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September
16, 2019 • Vol. 97 No. 18
Contents
Idea Exchange
Special Report
News & Markets
10
27
38
When Billion Dollar Cyber Losses Strike: Guy Carpenter/CyberCube
Special Report: New CEO Levinson on Rebuilding Lexington Insurance
When Words Collide: Resolving Claim Disputes: Step 3
Oil Industry’s $50 Billion in New Projects Conflict with Paris Climate Goals: Think Tank
30
The Competitive Advantage: The Missing Value Proposition of High Quality Agents
32
The Wedge: Enduring Pain on the Path to Success
14
Special Report: Today’s E&S Market Is an ‘Overwhelming’ Success
Special Report: The Remaking of Disgrace Insurance Departments
35
Special Report: The Importance of a Healthy E&S Market
44 48 52
Ask the Insurance Recruiter: Lacking Structure: My Agency’s Biggest Recruiting Problem
54
Tech Talk: Going Digital and Building Relationships
56
Minding Your Business: Financial Management 101
62
Closing Quote: Surplus Lines: Innovation Incubator
Departments 8 Opening Note
18 Business Moves
6 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
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Opening Note Write the Editor: awells@insurancejournal.com
ADMINISTRATION / CIRCULATION
Multitasking
I
’ve often pondered whether or not one person can excel at multitasking over another. Are women better at multitasking than men? Are younger people better multitaskers than their older counterparts? Today’s world is filled with multitasking opportunities — hundreds of emails, instant messaging, app notifications, RSS feeds, and a plethora of social networks — inundate almost every aspect of daily life from work to home. This barrage of IT interruptions makes it increasingly difficult to focus on the task-at-hand. Millennials, specifically the “Net Generation,” are known to use many technologies simultaneously, masterfully switching from one to the next. They claim that it’s easy and that they can do it much better than older generations. Previous research hasn’t proven this claim but a new study indicates millennials are, in fact, better at multitasking with technology. Florida Atlantic University researchers in the Charles E. Schmidt College of Science are among the first to examine this phenomenon in college-age students. The study provides some of the first results on whether “Net Genners,” who have grown up with widespread access to technology, are developing greater digital literacy than generations before them, and if this means they have an ability to switch their attention more efficiently. For the study, researchers simulated a typical working environment, complete with IT interruptions, to allow them to track the effects on participants’ inhibitory processes. The 177 mostly college-age study participants were divided into three groups: those who received IT interruptions; those who did not; and a control group. Researchers compared the three groups’ accuracy and response time on completing tasks, gauging their level of anxiety. Results, published in the journal Applied Neuropsychology: Adult, indicate there is no need to “pardon these interruptions,” at least for this younger generation. Findings show that switching between technologies did not deplete or diminish performance in the group that had the IT interruptions compared to the control group or the group that did not receive IT interruptions. Unexpectedly, however, researchers discovered diminished performance in the participants from the group that did not receive any IT interruptions. “We were really surprised to find impaired performance in the group that did not receive any information technology interruptions. It appears that the Net Generation thrives on switching their attention and they can do it more efficiently because information technology is woven throughout their daily lives,” said Mónica Rosselli, Ph.D., senior author, professor and assistant chair of psychology in FAU’s Charles E. Schmidt College of Science, and a member of the FAU Brain Institute (I-BRAIN), one of the University’s four research pillars. Prior research in the general population found that it takes about 25 minutes to return to an original task following an IT interruption and 41 percent of these interruptions result in discontinuing the interrupted task altogether. Emails alone cause about 96 interruptions in an eight-hour day with an added one-and-a-half hours of recovery time per day.
Millennials are better at multitasking with technology.
Andrea Wells Editor-in-Chief
8 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
Publisher Mark Wells | mwells@wellsmedia.com Chief Executive Officer Joshua Carlson | jcarlson@insurancejournal.com 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
Columnists: Chris Burand, Mary Newgard, Catherine Oak, Bill Schoeffler, Randy Schwantz, Tom Wetzel, Bill Wilson Contributor: Joel Cavaness
SALES / MARKETING
Chief Marketing Officer Julie Tinney | jtinney@insurancejournal.com West Sales Dena Kaplan | dkaplan@insurancejournal.com Romeo Valdez rvaldez@insurancejournal.com South Central Sales Mindy Trammell | mtrammell@insurancejournal.com Southeast and East Sales (except for NY, PA, CT) Howard Simkin | hsimkin@insurancejournal.com Midwest Sales Lisa Whalen | (800) 897-9965 x180 East Sales (NY, PA and CT only) Dave Molchan | (800) 897-9965 x145 Sales & Marketing Coordinator Ashley Berg | aberg@insurancejournal.com Advertising Coordinator Erin Burns | eburns@insurancejournal.com Insurance Markets Manager Kristine Honey | khoney@insurancejournal.com Senior Strategist Pam Simpson | psimpson@insurancejournal.com Social Media Manager Ly Short | Lshort@insurancejournal.com Marketing Administrator Gayle Wells | gwells@insurancejournal.com Marketing Director Derence Walk | dwalk@insurancejournal.com
DESIGN / WEB / VIDEO
V.P. of Design Guy Boccia | gboccia@insurancejournal.com V.P. of Technology Chris Thompson | cthompson@insurancejournal.com Ad Ops Specialist Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Terrance Woest | twoest@wellsmedia.com Web Developer Ryan Kleshinski | rkleshinski@wellsmedia.com New Media Producer Bobbie Dodge | bdodge@insurancejournal.com Videographer/Editor Ashley Waldrop | awaldrop@insurancejournal.com
ACADEMY OF INSURANCE
Director Patrick Wraight | pwraight@ijacademy.com Online Training Coordinator Nathan Granitz | ngranitz@ijacademy.com
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Outside the US, call (847) 400-5951 Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published semi-monthly by Wells Media Group, Inc., 3570 Camino del Rio North, Suite 200, San Diego, CA 92108-1747. Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all other countries. DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 2019 Wells Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Media Group, Inc. POSTMASTER: Send change of address form to Insurance Journal, Circulation Dept, PO Box 708, Northbrook, IL 60065-9967 ARTICLE REPRINTS: Contact (800) 897-9965 x125 or visit insurancejournal.com/reprints
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News & Markets When Billion Dollar Cyber Losses Strike: Guy Carpenter/CyberCube
A
s the cyber insurance market has continued its rapid growth, its loss vulnerabilities have become increasingly clear. A new report from Guy Carpenter and CyberCube Analytics has identified potential loss scenarios in the current market that run in the billions of dollars. A long-lasting outage at a major cloud service provider could produce a $14.3 billion loss, for example, whereas a large-scale data loss could surpass $22 billion. Widespread data theft from one of the larger email service providers might generate a $19 billion loss, their report found. The report, “Looking Beyond the Clouds: A U.S. Cyber Insurance Industry Catastrophe Loss Study,” examines key drivers of cyber catastrophe scenarios and provides a data-driven view on the potential insured loss figures for the standalone cyber insurance market. It also highlights particular vulnerabilities that could be exploited to execute a cyberattack and explores the volatility around the frequency and severity of those attacks. Robert Bentley, CEO, Global Strategic Advisory at Guy Carpenter, said in prepared remarks that the report points to a greater need for insurers and reinsurers to “develop a much more granular understanding of the potential impact of systemic events.” He urged the industry to carry out more work similar to what Guy Carpenter has done with CyberCube 10 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
to help re/insurers “make sound and informed risk tolerance decisions and help create a cyber market sufficiently robust to withstand these catastrophic events.” Pascal Milliare, CyberCube’s CEO, offered a similar endorsement for using better data and enhanced analytics to adequately prepare for cyber insurance loss risks. “Through improved data and enhanced analytics [insurers and reinsurers] can gain a much more granular understanding of these high-impact scenarios, enabling them to allocate capital appropriately and develop more nuanced underwriting strategies,” Milliare said in prepared remarks. The study found the total annual cyber catastrophe insured loss figure for a 1-in-100-year return period was $14.6 billion, climbing to more than $16 billion for a 1-in-200-year event. It also determined that widespread data theft from a major email service provider was the most likely catastrophe loss scenario. The second most likely scenario: large-scale ransomware at a leading cloud service provider. An analysis of 23 catastrophe loss scenarios, ranging from attacks on critical infrastructure to breaches affecting the cloud environment, showed the highest potential loss value generators were: • Long-lasting outage at a leading cloud service provider — $14.3 billion loss • Large-scale cloud ransomware at a leading cloud services provider — $11.5
billion loss • Widespread data loss from a leading operating system provider — $23.8 billion loss • Widespread theft from a major email service provider — $19.1 billion loss • Large-scale data loss from a cloud service provider — $22.2 billion loss While the widespread data loss from a leading operating system provider is the costliest cyber catastrophe scenario modeled, the likelihood of this occurring was the lowest — beyond the 1-in-300-year return period, according to the report. Business interruption costs factored heavily in the insured loss figures. Specifically, they made up 94.4% of the insured costs associated with a widespread data loss from a leading operating system. That number was 92% for a longer outage at a major cloud service provider. Financial firms were most impacted during systemic cyber events, leading to 20% of the overall insured loss. Researchers conducted their analysis based on a hypothetical $2.6 billion portfolio built using standard cyber insurance policy characteristics. CyberCube Analytics, using additional cyber security information and analytics, created a series of realistic catastrophe scenarios, applying frequencies and severities to build a probabilistic model. In total, the study analyzed 23 catastrophe loss scenarios. INSURANCEJOURNAL.COM
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News & Markets Oil Industry’s $50B in New Projects Conflict with Paris Climate Goals: Think Tank By Ron Bousso
M
ajor oil companies have approved $50 billion of projects since last year that will not be economically viable if governments implement the Paris Agreement on climate change, think-tank Carbon Tracker said in a recent report. The analysis found that investment plans by Royal Dutch Shell, BP and ExxonMobil among other companies will not be compatible with the 2015 Paris Agreement, which aims to limit global warming to 1.5 degrees Celsius. “Every oil major is betting heavily against a 1.5 degree Celsius world and investing in projects that are contrary to the Paris goals,” said report co-author Andrew Grant, a former natural resources analyst at Barclays. Big oil and gas companies have welcomed the U.N.backed Paris Agreement, in which governments agreed to curb greenhouse gas emissions enough to limit global warming to 1.5 degrees Celsius, or “well below” 2 degrees Celsius by the end of the century. Scientists view 1.5 degrees Celsius as a tipping point
where climate impacts such as sea-level rise, natural disasters, forced migration, failed harvests and deadly heatwaves will rapidly start to intensify if it is breached. Carbon Tracker’s analysis, co-authored by Mike Coffin, a former geologist at BP, found that 18 newly approved oil and gas projects worth $50 billion could be left “deep out of the money” in a lower carbon world. The projects include Shell’s $13 billion liquefied natural gas (LNG) Canada LNG project, a $4.3 billion oilfield expansion project in Azerbaijan owned by BP, Exxon, Chevron and Equinor, and a $1.3 billion deepwater project in Angola operated by BP, Exxon, Chevron, Total and Equinor. The report also concluded that oil and gas companies risk “wasting” $2.2 trillion by 2030 on new projects if governments apply stricter curbs on greenhouse gas emissions. Previous reports on the implications of climate change for oil
and gas companies by Carbon Tracker and other researchers have contributed to a wave of investor pressure on majors to show that their investments are aligned with the Paris goals. While some companies including Shell, BP, Total and Equinor increased spending on renewable energy and introduced carbon reduction targets, the sector says it needs to continue investing in new projects to meet future demand for oil and gas as Asian economies expand. Shell said in a statement that it has set out an “ambition” to halve net carbon emissions by 2050 “in step with society as it moves towards meeting the aims of Paris.” BP said its strategy to produce low cost and low carbon oil and gas was in line with the International Energy Agency (IEA) forecasts and the Paris agreement. “All of this is aimed at evolving BP from an oil and gas focused company to a much broader energy company so that we are best equipped to help
the world get to net zero while meeting rising energy demand,” the company said in a statement. Exxon, Chevron, Equinor and Total did not reply to requests for comment. Nevertheless, the latest Carbon Tracker report said big oil and gas companies spent at least 30% of their investment last year on projects that are inconsistent with the path to limit global warming to even 1.6 degrees Celsius. “These projects represent an imminent challenge for investors and companies looking to align with climate goals,” the report warned. Carbon Tracker’s calculations were based on three scenarios produced by the Paris-based IEA models of oil and gas supply under different warming pathways. With fossil fuel supply on course to outstrip demand if the world is to limit warming at 1.5 degrees Celsius, the report assumed projects with the lowest production costs would be the most competitive. “Demand for oil can be satisfied with projects that break even at below $40 per barrel and pursuing higher-cost projects risks creating stranded assets that will never deliver adequate returns,” it said.
Copyright 2019 Reuters.
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Lexington Insurance and Western World, both AIG companies, are U.S.-based surplus lines insurers. AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit www.aig.com. Products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Not all products and services are available in every jurisdiction, and insurance coverage is governed by actual policy language. Certain products and services may be provided by independent third parties. Insurance products may be distributed through affiliated or unaffiliated entities. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.
