Insurance Journal West 2020-09-07 by Insurance Journal

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September 7, 2020 • Vol. 98 No. 17

Contents

News & Markets

Idea Exchange

Special Report

Property/Casualty Insurance First-Half Underwriting, Net Income Drops Tied to COVID

Closer Look: Electric Storage Explosion Highlights Danger of a Growing Technology

Tech Talk: What Does the Future of the Agency System Look Like?

Spotlight: The Rising Risk of Inland Flooding

Minding Your Business: The Closing Window of Opportunity, or Is It?

S&P Says Underwriting in Lloyd’s Market Continues to Improve

Special Report: WSIA Annual Marketplace 2020: Going Virtual

Is It Covered?: ‘All Generalizations Are Dangerous….’

Special Report: Surplus Lines: Solving Risk Puzzles in a Complex World

The Wedge: Optimizing Producer Effectiveness

For 60% of Mid-Sized Businesses, Crisis Management Is Key Unmet Need

12 12

30 32

35 Special Report:

3 Questions for Lloyd’s U.S. Chief Hank Watkins

Departments 6 Opening Note 6 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

18 Declarations

18 Figures

24 People

44 46 50

Closing Quote: Recession Provides Fuel for Agency Start-ups

20 Business Moves

49 My New Markets

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NIMBLE&SMART E&S is at the heart of what we do. We apply cutting-edge technology and leverage data and analytics to drive decisions, informed by our unrivaled expertise developed over 37 years. Discover how we can put the best of E&S together for you. nationwide.com/bESt

E&S/Specialty | AM Best rating of A+ (Superior), FSC XV | Fortune 100 company Nationwide and the Nationwide N and Eagle are service marks of Nationwide Mutual Insurance Company. ÂŠ 2020 Nationwide ESC-0269M1 (05/20)

Opening Note Write the Editor: awells@insurancejournal.com

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

ADMINISTRATION / CIRCULATION

Young and Old Drive Less Safe Cars

een drivers and drivers 65 years and older – two age groups at a higher risk of being involved in an automobile accident – are more likely to be driving vehicles that are less safe, putting them at even higher risk of injury. That’s according to a study from the Center for Injury Research and Prevention (CIRP) at Children’s Hospital of Philadelphia (CHOP) that stresses the need for these groups to prioritize driving the safest vehicle they can afford. The findings are being published Aug. 27 in the journal Traffic Injury Prevention. Both younger and older drivers face unique challenges in reducing their crash risk. Newly licensed drivers have the highest crash risk of any age group, and older drivers have the highest crash fatality rate of any age group, with many of these crashes related to physical changes in health. Additionally, drivers of all age groups living in lower-income neighborhoods are disproportionately represented in fatal crashes, and younger and older residents in those neighborhoods are more likely to face financial challenges in securing a vehicle with key safety characteristics than their peers in wealthier neighborhoods, the study found. The authors say that one promising approach to reduce injuries related to crashes is to ensure drivers are behind the wheel of the safest vehicles they can afford. To better assess the risk presented to these vulnerable driver groups, this study adds empirical data describing the extent to which they are driving vehicles with fewer critical safety characteristics. “Survey studies had previously found that younger drivers were more likely to drive vehicles that were older, smaller and lacked certain safety features, but there had yet to be a population-based study that really explored this question for different ages and income levels,” says Kristi Metzger, PhD, MPH, a statistical scientist at CIRP and first author of the study. Metzger said this is the first large-scale study to estimate the prevalence of important vehicle safety criteria among a statewide driver population. The study showed that teens and older drivers were more likely than middle-aged adults to drive older cars that did not have ESC or side and curtain air bags. Additionally, drivers of all ages from lower-income neighborhoods were less likely to drive newer, safer cars. On average, young drivers from lower-income neighborhoods drove vehicles that were almost twice as old as their peers from higher-income neighborhoods. Young drivers from high-income neighborhoods were 53% more likely to drive cars with side airbags, and older drivers from high-income neighborhoods were 35% more likely to have vehicles with side airbags than older drivers from low-income neighborhoods. “All drivers should strive to be in the safest vehicle they can afford, regardless of age or income level,” says Dr. Metzger.

‘On average, young drivers from lower-income neighborhoods drove vehicles that were almost twice as old as their peers from higher-income neighborhoods.’

Andrea Wells Editor-in-Chief

8 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

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

EDITORIAL

Chief Content Officer Andrew Simpson | asimpson@insurancejournal.com Editor-in-Chief Andrea Wells | awells@insurancejournal.com East Editor Elizabeth Blosfield | eblosfield@insurancejournal.com Southeast Editor/MyNewMarkets Amy O’Connor | aoconnor@insurancejournal.com South Central Editor/Midwest Editor Stephanie K. Jones | sjones@insurancejournal.com West Editor Don Jergler | djergler@insurancejournal.com International Editor L.S. Howard | lhoward@insurancejournal.com Columnists & Contributors

Contributors: Matt Booker, Tony Caldwell, Jim Sams, William Schoeffler Columnists: Catherine Oak, Randy Schwantz, Tom Wetzel, Bill Wilson

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 Web Team Lead Nathan Huebner | nhuebner@insurancejournal.com Ad Ops Specialist Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Terrance Woest | twoest@wellsmedia.com Web Developer Ryan Kleshinski | rkleshinski@wellsmedia.com Web Developer James Wagoner | jwagoner@wellsmedia.com New Media Producer Bobbie Dodge | bdodge@insurancejournal.com

ACADEMY OF INSURANCE

Director Patrick Wraight | pwraight@ijacademy.com Online Training Coordinator George Jack | gjack@ijacademy.com

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News & Markets For 60% of Mid-Sized Businesses, Crisis Management Is Key Unmet Need

early 60% of mid-sized businesses said crisis management remains a top unmet need in terms of reducing risk exposure. At the same time, a little over a third said they’re concerned about rising insurance rates, according to a new QBE North America report. “We need to look to the future and understand what risks middle market companies worry about most to design effective solutions to address those evolving risks, whether it’s a new type of insurance coverage or loss prevention or recovery service,” Tom Fitzgerald, president of QBE North America’s Specialty & Commercial business, said in prepared remarks. The QBE North America 2020 Mid-Sized Company Risk Report, produced with the Association for Corporate Growth (ACG), focused on the top concerns among executives at companies with $200 million to $3 billion in revenues. The report also captures worries tied to the current environment, including pandemic risks, social unrest and 10 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

climate-related concerns. At the same time, it is not all about the pandemic for mid-sized businesses. QBE North America noted that many companies also remain worried about general business risks, citing concerns around financial risks, digital assets, litigation and talent and culture. Businesses had risk reduction shortfalls in all of those areas. Just 37% of mid-sized businesses said they have a pandemic risk mitigation strategy. Only a third (30%) said they have a macroeconomic risk mitigation strategy to combat recession. About 40% reported having a natural disaster risk mitigation strategy, and 25% said they maintain a climate change risk mitigation strategy. Among the additional findings: • Along with crisis management, nearly 60% of mid-size businesses say they are also lacking in customized advice in terms of reducing risk exposure. • Concerning pandemic-related risks, 32% said that ensuring employee safety is a concern. About 22% said it is a top risk.

• • •

33% said the pandemic’s impact on cash flow was a top worry, and 17% called it a top risk. 33% said they were concerned about rising insurance rates; 9% rated this as a top worry. 21% rated operations performance and fraud/theft as a top financial risk. Social unrest ranked as the sixth most concerning business interruption risk.

Among digital risks, cyberattacks (37%), data integrity (35%), and disruptive technology (32%) rate among the biggest concerns for mid-sized businesses. Concerning risks related to litigation, 23% of respondents said they are most concerned about customer lawsuits, underscoring the pressure social inflation is adding to businesses. The survey was conducted by the independent market research firm HawkPartners from June 24 to July 8, 2020 and included more than 300 decision makers at U.S. companies. INSURANCEJOURNAL.COM

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News & Markets Property/Casualty Insurance First-Half Underwriting, Net Income Drops Tied to COVID

.S. property/casualty insurance underwriting income dropped 5.5% in the first half of 2020 versus the same period last year. Higher underwriting expenses and policyholder dividends largely connected to COVID-19 costs are to blame, according to an A.M. Best report. A.M. Best said it drew its conclusion based on carriers’ six-month interim statutory statement, received as of Aug. 19. That data represented about 97% of the total P/C industry’s net premiums written, the ratings agency said. A.M. Best said that the decline in insured exposures stemmed from stayat-home orders and government-ordered business closures in response to the COVID-19 pandemic, which prompted some P/C insurers to provide premium credits. During the reporting period, underwriting expenses increased 5.5%, A.M. Best said, as some companies, including

Progressive, recorded policyholder credits as an underwriting expense rather than a reduction of premium. Dividends to policyholders increased $3.4 billion from the prior-year period, as companies such as State Farm and USAA provided refunds in the form of dividend payments.

Flat Combined Ratio

The P/C industry’s first-half combined ratio remained relatively flat year over year at 97.6. A.M. Best estimates that catastrophe losses accounted for 6.5 points on the six-month 2020 combined ratio, up from an estimated 4.5 points in the prior-year period. The commercial segment loss ratio increased by over four percentage points through the first six months of 2020 compared with its 2019 level. The decline in net underwriting income, coupled with slight declines in net investment and other income, reduced pre-tax

operating income 4.8% from the same period in 2019. Tax expenses were flat, but a $5.5 billion decline in realized capital gains contributed to industry net income decreasing 21.6 percent from the prior-year period to $25.0 billion, A.M. Best said. The full Best’s Special Report is “First Look: 6-Month 2020 Property/Casualty Financial Results.”

S&P Says Underwriting in Lloyd’s Market Continues to Improve

he Lloyd’s market looks unlikely to turn an underwriting profit in 2020 given the pandemic and hurricane season. However, there are signs of improvement, according to analysts at S&P Global Ratings. S&P notes that the COVID-19 pandemic has already caused the market considerable losses, both underwriting and investment, and the North Atlantic hurricane season is still underway. The market did manage to report an 12 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

overall profit in 2019, its first since 2016; however its underwriting remained unprofitable, with a combined (loss and expense) ratio of 102. S&P analysts do see some signs that the market is beginning to turn. Underlying combined ratios have slowly, but steadily, improved since 2017. As rates continue to harden and Lloyd’s cracks down on underperforming syndicates, the overall improvement is likely to continue in 2020-2021. “While the supertanker has not reached its cruising speed yet, it seems to be on the right course for now,” the latest S&P report says. At the syndicate level, S&P said that results over the past five years

indicate that the high level of natural catastrophes since 2015 has hit two types of syndicate hardest: those specializing in catastrophe-exposed short-tail lines; and special-purpose syndicates, which often reinsure the property catastrophe risk of their sponsor syndicates. S&P said its analysis shows that the “maturity of a syndicate is often the best determinant of operating success–size is less important.” The report also notes that Lloyd’s recently overhauled its executive suite and the management team has launched an ambitious project to create the “world’s most advanced insurance” marketplace. “An organization as complex as Lloyd’s takes some time to change course, but in our view, if the Future at Lloyd’s project is well executed, it will enable Lloyd’s to address its historical underperformance and further strengthen its competitive position,” S&P said. INSURANCEJOURNAL.COM

THE TINIEST DETAILS CAN MAKE ALL THE DIFFERENCE WHEN IT COMES TO KNOWING AND SERVICING AN INDUSTRY LIKE NO OTHER.

You need a carrier that specializes in an industry to find an exceptional level of service to match. We make it our business to know all there is to know about manufacturing. And with that deep specialization, comes expertise in underwriting, risk engineering and claims – all working together. All to help you develop customized product solutions that mitigate risk and maximize productivity for your mid- to large-size clients across a number of industries. Add to that an enhanced use of data & analytics, an extensive suite of unmatched capabilities, and a commitment to creating exceptional experiences, and it’s easy to see the difference true specialization can make. The Buck’s Got Your Back.® TheHartford.com/specialization The Hartford® is The Hartford Financial Services Group, Inc. and its property and casualty subsidiaries, including Hartford Fire Insurance Company. Its headquarters is in Hartford, CT. 20-ML-310353 © August 2020 The Hartford

Closer Look: Energy Electric Storage Explosion Highlights Danger of a Growing Technology

About the photo: Image from Arizona Public Service shows the DNV-GL consulting firm investigating the cause of an explosion of the utility’s McMicken energy storage facility.

By Jim Sams

n investigation into the cause of an explosion at an Arizona energy storage facility that injured four firefighters confirms what engineers had feared: Packing lithium-ion batteries tightly together can spark a chain reaction that can cause catastrophic damage and endanger lives. Arizona Public Service is holding off on its plan to aggressively expand battery storage capacity while its suppliers draw up new plans that will reduce the risk of similar accidents. APS has also taken two undamaged battery storage facilities offline until mitigation measures can be devised, said Scott Bordenkircher, director of technology innovation and integration for the utility. Bordenkircher said APS, which serves 2.6 million customers, is letting its peers know that existing standards may not offer protection from catastrophic failures.

