way out of the evidence caught on film because ‘Film Don’t Lie.’ 46 | INSURANCE JOURNAL | JUNE 17, 2019

If Tony Romo laid a ball out, right into the hands of Dez Bryant and he dropped it, it’s on film. If Emmitt Smith made a move and froze as the opposing linebacker stepped right by him, it’s on film. And because film don’t lie, it will be replayed, dissected and discussed over and over. For almost 50 years, ABC Wide World of Sports had an opening for all of its sports shows: ‘The thrill of victory and the agony of defeat.’ The film they used to represent “the agony of defeat” was from a ski-jumping competition. This downhill skier didn’t make it down the ramp before he wiped out. It was played over and over and over, millions of times for 30 years. Wouldn’t it be interesting if we could

film our sales calls? “The thrill of victory and the agony of defeat:” “Hey boss, I got a BOR on this account today.” “Nice, what did you do?” “Just told him we could help him.” “How big is the account?” “About $25,000.” “Good job.” Or this: “Hey Jack, how’d your presentation go today?” “Ahh, not so good. Don’t think we are going to get this one.” “Really, why not?” “Not sure. I did a good job of showing him how we could help, but just don’t think we’re going to get the account.” “Well, keep up the good work. The next INSURANCEJOURNAL.COM

could work, and it could work really well if two things are true: 1. People have a desire to get better. 2. You have a sales process.

one will fall your way.” Both winner and loser felt like they did a good job, of course. Who is going to come back from a sales call and say, “Hey boss, I’m a loser. I’m lousy at building rapport. I have nothing different. I can’t find pain, and I can’t get them to commit to a change.” You see, “Film Don’t Lie”, and because you can’t film the sales call, you ought to film the practice sessions. Just small segments at a time. Then put them on the big screen and dissect them. Your producers will feel very self-conscious in the beginning, but with a little conditioning, they’ll get used to it and start to appreciate the coaching. You’re probably thinking, "This won’t work with my group." And you are probably right if you already feel that way. But it INSURANCEJOURNAL.COM

After 27 years of being in the trenches, working with over 6,000 producers, I empathize with any sales leader bold enough to work with their producers to actually improve their sales call acumen. Most producers have some weird combination of overconfidence and insecurity; they feel they are great salespeople even when the results don’t show it. Or to the contrary, they know they aren’t good salespeople but don’t have the courage to admit it, so they show up and pretend really well. To amp up the desire, I do one simple exercise: Pull up your browser on the big screen. Do a search for how much money you need for retirement. Depending on which site you are on, you’ll see that you need about 22 times your annual living expenses. So, have them do the math: 22 times their $100,000 living expense is $2.2 million. To make this really impactful, have everyone’s 401(k) valuation in your hand so you can pass it out. Then subtract the difference between what they have and what they need and help them realize they are probably way behind the eightball when it comes to saving money. Then, put up on the white board: Earnings minus tax and lifestyle equals savings capability. Then, look them in the eye one-by-one and ask: “Who needs to make a lot more money so you can save a lot more money, so you can have a good life after this insurance career is over?” You should get a lot of hands going up. You just built some desire, and being a smart leader, you need to reinforce this desire over and over. Number two on the list above is simple: You need a sales process. I’ve debated with hundreds of agency owners about their sales process. Telling

a producer they should find pain is not a process; it is an abstract idea. You can’t role-play abstract ideas. If you were a receiver’s coach for a football team, and you told your wide receiver “get open” but you didn’t tell them how to do it, you should be fired as a receiver’s coach.

Most producers have some weird combination of overconfidence and insecurity; they feel they are great salespeople even when the results don’t show it. A great receiver’s coach would train them in technique. How to fire down the line. How to plant a foot and turn hard or how to make contact with the defensive guy and push off just enough to get open. For every single element of getting down the field and getting open, there is a technique that will help them improve. So, it should be the same with your sales call. If you can’t map it out, step by step, technique by technique, you probably don’t have a “sales call” process. And if that is true, you have nothing to film other than gibberish (unintelligible or meaningless speech; nonsense). There is a headline you can Google: Tom Brady Spent Sunday “Watching Film All Night” on the Bolts, Jan. 7, 2019. Because you can’t watch film on your competitors, your next best thing is to watch film on your own producers. Watching them role-play your well-defined and meaningful sales call process is helpful if you want them to radically improve, because “Film Don’t Lie.” Schwantz is founder of The Wedge Group. the author of five books including, Agency Growth Machine: Transform Producer Potential into Agency Growth & Profit Email: randy@ thewedge.net. Phone: 214446-3209. Website: www. thewedge.net