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National
Arch Insurance, Ventus Risk Management
Arch Insurance North America has agreed to acquire Ventus Risk Management, a technology and analyticsdriven managing general underwriter that specializes in providing coastal commercial property insurance solutions to small and mid-sized enterprises. Ventus, founded in 2016, has 30 employees and offices in Atlanta; Columbia, S.C.; Houston; and Richmond, Va. Ventus provides commercial property insurance from several carrier partners, including XL. Ventus’ proprietary technology is designed to improve automation, efficiency and risk selection by augmenting data submitted by insureds with third-party sources and proprietary algorithms. It also reports on risks in real-time, which the firm says makes risks more attractive to both traditional reinsurers and capital markets investors. The parties said that integrating Ventus into the Arch platform will enable third-party capital to provide capacity alongside Arch’s product offerings. George Reeth, a Ventus co-founder, announced his retirement with the sale of the company. Co-founder Stuart Mercer will become the CEO of Ventus upon the close of the sale.
Genstar, Worldwide
Worldwide Facilities has closed on the previously announced investment by Genstar Capital, a San Francisco-based 18 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
private equity firm. As part of the transaction, Lovell Minnick Partners is divesting its investment in Worldwide Facilities following four years of growth. Los Angeles-based Worldwide Facilities is a wholesale insurance broker, managing general agent and program underwriter. In 2018, the firm reported that it had grown from $550 million in gross written premium three years earlier to about $1.5 billion in premium in 2018. Genstar Capital is a private equity firm with a reported $17 billion of assets under management. Last month, Genstar sold its stake in insurance software firm Insurity to GI Partners.
East
USI Insurance Services, JRG Advisors
USI Insurance Services has acquired Wexford, Pa.-based employee benefits services firm JRG Advisors LLC. The company’s existing operations will be combined with Emerson Reid, USI’s employee benefits wholesale brokerage division. USI is a Valhalla, N.Y.-headquartered insurance brokerage and consulting firm, which delivers property and casualty, employee benefits, personal risk and retirement services to large risk management clients, middle-market companies, smaller firms and individuals. Founded in 1974, Emerson Reid is a wholesale general agent. Its strategy is to differentiate brokers from their competition through the introduction of new programs, while providing the tools,
Brown & Brown Metro LLC has acquired substantially all of the assets of Innovative Risk Solutions Inc. Innovative Risk Solutions was founded in 2004 by sole shareholder Sean Gormley, with the goal of providing employee benefits for Innovative’s customers. Following the transaction, Innovative will operate as a new stand-alone office within Brown & Brown’s retail segment and will continue doing business under the leadership of Sean Gormley from the Atlantic County, N.J., office. Brown & Brown Inc. is an insurance brokerage firm that provides risk management to individuals and businesses.
The Hilb Group, Greenwald Bark Agency
The Hilb Group LLC has acquired Pennsylvania-based Greenwald Berk Agency LLC. The transaction became effective July 1. GBA offers business insurance, personal insurance and life/health products and services. This acquisition will establish THG’s first location in Pennsylvania. Bob Greenwald, agency leader, will continue to lead GBA’s associates following the transaction. THG is a middle-market insurance agency headquartered in Richmond, Va., and is a portfolio company of Boston-based private equity firm Abry Partners. THG seeks to grow through targeted acquisitions in the middle-market insurance brokerage space. The company now has more than 80 offices in 20 states.
South Central
One General Agency, Acton Inc.
One General Agency (OGA has acquired the renewal rights to the book of business previously owned by Oklahoma City-based Acton Inc. Acton President Eric Acton will be joining the OGA staff. One General Agency, also based in Oklahoma City, is a managing general INSURANCEJOURNAL.COM
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News & Markets Conference: California Workers’ Comp Should Embrace Innovation By Don Jergler
T
he workers’ compensation market apparently needs to do some catching up where it concerns technology. “Historically we’ve been really slow to adapt to technology and innovation,” said Shaun Jackson, executive director of risk management at Panda Restaurant Group. Jackson was moderating a talk titled “Q&A Panel with Innovative Risk Management Experts” earlier this month during the annual CWC & Risk Conference in Dana Point, Calif. The three-day conference included market forecasts, legal matters, claims, cannabis, auto and fraud. The Innovative Risk Management panel included Jill Dulich, claims and operations manager at the California Self-Insurers Security Fund; Henry Cabaniss, director of risk management with Southern Glazers Wine and Spirits; and Orit Harrington, senior risk manager with International Coffee & Tea LLC. Dulich said large insurers and third-party providers have been reluctant to spend money on innovation and have been relying too much instead on vendors to bring new technology and innovation. Cabaniss talked about the massive amount of data being generated that can help workers’ comp industry. “Now that we can get down deep in data, it’s how are we going to use it,”
W2 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
he said. “There’s so much available, but what’s meaningful is a completely different challenge.” They also discussed telemedicine. Dulich, who covered some of the pros and cons of using telemedicine to treat injured workers, said that while several people want to continue with doctor’s visits, many workers have embraced it. “Convenience is key here,” she said. Harrington said her company started a telemedicine program in January to treat certain injuries with telemedicine with the prior approval of a medical professional. Nearly half of the 45 employees who were eligible for telemedicine treatment were fine with it, she said. “The majority have one visit and are discharged,” she said, adding that the most a worker has needed have been two visits. “It turns out we’re going to save a lot of money.” Workplace safety was another big topic at the conference. “OSHA Updates – What’s Next on the Horizon,” was the title of a panel with Joel Sherman, vice president of safety and corporate affairs for Grimmway, and Robert Cartwright Jr., division manager for Bridgestone. The pair covered new indoor heat regulations for California. The regulations kick in when temperatures reach 82 degrees Fahrenheit, and they address certain clothing that may cause a worker to overheat. In cases where workers are required to wear clothing that could make them too hot, the regulations could kick in at temperatures below 82 degrees, so companies will have to be mindful even at lower
temperatures, Sherman said. “It’s going to be interesting,” he said. Wildfire smoke emergency regulations, adopted in July, were another topic of discussion, as was new rules for Valley Fever. Valley Fever, also called coccidioidomycosis, comes from fungus that grows in the dirt in some areas of the Southwestern U.S., including California, and can cause flu-like symptoms, including fever, cough, chills, and chest pain. The rules require companies to take numerous preventative measures to protect workers in areas considered to be endemic, including Madera, Fresno, Tulare, Kern, Kings, Monterey and San Louis Obispo counties. Those who don’t adhere to the rules and are caught can be made to pay. For example, six employers in one period during 2017 were issued more than $240,000 in fines, according to Cartwright and Sherman. New workplace violence regulations was another topic the two addressed. Employer requirements include: employee training; creating an emergency action plan; conducting mock training exercises with local law enforcement; and adopting a zero-tolerance policy toward workplace violence. Sherman offered an example in which the husband of an employee reportedly had too much to drink and called the company’s main line and left threatening messages for his wife. Even though it was clearly a domestic dispute that was occurring outside work, the company decided to go to law enforcement and treat it as an incident because it involved the company phone. “A lot of them are driven by purely personal incidents,” Sherman said, referring to acts of workplace violence. Cartwright said companies should also pay attention to what is being said in the workplace, because words could lead to acts of violence. “Words matter,” he added.
‘Historically we’ve been really slow to adapt to technology and innovation.’
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News & Markets Oregon Employers Will Get $160 Million From SAIF
S
AIF customers in Oregon will receive $160 million in dividends this year. The SAIF the board of directors declared a $120 million primary dividend to be paid to policyholders based on their premium, and a $40 million safety
performance dividend to be paid based on each policyholder’s safety results. This is the 10th year in a row SAIF has offered dividends, and the 22nd dividend in the past 30 years. SAIF determines whether a policyholder
dividend is appropriate based on capital levels, claim trends and the economic environment. This year, SAIF has seen strong investment returns and favorable trends in injury prevention and claim cost containment. The safety performance dividend rewards policyholders for claims experience for policies whose annual term ended in 2018, based on a scale from 0 to 10.6% of their standard premium. This year, 48,508 policyholders eligible for SAIF’s primary dividend. Of those, roughly 93.9% are also eligible to receive all or a portion of the additional safety performance dividend. Checks will be mailed in October to eligible employers. SAIF is Oregon’s not-for-profit workers’ comp insurance company.
Oregon Teen Who Lost His Leg in DUI Accident Sues Driver, Brewery
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W4 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
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n Oregon teen who lost his leg in a car wreck is suing the driver who crashed into him — along with the Salem brewery accused of over-serving the driver– for $3.5 million. James Holland Jr., along with his parents, filed the negligence complaint against Jared Wayne Jones and Vagabond Brewing. The complaint says Jones was drinking at Vagabond Dec. 26, 2018, when he drove from Salem. The then 16-year-old Holland was parked on the side of the road after his car broke down and was standing with friends when they were struck by Jones. Jones pleaded guilty to DUI and assault and was sentenced to nine months in jail. Management with Vagabond Brewing did not immediately respond to request for comment. Copyright 2019 Associated Press. All rights reserved.
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News & Markets Dive Boat Owners Seek to Head off Lawsuits After 34 Die in Fire off California Coast
T
he owners of the dive boat where 34 people perished in a fire off Southern California filed a lawsuit in early September to head off potentially costly litigation, a move condemned by some observers as disrespectful to the families of the dead. Truth Aquatics Inc., which owned the Conception, filed the action in U.S. District Court in Los Angeles under a pre-Civil War provision of maritime law that allows it to limit its liability. Investigators are still searching for what caused the blaze that wrecked the boat, which remains upside down at the bottom of the sea near the Channel Islands. The time-tested legal maneuver has been successfully employed by owners of the Titanic and countless other crafts — some as small as Jet Skis — and was widely anticipated by maritime law experts. Still, the fact it was filed just three days after the deadly inferno came as a surprise to legal observers. Families of the deceased, who are not named in the complaint, will be served with notice that they have a limited time to challenge the company’s effort to clear itself of negligence or limit its liability to the value of the remains of the boat, which is a total loss. “They’re forcing these people to bring their claims and bring them now,” said attorney Charles Naylor, who represents victims in maritime law cases. “They have six months to do this. They could
let these people bury their kids. This is shocking.” Professor Martin J. Davies, the maritime law director at Tulane University, said the cases always follow accidents at sea and always look bad, but they are usually initiated by insurance companies to limit losses. “It seems like a pretty heartless thing to do, but that’s what always happens. They’re just protecting their position,” Davies said. “It produces very unpleasant results in dramatic cases like this one. … The optics are awful.” The U.S. law dates to 1851, but it has its origins in 18th century England, Davies said. It was designed to encourage the shipping business. Every country with a shipping industry has something similar on the books. In order to prevail, the
W6 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
company and owners Glen and Dana Fritzler have to show they were not at fault in the disaster. They asserted in the lawsuit that they “used reasonable care to make the Conception seaworthy, and she was, at all relevant times, tight, staunch, and strong, fully and properly manned, equipped and supplied and in all respects seaworthy and fit for the service in which she was engaged.” Even if the captain or crew are found at fault, the Fritzler’s and their insurance company could avoid paying a dime under the law, experts said. All of those who died were in a bunkroom below the main deck. Officials have said the 33 passengers and one crewmember had no ability to escape the flames.
There’s a long history of ship owners successfully asserting this protection. The case involving the White Star Line, the owners of the Titanic, went all the way to the U.S. Supreme Court, which held that a foreign owner could assert protection of the Limitation Act, attorney James Mercante said. In that case, plaintiffs eventually withdrew their lawsuits and filed them in England, where the company was based. British law, even though it also limited damages, provided a bigger payout than the value of the remaining lifeboats. While the law can shield owners from damages, over 90% of cases where injury and death are involved are settled before trial, Mercante said. Copyright 2019 Associated Press. All rights reserved. INSURANCEJOURNAL.COM
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agency and surplus lines broker that has been serving the specialty needs of independent insurance agents since 1951. OGA is a family owned and operated company centered on strong relationships and trust. It provides markets for commercial transportation, property and casualty, garage, oil and gas, personal lines, professional lines and workers’ compensation risks, and represents top-rated admitted and nonadmitted insurance carriers in Oklahoma and an expanding number of states. Acton Inc. is a managing general agency and surplus lines broker that has served Oklahoma independent insurance agents since its founding in 1972. Acton’s area of expertise includes many of the same lines as OGA but with a concentration in larger, more complex accounts, especially in the lines of excess and umbrella, environmental, professional and excess workers’ compensation. Its markets complement the admitted and non-admitted insurance carriers represented by OGA.
Higginbotham, Exploration Insurance Group
Ft. Worth, Texas-based Higginbotham and Exploration Insurance Group have merged their operations in Tyler, Texas. EIG opened in 2013 in Tyler to meet the east Texas region’s growing need for industry specific insurance. The independent seven-person agency brokers commercial insurance and employee benefits primarily to oil and gas, construction and manufacturing companies. Higginbotham has nearly 40 offices statewide, including two in Tyler. EIG will collaborate to fortify Higginbotham’s practice in East Texas. Higginbotham entered Tyler in 2014 and added another office in 2018, both through mergers. Higginbotham said EIG will complement Higginbotham’s industry practice groups by adding property/casualty insurance and employee benefit expertise in the oil and gas, construction, and manufacturing industries. EIG will operate under the Higginbotham name with EIG owners Angela Bridges, Colin Pope and Ryan Slaughter serving as vice presidents. INSURANCEJOURNAL.COM
Higginbotham was founded in 1948 in Ft. Worth, with more than 35 additional offices statewide. It also has offices in Oklahoma and Georgia serving domestic and international customers.