16 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

“We’re starting to spread the word,” he said. “There are still gaps in those standards across the industry.” Bordenkircher said APS had been on the verge of signing two contracts to build additional energy storage, but has asked the vendors who submitted the winning bids to go back and review their designs to ensure there are adequate safeguards. Knowledge about how to safely store energy is crucial as utilities invest heavily in renewable sources such as solar and wind, which cannot be cranked up or turned down to match consumer demand. APS plans to add 850 megawatts of electric storage capacity as it works toward a goal to produce 100% of its energy from renewable sources by 2050. A law passed in California earlier this year requires the state’s utilities to obtain 50% of the electricity generated from renewable sources by 2025 and 100% by 2045. The state already has eight battery storage facilities in operation that are able

to stow away 1,132 megawatts of electricity — enough to power about 1 million homes, according the state’s Independent System Operator, which runs the state’s electrical grid. Dozens of other projects are in the planning stages. Until last year, APS was drawing power out of three electric storage facilities. But on April 19, 2019, the McMicken storage facility in Surprise, Ariz. started smoking. After consulting with the contractor who built the facility and other experts, firefighters opened a door to the steel structure that housed lithium-ion batteries to investigate the source of the smoke, according to a report by Underwriter Laboratories Firefighter Safety Research Institute. A few minutes later, a jet of flame shot out an estimated 75 feet from the door. Four firefighters were hospitalized, two of them with traumatic brain injuries. APS commissioned DNV-GL to investigate the cause of the accident. Dr. Davion Hill, energy storage leader for the firm, INSURANCEJOURNAL.COM

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caused by defective battery cells. In a telephone interview, Hill said the danger of lithium-ion batteries its real but can be mitigated and will be as scientists learn more about the cause of thermal runaways. He said his paper points to some obvious first steps, such as ensuring proper ventilation and training firefighters

on how to respond. He said he doesn’t believe the technology presents an insurmountable risk to insurers. “Risk equals probability times consequence,” Hill said. “Insurers should be aware of the risks and the consequences and plan accordingly.”

E XC E S S & S U R P LU S L I N E S

concluded that the initial overheating was caused by a “thermal runaway” within one of the battery cells buried deep in an apparatus that held 27 separate racks containing a total of 10,584 lithium-ion battery cells. A thermal runaway is a chemical reaction that produces heat, but no visible flames. Typically the reaction is caused by defects within lithium-ion batteries. Hill said his investigation confirmed that the battery cell that ignited the Surprise accident had lithium deposits within it, which indicate it was defective. He said he found similar defects in other batteries within APS’ electrical storage facilities. Because the batteries were stacked close together, the thermal runaway spread to others batteries, the report says. Hill called it a “cascading thermal runaway.” The Fire Protection Research Foundation warned that such chain reactions are possible in a 2016 paper. The explosion at APS’ storage facility made apparent another hazard: When lithium-ion batteries heat up, they emit flammable gasses. Hill said the explosion was triggered when firefighters agitated the air inside the structure housing the batteries, causing that gas to combust. Even though a fire-suppression system inside the structure went off as designed, the aerosol it released could not stop a chemical chain reaction, the report said. The design of the system did not allow any ventilation that could release the build-up of flammable gas. LG Chem, the Korean company that manufactured the suspect batteries, refuted Hill’s conclusions in testimony to the Arizona Public Utilities Commission. The company submitted its own investigative report that concluded the explosion was possibly caused by a heat source such as external electrical arcing. Lithium-ion batteries have long been known to be a potential fire hazard. The DNV-GL report provides a brief history. Dell laptops overheated in 2006 and 2007, leading to a product recall. Thermal runaways have also been observed in early models of the Chevrolet Volt, in Teslas that came in contact with road debris and in Boeing Dreamliner battery packs. In 2017 and 2018, several “fires” were reported at electrical storage facilities in South Korea

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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 current, 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. Northfield is a U.S. based surplus lines insurer, operating in all states except IA, MA and MO. State law requires notification that Northfield is not licensed in California or New York. © 2020 The Travelers Indemnity Company. All rights reserved. BNFAD.000B-P Rev. 7-20

SEPTEMBER 7, 2020 INSURANCE JOURNAL | 17

Figures

531 The number of COVID-19 cases recorded by The University of Alabama during the first week of the fall semester. Officials of the university issued a 14-day moratorium on student gatherings, including all in-person events outside of the classroom, and the mayor of Tuscaloosa, where the campus is, closed down all bars in the city for two weeks as well.

$400 The amount the typical tow of a vehicle in Chicago should cost. However, according to the National Insurance Crime Bureau (NICB) towing bills in the city actually range from $3,000 to $5,000 due to extreme towing and storage fees. The NICB is supporting an amendment to a city ordinance that would require additional licensing for two truck drivers in an effort to improve safety and reduce towing costs.

Declarations ‘Canary in the Coal Mine’

St. Louis Building Collapse

— Gov. John Bel Edwards, speaking at a Coastal Protection and Restoration Agency meeting livestreamed from Baton Rouge, laid out the state’s first goal for greenhouse gases in an order creating a climate initiatives task force to include members from state government, business, environmental justice, Indian tribes, academics and other areas. Edwards has signed an executive order setting a goal for net zero greenhouse gas emissions by 2050.

— St. Louis, Mo., Alderman Dan Guenther comments after a six-story brick building in the area he represents that was part of a brewery complex built more than 150 years ago collapsed. No one was injured in the incident. The building had been used by the St. Louis Bicycle Works nonprofit, which gives away free bikes. At least 700 bicycles were thought to have been destroyed in the collapse.

“In many ways, Louisiana is the poster child for climate change, we are the canary in the coal mine.”

18 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

“It’s just fortunate no cars were driving by or no people walking by or anyone in the building. I don’t think anyone would have imagined a whole wall would come down.”

Mesospheric Penalty

“The jury found that ViSalus committed a stratospheric number of TCPA (Telephone Consumer Protection Act) violations. It is no surprise that the TCPA’s constitutionally valid minimum penalty of $500 for each violation has catapulted ViSalus’s penalty into the mesosphere.”

— U.S. District Judge Michael H. Simon in his opinion upholding the $925 million in damages awarded by a jury in Portland, Oregon, in a class-action case against a Michigan-based marketing company, ViSalus Inc., over unlawful telemarketing practices. Each robocall violation called for a $500 penalty, and a jury in April 2019 determined the company made 1,850,436 unlawful automated calls.

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$1,250,000

The amount Air Systems Inc. (ASI), a San Jose, Calif.-based electrical subcontractor at the Apple Park construction project, will pay to eight African American former employees to settle a racial harassment lawsuit, according to the U.S. Equal Employment Opportunity Commission (EEOC). The EEOC said in its suit that the harassment included racist graffiti of swastikas and racial epithets drawn on the walls of the portable toilets at the Apple Park construction project, as well as a noose at the worksite hung next to a scrawled note containing other expletives, and a threat of lynching.

The number of people indicted in Louisiana in a probe into a series of alleged staged accidents between automobiles and tractor-trailers in New Orleans. The defendants are accused of attempting to defraud trucking and insurance companies. The victim trucking and insurance companies paid out $277,500 for alleged fraudulent claims as a result of the scheme, according to the U.S. Attorney’s Office.

No Company Too Big

“Today’s charge reaffirms that no company is too big to be prosecuted for its role in conspiracies that led to substantially higher prices for generic drugs relied on by millions of Americans.”

— Assistant Attorney General Makan Delrahim said in a statement after the U.S. Justice Department charged Teva Pharmaceutical Industries Ltd. with conspiring to raise prices for generic drugs. The Justice Department has been investigating allegations the company colluded with other drugmakers to push up the prices of widely used pharmaceuticals. Teva said in a statement that “it firmly rejects the allegations and will vigorously defend the Company in court.”

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Lies and Deceit

“White collar criminals cause real harm to businesses, as well as the general public. They steal money through lies and deceit, driving up costs for everyone.”

— U.S. Attorney Scott W. Murray said in a press release issued by the U.S. Attorney’s Office, District of New Hampshire, after a New Hampshire woman was sentenced to 18 months in federal prison for participating in a mail fraud scheme targeting restaurants and insurance companies.

Opioid Overdose Accountability

“We must hold everyone accountable for the roles they played in the opioid epidemic and continue to push toward solutions that go after the root cause of the problem.”

— West Virginia Attorney General Patrick Morrissey on a lawsuit he filed in July 2020 against Walmart and drugstore chain CVS. The lawsuit claims the pharmacies failed to monitor and report suspicious orders of prescription painkillers to their retail pharmacies. Morrissey said Walmart and CVS were among the state’s top 10 opioid distributors from 2006 to 2014. West Virginia leads the nation in the rate of drug overdose deaths.

SEPTEMBER 7, 2020 INSURANCE JOURNAL | 19

Business Moves Remodelers Association of Massachusetts’ sponsored insurance program. AHT Insurance is a brokerage and consulting firm offering property and casualty, employee benefits, retirement, personal and international services for a range of industries Starkweather & Shepley Insurance

Brokerage, Newport Insurance Agency

National

Aon, Wills Towers Watson

Shareholders of insurance brokers Aon and Willis Towers Watson have approved all of the proposals necessary to complete their previously announced combination, the firms announced. Aon intends to combine with Willis in an all-stock deal valued at about $30 billion that is expected to be completed in the first half of 2021, subject to regulatory approvals. The deal has an implied combined equity value of approximately $80 billion. Under the terms of the proposed deal, Aon’s shareholders will own 63% and WTW shareholders will own 37% of the combined company. Willis Towers Watson shareholders will receive 1.08 Aon shares in exchange for each Willis Towers Watson share they held immediately prior to the closing. The deal and terms were first announced on March 9. Aon and Willis are the second- and third-largest insurance brokers by revenue. If the deal is approved, the combined company, named Aon, will have more than $20 billion in revenue. Aon reported $11 billion in revenue with $2.2 billion net income for 2019 compared to $9 billion revenue and $1.4 billion net income for Willis Towers Watson. Aon will maintain operating headquarters in London, United Kingdom. The parent company will be incorporated in Ireland. The combined firm will have 95,000 employees globally, with a “signif20 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

icant presence” in Chicago, New York and Singapore. The combined firm will be led by Aon CEO Greg Case and Aon Chief Financial Officer Christa Davies. The board of directors will comprise proportional members from Aon and Willis Towers Watson’s current directors. Willis Towers Watson CEO John Haley will take on the role of executive chairman with a focus on growth and innovation strategy.

East

AHT Insurance, Mason & Mason Insurance AHT Insurance has acquired Mason & Mason Insurance. Mason’s offices in Whitman, Mass., located near Boston, and North Conway, N.H., will become AHT’s eighth and ninth locations nationally. Mason’s staff of insurance professionals will join forces with AHT’s professionals following the acquisition. This acquisition marks AHT’s second over the past two years, having acquired Saul and Associates in 2018. For more than 40 years, Mason has brokered property and casualty insurance programs to fit the needs of businesses and individuals, with an emphasis on niche businesses. Mason is a provider of risk management and insurance brokerage services for venture capital, technology and life science firms. The company is also a provider of insurance to custom home builders and remodelers in Massachusetts and the managing agent for Builders and

Starkweather & Shepley Insurance Brokerage Inc. has acquired Newport Insurance Agency Inc. Located in Middletown, R.I., with 13 associates on staff, Newport Insurance is an independent agency serving commercial and personal lines clients throughout southern New England. Newport Insurance, now a division of Starkweather & Shepley, will continue to service clients from its Middletown, R.I., location following the acquisition. Established in 1879, Starkweather & Shepley is an independent agency in Rhode Island. The firm provides commercial and personal insurance, health and employee benefits, surety bonding and risk management services nationally and internationally through its partnership with Assurex Global.

ENV Insurance Agency, AssuredPartners

ENV Insurance Agency LLC of Liverpool, N.Y., has joined AssuredPartners Inc. The team of 26 will remain under the operational leadership of Ed Vaughn and Terry Engels. The agency currently reports $7.5 million in annualized revenues. Headquartered in Lake Mary, Fla., and led by Jim Henderson and Tom Riley, AssuredPartners acquires and invests in insurance brokerage businesses in the property and casualty, employee benefits, surety and managing general underwriter space across the U.S. and in England.

Midwest

High Street, Capital Insurance Group

High Street Insurance Partners, a portfolio company of the private equity firm Huron Capital, has acquired Capital Insurance Group, headquartered in

continued on page 22

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Business Moves continued from page 20 Bloomfield, Mich. CIG primarily sells commercial insurance programs throughout Michigan. The company’s customer base spans industries that include engineering firms, waste and recycling, utilities and other industrial and municipal services. The acquisition of CIG is Huron Capital’s 200th since its inception in 1999. Traverse City, Michigan-based High Street, an ExecFactor platform formed in August 2018 to build a full-service insurance brokerage business, has completed 13 acquisitions since its formation. Based in Detroit, Huron Capital is an operationally focused private equity firm with a history of growing lower middle-market companies through its ExecFactor buy-and-build investment model. Huron Capital’s sector focus includes business services, consumer products and services and specialty industrials.