JUNE 17, 2019 INSURANCE JOURNAL | 47

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My New Markets continued from page 44 religious expression liability; and sexual abuse and molestation. Available limits: As needed Carrier: Unable to disclose, nonadmitted available States: All states Contact: Jennifer Beener at 312-262-3332 or email: jbeener@promontadvisors.com

Community Association Crime Insurance

grams. These programs include value-added components such as specialized knowledge of business segment or customized coverages, a specialized method of distribution, or an element of underwriting leverage. Property and casualty programs available for the following lines of business: commercial property; commercial and personal inland marine; general liability; miscellaneous professional; excess lia-

Market Detail: Community Association

Insurance Solutions, LLC (CAIS) (caislive. com) offers a crime program, also referred to as employee dishonesty or a fidelity bond. The crime coverage protects the insured against theft of money, securities, or other property by an employee or property manager. Crime can be added to an existing workers’ comp policy in seconds. Available limits: As needed Carrier: Unable to disclose States: All states Contact: Gary Deck at 916-212-8310 or email: gary@mgalive.com

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Market Detail: Glencar Insurance Co. (www.glencar-ins.com) works with a wide spectrum of programs with a primary focus is on small- to mid-sized niche pro-

June 17, 2019 GuideOne Mutual Insurance Company 1111 Ashworth Road West Des Moines, IA 50265 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.

June 17, 2019

GuideOne Specialty Mutual Insurance Company 1111 Ashworth Road West Des Moines, IA 50265

GuideOne Elite Insurance Company 1111 Ashworth Road West Des Moines, IA 50265

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.

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bility/umbrella, workers compensation and commercial auto written primarily in support of other lines of business. Available limits: As needed Carrier: Unable to disclose States: All states Contact: Frank Overtheil at 856-242-9029 or email: Frank.Overtheil@hannover-re. com

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JUNE 17, 2019 INSURANCE JOURNAL | 49

Closing Quote Career Sense: Reverse, Prioritize, Partner, Attack

one are the days of insurers and brokers By Bryan Jackson offering multiline and multi-divisional training to their new staff. People entering the workforce today will start their careers with an insurance carrier or brokerage firm within one of the many industry disciplines. They will only be trained to handle that line of business, whether that is property, general liability, professional liability, etc. The concept of working one line of business used to be part of an old adage, “Become so niched and specialized in one industry and you will never be without a job.” While accurate, there is one problem with this. You will become an expert in underwriting property insurance or selling cyber errors and omissions (E&O) coverage, but you will also become bored with the field you specialized in. I speak with insurance professionals in claims to underwriting to risk management, and there is one ensuing trend I see for those that have been in the industry for five-plus years — they’re ready for a change and want to learn a new line of business. How do you escape this trend of becoming complacent and make a career transition while keeping your love for insurance alive?

1) Reverse engineer your career. If you are new to the

industry or even 10 years in, try to envision where you want to be in 10, 20 or 30 years from now and work your way back. Think of the steps you need to take to get you there, and begin to implement them one day at a time.

2) Prioritize ongoing education and certification. Continue

to educate yourself as you progress through your career. If you are a producer on the agency/broker side of the business but want to become an underwriter and work for a carrier, consider getting your CPCU designation. If you're an underwriter and want to make the move to claims, consider getting your AIC designation. Designations will help you stand out from the competition and show hiring authorities you are serious about making a change.

3) Partner with a niche search consultant. When searching

for new opportunities, speak to a recruiter that specializes in the industry. They will be able to offer advice as to how you could parlay your background into a new field or product line. A recruiter’s job is to network with as many industry professionals as possible, which allows him or her to learn about many unadvertised opportunities. They may also be able to “sell” your background and experience to a hiring manager and explain the reasons why you are looking to transition. Sending a resume alone will not have the same impact.

4) Attack social media. As

you continue to grow in your profession, make sure you are staying connected through social media. Many successful people in the insurance industry, including producers, account managers, claims professionals and underwriters provide insight into different trends and topics. Plug yourself into conversations with people that work in the area of business you are looking to become a part of. Social media should not just be used as an educational tool to read articles that are shared; you should make social media a form of conversation with industry peers. Like, share and provide your thoughts on social media content. If you don’t understand something that was mentioned in an article, comment on the post and inquire. Feeling

lost and pigeon-holed is something we all go through in our careers. What you do before and during those times of loss will show your strength and resilience. The ability to push through and make the changes you want to see ultimately lies within yourself. Following and implementing these tips can help set you on the right path toward reaching your future career aspirations. Jackson is an executive search consultant with Polikov Recruitment Solutions, specializing in the commercial P/C and professional lines industry.

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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.