Southeast
Brown & Brown, CKP
Brown & Brown of Florida Inc. has acquired substantially all of the assets of CKP. CKP provides brokerage services for customers throughout the U.S. operating in agricultural industry. CKP also provides property/casualty insurance products and services to customers in Florida. The CKP team will operate as a new stand-alone office within Brown & Brown’s retail segment, doing business under the leadership of Chuck Hemphill and Kevin Rader from CKP’s existing offices located in Florida, Arizona and New Mexico. Brown & Brown Inc. is an insurance brokerage firm, providing risk management to individuals and businesses.
The Liberty Company Insurance Brokers, Moody Insurance Group
The Liberty Company Insurance Brokers, a privately held agency on the West Coast, has partnered with Moody Insurance Group of Ft. Lauderdale, Fla. This marks Liberty’s first venture outside of California, laying the groundwork for more national growth in the future. Established in 1992, Moody Insurance Group is a South Florida-based agency specializing in business, marine, aviation, and personal insurance for the Southeast. The move into Florida is the first of several transactions Liberty plans to complete this year as part of its expansion outside the Golden State. The Liberty Company Insurance Brokers provides producers and agency owners a platform to achieve equity partnership in a growing organization. Liberty is an independently owned, full-service broker with offices throughout the country.
U.S. Risk, Regency Insurance Brokerage Services
U.S. Risk, LLC, a property and casualty
wholesaler and managing general agent (MGA), has acquired Regency Insurance Brokerage Services, a wholesale broker and MGA headquartered in Hallandale Beach, Fla. The company also operates from additional locations in New York, New Jersey and South Carolina. The Regency team will join U.S. Risk Brokers, the wholesale brokerage division of U.S. Risk. Terms of the transaction were not disclosed. U.S. Risk LLC, is an international specialty lines underwriting manager and wholesale broker headquartered in Dallas. The company operates 17 domestic and international branches, and offers a range of products and services through its affiliate companies, which include U.S. Risk Underwriters, U.S. Risk Brokers, U.S. Risk Solutions, Oxford Insurance Brokers Ltd. (UK), James Hampden International Insurance Brokers Ltd., (UK), MGB Insurance Brokers Ltd, (UK), Antarah FZE (UAE), and UNIS A.G. (Zurich).
West Arthur J. Gallagher, Garnett-Powers
Arthur J. Gallagher & Co. has acquired the university services business of Mission Viejo, Calif.-based benefits broker and consultant Garnett-Powers & Associates Insurance Services Inc. Garnett-Powers & Associates leader Steve Johnson and his associates will continue to operate from their current location under the direction of Norbert Chung, head of Gallagher’s Western region employee benefit consulting and brokerage operations. Terms of the deal were not disclosed. Garnett-Powers & Associates’ university services business offers medical, dental, vision, life, AD&D, and disability insurance plans to university postdoctoral scholars and visiting scholars. The company also offers health insurance plans to university students. Arthur J. Gallagher is a global insurance brokerage, risk management and consulting services firm headquartered in Rolling Meadows, Ill. SEPTEMBER 16, 2019 INSURANCE JOURNAL | 19
People National
Insurance broker Aon has appointed Jay Demeusy as U.S. vice chairman of its Reinsurance Solutions business. Alongside his new role, Demeusy will continue to chair the newly formed Global Construction & Inland Marine Practice Group and continue to lead Reinsurance Solutions’ U.S. retrocessional solutions team. His career at Aon spans 25 years. He is a member of the Reinsurance Solutions U.S. leadership team, focusing on core client strategies. In his roles, Demeusy continues to report to George W. deMenocal, president and CEO of Aon’s U.S. Reinsurance Solutions business.
National Flood Services,
which offers Ralph Blust processing, claims and customer service for flood insurance programs, has named Ralph Blust as CEO. Blust will replace interim CEO George Ruhana, who will continue in his role as operating partner. Blust has a 30-year insurance career. He joins NFS from his position as president of Insureon Solutions, formerly Insurance Noodle, a management and markets access platform for independent insurance agents. The company launched in 2000, was acquired by Willis Group in 2007 and was acquired by Insureon in 2014. Blust helped build Insurance Noodle while at Willis from 2010 to 2014. He has also held executive positions with Crump and TIG Insurance. NFS was acquired from broker Aon last August by PEAK6, an investment firm
that invests in and operates financial, technology and consumer businesses.
East
Fred C. Church Insurance, a Lowell, Mass.-based independent insurance agency, has named
George H. Lucas
George Lucas
as director of Business Development. In this role, Lucas will be responsible for the management and facilitation of the agency’s sales process and organic growth strategy. This comes after agency President and Chairman Mike Reilly in 2015 rolled out a companywide, five-year hiring initiative to combat the insurance industry’s talent crisis, according to Fred C. Church Insurance. Lucas has been operating as a sales consultant for Fred C. Church since 2015. NFP, a New Yorkheadquartered insurance broker and consultant that provides employee benefits, property and casualty, retirement and individual products, has named John Hyland, senior vice president of NFP Property and Casualty, to its Surety division. In this new role, Hyland will work to accelerate growth in NFP’s surety bond service offerings by working closely with the company’s national team of surety professionals to grow specialty lines and relationships in the construction space. Hyland will report to Henry C. Lombardi, executive vice president and head of NFP’s Property and Casualty division. Prior to NFP, Hyland was a
20 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
principal of The Hyde Agency, a New York-based surety and insurance specialist serving the construction industry. CorRisk Solutions has hired Donna A. Belvedere to lead its professional liability team. In this role, Belvedere will be based at CorRisk Solutions’ headquarters in Melville, N.Y. She joins CorRisk with more than three decades of specialty insurance experience. Her previous position was with Chubb Ltd., where she served as AVP and senior program manager for its Westchester Programs. Before ACE’s acquisition of Chubb in 2016, Belvedere had spent 31 years with Chubb & Son, starting as an underwriter in executive protection for its Long Island, N.Y., branch. From there, she became the executive protection practice leader for its Albany branch, before ascending to AVP.
Southeast
Olympus Insurance Co. appointed
James Carpenter as
assistant vice president of sales James Carpenter and marketing. Carpenter has more than 20 years of experience in the property and casualty insurance industry, seven of which he spent at Tower Hill Insurance. He also worked for two years as an underwriting manager at Vanguard before switching to the sales side. He was in marketing with Florida Family for 11 years,and spent a year and a half with Prepared Insurance before being asked to step into the assistant vice president of Sales and
Marketing role with Olympus Insurance. Headquartered in Palm Beach Gardens, Fla., and founded in 2007, Olympus Insurance Company specializes in Florida property insurance. Harden, an insurance, risk management and employee benefits firm in the Southeast, has expanded into the South Florida market with the opening of an office in Ft. Lauderdale and has added Doug Beller as executive vice president and South Florida market leader and Employee Benefits account director. Prior to joining Harden, Beller was senior vice president and managing director at USI Services. Harden is headquartered in Jacksonville, Fla., with offices in Amelia Island, Tampa and now Ft. Lauderdale. Cobbs Allen has hired Paul Sparks and Darren Sonderman to lead its new Specialty Insurance Brokerage. Sparks and Sonderman each bring more than 25 years of experience to their new roles from founding and leading the Financial Services Division of McGriff, Seibels & Williams Inc. The new venture is focused on providing complex risk products for corporate and private equity clients. It will combine structured capabilities with insurance brokerage services to offer clients more alternatives utilizing risk — taking capacity from both the insurance and private capital markets. According to Sparks, the new company will be private and majority controlled by employees. Cobbs Allen is an independent, national agency focused on enterprise risk management in niche practice groups and headquartered in
continued on page 22 INSURANCEJOURNAL.COM
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People continued from page 20 Birmingham, Ala.
South Central
Retired U.S. Navy Adm. Thomas B. Fargo has been named chairman of San Antoniobased USAA. Adm. Fargo is the financial services and insurance Thomas Fargo group’s 22nd chairman. He succeeds retired U.S. Air Force Gen. Lester L. Lyles, who is leaving USAA’s board of directors after 15 years of dedicated service. Adm. Fargo has had a 35-year career in the U.S. Navy and the Department of Defense. He was the 29th commander in chief of the U.S. Pacific Fleet and the 20th commander of the U.S. Pacific Command. He transitioned to corporate leadership in 2005 and led companies in both the transportation and technology sectors. Gen. Lyles is completing his term as chairman after nearly seven years in the role. During his tenure, Lyles helped oversee an expansion in membership and growth while the organization continued to receive accolades for member service and how it treats its employees. The USAA family of companies provides insurance, banking, investments, retirement products and advice to 13 million current and former members of the U.S. military and their families.
Midwest
Independent insurance brokerage
Holmes Murphy has
welcomed
Nate Hughes
Nate Hughes as account executive to the company’s growing Minneapolis property and casualty team. Hughes joins Holmes Murphy through the merger with Cobb Strecker Dunphy & Zimmermann, where he was a market leader focused on commercial and professional liability. Prior to that, Hughes worked at Wells Fargo Insurance Services in sales leadership and brokerage. At Holmes Murphy, Hughes will lead a team of insurance, risk management and organizational well-being professionals to advise clients in the areas of risk financing, risk management, compliance, productivity and the development of a client’s corporate culture that supports their strategic plan. Belen Tokarski has been named senior vice president and chief of Belen Tokarski strategy for commercial lines by Mylo, an insurance technology platform launched by Kansas City, Mo.-based Lockton. Tokarski will lead the strategic direction of Mylo’s small commercial business. In addition, she will have primary responsibility for overseeing the services that Mylo provides for small commercial clients referred by Lockton. Tokarski brings more than 20 years of experience to Mylo, most recently as president of Platform Solutions for Insureon. She held multiple roles at CNA Insurance, including vice president of Automation Strategy and Agency Solutions. Mylo is a digital broker
22 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
specializing in equipping small commercial clients with advice and customized coverage for every stage of their business.
West
EPIC Insurance Brokers and
Consultants
has named
Luke Aschermann as a client manager,
Norma Brehm
as a property and casualty claims manager, and
Belinda Lopes
Luke Aschermann
as a principal and senior cliNorma Brehm ent advocate. All join EPIC in Phoenix, from Willis Towers Watson. They will serve under K.J. Belinda Lopes Wagner, EPIC managing principal and director of the Southwest Region, and focus on the needs of both middlemarket, and large, complex accounts. EPIC is a retail property and casualty insurance brokerage and employee benefits consultant. CopperPoint Insurance Cos. has named Mark Mooney as vice president and head of underwriting for California. In this new role, Mooney will be based at CopperPoint’s PacificComp regional office in Westlake Village, Calif. He will lead the California underwriting team and will work with the business development teams to ensure profitability and growth. He
was most recently the regional vice president for the Texas region at Union Standard Insurance Group. Prior to working for Union Standard, he was the regional underwriting vice president at QBE North America. Mooney also held positions at Foremost Business Insurance and Auto Owners Insurance Co. CopperPoint is a provider of workers’ comp and commercial insurance in the Southwestern U.S. FTP Inc. has named Lee Glaser to establish FTP of California LLC, based in San Diego. In this new role, Glaser will focus on developing the producer base and adding underwriters and programs for FTP of California. He has a background in commercial property, specializing in underwriting, placing commercial property risks and developing short-tail and difference in conditions commercial property programs. He’s held previous positions with The Keating Group Inc., Atlas General Insurance Services and Ironshore. FTP Inc. is an independently owned and operated insurance wholesaler based in Old Bridge, N.J. CNA has named Tanya Decman as vice president and branch manager for the Seattle, Wash., and Portland, Ore., branches. Previously, Decman served as assistant vice president of sales and distribution in the West region for CNA. Before joining CNA, she served as a marketing manager for Chubb Insurance. CNA is based in Chicago and has offices throughout the U.S., Canada and Europe. INSURANCEJOURNAL.COM
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Figures
$4.2 Million
The amount Southeastern Grocers, a supermarket company with more than 500 stores in seven states in the Southeast, will spend over the next three years to reduce emissions of ozone-depleting gases from its refrigeration equipment. The company reached the agreement with the U.S. Department of Justice and U.S. Environmental Protection Agency and its subsidiaries to resolve violations of the Clean Air Act.
69
The number of people that labor organizations and a workplace safety advocacy group say died of work-related causes in Massachusetts last year, down slightly from 74 in 2017. A 28-page report released in April by the Massachusetts AFL-CIO and the Massachusetts Coalition for Occupational Safety and Health says the deaths were from documented occupational injuries or disease sustained on the job.
Declarations More Work to Be Done
“We have a lot more work that we need to get done. Despite Florida’s history of hurricanes, people are slow to make changes to improve their situation.” — Lisa Lindsay, president of the Private Risk Management Association, which focuses on the high net worth segment. She commented on a recent PRMA survey that showed the majority of responding agents believe less than 50% of their clients have a comprehensive hurricane preparedness plan.