Branch Insurance Exchange

Columbus, Ohio-headquartered personal lines insurance startup Branch has launched the Branch Insurance Exchange that it says will reduce the cost for its members. Branch formerly operated as a managing general agency, Branch bundles home and auto insurance, requiring only a name and address to get a bindable price in seconds. Branch says its reciprocal exchange is the first launched in Ohio in 75 years. The Branch Insurance Exchange is owned by its members and managed by Branch for a fixed 5% fee. Clients agree to become a member of the Exchange when they purchase a policy with Branch. Branch plans to return unused funds to members through vesting dividends. It was founded in 2018 by former Allstate and Esurance executive Steve Lekas and tech entrepreneur Joe Emison.

Risk Strategies, McCamon Hunt Insurance Agency

Risk Strategies, a privately held national insurance brokerage and risk management firm, has acquired Boardman, Ohio-based McCamon Hunt Insurance Agency Inc. 22 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

McCamon Hunt adds to Risk Strategies’ existing footprint in Ohio. Founded in 1996 through a merger, McCamon Hunt traces its roots to 1939. The all lines agency’s offerings span group health, commercial package, life insurance and personal lines. Its business segment clients include contractors, distributors, real estate and engineering firms. With many of its employees possessing almost two decades of experience in the industry and an average tenure of 17 years, McCamon Hunt offers its clients both stability and depth of expertise in its service. In Ohio, Risk Strategies established its transportation practice with the 2017 acquisition of Cleveland-based Brightstone Insurance Services, a specialist in sameday delivery, courier, warehouse and logistics companies. In 2018, it added to its employee benefits practice with the acquisition of Cincinnatibased Benefits Network Insurance Agency. Risk Strategies has offices in more than 70 locations nationwide including Boston, New York City, Chicago, Minneapolis, Miami, Atlanta, Houston, Dallas, Nashville, Los Angeles and San Francisco.

Southeast

The Upton Group, Acrisure

The Upton Group has entered into a partnership with global insurance broker Acrisure, which will enable The Upton Group to build insurance and risk management services for franchise business clients, with a special emphasis in pizza and food courier delivery. Acrisure offers insurance and risk management services and products through a global network of agency partners. As a majority employee-owned private company, the Acrisure model allows agency partners to maintain autonomy and offers tools and resources. According to Jason Upton, principal and founder, the partnership enhances its ability to provide additional options to clients and prospects going forward while maintaining its culture and business operations. The Upton Group is a retail agency based in Guntersville, Ala. The firm specializes in

pizza and food delivery insurance and risk management in all 50 states. Jason Upton, principal and founder spent 23 years with Domino’s, with 17 years as an owner/franchisee and formed The Upton Group in 2010. The Upton Group is a full service provider for all lines of insurance including property, general liability, hired and non-owned auto, business owned auto, workers' comp, umbrella and excess along with small and large group health insurance and limited indemnity plans specially developed for pizzeria and franchise workers.

Johnson & Johnson, National Program Management

Johnson & Johnson will expand its presence in Georgia by acquiring the assets of National Program Management located in Alpharetta. The parties expect the transaction to close Sept. 1, 2020. National Program Management’s origins date back to the mid-1980s. The company was formed as a wholesale broker specializing in environmental property and casualty insurance. In 2014, NPM acquired the assets of the Leverett Insurance Group Inc., formed in 1985 as a full-service wholesale brokerage firm. That acquisition expanded NPM’s brokerage capabilities to include energy, transportation, real estate, manufacturing, retail, construction, non-profits and professional service firms. Johnson & Johnson is a fourth generation, family owned managing general agency based in Charleston, South Carolina. According to Scott Lewis, general manager of NPM, the move strengthens its agent relationships through expanded products and services. Founded in 1930, Johnson & Johnson is a full-service managing general agency that provides excess and surplus markets, standard markets and premium financing to independent insurance agents within Alabama, Connecticut, Delaware, Florida, Georgia, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont and Virginia. In addition, Johnson & Johnson offers private flood and certain program business nationwide. INSURANCEJOURNAL.COM

People National

The Hartford has appointed Amy Stepnowski to

the positions Amy Stepnowski of chief investment officer of The Hartford and president of Hartford Investment Management Co. (HIMCO), effective Aug. 1. She succeeds Brion Johnson, who will remain with the company in an advisory capacity through the end of the year. Stepnowski previously served as managing director and head of Public Credit Research at HIMCO, where she worked since 2008 in roles of increasing scope and responsibility. She joined the company as a vice president and senior research analyst for emerging markets and then moved to the high yield team, where she covered a range of industries including media, energy and power. Prior to joining the company, Stepnowski worked for 12 years specializing in Latin American corporate and project finance at J.P. Morgan Chase & Co., where she worked most recently as a managing director. Johnson joined the company in October 2011 as chief financial officer and head of strategy for planning and development at HIMCO. He held roles of increasing responsibility, including his position as head of Talcott Resolution.

East

International law firm

McDermott Will & Emery

is continuing to build its insurance-sector capabilities with the addition of Jane M. Byrne to its New York office. Byrne is the most recent arrival

to the litigation group, which added new teams in New York, Miami, Delaware and London over the past year. Byrne previously served as co-chair of Quinn Emanuel’s Insurance and Reinsurance Litigation Group. Industry advisory firm TigerRisk Partners announced that Joe Jackson has joined its North American team. Jackson joins TigerRisk from Aon, where he was managing director of Reinsurance Solutions. He joined Benfield (later Aon) in 2006 and developed specialties in personal and commercial property, liability, workers’ compensation, non-standard and commercial auto. He advanced to become account manager for several major clients. He later joined Aon’s Managing General Agents (MGA) Practice Group. Jackson will join Kevin Abramson’s team and will be based at TigerRisk’s New York office.

C&S Insurance, based in

Mansfield, Mass., has hired

Matt Post and Paul West to its

team. This comes as the agency has added a fourth office location and expanded its staff by 30% over the past several months. As senior vice president of Commercial Insurance and Risk Management, Post joins the agency to bolster its business insurance division, particularly in the areas of commercial real estate, craft brewing and manufacturing. Throughout his career, Post has represented firms across the Northeast. In his current role, he will focus on the development of specialty manufacturing insurance programs

24 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

for breweries, distilleries and plastics manufacturers. As a personal risk advisor, West brings experience to the Private Client Group at C&S Insurance. He works closely with his clients, as well as their financial advisors, to identify carrier programs, enhanced coverage opportunities and unaddressed exposures.

Southeast

Valent Group, the risk

consulting and insurance division of EBSCO

Industries (EBSCO), has

Billy DeBuys

hired former attorney and business owner Billy DeBuys as vice president in its Employee Benefits Practice. DeBuys comes to Valent Group after serving as a workers’ compensation litigator for privately held companies such as Georgia-Pacific, Buffalo Rock, Drummond Company and Rockwood Casualty Insurance. He also has previous experience as a commercial business owner in the Birmingham area. According to Paul Barber, Valent Group president, DeBuys will focus primarily on caring for its employee benefits clients but will also consult on workers’ compensation-related coverages in its Property & Casualty practice. Prior to Valent Group, DeBuys spent nearly eight years as a litigator with Starnes Davis Florie, a litigation firm in Alabama, and several years leading Apollo Roofing, a commercial roofing contractor based in Birmingham.

South Central

Dallas-based independent

insurance agency, Sleeper Sewell Insurance, has named Myles Mendenhall as

president. Mendenhall joined Sleeper Sewell Insurance in Myles Mendenhall 2013. Prior to Sleeper Sewell, he served as president and was a shareholder of Planned Benefits Inc. DBA Foster Financial Group. Sleeper Sewell Insurance is a member of Insurors Group LLC, an alliance of independent insurance agents in Texas.

The Liberty Company Insurance Brokers added David McMinimy as a com-

mercial producer in its Liberty White unit in Houston. McMinimy has years of experience specializing in construction risks. He previously was with Allen Insurance Brokers. In addition to construction, David McMinimy Liberty’s Houston office also has a presence in the trucking and oil and gas sectors, the company said. The Liberty Company Insurance Brokers is headquartered in Woodland Hills, Calif.

Baton Rouge, Louisianabased workers’ compensation insurance company, LUBA Workers’ Comp, hired David Tucker as vice president and sales manager. Tucker has more than 10 years of service in the insurance industry, with experience in agency relations, risk mitigation, operations, underwriting and safety services.

continued on page 26 INSURANCEJOURNAL.COM

News & Markets UCLA Suing Under Armour, Seeking Damages in Excess of $200 Million

CLA filed a lawsuit against Under Armour in late August in U.S. District Court in Los Angeles for breach of contract, seeking damages in excess of $200 million. Under Armour announced in late June that it was ending its deal with the university. The two sides were four years into a 15-year deal worth $280 million, which remains the highest in college athletics. Under Armour paid $11 million per year in rights and marketing fees as well as contributing $2 million per year to aid in facility improvements. Under terms of the contract, the company is supposed to supply $6.85 million in athletic apparel, footwear and uniforms. “It is unfortunate that Under Armour is opportunistically using the global pandemic to try to walk away from a binding agreement it made in 2016 but no longer likes,” UCLA vice chancellor of strategic communications Mary Osako said in a statement. “UCLA has met the terms of the agreement, which does not require that games in any sport be played on a partic-

ular schedule. We filed this lawsuit in order to support our student-athletes and the broader UCLA community, including the athletic department that has brought 118 national championships to Westwood.’” The company cited Force Majeure due to the coronavirus pandemic as one of the reasons it was terminating the deal. Another was UCLA’s struggles in its flagship sports. The football program has had a losing record four straight seasons, including a 7-17 mark in Chip Kelly’s first two seasons, which has led to declining attendance at the Rose Bowl. Men’s basketball struggled the first half of last season but won nine of its last 11 in Mick Cronin’s first season. Under Armour said in a statement that it is confident in their position and that they would defend it. “We sought and remain open to working

out a reasonable and appropriate transition for the university, and most importantly for the student-athletes,” the statement continues. “In fact, at UCLA’s request after the termination of the agreement, Under Armour continued to deliver athletic products for the 2020-2021 school year because we support athletes, even as it remains uncertain when sports will resume.” Copyright 2020 Associated Press.

Washington Insurance Commissioner Probing Unpaid Insurance Taxes

ashington Insurance Commissioner Mike Kreidler has begun a study to determine how many organizations in Washington are not paying insurance premium tax as required under state law. The study began with an initial survey sent to about 5,000 businesses and other organizations in Washington asking if they use a captive insurance company. Currently, captive insurers are not authorized under Washington state law. Additionally, companies using them are not paying a 2% premium tax on the insurance they buy. Kreidler last year ordered insurers Olympic Casualty Insurance Co. and ASA Assurance to stop insuring risk in Washington for their parent companies, W2 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

Starbucks and Alaska Air Group. A year earlier, he fined an Alaska Air captive $2.5 million, and has also hit a Costco captive with a fine. Tax revenue from insurance companies doing business in Washington goes to the state general fund to pay for various public programs. Kreidler’s office contracted with Washingtonbased Milliman, Inc., to conduct the survey and study. The information gathered will not identify organizations failing to pay the premium tax but will show an overall projected amount owed. The state Department of Revenue is assisting with the survey. Kreidler’s office

will report results of the study to the Legislature later this year. Currently, Washington collects over $1.2 billion in premium tax every two years from more than 2,400 insurance companies doing business in the state. These funds are the state’s second largest source of revenue. Kreidler last year proposed legislation to authorize captive insurance in Washington and to collect the 2% premium tax owed. Kreidler set up a self-reporting plan for companies in December 2018 that resulted in 16 businesses reporting their use of this arrangement. This led to the initial payment of about $4 million in previously unpaid premium tax, fines and interest. In an effort to understand the magnitude of the amount of unpaid tax, Kreidler suspended enforcement actions against captive insurers, pending results of the survey and study. INSURANCEJOURNAL.COM

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News & Markets CDI: 3 Charged with Auto Insurance Fraud, Forgery in California

hree Californians have been charged with multiple felony counts of insurance fraud and forgery for allegedly filing fraudulent insurance claims on a former employee’s policy and intercepting insurance checks to receive undeserved payouts. Luis Manuel Burgos, 47, of Fresno, self-surrendered on Aug. 24 after being charged with multiple felony counts of insurance fraud and forgery for allegedly filing fraudulent insurance claims on a former employee’s policy and intercepting insurance checks to receive undeserved payouts. Two of Burgos’ former employees were also charged for their involvement in what investigators called an organized ring. The California Department of Insurance alleges that Burgos, the owner of B&R Private Security, arranged an informal sub-lease agreement for a 2016 Lexus with his former employee. Burgos filed several claims, or had several claims filed on his behalf, for the Lexus and his personal

vehicle, a BMW, on his former employee’s insurance policy without that former employee’s knowledge. CDI investigators say Burgos allegedly directed, conspired with, and/or aided another former employee, Steven Anthony Rogers, 47, who was also charged, to commit several criminal violations including intercepting insurance checks by impersonating the policyholder and forging the policyholder’s signature. Another B&R Private Security former employee, Darlina Gutierrez Diaz, 37, of Clovis, was also charged for filing an injury claim after being a passenger in a collision. According to CDI, Diaz claimed she missed work at B&R Private Security as a result of her injuries. Her boss, Burgos, provided further documentation to support Diaz was off work due to injury.