24 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
Plenty of Blame
“There’s plenty of blame to go around.” — Patrick Regan, a lawyer representing about 70 survivors and family members of those killed in an explosion at a suburban Maryland apartment complex, said. Regan was commenting on the National Transportation Safety Board’s findings that a gas company’s faulty equipment is the most likely cause of the explosion that killed seven people in 2016. A lawsuit against the utility and the company that manages the apartment complex has been held in abeyance as the NTSB conducted its investigation.
High Photoperiod
“It’s honestly expected and fairly routine in the sense that it is really hard to grow a plant that is 0.3% or below, and it is also really difficult in Hawaii because we have a really unique climate and photoperiod as compared to other states.” — Shelley Choy, Hawaii’s agriculture department hemp program coordinator, tried to explain why more than half of hemp crops cultivated in Hawaii in the past year were unusable due to high THC levels.
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$185,600
How much a Bellingham, Wash.-based property management company has been cited by the Washington Department of Labor & Industries for multiple serious safety and health violations, most of which involve improper handling of asbestos and lead.
$9 MILLION
The amount for which Mount Carmel Health System in Ohio, which employed a doctor charged with 25 counts of murder for giving often fatal doses of opioid painkillers to dozens of sick patients, has settled two wrongful death lawsuits. The suits claimed Dr. William Husel authorized drugs that led to the deaths of Donald McClung, 58, and Rebecca Walls, 75.
Wisconsin Hands-Free Law
“My hope is to jump-start the push for a Wisconsin state law in Madison so we can get a law later this year.” — Thomas Goeltz, a Wisconsin man who successfully lobbied Minnesota lawmakers to ban the use of cellphones or other electronic devices while driving, said he wants his home state to adopt similar legislation. Goeltz lost his pregnant daughter to an alleged distracted driver in February 2016 near Stillwater, Minn. Minnesota’s hands-free law took effect Aug. 1.
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Oklahoma Opioid Settlements
“The bottom line is that if we’re not setting up an infrastructure that’s all-inclusive for behavioral health and addiction services, then we’re setting ourselves up for failure.” — Ryan Hampton, who has battled opioid addiction and wrote a book on the crisis titled “American Fix — Inside the Opioid Addiction Crisis and How to End It,” says he has concerns over Oklahoma’s plans for spending the nearly $1 billion in settlements and judgments it has won in the states’ legal fight against the opioid industry.
SEPTEMBER 16, 2019 INSURANCE JOURNAL | 25
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www.nautilusinsgroup.com | 800.842.8972 Nautilus Insurance Group products and services are provided through various Surplus Lines insurance company subsidiaries of W. R. Berkley Corporation and offered through licensed Surplus Lines brokers. Not all products and services may be available in all jurisdictions, and the coverage provided by any insurer is subject to the actual terms and conditions of the policies issued. Surplus Lines insurance carriers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. ©2019 Nautilus Insurance Group. All rights reserved.
Special Report: Surplus Lines New CEO Levinson on
Rebuilding Lexington Insurance By Andrea Wells
S
uccess for a specialty lines carrier is about discipline. It’s about walking away from classes of business or lines of business when rates are no longer adequate. It’s about having the courage to make substantial changes. That’s according to Lou Levinson, the new appointed CEO of Lexington Insurance, the excess and surplus lines unit of American International Group Inc. For Lexington, success has been built around strong relationships with wholesale partners by delivering the right products and services for insureds. “But it’s also about having the underwriting courage and discipline to walk away when we think we either can’t fix something through rate, terms or price,” Levinson said. That means walking away from premium when “we don’t think we can make a fair profit,” he said. “I think that’s the key to success.” During AIG’s Q2 2019 earnings call on Aug. 8, President and CEO Brian Duperreault said that the evolving, hardening market is sustainable especially considering the insurer’s ongoing efforts to shed excessively risky business. Peter Zaffino, AIG’s CEO, general insurance cited Lexington Insurance, which he said has undergone INSURANCEJOURNAL.COM
“extensive repositioning with revised risk appetite and distribution strategy that has resulted in vastly improved submission flow and tighter limits.” The result has meant strong rate improvement in the mid-to-high teens in property/ casualty. But watching premiums rise and fall based on rate adequacy in different lines, and then shedding those lines of business that are not producing desired profitability, takes courage, Levinson told Insurance Journal. “Not every company has that same level of courage,” he added. “The strategic reshaping
‘It’s a much more disciplined market and that’s good. That’s healthy for everybody and we’re doing our share.’
Lou Levinson, CEO Lexington
in recent years of AIG, long the leading U.S. surplus lines writer, is partially responsible for the drop in the group’s topline nonadmitted premium, along with the planned move of some premium from its U.S. nonadmitted carriers to offshore affiliates,” said A.M. Best in its recently published Market Segment Outlook on U.S. Surplus Lines. Even so, AIG, through its main surplus lines insurer Lexington Insurance Co., remains far and away the largest U.S. surplus lines writer, controlling 7.1% of the total surplus lines market and writing $3.5 billion in surplus lines direct premium written in 2018, according to A.M. Best. Lexington Insurance wrote $2.4 billion, 4.8% of that share, the rating agency said. A hallmark of the Lexington brand is its ability to tackle the most complex and difficult insurance problems for brokers and insureds. “We’re known for doing,” Levinson said. But moving forward Lexington is broadening that view by expanding its offerings to provide solutions
for “very small business” through the acquisition of Western World, a specialist in U.S. small commercial excess and surplus underwriting. “We’re still very much a player in that large complex space and now able to provide a broad products and solutions to SME business,” Levinson said. That means focusing on speed and ease of doing business “because that matters,” he said. Levinson says that for the moment Lexington remains focused on how to get the insurer’s foundation right. “Do we rebuild it to make it
continued on page 28 SEPTEMBER 16, 2019 INSURANCE JOURNAL | 27
Special Report: Surplus Lines continued from page 27
managing resources as our submission activity is literally doubled; it’s twice what it was a year ago,” he said. “It’s remarkable in part because we’ve aligned ourselves with wholesalers and we’ve removed any channel conflict that may have existed.” In January, AIG announced that it would be refining its distribution strategy and risk appetite for North America General Insurance (AIG NA General Insurance), including its Lexington business, and that Lexington would concentrate on the E&S market, with its core property and casualty products available primarily through only wholesale brokers. However, Lexington’s Healthcare, Professional Liability, Property
Risk Management and other specialty product units continue to be provided through both wholesale and retail brokers. “I do think changing of our position, dedicating ourselves from a largely retail production to more of a wholesale focus has helped to increase submission activity,” Levinson noted. Lexington has also deployed more resources into the field than a year ago. That’s been helpful during an E&S market surge resulting in far more business today than a year ago, nearly twice as much, he said. “Our biggest challenge is getting to that business with the resources that we have in place today.” Overall, Levinson sees a better surplus lines market today than just a year ago.
“There’s certainly more underwriting discipline being put into the market as we and others look at our portfolios and drive the volatility out,” he said. Levinson sees a surplus lines market focused on being more thoughtful stewards of capital and capacity. “It’s a much more disciplined market and that’s good,” he said. “That’s healthy for everybody and we’re doing our share.” That’s a different scenario than 10 years ago when some thought wholesalers were going to go away and the E&S market was going to evaporate, Levinson said. “None of that happened,” he said. “The E&S market is more important today than it was a decade ago for providing innovative solutions.”
EXCES S & SURPLUS LINES
more relevant, more exclusive, and improve our franchise value today?” he asked. “Most of our energy and time is being spent on making sure that we build the right foundation for Lexington as opposed to spending time and energy on new product development at the moment. That does include focusing efforts on meeting the needs of our clients, from the large complex company to the SME market,” he said. “It’s really about profit and finding those niches that we think we can generate an underwriting profit. That is more important than growing top line.” That can be challenging in today’s booming E&S market, Levinson says. “Our obstacle today is
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Visit us today. northfieldins.com *A.M. Best’s rating of A++ applies to certain insurance subsidiaries of Travelers that are members of the Travelers Insurance Companies pool; other subsidiaries are included in another rating pool or are separately rated. For a listing of companies rated by A.M. Best and other rating services, visit travelers.com. Ratings listed herein are as of October 5, 2017, are used with permission, and are subject to changes by the rating services. For the latest rating, access ambest.com. Nothing stated herein affects the terms, conditions and coverages of any insurance policy issued by Northfield or its affiliates, nor does it imply that coverage does or does not exist for any particular claim or type of claim under any such policy. The information in this document is provided for general informational purposes and does not constitute an offer to sell or a solicitation. The information is for surplus lines licensees only. Advertising of surplus lines products may be restricted by state law; surplus lines licensees are responsible for compliance with all such laws. © 2018 The Travelers Indemnity Company. All rights reserved. BNFAD.0007-D New 6-18
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Special Report: Surplus Lines Today’s E&S Market Is an ‘Overwhelming’ Success Business Is Gushing, Underwriters Trying to Keep Up
By Andrea Wells
D
emand for surplus lines insurance rose dramatically in 2018 and is continuing to expand this year, so much so that some in the sector are feeling a bit overwhelmed. The excess and surplus lines sector is enjoying its largest growth rate – 11.2% – in years – thanks in great measure to standard carriers shedding business. The growth has also been fueled by the strong economy, changing technology, and weather catastrophes and wildfires. More and more business is
migrating from the retail channel into the wholesale channel. “There’s clearly a correction going on in the market,” Lou Levinson, CEO of Lexington Insurance, told Insurance Journal. “Everyone is looking at their portfolios and trying to adjust them to get in line with whatever their value proposition happens to be.” Kristopher Bauer, president of WTIS, a privately held wholesale broker and part of JenCap Holdings, says the market is almost too much for underwriters to keep up with. He likens it to having to drink from a fire hose. “There’s just so much
30 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
coming at them that they can’t digest all of it,” he said. “The underwriting community is just overwhelmed by submissions right now,” Bauer said. According to Bauer and others, the shift in market conditions has been swift but not unexpected. He said it’s a situation that requires patience.
New Business
New business into the U.S. E&S sector is mostly coming from standard lines companies nonrenewing accounts, according to Tim Turner, chairman and CEO, R-T
Specialty, and others. It’s also coming from the Lloyd’s market, which shed some $5-$6 billion in business. “In the first quarter this year we started to see things change – nonadmitted commercial lines business going into the E&S sector increased from 10% of market to 11%-12% by the start of the second quarter, and then up to 13% by the end of the second quarter,” Turner said. The data he has reviewed suggests that at the end of the first half of 2019, nonadmitted commercial lines business has more than doubled, again. “We believe the percentage of nonadmitted business in the E&S channel went up 30% or more during the first half of the year,” he said. In his view, the Lloyd’s market and large standard commercial lines carriers getting rid of unprofitable accounts is driving the current trend. “The biggest drivers are Lloyd’s shedding $6 billion worth of business that’s blowing back into the U.S. market. That was E&S business, but it was placed differently and now it’s getting placed over here,” Turner said. “And then AIG began shedding a lot of business on the admitted side, and that’s flowing into the nonadmitted marketplace.” Other standard markets in the U.S. also began nonrenewing their most unprofitable business last year. That trend has since picked up in the first half of 2019, he added. It started with AIG but then other big standard market carriers like Travelers, CNA and The Hartford, began shedding unprofitable INSURANCEJOURNAL.COM
business. All of that “shedding and dumping” is going into the nonadmitted channel and there’s a lot of it, Turner said, estimating it has spiked 30% in the first six months. Turner says the E&S market has been around 10% of the total P/C commercial market for the past eight to nine years, and it’s never been larger than 15% market share when it spiked in size after Sept. 11, 2001. Today’s insurance market cycle is different, he said, and some believe that the E&S market’s size will definitely grow to 15% of the overall market and may get as high as 20%. Turner said this year will likely increase the size of R-T Specialty’s book by about $3 billion. “We’ll go from $7 billion in premium to about $10 billion this year,” he said. Dave Obenauer, CEO of CRC Group, says the market is “probably the most challenging market in at least 15 years,” but with a key difference from the past. “It’s not the hard market like we saw 20 years ago when everything peaked and went up quickly all at once.” Instead this cycle has been more of a gradual and sustained market. Obenauer says terms and conditions have firmed up along with pricing. In his view, it’s a “new” hard market. “And certainly a lot more challenging environment than it has been in many years.” Tom Jurgen, senior vice president, brokerage underwriting, Nationwide, believes the E&S market couldn’t be better than it is today. “Even in light of the catastrophic events that have happened in the last couple of INSURANCEJOURNAL.COM
years, the market couldn’t be stronger, and from my perspective it’s really in a good position to move forward,” he said.
Opportunity in Chaos
James Drinkwater, president of AmWINS Group Inc. and AmWINS Brokerage, describes today’s market as highly dynamic, somewhat chaotic, but hugely opportunistic. Drinkwater says that organic growth for P&C transactional brokerage business and small commercial business has trended up more than 20% for his firm during the past year. AmWINS places about $16 billion in premium volume through five business segments. Drinkwater sees the biggest opportunities coming from four sectors: real estate, some areas of construction, health care/long-term care, and transportation. “These classes of business have been the toughest four classes of the business that we’re seeing today,” he told Insurance Journal. For R-T Specialty, the most significant increase in business has been in habitational real estate. “That’s the heaviest flow into the channel right now,” Turner said. Second to that has been construction; third, any catastrophe affected property business; fourth, certain types of professional liability including public D&O and nursing homes, and, finally, transportation. “These are great times for wholesaling and for the E&S market,” Turner said. “We’re under a lot of pressure as an industry to respond effectively and to execute on behalf of retail agents and markets.
That’s a great opportunity for us in this sector of the industry to perform at a high level.” He’s confident wholesalers and surplus lines insurers will rise to the occasion.
Getting Analytical
The use of data and analytics as well as a focus on distribution efficiencies are contributing to the movement. Jude DiBattista, senior vice president and head of Excess & Surplus Property & Casualty, at QBE North America, says data and analytics are helping to give underwriters a better view. The days of just using only historical exposure and losses to underwrite an account are gone. “There’s a lot of good things happening in the E&S market today and I think technology is one of them,” DiBattista said. “Technology is going to help us underwrite and identify emerging issues and trends better.” In the next 10 years, DiBattista says, the E&S sector will continue to see progress built on innovation. “Any new product that comes in, emerging issues or trends where the problem needs solving, comes to us,” he said. The future E&S market, like the broader insurance market, will be built on data and analytics. “It’s going to play a major part in assisting people to analyze risk and build different products. We’ll never lose that human touch that we have now in E&S — that gut feeling you have when you’re underwriting an account. But data and analytics will be an assistant to the underwriter to make better calculated decisions.”
E&S Riding High
T
he 11.2 percent jump in surplus lines direct premium written in 2018 is the largest growth since 2011 (11.8%), according to A.M. Best’s Surplus Lines Market Segment report published this month. Despite profit margins that remain below the levels achieved several years ago, the E&S sector’s premium rose for the seventh year in a row, Best said. “Catastrophe-driven losses and market competition led to an underwriting loss for the segment for a third consecutive year,” the report said. “Owning to investments, the surplus lines segment’s pretax and net income both grew significantly in 2018, following three years of profit declines.” Premium growth is continuing in 2018 at an even faster pace than last year. Mid-year premium growth reported by the 15 E&S stamping/service offices has reached almost $18 billion, based on data reported halfway through 2019. This growth represents a 12.7% increase over mid-year 2018, according to Texas E&S officials. All but one (Nevada) of the 15 service office states experienced premium increases, while 13 also recorded increases in policy filings. The largest gains: Minnesota (24.6%), Arizona (21.1%), North Carolina (18.9%), California (18.2%) and Idaho (15.7%).
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Special Report: Surplus Lines The Remaking of
Disgrace Insurance By Andrew G. Simpson
A
s co-founder and chief executive officer of the predictive analytics firm Spotted, Janet Comenos knows a lot about famous actors, artists, athletes and celebrity advertising. Her Boston startup matches companies with celebrities for endorsements and advertising. But lately Comenos has been learning a lot about insurance and talking about it with the enthusiasm of a celebrity at her own premiere. She is excited
about her new insurance subsidiary, SpottedRisk and its first production, a remake of “Disgrace Insurance” that she says is nothing like the original. “My only regret in running this business is that I did not discover insurance earlier,” she exclaimed at the outset of an interview with Insurance Journal. The reality is that celebrities — such as Bill Cosby, Felicity Huffman, Kevin Spacey, Roseann Barr, Tiger Woods or others in the news for the wrong reasons — can pose
a risk to companies that do business with them. About a year ago, Comenos began hearing about this exposure from more of her clients. “I started noticing that our clients were becoming increasingly concerned about their risk exposure that they were taking on by dedicating such a significant portion of their marketing budget to one individual celebrity or a small handful,” she told Insurance Journal. The disgraceful events can be damaging not only to reputations but also to the finances
of the studios and brands. They can lose business due to the public backlash but even more damaging, they may need to pull out of contracts and put on hold or sometimes entirely scrap costly productions. Comenos believes this concern is unlikely to fade given the growing popularity of social media and the rise of the #MeToo movement.
Lloyd’s Legacy Product
The Spotted executive was Googling risky celebrity behavior when she came across what she thought could be a solution: a Lloyd’s of London product called disgrace insurance that has been around for several decades. She and her team determined that the product as it was being sold would not be adequate for today but that the disgrace insurance concept was ripe for reinvention. Working with brokers including national wholesaler AmWINS and carriers writing at Lloyd’s including Markel and Talbot, Spotted studied the original product closely to better understand what needed to change. First, previous underwriters had few guidelines to assess the risk of the talent and their propensity to be involved in a future disgrace event. As a result, they would place low limits on the policies, typically from $250,000 to $500,000. “It was almost like a throw-in product that had a high deductible,” claims Comenos, who said these limits made the product unattractive to large
continued on page 34 32 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
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Special Report: Surplus Lines continued from page 32
brands or studios that might be paying from $25 million to $100 million a person or a production. The legacy product also had exclusions that reduced the value of the coverage. Underwriters rejected cases involving celebrities with any reported misbehavior in their past, as well as bad behavior that did not surface until after the policy went into effect. William Dixon, a senior vice president at AmWINS, said the prior approach to underwriting was also too invasive. “Studios felt that it put them at odds with their talent, asking types of questions that they typically wouldn’t have to ask but for this type of coverage,” he said. Finally, the legacy product relied on an ambiguous and subjective trigger for claims. “It said a disgrace was any behavior that puts the named individual into disrepute. So something you may deem disgraceful, I may not, and vice versa,” Comenos explained.
Reinvented Product
Spotted and its partners weighed these issues and their knowledge of analytics in remaking disgrace insurance. Although it carries the name disgrace insurance, Spotted’s Lloyd’s product is quite different from the original. “We systematically improved every part of the product,” Comenos said, boasting of building “very robust underwriting guidelines” that convinced eight Lloyd’s markets to put up limits of up to $10 million per policy. In its version, Spotted has eliminated all behavioral exclusions. Instead it uses its database of more than 26,000
famous people along with its predictive models to assess the risk that individual celebrities pose and price the risk for carriers.
‘We systematically improved every part of the product.’ Spotted covers just about “every imaginable type of talent” including actors, musicians, athletes, TV hosts, comedians, models, directors, producers, writers, influencers, chefs, artists and others. Spotted also simplified the process for retail agents accessing the product through a wholesale broker. “All we need is the named individual and then a little bit of detail around the size and scope of the production or endorsement deal and the length of it. That’s it,” said Comenos. “Then we handle all the underwriting, deliver a rate to our Lloyd’s consortium, and then the policy is bound.” According to Dixon, Spotted’s use of its proprietary database of “hundreds of data points” on each celebrity addresses the invasiveness problem while also simplifying the process. “That is the magic, that the ease of submission has just been amplified 1,000 times,” he said. If something bad does happen, Spotted, with what could be its most important invention, offers a unique way to objectively assess how bad the disgrace is and how much a claim is worth. The startup has developed the Public Outcry Index that scores the public’s recall and perceived severity of a disgraceful behavior. The index is based on a survey with
34 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
26 questions that are asked of different groups of people over a period to understand if they can recall the event and how severe they think it is. The index, which was developed in partnership with the research firm Kantar, determines how serious the incident is and how much will be paid out. “There has not been an objective measurement in the past. We are the first,” the Spotted executive said. The insured may choose limits up to $10 million even if it only paying the celebrity $2 million. “A lot of the damages are actually immeasurable,” says Comenos. “The damage to the brand could be far more than what they pay the celebrity. It’s reputational damage that we’re helping compensate the client for.” While Spotted’s policy lets insureds recoup losses associated with disgraceful behavior, it also provides post-incident analysis and crisis management assistance to mitigate the damage. After a disgrace is made public, the client can receive Spotted’s public outcry analytics to help decide what to do, whether the company should fire the celebrity, issue an apology, or even go so far as to shelve a production if only temporarily. AmWINS thinks Spotted’s approach is groundbreaking. “The fact that they have their own proprietary analytics and that they use a parametric trigger that is objective and is based on the public outcry, the shock value of it, is of great interest to us,” Dixon said. Dixon believes this reinvented product will be popular but that there remains an educational challenge to
“deliver the information that will differentiate this product from previous ones and make it of great interest.”
First Product
Spotted’s first disgrace insurance product is being targeted to companies that hire famous people, including film studios, film and TV financiers, brand advertisers, and sports teams and leagues. The product just launched this month. Comenos said there has been interest from Hollywood financiers and lenders as well as from studios, production companies and brands. Even though Spotted has just begun to market the celebrity product, its already at work on a second product focused on executives. The public outcry index will be calculated differently for executives whose exploits are typically less well known than those of celebrities. Comenos said research has shown that executive misbehavior can have a short-term and longterm effect on the perception of a company. AmWINS’ Dixon said he thinks the executive product might be a complement to directors and officers liability. James Drinkwater, president of the North Carolina-based wholesaler AmWINS, has even higher hopes. “We are eager to support Spotted as we believe that this way of looking at risk will only evolve to other areas of the market that have the same fundamental issues – an innocent third party now has the ability to protect themselves from the bad behavior and the poor judgement of an associate or employee. This is much more than a Me Too product,” he said. INSURANCEJOURNAL.COM
Special Report: Surplus Lines The Importance of a Healthy E&S Market By Patrick Wraight
T
here is a special segment of the insurance industry that can be maligned at times because of how it operates, but it is critically important to a healthy insurance marketplace. That industry segment is the excess and surplus (E&S) market. In Florida, when the state legislature was considering approving creating a homeowners’ insurance marketplace, it debated allowing surplus lines insurers access to it. Advocates believed that a marketplace would allow homeowners access to more carriers, while those who opposed it felt like consumers could suffer greatly due to the unregulated (or looser regulation) nature of the E&S market. In truth, the E&S market would likely have served homeowners well by entering that marketplace. What were those detractors really concerned about?
Unregulated Market?
E&S companies are loosely INSURANCEJOURNAL.COM
regulated. However, given that insurance is so heavily regulated, we can’t really say that they are unregulated — they are regulated differently than admitted companies. E&S companies don’t have to file their rules, rates or forms with the state where they are transacting business. This means that the state doesn’t approve companies’ risk selection criteria. This means that they can choose whatever risks they believe fit them best at the time. They don’t have to choose what risks they want in advance and stick to those criteria. E&S companies can also charge the premium that they want to charge for the risks that they select. The state doesn’t oversee their rate selection and doesn’t guarantee that those rates will be sufficient
The E&S market relieves some of the strain from the admitted and residual market by providing coverage for those risks that neither market wants to cover. to maintain their solvency without being so high as to not be affordable. The companies don’t file their forms, which means that insurance agents and consumers have a higher responsibility to read the policies that they receive. E&S policy forms may look
like admitted forms, but they may have exclusions that a standard market carrier couldn’t have. They may also contain policy provisions that make it more difficult for the customer to make a claim
continued on page 36
SEPTEMBER 16, 2019 INSURANCE JOURNAL | 35
Special Report: Surplus Lines continued from page 35
against the policy. In the end, the biggest problem that regulators saw was that the loosely regulated nature could create problems for consumers. With loose underwriting rules, no pricing guidance and unregulated forms, consumers could be in a world of trouble. That’s what the detractors say. However here’s the other side of the story.
Why E&S Makes the Overall Market Better
A strong E&S market makes the admitted market and residual market stronger. Consider what risks the E&S market is going to write. These are the risks that the admitted market won’t write. There are many risks that admitted markets just can’t write. They either didn’t file to write that business, or their underwriting rules won’t allow them to write it. It may be a business with a risk profile that the carrier isn’t comfortable with. It could be the location of the buildings that are a problem (high flood risk or high hurricane risk). Without a strong E&S market, many of those risks would be forced into a residual market. The residual market is
designed to provide coverage for those risks that should be able to buy insurance, but because of certain factors, they can’t find coverage in the admitted market. This might be risks with buildings in coastal areas or in flood prone areas. Expanding the residual market is a problem because in many cases, if losses exceed the financial ability of the residual market to pay, the claims get paid but customers in the admitted market may be required to pay fees or assessments to make up the difference. The E&S market relieves some of the strain from the admitted and residual market by providing coverage for those risks that neither market wants to cover. This includes the admitted market, because of the rules carriers must abide by, and the residual market, because of the weight of their burden. A strong E&S market can be a bed of innovation for the admitted market. There are risks that the admitted market is not prepared to write for many reasons. Going back to required filings, admitted markets do not generally respond quickly
36 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
to emerging risks. When carriers identify a new risk that they might be interested in writing, they have a process to follow. Consider the cyber liability market. A carrier would have to discern what the actual risks are, including the likelihood of those events happening. They would be faced with more questions than answers. They would have to research potential risks and then identify the risk exposures that they want to write and the exposures that they want to exclude. Once they identify those exposures, they have to work to determine how price those risks. Without actual data to confirm pricing, carriers would struggle to justify their pricing with insurance departments, some of which can be strict on pricing. Without data to come up with a rating structure, many admitted insurance companies would just as soon pass on the opportunity. The E&S market doesn’t have the constraints that the admitted market does. If a risk is submitted, they can make a decision about whether they have the capacity to write it. They can gather information about the risk and make their decision. They can learn by tri-
al and error which exposures to exclude, and which exposures are critical to write (even if they are of a higher risk). They can experiment with the pricing until they find the price that the provides the coverage that the risk needs while allowing them to make a profit. They can learn what price the market will bear. They can innovate on the fly and create some consistency over time. Once they learn about the risk, including the rules, rates and forms that are appropriate, it’s only a matter of time before the risk gets the attention of some enterprising admitted carrier, who will dip its toes into the market.