The CDI says its investigation revealed that the documents allegedly produced by Diaz’s treating physician to grant her time off work were forged. When confronted with this information, Diaz claimed Burgos forged the documents to get Diaz additional paid time off work. Burgos self-surrendered to the Fresno County Jail. Burgos’ bail was set at $62,000 and his arraignment is scheduled for Oct. 28. Rogers was arrested on Aug. 21. His bail was set at $49,000 and his arraignment is scheduled for Oct. 27. Diaz self-surrendered on Aug. 25 to the Fresno County Jail. Diaz’s bail was set at $30,000 and her arraignment is scheduled for Oct. 28. The Fresno County District Attorney’s Office is prosecuting this case.

Former Washington State Student Sues School District Over Mass Shooting

former student at a high school in Washington state who survived a school shooting is suing the district for what she claims was a preventable attack. The mass shooting killed four students and the gunman in 2014. Carmen Lopez, 20, filed the lawsuit in Snohomish County Superior Court. She said in her lawsuit that she has since suffered life-altering emotional trauma and has been diagnosed with post-traumatic stress disorder as a result of the incident. She was not physically harmed during the shooting. Marysville School District spokesperson Jodi Runyon said the district could not comment on pending litigation, The Daily Herald reported. W4 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

Jaylen Fryberg opened fire on students in the Marysville Pilchuck High School cafeteria, a school located about 40 miles north of Seattle. Students Zoe Galasso, Gia Soriano, Shaylee Chuckulnaskit and Andrew Fryberg died in the gunfire, and another student, Nate Hatch, survived a gunshot wound to the jaw. Jaylen Fryberg died by suicide afterwards. Lopez said that she was sitting at the same table as the victims and Fryberg when the shooting began. She said she was fortunate because he began by shooting those sitting across from him while she was sitting beside him. As the shooting began, Lopez dropped to the ground then ran away. The lawsuit claims the shooting was preventable because the school allegedly knew two days before that it would hap-

pen. Lopez alleges Fryberg had a pattern of worrisome behavior that should have alerted faculty members that he would “engage in behaviors either deleterious to himself or others, including his fellow students at the high school.” The lawsuit appears to share aspects with one brought by the families of the students who died or were injured in the shooting. The district settled that case in 2017 for $18 million. Plaintiffs in that case relied on the evolving story of a substitute teacher who claimed she had advanced warning about a potential shooting. The teacher told investigators she had shared the information with school staff. Detectives ultimately could find no merit to the story. The new lawsuit does not reference the substitute teacher, nor does it identify how the school knew beforehand that the shooting would take place. Copyright 2020 Associated Press. INSURANCEJOURNAL.COM

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News & Markets

2 Washington State Agribusinesses Settle Federal Discrimination Suit for $325K

wo agribusinesses in Washington state will distribute $325,000 among 105 Thai farm workers to settle a federal national origin and race discrimination lawsuit. The U.S. Equal Employment Opportunity Commission said the settlement with defendants Green Acre Farms Inc. and Valley Fruit Orchards LLC, both based in Wapato, Washington, encompass-

es monetary relief and injunctive relief remedies. The EEOC initially filed the Title VII lawsuit in April 2011 in the U.S. District Court for the Eastern District of Washington (EEOC v. Global Horizons, Inc. d/b/a Global Horizons Manpower, Inc., Green Acre Farms, Inc., Valley Fruit Orchards, LLC., et al). A default judgment was previously

awarded against Global Horizons, the company that provided farm labor services and supplied H-2A guest workers from Thailand to Green Acre and Valley Fruit. The two farms — Green Acre and Valley Fruit — remained as the only defendants left in the case. The EEOC’s claims against the Green Acre and Valley Fruit farms were initially dismissed on summary judgment by the District Court, which also awarded both farms their fees and costs of litigation. The EEOC appealed to the Ninth Circuit Court of Appeals. The Ninth Circuit overturned the award of fees and costs and reversed and remanded the case back to the District Court. On remand, the District Court again dismissed the EEOC’s claims on summary judgment, and the Court granted the farm defendants’ second motion for fees. The EEOC again appealed to the Ninth Circuit. The case resolved for a total payment of $325,000.00 which will be distributed among 105 Thai farm workers who were placed at the two farms by Global Horizons, the farm labor contractor. Additionally, Green Acre and Valley Fruit agreed to implement injunctive relief including accountability measures over farm labor contractors, training, review of policies and procedures, and reporting, according to the EEOC. The farms have denied liability at all times during the action.

Damages Awarded to Colorado Woman Under New ‘Revenge Porn’ Law

Denver, Colo., judge awarded $40,000 to a woman after a man she dated sent a sexually-explicit video of her to her estranged husband. The woman’s attorney says it is the first trial victory under Colorado’s “revenge porn” law. The decision on Aug. 3 in favor of Kristina Hendershott was issued under a 2019 law that allows victims to sue for damages if someone intentionally sends an explicit image or video of them W6 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

without their consent, said Hendershott’s attorney, Malissa Williams. Judge Christopher Baumann said in his ruling that he could not find any other trial verdicts under the 2019 “revenge porn” statute, Williams said. “This certainly gets the word out that victims have civil recourse when intimate images are sent without their consent,”

Williams said. In July 2019, the man stole from Hendershott’s phone an old video of her engaging in sexual conduct with another man, Hendershott told The Denver Post. The man, who was not identified by the Post, then sent the video to Hendershott’s estranged husband because he was jealous, she said. In 2018, lawmakers passed a bill that made it easier to charge people with revenge porn. In 2019, the state senate passed a bill that closed civil law loopholes. Copyright 2020 Associated Press. INSURANCEJOURNAL.COM

News & Markets California State Fund Declares 10% 2020 Mid-Year Dividend

alifornia’s State Compensation Insurance Fund will distribute a roughly $75 million dividend to its qualifying policyholders with policies that took effect between Jan. 1 and Aug. 26. The dividend equals roughly 10% of the estimated annual premium reported during that period. State Fund’s board will consider dividends again for the remainder of the 2020 policy year later this year. Through July, State Fund reported roughly $700 million in estimated annual premium and approximately $60 million in realized capital gains. “We’re working hard to support our policyholders in every way we can during this difficult time,” State Fund President and CEO Vern Steiner said in a statement. “Due to our strong, stable financial position and the claims outcomes we’ve seen over the past several years, we’re

able to return money to policyholders and we want to let them know it’s coming as early as possible. This is money they can count on as they plan for next year amidst so much uncertainty.” State Fund last year declared an

approximate $160 million dividend for 2019 policyholders. State Fund policyholders eligible for a 2020 dividend will receive their payments after the expiration date of their individual policies.

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News & Markets California Launches Remote Insurance Licensing Exams

he California Department of Insurance has launched remote testing for license examinations, designed to provide more flexibility and opportunities to thousands of insurance license candidates in light of existing COVID-19 social distancing requirements and local public health orders. The CDI issues more than 420,000 licenses for agents, brokers and other insurance professionals, which makes it California’s second-largest profession. The remote testing launch includes 18 license qualifying examinations and four of the remote license examinations are

in Spanish. From the onset of the pandemic, there has been a significant decrease in the number of licensing examinations being given due largely in part to the testing interruptions, social distancing requirements, limited seating requirements, and other COVID-19 related impacts on the business sector, according to CDI. Sixteen other states are currently utilizing remote testing for license examinations, including New York, Washington, Oregon, Pennsylvania and Colorado. An applicant required to take a license examination will now have the option to choose to take a remote online examination proctored by the Department’s license

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California Workers’ Comp Bureau Submits Premium Rate Filing

he Workers’ Compensation Insurance Rating Bureau of California has submitted its Jan. 1, 2021, pure premium rate filing to the California Department of Insurance, proposing advisory pure premium rates that are on average 2.6% above the average approved Jan. 1, 2020, advisory pure premium rates. The average of the proposed January 1, 2021, advisory pure premium rates is $1.56 per $100 of payroll. Absent the estimated impact of COVID-19 claims on 2021 policies, the filing reflects a modest decrease (1.3%) in advisory pure premium rates. In addition to projecting the cost of COVID-19 claims to be incurred on 2021 policies, the filing also reflects the impact of the pandemic-related economic slowdown on future wage growth, claim frequency and claim

all California surplus lines licensees. In these times when our members cannot come to the classroom, we are bringing the classroom to you! To see all our exciting course offerings—offered free of charge—please go to the SLA Learning Center at HTTPS://LEARNINGCENTER.SLACAL.COM/COURSELIST.

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severity. The move follows an earlier vote by the WCIRB governing committee. Once the CDI schedules a public hearing to consider the filing, a notice of proposed action and notice of public hearing will be issued and posted in the filings and plans section of the WCIRB website. INSURANCEJOURNAL.COM

People initiatives. As vice Midwest president Middleton, Wisconsin-based of claims, American Risk Management she will Mark Seich Resources Network LLC’s oversee the brokerage division appointed day-to-day Kari Dybdahl Kohal as the operations of the claims unit organization’s next president. and guide the development of Kohal brings to the position claims services. an array of experience in Prior to joining Berkley Fire business and the environ& Marine, Brickner managed mental insurance industry inland marine claims for a on a provincial, national and major U.S. insurance group for global level. She most recently more than 10 years. served as ARMR’s executive Seich has 13 years of experience with national and regional vice president and director of carriers in the industry. Prior to Operations. She has worked at joining Berkley Fire & Marine, ARMR Network he served most recently as for 13 years. regional vice president and Kohal has held various sales and succeeds David Dybdahl, who marketing-oriented roles with has served as Kari Dybdahl Kohal U.S. insurance carriers. founder and As vice president president of of Marketing, Sales & ARMR Network since 2000. Distribution, Seich will lead all Dybdahl will become CEO of marketing and sales driving ARMR Specialty Holdings and initiatives through the field continue to serve as president teams and online distribution of its two other subsidiaries, channel. as well as continue to work CRC Group opened a new closely with Kohal and the Indianapolis, Ind., office and senior management team. named Mark Maucere office Berkley Fire & Marine, president. headquartered in the Chicago Maucere is responsible for area, promoted Debra Brickner leading the team and growing to vice president of Claims the CRC footprint in the and hired Mark Seich as vice territory. president of Marketing, Sales & Maucere has more than Distribution. 25 years of MGA experience. Brickner has 15 years of He was previously vice industry experience working president with Arlington/Roe with marine claims and most & Co. He was with AmWins recently served as senior Transportation Underwriters director of claims. Inc. before that. Since joining Berkley Fire & West Marine in 2016, InterWest Insurance she has impleServices has named Melanie mented several Brubaker as a commercial organizational insurance broker in the business Debra Brickner Chico, Calif., office. She has transformation

continued from page 24

26 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

more than 17 years of sales experience. She was previously a benefits advisor with Aflac. She owned a marketing firm before that. InterWest offers all lines of property and casualty, workers’ compensation, employee benefits and personal insurance coverages, as well as surety products.

Crest Insurance Group of Scottsdale, Ariz., has named Frank Benedetto as a senior vice president of the employee benefits division. Crest Insurance Group of Tucson, Ariz., has named Matt Nelson as chief operating officer of the employee benefits division. Benedetto has more than 30 years of experience. He has held numerous positions in the healthcare Frank Benedetto industry, including as executive director of Cigna Healthcare (Tucson), Aetna’s Arizona market head of sales and eventually Banner Aetna business development director. Nelson joined Crest Insurance in 2020 as a benefits and commercial lines consultant. He was a vice president with Lovitt & Touche before that. CREST has offices throughout Arizona as well as in California and Colorado. Two owners have been added to Irvine, Calif.-based

SullivanCurtisMonroe’s

ownership team: Skip Jetté, who has been with SCM for 19 years and manages

Skip Jetté

the Corona office, and John Melbon, who joined SCM seven years ago and is part of the employee benefits John Melbon division. Jetté joined SCM in 2001. Prior to joining SCM, Jetté was a senior vice president at California Casualty/Calco Insurance Brokers. He began his career at Wausau Insurance Co. Melbon has more than 30 years of experience in employee benefits on the carrier and brokerage sides of the business. He started as a group sales representative with Guardian Life Insurance and became its Los Angeles sales manager in 1986. He launched Benefit Partners in 1990 and spent the next 18 years growing the employee benefits consulting and brokerage firm before merging into USI Insurance Services. Melbon spent five years at USI. He joined SCM in 2013. Lockton has added Philip Henry to its transaction liability team. Henry is based in San Francisco, Calif. He is a former mergers and acquisitions attorney and representations and warranties insurance underwriter whose practice focused on both domestic and cross-border private equity and corporate transactions. Prior to joining Lockton, he was a mergers & acquisitions attorney at Hogan Lovells US LLP and later Fenwick & West. Most recently, he established the West Coast R&W practice for AIG, where he served was a senior R&W underwriter. INSURANCEJOURNAL.COM

Spotlight: Flood The Rising Risk of Inland Flooding Not Only in FEMA Zones, Not Only During Hurricane Season

ajor companies across the U.S. are

increasingly recognizing the risk for inland flooding By Matt Booker and with good reason. As recent hurricanes like Harvey and Florence made clear, water can cause as much or even more damage and can result in greater costs than wind. According to catastrophe modeling firm RMS, about 90% of Harvey’s insured losses resulted from inland flooding. Strikingly, flooding is impacting more and more businesses outside of FEMA’s designated INSURANCEJOURNAL.COM

critical flood zones. According to the New York Times, new data from the First Street Foundation flood model — Flood Factor — has affirmed what insureds and insurers have been witnessing firsthand during catastrophic inland flooding events — that is, that many properties are at greater risk for flood across the United States than traditional government estimates and maps show. Specifically, the First Street Foundation model estimates that 14.6 million properties are at risk from a 100-year flood, a shocking increase from the 8.7 million properties flagged on FEMA flood maps. What’s behind this major expansion in flood exposure and losses? First, building codes have

not kept pace with the perils that come with escalated flood risks, and development has continued to expand in places and in ways that leave properties vulnerable to water and flooding. Second, flooding is increasing and broadening its reach due to an increased frequency of extreme weather events, including intense rainfall coupled with rising sea-levels. Third, FEMA flood maps, while updated, can be out of date and are not designed to account for flooding caused by excessive rainfall. According to First Street Foundation’s model, Chicago, Los Angeles, New York City, Cape Coral, Fla., and Philadelphia, Pa., are among the cities sitting on the greatest increase in flood risk.

Time to Reassess & Prioritize Flood Exposure

Risk managers with locations not traditionally considered to be flood-exposed need to take a closer look at flood risk and which properties need to be hardened against the exposure – not just during hurricane season, but all year round.

Flood Emergency Response: Not just for FEMA Flood Zones

Every company, regardless of locale, should consider developing a Flood Emergency Response Plan (FERP) – both as part of hurricane preparation and as part of overall emergency response planning. A well thought-out FERP is critical to help companies keep employees safe and ensure

continued on page 28

SEPTEMBER 7, 2020 INSURANCE JOURNAL | 27

Spotlight: Flood continued from page 27 that a company is prepared to protect property in the event of a flood. For example, a plan may establish procedures to keep water away from electrical equipment and articulate how and where to store important documents and protect fire protection equipment; it should establish shutdown procedures for equipment and utilities, and for a complete facility shutdown when needed. The plan should also include pre-vetted resources that can be marshaled quickly in the event of flooding – from backup and contingency systems to vendors to salvage damaged equipment.

Loss Prevention & Mitigation Measures: Well Before a Storm While companies are reviewing and fine-tuning

hurricane preparation plans, they should also focus on flood — even if they are not in a traditionally flood-prone zone. Planning should encompass loss prevention measures that should be put in place now and when a storm is imminent, including such standard, but pivotal, practices as: • Securing rack structures and shelving to prevent toppling. • Removing valuable documents or equipment from the premises or relocating them to upper floors. • Creating a barrier against incoming water using materials such as sandbags, flood doors, flood shields or even inflatable barriers when a storm is approaching. • Shielding valuable equipment — that which cannot be moved away from doors

and windows or removed to an offsite location — with water-resistant tarps when a storm is approaching. In addition, companies should work with their brokers to assess the possibility of purchasing flood insurance in places where they have not previously.

Learning from The Past, Looking to the Future

Insurers stand ready to partner with insureds to help them assess and mitigate escalating inland flood exposure, and to prioritize loss mitigation measures based on the newest flood information and their insured values. Along with loss prevention expertise before a loss (and after, to expedite recovery), insurers can also provide valuable insights into the latest modeling that can

help risk managers better understand inland flood risk for the continental U.S. and the possible effects of climate change on flood risk from storm surge and extreme precipitation. It is a new world in many ways, and prudent risk management during this hurricane season means a new focus on inland flood risk. Together, insureds and insurers can look back to consider the lessons learned from storms like Harvey and Florence and look ahead using the latest data and modeling to understand, prioritize and effectively harden facilities against the rising reality of inland flood exposure. Booker is senior vice president, U.S. Property Underwriting Manager for Chubb Major Accounts

Source: NOAA National Centers for Environmental Information (NCEI) U.S. Billion-Dollar Weather and Climate Disasters (2020). https://www.ncdc.noaa.gov/billions/, DOI: 10.25921/stkw-7w73. https://www.nrdc.org/experts/rob-moore/house-select-committee-focus-flooding-and-sea-level-rise

28 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

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WSIA Annual Marketplace

2020: Going Virtual By Andrea Wells

s with most industries in a COVID world, the excess and surplus lines industry had to shut down its signature in-person networking event scheduled for Sept. 10-17, 2020. Instead the Wholesale & Specialty Insurance Association (WSIA) made plans to go virtual. The virtual platform is a significant change for the thousands of executives from the E&S industry who travel from various parts of the world to attend the annual event each year. “Even as late as mid-April we

Brady Kelley Executive Director of WSIA 30 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

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were planning to move ahead with meetings, the WSIA team has done “a the September event,” said Brady phenomenal job shepherding us to where Kelley, executive directorWSIA_7X4.75.indd of WSIA. 1 we are today.” “Unfortunately, by mid-May we started One bonus to having a virtual event getting a better understanding of what over in-person is the opportunity to send the conference hotels would require additional people, said Joel Cavaness, should we move forward with an in-perpresident at Risk Placement Services and son event.” the immediate past president of WSIA. While the requirements were challeng“Going virtual gives us the opportunity to ing, Kelley said there was much more to allow four times the number of people to consider. “The WSIA board and staff also attend. We've already signed up over 400 wanted to consider the risks for attendees people for the virtual WSIA.” Why put people at risk and ask them to Tim Turner, chairman and CEO of travel before they may have felt safe?” RT Specialty, says virtual is just part of With that in mind, WSIA began making everyday life now. “But I'm confident plans to transition the event to a virtual that we'll all make the best of it. The format. WSIA Annual Marketplace event is an “We wanted to be able to preserve that incredibly significant conference for the week with a robust program and virtual surplus lines industry, and so we all will networking meeting opportunities, the miss it dearly this year; especially in a same as if we had the in-person conferfirm marketplace like this.” ence,” Kelley said. The change was a huge Bryan Sanders, president of Markel task considering the years’ long planning Specialty, and the current president of needed to produce such a large event that WSIA, says he has served as the WSIA typically encompasses multiple hotels president during the most “un-eventful” and event gatherings over the course of year in its 40-year history. “Because the week. events haven't taken place in person,” The effort hasn’t gone unnoticed by the he laughed. “But the truth of the association’s members. matter, the work that we've done has not “First and foremost, the leadership suffered at all, The annual marketplace that WSIA provided at what's been a very conference has grown by over 30% in difficult time is remarkable,” said James attendance from 2013 to 2019, but not for Drinkwater, president, Brokerage Division the pandemic, I would expect another at AmWINS Group. “Brady and his team record-year this year.” have done a great job.” Sanders views the change as “one of Neil Kessler, chief operating officer at those silver linings.” He said, “It’s allowed CRC Insurance Services, said that while us to get some new people involved in virtual meetings are never quite the same the conference that may not have been as face-to-face, relationship-building able to travel before.” INSURANCEJOURNAL.COM

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Special Report: Surplus Lines

By Andrea Wells

nsurance professionals in the surplus lines sector are busy. Busy adapting to a changing business world during COVID-19. Busy adapting to a changing property/casualty market where standard lines insurers are steadfastly shedding undesirable accounts. Busy adapting to a market that is increasingly digital. And busy multiplying their numbers of accounts and premium volume. While many U.S. businesses continue to lag, the surplus lines insurance industry is experiencing significant growth. The flow of business into the surplus lines channel is up 20% or more over last year, according to Timothy Turner, chairman and CEO of RT Specialty, Ryan Specialty Groupâ&#x20AC;&#x2122;s wholesale brokerage operation. That increase comes after a similar 20% jump in 2019, he said.

‘It’s doubling. It’s a multiplier effect now.’ — Timothy Turner, RT Specialty

‘It's been a very busy year, and a very challenging year but all things considered, the E&S market is remarkably positive.’ — James Drinkwater, AmWINS Group

“It’s doubling. It’s a multiplier effect now,” Turner said. Surplus lines premium reported to the U.S. surplus lines stamping offices in the first six months of 2020 neared $20 billion more than the first six months of 2019. Even while transaction counts decreased by 60,181, or 2.6% below mid-year transactions in 2019, premium growth continued despite the ongoing pandemic, social distancing guidelines and resulting economic conditions, the stamping offices reported in July. “Business continues to flow into our space from the standard market,” said Bryan Sanders, president of Markel Specialty, and the current president of the Wholesale & Specialty Insurance Association (WSIA). “The market conditions that existed pre-COVID still exist, but COVID has layered another dynamic on INSURANCEJOURNAL.COM

top of that.” That’s given the standard insurance marketplace more reason to exit more challenging classes of business. But pre-COVID conditions, low interest rates for carriers and social inflation still exist. “They haven't gone away since COVID is upon us,” Sanders said. Not every state reports their surplus lines premium to surplus lines stamping offices, but it’s estimated that about 62.7% of the total U.S. surplus lines premium volume is generated from the 15 states that do have offices. Of those 15 stamping offices, all reported premium increases for mid-year 2020 with eight states reporting double-digit percentage increases. While transaction counts were down overall, nine states reported increases in surplus lines transactions. Texas was one of six states with an increase in premium and drop in transactions. Greg Brandon, executive director of the Surplus Lines Stamping Office of Texas

(SLTX), noted that while yearto-date 2020 reflects a reduction in the overall number of filings, Texas is seeing record setting premiums reported. “In fact, the second quarter of 2020 has resulted in three of the top four highest premium months in SLTX history,” Brandon said.

COVID’s Impact

The COVID-19 pandemic has been the biggest element of uncertainty for surplus lines, according to Sanders, who says the market pre-COVID was already firming, but the pandemic accelerated that trend. The biggest challenge right now for E&S carriers is that “none of us know where we are in the cycle,” Sanders said. “All we know is that the pandemic started somewhere after the beginning [of that change], and we don’t know how close we are to the end.” It’s in challenging times like these where the surplus lines market really shines. “I think our industry and

certainly Markel focuses on solving people’s problems,” he said. “That helps separate us as a market and to a large extent helps separate our end of the industry as well.” Today’s E&S market is a stark change from a year ago when the property/casualty insurance prices increased in certain “pockets” of the market, said Joel Cavaness, president at Risk Placement Services. “It was spotty. Certain classes, certain types of business, certain industries were certainly seeing rate change.” Today, Cavaness and others in the surplus lines industry say nearly all areas of the P/C market are seeing broad firming of rates, and tighter policy terms and conditions. “There are few exceptions to that trend — workers’ comp and a few other smaller lines of business are not seeing the same rate increases,” he said. “But I would say broadly, across the board,” most of the market is seeing rates rise.

continued on page 34

SEPTEMBER 7, 2020 INSURANCE JOURNAL | 33

Special Report: Surplus Lines continued from page 33 It’s not just price and tougher policy terms that are changing, he added. It’s also changes to buying habits of insureds. “People pay little attention to buying habits but when prices change and go up dramatically, people have a tendency to rearrange their program to soften the impact of the overall price,” Cavaness said. Changes in buyers’ habits are important, he noted. “What limits are they buying or, candidly, what deductibles are they willing to assume, or SIRs (self-insured retentions),” he said. “All the various levers that buyers can pull to soften a particular amount of a rate increase.” That means fewer coverage choices for commercial insureds, a significant change from just a year or two ago when insureds had more choice and more coverage. The pandemic has hit the small business sector much harder than larger business classes in the surplus lines. “Small businesses, which we do a lot of them as a large MGA (managing general agency), has seen more of an impact from COVID than the larger placements,” he said. One positive is that the small business side of the market isn’t yet seeing the same level of rate increases as larger and more complicated accounts, Cavaness added. For large, more complex risks, in general, rate has outpaced exposure change, Cavaness said. “In property, even though there’s a pandemic, that doesn't change the value of a particular piece of property or location or schedule,” Cavaness said. However, the slowdown in small business has been significant. “Small business feeds off

the economy, people starting new restaurants or new bars or new taverns, or whatever it might be,” he noted. “So, when you have a pandemic and businesses are shutting down, either temporarily or permanently, it does have an impact.” In contrast, there has been an acceleration in the number of submissions into surplus lines for larger business classes during the second quarter. “You could clearly see indicators like submission flow and the national percentage of non-admitted business, pouring into the channel as standard companies were forced to put up reserves. That weakened their balance sheet, and it caused them to shed more unprofitable business at an accelerated pace,” he added. While 2019 was difficult in some classes of business, 2020 has proven to be even more difficult, according to Neil Kessler, chief operating officer at CRC Insurance Services Inc. He said the excess and surplus lines market saw a few carriers pushing to cut limits and raise prices for certain classes in 2019, but in 2020 that scenario has expanded with more and more carriers tightening limits, terms and conditions and increasing rates. The pandemic is adding further “downward pressure” on already challenging market conditions, he said. “I think the rate trends and the limit cuts are moving faster than just the economic pressure,” he said. As traditional carriers say, ‘We're not going to write this type of business or that type of class,’ the channel expands more. We’re definitely seeing the channel get bigger,” Kessler said.