Strong E&S Market A strong E&S market specializes in fringe insurance. The quarterback with insurance on his throwing arm. The soccer player with insurance on her legs. The golfer with insurance on his arm. The singer with insurance on her voice. We have heard the stories. Some are real, and usually the most unbelievable stories are true in this space. These risks are so unique that no admitted market would be able to properly insure them, but it’s what the E&S market excels at. The insurance industry owes much to the E&S market. This segment allows the standard market to continue to provide coverage for the risks that it anticipates, while it provides coverage for the risks that the rest can’t think about. Wraight, CIC, CRM, CISR, AU, AINS, is the director of Insurance Journal’s Academy of Insurance. Email: pwraight@ijacademy.com. Website: www.IJAcademy.com INSURANCEJOURNAL.COM
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Idea Exchange: When Words Collide Resolving Claim Disputes:
STEP 3
Research and Document the Interpretation – Part 1 of 3
T
his article introduces a three-part series covering over a dozen largely legal and contractual principles, many of which are used by By Bill Wilson attorneys to resolve contract disputes. Most of them can also be used by agents and consultants to resolve insurance policy disputes without resorting to litigation. The first article in this series is devoted to a single principle that plays a role in a majority of claim disputes — ambiguity. While this entire 12-part series is presented largely from the perspectives of the agent and policyholder, many of the principles and practices can be applied from the carrier side. Undoubtedly, any adjuster can provide dozens of examples of where a claim is clearly not covered, but the adjuster is frustratingly unable to
38 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
convince the agent and/or policyholder. Many of these principles may be just as effective in demonstrating that a claim is not covered as it is in arguing that a claim is covered.
Contra Proferentem
The doctrine, based on contra proferentem (“against the offerer”) that insurance policies are, for the most part, contracts of adhesion was explained in last month’s column. If a policyholder can demonstrate that policy language on which a claim denial is conditioned is ambiguous, then a court will often reverse the denial. The logic for this, in large part, is that the insured did not draft the insurance contract, and any ambiguity should be interpreted in favor of the policyholder.
‘Weasel Words’ and Tergiversation
Creating and editing insurance policies and drafting insurance contract language is incredibly difficult. The challenge is to
meet state regulatory readability tests and create a legal contract that is understandable to the layman, while using language and structure that is precise enough to meet the legal clarity standards imposed by attorneys and courts. As a result, sometimes the chosen form language might not be able to meet all of these goals. For example, most dwelling policies and some homeowners policies only cover personal property “usual to the occupancy as a dwelling.” So, would snow skis be considered covered property in such policies? Snow skis in a dwelling in Vail, Colo., are probably quite common, but perhaps not in Phoenix. So, what constitutes covered property under the same policy might depend on the location of the dwelling or on other unique facts and circumstances of the exposure or claim. To quote Supreme Court Justice Oliver Wendell Holmes Jr., “A word is not a crystal, transparent and unchanged; it is
continued on page 40
INSURANCEJOURNAL.COM
Idea Exchange: When Words Collide continued from page 38 the skin of a living thought and may vary greatly in color and content according to the circumstances and time in which it is used.” The same can be said of insurance policy language. Most commercial general liability (CGL) policies have a coverage territory, although some coverage might extend on an international basis to an employee who resides in the territory “but is away for a short time on your business,” as the ISO CGL policy says. So, what constitutes a “short time”? A week? Two weeks? A month? Three months? Why would a policy use such a broad, vague term? Some policyholder attorneys might refer to this as tergiversation, which is the use of an intentional ambiguity to avoid a clear action or answer. In the vernacular of some plaintiffs’ attorneys, the phrase “weasel words,” is used, meaning their vagueness enables insurers to weasel” out of claims. Knowing that most insurers generally abhor ambiguity (see the “vermin” example below) because it makes risk assumption and pricing difficult, I suspect the reason for this language has to do with the fact that contract language preciseness is either difficult or this particular verbiage might allow more flexibility and less restrictiveness than a specific time limit. As a matter of good faith, hopefully the phrase “short time” would be interpreted favorably for the insured.
Semantic vs. Syntactic Ambiguities
Ambiguities come in two major flavors. Semantic ambiguities involve the “choice of words,” their meaning and their contextual use in the contract, and within the facts and circumstances of each claim. Syntactic ambiguities involve the “arrangement of words,” including sentence structure, punctuation, tabulation, connectives, nouns, verbs (and their tense), adjectives, adverbs, prepositions, etc. With regard to semantic ambiguities, take for example mice, rats, squirrels, roaches, bedbugs, carpet beetles, snakes, turtles, bats, pigeons, owls, raccoons and skunks. What do these creatures have in 40 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
common? They have all been cited in claim denials involving policies that excluded damage caused by “vermin.” In each instance, the agent was able to get a reversal on the denial except for those that were birds, rodents or insects, and specifically excluded as such elsewhere in the policy.
Avoiding or preventing a claim dispute is a far better approach than trying to resolve a denied claim after the loss has occurred. The ability to do this is what separates good agents from not so good agents, and from insurtechs that say they can insure someone in 60-90 seconds. Years ago, I did extensive research and could not find a single precedent-setting court case that had upheld a vermin exclusion (other than critters like bedbugs and rats) as unambiguous. As a result, ISO removed that exclusionary term from its homeowners policies to eliminate the ambiguity. (To read the article I wrote, simply Google “what is a vermin” and the article should be the first nondictionary result listed.) My experience has been that semantic ambiguities are far more common in claim denial challenges than syntactic ambiguities. Yet in many cases, an ambiguity may be created by a combination of the choice of words and their arrangement. This is particularly true in policies that organize exclusions in tabular lists. I have used the two interpretative rules below on countless occasions to successfully reverse denied claims involving lists of exclusionary terms.
Noscitur a Sociis
Noscitur a sociis is a Latin phrase that roughly translates as, “it is known from its associates.” I can’t overstate how powerful this interpretive rule is in determining the meaning and context of policy language, especially in the case of exclusionary terms that are most often the subject of coverage disputes. Take, for example, a claim I mentioned in my February column. A warehouse was insured using the ISO CP 00 10 Building and Personal Property Coverage Form, and the ISO CP 10 30 Special Causes of Loss form. The latter form covers damage to property caused by vehicles. In this case, a truck slammed into a loading dock causing about $6,000 in damage. The adjuster denied the claim, citing the Property Not Covered section of the CP 00 10, which excluded damage to “bulkheads, pilings, piers, wharves or docks ...” In the listing of “bulkheads, pilings, piers, wharves or docks,” the meaning of the word “dock” is “known from its associates” (noscitur a sociis). In other words, examining the other four classes of property in the same list enables us to determine that “dock” refers to a waterfront structure, not a loading dock on a warehouse. In another case, a contractor was using mobile equipment to tear down a retaining wall around a storage tank. The operator lost control of the vehicle and damaged the tank. The adjuster denied the claim under the CGL policy, citing this exclusion: “The use of ‘mobile equipment’ in … any prearranged racing, speed, demolition or stunting activity.” The adjuster’s logic was that the equipment was used to “demolish” the retaining wall and, thus, excluded. However, the use of the word “demolition” must be viewed within the context of the entire listing, which includes the terms “racing, speed … or stunting activity.”
continued on page 42 INSURANCEJOURNAL.COM
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Idea Exchange: When Words Collide continued from page 40 Clearly, these refer to vehicle competitive activities such as a demolition derby. In this case, the denial had already made its way into the hands of the insured’s attorney, and my role was to write a short letter explaining the use of “noscitur a sociis” and the claim was quickly settled. Noscitur a sociis, again, is a powerful tool I’ve used enumerable times to quickly resolve claim disputes involving exclusionary policy terms, from wear and tear and mechanical breakdown to pollution claims.
Ejusdem Generis
Ejusdem generis is a Latin phrase that roughly translates as “of the same kind, class, or nature.” Its use is similar to that of noscitur a sociis in that it usually involves a list of terms, but in this case one that ends in a catch-all category. Whether a particular object or event not specifically referenced in that list is subject to the exclusionary function of the listing depends on its similarity to the other items in the listing. If that explanation is confusing, three illustrations might help. President Clinton was impeached by the House but acquitted by the Senate. A president can be impeached for “treason, bribery, and high crimes and misdemeanors.” The question is, what constitutes the catch-all phrase “high crime or misdemeanor?” That’s an ejusdem generis question. The legal consensus was that such illegal activities must rise to the level of treason and bribery, and presumably the Senate collectively decided that this was not the case for the president’s actions or that the term was ambiguous. (Disclaimer: I am not an attorney or legal scholar, so this explanation comes from a layman’s apolitical viewpoint.) 42 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
In a more practical and insurance-oriented example, an expensive carved wooden bowl was broken. The adjuster denied the claim under the insured’s homeowners policy, citing an exclusion for “breakage of art glass windows, glassware, statuary, marble, bric-a-brac, porcelains, and similar fragile articles.” The question is whether a wooden bowl is “similar” in both nature and fragility to the items listed. Our position was that it was not, or that it was ambiguous to the point that such ambiguity had to be interpreted in the favor of the insured. In another case, not a claim but a coverage dispute involving a new business homeowners application, a detached garage was separated from the dwelling by a covered breezeway that was roofed but without sides. The question was whether the garage was part of Coverage A, or if it was a Coverage B structure. At issue was the adequacy of the Coverage A and B limits, depending on what coverage the garage structure fell under. The homeowners policy defined Coverage B to apply to structures separated from the dwelling by clear space or those “connected to the dwelling by only a fence, utility line, or similar connection.” The question was whether the covered breezeway was “similar to” a fence or
utility line. The new agent and underwriter agreed that it was not “similar,” and therefore, the value should be included in Coverage A. In addition to illustrating the meaning of ejusdem generis, this last example also is an excellent example of how resolving coverage issues prior to loss, as discussed earlier in this series, may prevent a claim dispute later. Avoiding or preventing a claim dispute is a far better approach than trying to resolve a denied claim after the loss has occurred. The ability to do this is what separates good agents from not so good agents, and from insurtechs that say they can insure someone in 60-90 seconds. It’s not that easy.
Research and Document Your Interpretation
So, in the preceding claims, whose interpretation was right? The answer is no one, everyone and it doesn’t matter. Resolving claims is very often not about right or wrong, or correctness or incorrectness. It is often enough just to establish through logic and language, supported by a preponderance of the evidence, that a term in dispute is ambiguous. In the next two installments of Step 3 in the resolution process, we will examine several other principles you may be able to use to resolve coverage and claim disputes. Your knowledge and understanding of policy language is critical, as is your ability to use logic and reason supported where possible, by research and authoritative resources. Wilson, CPCU, ARM, AIM is the founder and CEO of Insurance Commentary.com, and the author of the book “When Words Collide: Resolving Insurance Coverage and Claims Disputes.” He may be contacted at bill@ insurancecommentary.com. INSURANCEJOURNAL.COM
Idea Exchange: The Competitive Advantage The Missing Value Proposition of
High Quality Agents
know how all agencies operate, but that is probably a reasonable statistical universe. The majority of agencies do not give proper advice, and many are encouraged not to provide such advice, so they can avoid E&O claims based on the presumption they are professionals. I’ll start shooting there.
Arrow #1: My first arrow is aimed at the ludicrous advice to not be a “professional” because it increases one’s standard of care. The reality is that most E&O advisors and attorneys are chickens for not admitting the truth – that they have lost faith in most agents’ ability to be a professional. Therefore, they advise agents not to attempt to be professionals and not to advertise that they are professionals, unless they are really going to be a pro with all of their clients. I am being straight here rather than hide behind a spurious argument. To put it differently; name anyone who needs an amateur agent. The best way to avoid an E&O claim is to be an amateur because you’ll run out of clients and without clients, it is difficult to incur an E&O claim. Arrow #2: My second arrow is for those
I
was having dinner with a close friend who is retired, has no debt and has decent wealth. He asked me why I think he needs insurance. He was wondering if insurance at this stage of his life was a waste. My heart sank. This is an incredibly smart person who By Chris Burand has been buying insurance for 40-50 years and no one, not one single agent that he can remember, ever explained to him why he needs insurance. Evidently, he only purchased 44 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
insurance from order takers instead of professionals. That is sad. Here is an arrow aimed at the heart of the hypocrisy of so many agents, consultants, carriers and associations. Independent agents have an exquisite ability, in fact they are the only insurance distributors with the full ability, to provide high quality advice and education. Yet agents fail to fulfill this purpose, over and over and honestly, many do not even try. I have been doing E&O audits and teaching insurance classes for 25-plus years. I have met and spoken to maybe 5,000 to 10,000 agents, so I do not
who argue that artificial intelligence (AI) can’t replace humans in offering quality advice. That argument assumes humans are offering quality advice. AI advice can’t, literally it would be impossible, offer worse insurance advice than many human agents. After all, how much worse can it get than the court case where the agent advised the insured, directly advised the insured, to not purchase flood insurance. The insured’s house was around a foot above sea level and they were on the water. Guess what happened? Or, the agent who advertised he was an expert at insuring in-home businesses, but did not know anything about the endorsements required to insure in-home businesses? Or the agent who advised kids they should be insured on their parents’ auto policies even though their parents had no insurable interest in their vehicles and
continued on page 46 INSURANCEJOURNAL.COM
Idea Exchange: The Competitive Advantage continued from page 44 the kids were married and living in their own homes? Or, how about the dozens of agents who have asked, “I actually have to read the policy to know what is covered?” I’d vote for AI any day.