34 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

‘The market conditions that existed pre-COVID still exist, but COVID has layered another dynamic on top of that.’ — Bryan Sanders, Markel Specialty James Drinkwater, president, Brokerage Division at AmWINS Group, agrees. “It's been a very busy year, and a very challenging year but all things considered, the E&S market is remarkably positive,” he said. “Submissions are up dramatically.” He said at AmWINS, submissions are up 12% to 15% and retention has improved. “I don't see an end in sight certainly in the next 12 months,” Drinkwater said.

Momentum Continues

This momentum is likely to continue through the end of 2020, believes David Blades, senior financial analysts at AM Best, and author of the annual Best Market Segment report on the surplus lines industry. “Although there's a lot of unknowns still playing out from COVID-19 and how it will manifest itself in terms of insurance companies from an earnings perspective, you're still seeing that the surplus lines market, and especially for really well-established surplus lines companies, the market is

‘I think the rate trends and the limit cuts are moving faster than just the economic pressure.’ — Neil Kessler, CRC Insurance Services Inc.

yielding a lot of opportunities,” Blades said. Blades said 2019 saw a notable improvement for surplus lines companies over the previous year. “When you look at 2017 and 2018, you saw a big impact on results from domestic catastrophes, whether it be wildfires or hurricanes, than you saw in the benign year of 2019,” the AM Best analyst said. Along with more business moving into the E&S sector, results overall improved. “The industry again saw E&S outperforming the overall P/C industry in terms of the loss and loss adjustment expense ratio,” Blades said. “We also saw from a combined ratio perspective, leveling off.” Blades said those positive factors extending across the market through the end 2019 manifested in improvements to bottom line results from E&S carriers, both on the underwriting side and on the overall operating results’ side and through the second quarter 2020. We're seeing that that momentum continue.” INSURANCEJOURNAL.COM

Special Report: Surplus Lines 3 Questions for Lloyd’s U.S. Chief Hank Watkins

loyd’s of London announced it plans to stop accepting admitted market accounts in the United States in a year and focus on the U.S. reinsurance and excess and surplus (E&S) insurance market, where it is the market leader. In this interview with Insurance Journal’s Andrea Wells, Hank Watkins, Lloyd’s U.S. chief, discusses the change, Lloyd’s efforts to keep a “heavier touch” on poor performing syndicates and advice for finding the right solutions in an ever-changing and riskier world.

Lloyd’s recently announced it would exit admitted business in the U.S. What kind of business are you exiting, and why? Hank Watkins: Over the past 10

years, E&S as a segment of the industry has grown 5% or 6%, sometimes 7% per year, and Lloyds has grown right along with that. Sometimes more, sometimes less, depending on what’s needed that year. Sometimes we’re writing more cyber risks than other types of things, but our business has grown in E&S by a healthy margin every year for the past 10 years. Same with our reinsurance business. If you look at the admitted platforms, we’re really just in Kentucky, Illinois and the U.S. Virgin Islands. That business has not grown in 20 years. And so, this was a strategic decision. You look at what you excel at? And for Lloyd’s, it’s E&S and reinsurance. There’s no argument there. We’re number one in the U.S. in E&S, and number three or four, depending on how Berkshire or Munich INSURANCEJOURNAL.COM

Re or Swiss Re are doing in reinsurance in a given year, but still a very solid business for us.

Syndicate performance is important for Lloyd’s. How are performance goals affecting the Lloyd’s market overall? Watkins: As I talked about the

growth over those past 10 years, Lloyd’s wrote business, as did other markets around the world, that didn’t perform very well in 2017 and 2018. So, we came in at 114% combined ratio in 2017 and about 104, 105 in 2018. Nothing to be proud of. And so, that’s why we implemented the “decile 10” exercise towards the end of 2017. And over time have moved the market toward a more profitable position. We ended 2019 at about 102, which was better, but a lot of that improved profitability was due to investment income, not really the underwriting improvement that we’d wanted to see. So, we’re currently in the business planning process for 2021, and there are about 50% of the syndicates that are performing well. And they’re going to be what we call “light touch” business plans. Some of them submit their plans. Our teams in London spend their entire latter half of each year, reviewing the plans, going back and forth and ultimately, reaching a decision with the syndicates as to what they’re going to write, where they’re going to write it, etc. … There’s still about 50% of the market though that’s not performing to where we want them to be, which is under 100% com-

bined. And so, they’re going to have a “heavier touch” and require a lot more attention by us to get their plans approved. … It’s a really robust process we go through because we all know that if we were to lighten up, there will always be syndicates as there will always be underwriters in the world that aren’t successful in a given year. And we just can’t afford to go through many more years of combined ratios in excess of 100%.

Any advice for wholesalers and retail agents going forward in this changing world? Watkins: The pandemic is

something that clearly nobody expected ever. There were a couple of markets out there pre-COVID that had offered pandemic coverage to their clients. Very few people bought it. A lot of the claims that we are paying for pandemic losses had that coverage. You look at event cancellation, some properties, travel accidents, E&S business. Lloyd’s is currently looking at between $3.5 billion to $4 billion through the first half of the year, in claims we’re

going to pay globally associated with the pandemic. So while there has been a fair amount of pandemic coverage out there, very few people across the world actually purchased what they in retrospect needed. … People just didn’t anticipate that a pandemic could come this quickly and this broadly across the entire world. That’s going to change. But my advice for retail agents and brokers is, clearly, if you’re in this business, you’ve grown up knowing that you have to try to anticipate everything, whether it’s a flood, a potential earthquake, a product liability claim, a cyber-attack. And these are really complex risks, especially cyber. … It’s an increasingly complex world. We have to constantly keep our eyes open. And to that end, there are a lot of organizations in the insurance space that have terrific thought leadership papers out there, you can download for free. Go get them because they might help you figure out a way to convince your client to reconsider that risk they didn’t want to buy insurance for.

SEPTEMBER 7, 2020 INSURANCE JOURNAL | 35

Idea Exchange: Tech Talk What Does the Future of the Agency System Look Like?

By Tom Wetzel

he demise of the independent agent has been predicted ad nauseam, however arguably the most hotly debated version came from a 2013 McKinsey report with a section entitled “The End of an Era for the Local Insurance Agent.” When Bryan Falchuk’s new book, “The Future of Insurance,” came out this summer, I wanted to seek him out because he once worked for McKinsey several years prior to that report. “McKinsey was wrong,” according to Falchuk, an industry veteran with stints at Liberty Mutual, Beazley, and Hiscox USA, among others. “The report discussed how the marketing landscape was changing but

36 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

then stated that a smaller group of agents will prosper and made no distinction between exclusive agents and independent agents.” Falchuk’s book focuses more on carriers, so I wanted to discuss what agents are facing today. “Agents are facing not one but two disruptions,” he said. “The first is the rise of new digital distribution platforms such as Lemonade, Root, Hippo, Next, and Vault.” The second disruption, and just as important, is a new generation of agencies — young agents who become frustrated when they first enter the business and move on to start agencies of their own. “This disruption is not a threat to the agency system as much as it is a signal that the current model must change,” he said. “Agents today must lead with sales and service and can’t just be record keepers.” Falchuk said there is also a lot of “hand-wringing” over who owns the customer. “That question is based on fear, and decisions being made based on fear, results in bad decisions,” he says. Agents must understand the expectations of today’s customers which have now become demands. “All of us can’t just pay lip service to

listening to customers. Sadly, too many agents still do not want to get out of the way of customers getting the attention and help they expect, wherever that help comes from.” Below are three strategies Falchuk outlined for agents. “First, the reality is that the pandemic has changed every aspect of our lives, as human beings, as consumers and as industry professionals,” he says. “It has forced both structural changes and accelerated the speed with which the marketplace is evolving.” Everyone is becoming Zoomsavvy. Everyone is discovering ways to become more efficient. “Going forward, agents cannot prohibit remote work but must instead find ways to adapt to it.” Second, agents need to play both offense and defense, Falchuk said. “Defense is about catching up.” Agents should ask themselves, am I really listening to my clients? When an agency loses a client, ask the individual or business why? “Believe me, it is not just because of price,” he noted. “If you hear something, do something.” On offense, it’s about looking ahead. “Ask about benefits at work, what are the financial advisers and prospects telling them?” It is also reimagining the future. “Our country did not hesitate to go to the moon, did not think to ask why it was not possible,” he said. Everything today is being rethought. That includes everything from travel to how and when to go out to restaurants. Car ownership is changing, he said. “Do I really need two cars?” Finally, agents should take note of the budget process, Falchuk added. “With greater scrutiny on vendor services and understanding their data security protocols and privacy policies, insurers are discovering they can renegotiate with their checkbooks and so can agents,” he said. The same is true on budgeting. “It used to be that you would put off something if it has not been budgeted. With the market changing so fast, if an initiative is mission critical and the money is available, it’s the smart move to take action quickly.” Wetzel is CEO of Thomas H. Wetzel & Associates, an insurance marketing firm for independent agents. Email: twetzel@wetzelandassociates.com INSURANCEJOURNAL.COM

Idea Exchange: Minding Your Business The Closing Window of Opportunity, or Is It?

s merger and acquisition consultants, we wonder how long unusually high EBITDA multiples will be paid by buyers. Most of our insurance agency clients have not seen dramatic losses of commissions and fees during COVID-19, mostly because of not having a dependency on the hospitality, By Catherine Oak and entertainment, hotels, restaurant and bar industries. We have a number of buyers that we represent that pay EBITDA multiples in the 8 to 10 times William Schoeffler range. When preparing a valuation, we adjust for already lost business or lower workersâ&#x20AC;&#x2122; compensation commissions, if some of the businesses they insure are lowering payrolls, due to temporary or even permanent layoffs. New sales are also lower for many clients, so these rating bases are being adjusted, which lowers agency commissions. What will the new M&A environment look like in 2021? While even policy makers fail to predict recessions or future interest rates, it is clear massive economic risk factors remain. This fall there are predictions of a resurgence of COVID-19, a presidential election is underway and many businesses appear to be closing or downsizing to comply with new mandated distancing regulations. Is the recovery going to be a V (quick recovery) an L (drop with no recovery) or a W (drop and a recovery followed by another drop)? Will it take a vaccine in the middle of 2021 before we see the bulk of the 30 million unemployed Americans return to work? With many states deciding not to open schools this fall, or doing so on a limited basis, most children are going to learn via Zoom. This in turn puts more pressure on workers with children severely impacting their labor productivity and 38 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

forcing up to 15% of workers to exit the labor force to pick up these new responsibilities, according to Goldman Sachs.

Recession: Second Wave?

As unemployment compensation expires and cash reserves dwindle, a big fear among economists is a secondary economic recession. While consumers have lapped up unemployment, they have been paying down debt and even leading a retail spending jump. This moment is fragile and business owners need to prepare for an uncertain future. Those looking to sell or buy have a golden opportunity to persue their transaction in the next few months.

Taxes & Interest Rates

With debt levels climbing, business owners are not expecting any permanent tax cuts next year. Yet, with the federal reserve lowering interest rates to near zero, those eligible to borrow capital are in the best position to do so in recent history. A flight to safety has occurred in the last year that will likely continue into the next year. Private equity with nearly unlimited borrowing capacities financed at record low rates will likely continue to lap up safe books of business and agencies. Even if

the standard 95% renewal rate is lower, insurance continues to be a much safer investment for PE buyers. Yet aftershocks will surely be felt and going forward a larger uncertainty discount may be applied. As consultants, we want to get all the deals we have in process closed before the end of the year. This will save our clients a great amount of money on taxes on their down payment, which have been averaging in the 80% to 90% of purchase price range. Earn-outs and bonuses that go further into the future, would also likely be taxed at a higher rate. The stock some take in the transactions would also be taxed at higher rates when it is sold, likely at retirement.

Summary

Be safe by wearing a mask. If the perpetuation plan is to sell in the next two to three years, then moving this time period up, would be a very good idea. Oak is the founder of the consulting firm, Oak & Associates. Schoeffler is a financial analyst and junior consultant at the firm. Oak & Associates specializes in financial and management consulting for independent insurance agencies. Phone: 707-935-6565. Email: catoak@gmail.com. INSURANCEJOURNAL.COM

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Celebrating 50 Years of Leadership Summer 2020 marks our 50th anniversary with Mark Wells at the helm of Insurance Journal magazine. Unbeknownst to him, we decided to dedicate a few pages in celebration of his leadership, generosity, and the legacy he continues to build.