Arrow #4: A huge distinction exists
between different kinds of distributors. I asked this friend about what kind of agent he had. I explained certain kinds of agents are true agents of the insurance carrier. Other than fraud and complete misrepresentation, in most states, Arrow #3: To provide quality advice these agents do not owe good advice to to clients, agents the insured. If need to converse something goes with clients. How wrong and one does having a tries to sue the service center agent, they are rather than you really trying to sue service an account the carrier, so the achieve this insured’s options necessity? How are rather limited. does following consultants’ advice to One of the best-selling points for lower your cost by not talking to clients independent agents is that independent at renewal enable you to provide quality agents can be sued. They can be sued advice? Remember, no one needs to pay more easily because they work, at times a 13% commission on renewals for an under the legal theory of duality, for the agent to do nothing. That is a waste to insured. They owe the insured a duty of Manufacturers PRINT.pdf 1 8/12/19 the carrierA&M and the insured. care. 9:09 Now,AMif one hides behind the blan-
Agents who do not provide quality advice and service to all their clients are grossly overpaid and insurtechs know this. You are their target.
ket of not having much of a standard of care, this value proposition is wasted. But the opportunity to separate one’s self from the masses exists. Hiding behind the “I don’t really have a duty to advise” defense is a lemming defense.
Arrow #5: Agents who do not provide
quality advice and service to all their clients are grossly overpaid, and insurtechs know this. You are their target. They are not aiming at the high quality agents.
Arrow #6: Insurance education as it is
typically obtained today is inadequate. CE ruined quality education by turning the focus to hours rather than quality. This is made worse by the CE classes that are available, whereby you can click a button every so often while doing other work. I explained to my friend how a good agent would have first had a conversation with him regarding his situation. Since he did not remember his agent and whether the agent was an independent agent, it was obvious no such conversation had occurred and therefore, the agent was likely worthless. I then explained how his issue was not relative to whether his home burned down. First, the odds of a home burning down are almost nothing. Second, he had no mortgage and has the money to rebuild if he wants to do so. Insuring the property was a moot point but that was the only point of insurance anyone had ever explained to him. I explained his real reason for purchasing insurance is for fraudulent liability claims and the defense costs associated with such claims. I explained he needs more coverage than he has. I gave him many examples of such claims. He was astounded and had never thought people like him were sued for such ridiculous events. I also talked him into finding a quality agent. Quality agents can and do make life changing positive differences in people’s lives. Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-4853868. E-mail: chris@burand-associates.com.
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Idea Exchange: The Wedge
Enduring Pain on the Path to Success
D
o you ever get sick of hearing about professional athletes like Tom Brady, Tiger Woods and Steph Curry who have tremendous By Randy Schwantz success because of their work ethic and ability to endure pain? Or maybe you’re tired of stories about the special forces like the Green Berets, Navy Seals and Army Rangers, and the six months of hell they go through to become the elite hardened warriors that have earned our lasting respect? Or what about the 14-year old kid that gets out his Fender Stratocaster and plays, practicing the same lick over and over and over, until he either gets it down or his fingers bleed? I was watching Dan Rather interview Toby Keith, a country music star most of us have heard about over the years. Toby loves music, but he made his living as a roughneck working on an oil rig along with his dad. When a recession hit the oil industry, his dad retired and Toby decided 48 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
to follow his dream, playing music. Ten years later, after playing every little bar in any town he could find, he had a breakthrough. He wrote a hit song. Ten years of bleeding with his pencil all over a piece of paper, trying to write lyrics and a lick that would resonate with a big audience. The only thing that got him through was his ability to endure the pain of no money, small audiences, sleeping in crappy hotels and the dream to someday make it. Enduring pain, practicing your craft, mastering your mind and improving your skills. It’s the same whether you’re an athlete, a warrior, a musician or a salesperson. But, too many of us look at the highlight reels of the rich and famous, those applauded for being the best and can easily fall into the trap of thinking they got where they are, without putting in the blood, sweat and tears that were necessary to hone those skills, mold that mindset, chisel that intellect and grow themselves into the masters we witness today. Last week I was teaching a group of producers The Wedge sales process. It’s not unusual that about half of the people in the class are a bunch of marshmallows.
The last time they did any hard work was in high school when their coach busted their butt for slacking off. I asked the group, “Any of you ever play sports?” About half the group raised their hands. “Any football players?” Still a bunch of hands went up. “Anyone play quarterback?” One guy raised his hand. “Ok, let me ask you this, did you have a playbook in high school?” Yes, sir. “How many plays?” I asked. He said about 60. “Did you have to memorize that playbook?” Yes, sir, I did. “Great, come up here and draw one on the white board for me.” And, he did. So, I asked him to draw another one, then another one. “Nice job bud, you obviously learned your high school playbook really well. How long ago was that?” He responded: “About eight years ago.” “Awesome, could you draw all 60 plays if I gave you the time?” Yes sir, I believe I could. “Good. Now that I know you are loaded with a good mind, a good memory, a
continued on page 50
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Idea Exchange: The Wedge continued from page 48 smart guy, I want you to draw your sales playbook for me. When you get that done, then draw out, in any way you want, your service differentiators.” I tore six clean pages off the flip chart, pasted them on the wall and said, “Go to work.”
The other 29 producers sat there quietly, their jaws dropped, their eyes bugged. I could easily read their minds: They were sitting there thinking; glad that’s not me. Here is the point. This former quarterback is a smart guy, a talented kid. He has virtually unlimited potential as a producer, a professional salesperson. But the fact is,
he’s never been challenged to be anywhere near his best. Unlike his high school football coach, no one told him to study a sales playbook until he had it mastered. In fact, not only did they not expect him to master a sales playbook, they never even gave him one. So, if you want to be an elite producer, an epic performer, a hero to your kids, you have to do the work. Are you capable? No doubt you are, but you must endure the pain of loneliness, hard work and repetition. You need a plan. You need to role play with a partner, write out your sound bites and rehearse your scripts. Let’s take this one step further: I recently asked a group, “How many believe that you are a professional salesperson, you just happen to be selling insurance as your product?” Most of them raised their hands. “OK, as a professional salesperson, how many books have you read on selling in the past five years? Just hold your fingers up.” You might be amazed that two-thirds of them raised either zero or only one finger. Professional salespeople that have read zero books on how to sell. One of the beautiful things about the insurance business is this: There is no limitation on the number of prospects out there — it’s endless. And, there is no limitation on the amount of product to be sold. Insurance companies all over the country are begging for more premium in their coffers. So, that suggests there is an endless amount of income to be made for someone willing to do the work. But work is hard. Marshmallows don’t like to work. Marshmallows get squeezed and lose their shape. Hopefully that’s not you. Is it time for you to endure the pain of success? Then go to work: Develop your plan. Master your sales process and become one of the elite performers, epic achievers, super producers — because you can. 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: 214-4463209. Website: www.thewedge.net
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Idea Exchange: Ask the Insurance Recruiter Lacking Structure: My Agency’s Biggest Recruiting Problem
Q&A I
You Wouldn’t Sell Without a Plan. (Recruiting Is Sales.)
Q:What are you seeing out there
for experienced insurance talent? I dread recruiting because it’s never easy to find quality people. What are agencies doing to fill critical service roles and recruit producers?
A:
Insurance agencies feed too much into the narrative: “The market is really tight. There are more jobs than candidates.” This isn’t untrue, but if your agency approaches recruiting with a defeatist mentality, then you’re going to struggle. The single biggest hiring issue for insurance organizations, no matter whether the agency has 50 or 5,000 employees, is a lack of structure. They treat the process the same for every position, lump all the resources into one bucket and hope to have successful, equal outcomes. So, how do you know if your recruiting problems boil down to a lack of structure? If you’re guilty of some or all of the following, then yes, you need more structure.
cannot imagine a sales leader telling his or her producers to prospect By Mary Newgard a $5,000 revenue small-business unit (SBU) account the exact same way as a Fortune 500 deal. Your agency knows time, resources and messaging are different based on the target client. The same is true in recruiting. You don’t have a solid recruiting plan if you’re doing these things: • Your job postings look the same for every opening. • You believe a posting on LinkedIn or Indeed will attract producers. • You think most positions can be filled in 60 days. • Your interview process is the same for an AE and a manager. • You hate recruiting fees and avoid third-party help at all cost.
Let’s Start With Postings. (Money Doesn’t Solve Problems.)
This is the “fling it out there and see what sticks” approach. Job applications are the best way to fill open positions, right? Wrong. Here’s how to tell if you rely too much on postings to start your process. • Your first thought is how much it costs per click to post/sponsor/boost a job. • Your applicant flow sharply decreases after 14-21 days. • You threw 90% of the applications in the garbage. • You’re only seeing the same, retread resumes. • You aren’t interviewing any passive candidates.
HR Handles Our Recruiting. (But Openings Affect Everyone).
A hands-off approach to recruiting is
52 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
unfair to HR. Lack of engagement is a real problem among insurance executives. Hiring is frustrating and difficult to navigate when you don’t have structure to lean on. You are pushing 100% accountability to HR if you do the following: 1) You haven’t provided clear, concise information on required skills and experience. 2) You’re “open” on compensation without defining the floor or ceiling to screen candidates. 3) You take longer than 24 hours to respond to submissions. 4) You haven’t said if you want one, two or 10 interviews, and what’s involved in each. 5) You haven’t asked nor care about performance in postings, cold calls or employee referrals.
Food For Thought
There is very little hiring data available for insurance agencies. Capstone compiles its own data on an annual basis to look at trends and help agencies structure recruiting plans. Does this information surprise you or seem familiar? • 60% of agency hiring is account manager/account executive related. • 30% of agency hiring is producer related. • 10% of agency hiring activity is management or technical driven (i.e., claims, marketing and loss control).
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.
INSURANCEJOURNAL.COM
Idea Exchange: Tech Talk Going Digital and Building Relationships By Tom Wetzel
E
very agent I’ve met in the past decade understands the need to adapt in some way to the digital marketplace — a better-looking website, a more effective email marketing program or adding a mobile app. When the discussion turns to improving customer experience, many of these same agents resist the pressure to text clients, accept phone tag as an annoyance but not a roadblock, and see many digital upgrades as less critical
Going digital doesn’t mean abandoning the personal touch.
to building stronger relationship with existing and potential clients. “It’s the personal touch that’s our strongest advantage” is a frequent response. This viewpoint sets up a false “either/or” proposition — that somehow going digital means abandoning the personal touch. Nothing could be further from the truth. Consumers consider timeliness to be the #1 differentiator, more important than professionalism or product knowledge. What this means is that response times must now be measured in minutes, not hours or days. Finding information on the agency website should take one minute instead of five. It matters if no one is available over the lunch hour to take calls or texts, or respond to emails, and the only option in the evening or on weekends is to leave a message. Minutes can mean meeting the expectations of clients and prospects or pushing them away. Sam Friedman, Insurance Research Leader for Deloitte Services, is unabashed in his support of independent agents. In an August blog, he called on agents to “disrupt their own outdated business practices and integrate many of the same tools and technologies being deployed by those looking to displace them.” Friedman’s key points (edited for brevity) include: Going 24/7: Agencies need to have a robust web page and mobile app with intuitive self-service options, and give customers direct access to coverage information, first notice of loss capability, and claims status, at a minimum. Having the option to contact a live person via phone or text, like a doctor with
a service to reach them in case of an emergency, would retain the agency’s key competitive advantage — its customer-centricity. Going virtual: Some insurtechs serve as virtual wholesalers and incorporate legacy retail producers into their business models. Joining such platforms can extend an agency’s market reach among those who may want to window shop for insurance online, yet might still be convinced to opt for an expert intermediary who can get adequate coverage at a competitive price, while providing value-added risk management advice and claims support. Going electronic: Enabling electronic signatures, policy delivery and proof of insurance certificates can make doing business with brick-and-mortar agencies much more convenient than asking clients to come to the office or exchange documents through regular mail. Getting automated: Chatbots can help agencies refer calls to the proper people or even directly handle routine queries about coverage or claims, setting or confirming appointments, or seeking preliminary information about buying or renewing policies. Automated systems can also help agents determine placement options for new or renewal business before involving a live producer to close the deal with customers. Getting advanced analytics: Agencies can tap into big data and artificial intelligence programs to identify new prospects and cross-selling opportunities, pre-populate applications, and assess a client’s coverage and risk management needs. This saves agents time and effort, and better prepares them for a face-to-face (or better yet, virtual) consultation with customers. Insurance cannot be sold like a loaf of bread. However agents cannot use that as an excuse to put off adapting to the demands of the digital marketplace. Wetzel is CEO of Thomas H. Wetzel & Associates, an insurance marketing firm for independent agents. Email: twetzel@wetzelandassociates.com INSURANCEJOURNAL.COM
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Idea Exchange: Minding Your Business Financial Management 101
T
ypically, financial management is learned on the job rather than through formal training. Agency owners frequently start off as producers, so selling is their strength, not dealing with credits and debits. It is not unusual for some business By Catherine Oak and owners to dread handling the accounting for their firm. However, it is not good to let accounting and financial management tasks in a firm to suffer because of owner indifference, Bill Schoeffler fear and ignorance of the subject. An agency needs to be financially sound for its clients, carriers and employees. There can also be a selfish reason: sound financial management is necessary to provide owners with their personal income and enhance equity in the business. Basic financial management is easy to learn. Once a system is set up, there's not much to financial management. The key is to develop a system that will be used and not ignored or misused.