Mark W ells

Executiv e Chairm a Wells M edia Gro n up, Inc.

“Congratulations Mark! You have been a voice of the industry for over a half a century. We all have come to rely on your honesty, integrity and support.”

Stanley D Loar Chairman Emeritus Woodruff Sawyer

“Best wishes and congratulations to Mark on your 50th anniversary! An impressive leadership run for our good friend and a significant milestone for Wells Media Group. Your support of our industry over the decades is appreciated by so many and looked forward to in the years to come.”

Hank Watkins

Regional Director & President, Americas, Lloyd’s

“Imagine a publisher that is creative and innovative, independent and determined to present fact, and committed to delivering the information that his readers need and want to hear. Would that there were more Mark Wells in this world! Congratulations in building a national brand that sets the standard for publications for the insurance industry.”

Hank Haldeman

President - Worldwide Programs Worldwide Facilities, LLC

“Mark, you have been a tremendous chronicler for the industry and a great advocate for the surplus/specialty segment. We, at Markel, appreciate what you’ve

done for our organization and the industry as a whole, and wish you another 50 years at the helm.”

Tony Markel

Retired Vice Chairman, President & CEO, Markel Corporation

“Mark, 50 Years! Now that is something to talk about. I wish we could be celebrating this milestone in person but these words will have to do during these unusual times. You have always been a tremendous supporter of the surplus lines industry and we are all grateful for that support. In the early stages of AmWINS you were kind enough to listen to our story and tell it

in such a way that your readers could appreciate what a ‘financial guy’ was trying to say. Thank You. Congratulations. It is truly remarkable to have the drive and passion to persevere through 50 years! You love what you do and it shows.”

mote that by the first-rate example you set. Congratulations on your outstanding 50th anniversary!”

Steve DeCarlo

“Congratulations Mark! Everyone at the Insurance Industry Charitable Foundation (IICF) sends you best wishes as you celebrate 50 years at the helm of the Wells Media. Thank you for your continued support of the IICF and our communities, and for the valuable information you have brought to the insurance industry.”

Executive Chairman AmWINS Group

“Mark: Congratulations on 50 years of managing Insurance Journal and for developing it into absolutely the best media publication covering the insurance industry. You were the first to tap the internet and you have out classed all the others. You are the only media of any kind that one can totally trust to properly handle ‘off the record’ discussions. Well done you and your entire team!!”

Jerry Sullivan

Chairman, G.J. Sullivan Co., Reinsurance

“Mark — congratulations on 50 years leading & directing the Wells Publishing empire. The insurance industry has benefited enormously because of your trade publications, and I’m personally thankful for our friendship over the years.”

Richard Polizzi

Founder & former CEO, Western Security Surplus Insurance Brokers

“What I love most about this industry, and our association and the wholesale segment in particular, is the people who make it great— professional, skilled, honorable, dedicated to doing the right thing, and the list goes on. I sincerely appreciate all you and Insurance Journal do to demonstrate and pro-

Brady R. Kelley

Executive Director, Wholesale & Specialty Insurance Association

Bill Ross

CEO, Insurance Industry Charitable Foundation

“Monarch has loved Mark Wells since 1986. A true gentleman of our industry, a treasure. We all know Mark married above his pay grade, with beautiful Gayle. Fight On!”

Derek Borisoff CEO, Monarch E&S Insurance Services -Division of SPG Insurance Solutions

“Mark, I’ve worked with you on news, features, advertising, podcasts, video content and pinot noir since 1988 — 32 of your 50 years! I’ve admired the tremendous impact Wells Media has had on insurance knowledge. Thanks for valuing other people and for being such a great friend!”

Peter van Aartrijk CEO Aartrijk

“A lot has changed in the insurance world, but one thing that has not is the contribution that Mark

Wells and the Insurance Journal continue to contribute to making our insurance world a better place. Not only has Mark carried the torch of excellence in keeping us all informed through the unparalleled reporting in The Insurance Journal but more importantly he is a face and spokesperson for our industry. Thanks for all you have done and, most importantly, your friendship through all these years.”

Laurie Zangwill-Infantino President & Co-founder Insurance Community/University

“Knowing Mark for 35 years is truly a gift of friendship. Working together has been an added bonus, but watching him return my Dad’s sneaky lob shots on the tennis court is most memorable.”

Rupert Hall

Chief Executive Officer M.J. Hall & Company, Inc.

“Mark — Congratulations on 50 years at the wheel of IJ! IJ is a symbol of professionalism and class, just like its publisher. Once again, congratulations from the entire team at WSS & XPT.”

Kyle Stevens

President, Western Security Surplus Insurance Brokers, LLC

“Mark — happy 50th anniversary. It has been a pleasure knowing you and doing business with the IJ. Thank you for your exemplary leadership and excellent coverage on the wholesale sector of our industry. Best wishes for many more great years!”

Davis Moore

CEO, Worldwide Facilities, LLC

“For the over 30 years that I’ve known you, you’ve hardly aged a day. Your calm, kind, professional and warm demeanor immediately puts people at ease, especially when you’re doing one of your engaging and informative video interviews. The thoughtful, innovative journalism, great staff and constant quality you’ve championed has made Insurance Journal the trusted partner in the industry. Congratulations on your 50 years leading Insurance Journal!”

Tom Kuzma

President & CEO, Nautilus Insurance (a Berkley Company)

“When something works well for 50 years, there sure isn’t cause for complaint. Who can deny it’s a remarkable feat? You’d think there’d be some, but there ain’t. Congratulations to you on this special day. Fifty years you’ve been loving and living. Our wishes are for the continuing joy, that your love and dedication keep giving. All the best Mark and I look forward to fishing with you again soon!”

preneur, father, grandfather, husband, gentleman, publisher, leader, innovator all describe you. Loved by many and people are still interested in hearing what you have to say: not because you have a big megaphone but because of the quality of the message. ‘Wells’ done my friend. All the best.”

Bart Koch

Taga Member/Owner

“Mark — I have always admired you for being a remarkable listener and a great friend. You are a ‘true gentleman.’ Congrats for accurately reporting on our industry for 50 years. All the best!”

David Rucker

Senior Vice President United States Liability Insurance

“Happy 50th Anniversary Mark! From one giant of the insurance industry to another.”

Emil Moskowitz

President, Cal Inspection Bureau & Legacy National Audit Bureau

“Mark, what an amazing job you have done growing IJ over the decades. It has been my pleasure dealing with you and Wells Media for 45 years! Happy anniversary from the Greenspan Company and I wish you the best.”

Robb Greenspan

Claims Consultant for the Policyholder only, The Greenspan Co.

“Happy 50th Mark Wells! Professional, friend, colleague, entre-

Gil Hine

Executive VP, Worldwide Facilities, LLC, MHI-MGA Division

“Congrats to Mark Wells on 50 years at the helm of the Insurance Journal! What an amazing accomplishment! We look forward to many more years of working with you & the Insurance Journal.”

Jean Patterson

Executive Director, Texas Surplus Lines Association, Inc.

“Honoring your 50 Years with IJ / Wells Media. Mark you have been a tremendous asset and ally to this industry. Personally, you have been a treasured friend to us for over 40 years. Cheers and blessings to you!”

Patty Carlson

Co-Founder, Insurance Skills Center and Zangwill, Carlson & Wells Insurance Personnel Agency

David Carlson Co-Founder Beecher & Carlson

Chuck Holdren

President & CEO Sage Program Underwriters

all of us and a strong advocate of the Wholesale Insurance industry for these many years. Here’s to many more!”

“Congratulations Mark for a long and distinguished career! We are very thankful for all your support to City of Hope and your leadership of the National Insurance Industry Council! You are a true class act!”

Ken Birkett, ARM Senior Director City of Hope

“Mark, Your commitment, dedication, leadership, and professionalism is something we can all learn from. Congratulations on 50 amazing years at the Insurance Journal. We are all incredibly proud to be associated with you. All the best.”

Paul W. Rainey “From one old timer who used a lot of white out to another, congratulations on a long and very successful career. Under your leadership, the Insurance Journal has been an important source of information for

President RSI International, Inc.

“Congratulations & thanks for the 50 years of providing first class journalism to the insurance

industry. And more personally, for the sage advice of ‘Beware of the tyranny of the present.’ I still try to remember and preach his wisdom to this day.”

“Mark, congratulations on your 50 years at Wells Media Group! Thanks for everything you’ve done for our great insurance industry!”

Mark Kaufman

Marcus Jensvold

CEO, Western Security Surplus Insurance Brokers

Retired

“Mark, 50 years of first class publishing: congratulations! The IJ is the Oracle of Insurance Media!”

Jim Woods

Insurance Authority & Founder Woods Group Solutions

“Congratulations on your 50th anniversary Mark! You’ve lead the best publication team in the business; we appreciate all you’ve done for our agency and the industry! Best wishes.”

Bill & Jennifer Brecht Brecht & Associates, Inc.

“Mark, There are not many of us left who remember the days of manual typewriters, rotary dial phones, Xerox machines, and face to face meetings...a grand time in a great industry, and my distinct pleasure to work with a professional such as yourself. Your publication was always current, pertinent to the issues and a star in a sea of journalism mediocrity. You should be proud of what you accomplished. Your support of IICF over the years has been a boon to the growth of the charity. Something which will always be appreciated. Be Good.”

“Happy 50th anniversary and congratulations on your success. I’m so glad to have gotten the opportunity to know you professionally and personally. Miss the TSLA days when we all would get together. Wonderful memories and best wishes for many more!”

Cindy Yurkovich Partner TAGA

“Congratulations for 50 years at the helm of Wells Media Group, Mark! Your professional approach and vast accomplishments over the years are a testament to your dedication to our industry! Thank you!”

Bryan W. Sanders President Markel Specialty

Bruce Basso “Congratulations Mark, and thank you for leading the insurance industry for 50 years in publishing unbiased, factual, relative, and interesting information about our business. Mostly, thank you for being a friend to so many of us.”

Monte R. Stringer

Chairman Emeritus Worldwide Broker Network

! k r a M , s t a ! r u g o n y o C nk

Vice President All Risks, Ltd.

Love, The Entire P/C Insurance Industry & Your family at Wells Media Group, Inc.

a h t d An

Idea Exchange: Is It Covered? Logic & Language and Forms & Facts ‘All Generalizations Are Dangerous….’

love quotations. I’ve collected them for almost 50 years. Over 20 years ago, I published my first book which was a By Bill Wilson collection of 1,500 of my favorite quotations, all indexed and cross-referenced, with an introduction that explained how they can be used in speaking and writing, as I’m doing right now. That book is out of print but I provide a free PDF download in a book I published last year on Amazon called “52 of the Greatest Things Anyone Ever Said…and Why.” One of my favorite quotations found in both of those books is from French novelist Alexandre Dumas who said, “All generalizations are dangerous, even this one.” I explain that quotation in my “52 Greatest” book in the context of stereotyping and bigotry, but for this article, let’s examine the insurance implications of that assertion. Although I retired from the Big “I” at the

44 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

end of 2016, I continue to serve as a faculty member of the Big “I” Virtual University where member agencies can pose coverage and claim questions to some of the top insurance experts in the country. The pet peeve of almost every faculty member is the question that begins something like, “Does ‘a’ homeowners policy cover…” or “Does ‘a’ CGL policy cover….” You cannot generalize about the coverage provided by insurance policies when answering specific coverage questions. Insurance is not a commodity. The language used in similar insurance contracts is often different and, even where identical, the interpretation of what that language means may vary by insurer or individual adjuster. Let’s take a look at a common generalization in the context of an actual claim to illustrate why generalization is futile in the absence of specific contract language. First of all, here’s the generalization:

CGL policies do not cover an insured’s damage to his or her own work. That’s a business risk expressed in at

least three “workmanship” exclusions in

‘a’ CGL policy:

j. Damage To Property: (5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the “property damage” arises out of those operations; or (6) That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it. l. Damage To Your Work “Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard”. This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor. For the purpose of this article, “your work,” as used in the exclusions above, means “Work or operations performed by you or on your behalf…” and the “products-completed operations hazard” says, in part,

“Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.”

The aforementioned exclusions are from the current ISO CG 00 01 policy, though the generalization refers only to ‘a’ CGL policy. CGL policies are different and the policies are often modified by endorsements or the meaning of a policy provision has been established by case law that varies by jurisdiction. You can’t opine about ‘a’ CGL policy, only about specific forms that apply to specific insureds under specific circumstances. Here’s the actual claim. A contractor was building a detached garage in the backyard of a home and was almost finished. He planned to return the following morning for some minor touch-up work but, for all practical purposes, the garage was finished. He admired his work as he smoked a cigarette, put it out in an ashtray, then discarded the butt in a bucket and departed. Unbeknownst to him, the cigarette butt was not fully extinguished and, to make a long story short, the garage burned to the ground. INSURANCEJOURNAL.COM

When the contractor turned the claim in to his CGL carrier, the adjuster denied the damage on the basis that the ISO CGL policy used by the insurer did not cover damage caused by him to his own work, citing the three exclusions listed above. So, do these exclusions actually apply to this loss given the specific facts of the claim?

‘You cannot generalize about the coverage provided by insurance policies when answering specific coverage questions. Insurance is not a commodity.’ To answer that question, we must actually READ the contract language. If you look at the “products-completed operations hazard” definition excerpt above, this is probably a completed, not an ongoing,

operations claim, but let’s examine the (in) applicability of each exclusion, if anything, as an educational exercise. Exclusion j.(5) applies to damage to property “on which” the insured is “performing operations” only “IF the ‘property damage’ arises out of those operations.” This is a workmanship exclusion. However, in this case, the damage did not arise out of the work product. The insured was smoking a cigarette and the loss did not arise out of any work or operation actually being performed. Exclusion j.(6) is a pure workmanship exclusion that applies only if “your work” was “incorrectly performed” on the property. The damage did not arise from any actual work or operation, but rather from the negligent discarding of a cigarette. This brings us to Exclusion l. which applies only to damage to “your work” that actually arises out of the work or operations performed by the insured. Again, the loss arose from the negligent discarding of a

cigarette, not the actual work performance of the insured. Examining the contract language within the context of exactly what occurred means that none of these “workmanship” exclusions apply to this loss. Working with the agent, when this argument was presented to the adjuster, to his credit, he acknowledged this interpretation, within the unique facts and circumstances of the loss, and reversed the initial denial. Claim paid and generalization dispelled. Generalizing about policy form coverage or lack thereof is a pointless exercise when it comes to determining whether or not a real-life claim is covered. You have to READ the contract language carefully and within the context of the unique facts and circumstances of each claim. Wilson, CPCU, ARM, AIM is the founder and CEO of InsuranceCommentary.com and the author of four books, including “When Words Collide: Resolving Insurance Coverage and Claims Disputes.”

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Idea Exchange: The Wedge Optimizing Producer Effectiveness: Using Stats Not Feelings

e were in the locker at half-time, down by two points. Kenny, our center, felt like he was playing a terrible game. He already had two fouls, and the guy he was guarding seemed like he was scoring at will. Coach then pulled out the stat sheet, and what Kenny By Randy Schwantz found is that he had 12 points, and his opponent was only up to 14 points. He was having a good game and hit 66% of his shots. The guy he was guarding had 14 points but was only scoring on 40% of his shots. Kenny was playing a great game, but he didn’t realize it. A preacher once told me, “your feelings are valid, just not reliable.” The concept applies here, too. When you are coaching a producer, you can count on the fact that they are subjective in how they feel about their progress. So, what do stats have to do with coaching producers? Perhaps everything. Ironically, we criticize prospects for turning to the last page of the proposal to look at the price before looking at anything else. As sales leaders, we do the same thing. We only look up how much they sold. But the problem happens because that’s where the effort generally stops. If our producer hit their numbers, we pat them on the back and tell them they did a good job. If our producer doesn’t hit their numbers, we encourage them to “try” harder. In reality, the producer hitting their numbers might be the one that needs to try harder and the one struggling needs to keep up the work ethic, but needs help driving 46 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

the right behaviors. But you’d never know that unless you have the stats. Human nature drives most of us to pat ourselves on the back when we are doing well and punish ourselves emotionally when we aren’t performing. Neither is a sustainable practice if you want to improve, which is where the stats come to play. Most producers and their leaders don’t grasp how much work went into creating the desired outcome. How many dials did it take to produce a conversation? How many of those dials converted to a set appointment? The No. 1 reason why most producers don’t achieve their sales goal is that they didn’t set enough appointments. Which means they didn’t make enough phone calls. It’s that simple. The majority of sales leaders don’t care about how a producer writes new business — they only care about getting the revenue. It works well if you have a team of dedicated and reliable producers. Do you have a team of producers that get the job done year after year? If so, you should have stopped reading when you saw the headline. For the rest of you, there is a good chance that 20% of your producers are high-performers, and the rest of them

drive you completely nuts. Do you have a system to understand which producers are contributing the top 20% of your business, and which ones aren’t? If not, there’s a strong chance that you are managing your producers with your feelings, and not with stats. If you were in court and had to prove your producers’ activity or else you’d go to jail, most of us would probably end up in the slammer. Here’s the insane part: the fact that you can’t validate your underperformer’s activity is what is keeping you in a jail of your own making. Let me describe your prison. While driving on the way to work, you start thinking about your producers. “What the hell is wrong with John, he hasn’t written poop this year?” Then you enter a never-ending cycle in your mind. Should I fire him? Should I keep him? Should I leave him alone? He’s a good guy, but he’s not working out. He’s not costing us money, but he’s not making us any money. You finally say to yourself, “Let’s give him some time and see what happens.” The problem: it’s the same thing you say to yourself about him every week. Your prison walls are fortified with loads of false information and ignorance. Here are some of the things you don’t INSURANCEJOURNAL.COM

know about John. What would John’s new business goal be this year if you didn’t make him put some arbitrary number on a piece of paper? Would it be $0, $50,000, $75,000, $100,000? What impact does that have on his lifestyle, or his ability to fund his kids’ education and weddings? What effect does that have on his ability to max out his 401(k) or fund his retirement? You’re his sales leader, and you don’t know, do you? How many prospects does Johnny have in his database that have profitable revenue? What is John’s close-ratio on new business? How many appointments does he need every month to make his goal? What is John’s daily “dial” goal to lead to his appointment goal? How many conversations does he need to have to set an appointment? As the sales leader, you don’t know, and you probably don’t care. You just want John to produce. But he isn’t producing, just like most of your other producers. You have two honest choices. Put your head in the sand, look the other way, and hope the problem goes away. Or you can attack the problem with the truth that stats will provide you. Granted, it doesn’t mean the problem will automatically get better. But it does mean you can identify and now focus on the real problem:

Escaping your sales prison starts with knowing the truth, and stats are a big part of that equation. If you want to learn more about how to fine tune your agency’s growth, download your free digital copy of Agency Growth Machine here: www.thewedge.net/freebook/.

Or don’t and rely on your gut feelings instead. Which reality do you choose for your business? Schwantz is founder of The Wedge Group. He’s also the author of the book Agency Growth Machine. Phone: 214-446-3209. Email: randy@thewedge.net.

Advanced Risk Analytics for Wildfire & Flood in the U.S.

The past few years have seen increasingly severe flooding and wildfires in the US, and it’s forced the industry to rethink their approach to managing these disasters. From Super Storm Sandy, to Hurricane Harvey, to the recent California Wildfire seasons, it’s no surprise that the industry is still recovering from decades of losses to capital reserves. The solution has become clear. Today’s (re)insurance carriers

• Is it that he’s not making enough dials? • Is it that he can’t convince a prospect to set an appointment? • Is it when he gets on the sales call, he can’t find pain or a reason the buyer would want to buy from him over the incumbent?

and regulators need to actively manage this risk.

Which problem is it: inactivity or ineffectiveness? Until you find out, you don’t have a prayer to fix it. Imagine you had all those stats on John and your other under-performers to pinpoint the real problem. Then, imagine you knew what to do to coach and train them to improve. What would that do for your business? What would that do to get you out of prison?

can actively prepare for the seasons ahead.

If you would like to learn how new data and advanced risk analytics can help you actively manage your exposure to this new (ab)normal, we invite you to watch our new webinar. Whether you’re looking for profitable (re)insurance opportunities or you’re interested in understanding just how interconnected these risks are to the rest of your portfolio, we’ll help you understand how you

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SEPTEMBER 7, 2020 INSURANCE JOURNAL | 47

â&#x20AC;&#x153;I consider Insurance Journal to be an authoritative and reliable source of insurance news and content.â&#x20AC;? Kimberly Taylor Director of Specialized Client Services at Sihle Insurance Group & Satisfied Insurance Journal Subscriber

Thanks to Kimberly for the kind words and thank YOU for reading. Our journalists take pride in serving the industry. If this publication is valuable to you, please consider upgrading your subscription at www.insurancejournal.com/pro

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Advertisers Index Amwins Group, Inc. www.amwins.com 14, 15 Applied Underwriters www.auw.com 2, 3, 52 GeoVera Insurance Company SC1, S1 www.geovera.com Golden Bear Insurance www.goldenbear.com 23 Hallmark Financial Services www.hallmarkgrp.com 39 Hudson Insurance Company www.hudsoninsgroup.com 29 Insurance Technologies Corp. www.getitc.com 37 JM Wilson S4, M2 www.jmwilson.com K&K Insurance Group www.kandkinsurance.com 25 M.J. Hall & Company www.mjhallandcompany.com W1 Monarch E&S Insurance Services www.monarchexcess.com W5 Nationwide Mutual www.nationwide.com 7 Nautilus Insurance Company www.nautilusinsgroup.com 21 Nortfield Excess & Surplus Lines www.northfieldins.com 17 Omaha National Underwriters www.omahanational.com 1 Pacific Gateway Insurance Services W3 www.pgiainsurance.com PersonalUmbrella.Com www.personalumbrella.com 4, 5 Philadelphia Insurance Companies www.phly.com 31 Risk Placement Services www.rpsins.com W7 RSGUM - Ryan Specialty Group www.ryansg.com 51 RT Binding www.rtbinding.com 11 Ryan Turner Specialty www.rtspecialty.com 9 Surplus Line Association of California www.slacal.com W8 Tejas American General Agency www.taga1.com SC3, S3 Texas Mutual www.texasmutual.com SC5, SC7 The Hartford Insurance Group www.thehartford.com 13 WSIA- Wholesale & Specialty Ins. Assoc. www.wsia.org 45

SEPTEMBER 7, 2020 INSURANCE JOURNAL | 49

Closing Quote Recession Provides Fuel for Agency Start-ups

By Tony Caldwell

tarting an independent insurance agency, or any business, is a risky proposition. You’re moving from a secure position with a regular income and foreseeable future to a place where uncertainty is the new normal. Some may think that’s truer than ever today, given the economic fallout from COVID-19. I see it quite differently. For those with the preparation, mindset and courage to move forward with their dream, this may be the best time in history to start an independent agency. Why? History has shown that recessions and economic turmoil present significant opportunities for new business start-ups. In the insurance industry today, you’ll find three conditions that provide fertile ground for the entrepreneur willing to take the risk — as well as for existing agencies to adapt and thrive.

Greater Growth Opportunities First, there are increased opportunities for business growth. With massive unem-

ployment and a contracting economy, everyone is trying to reduce expenses. That means almost every insurance policy in the country may be up for grabs. Existing insurance agencies are focusing time and attention on playing defense, and history shows that many will not do what it takes. Agencies also find it easier to get appointed during a recession when carriers, which are facing top-line declines, tend to moderate price increases to retain business and market share. New agencies can get access to the products they want to sell. Finally, hard markets always present great opportunities for new agencies. We entered 2020 with hardening in commercial property and continuing hardening in commercial and personal auto, and COVID-19 has reduced availability and increased prices along some lines and in some markets.

Lower Costs

The second condition conducive to new start-ups is lower costs, and costs tend to drop in a recession. Commercial vacancies rise and office space and real estate become cheaper, equipment drops in price and becomes more readily available. Virtually everything a new business needs to get

50 | INSURANCE JOURNAL | SEPTEMBER 7, 2020

started is dropping in price, including talent. New technologies being embraced during COVID-19 are also lowering operating expenses, while increasing speed and efficiency. This is a great combination for new agents, who can create their business from the ground up with this technology and get a leg up in the marketplace against incumbents. Remote technologies like Zoom are also valuable for prospecting, selling and building relationships and offer lower-cost opportunities for a new agency to dramatically expand its market — selling and servicing insurance anywhere. This is a trend existing agencies should also embrace.

Increased Talent Pool

Finally, higher unemployment gives savvy entrepreneurs greater opportunities to hire talented people, often with creative or lower compensation. In the current environment, this talent may also view start-ups as more attractive — especially those that create work environments with the technology, mentoring and flexible work policies that young employees want today. While recessions always grow the talent pool, our current economic situation is unique because the same technology that is now widely adopted for prospecting and selling (Zoom, etc.) can be used to recruit and manage

‘History has shown that recessions and economic turmoil present significant opportunities for new business start-ups.’ employees located anywhere. This is a big opportunity for new agencies, particularly those located in remote areas with a small employment base.

A Unique Confluence

Some of the conditions described above are typically available during any recession; some are unique to the current environment. I see them combining to create incredible and unique opportunities for a start-up agency. That’s why I believe the next several years are truly the best time in our history to create a new independent insurance agency. For existing agencies, it’s time to take notice of these same conditions and adapt their operations so they can stay competitive with a new crop of start-ups. Caldwell is an author, speaker and CEO of One Agents Alliance, an alliance of 185 independent insurance agents in Oklahoma, Arkansas, Kansas and California. Visit: www.tonycaldwell.net. Email: tonyc@oneagentsalliance.net. INSURANCEJOURNAL.COM

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