Starting Point
A good accounting system is accurate, easy to use and quickly understood by an outside party. The most robust accounting system is integrated with the agency management system. This allows management to see the relationship between the agency’s finances, client accounts, policy premiums and agency commissions. Software like QuickBooks or Excel can be used by small agencies that are mostly on direct bill. But those methods don’t work well when handling fiduciary funds (i.e., agency bill) and there can easily be a disconnect when trying to reconcile the financials to the book of business. An agency should have both an “operating account” for agency money and 56 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
a “trust account” for client money, regardless of local and state requirements. This clarifies the handling of fiduciary funds and helps to avoid the error of showing premiums received as agency income.
Define the Role
In a small agency, the owner should be able to handle the accounting, or perhaps use an outside bookkeeper to enter the data. In most medium to large firms, the agency owner’s role should be strategic, not centered on day-to-day tasks. The owner should focus on monthly or quarterly reports and review budgets. Management should make all decisions based on how they will affect the value of the firm. This focus helps management choose the direction that will lead to more money for their retirement from either the sale of their stock internally, the merger with another firm or the eventual sale of the firm to a third-party buyer. The employee handling the accounting/ bookkeeping will perform the necessary day-to-day functions, as well as prepare reports for management. We recommend that a checklist be created of the typical tasks that person is expected to perform. The following is a brief list of key items to include on all checklists. Some accounting tasks might be handled by the service staff rather than the bookkeeper, such as issuing agency bill invoices.
Day-to Day Bookkeeping
• Issue client agency bill invoices.
• Record and reconcile customer accounts receivable. • Handle bank deposits. • Record and pay agency bill premiums to carriers. • Record and reconcile direct bill commissions. • Review vendor bills and handle disbursements. • Process payroll. • Calculate producer commissions. • Handle collections of A/R over 60 days. • Review bank accounts and cash position.
Monthly
• Reconcile all bank accounts. • Verify all payroll taxes were paid. • Run balance sheet: • Review cash position; • Review receivables and payables; • Calculate ratios: trust, current, etc. • Run aged A/R report: • Review and correct 60-plus days receivables. • Run monthly and year-to-date income statement: • Compare statement to last year, the budget and industry standards; • Analyze any deviations. • Prepare monthly producer statements for owner’s review.
Quarterly
• Make quarterly tax payments. • Perform the following additional analysis to quarterly income statement:
continued on page 58
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Idea Exchange: Minding Your Business continued from page 56
• Calculate changes from prior quarter and last year (net change and percent change); • Estimate projections for the next quarter for revenues and expenses; • Calculate net profit and make recommendations how much should be reserved; • Review investments and debt liabilities.
Semiannual
• Calculate personnel standards (revenue per employee, etc.): • Compare to industry standards; Compare to last period and last year; • Analyze the book of business and CSR workloads. • Provide report to owner with recommendations. (Perform for each producer, each CSR and the agency overall.) • Determine commercial lines and personal lines commission revenues
and the number of accounts handled (add to CSR workload report the number of transactions if possible). • Calculate the average size of accounts: • Compare to industry standards and last year. • Prepare a report showing each market’s volume: • Compare to last period and last year. • Prepare a list of top 50 accounts for each producer and the agency: • Compare to last period and last year.
Annual • • •
Organize financials for CPA to prepare for taxes. Fill out and send annual tax forms, such as payroll and sales taxes. Assist the owners to develop a budget for the next year.
All well-run firms exhibit certain financial management characteristics, including:
• Accounting process is well-defined and followed. • Strong internal controls are in place. • Reviews are performed by independent outside professionals. • Management reviews financial reports and acts based on results. • Forecasts are used to assist with sales management. • Budgets are developed and compared to actual results. • Agency has good control over expenses. • Good communication between accounting and management.
Summary
Financial management might not be fun, but it should be easy. By setting up a system and spending a little time each month, agency owners can be sure their financial affairs are in good shape. Oak is the founder of Oak & Associates, and Schoeffler is an associate. Phone: 707-935-6565.
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INSURANCE INDUSTRY CHARITABLE FOUNDATION
Helping communities and enriching lives, together.
Insurance Industry Charitable Foundation (IICF) is a unique nonprofit that unites the collective strengths of the insurance industry to help communities and enrich lives through grants, volunteer service and leadership. Having contributed $36 million in community grants and over 300,000 volunteer hours, to hundreds of charities and nonprofit organizations, IICF continues to reinvest locally where funds are raised for greatest community impact. #IICFWeekofGiving Join with thousands of your industry colleagues for our annual
IICF Week of Giving October 12–19, 2019 Be a Part of Something Greater Register your volunteer team and sign up for projects at: volunteer.iicf.org As the largest ongoing volunteer initiative in the insurance industry, IICF Week of Giving celebrates industry volunteerism and unites colleagues, competitors and clients in service to charities and nonprofit organizations supporting the communities where we live and work. Midwest Division Kelly Hartweg Phone: (773) 991-2149 khartweg@iicf.com
Northeast Division Betsy Myatt Phone: (917) 544-0895 emyatt@iicf.com
Southeast Division Sarah Conway Phone: (214) 228-2910 sconway@iicf.com
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Primary Flood
Market Detail: SeaCoast Undewriters Inc.
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Extra Expense for Outbreaks
Market Detail: Indemnity Excess and Surplus Agency Inc.’s (www.ies-xs.com) coverage is designed to provide businesses with insurance in the event that their business operations are suspended by a public health official due to a covered contagion, such as Avian Flu, e-Coli, Salmonella and Legionnaires' Disease. Available limits: Maximum $50,000 Carrier: Evanston Insurance Company States: Ariz., Colo., Hawaii, Idaho, Nev., Ore., Texas and Wash. Contact: Jim Heisler at 800-487-2442 or email: jimh@ies-xs.com
Auto Repossessor
Market Detail: The Sirix Group’s (www. sirixgroup.com) program is designed for distressed accounts that are no longer a fit for standard markets or package coverage. Coverages available include: general liability with wrongful repossession limits up to $1 million/$3 million csl; GKLL/ GKDP; driveaway; on-hook; and multi state exposure. Low minimum premiums available. Coverage can be tailored to meet the needs of the insured. Available limits: Minimum $5,000 Carrier: Unable to disclose, nonadmitted States: All states Contact: Helen Tvrdy at 561-244-2597 or email: helen@sirixgroup.com
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Advertisers Index Abram Interstate www.abraminterstate.com W4 American Equity Underwriters www.amequity.com 63 AmWINS Group, Inc www.amwins.com 12, 13 Anderson & Murison www.andersonmurison.com 46 Applied Underwriters www.auw.com 2, 3, 64 Aspen Insurance www.aspen-insurance.com 57 Brecht & Associates www.brechtassoc.com SC4 Brighthouse Financial www.brighthousefinancialpro.com 4, 5 Burns & Wilcox, Ltd. www.burnsandwilcox.com 43 California Earthquake Authority mvp.earthquakeauthority.com W3 Encova Insurance www.encova.com S1, M1 GeoVera Insurance Company www.geovera.com SC5, S3 Golden Bear Insurance www.goldenbear.com 51 Great American Insurance Group www.gaig.com 47 Hallmark Financial Services www.hallmarkgrp.com 45 Hudson Insurance Company www.hudsoninsgroup.com 49 IICF www.iicf.org 60 Insurance Technologies Corp. www.getitc.com 55 JenCap Holding LLC www.jencapholdings.com 23 JM Wilson www.jmwilson.com S2, M2 K&K Insurance Group www.kandkinsurance.com 39 Lexington Insurance www.lexingtoninsurance.com 15 Liberty Mutual www.libertymutualgroup.com/business 21 M.J. Hall & Company www.mjhallandcompany.com W5, W8 Midlands Management Corporation www.midlandsmgmt.com SC7 Monarch E&S Insurance Services www.monarchexcess.com W1 Nationwide E&S www.wearenownationwide.com 7 Nautilus Insurance Company www.nautilusinsgroup.com 26 Northfield Excess & Surplus Lines www.northfieldins.com 28 Pacific Gateway Insurance Services www.pgiainsurance.com W7 Philadelphia Insurance Companies www.phly.com 33 ReSource Pro www.resourcepro.com 50 Risk Placement Services www.rpsins.com 41 RT Binding Authority www.rtbinding.com 9 Ryan Specialty Group www.ryansg.com 16, 17 Ryan Turner Specialty www.ryansg.com 9 Smart Choice Agents Program www.smartchoiceagents.com 37 Tejas American General Agency www.taga1.com SC3, S4 Texas Mutual www.texasmutual.com SC1 United Fire Group www.ufgsolutions.com 29 Worldwide Facilities www.wwfi.com 53 WSIA- Wholesale & Specialty Ins. Assoc. www.wsia.org 58
SEPTEMBER 16, 2019 INSURANCE JOURNAL | 61
Closing Quote Surplus Lines: Innovation Incubator
T By Joel Cavaness
The surplus lines market often serves as an incubator for new insurance products.
he surplus lines marketplace is often viewed as the insurer of last resort, the marketplace for bad risks with poor loss records. But particularly in a time of great economic growth like now — we’re also the place where innovative companies, imaginative start-ups and new government programs look for coverage when admitted underwriters shy away from potential business that hasn’t had the time to accumulate a loss history. That role in the insurance value chain is one of the primary reasons the surplus lines sector has grown significantly in recent years, even during soft market conditions, and continues to do so. The reason for its success is deceptively simple — it’s an industry that’s willing to look at the market in a different way than other players. When the standard market excludes lines of business, we’re ready to jump in and solve the problem.
A Financially Successful Marketplace
A growing economy has helped the surplus lines industry grow, and the industry has returned the favor by supporting economic growth. Look at the skyline of places such
62 | INSURANCE JOURNAL | SEPTEMBER 16, 2019
as Miami today versus what it looked like even 30 years ago and you’ll see why the market has grown. Or look at Texas, where economic growth has been phenomenal. Then look at the transportation industry; truckloads are up, and trucking is expanding as the economy expands, generating the need for coverage the surplus lines industry provides. Another reason for the surplus lines market’s success is its financial stability. We didn’t always have that image. Some potential customers would look at surplus lines, note that the industry wasn’t covered by state guaranty funds and shy away from placing business with us. But the surplus lines market has proven to be a financially successful risk taker, and is a thriving marketplace.
Where Creativity and Expertise Meet
Insurance is the oxygen of business and the economy as a whole. Everybody needs insurance to succeed. But it’s not always easy to get, particularly for new industries. Where did insurance for emerging risks like drones, ride-sharing, and the ever-changing cyber risks come from? It was developed in the surplus lines market. The great thing about the surplus lines insurance industry is that we’re constantly innovating and developing new products to cover new risks. Where standard lines insurers aren’t willing to take on a new risk because it’s unknown or deemed simply too risky, we step in and fill the gaps.
Traditionally, we tailor coverages specific to the risk that’s trying to be shifted or mitigated. Because of the role we play in the insurance ecosystem, we are more capable — in the way we’re structured and regulated — to tailor-make insurance solutions for specific risk exposures.
Solving Tomorrow’s Problems
The surplus lines market often serves as an incubator for new insurance products, which may eventually move into traditional insurance markets. Creativity is what it’s all about. We’ll continue to play that role for emerging risks, as we can see happening today in the emerging crisis-risk coverages. Ultimately, we are selling a promise, a promise to deliver on the impact of a future act. Because we can craft policy wording tailored to best fit the risk, and that coverage is backed by the financial strength of our industry, we’re solving problems for future events. For all of these reasons and more, it’s also a great sector for a new insurance professional to launch a career. The advice I give to people starting their career is to focus on a growing company in a growing industry, and then the opportunities will be endless. We have that in the surplus lines market. For someone who wants to be creative and help solve challenges, our industry can offer opportunities that are second to none. Cavaness is president of Risk Placement Services. INSURANCEJOURNAL.COM
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